0001104659-19-024952.txt : 20190430 0001104659-19-024952.hdr.sgml : 20190430 20190430084952 ACCESSION NUMBER: 0001104659-19-024952 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 20190228 FILED AS OF DATE: 20190430 DATE AS OF CHANGE: 20190430 EFFECTIVENESS DATE: 20190430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VANGUARD WORLD FUND CENTRAL INDEX KEY: 0000052848 IRS NUMBER: 046035483 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-01027 FILM NUMBER: 19778706 BUSINESS ADDRESS: STREET 1: PO BOX 2600 STREET 2: V26 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 6106691000 MAIL ADDRESS: STREET 1: PO BOX 2600 STREET 2: V26 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: VANGUARD WORLD FUNDS DATE OF NAME CHANGE: 20020402 FORMER COMPANY: FORMER CONFORMED NAME: VANGUARD WORLD FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: IVEST FUND INC DATE OF NAME CHANGE: 19850923 0000052848 S000004440 Vanguard FTSE Social Index Fund C000012203 Investor Shares VFTSX C000012204 Institutional Shares VFTNX C000209798 Admiral Shares VFTAX 0000052848 S000004441 Vanguard Materials Index Fund C000012205 Admiral Shares VMIAX C000012206 ETF Shares VAW 0000052848 S000004443 Vanguard Communication Services Index Fund C000012208 Admiral Shares VTCAX C000012209 ETF Shares VOX 0000052848 S000004444 Vanguard U.S. Growth Fund C000012210 Investor Shares VWUSX C000012211 Admiral Shares VWUAX 0000052848 S000004445 Vanguard Utilities Index Fund C000012212 Admiral Shares VUIAX C000012213 ETF Shares VPU 0000052848 S000004446 Vanguard Consumer Discretionary Index Fund C000012214 Admiral Shares VCDAX C000012215 ETF Shares VCR 0000052848 S000004447 Vanguard Consumer Staples Index Fund C000012216 Admiral Shares VCSAX C000012217 ETF Shares VDC 0000052848 S000004448 Vanguard Energy Index Fund C000012218 Admiral Shares VENAX C000012219 ETF Shares VDE 0000052848 S000004449 Vanguard Financials Index Fund C000012220 Admiral Shares VFAIX C000012221 ETF Shares VFH 0000052848 S000004450 Vanguard Health Care Index Fund C000012222 Admiral Shares VHCIX C000012223 ETF Shares VHT 0000052848 S000004451 Vanguard Industrials Index Fund C000012224 Admiral Shares VINAX C000012225 ETF Shares VIS 0000052848 S000004452 Vanguard Information Technology Index Fund C000012226 Admiral Shares VITAX C000012227 ETF Shares VGT 0000052848 S000004453 Vanguard International Growth Fund C000012228 Investor Shares VWIGX C000012229 Admiral Shares VWILX 0000052848 S000018789 Vanguard Extended Duration Treasury Index Fund C000051979 Institutional Shares VEDTX C000051980 Institutional Plus Shares VEDIX C000051981 ETF Shares EDV 0000052848 S000019698 Vanguard Mega Cap Index Fund C000055209 Institutional Shares VMCTX C000055210 ETF Shares MGC 0000052848 S000019699 Vanguard Mega Cap Value Index Fund C000055212 Institutional Shares VMVLX C000055213 ETF Shares MGV 0000052848 S000019700 Vanguard Mega Cap Growth Index Fund C000055215 Institutional Shares VMGAX C000055216 ETF Shares MGK 0000052848 S000059218 Vanguard Global Wellesley Income Fund C000194068 Admiral Shares VGYAX C000194069 Investor Shares VGWIX 0000052848 S000059219 Vanguard Global Wellington Fund C000194070 Admiral Shares VGWAX C000194071 Investor Shares VGWLX 0000052848 S000063074 Vanguard ESG International Stock ETF C000204566 ETF Shares VSGX 0000052848 S000063075 Vanguard ESG U.S. Stock ETF C000204567 ETF Shares ESGV N-CSRS 1 a19-6275_1ncsrs.htm N-CSRS

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT

OF

REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-01027

 

 

Name of Registrant:

 

Vanguard World Fund

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:  August 31

 

Date of reporting period: September 1, 2018—February 28, 2019

 

 

Item 1: Reports to Shareholders

 

 

 

 

 

Semiannual Report  |  February 28, 2019

 

 

Vanguard U.S. Growth Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

Contents

 

 

 

About Your Fund’s Expenses

1

Financial Statements

4

Trustees Approve Advisory Arrangements

20

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·   Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·   Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Six Months Ended February 28, 2019

 

U.S. Growth Fund

 

Beginning
Account Value
8/31/2018

 

Ending
Account Value
2/28/2019

 

Expenses
Paid During
Period

Based on Actual Fund Return

 

 

 

 

 

 

Investor Shares

 

$1,000.00

 

$969.77

 

$2.00

Admiral™ Shares

 

1,000.00

 

970.23

 

1.47

Based on Hypothetical 5% Yearly Return

 

 

 

 

 

 

Investor Shares

 

$1,000.00

 

$1,022.76

 

$2.06

Admiral Shares

 

1,000.00

 

1,023.31

 

1.51

 

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.41% for Investor Shares and 0.30% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

 

2

 

U.S. Growth Fund

 

 

Sector Diversification

As of February 28, 2019

 

 

 

 

 

Communication Services

 

14.8

%

Consumer Discretionary

 

18.5

 

Consumer Staples

 

2.7

 

Energy

 

0.2

 

Financials

 

9.3

 

Health Care

 

12.8

 

Industrials

 

6.7

 

Information Technology

 

31.6

 

Materials

 

0.4

 

Other

 

0.9

 

Real Estate

 

2.0

 

Utilities

 

0.1

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

3

 

U.S. Growth Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (94.2%)1

 

 

 

 

Communication Services (14.2%)

 

 

 

 

*

Alphabet Inc. Class C

 

316,218

 

354,139

*

Netflix Inc.

 

549,659

 

196,833

*

Facebook Inc. Class A

 

1,155,368

 

186,534

*

Alphabet Inc. Class A

 

124,620

 

140,391

*

Liberty Global plc

 

5,099,846

 

129,485

*

Charter Communications Inc. Class A

 

362,076

 

124,884

*

TripAdvisor Inc.

 

2,144,824

 

114,040

*

Take-Two Interactive Software Inc.

 

1,289,225

 

112,498

 

Activision Blizzard Inc.

 

823,080

 

34,685

 

Spotify Technology SA

 

216,016

 

30,272

*

Liberty Global plc Class A

 

915,119

 

24,113

 

Tencent Holdings Ltd. ADR

 

529,451

 

22,666

 

Tencent Holdings Ltd.

 

514,429

 

22,029

*,^

Eventbrite Inc. Class A

 

444,931

 

13,161

 

 

 

 

 

1,505,730

Consumer Discretionary (17.8%)

 

 

 

 

*

Amazon.com Inc.

 

281,803

 

462,109

 

Dollar General Corp.

 

1,317,497

 

156,071

*

Dollar Tree Inc.

 

1,603,953

 

154,509

*

Wayfair Inc.

 

931,789

 

154,379

 

Hasbro Inc.

 

1,729,298

 

146,817

*

Alibaba Group Holding Ltd. ADR

 

728,990

 

133,427

*

Tesla Inc.

 

396,085

 

126,700

 

Home Depot Inc.

 

578,447

 

107,094

*

GrubHub Inc.

 

952,931

 

77,740

 

Hilton Worldwide Holdings Inc.

 

643,000

 

53,433

*

O’Reilly Automotive Inc.

 

112,687

 

41,915

*

Booking Holdings Inc.

 

22,233

 

37,730

*

Under Armour Inc. Class A

 

1,652,024

 

37,253

*

Roku Inc.

 

517,201

 

34,285

*

Chegg Inc.

 

821,694

 

32,564

 

Ross Stores Inc.

 

328,556

 

31,157

*,^

Stitch Fix Inc. Class A

 

997,431

 

27,749

 

TJX Cos. Inc.

 

386,120

 

19,804

 

eBay Inc.

 

441,192

 

16,390

 

NIKE Inc. Class B

 

186,211

 

15,964

 

Kering SA

 

21,462

 

11,709

 

Marriott International Inc. Class A

 

55,515

 

6,954

*

Under Armour Inc. Class C

 

2,622

 

53

 

 

 

 

 

1,885,806

Consumer Staples (2.5%)

 

 

 

 

 

Constellation Brands Inc. Class A

 

1,043,686

 

176,550

*

Monster Beverage Corp.

 

903,903

 

57,696

 

Costco Wholesale Corp.

 

81,408

 

17,807

 

Estee Lauder Cos. Inc. Class A

 

75,192

 

11,801

 

 

 

 

 

263,854

Financials (8.7%)

 

 

 

 

 

KKR & Co. Inc. Class A

 

7,847,310

 

174,446

 

Charles Schwab Corp.

 

2,661,641

 

122,462

 

MarketAxess Holdings Inc.

 

463,650

 

113,075

 

CME Group Inc.

 

520,223

 

94,634

 

First Republic Bank

 

618,801

 

64,962

*

Markel Corp.

 

55,866

 

56,138

 

Progressive Corp.

 

731,739

 

53,344

 

S&P Global Inc.

 

217,343

 

43,549

 

Intercontinental Exchange Inc.

 

543,734

 

41,949

 

MSCI Inc. Class A

 

224,011

 

41,379

 

Marsh & McLennan Cos. Inc.

 

387,196

 

36,017

 

TD Ameritrade Holding Corp.

 

568,473

 

32,022

 

4

 

U.S. Growth Fund

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Interactive Brokers Group Inc.

 

528,845

 

29,208

 

JPMorgan Chase & Co.

 

63,643

 

6,642

 

Goldman Sachs Group Inc.

 

30,200

 

5,940

 

 

 

 

 

915,767

Health Care (12.1%)

 

 

 

 

*

IQVIA Holdings Inc.

 

1,557,058

 

218,144

 

UnitedHealth Group Inc.

 

830,767

 

201,228

*

Illumina Inc.

 

620,253

 

193,997

*

Biogen Inc.

 

343,457

 

112,657

*

ABIOMED Inc.

 

250,712

 

83,863

*

Edwards Lifesciences Corp.

 

447,943

 

75,832

 

Thermo Fisher Scientific Inc.

 

164,830

 

42,785

*

Novocure Ltd.

 

724,772

 

38,928

*

Penumbra Inc.

 

277,416

 

37,082

*

Glaukos Corp.

 

442,104

 

32,791

*

Vertex Pharmaceuticals Inc.

 

159,032

 

30,017

*,^

Elanco Animal Health Inc.

 

955,690

 

28,900

*

Alnylam Pharmaceuticals Inc.

 

314,309

 

26,716

 

Danaher Corp.

 

168,050

 

21,346

*,^

Denali Therapeutics Inc.

 

922,497

 

20,074

*

DexCom Inc.

 

142,465

 

19,850

*

Agios Pharmaceuticals Inc.

 

240,430

 

15,597

 

AstraZeneca plc ADR

 

347,626

 

14,454

 

Intuitive Surgical Inc.

 

24,410

 

13,367

^

Moderna Inc.

 

577,080

 

13,042

 

Alexion Pharmaceuticals Inc.

 

96,137

 

13,010

 

BioMarin Pharmaceutical Inc.

 

133,733

 

12,472

 

Merck & Co. Inc.

 

128,278

 

10,428

 

Centene Corp.

 

17,610

 

1,072

 

 

 

 

 

1,277,652

Industrials (6.3%)

 

 

 

 

 

United Technologies Corp.

 

808,544

 

101,610

 

TransUnion

 

1,009,957

 

65,203

 

Lockheed Martin Corp.

 

200,919

 

62,166

*

CoStar Group Inc.

 

131,632

 

60,225

*

IHS Markit Ltd.

 

1,048,055

 

55,725

 

Equifax Inc.

 

392,987

 

43,036

 

Northrop Grumman Corp.

 

142,760

 

41,395

 

Watsco Inc.

 

260,960

 

37,549

 

AMETEK Inc.

 

425,314

 

33,846

 

Fortive Corp.

 

353,336

 

28,822

 

Boeing Co.

 

55,357

 

24,355

 

HEICO Corp. Class A

 

280,275

 

22,419

^

Wabtec Corp.

 

285,637

 

20,926

*

NOW Inc.

 

1,247,523

 

18,002

 

Fortune Brands Home & Security Inc.

 

306,679

 

14,451

 

Safran SA

 

79,856

 

10,886

 

Union Pacific Corp.

 

62,696

 

10,514

 

Canadian National Railway Co.

 

108,848

 

9,348

 

Airbus SE

 

17,500

 

2,254

 

 

 

 

 

662,732

Information Technology (30.4%)

 

 

 

 

 

Microsoft Corp.

 

5,649,863

 

632,954

 

Mastercard Inc. Class A

 

1,628,765

 

366,098

 

Visa Inc. Class A

 

1,747,469

 

258,835

*

PayPal Holdings Inc.

 

2,487,397

 

243,939

*

Autodesk Inc.

 

1,346,205

 

219,445

 

Apple Inc.

 

766,879

 

132,785

*

Arista Networks Inc.

 

438,279

 

125,019

 

Applied Materials Inc.

 

3,221,356

 

123,507

*

Adobe Inc.

 

386,096

 

101,350

*

ServiceNow Inc.

 

414,655

 

99,285

*

salesforce.com Inc.

 

601,750

 

98,476

*

FleetCor Technologies Inc.

 

377,329

 

88,023

*

Workday Inc. Class A

 

420,368

 

83,203

*

Trade Desk Inc. Class A

 

338,376

 

66,843

 

SS&C Technologies Holdings Inc.

 

977,984

 

60,224

*

2U Inc.

 

783,487

 

57,743

 

Global Payments Inc.

 

439,364

 

57,284

*

Shopify Inc. Class A

 

286,881

 

54,264

^

Microchip Technology Inc.

 

591,229

 

51,360

 

CDW Corp.

 

524,300

 

49,227

*

Tableau Software Inc. Class A

 

349,951

 

46,159

*

Advanced Micro Devices Inc.

 

1,538,375

 

36,198

*

Ellie Mae Inc.

 

309,488

 

30,791

*

New Relic Inc.

 

279,320

 

29,538

*

Gartner Inc.

 

180,886

 

25,740

 

NVIDIA Corp.

 

164,556

 

25,384

*

DocuSign Inc. Class A

 

391,125

 

21,571

^

Square Inc.

 

145,851

 

11,849

 

Broadcom Inc.

 

32,292

 

8,892

2

Adyen NV

 

9,336

 

6,991

 

Red Hat Inc.

 

35,696

 

6,518

*

Yext Inc.

 

24,309

 

452

 

 

 

 

 

3,219,947

Materials (0.3%)

 

 

 

 

 

Sherwin-Williams Co.

 

64,725

 

28,039

 

5

 

U.S. Growth Fund

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Other (0.0%)

 

 

 

 

*,§,3

WeWork Class A PP

 

19,046

 

1,295

 

 

 

 

 

 

Real Estate (1.9%)

 

 

 

 

 

Crown Castle International Corp.

 

619,914

 

73,615

 

American Tower Corp.

 

390,716

 

68,825

 

Equinix Inc.

 

76,200

 

32,271

*,^

Redfin Corp.

 

1,199,275

 

23,949

 

 

 

 

198,660

Total Common Stocks

(Cost $6,782,437)

 

 

 

9,959,482

Preferred Stocks (0.9%)

 

 

 

 

*,§,3,4

Uber Technologies PP, 8.00%

 

999,588

 

43,432

*,§,3,4

WeWork Pfd. D1 PP

 

260,418

 

17,708

*,§,3,4

Airbnb Inc., 8.00%

 

128,123

 

14,040

*,§,3,4

WeWork Pfd. D2 PP

 

204,614

 

13,914

*,§,3,4

Pinterest Prf G PP, 8.00%

 

1,596,475

 

8,190

Total Preferred Stocks

(Cost $46,639)

 

 

 

97,284

Temporary Cash Investments (5.4%)1

 

 

 

 

Money Market Fund (5.0%)

 

 

 

 

5,6

Vanguard Market Liquidity Fund, 2.563%

 

5,326,449

 

532,698

 

 

 

 

 

 

 

Face

 

 

 

 

Amount

 

 

 

 

($000

)

 

Repurchase Agreement (0.2%)

 

 

 

 

 

Bank of America Securities, LLC 2.570%, 3/1/19 (Dated 2/28/19, Repurchase Value $24,802,000, collateralized by Government National Mortgage Assn. 5.000%, 1/20/49, with a value of $25,296,000)

 

24,800

 

24,800

 

 

 

 

 

U.S. Government and Agency Obligations (0.2%)

 

 

 

 

7

United States Treasury Bill, 2.439%, 4/11/19

 

15,000

 

14,959

Total Temporary Cash Investments

(Cost $572,391)

 

 

 

572,457

Total Investments (100.5%)

(Cost $7,401,467)

 

 

 

10,629,223

Other Assets and Liabilities (-0.5%)

 

 

 

 

Other Assets

 

 

 

100,863

Liabilities5

 

 

 

(156,420)

 

 

 

 

(55,557)

Net Assets (100%)

 

 

 

10,573,666

 

6

 

U.S. Growth Fund

 

 

 

Amount

 

 

($000)

Statement of Assets and Liabilities

 

 

Assets

 

 

Investments in Securities, at Value

 

 

Unaffiliated Issuers

 

10,096,525

Affiliated Issuers

 

532,698

Total Investments in Securities

 

10,629,223

Investment in Vanguard

 

524

Receivables for Investment Securities Sold

 

36,946

Receivables for Accrued Income

 

7,210

Receivables for Capital Shares Issued

 

51,880

Other Assets

 

4,303

Total Assets

 

10,730,086

Liabilities

 

 

Payables for Investment Securities Purchased

 

50,309

Collateral for Securities on Loan

 

83,544

Payables to Investment Advisor

 

4,481

Payables for Capital Shares Redeemed

 

7,695

Payables to Vanguard

 

9,309

Variation Margin Payable—Futures Contracts

 

1,080

Other Liabilities

 

2

Total Liabilities

 

156,420

Net Assets

 

10,573,666

 

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

($000)

Paid-in Capital

 

6,861,497

Total Distributable Earnings (Loss)

 

3,712,169

Net Assets

 

10,573,666

 

 

 

Investor Shares—Net Assets

 

 

Applicable to 114,375,626 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

4,387,668

Net Asset Value Per Share—Investor Shares

 

$38.36

 

 

 

Admiral Shares—Net Assets

 

 

Applicable to 62,256,159 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

6,185,998

Net Asset Value Per Share—Admiral Shares

 

$99.36

 

· See Note A in Notes to Financial Statements.

* Non-income-producing security.

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $81,240,000.

§ Security value determined using significant unobservable inputs.

1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 97.3% and 2.3%, respectively, of net assets.

2 Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At February 28, 2019, the value of this security represented 0.1% of net assets.

3 Restricted securities totaling $98,579,000, representing 0.9% of net assets. See Restricted Securities table for additional information.

4 Perpetual security with no stated maturity date.

5 Includes $83,544,000 of collateral received for securities on loan.

6 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

7 Securities with a value of $12,316,000 have been segregated as initial margin for open futures contracts.

ADR—American Depositary Receipt.

PP—Private Placement.

 

7

 

U.S. Growth Fund

 

 

Restricted Securities as of Period End

 

Security Name

 

Acquisition
Date

 

Acquisition  
Cost  
($000)

Uber Technologies PP

 

June 2014

 

15,507

WeWork Pfd. D1 PP

 

December 2014

 

4,336

WeWork Pfd. D2 PP

 

December 2014

 

3,407

WeWork Class A PP

 

December 2014

 

317

Pinterest Prf G PP

 

March 2015

 

11,461

Airbnb Inc.

 

June 2015

 

11,928

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($000)

 

 

 

 

 

 

 

 

 

Value and

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

Long (Short)

 

Notional

 

Appreciation

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation)

Long Futures Contracts

 

 

 

 

 

 

 

 

E-mini S&P 500 Index

 

March 2019

 

1,975

 

274,989

 

13,684

E-mini S&P Mid-Cap 400 Index

 

March 2019

 

262

 

50,063

 

4,584

 

 

 

 

 

 

 

 

18,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

8

 

U.S. Growth Fund

 

 

Statement of Operations

 

 

 

 

Six Months Ended

February 28, 2019

 

 

($000)

Investment Income

 

 

Income

 

 

Dividends—Unaffiliated Issuers1

 

36,182

Dividends—Affiliated Issuers

 

3

Interest—Unaffiliated Issuers

 

641

Interest—Affiliated Issuers

 

4,268

Securities Lending—Net

 

412

Total Income

 

41,506

Expenses

 

 

Investment Advisory Fees—Note B

 

 

Basic Fee

 

8,414

Performance Adjustment

 

160

The Vanguard Group—Note C

 

 

Management and Administrative—Investor Shares

 

4,734

Management and Administrative—Admiral Shares

 

3,548

Marketing and Distribution—Investor Shares

 

240

Marketing and Distribution—Admiral Shares

 

148

Custodian Fees

 

38

Auditing Fees

 

5

Shareholders’ Reports—Investor Shares

 

41

Shareholders’ Reports—Admiral Shares

 

17

Trustees’ Fees and Expenses

 

6

Total Expenses

 

17,351

Expenses Paid Indirectly

 

(155)

Net Expenses

 

17,196

Net Investment Income

 

24,310

Realized Net Gain (Loss)

 

 

Investment Securities Sold—Unaffiliated Issuers

 

722,365

Investment Securities Sold—Affiliated Issuers

 

313

Futures Contracts

 

(46,549)

Foreign Currencies

 

(8)

Realized Net Gain (Loss)

 

676,121

Change in Unrealized Appreciation (Depreciation)

 

 

Investment Securities—Unaffiliated Issuers

 

(1,043,966)

Investment Securities—Affiliated Issuers

 

(370)

Futures Contracts

 

7,841

Foreign Currencies

 

(1)

Change in Unrealized Appreciation (Depreciation)

 

(1,036,496)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(336,065)

 

1   Dividends are net of foreign withholding taxes of $16,000.

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

9

 

U.S. Growth Fund

 

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

 

Year Ended

 

 

February 28,

 

August 31,

 

 

2019

 

2018

 

 

($000)

 

($000)

Increase (Decrease) in Net Assets

 

 

 

 

Operations

 

 

 

 

Net Investment Income

 

24,310

 

37,599

Realized Net Gain (Loss)

 

676,121

 

712,534

Change in Unrealized Appreciation (Depreciation)

 

(1,036,496)

 

1,487,575

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(336,065)

 

2,237,708

Distributions

 

 

 

 

Net Investment Income

 

 

 

 

Investor Shares

 

(14,003)

 

(15,531)

Admiral Shares

 

(26,012)

 

(16,499)

Realized Capital Gain1

 

 

 

 

Investor Shares

 

(328,376)

 

(180,528)

Admiral Shares

 

(451,846)

 

(192,765)

Total Distributions

 

(820,237)

 

(405,323)

Capital Share Transactions

 

 

 

 

Investor Shares

 

288,873

 

(383,169)

Admiral Shares

 

610,290

 

1,477,489

Net Increase (Decrease) from Capital Share Transactions

 

899,163

 

1,094,320

Total Increase (Decrease)

 

(257,139)

 

2,926,705

Net Assets

 

 

 

 

Beginning of Period

 

10,830,805

 

7,904,100

End of Period

 

10,573,666

 

10,830,805

 

1   Includes fiscal 2019 and 2018 short-term gain distributions totaling $87,222,000 and $24,991,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

10

 

U.S. Growth Fund

 

 

Financial Highlights

 

 

Investor Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding
Throughout Each Period

 

February 28,

 

 

 

 

 

Year Ended August 31,

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

Net Asset Value, Beginning of Period

 

$43.31

 

$35.62

 

$30.32

 

$30.89

 

$31.03

 

$24.67

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.0811

 

.1341

 

.1511

 

.151

 

.169

 

.168

Net Realized and Unrealized Gain (Loss) on Investments

 

(1.794)

 

9.394

 

5.590

 

1.944

 

2.168

 

6.303

Total from Investment Operations

 

(1.713)

 

9.528

 

5.741

 

2.095

 

2.337

 

6.471

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.132)

 

(.146)

 

(.121)

 

(.147)

 

(.194)

 

(.111)

Distributions from Realized Capital Gains

 

(3.105)

 

(1.692)

 

(.320)

 

(2.518)

 

(2.283)

 

—

Total Distributions

 

(3.237)

 

(1.838)

 

(.441)

 

(2.665)

 

(2.477)

 

(.111)

Net Asset Value, End of Period

 

$38.36

 

$43.31

 

$35.62

 

$30.32

 

$30.89

 

$31.03

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-3.02%

 

27.64%

 

19.24%

 

6.89%

 

7.96%

 

26.29%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$4,388

 

$4,582

 

$4,113

 

$3,794

 

$3,975

 

$4,038

Ratio of Total Expenses to Average Net Assets3

 

0.41%

 

0.42%

 

0.43%

 

0.46%

 

0.47%

 

0.44%

Ratio of Net Investment Income to Average Net Assets

 

0.42%

 

0.35%

 

0.47%

 

0.50%

 

0.53%

 

0.59%

Portfolio Turnover Rate

 

43%

 

33%

 

27%

 

32%

 

38%

 

36%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3   Includes performance-based investment advisory fee increases (decreases) of 0.00%, 0.01%, (0.01%), 0.02%, 0.03%, and (0.01%).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

11

 

U.S. Growth Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

 

 

 

 

Ended

 

 

For a Share Outstanding

Throughout Each Period

 

February 28,

 

Year Ended August 31,

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

Net Asset Value, Beginning of Period

 

$112.28

 

$92.24

 

$78.52

 

$80.01

 

$80.37

 

$63.91

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.2651

 

.4761

 

.5021

 

.506

 

.563

 

.557

Net Realized and Unrealized Gain (Loss) on Investments

 

(4.670)

 

24.323

 

14.480

 

5.018

 

5.607

 

16.293

Total from Investment Operations

 

(4.405)

 

24.799

 

14.982

 

5.524

 

6.170

 

16.850

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.464)

 

(.375)

 

(.433)

 

(.499)

 

(.623)

 

(.390)

Distributions from Realized Capital Gains

 

(8.051)

 

(4.384)

 

(.829)

 

(6.515)

 

(5.907)

 

—

Total Distributions

 

(8.515)

 

(4.759)

 

(1.262)

 

(7.014)

 

(6.530)

 

(.390)

Net Asset Value, End of Period

 

$99.36

 

$112.28

 

$92.24

 

$78.52

 

$80.01

 

$80.37

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-2.98%

 

27.78%

 

19.42%

 

7.03%

 

8.12%

 

26.44%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$6,186

 

$6,249

 

$3,791

 

$3,066

 

$2,421

 

$1,868

Ratio of Total Expenses to Average Net Assets3

 

0.30%

 

0.30%

 

0.30%

 

0.32%

 

0.33%

 

0.30%

Ratio of Net Investment Income to Average Net Assets

 

0.53%

 

0.47%

 

0.60%

 

0.64%

 

0.67%

 

0.73%

Portfolio Turnover Rate

 

43%

 

33%

 

27%

 

32%

 

38%

 

36%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3   Includes performance-based investment advisory fee increases (decreases) of 0.00%, 0.01%, 0.02%, 0.03%, and (0.01%).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

12

 

U.S. Growth Fund

 

 

Notes to Financial Statements

 

 

Vanguard U.S. Growth Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

 

3. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin

 

13

 

U.S. Growth Fund

 

 

 

 

requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented 3% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

4. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature, and in the absence of a default, such collateral cannot be repledged, resold, or rehypothecated. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of pre-qualified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.

 

5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

6. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

7. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans

 

14

 

U.S. Growth Fund

 

 

 

 

with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

8. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

9. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  The investment advisory firms Wellington Management Company LLP, Jackson Square Partners, LLC, Baillie Gifford Overseas Ltd., and Jennison Associates LLC each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fees of Wellington Management Company LLP, Jackson Square Partners, LLC, and Jennison Associates LLC are subject to quarterly adjustments based on performance relative to the Russell 1000 Growth Index for the preceding three years. The basic fee of Baillie Gifford Overseas Ltd. is subject to quarterly adjustments based on performance relative to

 

15

 

U.S. Growth Fund

 

 

 

 

the S&P 500 Index for the preceding three years. Until November 2018, a portion of the portfolio was managed by William Blair Investment Management, LLC. The basic fee paid to William Blair Investment Management, LLC, was subject to quarterly adjustments based on performance relative to the Russell 1000 Growth Index for the preceding five years.

 

Vanguard manages the cash reserves of the fund as described below.

 

For the six months ended February 28, 2019, the aggregate investment advisory fee paid to all advisors represented an effective annual basic rate of 0.17% of the fund’s average net assets, before an increase of $160,000 (0.00%) based on performance.

 

C.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, distribution, and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $524,000, representing 0.01% of the fund’s net assets and 0.21% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

D.  The fund has asked its investment advisors to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund’s management and administrative expenses. The fund’s custodian bank has also agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended February 28, 2019, these arrangements reduced the fund’s management and administrative expenses by $152,000 and custodian fees by $3,000. The total expense reduction represented an effective annual rate of 0.00% of the fund’s average net assets.

 

E.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

 

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

 

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

16

 

U.S. Growth Fund

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1 

 

Level 2 

 

Level 3

Investments

 

($000)

 

($000)

 

($000)

Common Stocks

 

9,904,317

 

53,870

 

1,295

Preferred Stocks

 

—

 

—

 

97,284

Temporary Cash Investments

 

532,698

 

39,759

 

—

Futures Contracts—Liabilities1

 

(1,080)

 

—

 

—

Total

 

10,435,935

 

93,629

 

98,579

 

1 Represents variation margin on the last day of the reporting period.

 

The determination of Level 3 fair value measurements is governed by documented policies and procedures adopted by the board of trustees. The board has designated a pricing review committee, as an agent of the board, to ensure the timely analysis and valuation of Level 3 securities held by the fund in accordance with established policies and procedures. The pricing review committee employs various methods for calibrating valuation approaches, including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity. All valuation decisions made by the pricing review committee are reported to the board on a quarterly basis for review and ratification. The board reviews the adequacy of the fair value measurement policies and procedures in place on an annual basis.

 

The following table summarizes changes in investments valued based on Level 3 inputs during the six months ended February 28, 2019. Transfers, if any, into or out of Level 3 are recognized based on values as of the date of transfer.

 

 

 

Investments

 

Investments

 

 

in Common

 

in Preferred

 

 

Stocks

 

Stocks

Amount Valued Based on Level 3 Inputs

 

($000)

 

($000)

Balance as of August 31, 2018

 

1,189

 

97,204

Purchases

 

—

 

—

Sales

 

—

 

—

Net Realized Gain (Loss)

 

—

 

—

Change in Unrealized Appreciation (Depreciation)

 

106

 

80

Balance as of February 28, 2019

 

1,295

 

97,284

 

Net change in unrealized appreciation (depreciation) from investments still held as of February 28, 2019, was $186,000.

 

17

 

U.S. Growth Fund

 

 

 

 

 

The following table provides quantitiative information about the significant unobservable inputs used in fair value measurement as of February 28, 2019:

 

 

 

Fair Value

 

 

 

 

 

 

 

 

at 2/28/2019

 

 

 

 

 

Amount or Range/

Security Type

 

($000)

 

Valuation Technique

 

Unobservable Input

 

Weighted Avg.

Common Stocks

 

1,295

 

Target Event

 

Weighted Average

 

75% at $54.00

 

 

 

 

 

 

Price/Weighted IPO

 

25% at $110.00

 

 

 

 

 

 

Probability

 

 

Preferred Stocks

 

43,432

 

Last Bid Price

 

Average Secondary

 

$43.45

 

 

 

 

 

 

Market Bids

 

 

 

 

31,622

 

Target Event

 

Weighted Average

 

75% at $54.00

 

 

 

 

 

 

Price/Weighted IPO

 

25% at $110.00

 

 

 

 

 

 

Probability

 

 

 

 

14,040

 

Comparable Companies

 

Enterprise Value/

 

5.5x-6.5x

 

 

 

 

Approach

 

Forward Revenue

 

 

 

 

 

 

 

 

Multiples

 

 

 

 

 

 

 

 

Liquidity Discount

 

10%

 

 

 

 

 

 

Weighted IPO

 

40%/60%

 

 

 

 

 

 

Probability

 

 

 

 

8,190

 

Comparable Companies

 

Enterprise Value/

 

5.5x

 

 

 

 

Approach

 

Forward Revenue

 

 

 

 

 

 

 

 

Multiple

 

 

 

 

 

 

 

 

Liquidity Discount

 

10%

 

 

 

 

 

 

IPO Probability

 

100%

 

Significant increases or decreases in the significant unobservable inputs used in the fair value measurement of the portfolio’s Level 3 securities, in isolation, could result in a significantly higher or lower fair value measurement at February 28, 2019.

 

F.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

($000)

Tax Cost

 

7,401,467

Gross Unrealized Appreciation

 

3,481,508

Gross Unrealized Depreciation

 

(253,752)

Net Unrealized Appreciation (Depreciation)

 

3,227,756

 

G. During the six months ended February 28, 2019, the fund purchased $2,743,425,000 of investment securities and sold $2,771,819,000 of investment securities, other than temporary cash investments.

 

18

 

U.S. Growth Fund

 

 

 

 

 

The fund purchased securities from and sold securities to other Vanguard funds or accounts managed by Vanguard or its affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the six months ended February 28, 2019, such purchases and sales were $51,233,000 and $344,872,000, respectively; these amounts are included in the purchases and sales of investment securities noted above.

 

H.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

Year Ended

 

 

February 28, 2019

 

August 31, 2018

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

($000)

 

(000)

 

($000)

 

(000)

Investor Shares

 

 

 

 

 

 

 

 

Issued

 

456,148

 

12,030

 

885,293

 

22,516

Issued in Lieu of Cash Distributions

 

333,194

 

9,768

 

192,107

 

5,198

Redeemed

 

(500,469)

 

(13,217)

 

(1,460,569)

 

(37,385)

Net Increase (Decrease)—Investor Shares

 

288,873

 

8,581

 

(383,169)

 

(9,671)

Admiral Shares

 

 

 

 

 

 

 

 

Issued

 

836,020

 

8,463

 

2,260,647

 

22,186

Issued in Lieu of Cash Distributions

 

449,504

 

5,088

 

199,346

 

2,082

Redeemed

 

(675,234)

 

(6,947)

 

(982,504)

 

(9,715)

Net Increase (Decrease)—Admiral Shares

 

610,290

 

6,604

 

1,477,489

 

14,553

 

 

I.   Transactions during the period in investments where the issuer is another member of The Vanguard Group were as follows:

 

 

 

 

 

Current Period Transactions

 

 

 

 

Aug. 31,

 

 

 

Proceeds

 

Realized

 

 

 

 

 

 

 

Feb. 28,

 

 

2018

 

 

 

from

 

Net

 

Change in

 

 

 

Capital Gain

 

2019

 

 

Market

 

Purchases

 

Securities

 

Gain

 

Unrealized

 

 

 

Distributions

 

Market

 

 

Value

 

at Cost

 

Sold

 

(Loss)

 

App. (Dep.)

 

Income

 

Received

 

Value

 

 

($000)

 

($000)

 

($000)

 

($000)

 

($000)

 

($000)

 

($000

)

($000)

Vanguard Growth ETF

 

498

 

—

 

465

 

309

 

(342)

 

3

 

—

 

—

Vanguard Market Liquidity Fund

 

379,919

 

NA1

 

NA1

 

4

 

(28)

 

4,268

 

—

 

532,698

Total

 

380,417

 

 

 

 

 

313

 

(370)

 

4,271

 

—

 

532,698

 

1 Not applicable —purchases and sales are for temporary cash investment purposes.

 

J.  On April 5, 2019, the fund acquired all of the net assets of Vanguard Morgan Growth Fund pursuant to a plan of reorganization approved by the funds’ board of trustees in November 2018. The purpose of the transaction was to combine two funds with comparable investment objectives. The acquisition was accomplished by a tax-free exchange of Vanguard U.S. Growth Fund’s capital shares for shares of Vanguard Morgan Growth Fund.

 

Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

19

 

Trustees Approve Advisory Arrangements

 

 

The board of trustees of Vanguard U.S. Growth Fund has renewed the fund’s investment advisory arrangements with Baillie Gifford Overseas Ltd. (Baillie Gifford), Jackson Square Partners, LLC (Jackson Square), Jennison Associates LLC (Jennison), and Wellington Management Company LLP (Wellington Management). The board determined that renewing the fund’s advisory arrangements was in the best interests of the fund and its shareholders. Please note that in December, the fund’s trustees modified its investment advisory arrangement. William Blair Investment Management, LLC, no longer serves as one of the fund’s advisors.

 

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 throughout 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:

 

Baillie Gifford. Baillie Gifford—a unit of Baillie Gifford & Co., founded in 1908—is among the largest independently owned investment management firms in the United Kingdom. Baillie Gifford aims to deliver outstanding investment performance by identifying exceptional growth companies in the United States and investing in them long enough for the advantages of their business models and strength of their cultures to become the dominant drivers of their stock prices. This long-term horizon allows the advisor to harness the asymmetry inherent in equity markets to capture the disproportionate impact of successful investments in the portfolio. Baillie Gifford has managed a portion of the fund since 2014.

 

Jackson Square. Founded in 2014, Jackson Square invests primarily in common stocks of large-capitalization, growth-oriented companies that it believes have long-term capital appreciation potential and are expected to grow faster than the U.S. economy. Jackson Square uses a bottom-up approach, seeking companies that have large-end market potential, dominant business models,

 

20

 

and strong free cash flow generation that is attractively priced compared to the intrinsic value of the securities. Jackson Square was founded by the same investment team that has managed a portion of the fund since 2010, previously as a part of Delaware Investments.

 

Jennison. Jennison, founded in 1969, is an indirect, wholly owned subsidiary of Prudential Financial Inc. Jennison uses internal fundamental research and a highly interactive stock selection process to identify companies that exhibit above-average growth in units, revenues, earnings, and cash flows. When analyzing a company for purchase or sale, Jennison focuses on the duration of the company’s growth opportunity and seeks to capture inflection points in its growth trajectory. Jennison has managed a portion of the fund since 2014.

 

Wellington Management. Founded in 1928, Wellington Management is among the nation’s oldest and most respected institutional investment managers. The advisor employs a traditional, bottom-up fundamental research approach to identify companies with sustainable growth advantages and reasonable valuations. Wellington Management identifies companies that have demonstrated above-average growth in the past and follows up with a thorough review of each company’s business model and an assessment of its valuation. The goal of this review is to identify companies with high returns on capital, superior business management, and high-quality balance sheets. Wellington Management has managed 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 each advisor’s subportfolio, including any periods of outperformance or underperformance compared with a relevant benchmark and peer group. The board concluded that the performance was such that each advisory arrangement should continue.

 

Cost

The board concluded that the fund’s expense ratio was below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below the peer-group average.

 

The board did not consider the profitability of Baillie Gifford, Jackson Square, Jennison, or Wellington Management in determining whether to approve the advisory fees, because the advisors 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 Baillie Gifford, Jackson Square, Jennison, and Wellington Management. The breakpoints reduce the effective rate of the fees as the fund’s assets managed by each advisor increase.

 

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

 

21

 

 

 

 

 

 

 

P.O. Box 2600

 

Valley Forge, PA 19482-2600

 

 

Connect with Vanguard® > vanguard.com

 

 

Fund Information > 800-662-7447

 

Direct Investor Account Services > 800-662-2739

 

Institutional Investor Services > 800-523-1036

 

Text Telephone for People

 

Who Are Deaf or Hard of Hearing > 800-749-7273

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

Source for Bloomberg Barclays indexes: Bloomberg Index Services Limited. Copyright 2019, Bloomberg. All rights reserved.

 

CFA® is a registered trademark owned by CFA Institute.

 

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

All rights reserved.

Vanguard Marketing Corporation, Distributor.

 

Q232 042019

 

 

 

 

 

 

Semiannual Report  |  February 28, 2019

 

 

Vanguard International Growth Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

About Your Fund’s Expenses

1

 

 

Financial Statements

4

 

 

Trustees Approve Advisory Arrangements

22

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·             Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·             Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Six Months Ended February 28, 2019

 

 

 

Beginning

 

Ending

 

Expenses

 

 

Account Value

 

Account Value

 

Paid During

International Growth Fund

 

8/31/2018

 

2/28/2019

 

Period

Based on Actual Fund Return

 

 

 

 

 

 

Investor Shares

 

$1,000.00

 

$949.44

 

$2.18

Admiral™ Shares

 

1,000.00

 

950.04

 

1.55

Based on Hypothetical 5% Yearly Return

 

 

 

 

 

 

Investor Shares

 

$1,000.00

 

$1,022.56

 

$2.26

Admiral Shares

 

1,000.00

 

1,023.21

 

1.61

 

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.45% for Investor Shares and 0.32% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

 

2

 

International Growth Fund

 

 

Sector Diversification

As of February 28, 2019

 

Communication Services

 

12.7

%

Consumer Discretionary

 

32.0

 

Consumer Staples

 

6.0

 

Energy

 

1.5

 

Financials

 

15.0

 

Health Care

 

10.1

 

Industrials

 

9.7

 

Information Technology

 

8.1

 

Materials

 

4.1

 

Other

 

0.8

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

3

 

International Growth Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (98.3%)1

 

 

 

 

Australia (0.5%)

 

 

 

 

 

Brambles Ltd.

 

20,161,054

 

168,301

 

 

 

 

 

 

Austria (0.4%)

 

 

 

 

 

Erste Group Bank AG

 

3,447,596

 

130,019

 

 

 

 

 

 

Belgium (1.1%)

 

 

 

 

 

Umicore SA

 

8,779,863

 

379,060

 

 

 

 

 

 

Brazil (0.8%)

 

 

 

 

 

B3 SA - Brasil Bolsa Balcao

 

13,303,825

 

116,138

 

Raia Drogasil SA

 

4,999,559

 

87,063

 

Telefonica Brasil SA Preference Shares

 

5,582,011

 

69,535

 

 

 

 

 

272,736

Canada (1.1%)

 

 

 

 

 

Nutrien Ltd.

 

3,575,914

 

194,645

 

Toronto-Dominion Bank

 

3,057,005

 

175,296

 

 

 

 

 

369,941

China (18.9%)

 

 

 

 

*

Alibaba Group Holding Ltd. ADR

 

10,636,558

 

1,946,809

 

Tencent Holdings Ltd.

 

41,822,300

 

1,790,967

*

Baidu Inc. ADR

 

4,633,984

 

753,208

*

TAL Education Group ADR

 

18,485,132

 

658,071

 

Ping An Insurance Group Co. of China Ltd.

 

37,534,500

 

396,790

*

Ctrip.com International Ltd. ADR

 

9,001,376

 

307,217

*,^

NIO Inc. ADR

 

17,591,617

 

168,352

*,^

iQIYI Inc. ADR

 

5,046,134

 

137,053

*,2

Meituan Dianping

 

18,638,108

 

130,138

 

China Pacific Insurance Group Co. Ltd.

 

33,827,200

 

127,275

*,^

Meituan Dianping Class B

 

13,982,022

 

108,423

 

China Mengniu Dairy Co. Ltd.

 

32,708,000

 

101,008

 

 

 

 

 

6,625,311

Denmark (2.9%)

 

 

 

 

*

Genmab A/S

 

2,594,661

 

447,800

 

Vestas Wind Systems A/S

 

2,043,797

 

170,277

 

Chr Hansen Holding A/S

 

1,658,818

 

168,842

 

Ambu A/S Class B

 

5,449,774

 

127,628

 

Novozymes A/S

 

2,401,809

 

109,065

 

 

 

 

 

1,023,612

France (7.0%)

 

 

 

 

 

Kering SA

 

1,368,726

 

746,737

 

L’Oreal SA

 

2,310,130

 

582,644

 

Schneider Electric SE

 

5,076,412

 

394,471

 

TOTAL SA

 

5,193,328

 

295,601

 

EssilorLuxottica SA

 

2,005,073

 

242,666

 

Vivendi SA

 

7,164,431

 

209,220

 

 

 

 

 

2,471,339

Germany (5.9%)

 

 

 

 

*,^,3

Zalando SE

 

10,466,867

 

386,067

 

Bayerische Motoren Werke AG

 

3,268,453

 

276,287

*,3

Delivery Hero SE

 

6,275,610

 

243,348

 

Infineon Technologies AG

 

8,669,188

 

190,527

 

adidas AG

 

716,713

 

173,983

 

BASF SE

 

2,275,881

 

173,236

 

Continental AG

 

815,675

 

133,597

 

SAP SE

 

1,238,958

 

132,603

*,^,4

HelloFresh SE

 

10,552,945

 

114,968

 

GEA Group AG

 

3,320,563

 

79,431

*

MorphoSys AG

 

664,989

 

68,341

*,3

Rocket Internet SE

 

2,762,933

 

64,982

*

AIXTRON SE

 

3,130,112

 

27,981

*,4

Home24 SE

 

1,862,256

 

15,351

 

 

 

 

 

2,080,702

 

4

 

International Growth Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Hong Kong (4.7%)

 

 

 

 

 

AIA Group Ltd.

 

127,277,600

 

1,270,273

 

Jardine Matheson Holdings Ltd.

 

3,099,000

 

212,243

 

Hong Kong Exchanges & Clearing Ltd.

 

4,767,930

 

164,347

 

 

 

 

 

1,646,863

India (2.2%)

 

 

 

 

 

Housing Development Finance Corp. Ltd.

 

11,680,736

 

302,612

 

HDFC Bank Ltd.

 

7,780,817

 

227,806

 

Zee Entertainment Enterprises Ltd.

 

27,208,888

 

178,576

*,§,2

ANI Technologies

 

166,185

 

49,650

 

 

 

 

 

758,644

Indonesia (0.4%)

 

 

 

 

 

Bank Central Asia Tbk PT

 

64,782,900

 

126,760

 

 

 

 

 

 

Israel (0.3%)

 

 

 

 

*

Check Point Software Technologies Ltd.

 

978,890

 

119,718

 

 

 

 

 

 

Italy (2.3%)

 

 

 

 

 

Ferrari NV

 

4,745,012

 

610,512

*

Fiat Chrysler Automobiles NV

 

13,737,294

 

203,011

 

 

 

 

 

813,523

Japan (11.0%)

 

 

 

 

 

SoftBank Group Corp.

 

6,053,300

 

561,712

 

SMC Corp.

 

1,548,600

 

541,735

 

M3 Inc.

 

26,545,800

 

439,118

 

Nidec Corp.

 

2,080,800

 

252,360

 

Bridgestone Corp.

 

6,324,500

 

250,523

 

Recruit Holdings Co. Ltd.

 

8,709,100

 

244,161

 

Nintendo Co. Ltd.

 

713,800

 

195,752

 

Takeda Pharmaceutical Co. Ltd.

 

4,689,100

 

188,703

 

Keyence Corp.

 

285,200

 

166,775

 

Sekisui Chemical Co. Ltd.

 

9,761,500

 

153,571

 

Pigeon Corp.

 

3,300,800

 

134,768

 

Kubota Corp.

 

9,695,100

 

130,759

 

Toyota Motor Corp.

 

2,137,700

 

129,178

 

Murata Manufacturing Co. Ltd.

 

728,600

 

113,651

 

ORIX Corp.

 

6,873,900

 

99,524

 

Suzuki Motor Corp.

 

1,855,100

 

95,258

 

SBI Holdings Inc.

 

4,470,400

 

94,528

 

KDDI Corp.

 

2,856,800

 

69,048

 

 

 

 

 

3,861,124

Netherlands (3.8%)

 

 

 

 

 

ASML Holding NV

 

7,358,719

 

1,346,194

 

 

 

 

 

 

Norway (0.8%)

 

 

 

 

 

DNB ASA

 

7,488,359

 

143,431

 

Norsk Hydro ASA

 

30,534,386

 

126,025

 

 

 

 

 

269,456

Other (0.2%)

 

 

 

 

5

Vanguard FTSE All-World ex-US ETF

 

1,128,434

 

56,230

 

 

 

 

 

 

Singapore (0.4%)

 

 

 

 

 

Oversea-Chinese Banking Corp. Ltd.

 

18,606,300

 

151,799

 

 

 

 

 

 

South Korea (2.0%)

 

 

 

 

*,^

Celltrion Inc.

 

1,695,817

 

307,636

 

Samsung Electronics Co. Ltd.

 

5,161,446

 

206,570

 

Samsung SDI Co. Ltd.

 

546,742

 

115,256

 

NAVER Corp.

 

539,978

 

63,800

 

 

 

 

 

693,262

Spain (3.2%)

 

 

 

 

 

Industria de Diseno Textil SA

 

21,245,632

 

641,331

 

Banco Bilbao Vizcaya Argentaria SA

 

79,161,502

 

491,032

^

Distribuidora Internacional de Alimentacion SA

 

12,745,795

 

8,267

 

 

 

 

 

1,140,630

Sweden (4.7%)

 

 

 

 

 

Svenska Handelsbanken AB Class A

 

35,069,697

 

399,529

 

Spotify Technology SA

 

2,632,668

 

368,942

*

Atlas Copco AB Class A

 

10,589,929

 

287,018

 

Kinnevik AB

 

10,340,628

 

261,685

 

Assa Abloy AB Class B

 

7,041,057

 

145,526

 

SKF AB

 

6,883,760

 

115,615

^

Elekta AB Class B

 

6,427,670

 

74,042

 

 

 

 

 

1,652,357

Switzerland (4.4%)

 

 

 

 

 

Nestle SA

 

5,177,491

 

468,325

 

Roche Holding AG

 

1,241,279

 

344,485

 

Novartis AG

 

2,570,314

 

234,243

 

UBS Group AG

 

14,683,126

 

186,327

 

Cie Financiere Richemont SA

 

2,255,223

 

172,302

 

Lonza Group AG

 

560,478

 

155,651

 

 

 

 

 

1,561,333

 

5

 

International Growth Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Taiwan (1.1%)

 

 

 

 

 

Taiwan Semiconductor Manufacturing Co. Ltd.

 

49,227,000

 

377,754

 

 

 

 

 

 

Thailand (0.4%)

 

 

 

 

 

Kasikornbank PCL (Foreign)

 

21,738,556

 

136,528

 

 

 

 

 

 

Turkey (0.2%)

 

 

 

 

 

Turkiye Garanti Bankasi AS

 

38,670,212

 

64,409

 

 

 

 

 

 

United Kingdom (7.6%)

 

 

 

 

 

Rolls-Royce Holdings plc

 

46,651,516

 

591,812

 

Diageo plc

 

9,856,147

 

381,676

*

Ocado Group plc

 

20,473,468

 

280,818

 

BHP Group plc

 

11,327,846

 

262,767

 

Royal Dutch Shell plc Class A

 

6,506,874

 

202,736

 

Reckitt Benckiser Group plc

 

2,343,204

 

178,963

 

Burberry Group plc

 

6,684,815

 

167,601

 

GlaxoSmithKline plc

 

6,811,239

 

135,754

 

Whitbread plc

 

1,986,669

 

127,919

 

Aviva plc

 

21,602,972

 

121,098

 

Smith & Nephew plc

 

5,870,828

 

111,551

*,^,3

Aston Martin Lagonda Global Holdings plc

 

6,321,596

 

90,271

 

 

 

 

 

2,652,966

United States (10.0%)

 

 

 

 

*

Amazon.com Inc.

 

669,737

 

1,098,255

*

Booking Holdings Inc.

 

72,687

 

123,353

*

Illumina Inc.

 

2,734,956

 

855,412

*

MercadoLibre Inc.

 

1,574,407

 

722,322

 

Philip Morris International Inc.

 

1,365,456

 

118,713

*,^

Tesla Inc.

 

1,894,281

 

605,942

 

 

 

 

 

3,523,997

Total Common Stocks
(Cost $24,754,888)

 

 

 

34,474,568

Preferred Stocks (0.2%)

 

 

 

 

*,§,2,6

CureVac GmbH

 

12,600

 

30,597

*,§,2,4,6

You & Mr. Jones

 

44,800,000

 

51,520

Total Preferred Stocks
(Cost $75,682)

 

 

 

82,117

Temporary Cash Investments (4.1%)1

 

 

 

 

Money Market Fund (4.0%)

 

 

 

 

7,8

Vanguard Market Liquidity Fund, 2.563%

 

14,167,701

 

1,416,912

 

 

 

 

Face

 

 

 

 

 

Amount

 

 

 

 

 

($000)

 

 

U.S. Government and Agency Obligations (0.1%)

 

 

 

 

9

United States Treasury Bill, 2.374%, 3/7/19

 

12,000

 

11,995

9

United States Treasury Bill, 2.388%, 3/28/19

 

3,000

 

2,995

9

United States Treasury Bill, 2.439%, 4/11/19

 

8,500

 

8,477

9

United States Treasury Bill, 2.497%, 5/23/19

 

8,000

 

7,956

 

 

 

 

 

31,423

Total Temporary Cash Investments
(Cost $1,448,158)

 

 

 

1,448,335

Total Investments (102.6%)
(Cost $26,278,728)

 

 

 

36,005,020

 

6

 

International Growth Fund

 

 

 

 

Amount

 

 

($000)

Other Assets and Liabilities (-2.6%)

 

 

Other Assets

 

 

Investment in Vanguard

 

1,739

Receivables for Accrued Income

 

48,078

Receivables for Capital Shares Issued

 

21,364

Variation Margin Receivable — Futures Contracts

 

1,520

Unrealized Appreciation — Forward Currency Contracts

 

10,348

Other Assets10

 

27,034

Total Other Assets

 

110,083

Liabilities

 

 

Payables for Investment Securities Purchased

 

(792)

Collateral for Securities on Loan

 

(949,354)

Payables for Capital Shares Redeemed

 

(19,181)

Payables to Investment Advisor

 

(14,180)

Payables to Vanguard

 

(31,179)

Variation Margin Payable — Futures Contracts

 

(2,009)

Unrealized Depreciation — Forward Currency Contracts

 

(6,332)

Total Liabilities

 

(1,023,027)

Net Assets (100%)

 

35,092,076

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

($000)

Paid-in Capital

 

25,504,938

Total Distributable Earnings (Loss)

 

9,587,138

Net Assets

 

35,092,076

 

 

 

Investor Shares—Net Assets

 

 

Applicable to 255,401,055 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

7,192,607

Net Asset Value Per Share—Investor Shares

 

$28.16

 

 

 

Admiral Shares—Net Assets

 

 

Applicable to 311,439,108 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

27,899,469

Net Asset Value Per Share—Admiral Shares

 

$89.58

 

·      See Note A in Notes to Financial Statements.

 

*       Non-income-producing security.

 

^      Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $908,507,000.

 

§     Security value determined using significant unobservable inputs.

 

1     The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.4% and 3.0%, respectively, of net assets.

 

2     Restricted securities totaling $261,905,000, representing 0.7% of net assets. See Restricted Securities table for additional information.

 

3     Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At February 28, 2019, the aggregate value of these securities was $784,668,000, representing 2.2% of net assets.

 

4     Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.

 

5     Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.

 

6     Perpetual security with no stated maturity date.

 

7     Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

8     Includes $949,354,000 of collateral received for securities on loan.

 

9     Securities with a value of $19,881,000 have been segregated as initial margin for open futures contracts.

 

10     Cash of $1,420,000 has been segregated as collateral for open forward currency contracts.

 

ADR—American Depositary Receipt.

 

7

 

International Growth Fund

 

 

Restricted Securities as of Period End

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition

 

 

Acquisition

 

Cost

Security Name

 

Date

 

($000)

You & Mr. Jones

 

September 2015

 

44,800

CureVac GmbH

 

October 2015

 

30,882

ANI Technologies

 

December 2015

 

51,748

Meituan Dianping

 

December 2015

 

71,956

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

 

 

 

 

 

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($000)

 

 

 

 

 

 

 

 

Value and

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

Long (Short)

 

Notional

 

Appreciation

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation)

Long Futures Contracts

 

 

 

 

 

 

 

 

Dow Jones EURO STOXX 50 Index

 

March 2019

 

3,656

 

137,149

 

7,350

Topix Index

 

March 2019

 

750

 

108,061

 

5,397

FTSE 100 Index

 

March 2019

 

725

 

68,039

 

1,368

S&P ASX 200 Index

 

March 2019

 

622

 

67,826

 

4,130

 

 

 

 

 

 

 

 

18,245

 

Forward Currency Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract

Settlement

Date

 

 

 

 

 

 

 

Unrealized

Appreciation

($000)

 

Unrealized

(Depreciation)

($000)

 

 

 

Contract Amount (000)

 

 

Counterparty

 

 

 

Receive

 

 

Deliver

 

 

BNP Paribas

 

3/20/19

 

EUR

116,235

 

USD

133,151

 

—

 

(707)

UBS AG

 

3/12/19

 

JPY

8,900,280

 

USD

80,467

 

—

 

(540)

Morgan Stanley Capital Services LLC

 

3/12/19

 

JPY

6,882,143

 

USD

61,223

 

581

 

—

Citibank, N.A.

 

3/26/19

 

AUD

85,914

 

USD

60,630

 

340

 

—

Morgan Stanley Capital Services LLC

 

3/20/19

 

GBP

38,286

 

USD

48,597

 

2,239

 

—

Citibank, N.A.

 

3/26/19

 

AUD

61,391

 

USD

43,804

 

—

 

(237)

Barclays Bank plc

 

3/20/19

 

GBP

32,460

 

USD

41,470

 

1,630

 

—

Citibank, N.A.

 

3/12/19

 

JPY

4,388,340

 

USD

39,861

 

—

 

(452)

JPMorgan Chase Bank, N.A.

 

3/12/19

 

JPY

3,824,850

 

USD

34,233

 

116

 

—

BNP Paribas

 

3/12/19

 

JPY

3,602,310

 

USD

32,597

 

—

 

(247)

Citibank, N.A.

 

3/20/19

 

EUR

24,252

 

USD

27,649

 

—

 

(15)

Morgan Stanley Capital Services LLC

 

3/20/19

 

EUR

18,752

 

USD

21,653

 

—

 

(286)

 

8

 

International Growth Fund

 

 

Forward Currency Contracts (continued)

 

 

Contract

 

 

 

 

Unrealized

Unrealized

 

Settlement

 

Contract Amount (000)

Appreciation

(Depreciation)

Counterparty

Date

 

Receive

 

Deliver

($000)

($000)

JPMorgan Chase Bank, N.A.

3/20/19

EUR

18,359

USD

20,860

59

—

Deutsche Bank AG

3/20/19

EUR

16,650

USD

19,115

—

(144)

Citibank, N.A.

3/20/19

GBP

14,728

USD

18,867

688

—

Goldman Sachs International

3/20/19

GBP

14,467

USD

18,740

469

—

JPMorgan Chase Bank, N.A.

3/20/19

EUR

15,706

USD

18,018

—

(122)

Morgan Stanley Capital Services LLC

3/26/19

AUD

23,269

USD

16,606

—

(93)

BNP Paribas

3/20/19

GBP

9,683

USD

12,292

566

—

Bank of America, N.A.

3/20/19

EUR

9,564

USD

10,853

45

—

UBS AG

3/20/19

GBP

8,276

USD

10,825

164

—

Morgan Stanley Capital Services LLC

3/20/19

EUR

7,993

USD

9,086

21

—

Barclays Bank plc

3/26/19

AUD

11,146

USD

8,027

—

(117)

Morgan Stanley Capital Services LLC

3/12/19

JPY

872,100

USD

7,884

—

(52)

JPMorgan Chase Bank, N.A.

3/26/19

AUD

6,818

USD

4,890

—

(52)

Goldman Sachs International

3/26/19

AUD

6,823

USD

4,866

—

(24)

Toronto—Dominion Bank

3/12/19

USD

70,505

JPY

7,674,290

1,586

—

Toronto—Dominion Bank

3/20/19

USD

47,423

EUR

41,532

100

—

BNP Paribas

3/20/19

USD

41,669

EUR

36,134

497

—

UBS AG

3/26/19

USD

32,688

AUD

45,844

154

—

Goldman Sachs International

3/12/19

USD

30,749

JPY

3,441,250

—

(155)

Morgan Stanley Capital Services LLC

3/20/19

USD

28,358

GBP

21,809

—

(600)

Goldman Sachs International

3/20/19

USD

22,649

GBP

17,738

—

(904)

JPMorgan Chase Bank, N.A.

3/20/19

USD

22,302

EUR

19,431

162

—

BNP Paribas

3/20/19

USD

20,749

GBP

16,266

—

(849)

JPMorgan Chase Bank, N.A.

3/26/19

USD

20,696

AUD

29,334

—

(122)

JPMorgan Chase Bank, N.A.

3/12/19

USD

20,641

JPY

2,318,180

—

(176)

Goldman Sachs International

3/26/19

USD

11,800

AUD

16,431

140

—

Bank of America, N.A.

3/20/19

USD

9,183

EUR

8,063

—

(4)

Bank of America, N.A.

3/20/19

USD

8,987

GBP

6,934

—

(220)

Goldman Sachs International

3/12/19

USD

8,249

JPY

914,320

38

—

JPMorgan Chase Bank, N.A.

3/12/19

USD

8,082

JPY

866,230

303

—

Citibank, N.A.

3/20/19

USD

7,963

EUR

7,011

—

(25)

Citibank, N.A.

3/12/19

USD

7,599

JPY

826,960

173

—

Barclays Bank plc

3/12/19

USD

6,243

JPY

682,220

117

—

Deutsche Bank AG

3/26/19

USD

4,926

AUD

6,897

31

—

Deutsche Bank AG

3/20/19

USD

4,657

GBP

3,496

15

—

 

9

 

International Growth Fund

 

 

Forward Currency Contracts (continued)

 

 

Contract

 

 

 

 

Unrealized

Unrealized

 

Settlement

 

Contract Amount (000)

Appreciation

(Depreciation)

Counterparty

Date

 

Receive

 

Deliver

($000)

($000)

BNP Paribas

3/12/19

USD

4,602

JPY

517,770

—

(48)

Citibank, N.A.

3/20/19

USD

4,015

EUR

3,494

33

—

Citibank, N.A.

3/26/19

USD

3,709

AUD

5,227

—

(1)

Citibank, N.A.

3/20/19

USD

3,185

GBP

2,504

—

(140)

Citibank, N.A.

3/26/19

USD

3,039

AUD

4,241

29

—

BNP Paribas

3/26/19

USD

2,112

AUD

2,902

52

—

 

 

 

 

 

 

10,348

(6,332)

 

AUD—Australian dollar.

 

EUR—euro.

 

GBP—British pound.

 

JPY—Japanese yen.

 

USD—U.S. dollar.

 

 

At February 28, 2019, the counterparties had deposited in segregated accounts securities and cash with a value of $6,759,000 in connection with open forward currency contracts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

10

 

International Growth Fund

 

 

Statement of Operations

 

 

Six Months Ended

 

February 28, 2019

 

($000)

Investment Income

 

Income

 

Dividends—Unaffiliated Issuers1

120,622

Dividends—Affiliated Issuers

812

Interest—Unaffiliated Issuers

344

Interest—Affiliated Issuers

5,254

Securities Lending—Net

13,562

Total Income

140,594

Expenses

 

Investment Advisory Fees—Note B

 

Basic Fee

23,871

Performance Adjustment

5,048

The Vanguard Group—Note C

 

Management and Administrative—Investor Shares

9,002

Management and Administrative—Admiral Shares

17,726

Marketing and Distribution—Investor Shares

497

Marketing and Distribution—Admiral Shares

824

Custodian Fees

1,318

Shareholders’ Reports—Investor Shares

89

Shareholders’ Reports—Admiral Shares

93

Trustees’ Fees and Expenses

19

Total Expenses

58,487

Net Investment Income

82,107

Realized Net Gain (Loss)

 

Investment Securities Sold—Unaffiliated Issuers

80,599

Investment Securities Sold—Affiliated Issuers

130

Futures Contracts

(22,480)

Forward Currency Contracts

(17,549)

Foreign Currencies

387

Realized Net Gain (Loss)

41,087

Change in Unrealized Appreciation (Depreciation)

 

Investment Securities—Unaffiliated Issuers

(1,979,532)

Investment Securities—Affiliated Issuers

(71,051)

Futures Contracts

19,122

Forward Currency Contracts

13,274

Foreign Currencies

(981)

Change in Unrealized Appreciation (Depreciation)

(2,019,168)

Net Increase (Decrease) in Net Assets Resulting from Operations

(1,895,974)

 

1   Dividends are net of foreign withholding taxes of $15,202,000.

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

11

 

International Growth Fund

 

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

Year Ended

 

February 28,

 

August 31,

 

2019

 

2018

 

($000)

 

($000)

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net Investment Income

82,107

485,445

Realized Net Gain (Loss)

41,087

1,574,400

Change in Unrealized Appreciation (Depreciation)

(2,019,168)

1,400,252

Net Increase (Decrease) in Net Assets Resulting from Operations

(1,895,974)

3,460,097

Distributions

 

 

Net Investment Income

 

 

Investor Shares

(101,822)

(66,639)

Admiral Shares

(414,446)

(217,469)

Realized Capital Gain1

 

 

Investor Shares

(234,310)

—

Admiral Shares

(863,521)

—

Total Distributions

(1,614,099)

(284,108)

Capital Share Transactions

 

 

Investor Shares

(108,118)

(426,156)

Admiral Shares

1,466,505

3,661,907

Net Increase (Decrease) from Capital Share Transactions

1,358,387

3,235,751

Total Increase (Decrease)

(2,151,686)

6,411,740

Net Assets

 

 

Beginning of Period

37,243,762

30,832,022

End of Period

35,092,076

37,243,762

 

1   Includes fiscal 2019 and 2018 short-term gain distributions totaling $14,439,000 and $0, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

12

 

International Growth Fund

 

 

Financial Highlights

 

 

Investor Shares

 

 

Six Months

 

 

 

 

 

 

Ended

 

 

 

 

 

For a Share Outstanding

February 28,

 

Year Ended August 31,

Throughout Each Period

2019

2018

2017

2016

2015

2014

Net Asset Value, Beginning of Period

$31.23

$28.38

$22.38

$20.83

$23.79

$20.42

Investment Operations

 

 

 

 

 

 

Net Investment Income

.0541

.3811

.2401

.304

.308

.4712

Net Realized and Unrealized Gain (Loss) on Investments

(1.793)

2.722

6.028

1.539

(2.774)

3.235

Total from Investment Operations

(1.739)

3.103

6.268

1.843

(2.466)

3.706

Distributions

 

 

 

 

 

 

Dividends from Net Investment Income

(.403)

(.253)

(.268)

(.293)

(.494)

(.336)

Distributions from Realized Capital Gains

(.928)

—

—

—

—

—

Total Distributions

(1.331)

(.253)

(.268)

(.293)

(.494)

(.336)

Net Asset Value, End of Period

$28.16

$31.23

$28.38

$22.38

$20.83

$23.79

 

 

 

 

 

 

 

Total Return3

-5.06%

10.97%

28.43%

8.95%

-10.46%

18.26%

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$7,193

$8,074

$7,731

$6,700

$7,172

$8,976

Ratio of Total Expenses to Average Net Assets4

0.45%

0.45%

0.45%

0.46%

0.47%

0.47%

Ratio of Net Investment Income to Average Net Assets

0.39%

1.25%

1.01%

1.47%

1.34%

2.08%2

Portfolio Turnover Rate

16%

16%

15%

29%

29%

21%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Net investment income per share and the ratio of net investment income to average net assets include $.080 and 0.35%, respectively, resulting from income received from Vodafone Group plc in the form of cash and shares in Verizon Communications Inc. in February 2014.

 

3   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

4   Includes performance-based investment advisory fee increases (decreases) of 0.03%, 0.03%, 0.03%, 0.04%, 0.03%, and 0.03%.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

13

 

International Growth Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

Six Months

 

 

 

 

 

 

Ended

 

 

 

 

 

For a Share Outstanding

February 28,

 

Year Ended August 31,

Throughout Each Period

2019

2018

2017

2016

2015

2014

Net Asset Value, Beginning of Period

$99.45

$90.24

$71.19

$66.28

$75.70

$64.98

Investment Operations

 

 

 

 

 

 

Net Investment Income

.2271

1.3651

.8791

1.062

1.088

1.6132

Net Realized and Unrealized Gain (Loss) on Investments

(5.724)

8.652

19.127

4.877

(8.821)

10.277

Total from Investment Operations

(5.497)

10.017

20.006

5.939

(7.733)

11.890

Distributions

 

 

 

 

 

 

Dividends from Net Investment Income

(1.418)

(.807)

(.956)

(1.029)

(1.687)

(1.170)

Distributions from Realized Capital Gains

(2.955)

—

—

—

—

—

Total Distributions

(4.373)

(.807)

(.956)

(1.029)

(1.687)

(1.170)

Net Asset Value, End of Period

$89.58

$99.45

$90.24

$71.19

$66.28

$75.70

 

 

 

 

 

 

 

Total Return3

-5.00%

11.14%

28.57%

9.07%

-10.32%

18.42%

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$27,899

$29,170

$23,101

$15,704

$13,752

$14,415

Ratio of Total Expenses to Average Net Assets4

0.32%

0.32%

0.32%

0.33%

0.34%

0.34%

Ratio of Net Investment Income to Average Net Assets

0.52%

1.38%

1.14%

1.60%

1.47%

2.21%2

Portfolio Turnover Rate

16%

16%

15%

29%

29%

21%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Net investment income per share and the ratio of net investment income to average net assets include $.255 and 0.35%, respectively, resulting from income received from Vodafone Group plc in the form of cash and shares in Verizon Communications Inc. in February 2014.

 

3   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

4   Includes performance-based investment advisory fee increases (decreases) of 0.03%, 0.03%, 0.03%, 0.04%, 0.03%, and 0.03%.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

14

 

International Growth Fund

 

 

Notes to Financial Statements

 

 

Vanguard International Growth Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.

 

A.      The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

 

3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse

 

15

 

International Growth Fund

 

 

 

 

 

imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

The fund enters into forward currency contracts to provide the appropriate currency exposure related to any open futures contracts or to protect the value of securities and related receivables and payables against changes in foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund’s average investment in forward currency contracts represented 2% of net assets, based on the average of the notional amounts at each quarter-end during the period.

 

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

16

 

International Growth Fund

 

 

 

 

 

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Withholding taxes on foreign dividends and capital gains have been provided for in accordance with the fund’s understanding of the applicable countries’ tax rules and rates. The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries.

 

17

 

International Growth Fund

 

 

 

 

 

Such tax reclaims received during the year, if any, are included in dividend income. No other amounts for additional tax reclaims are reflected in the financial statements due to the uncertainty as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.      The investment advisory firms Baillie Gifford Overseas Ltd. and Schroder Investment Management North America Inc. each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fees of Baillie Gifford Overseas Ltd. and Schroder Investment Management North America Inc. are subject to quarterly adjustments based on performance relative to the MSCI All Country World Index ex USA for the preceding three years.

 

Vanguard manages the cash reserves of the fund as described below.

 

For the six months ended February 28, 2019, the aggregate investment advisory fee represented an effective annual basic rate of 0.14% of the fund’s average net assets, before an increase of $5,048,000 (0.03%) based on performance.

 

C.      In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution, and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $1,739,000, representing 0.00% of the fund’s net assets and 0.70% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

D.      Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

 

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

 

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

18

 

International Growth Fund

 

 

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

Level 1

Level 2

Level 3

Investments

($000)

($000)

($000)

Common Stocks—North and South America

4,166,674

—

—

Common Stocks—Other

4,515,600

25,742,644

49,650

Preferred Stocks

—

—

82,117

Temporary Cash Investments

1,416,912

31,423

—

Futures Contracts—Assets1

1,520

—

—

Futures Contracts—Liabilities1

(2,009)

—

—

Forward Currency Contracts—Assets

—

10,348

—

Forward Currency Contracts—Liabilities

—

(6,332)

—

Total

10,098,697

25,778,083

131,767

 

1   Represents variation margin on the last day of the reporting period.

 

E.  At February 28, 2019, the fair values of derivatives were reflected in the Statement of Net Assets as follows:

 

 

 

Foreign

 

 

Equity

Exchange

 

 

Contracts

Contracts

Total

Statement of Net Assets Caption

($000)

($000)

($000)

Variation Margin Receivable—Futures Contracts

1,520

—

1,520

Unrealized Appreciation—Forwards Contracts

—

10,348

10,348

Total Assets

1,520

10,348

11,868

 

 

 

 

Variation Margin Payable—Futures Contracts

(2,009)

—

(2,009)

Unrealized Depreciation—Forwards Contracts

—

(6,332)

(6,332)

Total Liabilities

(2,009)

(6,332)

(8,341)

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 28, 2019, were:

 

 

 

Foreign

 

 

Equity

Exchange

 

 

Contracts

Contracts

Total

Realized Net Gain (Loss) on Derivatives

($000)

($000)

($000)

Futures Contracts

(22,480)

—

(22,480)

Forward Currency Contracts

—

(17,549)

(17,549)

Realized Net Gain (Loss) on Derivatives

(22,480)

(17,549)

(40,029)

 

 

 

 

Change in Unrealized Appreciation (Depreciation) on Derivatives

 

 

 

Futures Contracts

19,122

—

19,122

Forward Currency Contracts

—

13,274

13,274

Change in Unrealized Appreciation (Depreciation) on Derivatives

19,122

13,274

32,396

 

 

19

 

International Growth Fund

 

 

 

 

 

 

F.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

Amount

 

($000)

Tax Cost

26,302,751

Gross Unrealized Appreciation

11,553,743

Gross Unrealized Depreciation

(1,841,947)

Net Unrealized Appreciation (Depreciation)

9,711,796

 

G. During the six months ended February 28, 2019, the fund purchased $2,675,818,000 of investment securities and sold $2,958,398,000 of investment securities, other than temporary cash investments.

 

H.  Capital share transactions for each class of shares were:

 

 

Six Months Ended

 

Year Ended

 

February 28, 2019

 

August 31, 2018

 

Amount

Shares

 

Amount

Shares

 

($000)

(000)

 

($000)

(000)

Investor Shares

 

 

 

 

 

Issued

528,708

19,110

 

2,130,616

68,838

Issued in Lieu of Cash Distributions

322,714

12,842

 

64,011

2,138

Redeemed

(959,540)

(35,077)

 

(2,620,783)

(84,901)

Net Increase (Decrease)—Investor Shares

(108,118)

(3,125)

 

(426,156)

(13,925)

Admiral Shares

 

 

 

 

 

Issued

3,162,396

36,602

 

7,766,732

78,708

Issued in Lieu of Cash Distributions

1,174,404

14,695

 

199,790

2,098

Redeemed

(2,870,295)

(33,180)

 

(4,304,615)

(43,465)

Net Increase (Decrease)—Admiral Shares

1,466,505

18,117

 

3,661,907

37,341

 

 

20

 

International Growth Fund

 

I.   Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company or the issuer is another member of The Vanguard Group. Transactions during the period in securities of these companies were as follows:

 

 

 

 

Current Period Transactions

 

 

Aug. 31,

 

 

Proceeds

Net

Change in

 

 

 

Feb. 28,

 

2018

 

 

from

Realized

Net

 

 

Capital Gain

2019

 

Market

 

Purchases

Securities

Gain

Unrealized

 

 

Distributions

Market

 

Value

 

at Cost

Sold

(Loss)

App. (Dep.)

Income

 

Received

Value

 

($000)

 

($000)

($000)

($000)

($000)

($000)

 

($000)

($000)

HelloFresh SE

150,128

 

—

—

—

(35,160)

—

 

—

114,968

Home 24 SE

NA1

 

—

—

—

(38,777)

—

 

—

15,351

Vanguard FTSE All-World ex-US ETF

58,780

 

—

—

—

(2,550)

812

 

—

56,230

Vanguard Market Liquidity Fund

956,789

 

NA2

NA2

130

(30)

5,254

 

—

1,416,912

You & Mr. Jones

46,054

 

—

—

—

5,466

—

 

—

51,520

Total

1,211,751

 

 

 

130

(71,051)

6,066

 

—

1,654,981

 

1   Not applicable—at August 31, 2018, the issuer was not an affiliated company of the fund.

 

2   Not applicable—purchases and sales are for temporary cash investment purposes.

 

J.  Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

 

21

 

Trustees Approve Advisory Arrangements

 

 

The board of trustees of Vanguard International Growth Fund has renewed the fund’s investment advisory arrangements with Baillie Gifford Overseas Ltd. (Baillie Gifford) and Schroder Investment Management North America Inc. (Schroder Inc.), as well as the sub-advisory agreement with Schroder Investment Management North America Ltd. (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 advisory 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 throughout 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:

 

Baillie Gifford. Baillie Gifford—a unit of Baillie Gifford & Co., founded in 1908—is among the largest independently owned investment management firms in the United Kingdom. Baillie Gifford uses fundamental research to make long-term investments in companies that have above-average growth potential resulting from sustainable competitive advantages, special cultures and management, or competitive strength in underestimated technology shifts. Baillie Gifford believes that equities’ asymmetrical return pattern means that alpha is generated by focusing on the upside and the potential to earn exponential returns rather than being overly concerned with avoiding losing investments. The advisor takes a bottom-up, stock-driven approach to sector and country allocation. Baillie Gifford has advised a portion of the fund since 2003.

 

 

22

 

Schroder. Schroders plc, the parent company of Schroder Inc. and Schroder Ltd. (collectively, Schroder), was founded in 1804 in London, England. Schroder specializes in global equity and fixed income management and seeks to invest in securities of international companies where it has identified a significant growth gap, which is defined as forward earnings growth that is not yet recognized by the market. Schroder believes that market inefficiencies often drive material differences between underlying company fundamentals and market estimates. The advisor also believes that in-depth fundamental research, incorporating a comprehensive macroeconomic viewpoint and a robust framework of fundamental risk analysis, is the most reliable means of finding those companies and identifying the growth gap. Schroder Inc. has advised the fund since its inception in 1981, and its affiliate Schroder Ltd. has advised the fund since 2003.

 

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 each advisor’s sub-portfolio, including any periods of outperformance or underperformance compared with a relevant benchmark and peer group. The board concluded that the performance was such that each advisory arrangement should continue.

 

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 the peer-group average.

 

The board did not consider the profitability of Baillie Gifford or Schroder 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 Baillie Gifford and Schroder. The breakpoints reduce the effective rate of the fees as the fund’s assets managed by each advisor increase.

 

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

 

 

23

 

This page intentionally left blank.

 

 

 

This page intentionally left blank.

 

 

 

 

 

 

 

P.O. Box 2600

 

Valley Forge, PA 19482-2600

 

 

 

Connect with Vanguard® > vanguard.com

 

 

 

 

Fund Information > 800-662-7447

 

Direct Investor Account Services > 800-662-2739

 

Institutional Investor Services > 800-523-1036

 

Text Telephone for People

Who Are Deaf or Hard of Hearing > 800-749-7273

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

Source for Bloomberg Barclays indexes: Bloomberg Index Services Limited. Copyright 2019, Bloomberg. All rights reserved.

 

CFA® is a registered trademark owned by CFA Institute.

 

 

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

 

All rights reserved.

 

Vanguard Marketing Corporation, Distributor

 

 

 

Q812 042019

 

 

 

 

 

 

Semiannual Report | February 28, 2019

 

 

Vanguard FTSE Social Index Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

 

 

About Your Fund’s Expenses

1

Financial Statements

4

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·   Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·   Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Six Months Ended February 28, 2019

 

 

 

FTSE Social Index Fund

Beginning
Account Value
8/31/2018

Ending
Account Value
2/28/2019

Expenses
Paid During
Period

Based on Actual Fund Return

 

 

 

Investor Shares

$1,000.00

$971.08

$0.88

Admiral™ Shares

1,000.00

1,030.00

0.09

Institutional Shares

1,000.00

971.31

0.59

Based on Hypothetical 5% Yearly Return

 

 

 

Investor Shares

$1,000.00

$1,023.90

$0.90

Admiral Shares

1,000.00

1,024.10

0.09

Institutional Shares

1,000.00

1,024.20

0.60

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.18% for Investor Shares, 0.14% for Admiral Shares (since inception), and 0.12% for Institutional Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365 for Investor and Institutional Shares and 22/365 for Admiral Shares).

 

2

 

FTSE Social Index Fund

 

Sector Diversification

As of February 28, 2019

 

Basic Materials

 

1.9

%

Consumer Goods

 

8.0

 

Consumer Services

 

9.7

 

Financials

 

22.1

 

Health Care

 

17.0

 

Industrials

 

9.4

 

Oil & Gas

 

3.3

 

Technology

 

27.4

 

Telecommunications

 

0.1

 

Utilities

 

1.1

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. Sector categories are based on the Industry Classification Benchmark (“ICB”), except for the “Other” category (if applicable), which includes securities that have not been provided an ICB classification as of the effective reporting period.

 

3

 

FTSE Social Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

Common Stocks (100.0%)

 

 

 

 

 

Basic Materials (1.9%)

 

 

 

 

 

 

 

Linde plc

 

154,527

 

26,770

 

 

 

Ecolab Inc.

 

71,418

 

12,063

 

 

 

Air Products & Chemicals Inc.

 

61,483

 

11,139

 

 

 

PPG Industries Inc.

 

67,805

 

7,592

 

 

 

LyondellBasell Industries NV Class A

 

87,978

 

7,524

 

 

 

Nucor Corp.

 

87,944

 

5,327

 

 

 

Newmont Mining Corp.

 

149,346

 

5,096

 

 

 

International Flavors & Fragrances Inc.

 

28,219

 

3,598

 

 

 

FMC Corp.

 

37,510

 

3,357

 

 

 

Mosaic Co.

 

98,454

 

3,079

 

 

 

CF Industries Holdings Inc.

 

64,589

 

2,726

 

 

 

Albemarle Corp.

 

29,560

 

2,699

 

 

 

Avery Dennison Corp.

 

24,140

 

2,608

 

 

 

Steel Dynamics Inc.

 

61,700

 

2,303

 

*

 

Alcoa Corp.

 

52,137

 

1,538

 

 

 

Ashland Global Holdings Inc.

 

17,458

 

1,351

 

 

 

Westlake Chemical Corp.

 

10,098

 

706

 

 

 

 

 

 

 

99,475

 

Consumer Goods (8.0%)

 

 

 

 

 

 

 

Procter & Gamble Co.

 

698,347

 

68,822

 

 

 

PepsiCo Inc.

 

397,170

 

45,929

 

 

 

NIKE Inc. Class B

 

351,742

 

30,155

 

 

 

Mondelez International Inc. Class A

 

400,217

 

18,874

 

 

 

Colgate-Palmolive Co.

 

238,916

 

15,737

 

 

 

General Motors Co.

 

367,085

 

14,493

 

*

 

Tesla Inc.

 

38,416

 

12,289

 

 

 

Kimberly-Clark Corp.

 

97,650

 

11,408

 

 

 

Ford Motor Co.

 

1,093,297

 

9,588

 

 

 

Estee Lauder Cos. Inc. Class A

 

59,981

 

9,413

 

 

 

Activision Blizzard Inc.

 

210,929

 

8,889

 

*

 

Electronic Arts Inc.

 

83,135

 

7,963

 

 

 

VF Corp.

 

90,643

 

7,919

 

 

 

General Mills Inc.

 

166,259

 

7,836

 

*

 

Monster Beverage Corp.

 

111,745

 

7,133

 

 

 

Aptiv plc

 

74,151

 

6,163

 

 

 

Clorox Co.

 

35,962

 

5,683

 

 

 

Kraft Heinz Co.

 

168,973

 

5,608

 

 

 

Tyson Foods Inc. Class A

 

81,354

 

5,016

 

 

 

McCormick & Co. Inc.

 

34,014

 

4,625

 

 

 

Church & Dwight Co. Inc.

 

68,396

 

4,500

 

 

 

Genuine Parts Co.

 

40,009

 

4,352

 

 

 

Hershey Co.

 

39,318

 

4,352

 

*

 

Lululemon Athletica Inc.

 

26,741

 

4,022

 

 

 

Kellogg Co.

 

69,625

 

3,917

 

 

 

Lennar Corp. Class A

 

80,391

 

3,857

 

 

 

DR Horton Inc.

 

96,462

 

3,751

 

^

 

Hormel Foods Corp.

 

76,125

 

3,301

 

 

 

JM Smucker Co.

 

30,853

 

3,268

 

 

 

Conagra Brands Inc.

 

135,304

 

3,162

 

 

 

Lamb Weston Holdings Inc.

 

41,018

 

2,843

 

 

 

Tapestry Inc.

 

80,686

 

2,819

 

*

 

Take-Two Interactive Software Inc.

 

31,600

 

2,757

 

 

 

Lear Corp.

 

17,906

 

2,723

 

 

 

Garmin Ltd.

 

31,928

 

2,681

 

 

 

Whirlpool Corp.

 

17,518

 

2,479

 

 

 

PVH Corp.

 

21,456

 

2,464

 

*

 

LKQ Corp.

 

88,591

 

2,454

 

 

 

Coca-Cola European Partners plc

 

51,098

 

2,409

 

 

 

BorgWarner Inc.

 

58,390

 

2,371

 

*

 

Mohawk Industries Inc.

 

17,416

 

2,371

 

 

 

Bunge Ltd.

 

39,299

 

2,086

 

 

 

Autoliv Inc.

 

24,545

 

2,008

 

 

 

Newell Brands Inc.

 

121,415

 

1,971

 

 

 

PulteGroup Inc.

 

71,580

 

1,933

 

 

 

Ralph Lauren Corp. Class A

 

15,137

 

1,895

 

 

 

Fortune Brands Home & Security Inc.

 

39,831

 

1,877

 

 

 

Hanesbrands Inc.

 

100,160

 

1,862

 

 

4

 

FTSE Social Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

 

 

Ingredion Inc.

 

19,746

 

1,826

 

*

 

Capri Holdings Ltd.

 

39,418

 

1,797

 

*

 

Campbell Soup Co.

 

49,508

 

1,783

 

*

 

Herbalife Nutrition Ltd.

 

30,412

 

1,706

 

 

 

Harley-Davidson Inc.

 

45,681

 

1,696

 

 

 

Leggett & Platt Inc.

 

36,579

 

1,661

 

 

 

Jefferies Financial Group Inc.

 

81,700

 

1,656

 

 

 

Gentex Corp.

 

75,545

 

1,537

 

^

 

Coty Inc. Class A

 

130,500

 

1,436

 

 

 

Polaris Industries Inc.

 

16,390

 

1,397

 

*,^

 

Mattel Inc.

 

96,279

 

1,388

 

 

 

Toll Brothers Inc.

 

38,099

 

1,356

 

 

 

Goodyear Tire & Rubber Co.

 

65,400

 

1,294

 

 

 

Keurig Dr Pepper Inc.

 

50,267

 

1,264

 

*

 

Under Armour Inc. Class A

 

51,550

 

1,162

 

*

 

Under Armour Inc. Class C

 

53,537

 

1,075

 

 

 

Adient plc

 

26,300

 

511

 

*

 

Garrett Motion Inc.

 

21,300

 

357

 

 

 

 

 

 

 

408,929

 

Consumer Services (9.7%)

 

 

 

 

 

 

 

Home Depot Inc.

 

323,226

 

59,842

 

 

 

Walt Disney Co.

 

418,023

 

47,170

 

*

 

Netflix Inc.

 

116,781

 

41,819

 

 

 

McDonald’s Corp.

 

217,792

 

40,039

 

 

 

Lowe’s Cos. Inc.

 

228,912

 

24,056

 

 

 

Starbucks Corp.

 

338,654

 

23,794

 

*

 

Booking Holdings Inc.

 

13,310

 

22,588

 

 

 

CVS Health Corp.

 

360,046

 

20,821

 

 

 

TJX Cos. Inc.

 

347,052

 

17,800

 

 

 

Twenty-First Century Fox Inc. Class A

 

292,500

 

14,751

 

 

 

Ross Stores Inc.

 

102,360

 

9,707

 

 

 

Sysco Corp.

 

133,412

 

9,012

 

 

 

Delta Air Lines Inc.

 

178,959

 

8,873

 

 

 

Dollar General Corp.

 

74,553

 

8,832

 

*

 

O’Reilly Automotive Inc.

 

22,095

 

8,218

 

 

 

Southwest Airlines Co.

 

146,300

 

8,199

 

 

 

McKesson Corp.

 

54,704

 

6,956

 

 

 

Twenty-First Century Fox Inc.

 

136,917

 

6,868

 

*

 

AutoZone Inc.

 

7,115

 

6,681

 

*

 

Dollar Tree Inc.

 

65,726

 

6,331

 

*

 

United Continental Holdings Inc.

 

68,500

 

6,015

 

*

 

MercadoLibre Inc.

 

11,500

 

5,276

 

*

 

Ulta Beauty Inc.

 

15,839

 

4,950

 

 

 

Omnicom Group Inc.

 

62,333

 

4,719

 

 

 

Best Buy Co. Inc.

 

65,923

 

4,538

 

 

 

American Airlines Group Inc.

 

116,700

 

4,158

 

 

 

Expedia Group Inc.

 

33,690

 

4,154

 

*

 

Chipotle Mexican Grill Inc. Class A

 

6,834

 

4,152

 

 

 

Yum China Holdings Inc.

 

97,832

 

4,082

 

 

 

Darden Restaurants Inc.

 

34,683

 

3,888

 

 

 

AmerisourceBergen Corp. Class A

 

44,148

 

3,678

 

*

 

Copart Inc.

 

56,700

 

3,327

 

 

 

Tractor Supply Co.

 

34,138

 

3,255

 

 

 

Tiffany & Co.

 

34,027

 

3,234

 

 

 

Advance Auto Parts Inc.

 

19,525

 

3,159

 

 

 

Kohl’s Corp.

 

46,766

 

3,158

 

*

 

CarMax Inc.

 

48,864

 

3,034

 

 

 

Domino’s Pizza Inc.

 

11,600

 

2,911

 

 

 

Viacom Inc. Class B

 

99,077

 

2,895

 

 

 

Nielsen Holdings plc

 

99,944

 

2,619

 

*

 

Discovery Communications Inc.

 

94,698

 

2,581

 

*

 

Henry Schein Inc.

 

42,454

 

2,518

 

 

 

Interpublic Group of Cos. Inc.

 

107,613

 

2,478

 

 

 

Vail Resorts Inc.

 

11,200

 

2,334

 

 

 

Macy’s Inc.

 

85,601

 

2,122

 

 

 

Alaska Air Group Inc.

 

33,654

 

2,076

 

 

 

Aramark

 

68,317

 

2,070

 

 

 

Foot Locker Inc.

 

31,968

 

1,903

 

 

 

L Brands Inc.

 

63,939

 

1,671

 

 

 

Rollins Inc.

 

40,700

 

1,614

 

 

 

Nordstrom Inc.

 

32,933

 

1,557

 

 

 

Gap Inc.

 

60,393

 

1,534

 

 

 

Wyndham Hotels & Resorts Inc.

 

27,300

 

1,435

 

 

 

H&R Block Inc.

 

57,506

 

1,389

 

*,^

 

Discovery Communications Inc. Class A

 

44,966

 

1,300

 

*

 

AutoNation Inc.

 

15,257

 

538

 

 

 

 

 

 

 

498,676

 

Financials (22.1%)

 

 

 

 

 

 

 

JPMorgan Chase & Co.

 

927,878

 

96,833

 

 

 

Bank of America Corp.

 

2,564,941

 

74,588

 

 

 

Visa Inc. Class A

 

493,868

 

73,152

 

 

 

Wells Fargo & Co.

 

1,189,615

 

59,350

 

 

 

Mastercard Inc. Class A

 

257,592

 

57,899

 

 

 

Citigroup Inc.

 

684,957

 

43,824

 

 

 

US Bancorp

 

424,081

 

21,921

 

 

 

American Tower Corp.

 

122,905

 

21,650

 

 

 

American Express Co.

 

185,002

 

19,932

 

 

 

Goldman Sachs Group Inc.

 

97,733

 

19,224

 

 

 

CME Group Inc.

 

99,115

 

18,030

 

 

 

Chubb Ltd.

 

128,537

 

17,211

 

 

 

PNC Financial Services Group Inc.

 

130,098

 

16,395

 

 

 

Simon Property Group Inc.

 

86,396

 

15,651

 

 

5

 

FTSE Social Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

 

 

Charles Schwab Corp.

 

336,726

 

15,493

 

 

 

Morgan Stanley

 

364,136

 

15,286

 

 

 

BlackRock Inc.

 

34,017

 

15,077

 

 

 

S&P Global Inc.

 

70,393

 

14,105

 

 

 

Crown Castle International Corp.

 

116,044

 

13,780

 

 

 

Bank of New York Mellon Corp.

 

256,362

 

13,454

 

 

 

Marsh & McLennan Cos. Inc.

 

142,101

 

13,218

 

 

 

Prologis Inc.

 

175,480

 

12,294

 

 

 

Intercontinental Exchange Inc.

 

157,432

 

12,146

 

 

 

Progressive Corp.

 

162,470

 

11,844

 

 

 

Aon plc

 

67,363

 

11,555

 

 

 

Capital One Financial Corp.

 

133,662

 

11,171

 

 

 

Prudential Financial Inc.

 

115,685

 

11,088

 

 

 

BB&T Corp.

 

215,802

 

10,999

 

 

 

American International Group Inc.

 

249,348

 

10,772

 

 

 

MetLife Inc.

 

236,820

 

10,702

 

 

 

Aflac Inc.

 

214,032

 

10,518

 

 

 

Travelers Cos. Inc.

 

74,155

 

9,856

 

 

 

Equinix Inc.

 

22,474

 

9,518

 

 

 

Allstate Corp.

 

96,898

 

9,145

 

 

 

Public Storage

 

41,627

 

8,804

 

 

 

SunTrust Banks Inc.

 

125,769

 

8,159

 

*

 

Moody’s Corp.

 

46,680

 

8,081

 

 

 

Welltower Inc.

 

104,237

 

7,746

 

 

 

State Street Corp.

 

105,163

 

7,558

 

 

 

AvalonBay Communities Inc.

 

38,691

 

7,530

 

 

 

Equity Residential

 

100,515

 

7,407

 

 

 

M&T Bank Corp.

 

39,239

 

6,791

 

 

 

Synchrony Financial

 

207,653

 

6,772

 

 

 

Discover Financial Services

 

93,977

 

6,730

 

 

 

T. Rowe Price Group Inc.

 

66,148

 

6,643

 

 

 

Digital Realty Trust Inc.

 

57,596

 

6,515

 

 

 

Ventas Inc.

 

99,698

 

6,256

 

 

 

Boston Properties Inc.

 

43,267

 

5,741

 

 

 

Realty Income Corp.

 

82,762

 

5,724

 

*

 

IHS Markit Ltd.

 

106,929

 

5,685

 

*

 

SBA Communications Corp. Class A

 

31,400

 

5,670

 

 

 

Northern Trust Corp.

 

57,110

 

5,323

 

 

 

Weyerhaeuser Co.

 

209,665

 

5,219

 

 

 

Ameriprise Financial Inc.

 

39,046

 

5,140

 

 

 

KeyCorp

 

288,673

 

5,098

 

 

 

Fifth Third Bancorp

 

183,582

 

5,063

 

 

 

Hartford Financial Services Group Inc.

 

100,025

 

4,937

 

 

 

Citizens Financial Group Inc.

 

130,941

 

4,837

 

 

 

First Republic Bank

 

45,737

 

4,801

 

 

 

Regions Financial Corp.

 

289,683

 

4,751

 

 

 

MSCI Inc. Class A

 

24,400

 

4,507

 

 

 

TD Ameritrade Holding Corp.

 

78,860

 

4,442

 

*

 

CBRE Group Inc. Class A

 

89,074

 

4,432

 

 

 

Huntington Bancshares Inc.

 

295,437

 

4,257

 

 

 

Principal Financial Group Inc.

 

78,345

 

4,124

 

 

 

Arthur J Gallagher & Co.

 

50,589

 

4,061

 

 

 

HCP Inc.

 

131,650

 

4,051

 

 

 

Alexandria Real Estate Equities Inc.

 

29,800

 

4,050

 

 

 

Host Hotels & Resorts Inc.

 

205,300

 

4,026

 

 

 

Comerica Inc.

 

45,104

 

3,929

 

 

 

Annaly Capital Management Inc.

 

387,433

 

3,925

 

*

 

Markel Corp.

 

3,807

 

3,826

 

 

 

Cincinnati Financial Corp.

 

43,051

 

3,738

 

 

 

Lincoln National Corp.

 

59,783

 

3,738

 

 

 

Loews Corp.

 

77,955

 

3,712

 

 

 

Equifax Inc.

 

33,418

 

3,660

 

*

 

SVB Financial Group

 

14,800

 

3,658

 

*

 

Arch Capital Group Ltd.

 

108,372

 

3,541

 

 

 

E*TRADE Financial Corp.

 

71,198

 

3,488

 

 

 

UDR Inc.

 

74,433

 

3,306

 

 

 

Mid-America Apartment Communities Inc.

 

31,776

 

3,291

 

 

 

Vornado Realty Trust

 

48,158

 

3,242

 

 

 

Ally Financial Inc.

 

118,248

 

3,203

 

 

 

Raymond James Financial Inc.

 

36,766

 

3,036

 

 

 

Nasdaq Inc.

 

32,356

 

2,963

 

 

 

Duke Realty Corp.

 

100,002

 

2,957

 

 

 

Iron Mountain Inc.

 

79,424

 

2,813

 

 

 

Regency Centers Corp.

 

42,502

 

2,773

 

 

 

Franklin Resources Inc.

 

84,200

 

2,746

 

 

 

Zions Bancorp NA

 

53,246

 

2,721

 

 

 

Alleghany Corp.

 

4,068

 

2,616

 

 

 

Fidelity National Financial Inc.

 

74,013

 

2,597

 

 

 

AGNC Investment Corp.

 

144,990

 

2,559

 

 

 

Everest Re Group Ltd.

 

11,301

 

2,555

 

 

 

Torchmark Corp.

 

28,905

 

2,386

 

 

 

Western Union Co.

 

125,027

 

2,234

 

 

 

WR Berkley Corp.

 

26,654

 

2,230

 

 

 

Voya Financial Inc.

 

43,553

 

2,202

 

 

 

Invesco Ltd.

 

113,541

 

2,197

 

 

 

Unum Group

 

57,898

 

2,163

 

 

 

VEREIT Inc.

 

270,956

 

2,160

 

 

 

SL Green Realty Corp.

 

23,018

 

2,088

 

 

 

Kimco Realty Corp.

 

113,744

 

2,001

 

 

 

Liberty Property Trust

 

41,206

 

1,950

 

 

 

Brown & Brown Inc.

 

65,000

 

1,925

 

 

6

 

FTSE Social Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

 

 

Invitation Homes Inc.

 

83,600

 

1,923

 

 

 

People’s United Financial Inc.

 

103,525

 

1,839

 

 

 

SEI Investments Co.

 

34,181

 

1,803

 

 

 

Park Hotels & Resorts Inc.

 

56,400

 

1,762

 

 

 

Commerce Bancshares Inc.

 

27,936

 

1,758

 

 

 

New York Community Bancorp Inc.

 

132,879

 

1,662

 

 

 

Macerich Co.

 

37,919

 

1,653

 

 

 

Old Republic International Corp.

 

79,000

 

1,648

 

 

 

RenaissanceRe Holdings Ltd.

 

11,135

 

1,637

 

 

 

Affiliated Managers Group Inc.

 

14,700

 

1,611

 

 

 

CIT Group Inc.

 

29,600

 

1,509

 

 

 

Assurant Inc.

 

14,487

 

1,492

 

*,^

 

Zillow Group Inc.

 

33,900

 

1,417

 

 

 

Janus Henderson Group plc

 

55,700

 

1,365

 

 

 

Axis Capital Holdings Ltd.

 

22,962

 

1,310

 

*

 

Brighthouse Financial Inc.

 

33,719

 

1,306

 

 

 

Hospitality Properties Trust

 

45,298

 

1,226

 

 

 

AXA Equitable Holdings Inc.

 

55,700

 

1,065

 

 

 

Brookfield Property REIT Inc. Class A

 

35,182

 

690

 

 

 

Santander Consumer USA Holdings Inc.

 

32,598

 

670

 

*

 

Zillow Group Inc. Class A

 

15,800

 

655

 

 

 

CNA Financial Corp.

 

7,900

 

341

 

 

 

 

 

 

 

1,133,083

 

Health Care (17.0%)

 

 

 

 

 

 

 

Johnson & Johnson

 

752,811

 

102,864

 

*

 

Pfizer Inc.

 

1,626,836

 

70,523

 

 

 

UnitedHealth Group Inc.

 

267,993

 

64,913

 

 

 

Merck & Co. Inc.

 

729,765

 

59,323

 

 

 

Abbott Laboratories

 

479,644

 

37,230

 

 

 

Medtronic plc

 

379,461

 

34,341

 

 

 

Amgen Inc.

 

178,772

 

33,981

 

 

 

AbbVie Inc.

 

424,929

 

33,671

 

^

 

Eli Lilly & Co.

 

263,671

 

33,299

 

 

 

Bristol-Myers Squibb Co.

 

458,609

 

23,692

 

 

 

Gilead Sciences Inc.

 

362,891

 

23,595

 

 

 

Anthem Inc.

 

72,925

 

21,931

 

*

 

Biogen Inc.

 

56,395

 

18,498

 

 

 

Becton Dickinson and Co.

 

74,243

 

18,471

 

*

 

Cigna Corp.

 

104,496

 

18,228

 

 

 

Stryker Corp.

 

95,760

 

18,052

 

*

 

Intuitive Surgical Inc.

 

31,479

 

17,238

 

*

 

Celgene Corp.

 

196,687

 

16,349

 

*

 

Boston Scientific Corp.

 

386,225

 

15,495

 

*

 

Vertex Pharmaceuticals Inc.

 

71,460

 

13,488

 

 

 

Allergan plc

 

94,943

 

13,075

 

*

 

Illumina Inc.

 

41,115

 

12,860

 

 

 

Zoetis Inc.

 

135,816

 

12,798

 

 

 

Humana Inc.

 

38,546

 

10,987

 

 

 

HCA Healthcare Inc.

 

76,466

 

10,632

 

 

 

Baxter International Inc.

 

140,246

 

10,481

 

*

 

Edwards Lifesciences Corp.

 

58,863

 

9,965

 

*

 

Regeneron Pharmaceuticals Inc.

 

22,315

 

9,612

 

*

 

Alexion Pharmaceuticals Inc.

 

59,998

 

8,120

 

 

 

Zimmer Biomet Holdings Inc.

 

57,022

 

7,078

 

*

 

Centene Corp.

 

113,722

 

6,925

 

*

 

IQVIA Holdings Inc.

 

45,567

 

6,384

 

*

 

Align Technology Inc.

 

22,248

 

5,762

 

*

 

IDEXX Laboratories Inc.

 

24,041

 

5,073

 

*

 

BioMarin Pharmaceutical Inc.

 

49,414

 

4,608

 

 

 

Cardinal Health Inc.

 

83,363

 

4,530

 

*

 

Incyte Corp.

 

49,056

 

4,230

 

*

 

Laboratory Corp. of America Holdings

 

28,207

 

4,181

 

 

 

ResMed Inc.

 

39,324

 

4,028

 

*

 

ABIOMED Inc.

 

12,000

 

4,014

 

 

 

Cooper Cos. Inc.

 

13,519

 

3,866

 

*

 

Mylan NV

 

143,635

 

3,791

 

 

 

Teleflex Inc.

 

12,800

 

3,710

 

*

 

Hologic Inc.

 

76,027

 

3,585

 

*

 

WellCare Health Plans Inc.

 

14,000

 

3,550

 

*

 

Varian Medical Systems Inc.

 

25,613

 

3,441

 

 

 

Quest Diagnostics Inc.

 

38,097

 

3,297

 

 

 

Universal Health Services Inc. Class B

 

23,370

 

3,244

 

 

 

Dentsply Sirona Inc.

 

61,249

 

2,558

 

*

 

Jazz Pharmaceuticals plc

 

16,454

 

2,304

 

*

 

Alnylam Pharmaceuticals Inc.

 

25,088

 

2,132

 

*

 

DaVita Inc.

 

36,223

 

2,061

 

 

 

Perrigo Co. plc

 

35,708

 

1,739

 

*

 

Alkermes plc

 

43,000

 

1,431

 

 

 

 

 

 

 

871,233

 

Industrials (9.4%)

 

 

 

 

 

 

 

Union Pacific Corp.

 

207,359

 

34,774

 

*

 

PayPal Holdings Inc.

 

333,067

 

32,664

 

 

 

Accenture plc Class A

 

180,313

 

29,099

 

 

 

United Parcel Service Inc. Class B

 

193,599

 

21,335

 

 

 

Automatic Data Processing Inc.

 

123,496

 

18,899

 

 

7

 

FTSE Social Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

 

 

CSX Corp.

 

225,176

 

16,364

 

 

 

Deere & Co.

 

90,746

 

14,886

 

 

 

Norfolk Southern Corp.

 

76,293

 

13,679

 

 

 

Illinois Tool Works Inc.

 

93,034

 

13,404

 

 

 

FedEx Corp.

 

68,421

 

12,384

 

 

 

Waste Management Inc.

 

119,514

 

12,101

 

 

 

Sherwin-Williams Co.

 

23,384

 

10,130

 

 

 

Fidelity National Information Services Inc.

 

91,400

 

9,885

 

 

 

Eaton Corp. plc

 

122,474

 

9,770

 

*

 

Fiserv Inc.

 

111,736

 

9,463

 

 

 

Johnson Controls International plc

 

258,869

 

9,130

 

*

 

Worldpay Inc. Class A

 

83,783

 

8,026

 

 

 

Amphenol Corp. Class A

 

82,600

 

7,762

 

 

 

Agilent Technologies Inc.

 

89,325

 

7,096

 

 

 

Fortive Corp.

 

82,276

 

6,711

 

*

 

Square Inc.

 

82,000

 

6,662

 

 

 

PACCAR Inc.

 

96,179

 

6,521

 

 

 

Cummins Inc.

 

41,684

 

6,423

 

 

 

Willis Towers Watson plc

 

36,296

 

6,244

 

 

 

Rockwell Automation Inc.

 

33,718

 

6,021

 

 

 

Global Payments Inc.

 

44,504

 

5,802

 

*

 

FleetCor Technologies Inc.

 

24,600

 

5,739

 

*

 

Verisk Analytics Inc. Class A

 

44,865

 

5,672

 

 

 

Stanley Black & Decker Inc.

 

42,405

 

5,616

 

 

 

Ball Corp.

 

93,489

 

5,121

 

*

 

Waters Corp.

 

21,059

 

5,101

 

 

 

Fastenal Co.

 

80,393

 

5,060

 

*

 

Shopify Inc. Class A

 

26,400

 

4,994

 

 

 

Republic Services Inc. Class A

 

60,832

 

4,771

 

 

 

Total System Services Inc.

 

50,472

 

4,765

 

*

 

Mettler-Toledo International Inc.

 

6,887

 

4,689

 

*

 

CoStar Group Inc.

 

10,000

 

4,575

 

*

 

Keysight Technologies Inc.

 

52,466

 

4,429

 

 

 

Vulcan Materials Co.

 

36,806

 

4,102

 

 

 

WW Grainger Inc.

 

12,747

 

3,885

 

 

 

Xylem Inc.

 

50,253

 

3,797

 

 

 

Dover Corp.

 

40,518

 

3,668

 

 

 

Expeditors International of Washington Inc.

 

48,287

 

3,619

 

 

 

CH Robinson Worldwide Inc.

 

38,197

 

3,452

 

 

 

TransUnion

 

51,500

 

3,325

 

 

 

Martin Marietta Materials Inc.

 

17,590

 

3,303

 

 

 

Broadridge Financial Solutions Inc.

 

32,438

 

3,284

 

 

 

Masco Corp.

 

85,300

 

3,204

 

 

 

Kansas City Southern

 

28,701

 

3,118

 

*

 

United Rentals Inc.

 

22,709

 

3,056

 

 

 

Old Dominion Freight Line Inc.

 

18,500

 

2,789

 

*

 

Trimble Inc.

 

69,700

 

2,789

 

 

 

JB Hunt Transport Services Inc.

 

24,351

 

2,622

 

 

 

Snap-on Inc.

 

15,719

 

2,515

 

 

 

Packaging Corp. of America

 

26,120

 

2,497

 

 

 

Allegion plc

 

26,559

 

2,389

 

*

 

Sensata Technologies Holding plc

 

45,377

 

2,302

 

 

 

Alliance Data Systems Corp.

 

13,279

 

2,297

 

 

 

Robert Half International Inc.

 

33,107

 

2,258

 

 

 

Arconic Inc.

 

120,989

 

2,237

 

*

 

Arrow Electronics Inc.

 

24,288

 

1,936

 

 

 

Sealed Air Corp.

 

43,837

 

1,912

 

 

 

Xerox Corp.

 

58,517

 

1,808

 

*

 

XPO Logistics Inc.

 

35,000

 

1,762

 

 

 

Wabtec Corp.

 

24,000

 

1,758

 

*

 

Flex Ltd.

 

147,700

 

1,557

 

 

 

ManpowerGroup Inc.

 

17,311

 

1,458

 

 

 

Acuity Brands Inc.

 

11,138

 

1,449

 

 

 

MDU Resources Group Inc.

 

54,215

 

1,432

 

 

 

Avnet Inc.

 

30,984

 

1,347

 

 

 

Jabil Inc.

 

44,355

 

1,260

 

 

 

nVent Electric plc

 

45,200

 

1,242

 

*

 

Stericycle Inc.

 

23,252

 

1,037

 

*

 

Resideo Technologies Inc.

 

34,600

 

889

 

 

 

 

 

 

 

483,123

 

Oil & Gas (3.3%)

 

 

 

 

 

 

 

ConocoPhillips

 

323,028

 

21,917

 

 

 

EOG Resources Inc.

 

162,029

 

15,231

 

 

 

Occidental Petroleum Corp.

 

211,779

 

14,009

 

 

 

Marathon Petroleum Corp.

 

187,898

 

11,652

 

 

 

Phillips 66

 

116,700

 

11,245

 

 

 

Kinder Morgan Inc.

 

532,015

 

10,193

 

 

 

Valero Energy Corp.

 

118,815

 

9,691

 

 

 

Williams Cos. Inc.

 

340,386

 

9,085

 

 

 

ONEOK Inc.

 

114,781

 

7,376

 

 

 

Pioneer Natural Resources Co.

 

47,402

 

6,681

 

 

 

Anadarko Petroleum Corp.

 

141,357

 

6,149

 

 

 

Concho Resources Inc.

 

54,509

 

5,996

 

 

 

Diamondback Energy Inc.

 

44,000

 

4,529

 

 

 

Hess Corp.

 

73,200

 

4,235

 

 

 

Devon Energy Corp.

 

130,884

 

3,862

 

 

 

Marathon Oil Corp.

 

232,541

 

3,860

 

 

 

Baker Hughes a GE Co. Class A

 

143,739

 

3,792

 

 

8

 

FTSE Social Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

 

 

Apache Corp.

 

107,006

 

3,550

 

 

 

Cabot Oil & Gas Corp.

 

121,735

 

2,997

 

 

 

Targa Resources Corp.

 

63,221

 

2,544

 

 

 

HollyFrontier Corp.

 

44,460

 

2,276

 

 

 

Cimarex Energy Co.

 

27,764

 

1,997

 

 

 

Helmerich & Payne Inc.

 

29,679

 

1,609

 

 

 

Murphy Oil Corp.

 

45,799

 

1,324

 

 

 

EQT Corp.

 

71,188

 

1,290

 

*

 

Continental Resources Inc.

 

24,400

 

1,088

 

 

 

Equitrans Midstream Corp.

 

59,470

 

1,049

 

^

 

Core Laboratories NV

 

12,224

 

792

 

 

 

Range Resources Corp.

 

59,506

 

637

 

*

 

Antero Resources Corp.

 

67,800

 

587

 

 

 

 

 

 

 

171,243

 

Other (0.0%)1

 

 

 

 

 

*,§

 

Herbalife Ltd. CVR

 

2,328

 

23

 

 

 

 

 

 

 

Technology (27.4%)

 

 

 

 

 

 

 

Microsoft Corp.

 

2,125,098

 

238,075

 

 

 

Apple Inc.

 

1,331,695

 

230,583

 

*

 

Facebook Inc. Class A

 

666,767

 

107,650

 

*

 

Alphabet Inc. Class C

 

85,296

 

95,525

 

*

 

Alphabet Inc. Class A

 

83,851

 

94,462

 

 

 

Intel Corp.

 

1,281,097

 

67,847

 

 

 

Cisco Systems Inc.

 

1,271,485

 

65,825

 

 

 

Oracle Corp.

 

714,271

 

37,235

 

*

 

Adobe Inc.

 

137,810

 

36,175

 

*

 

salesforce.com Inc.

 

201,651

 

33,000

 

 

 

Broadcom Inc.

 

115,474

 

31,797

 

 

 

Texas Instruments Inc.

 

269,475

 

28,505

 

 

 

NVIDIA Corp.

 

163,239

 

25,181

 

 

 

QUALCOMM Inc.

 

339,849

 

18,145

 

 

 

Intuit Inc.

 

68,388

 

16,901

 

*

 

Micron Technology Inc.

 

317,390

 

12,975

 

*

 

ServiceNow Inc.

 

49,793

 

11,922

 

 

 

Cognizant Technology Solutions Corp. Class A

 

163,637

 

11,615

 

 

 

Analog Devices Inc.

 

103,500

 

11,070

 

 

 

Applied Materials Inc.

 

275,212

 

10,552

 

*

 

Autodesk Inc.

 

61,474

 

10,021

 

*

 

Red Hat Inc.

 

49,613

 

9,059

 

 

 

Xilinx Inc.

 

71,325

 

8,937

 

 

 

NXP Semiconductors NV

 

96,448

 

8,808

 

 

 

HP Inc.

 

443,987

 

8,760

 

*

 

Workday Inc. Class A

 

40,656

 

8,047

 

 

 

Corning Inc.

 

220,605

 

7,679

 

 

 

Lam Research Corp.

 

43,521

 

7,664

 

 

 

Hewlett Packard Enterprise Co.

 

412,261

 

6,753

 

 

 

Motorola Solutions Inc.

 

45,386

 

6,496

 

*

 

Palo Alto Networks Inc.

 

25,468

 

6,272

 

*

 

Twitter Inc.

 

200,399

 

6,168

 

*

 

Advanced Micro Devices Inc.

 

262,111

 

6,167

 

^

 

Microchip Technology Inc.

 

64,400

 

5,594

 

*

 

Splunk Inc.

 

41,034

 

5,576

 

 

 

KLA-Tencor Corp.

 

46,000

 

5,313

 

*

 

VeriSign Inc.

 

29,439

 

5,241

 

 

 

DXC Technology Co.

 

78,655

 

5,180

 

*

 

Cerner Corp.

 

88,772

 

4,967

 

 

 

NetApp Inc.

 

73,365

 

4,783

 

*

 

Arista Networks Inc.

 

16,142

 

4,605

 

*

 

Cadence Design Systems Inc.

 

78,100

 

4,471

 

 

 

Maxim Integrated Products Inc.

 

77,896

 

4,240

 

*

 

Synopsys Inc.

 

41,415

 

4,211

 

 

 

Skyworks Solutions Inc.

 

50,147

 

4,095

 

 

 

Western Digital Corp.

 

81,223

 

4,086

 

*

 

Check Point Software Technologies Ltd.

 

33,258

 

4,067

 

 

 

Symantec Corp.

 

178,183

 

4,007

 

 

 

Citrix Systems Inc.

 

37,838

 

3,992

 

 

 

CDW Corp.

 

41,008

 

3,850

 

 

 

Seagate Technology plc

 

79,871

 

3,719

 

 

 

SS&C Technologies Holdings Inc.

 

57,800

 

3,559

 

*

 

Gartner Inc.

 

24,800

 

3,529

 

*

 

GoDaddy Inc. Class A

 

47,200

 

3,523

 

 

 

VMware Inc. Class A

 

19,924

 

3,423

 

 

 

Marvell Technology Group Ltd.

 

155,100

 

3,094

 

*

 

Akamai Technologies Inc.

 

44,303

 

3,086

 

*

 

PTC Inc.

 

32,700

 

3,035

 

*

 

F5 Networks Inc.

 

17,144

 

2,883

 

 

 

Juniper Networks Inc.

 

95,725

 

2,592

 

*

 

Yandex NV Class A

 

73,620

 

2,533

 

*

 

Qorvo Inc.

 

34,900

 

2,448

 

*

 

Dell Technologies Inc.

 

41,853

 

2,336

 

 

 

Amdocs Ltd.

 

40,025

 

2,224

 

 

 

CDK Global Inc.

 

36,250

 

2,103

 

*

 

Nuance Communications Inc.

 

80,000

 

1,342

 

*

 

Covetrus Inc.

 

17,121

 

613

 

 

 

 

 

 

 

1,410,191

 

Telecommunications (0.1%)

 

 

 

 

 

*

 

T-Mobile US Inc.

 

86,114

 

6,218

 

*

 

Sprint Corp.

 

182,441

 

1,159

 

 

 

 

 

 

 

7,377

 

Utilities (1.1%)

 

 

 

 

 

 

 

Consolidated Edison Inc.

 

87,325

 

7,200

 

 

 

WEC Energy Group Inc.

 

88,520

 

6,752

 

 

 

PPL Corp.

 

202,137

 

6,503

 

 

 

Eversource Energy

 

88,584

 

6,184

 

 

 

American Water Works Co. Inc.

 

50,547

 

5,137

 

 

9

 

FTSE Social Index Fund

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

 

($000

 

)

 

 

CMS Energy Corp.

 

78,855

 

4,290

 

 

CenterPoint Energy Inc.

 

140,166

 

4,225

 

 

Evergy Inc.

 

73,700

 

4,121

 

 

AES Corp.

 

185,200

 

3,191

 

 

Alliant Energy Corp.

 

66,000

 

3,027

 

 

NiSource Inc.

 

101,592

 

2,741

 

 

Avangrid Inc.

 

15,859

 

767

 

 

 

 

 

 

54,137

 

Total Common Stocks
(Cost $3,906,334)

 

 

 

5,137,490

 

Temporary Cash Investments (0.2%)

 

 

 

 

 

Money Market Fund (0.2%)

 

 

 

 

 

2,3

Vanguard Market Liquidity Fund, 2.563%

 

89,539

 

8,955

 

 

 

 

Face

 

 

 

 

 

Amount

 

 

 

 

 

($000

)

 

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

 

 

United States Treasury Bill, 2.365%, 3/21/19

 

400

 

399

 

Total Temporary Cash Investments
(Cost $9,354)

 

 

 

9,354

 

Total Investments (100.2%)
(Cost $3,915,688)

 

 

 

5,146,844

 

 

 

 

 

 

Amount

 

 

 

 

 

($000

 

)

 

Other Assets and Liabilities (-0.2%)

 

 

 

 

 

Other Assets

 

 

 

 

 

Investment in Vanguard

 

 

 

252

 

Receivables for Accrued Income

 

 

 

8,377

 

Receivables for Capital Shares Issued

 

 

 

6,941

 

Total Other Assets

 

 

 

15,570

 

Liabilities

 

 

 

 

 

Payables for Investment Securities Purchased

 

 

 

(9,332

)

Collateral for Securities on Loan

 

 

 

(8,948

)

Payables for Capital Shares Redeemed

 

 

 

(1,834

)

Payables to Vanguard

 

 

 

(1,174

)

Other Liabilities

 

 

 

(2,402

)

Total Liabilities

 

 

 

(23,690

)

Net Assets (100.0%)

 

 

 

5,138,724

 

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

Amount

 

 

 

 

 

($000

 

)

 

Paid-in Capital

 

 

 

3,938,293

 

Total Distributable Earnings (Loss)

 

 

 

1,200,431

 

Net Assets

 

 

 

5,138,724

 

 

 

 

 

 

 

Investor Shares—Net Assets

 

 

 

 

 

Applicable to 150,652,086 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

 

 

2,791,142

 

Net Asset Value Per Share—Investor Shares

 

 

 

$18.53

 

 

 

 

 

 

 

Admiral Shares—Net Assets

 

 

 

 

 

Applicable to 11,247,744 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

 

 

289,670

 

Net Asset Value Per Share—Admiral Shares

 

 

 

$25.75

 

 

 

 

 

 

 

Institutional Shares—Net Assets

 

 

 

 

 

Applicable to 110,991,155 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

 

 

2,057,912

 

Net Asset Value Per Share—Institutional Shares

 

 

 

$18.54

 

 

· See Note A in Notes to Financial Statements.

 

* Non-income-producing security.

 

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $8,728,000.

 

§ Security value determined using significant unobservable inputs.

 

1 “Other” represents securities that are not classified by the fund’s benchmark index.

 

2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

3 Includes $8,948,000 of collateral received for securities on loan.

 

CVR—Contingent Value Rights.

 

REIT—Real Estate Investment Trust.

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

10

 

FTSE Social Index Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000)

 

Investment Income

 

 

 

Income

 

 

 

Dividends

 

 

41,670

Interest1

 

 

47

Securities Lending—Net

 

 

47

Total Income

 

 

41,764

Expenses

 

 

 

The Vanguard Group—Note B

 

 

 

Investment Advisory Services

 

 

742

Management and Administrative—Investor Shares

 

 

1,799

Management and Administrative—Admiral Shares

 

 

14

Management and Administrative—Institutional Shares

 

 

752

Marketing and Distribution—Investor Shares

 

 

215

Marketing and Distribution—Admiral Shares

 

 

—

Marketing and Distribution—Institutional Shares

 

 

37

Custodian Fees

 

 

54

Shareholders’ Reports—Investor Shares

 

 

12

Shareholders’ Reports—Admiral Shares

 

 

—

Shareholders’ Reports—Institutional Shares

 

 

10

Trustees’ Fees and Expenses

 

 

1

Total Expenses

 

 

3,636

Net Investment Income

 

 

38,128

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold1,2

 

 

221,816

Futures Contracts

 

 

(157)

Realized Net Gain (Loss)

 

 

221,659

Change in Unrealized Appreciation (Depreciation)

 

 

 

Investment Securities1

 

 

(374,585)

Futures Contracts

 

 

(81)

Change in Unrealized Appreciation (Depreciation)

 

 

(374,666)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

 

(114,879)

 

1   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $42,000, ($1,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

2   Includes $225,035,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

11

 

FTSE Social Index Fund

 

 

Statement of Changes in Net Assets

 

 

 

 

Six Months Ended

 

Year Ended

 

 

February 28,

 

August 31,

 

 

2019

 

2018

 

 

($000)

 

($000)

Increase (Decrease) in Net Assets

 

 

 

 

Operations

 

 

 

 

Net Investment Income

 

38,128

 

69,426

Realized Net Gain (Loss)

 

221,659

 

(2,106)

Change in Unrealized Appreciation (Depreciation)

 

(374,666)

 

739,335

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(114,879)

 

806,655

Distributions

 

 

 

 

Net Investment Income

 

 

 

 

Investor Shares

 

(26,310)

 

(35,275)

Admiral Shares

 

—

 

—

Institutional Shares

 

(19,932)

 

(27,400)

Realized Capital Gain

 

 

 

 

Investor Shares

 

—

 

—

Admiral Shares

 

—

 

—

Institutional Shares

 

—

 

—

Total Distributions

 

(46,242)

 

(62,675)

Capital Share Transactions

 

 

 

 

Investor Shares

 

75,382

 

444,974

Admiral Shares

 

285,718

 

—

Institutional Shares

 

(227,183)

 

581,627

Net Increase (Decrease) from Capital Share Transactions

 

133,917

 

1,026,601

Total Increase (Decrease)

 

(27,204)

 

1,770,581

Net Assets

 

 

 

 

Beginning of Period

 

5,165,928

 

3,395,347

End of Period

 

5,138,724

 

5,165,928

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

12

 

FTSE Social Index Fund

 

 

Financial Highlights

 

 

Investor Shares

 

For a Share Outstanding

Six Months
Ended
February 28,

 

Year Ended August 31,

 

Throughout Each Period

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

$19.27

 

$16.14

 

$13.95

 

$12.99

 

$12.74

 

$10.28

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

.145

1

.290

1

.256

1

.241

 

.183

 

.167

 

Net Realized and Unrealized Gain (Loss) on Investments

(.712

)

3.108

 

2.175

 

1.025

 

.231

 

2.442

 

Total from Investment Operations

(.567

)

3.398

 

2.431

 

1.266

 

.414

 

2.609

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(.173

)

(.268

)

(.241

)

(.306

)

(.164

)

(.149

)

Distributions from Realized Capital Gains

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

(.173

)

(.268

)

(.241

)

(.306

)

(.164

)

(.149

)

Net Asset Value, End of Period

$18.53

 

$19.27

 

$16.14

 

$13.95

 

$12.99

 

$12.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

-2.89%

 

21.27%

 

17.61%

 

9.95%

 

3.25%

 

25.58%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$2,791

 

$2,817

 

$1,952

 

$1,435

 

$1,131

 

$800

 

Ratio of Total Expenses to Average Net Assets

0.18%

 

0.18%

 

0.20%

 

0.22%

 

0.25%

 

0.27%

 

Ratio of Net Investment Income to Average Net Assets

1.64%

 

1.65%

 

1.71%

 

1.87%

 

1.63%

 

1.51%

 

Portfolio Turnover Rate3

12%

 

8%

 

11%

 

16%

 

20%

 

14%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

13

 

FTSE Social Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

February 7, 20191 to

 

For a Share Outstanding Throughout the Period

 

 

February 28, 2019

Net Asset Value, Beginning of Period

 

 

$25.00

Investment Operations

 

 

 

Net Investment Income2

 

 

.001

Net Realized and Unrealized Gain (Loss) on Investments

 

 

.749

Total from Investment Operations

 

 

.750

Distributions

 

 

 

Dividends from Net Investment Income

 

 

—

Distributions from Realized Capital Gains

 

 

—

Total Distributions

 

 

—

Net Asset Value, End of Period

 

 

$25.75

 

 

 

Total Return3

 

 

3.00%

 

 

 

Ratios/Supplemental Data

 

 

 

Net Assets, End of Period (Millions)

 

 

$290

Ratio of Total Expenses to Average Net Assets

 

 

0.14%

Ratio of Net Investment Income to Average Net Assets

 

 

1.68%

Portfolio Turnover Rate4

 

 

12%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Inception.

 

2 Calculated based on average shares outstanding.

 

3   Total returns do not include account service fees that may have applied in the period shown. Fund prospectuses provide information about any applicable account service fees.

 

4   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

14

 

FTSE Social Index Fund

 

 

Financial Highlights

 

 

Institutional Shares

 

For a Share Outstanding

Six Months
Ended
February 28,

 

Year Ended August 31,

 

Throughout Each Period

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

$19.28

 

$16.15

 

$13.96

 

$13.00

 

$12.75

 

$10.29

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

.147

1

.305

1

.271

1

.254

 

.193

 

.180

 

Net Realized and Unrealized Gain (Loss) on Investments

(.710

)

3.105

 

2.175

 

1.029

 

.233

 

2.440

 

Total from Investment Operations

(.563

)

3.410

 

2.446

 

1.283

 

.426

 

2.620

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(.177

)

(.280

)

(.256

)

(.323

)

(.176

)

(.160

)

Distributions from Realized Capital Gains

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

(.177

)

(.280

)

(.256

)

(.323

)

(.176

)

(.160

)

Net Asset Value, End of Period

$18.54

 

$19.28

 

$16.15

 

$13.96

 

$13.00

 

$12.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

-2.87%

 

21.34%

 

17.72%

 

10.09%

 

3.34%

 

25.68%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$2,058

 

$2,349

 

$1,443

 

$876

 

$706

 

$429

 

Ratio of Total Expenses to Average Net Assets

0.12%

 

0.12%

 

0.12%

 

0.12%

 

0.15%

 

0.16%

 

Ratio of Net Investment Income to Average Net Assets

1.70%

 

1.71%

 

1.79%

 

1.97%

 

1.73%

 

1.62%

 

Portfolio Turnover Rate2

12%

 

8%

 

11%

 

16%

 

20%

 

14%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

15

 

FTSE Social Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard FTSE Social Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: Investor Shares, Admiral Shares, and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. Admiral Shares were issued on February 7, 2019.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at February 28, 2019.

 

16

 

FTSE Social Index Fund

 

 

 

 

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

17

 

FTSE Social Index Fund

 

 

 

 

 

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $252,000, representing 0.00% of the fund’s net assets and 0.10% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

18

 

FTSE Social Index Fund

 

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

Investments

 

Level 1
($000

)

Level 2
($000

)

Level 3
($000

)

Common Stocks

 

5,137,467

 

—

 

23

 

Temporary Cash Investments

 

8,955

 

399

 

—

 

Total

 

5,146,422

 

399

 

23

 

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

 

 

Amount
($000

)

Tax Cost

3,915,688

 

Gross Unrealized Appreciation

1,386,365

 

Gross Unrealized Depreciation

(155,209

)

Net Unrealized Appreciation (Depreciation)

1,231,156

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $394,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $38,363,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $968,824,000 of investment securities and sold $832,832,000 of investment securities, other than temporary cash investments. Purchases and sales include $0 and $416,579,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

The fund purchased securities from and sold securities to other Vanguard funds or accounts managed by Vanguard or its affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the six months ended February 28, 2019, such purchases and sales were $73,067,000 and $129,723,000, respectively; these amounts are included in the purchases and sales of investment securities noted above.

 

19

 

FTSE Social Index Fund

 

 

 

 

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended
February 28, 2019

 

Year Ended
August 31, 2018

 

 

 

Amount

 

Shares 

 

Amount

 

Shares

 

 

 

($000

)

(000)

 

($000

)

(000

)

Investor Shares

 

 

 

 

 

 

 

 

 

Issued

 

594,248

 

33,146

 

875,104

 

49,256

 

Issued in Lieu of Cash Distributions

 

23,147

 

1,321

 

31,033

 

1,813

 

Redeemed

 

(542,013

)

(29,972

)

(461,163

)

(25,902

)

Net Increase (Decrease)—Investor Shares

 

75,382

 

4,495

 

444,974

 

25,167

 

Admiral Shares1

 

 

 

 

 

 

 

 

 

Issued

 

287,595

 

11,321

 

—

 

—

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

 

Redeemed

 

(1,877

)

(73

)

—

 

—

 

Net Increase (Decrease)—Admiral Shares

 

285,718

 

11,248

 

—

 

—

 

Institutional Shares

 

 

 

 

 

 

 

 

 

Issued

 

343,445

 

19,168

 

778,428

 

43,355

 

Issued in Lieu of Cash Distributions

 

19,644

 

1,108

 

26,908

 

1,569

 

Redeemed

 

(590,272

)

(31,119

)

(223,709

)

(12,466

)

Net Increase (Decrease)—Institutional Shares

 

(227,183

)

(10,843

)

581,627

 

32,458

 

 

1 Inception was February 7, 2019, for Admiral Shares.

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

20

 

This page intentionally left blank.

 

 

 

 

 

 

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Valley Forge, PA 19482-2600

 

 

Connect with Vanguard® > vanguard.com

 

 

 

Fund Information > 800-662-7447

 

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Institutional Investor Services > 800-523-1036

 

Text Telephone for People

Who Are Deaf or Hard of Hearing > 800-749-7273

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

Source for Bloomberg Barclays indexes: Bloomberg Index Services Limited. Copyright 2019, Bloomberg. All rights reserved.

 

London Stock Exchange Group companies include FTSE International Limited (“FTSE”), Frank Russell Company (“Russell”), MTS Next Limited (“MTS”), and FTSE TMX Global Debt Capital Markets Inc. (“FTSE TMX”). All rights reserved. “FTSE®”, “Russell®”, “MTS®”, “FTSE TMX®” and “FTSE Russell” and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under licence. All information is provided for information purposes only. No responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither the London Stock Exchange Group companies nor any of its licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE4Good US Select Index or the fitness or suitability of the FTSE4Good US Select Index for any particular purpose to which it might be put.

 

The Industry Classification Benchmark (“ICB”) is owned by FTSE. FTSE does not accept any liability to any person for any loss or damage arising out of any error or omission in the ICB.

 

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

 

All rights reserved.

 

Vanguard Marketing Corporation, Distributor.

 

 

 

Q2132 042019

 

 

 

 

 

 

Semiannual Report  |  February 28, 2019

 

 

Vanguard U.S. Sector Index Funds

 

 

 

 

 

 

 

 

 

 

 

Vanguard Communication Services Index Fund

 

Vanguard Consumer Discretionary Index Fund

 

Vanguard Consumer Staples Index Fund

 

Vanguard Energy Index Fund

 

Vanguard Financials Index Fund

 

Vanguard Health Care Index Fund

 

Vanguard Industrials Index Fund

 

Vanguard Information Technology Index Fund

 

Vanguard Materials Index Fund

 

Vanguard Utilities Index Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

 

 

About Your Fund’s Expenses

1

Communication Services Index Fund

3

Consumer Discretionary Index Fund

13

Consumer Staples Index Fund

23

Energy Index Fund

33

Financials Index Fund

43

Health Care Index Fund

54

Industrials Index Fund

65

Information Technology Index Fund

77

Materials Index Fund

89

Utilities Index Fund

98

 

 

 

 

 

 

 

 

 

 

INDEXED TO

MSCI®

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·   Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·   Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Six Months Ended February 28, 2019

 

 

 

 

Index Fund

Share Class

Beginning
Account Value
8/31/2018

Ending
Account Value
2/28/2019

Expenses
Paid During
Period1

Based on Actual Fund Return

 

 

 

 

Communication Services

ETF

$1,000.00

$952.88

$0.48

 

Admiral

1,000.00

952.94

0.48

Consumer Discretionary

ETF

$1,000.00

$936.33

$0.48

 

Admiral

1,000.00

936.27

0.48

Consumer Staples

ETF

$1,000.00

$1,020.60

$0.50

 

Admiral

1,000.00

1,020.66

0.50

Energy

ETF

$1,000.00

$865.10

$0.46

 

Admiral

1,000.00

865.17

0.46

Financials

ETF

$1,000.00

$946.18

$0.48

 

Admiral

1,000.00

946.09

0.48

Health Care

ETF

$1,000.00

$983.19

$0.49

 

Admiral

1,000.00

983.25

0.49

Industrials

ETF

$1,000.00

$983.68

$0.49

 

Admiral

1,000.00

983.54

0.49

Information Technology

ETF

$1,000.00

$959.44

$0.49

 

Admiral

1,000.00

959.37

0.49

Materials

ETF

$1,000.00

$926.88

$0.48

 

Admiral

1,000.00

926.65

0.48

Utilities

ETF

$1,000.00

$1,080.89

$0.52

 

Admiral

1,000.00

1,080.93

0.52

Based on Hypothetical 5% Yearly Return

 

 

 

Communication Services

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Consumer Discretionary

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Consumer Staples

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Energy

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Financials

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Health Care

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Industrials

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Information Technology

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Materials

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

Utilities

ETF

$1,000.00

$1,024.30

$0.50

 

Admiral

1,000.00

1,024.30

0.50

 

1   The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are 0.10% for the Communication Services Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Consumer Discretionary Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Consumer Staples Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Energy Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Financials Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Health Care Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Industrials Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Information Technology Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Materials Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Utilities Index Fund ETF Shares and 0.10% for the Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

 

2

 

Communication Services Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Advertising

 

1.6

%

Alternative Carriers

 

3.2

 

Broadcasting

 

3.8

 

Cable & Satellite

 

11.7

 

Integrated Telecommunication Services

 

13.3

 

Interactive Home Entertainment

 

3.7

 

Interactive Media & Services

 

41.3

 

Movies & Entertainment

 

15.8

 

Publishing

 

2.0

 

Wireless Telecommunication Services

 

3.6

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

3

 

Communication Services Index Fund

 

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

Common Stocks (100.1%)1

 

 

 

 

 

Diversified Telecommunication Services (16.5%)

 

 

 

 

 

 

 

Alternative Carriers (3.2%)

 

 

 

 

 

 

 

CenturyLink Inc.

 

1,140,319

 

15,041

 

*

 

Zayo Group Holdings Inc.

 

484,055

 

12,005

 

*

 

Vonage Holdings Corp.

 

548,539

 

5,639

 

 

 

Cogent Communications Holdings Inc.

 

106,437

 

5,185

 

*

 

Iridium Communications Inc.

 

228,149

 

4,857

 

*,^

 

Globalstar Inc.

 

7,377,906

 

3,701

 

*

 

ORBCOMM Inc.

 

181,603

 

1,280

 

*

 

pdvWireless Inc.

 

21,420

 

841

 

 

 

 

 

 

 

 

 

 

 

Integrated Telecommunication Services (13.3%)

 

 

 

 

 

 

 

Verizon Communications Inc.

 

2,281,393

 

129,857

 

 

 

AT&T Inc.

 

2,290,756

 

71,288

 

 

 

Consolidated Communications Holdings Inc.

 

172,304

 

1,711

 

 

 

ATN International Inc.

 

27,034

 

1,517

 

*

 

Cincinnati Bell Inc.

 

103,646

 

1,005

 

*,^

 

Frontier Communications Corp.

 

257,576

 

786

 

^

 

Windstream Holdings Inc.

 

898,642

 

360

 

 

 

IDT Corp. Class B

 

44,857

 

271

 

 

 

 

 

 

 

255,344

 

Entertainment (19.5%)

 

 

 

 

 

 

 

Interactive Home Entertainment (3.7%)

 

 

 

 

 

 

 

Activision Blizzard Inc.

 

494,805

 

20,851

 

*

 

Electronic Arts Inc.

 

206,270

 

19,757

 

*

 

Take-Two Interactive Software Inc.

 

96,532

 

8,423

 

*

 

Zynga Inc. Class A

 

1,038,212

 

5,420

 

*

 

Glu Mobile Inc.

 

275,611

 

2,475

 

 

 

 

 

 

 

 

 

 

 

Movies & Entertainment (15.8%)

 

 

 

 

 

*

 

Netflix Inc.

 

195,674

 

70,071

 

 

 

Walt Disney Co.

 

619,930

 

69,953

 

 

 

Twenty-First Century Fox Inc. Class A

 

687,889

 

34,690

 

 

 

Twenty-First Century Fox Inc.

 

316,528

 

15,877

 

 

 

Viacom Inc. Class B

 

302,332

 

8,834

 

*

 

Live Nation Entertainment Inc.

 

134,650

 

7,616

 

*

 

Liberty Media Corp-Liberty Formula One

 

205,261

 

6,388

 

*

 

Madison Square Garden Co. Class A

 

19,369

 

5,581

 

 

 

Cinemark Holdings Inc.

 

136,827

 

5,149

 

 

 

World Wrestling Entertainment Inc. Class A

 

53,395

 

4,469

 

 

 

Lions Gate Entertainment Corp. Class B

 

238,112

 

3,498

 

*

 

IMAX Corp.

 

135,461

 

3,103

 

*

 

Liberty Media Corp-Liberty Braves Class C

 

86,013

 

2,394

 

 

 

Lions Gate Entertainment Corp. Class A

 

128,388

 

1,983

 

 

 

Marcus Corp.

 

45,664

 

1,936

 

*

 

Liberty Media Corp-Liberty Formula One Class A

 

61,715

 

1,897

 

 

 

AMC Entertainment Holdings Inc. Class A

 

118,227

 

1,659

 

*

 

Liberty Media Corp-Liberty Braves Class A

 

22,182

 

616

 

 

 

 

 

 

 

302,640

 

Interactive Media & Services (41.3%)

 

 

 

 

 

*

 

Facebook Inc. Class A

 

1,373,428

 

221,740

 

*

 

Alphabet Inc. Class C

 

160,934

 

180,233

 

*

 

Alphabet Inc. Class A

 

151,650

 

170,841

 

*

 

Twitter Inc.

 

495,954

 

15,266

 

*

 

IAC/InterActiveCorp

 

58,649

 

12,495

 

*,^

 

Zillow Group Inc.

 

145,646

 

6,088

 

*,^

 

Snap Inc.

 

610,830

 

5,986

 

*

 

TripAdvisor Inc.

 

109,868

 

5,842

 

^

 

Match Group Inc.

 

78,402

 

4,342

 

*

 

Zillow Group Inc. Class A

 

103,874

 

4,304

 

*

 

Yelp Inc. Class A

 

112,931

 

4,208

 

*

 

Cars.com Inc.

 

142,404

 

3,352

 

*

 

Liberty TripAdvisor Holdings Inc. Class A

 

173,462

 

2,618

 

*

 

Care.com Inc.

 

61,185

 

1,541

 

*

 

TrueCar Inc.

 

187,599

 

1,358

 

*

 

Meet Group Inc.

 

177,884

 

1,067

 

 

 

 

 

 

 

641,281

 

Media (19.2%)

 

 

 

 

 

 

 

Advertising (1.7%)

 

 

 

 

 

 

 

Omnicom Group Inc.

 

169,700

 

12,846

 

 

 

Interpublic Group of Cos. Inc.

 

343,059

 

7,901

 

*

 

comScore Inc.

 

106,256

 

2,317

 

 

 

National CineMedia Inc.

 

189,913

 

1,470

 

 

 

Emerald Expositions Events Inc.

 

44,037

 

554

 

*

 

Cardlytics Inc.

 

25,766

 

454

 

 

 

 

 

 

 

 

 

 

 

Broadcasting (3.8%)

 

 

 

 

 

 

 

CBS Corp. Class B

 

254,218

 

12,764

 

*

 

Discovery Communications Inc.

 

278,920

 

7,601

 

 

 

Nexstar Media Group Inc. Class A

 

56,808

 

5,552

 

*,^

 

Discovery Communications Inc. Class A

 

183,373

 

5,299

 

 

 

Tribune Media Co. Class A

 

106,394

 

4,919

 

 

 

TEGNA Inc.

 

342,556

 

4,511

 

*

 

AMC Networks Inc. Class A

 

67,651

 

4,445

 

 

 

Sinclair Broadcast Group Inc. Class A

 

121,928

 

4,402

 

*

 

Gray Television Inc.

 

195,899

 

4,292

 

 

 

EW Scripps Co. Class A

 

115,725

 

2,448

 

 

 

Entercom Communications Corp. Class A

 

299,742

 

1,846

 

 

 

Entravision Communications Corp. Class A

 

155,385

 

614

 

*

 

Hemisphere Media Group Inc. Class A

 

40,135

 

558

 

 

 

 

 

 

 

 

 

 

 

Cable & Satellite (11.7%)

 

 

 

 

 

 

 

Comcast Corp. Class A

 

1,847,969

 

71,461

 

*

 

Charter Communications Inc. Class A

 

103,915

 

35,841

 

*

 

Liberty Global plc

 

413,205

 

10,491

 

*

 

Liberty Broadband Corp.

 

93,530

 

8,371

 

*

 

DISH Network Corp. Class A

 

222,517

 

7,234

 

*

 

Liberty Media Corp-Liberty SiriusXM Class C

 

167,640

 

6,908

 

*

 

GCI Liberty Inc. Class A

 

105,663

 

5,657

 

*

 

Liberty Global plc Class A

 

212,383

 

5,596

 

 

 

Cable One Inc.

 

5,375

 

5,101

 

*

 

Liberty Media Corp-Liberty SiriusXM Class A

 

116,747

 

4,775

 

 

 

Sirius XM Holdings Inc.

 

787,552

 

4,670

 

*

 

Liberty Latin America Ltd.

 

213,961

 

4,149

 

*

 

Liberty Broadband Corp. Class A

 

45,195

 

4,037

 

*

 

MSG Networks Inc.

 

147,244

 

3,555

 

*

 

Liberty Latin America Ltd. Class A

 

104,887

 

2,058

 

*

 

Loral Space & Communications Inc.

 

30,922

 

1,265

 

*

 

WideOpenWest Inc.

 

59,690

 

491

 

 

 

 

 

 

 

 

 

 

 

Publishing (2.0%)

 

 

 

 

 

 

 

News Corp. Class A

 

436,767

 

5,687

 

 

 

New York Times Co. Class A

 

160,613

 

5,276

 

 

 

Meredith Corp.

 

71,065

 

4,070

 

 

 

John Wiley & Sons Inc. Class A

 

78,320

 

4,064

 

 

 

News Corp. Class B

 

280,327

 

3,731

 

 

 

Scholastic Corp.

 

72,362

 

3,062

 

 

 

Gannett Co. Inc.

 

253,184

 

2,972

 

 

 

New Media Investment Group Inc.

 

130,517

 

1,738

 

*

 

Tribune Publishing Co.

 

38,547

 

465

 

 

 

 

 

 

 

297,518

 

Wireless Telecommunication Services (3.6%)

 

 

 

 

 

*

 

T-Mobile US Inc.

 

356,110

 

25,715

 

*

 

Sprint Corp.

 

1,963,168

 

12,466

 

 

 

Telephone & Data Systems Inc.

 

241,688

 

7,746

 

 

 

Shenandoah Telecommunications Co.

 

113,489

 

5,043

 

 

4

 

Communication Services Index Fund

 

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

*

 

Boingo Wireless Inc.

 

102,753

 

2,299

 

*

 

United States Cellular Corp.

 

32,009

 

1,494

 

 

 

Spok Holdings Inc.

 

47,478

 

656

 

*,^

 

Gogo Inc.

 

136,770

 

628

 

 

 

 

 

 

 

56,047

 

Total Common Stocks (Cost $1,599,773)

 

 

 

1,552,830

 

Temporary Cash Investment (1.7%)1

 

 

 

 

 

Money Market Fund (1.7%)

 

 

 

 

 

2,3

 

Vanguard Market Liquidity Fund, 2.563% (Cost $26,342)

 

263,422

 

26,345

 

Total Investments (101.8%)

(Cost $1,626,115)

 

 

 

1,579,175

 

Other Assets and Liabilities (-1.8%)

 

 

 

 

 

Other Assets

 

 

 

97,308

 

Liabilities3

 

 

 

(124,808

)

 

 

 

 

(27,500

)

Net Assets (100%)

 

 

 

1,551,675

 

 

 

 

Amount

 

 

 

($000

)

Statement of Assets and Liabilities

 

 

 

Assets

 

 

 

Investments in Securities, at Value

 

 

 

Unaffiliated Issuers

 

1,552,830

 

Affiliated Issuers

 

26,345

 

Total Investments in Securities

 

1,579,175

 

Investment in Vanguard

 

72

 

Receivables for Investment Securities Sold

 

97,094

 

Receivables for Accrued Income

 

107

 

Receivables for Capital Shares Issued

 

34

 

Other Assets

 

1

 

Total Assets

 

1,676,483

 

Liabilities

 

 

 

Payables for Investment Securities Purchased

 

101,576

 

Collateral for Securities on Loan

 

22,118

 

Payables for Capital Shares Redeemed

 

640

 

Payables to Vanguard

 

415

 

Unrealized Depreciation—OTC Swap Contracts

 

59

 

Total Liabilities

 

124,808

 

Net Assets

 

1,551,675

 

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

 

($000

)

Paid-in Capital

 

1,908,688

 

Total Distributable Earnings (Loss)

 

(357,013

)

Net Assets

 

1,551,675

 

 

 

 

 

ETF Shares – Net Assets

 

 

 

Applicable to 18,289,812 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

1,504,025

 

Net Asset Value Per Share – ETF Shares

 

$82.23

 

 

 

 

 

Admiral Shares – Net Assets

 

 

 

Applicable to 1,137,084 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

47,650

 

Net Asset Value Per Share – Admiral Shares

 

$41.91

 

 

· See Note A in Notes to Financial Statements.

 

* Non-income-producing security.

 

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $15,095,000.

 

1 The fund invests a portion of its cash reserves in equity markets through the use of swap contracts. After giving effect to swap investments, the fund’s effective common stock and temporary cash investment positions represent 100.3% and 1.5%, respectively, of net assets.

 

2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

3 Includes $22,118,000 of collateral received for securities on loan. OTC—Over-the-Counter.

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

Over-the-Counter Total Return Swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Floating

 

Value and

 

Value and

 

 

 

 

 

 

 

Notional

 

Interest Rate

 

Unrealized

 

Unrealized

 

 

 

Termination

 

 

 

Amount

 

Received

 

Appreciation

 

(Depreciation

)

Reference Entity

 

Date

 

Counterparty

 

($000

)

(Paid

)1

($000

)

($000

)

Sirius XM Holdings Inc.

 

2/4/20

 

GSI

 

3,920

 

(2.485%

)

—

 

(59

)

 

1 Payment received/paid monthly.

GSI—Goldman Sachs International.

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

5

 

Communication Services Index Fund

 

 

 

 

Statement of Operations

 

 

 

Six Months Ended

 

 

February 28, 2019

 

 

($000)

Investment Income

 

 

Income

 

 

Dividends

 

8,026

Interest1

 

17

Securities Lending—Net

 

142

Total Income

 

8,185

Expenses

 

 

The Vanguard Group—Note B

 

 

Investment Advisory Services

 

165

Management and Administrative— ETF Shares

 

359

Management and Administrative— Admiral Shares

 

13

Marketing and Distribution— ETF Shares

 

39

Marketing and Distribution— Admiral Shares

 

2

Custodian Fees

 

21

Shareholders’ Reports—ETF Shares

 

59

Shareholders’ Reports—Admiral Shares

 

—

Total Expenses

 

658

Net Investment Income

 

7,527

Realized Net Gain (Loss)

 

 

Investment Securities Sold1,2

 

23,299

Futures Contracts

 

(85)

Swap Contracts

 

(232)

Realized Net Gain (Loss)

 

22,982

Change in Unrealized Appreciation (Depreciation)

 

 

Investment Securities1

 

(56,527)

Swap Contracts

 

(59)

Change in Unrealized Appreciation (Depreciation)

 

(56,586)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(26,077)

 

1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from affiliated companies of the fund were $17,000, ($1,000), and ($2,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

2 Includes $35,127,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

Statement of Changes in Net Assets

 

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28,

 

August 31,

 

 

 

2019

 

2018

 

 

 

($000)

 

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

Operations

 

 

 

 

 

Net Investment Income

 

7,527

 

39,579

 

Realized Net Gain (Loss)

 

22,982

 

(198,104

)

Change in Unrealized Appreciation (Depreciation)

 

(56,586)

 

102,207

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(26,077)

 

(56,318

)

Distributions

 

 

 

 

 

Net Investment Income

 

 

 

 

 

ETF Shares

 

(7,762)

 

(43,280

)

Admiral Shares

 

(277)

 

(1,863

)

Realized Capital Gain

 

 

 

 

 

ETF Shares

 

—

 

—

 

Admiral Shares

 

—

 

—

 

Total Distributions

 

(8,039)

 

(45,143

)

Capital Share Transactions

 

 

 

 

 

ETF Shares

 

522,172

 

(275,041

)

Admiral Shares

 

2,516

 

(659

)

Net Increase (Decrease) from Capital Share Transactions

 

524,688

 

(275,700

)

Total Increase (Decrease)

 

490,572

 

(377,161

)

Net Assets

 

 

 

 

 

Beginning of Period

 

1,061,103

 

1,438,264

 

End of Period

 

1,551,675

 

1,061,103

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

6

 

Communication Services Index Fund

 

 

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$86.83

 

$93.54

 

$95.16

 

$83.80

 

$88.44

 

$78.54

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.457

1

3.067

1

3.108

1

2.622

 

2.789

 

2.394

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(4.551

)

(6.297

)

(1.587

)

12.811

 

(5.178

)

10.749

 

Total from Investment Operations

 

(4.094

)

(3.230

)

1.521

 

15.433

 

(2.389

)

13.143

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.506

)

(3.480

)

(3.141

)

(4.073

)

(2.251

)

(3.243

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.506

)

(3.480

)

(3.141

)

(4.073

)

(2.251

)

(3.243

)

Net Asset Value, End of Period

 

$82.23

 

$86.83

 

$93.54

 

$95.16

 

$83.80

 

$88.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-4.71%

 

-3.50%

 

1.62%

 

19.14%

 

-2.72%

 

17.08%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$1,504

 

$1,015

 

$1,388

 

$1,483

 

$795

 

$743

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.14%

 

3.48%

 

3.26%

 

3.10%

 

3.20%

 

3.29%

 

Portfolio Turnover Rate2

 

42%

 

84%

 

18%

 

20%

 

18%

 

19%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

7

 

Communication Services Index Fund

 

 

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$44.25

 

$47.67

 

$48.50

 

$42.71

 

$45.07

 

$40.02

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.234

1

1.554

1

1.601

1

1.337

 

1.419

 

1.217

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(2.317

)

(3.199

)

(.829

)

6.529

 

(2.637

)

5.486

 

Total from Investment Operations

 

(2.083

)

(1.645

)

.772

 

7.866

 

(1.218

)

6.703

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.257

)

(1.775

)

(1.602

)

(2.076

)

(1.142

)

(1.653

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.257

)

(1.775

)

(1.602

)

(2.076

)

(1.142

)

(1.653

)

Net Asset Value, End of Period

 

$41.91

 

$44.25

 

$47.67

 

$48.50

 

$42.71

 

$45.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-4.71%

 

-3.48%

 

1.61%

 

19.14%

 

-2.66%

 

17.13%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$48

 

$46

 

$50

 

$65

 

$24

 

$26

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.14%

 

3.48%

 

3.26%

 

3.10%

 

3.20%

 

3.29%

 

Portfolio Turnover Rate3

 

42%

 

84%

 

18%

 

20%

 

18%

 

19%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

8

 

 

Communication Services Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Communication Services Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at February 28, 2019.

 

3. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until termination of the swap, at which time realized gain (loss) is recorded.

 

9

 

Communication Services Index Fund

 

 

 

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

During the six months ended February 28, 2019, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

10

 

Communication Services Index Fund

 

 

 

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Assets and Liabilities. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $72,000, representing 0.00% of the fund’s net assets and 0.03% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

1,552,830

 

—

 

—

 

Temporary Cash Investments

 

26,345

 

—

 

—

 

Swap Contracts—Liabilities

 

—

 

(59

)

—

 

Total

 

1,579,175

 

(59

)

—

 

 

D. As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

1,626,115

 

Gross Unrealized Appreciation

 

46,875

 

Gross Unrealized Depreciation

 

(93,815

)

Net Unrealized Appreciation (Depreciation)

 

(46,940

)

 

11

 

Communication Services Index Fund

 

 

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $11,458,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $288,569,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E. During the six months ended February 28, 2019, the fund purchased $1,297,782,000 of investment securities and sold $725,831,000 of investment securities, other than temporary cash investments. Purchases and sales include $1,001,126,000 and $443,339,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F. Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28, 2019

 

August 31, 2018

 

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

 

($000

)

(000

)

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

Issued

 

967,449

 

12,300

 

499,222

 

5,625

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

 

Redeemed

 

(445,277

)

(5,700

)

(774,263

)

(8,775

)

Net Increase (Decrease)—ETF Shares

 

522,172

 

6,600

 

(275,041

)

(3,150

)

Admiral Shares

 

 

 

 

 

 

 

 

 

Issued

 

12,307

 

334

 

29,914

 

666

 

Issued in Lieu of Cash Distributions

 

234

 

6

 

1,591

 

35

 

Redeemed

 

(10,025

)

(245

)

(32,164

)

(711

)

Net Increase (Decrease)—Admiral Shares

 

2,516

 

95

 

(659

)

(10

)

 

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

12

 

Consumer Discretionary Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Apparel Retail

 

5.1

%

Apparel, Accessories & Luxury Goods

 

3.6

 

Auto Parts & Equipment

 

2.9

 

Automobile Manufacturers

 

4.4

 

Automotive Retail

 

3.2

 

Casinos & Gaming

 

2.4

 

Computer & Electronics Retail

 

0.7

 

Consumer Electronics

 

0.4

 

Department Stores

 

0.9

 

Distributors

 

1.1

 

Education Services

 

1.0

 

Footwear

 

4.3

 

General Merchandise Stores

 

3.3

 

Home Furnishings

 

0.7

 

Home Improvement Retail

 

10.3

 

Homebuilding

 

2.4

 

Homefurnishing Retail

 

0.6

 

Hotels, Resorts & Cruise Lines

 

5.1

 

Household Appliances

 

0.6

 

Housewares & Specialties

 

0.3

 

Internet & Direct Marketing Retail

 

29.5

 

Leisure Facilities

 

0.7

 

Leisure Products

 

1.1

 

Motorcycle Manufacturers

 

0.2

 

Restaurants

 

11.9

 

Specialized Consumer Services

 

0.9

 

Specialty Stores

 

2.2

 

Tires & Rubber

 

0.2

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

13

 

Consumer Discretionary Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

Common Stocks (100.0%)

 

 

 

 

 

Auto Components (3.1%)

 

 

 

 

 

 

 

Aptiv plc

 

275,592

 

22,904

 

 

 

Lear Corp.

 

67,559

 

10,274

 

 

 

BorgWarner Inc.

 

218,717

 

8,882

 

 

 

Autoliv Inc.

 

91,251

 

7,465

 

 

 

Gentex Corp.

 

278,215

 

5,659

 

 

 

Goodyear Tire & Rubber Co.

 

248,189

 

4,909

 

 

 

Dana Inc.

 

155,554

 

3,072

 

*,^

 

Veoneer Inc.

 

89,158

 

2,725

 

*

 

Visteon Corp.

 

31,340

 

2,685

 

*

 

Fox Factory Holding Corp.

 

40,834

 

2,588

 

*

 

Dorman Products Inc.

 

30,475

 

2,465

 

 

 

LCI Industries

 

27,623

 

2,251

 

 

 

Delphi Technologies plc

 

98,012

 

2,138

 

*

 

American Axle & Manufacturing Holdings Inc.

 

122,243

 

1,968

 

 

 

Tenneco Inc. Class A

 

56,411

 

1,952

 

 

 

Adient plc

 

96,238

 

1,871

 

 

 

Cooper Tire & Rubber Co.

 

54,985

 

1,757

 

*

 

Gentherm Inc.

 

38,668

 

1,585

 

*

 

Garrett Motion Inc.

 

83,213

 

1,393

 

*

 

Cooper-Standard Holdings Inc.

 

19,993

 

1,202

 

 

 

Standard Motor Products Inc.

 

22,956

 

1,132

 

*

 

Stoneridge Inc.

 

31,807

 

940

 

*

 

Modine Manufacturing Co.

 

59,811

 

899

 

 

 

Tower International Inc.

 

24,778

 

636

 

*

 

Motorcar Parts of America Inc.

 

23,923

 

495

 

 

 

Superior Industries International Inc.

 

38,108

 

236

 

 

 

 

 

 

 

94,083

 

Automobiles (4.6%)

 

 

 

 

 

 

 

General Motors Co.

 

1,318,132

 

52,040

 

*,^

 

Tesla Inc.

 

132,833

 

42,491

 

 

 

Ford Motor Co.

 

3,863,490

 

33,883

 

 

 

Harley-Davidson Inc.

 

172,501

 

6,403

 

 

 

Thor Industries Inc.

 

56,159

 

3,626

 

 

 

Winnebago Industries Inc.

 

34,334

 

1,120

 

 

 

 

 

 

 

139,563

 

Distributors (1.1%)

 

 

 

 

 

 

 

Genuine Parts Co.

 

153,093

 

16,653

 

*

 

LKQ Corp.

 

332,792

 

9,218

 

 

 

Pool Corp.

 

42,404

 

6,765

 

 

 

Core-Mark Holding Co. Inc.

 

50,634

 

1,596

 

 

 

 

 

 

 

34,232

 

Diversified Consumer Services (1.9%)

 

 

 

 

 

 

 

Service Corp. International

 

188,843

 

7,807

 

*

 

Bright Horizons Family Solutions Inc.

 

57,866

 

7,175

 

*

 

ServiceMaster Global Holdings Inc.

 

142,536

 

6,437

 

*

 

Grand Canyon Education Inc.

 

50,708

 

5,866

 

 

 

H&R Block Inc.

 

217,113

 

5,243

 

*

 

Chegg Inc.

 

104,441

 

4,139

 

 

 

Graham Holdings Co. Class B

 

4,682

 

3,201

 

*

 

Adtalem Global Education Inc.

 

63,367

 

3,054

 

 

 

Strategic Education Inc.

 

23,192

 

3,033

 

*

 

frontdoor Inc.

 

78,079

 

2,499

 

*

 

Sotheby’s

 

40,774

 

1,789

 

*

 

Career Education Corp.

 

80,608

 

1,340

 

*

 

K12 Inc.

 

38,636

 

1,238

 

*

 

Houghton Mifflin Harcourt Co.

 

120,761

 

955

 

*

 

Weight Watchers International Inc.

 

43,717

 

885

 

*

 

Regis Corp.

 

40,190

 

727

 

*

 

American Public Education Inc.

 

20,311

 

656

 

 

 

Carriage Services Inc. Class A

 

23,653

 

497

 

*

 

Bridgepoint Education Inc. Class A

 

38,054

 

392

 

 

 

 

 

 

 

56,933

 

Hotels, Restaurants & Leisure (20.2%)

 

 

 

 

 

 

 

McDonald’s Corp.

 

804,233

 

147,850

 

 

 

Starbucks Corp.

 

1,295,798

 

91,043

 

 

 

Marriott International Inc. Class A

 

303,342

 

38,000

 

 

 

Yum! Brands Inc.

 

326,939

 

30,896

 

 

 

Carnival Corp.

 

441,391

 

25,495

 

 

 

Las Vegas Sands Corp.

 

410,044

 

25,189

 

 

 

Hilton Worldwide Holdings Inc.

 

294,826

 

24,500

 

 

 

Royal Caribbean Cruises Ltd.

 

174,101

 

20,627

 

*

 

Chipotle Mexican Grill Inc. Class A

 

26,144

 

15,883

 

 

 

Darden Restaurants Inc.

 

129,478

 

14,516

 

 

 

MGM Resorts International

 

525,958

 

14,069

 

 

 

Wynn Resorts Ltd.

 

102,210

 

12,934

 

*

 

Norwegian Cruise Line Holdings Ltd.

 

229,871

 

12,765

 

 

 

Domino’s Pizza Inc.

 

41,574

 

10,433

 

 

 

Vail Resorts Inc.

 

42,109

 

8,775

 

 

 

Aramark

 

257,811

 

7,812

 

 

 

Dunkin’ Brands Group Inc.

 

87,613

 

6,260

 

 

 

Wyndham Hotels & Resorts Inc.

 

105,356

 

5,538

 

*

 

Planet Fitness Inc. Class A

 

92,954

 

5,464

 

*

 

Caesars Entertainment Corp.

 

604,587

 

5,211

 

 

 

Wyndham Destinations Inc.

 

103,785

 

4,673

 

 

 

Texas Roadhouse Inc. Class A

 

71,717

 

4,540

 

 

 

Six Flags Entertainment Corp.

 

75,910

 

4,229

 

 

 

Marriott Vacations Worldwide Corp.

 

42,879

 

4,174

 

 

 

Extended Stay America Inc.

 

201,471

 

3,675

 

 

 

Churchill Downs Inc.

 

39,129

 

3,670

 

 

 

Wendy’s Co.

 

202,395

 

3,507

 

 

 

Hyatt Hotels Corp. Class A

 

45,927

 

3,342

 

*

 

Cracker Barrel Old Country Store Inc.

 

20,516

 

3,323

 

*

 

Hilton Grand Vacations Inc.

 

103,921

 

3,304

 

 

 

Choice Hotels International Inc.

 

39,124

 

3,124

 

*

 

Penn National Gaming Inc.

 

120,055

 

2,983

 

 

 

Boyd Gaming Corp.

 

90,871

 

2,704

 

*

 

Eldorado Resorts Inc.

 

54,178

 

2,612

 

 

 

Jack in the Box Inc.

 

28,070

 

2,261

 

*

 

Belmond Ltd. Class A

 

89,939

 

2,235

 

 

 

Cheesecake Factory Inc.

 

46,731

 

2,210

 

 

 

Dave & Buster’s Entertainment Inc.

 

42,699

 

2,192

 

 

 

Red Rock Resorts Inc. Class A

 

76,616

 

2,154

 

 

 

Wingstop Inc.

 

32,061

 

2,136

 

 

 

Brinker International Inc.

 

42,418

 

1,941

 

 

 

Dine Brands Global Inc.

 

18,651

 

1,850

 

*

 

Scientific Games Corp.

 

61,182

 

1,778

 

 

 

Bloomin’ Brands Inc.

 

85,720

 

1,773

 

*

 

Shake Shack Inc. Class A

 

29,445

 

1,624

 

*

 

SeaWorld Entertainment Inc.

 

58,571

 

1,598

 

*

 

Denny’s Corp.

 

70,459

 

1,230

 

 

 

International Speedway Corp. Class A

 

27,830

 

1,204

 

 

 

Papa John’s International Inc.

 

26,503

 

1,158

 

 

 

BJ’s Restaurants Inc.

 

23,748

 

1,136

 

 

 

Ruth’s Hospitality Group Inc.

 

34,209

 

870

 

*

 

PlayAGS Inc.

 

29,797

 

709

 

*

 

Monarch Casino & Resort Inc.

 

15,547

 

682

 

*

 

Playa Hotels & Resorts NV

 

73,785

 

562

 

*

 

Chuy’s Holdings Inc.

 

22,379

 

501

 

*

 

Red Robin Gourmet Burgers Inc.

 

16,432

 

500

 

*

 

Carrols Restaurant Group Inc.

 

45,078

 

482

 

*

 

Fiesta Restaurant Group Inc.

 

30,969

 

467

 

*

 

El Pollo Loco Holdings Inc.

 

30,524

 

462

 

*

 

Lindblad Expeditions Holdings Inc.

 

33,839

 

460

 

*

 

Del Taco Restaurants Inc.

 

43,321

 

448

 

*

 

Del Frisco’s Restaurant Group Inc.

 

47,606

 

403

 

*

 

Habit Restaurants Inc. Class A

 

29,134

 

328

 

*

 

Potbelly Corp.

 

34,923

 

294

 

*

 

Biglari Holdings Inc.

 

341

 

238

 

*

 

Biglari Holdings Inc. Class B

 

1,035

 

139

 

 

 

 

 

 

 

609,145

 

 

14

 

Consumer Discretionary Index Fund

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

Household Durables (4.3%)

 

 

 

 

 

 

 

Lennar Corp. Class A

 

304,553

 

14,612

 

 

 

DR Horton Inc.

 

373,879

 

14,540

 

 

 

Garmin Ltd.

 

118,803

 

9,976

 

 

 

Whirlpool Corp.

 

67,267

 

9,519

 

*

 

NVR Inc.

 

3,606

 

9,448

 

*

 

Mohawk Industries Inc.

 

66,421

 

9,041

 

 

 

Newell Brands Inc.

 

492,686

 

7,996

 

 

 

PulteGroup Inc.

 

281,928

 

7,612

 

 

 

Leggett & Platt Inc.

 

137,219

 

6,233

 

 

 

Toll Brothers Inc.

 

148,515

 

5,287

 

*,^

 

iRobot Corp.

 

29,573

 

3,698

 

*

 

Helen of Troy Ltd.

 

28,055

 

3,145

 

*

 

Tempur Sealy International Inc.

 

50,181

 

2,921

 

*

 

TopBuild Corp.

 

38,581

 

2,296

 

*

 

Taylor Morrison Home Corp. Class A

 

129,087

 

2,165

 

 

 

KB Home

 

87,146

 

1,988

 

*

 

TRI Pointe Group Inc.

 

155,647

 

1,961

 

*

 

Meritage Homes Corp.

 

41,752

 

1,831

 

 

 

La-Z-Boy Inc.

 

52,346

 

1,801

 

 

 

Tupperware Brands Corp.

 

53,754

 

1,619

 

 

 

MDC Holdings Inc.

 

54,754

 

1,579

 

*

 

Cavco Industries Inc.

 

9,579

 

1,326

 

*,^

 

LGI Homes Inc.

 

21,759

 

1,286

 

*

 

Installed Building Products Inc.

 

24,957

 

1,089

 

*

 

M/I Homes Inc.

 

32,624

 

850

 

*,^

 

GoPro Inc. Class A

 

136,019

 

793

 

 

 

Skyline Champion Corp.

 

39,818

 

791

 

*

 

Century Communities Inc.

 

28,393

 

648

 

 

 

Ethan Allen Interiors Inc.

 

31,061

 

624

 

*

 

Universal Electronics Inc.

 

17,299

 

578

 

*

 

William Lyon Homes Class A

 

40,656

 

575

 

*

 

Beazer Homes USA Inc.

 

40,435

 

490

 

 

 

Hooker Furniture Corp.

 

15,537

 

488

 

*

 

Green Brick Partners Inc.

 

38,401

 

342

 

 

 

Flexsteel Industries Inc.

 

11,939

 

297

 

 

 

Hamilton Beach Brands Holding Co. Class A

 

11,350

 

275

 

*

 

Hovnanian Enterprises Inc. Class A

 

205,648

 

139

 

 

 

 

 

 

 

129,859

 

Internet & Direct Marketing Retail (29.5%)

 

 

 

 

 

*

 

Amazon.com Inc.

 

420,766

 

689,985

 

*

 

Booking Holdings Inc.

 

48,387

 

82,115

 

 

 

eBay Inc.

 

956,967

 

35,551

 

*

 

MercadoLibre Inc.

 

43,773

 

20,083

 

 

 

Expedia Group Inc.

 

128,279

 

15,818

 

*

 

Wayfair Inc.

 

59,787

 

9,906

 

*

 

Etsy Inc.

 

113,615

 

8,097

 

*

 

Qurate Retail Group Inc. QVC Group Class A

 

442,790

 

7,975

 

*

 

GrubHub Inc.

 

95,127

 

7,761

 

*

 

Liberty Expedia Holdings Inc. Class A

 

59,147

 

2,620

 

*

 

Stamps.com Inc.

 

18,578

 

1,746

 

*

 

Groupon Inc. Class A

 

507,511

 

1,660

 

*

 

Shutterfly Inc.

 

35,154

 

1,575

 

 

 

Nutrisystem Inc.

 

32,819

 

1,420

 

 

 

Shutterstock Inc.

 

22,174

 

1,027

 

*

 

Quotient Technology Inc.

 

93,158

 

934

 

*

 

Duluth Holdings Inc.

 

23,244

 

590

 

 

 

PetMed Express Inc.

 

25,432

 

586

 

*

 

1-800-Flowers.com Inc. Class A

 

31,864

 

569

 

*,^

 

Overstock.com Inc.

 

28,337

 

561

 

*,^

 

Lands’ End Inc.

 

17,210

 

314

 

 

 

 

 

 

 

890,893

 

Leisure Products (1.1%)

 

 

 

 

 

 

 

Hasbro Inc.

 

125,954

 

10,694

 

 

 

Polaris Industries Inc.

 

62,149

 

5,297

 

*,^

 

Mattel Inc.

 

363,049

 

5,235

 

 

 

Brunswick Corp.

 

91,445

 

4,823

 

 

 

Callaway Golf Co.

 

103,768

 

1,786

 

 

 

Sturm Ruger & Co. Inc.

 

20,048

 

1,142

 

 

 

Acushnet Holdings Corp.

 

39,013

 

972

 

*

 

American Outdoor Brands Corp.

 

63,961

 

803

 

*

 

Vista Outdoor Inc.

 

67,812

 

604

 

*

 

MasterCraft Boat Holdings Inc.

 

23,123

 

570

 

*

 

Nautilus Inc.

 

38,816

 

253

 

 

 

 

 

 

 

32,179

 

Multiline Retail (4.2%)

 

 

 

 

 

 

 

Target Corp.

 

518,614

 

37,672

 

 

 

Dollar General Corp.

 

276,082

 

32,705

 

*

 

Dollar Tree Inc.

 

247,684

 

23,859

 

 

 

Kohl’s Corp.

 

174,656

 

11,795

 

 

 

Macy’s Inc.

 

320,669

 

7,949

 

 

 

Nordstrom Inc.

 

123,108

 

5,821

 

*

 

Ollie’s Bargain Outlet Holdings Inc.

 

55,917

 

4,933

 

 

 

Big Lots Inc.

 

44,371

 

1,399

 

 

 

Dillard’s Inc. Class A

 

15,081

 

1,184

 

*,^

 

JC Penney Co. Inc.

 

383,684

 

583

 

 

 

 

 

 

 

127,900

 

Other (0.0%)1

 

 

 

 

 

*,§

 

Media General Inc. CVR

 

69,182

 

3

 

 

 

 

 

 

 

 

 

Specialty Retail (22.0%)

 

 

 

 

 

 

 

Home Depot Inc.

 

1,178,992

 

218,279

 

 

 

Lowe’s Cos. Inc.

 

841,284

 

88,411

 

 

 

TJX Cos. Inc.

 

1,288,450

 

66,085

 

 

 

Ross Stores Inc.

 

390,604

 

37,041

 

*

 

O’Reilly Automotive Inc.

 

83,755

 

31,154

 

*

 

AutoZone Inc.

 

26,415

 

24,803

 

*

 

Ulta Beauty Inc.

 

59,163

 

18,488

 

 

 

Best Buy Co. Inc.

 

259,412

 

17,858

 

 

 

Advance Auto Parts Inc.

 

76,628

 

12,397

 

 

 

Tractor Supply Co.

 

127,306

 

12,139

 

*

 

Burlington Stores Inc.

 

70,638

 

11,990

 

*

 

CarMax Inc.

 

183,755

 

11,411

 

 

 

Tiffany & Co.

 

115,027

 

10,932

 

 

 

Foot Locker Inc.

 

121,516

 

7,233

 

*

 

Five Below Inc.

 

58,513

 

7,042

 

 

 

L Brands Inc.

 

246,784

 

6,451

 

 

 

Gap Inc.

 

242,653

 

6,163

 

 

 

Williams-Sonoma Inc.

 

85,481

 

4,972

 

 

 

Aaron’s Inc.

 

73,304

 

3,980

 

 

 

American Eagle Outfitters Inc.

 

179,724

 

3,666

 

*,^

 

RH

 

21,128

 

3,245

 

 

 

Dick’s Sporting Goods Inc.

 

79,556

 

3,107

 

 

 

Monro Inc.

 

35,446

 

2,705

 

*

 

Floor & Decor Holdings Inc. Class A

 

70,191

 

2,610

 

*

 

Murphy USA Inc.

 

32,997

 

2,566

 

*

 

Urban Outfitters Inc.

 

81,965

 

2,529

 

 

 

Bed Bath & Beyond Inc.

 

149,750

 

2,505

 

*

 

National Vision Holdings Inc.

 

71,135

 

2,390

 

*

 

Sally Beauty Holdings Inc.

 

130,054

 

2,350

 

 

 

DSW Inc. Class A

 

75,543

 

2,237

 

 

 

Lithia Motors Inc. Class A

 

24,563

 

2,217

 

*

 

AutoNation Inc.

 

58,865

 

2,076

 

 

 

Office Depot Inc.

 

541,981

 

1,881

 

 

 

Penske Automotive Group Inc.

 

41,952

 

1,864

 

 

 

Children’s Place Inc.

 

17,896

 

1,710

 

 

 

Signet Jewelers Ltd.

 

57,911

 

1,628

 

*

 

Sleep Number Corp.

 

36,918

 

1,611

 

 

 

Abercrombie & Fitch Co.

 

73,352

 

1,610

 

*

 

Michaels Cos. Inc.

 

113,229

 

1,601

 

*

 

Asbury Automotive Group Inc.

 

21,802

 

1,565

 

 

 

Guess? Inc.

 

68,149

 

1,526

 

 

 

Caleres Inc.

 

48,562

 

1,510

 

 

 

GameStop Corp. Class A

 

113,214

 

1,325

 

 

 

Group 1 Automotive Inc.

 

20,574

 

1,279

 

*

 

At Home Group Inc.

 

50,054

 

1,225

 

*

 

Genesco Inc.

 

23,267

 

1,123

 

*

 

Rent-A-Center Inc.

 

46,882

 

872

 

 

 

Chico’s FAS Inc.

 

143,865

 

840

 

 

 

Tailored Brands Inc.

 

55,871

 

724

 

*

 

Party City Holdco Inc.

 

68,823

 

716

 

 

 

Buckle Inc.

 

35,320

 

678

 

*

 

MarineMax Inc.

 

32,698

 

642

 

*

 

America’s Car-Mart Inc.

 

7,826

 

639

 

*

 

Conn’s Inc.

 

25,102

 

592

 

*

 

Zumiez Inc.

 

23,793

 

588

 

 

 

Haverty Furniture Cos. Inc.

 

23,555

 

574

 

 

 

Winmark Corp.

 

3,213

 

553

 

 

 

Shoe Carnival Inc.

 

14,464

 

552

 

^

 

Camping World Holdings Inc. Class A

 

40,096

 

517

 

*

 

Express Inc.

 

91,988

 

478

 

 

 

Cato Corp. Class A

 

30,339

 

478

 

*

 

Hibbett Sports Inc.

 

25,338

 

470

 

 

 

Barnes & Noble Inc.

 

71,826

 

452

 

 

 

Sonic Automotive Inc. Class A

 

29,948

 

450

 

*

 

Lumber Liquidators Holdings Inc.

 

37,707

 

445

 

*

 

Ascena Retail Group Inc.

 

173,695

 

386

 

*

 

GNC Holdings Inc. Class A

 

122,164

 

364

 

*

 

Barnes & Noble Education Inc.

 

52,435

 

361

 

 

 

Tile Shop Holdings Inc.

 

53,022

 

338

 

*

 

Vitamin Shoppe Inc.

 

32,451

 

239

 

 

 

 

 

 

 

665,438

 

Textiles, Apparel & Luxury Goods (8.0%)

 

 

 

 

 

 

 

NIKE Inc. Class B

 

1,327,985

 

113,848

 

 

 

VF Corp.

 

350,444

 

30,615

 

*

 

Lululemon Athletica Inc.

 

103,687

 

15,597

 

 

 

Tapestry Inc.

 

301,018

 

10,518

 

 

 

PVH Corp.

 

80,680

 

9,265

 

 

 

Ralph Lauren Corp. Class A

 

57,712

 

7,224

 

*

 

Capri Holdings Ltd.

 

156,677

 

7,144

 

 

 

Hanesbrands Inc.

 

379,431

 

7,054

 

*

 

Skechers U.S.A. Inc. Class A

 

142,637

 

4,797

 

 

 

Carter’s Inc.

 

48,926

 

4,767

 

*

 

Under Armour Inc. Class A

 

196,968

 

4,442

 

*

 

Deckers Outdoor Corp.

 

28,020

 

4,146

 

*

 

Under Armour Inc. Class C

 

202,562

 

4,067

 

 

 

Wolverine World Wide Inc.

 

101,634

 

3,634

 

 

 

Columbia Sportswear Co.

 

33,374

 

3,436

 

 

 

Steven Madden Ltd.

 

89,761

 

2,961

 

*

 

Crocs Inc.

 

73,246

 

1,881

 

*

 

G-III Apparel Group Ltd.

 

45,865

 

1,633

 

 

 

Oxford Industries Inc.

 

18,886

 

1,493

 

 

15

 

Consumer Discretionary Index Fund

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

*

 

Fossil Group Inc.

 

50,701

 

793

 

 

 

Movado Group Inc.

 

18,938

 

663

 

*

 

Unifi Inc.

 

19,748

 

437

 

 

 

Culp Inc.

 

16,466

 

305

 

*

 

Vera Bradley Inc.

 

31,729

 

303

 

 

 

 

 

 

 

241,023

 

Total Common Stocks
(Cost $2,657,398)

 

 

 

3,021,251

 

Temporary Cash Investment (0.7%)

 

 

 

 

 

Money Market Fund (0.7%)

 

 

 

 

 

2,3

 

Vanguard Market Liquidity Fund, 2.563%
(Cost $22,386)

 

223,858

 

22,388

 

Total Investments (100.7%)
(Cost $2,679,784)

 

 

 

3,043,639

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

 

 

 

 

 

($000

)

Other Assets and Liabilities (-0.7%)

 

 

 

 

 

Other Assets

 

 

 

 

 

Investment in Vanguard

 

 

 

149

 

Receivables for Investment Securities Sold

 

 

 

14,034

 

Receivables for Accrued Income

 

 

 

3,520

 

Receivables for Capital Shares Issued

 

 

 

174

 

Other Assets

 

 

 

422

 

Total Other Assets

 

 

 

18,299

 

Liabilities

 

 

 

 

 

Payables for Investment Securities Purchased

 

 

 

(15,800

)

Collateral for Securities on Loan

 

 

 

(22,385

)

Payables for Capital Shares Redeemed

 

 

 

(235

)

Payables to Vanguard

 

 

 

(653

)

Total Liabilities

 

 

 

(39,073

)

Net Assets (100%)

 

 

 

3,022,865

 

 

 

 

 

 

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

 

 

 

($000

)

Paid-in Capital

 

 

 

2,731,524

 

Total Distributable Earnings (Loss)

 

 

 

291,341

 

Net Assets

 

 

 

3,022,865

 

 

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

 

 

Applicable to 16,145,448 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

 

 

2,715,940

 

Net Asset Value Per Share—ETF Shares

 

 

 

$168.22

 

 

 

 

 

 

 

Admiral Shares—Net Assets

 

 

 

 

 

Applicable to 3,525,011 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

 

 

306,925

 

Net Asset Value Per Share— Admiral Shares

 

 

 

$87.07

 

 

·      See Note A in Notes to Financial Statements.

 

*       Non-income-producing security.

 

^      Includes partial security positions on loan to broker-dealers.

 

The total value of securities on loan is $21,716,000.

§     Security value determined using significant unobservable inputs.

 

1     “Other” represents securities that are not classified by the fund’s benchmark index.

 

2     Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

3     Includes $22,385,000 of collateral received for securities on loan.

 

CVR—Contingent Value Rights.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

16

 

Consumer Discretionary Index Fund

 

 

 

Statement of Operations

 

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000

)

Investment Income

 

 

 

Income

 

 

 

Dividends

 

18,113

 

Interest1

 

18

 

Securities Lending—Net

 

198

 

Total Income

 

18,329

 

Expenses

 

 

 

The Vanguard Group—Note B

 

 

 

Investment Advisory Services

 

393

 

Management and Administrative—ETF Shares

 

871

 

Management and Administrative—Admiral Shares

 

96

 

Marketing and Distribution—ETF Shares

 

59

 

Marketing and Distribution—Admiral Shares

 

10

 

Custodian Fees

 

19

 

Shareholders’ Reports—ETF Shares

 

68

 

Shareholders’ Reports—Admiral Shares

 

3

 

Trustees’ Fees and Expenses

 

1

 

Total Expenses

 

1,520

 

Net Investment Income

 

16,809

 

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold1,2

 

128,131

 

Futures Contracts

 

(450

)

Realized Net Gain (Loss)

 

127,681

 

Change in Unrealized Appreciation (Depreciation) of Investment Securities1

 

(403,546

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(259,056

)

 

1       Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $14,000, ($2,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.

2       Includes $176,337,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

Statement of Changes in Net Assets

 

 

 

 

Six Months Ended

 

 

Year Ended

 

 

 

February 28,

 

 

August 31,

 

 

 

2019

 

 

2018

 

 

 

($000

)

 

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

 

Operations

 

 

 

 

 

 

Net Investment Income

 

16,809

 

 

36,568

 

Realized Net Gain (Loss)

 

127,681

 

 

177,750

 

Change in Unrealized Appreciation (Depreciation)

 

(403,546

)

 

506,647

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(259,056

)

 

720,965

 

Distributions

 

 

 

 

 

 

Net Investment Income

 

 

 

 

 

 

ETF Shares

 

(19,474

)

 

(31,797

)

Admiral Shares

 

(2,046

)

 

(3,079

)

Realized Capital Gain

 

 

 

 

 

 

ETF Shares

 

—

 

 

—

 

Admiral Shares

 

—

 

 

—

 

Total Distributions

 

(21,520

)

 

(34,876

)

Capital Share Transactions

 

 

 

 

 

 

ETF Shares

 

(226,331

)

 

376,174

 

Admiral Shares

 

3,211

 

 

62,722

 

Net Increase (Decrease) from Capital Share Transactions

 

(223,120

)

 

438,896

 

Total Increase (Decrease)

 

(503,696

)

 

1,124,985

 

Net Assets

 

 

 

 

 

 

Beginning of Period

 

3,526,561

 

 

2,401,576

 

End of Period

 

3,022,865

 

 

3,526,561

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

17

 

Consumer Discretionary Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$180.85

 

$141.74

 

$126.45

 

$120.80

 

$111.79

 

$93.38

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.908

1

2.066

1

2.068

1

1.875

 

1.542

 

1.251

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(12.425

)

39.031

 

15.248

 

6.259

 

8.900

 

18.072

 

Total from Investment Operations

 

(11.517

)

41.097

 

17.316

 

8.134

 

10.442

 

19.323

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.113

)

(1.987

)

(2.026

)

(2.484

)

(1.432

)

(.913

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(1.113

)

(1.987

)

(2.026

)

(2.484

)

(1.432

)

(.913

)

Net Asset Value, End of Period

 

$168.22

 

$180.85

 

$141.74

 

$126.45

 

$120.80

 

$111.79

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-6.37%

 

29.22%

 

13.81%

 

6.84%

 

9.41%

 

20.75%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$2,716

 

$3,199

 

$2,198

 

$1,926

 

$1,842

 

$1,298

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.10%

 

1.28%

 

1.53%

 

1.54%

 

1.31%

 

1.26%

 

Portfolio Turnover Rate2

 

9%

 

28%

 

6%

 

7%

 

6%

 

7%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

18

 

Consumer Discretionary Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$93.61

 

$73.36

 

$65.45

 

$62.53

 

$57.87

 

$48.34

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.466

1

1.073

1

1.071

1

.971

 

.805

 

.648

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(6.429

)

20.205

 

7.890

 

3.239

 

4.595

 

9.361

 

Total from Investment Operations

 

(5.963

)

21.278

 

8.961

 

4.210

 

5.400

 

10.009

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.577

)

(1.028

)

(1.051

)

(1.290

)

(.740

)

(.479

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.577

)

(1.028

)

(1.051

)

(1.290

)

(.740

)

(.479

)

Net Asset Value, End of Period

 

$87.07

 

$93.61

 

$73.36

 

$65.45

 

$62.53

 

$57.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-6.37%

 

29.24%

 

13.81%

 

6.83%

 

9.43%

 

20.77%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$307

 

$328

 

$204

 

$169

 

$139

 

$83

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.09%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.10%

 

1.28%

 

1.53%

 

1.54%

 

1.32%

 

1.26%

 

Portfolio Turnover Rate3

 

9%

 

28%

 

6%

 

7%

 

6%

 

7%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

19

 

Consumer Discretionary Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Consumer Discretionary Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at February 28, 2019.

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties.

 

20

 

Consumer Discretionary Index Fund

 

 

 

 

The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $149,000, representing 0.00% of the fund’s net assets and 0.06% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

21

 

Consumer Discretionary Index Fund

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

3,021,248

 

—

 

3

 

Temporary Cash Investments

 

22,388

 

—

 

—

 

Total

 

3,043,636

 

—

 

3

 

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

2,679,784

 

Gross Unrealized Appreciation

 

581,292

 

Gross Unrealized Depreciation

 

(217,437

)

Net Unrealized Appreciation (Depreciation)

 

363,855

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $1,493,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $25,564,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $390,342,000 of investment securities and sold $621,464,000 of investment securities, other than temporary cash investments. Purchases and sales include $220,063,000 and $487,922,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

 

Year Ended

 

 

 

February 28, 2019

 

 

August 31, 2018

 

 

 

Amount

 

Shares

 

 

Amount

 

Shares

 

 

 

($000

)

(000

)

 

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

 

Issued

 

263,409

 

1,559

 

 

754,991

 

4,555

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

 

—

 

—

 

Redeemed

 

(489,740

)

(3,100

)

 

(378,817

)

(2,375

)

Net Increase (Decrease)—ETF Shares

 

(226,331

)

(1,541

)

 

376,174

 

2,180

 

Admiral Shares

 

 

 

 

 

 

 

 

 

 

Issued

 

57,656

 

672

 

 

131,064

 

1,547

 

Issued in Lieu of Cash Distributions

 

1,807

 

21

 

 

2,715

 

33

 

Redeemed

 

(56,252

)

(672

)

 

(71,057

)

(854

)

Net Increase (Decrease)—Admiral Shares

 

3,211

 

21

 

 

62,722

 

726

 

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

22

 

Consumer Staples Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Agricultural Products

 

2.7

%

Brewers

 

0.9

 

Distillers & Vintners

 

2.5

 

Drug Retail

 

3.5

 

Food Distributors

 

3.0

 

Food Retail

 

2.3

 

Household Products

 

21.4

 

Hypermarkets & Super Centers

 

12.1

 

Packaged Foods & Meats

 

16.2

 

Personal Products

 

3.9

 

Soft Drinks

 

19.6

 

Tobacco

 

11.9

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

23

 

Consumer Staples Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000

)

Common Stocks (99.9%)1

 

 

 

 

 

Beverages (23.0%)

 

 

 

 

 

 

Coca-Cola Co.

 

11,012,386

 

499,302

 

 

PepsiCo Inc.

 

3,814,634

 

441,124

 

 

Constellation Brands Inc. Class A

 

500,579

 

84,678

 

*

Monster Beverage Corp.

 

1,197,596

 

76,443

 

 

Brown-Forman Corp. Class B

 

870,684

 

43,090

 

 

Molson Coors Brewing Co. Class B

 

554,311

 

34,179

 

*

Boston Beer Co. Inc. Class A

 

37,629

 

11,761

 

 

Coca-Cola Consolidated Inc.

 

27,466

 

6,808

 

 

MGP Ingredients Inc.

 

30,987

 

2,536

 

 

National Beverage Corp.

 

29,595

 

2,030

 

 

 

 

 

 

1,201,951

 

Food & Staples Retailing (20.9%)

 

 

 

 

 

 

Walmart Inc.

 

3,889,253

 

384,997

 

 

Costco Wholesale Corp.

 

1,086,671

 

237,698

 

 

Walgreens Boots Alliance Inc.

 

2,526,803

 

179,883

 

 

Sysco Corp.

 

1,555,734

 

105,090

 

 

Kroger Co.

 

2,681,956

 

78,662

 

*

US Foods Holding Corp.

 

621,730

 

21,910

 

 

Casey’s General Stores Inc.

 

131,302

 

17,692

 

*

Sprouts Farmers Market Inc.

 

513,445

 

11,973

 

*

Performance Food Group Co.

 

296,842

 

11,437

 

*

Chefs’ Warehouse Inc.

 

203,698

 

6,520

 

 

BJ’s Wholesale Club Holdings Inc.

 

223,539

 

5,660

 

 

Andersons Inc.

 

150,800

 

5,574

 

 

PriceSmart Inc.

 

81,146

 

5,247

 

 

Weis Markets Inc.

 

94,571

 

4,758

 

 

SpartanNash Co.

 

217,769

 

4,133

 

*

United Natural Foods Inc.

 

198,121

 

2,974

 

 

Village Super Market Inc. Class A

 

93,533

 

2,867

 

 

Ingles Markets Inc. Class A

 

79,144

 

2,463

 

*,^

Rite Aid Corp.

 

3,175,010

 

2,349

 

*

Smart & Final Stores Inc.

 

227,560

 

1,411

 

 

 

 

 

 

1,093,298

 

Food Products (18.8%)

 

 

 

 

 

 

Mondelez International Inc. Class A

 

4,465,089

 

210,574

 

 

General Mills Inc.

 

1,726,683

 

81,379

 

 

Archer-Daniels-Midland Co.

 

1,738,246

 

73,875

 

 

Kraft Heinz Co.

 

1,761,843

 

58,476

 

 

Tyson Foods Inc. Class A

 

899,188

 

55,444

 

 

Hershey Co.

 

446,930

 

49,466

 

 

McCormick & Co. Inc.

 

355,118

 

48,289

 

 

Kellogg Co.

 

781,543

 

43,970

 

 

Hormel Foods Corp.

 

886,237

 

38,427

 

 

Conagra Brands Inc.

 

1,548,095

 

36,179

 

 

JM Smucker Co.

 

339,813

 

35,990

 

 

Lamb Weston Holdings Inc.

 

420,595

 

29,151

 

 

Bunge Ltd.

 

441,572

 

23,439

 

*

Post Holdings Inc.

 

208,515

 

21,243

 

 

Ingredion Inc.

 

226,144

 

20,907

 

*

Darling Ingredients Inc.

 

706,807

 

15,536

 

*

Campbell Soup Co.

 

397,510

 

14,318

 

 

Flowers Foods Inc.

 

636,775

 

13,035

 

*

Freshpet Inc.

 

288,540

 

11,894

 

 

Lancaster Colony Corp.

 

75,784

 

11,881

 

*

TreeHouse Foods Inc.

 

191,122

 

11,578

 

 

Sanderson Farms Inc.

 

91,348

 

10,523

 

 

J&J Snack Foods Corp.

 

63,754

 

9,900

 

 

Calavo Growers Inc.

 

87,456

 

7,445

 

*

Hain Celestial Group Inc.

 

345,624

 

6,798

 

 

B&G Foods Inc.

 

264,822

 

6,520

 

*

Pilgrim’s Pride Corp.

 

306,000

 

6,019

 

 

Cal-Maine Foods Inc.

 

131,161

 

5,784

 

 

Tootsie Roll Industries Inc.

 

143,260

 

5,328

 

 

Fresh Del Monte Produce Inc.

 

152,686

 

4,226

 

*

Simply Good Foods Co.

 

183,338

 

3,751

 

*

Landec Corp.

 

272,524

 

3,499

 

*

Hostess Brands Inc. Class A

 

248,980

 

3,023

 

*

Farmer Brothers Co.

 

109,620

 

2,614

 

*

Seneca Foods Corp. Class A

 

77,035

 

2,274

 

 

Dean Foods Co.

 

398,306

 

1,597

 

 

John B Sanfilippo & Son Inc.

 

19,636

 

1,364

 

 

 

 

 

 

985,716

 

Household Products (21.4%)

 

 

 

 

 

 

Procter & Gamble Co.

 

6,897,313

 

679,730

 

 

Colgate-Palmolive Co.

 

2,437,768

 

160,576

 

 

Kimberly-Clark Corp.

 

1,043,228

 

121,880

 

 

Clorox Co.

 

381,309

 

60,258

 

 

Church & Dwight Co. Inc.

 

793,423

 

52,207

 

 

WD-40 Co.

 

65,946

 

11,803

 

 

Energizer Holdings Inc.

 

247,731

 

11,366

 

 

Spectrum Brands Holdings Inc.

 

161,954

 

8,773

 

*

Central Garden & Pet Co. Class A

 

268,382

 

7,475

 

*

Central Garden & Pet Co.

 

126,446

 

3,955

 

 

 

 

 

 

1,118,023

 

Other (0.0%)2

 

 

 

 

 

*,§

Herbalife Ltd. CVR

 

28,862

 

280

 

 

 

 

 

 

 

 

Personal Products (3.9%)

 

 

 

 

 

 

Estee Lauder Cos. Inc. Class A

 

663,442

 

104,121

 

*

Herbalife Nutrition Ltd.

 

415,879

 

23,331

 

^

Coty Inc. Class A

 

1,481,604

 

16,298

 

 

Nu Skin Enterprises Inc. Class A

 

226,725

 

13,628

 

 

Medifast Inc.

 

105,507

 

13,445

 

 

Inter Parfums Inc.

 

139,581

 

10,297

 

*

Edgewell Personal Care Co.

 

205,387

 

9,111

 

*

USANA Health Sciences Inc.

 

70,741

 

6,968

 

*

Avon Products Inc.

 

1,935,427

 

5,980

 

*,^

elf Beauty Inc.

 

61,529

 

489

 

 

 

 

 

 

203,668

 

Tobacco (11.9%)

 

 

 

 

 

 

Philip Morris International Inc.

 

4,120,475

 

358,234

 

 

Altria Group Inc.

 

4,825,751

 

252,918

 

 

Universal Corp.

 

104,882

 

6,224

 

 

Vector Group Ltd.

 

415,226

 

4,866

 

 

 

 

 

 

622,242

 

Total Common Stocks
(Cost $5,016,176)

 

 

 

5,225,178

 

Temporary Cash Investments (0.1%)1

 

 

 

 

 

Money Market Fund (0.1%)

 

 

 

 

 

3,4

Vanguard Market Liquidity Fund, 2.563%

 

46,613

 

4,662

 

 

 

 

 

 

 

 

 

 

 

Face

 

 

 

 

 

 

Amount

 

 

 

 

 

 

($000

)

 

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

 

 

United States Treasury Bill, 2.492%, 5/23/19

 

2,500

 

2,486

 

Total Temporary Cash Investments
(Cost $7,148)

 

 

 

7,148

 

Total Investments (100.0%)
(Cost $5,023,324)

 

 

 

5,232,326

 

 

24

 

Consumer Staples Index Fund

 

 

 

 

 

 

Amount

 

 

 

($000

)

Other Assets and Liabilities (0.0%)

 

 

 

Other Assets

 

 

 

Investment in Vanguard

 

256

 

Receivables for Investment Securities Sold

 

36,268

 

Receivables for Accrued Income

 

8,161

 

Receivables for Capital Shares Issued

 

472

 

Unrealized Appreciation—OTC Swap Contracts

 

212

 

Other Assets5

 

450

 

Total Other Assets

 

45,819

 

Liabilities

 

 

 

Payables for Investment Securities Purchased

 

(39,233

)

Collateral for Securities on Loan

 

(2,993

)

Payables for Capital Shares Redeemed

 

(2,913

)

Payables to Vanguard

 

(1,219

)

Total Liabilities

 

(46,358

)

Net Assets (100%)

 

5,231,787

 

 

 

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

 

($000

)

Paid-in Capital

 

5,072,441

 

Total Distributable Earnings (Loss)

 

159,346

 

Net Assets

 

5,231,787

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

Applicable to 32,749,684 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

4,622,583

 

Net Asset Value Per Share—ETF Shares

 

$141.15

 

 

 

 

 

Admiral Shares—Net Assets

 

 

 

Applicable to 8,753,336 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

609,204

 

Net Asset Value Per Share—Admiral Shares

 

$69.60

 

 

· See Note A in Notes to Financial Statements.

 

* Non-income-producing security.

 

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $2,430,000.

 

§ Security value determined using significant unobservable inputs.

 

1   The fund invests a portion of its cash reserves in equity markets through the use of swap contracts. After giving effect to swap investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.

 

2   “Other” represents securities that are not classified by the fund’s benchmark index.

 

3   Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

4   Includes $2,993,000 of collateral received for securities on loan.

 

5   Cash of $450,000 has been segregated as collateral for open over-the-counter swap contracts.

 

CVR—Contingent Value Rights.

 

OTC —Over-the-Counter.

 

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Over-the-Counter Total Return Swaps

 

 

 

 

 

 

 

 

 

Floating

 

Value and

 

Value and

 

 

 

 

 

 

 

Notional

 

Interest Rate

 

Unrealized

 

Unrealized

 

 

 

Termination

 

 

 

Amount

 

Received

 

Appreciation

 

(Depreciation

)

Reference Entity

 

Date

 

Counterparty

 

($000

)

(Paid)

1

($000

)

($000

)

Campbell Soup Co.

 

2/4/20

 

GSI

 

6,088

 

(2.485

)

212

 

—

 

 

1   Payment received/paid monthly.

 

GSI—Goldman Sachs International.

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

25

 

Consumer Staples Index Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000

)

Investment Income

 

 

 

Income

 

 

 

Dividends

 

69,479

 

Interest1

 

39

 

Securities Lending—Net

 

33

 

Total Income

 

69,551

 

Expenses

 

 

 

The Vanguard Group—Note B

 

 

 

Investment Advisory Services

 

641

 

Management and Administrative—ETF Shares

 

1,254

 

Management and Administrative—Admiral Shares

 

176

 

Marketing and Distribution—ETF Shares

 

107

 

Marketing and Distribution—Admiral Shares

 

21

 

Custodian Fees

 

82

 

Shareholders’ Reports—ETF Shares

 

105

 

Shareholders’ Reports—Admiral Shares

 

6

 

Trustees’ Fees and Expenses

 

1

 

Total Expenses

 

2,393

 

Net Investment Income

 

67,158

 

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold1,2

 

70,516

 

Futures Contracts

 

(131

)

Swap Contracts

 

232

 

Realized Net Gain (Loss)

 

70,617

 

Change in Unrealized Appreciation (Depreciation)

 

 

 

Investment Securities1

 

(49,315

)

Futures Contracts

 

(101

)

Swap Contracts

 

212

 

Change in Unrealized Appreciation (Depreciation)

 

(49,204

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

88,571

 

 

1   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $14,000, ($1,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

2   Includes $73,891,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

 

 

Year Ended

 

 

 

February 28,

 

 

August 31,

 

 

 

2019

 

 

2018

 

 

 

($000

)

 

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

 

Operations

 

 

 

 

 

 

Net Investment Income

 

67,158

 

 

115,562

 

Realized Net Gain (Loss)

 

70,617

 

 

165,928

 

Change in Unrealized Appreciation (Depreciation)

 

(49,204

)

 

(172,271

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

88,571

 

 

109,219

 

Distributions

 

 

 

 

 

 

Net Investment Income

 

 

 

 

 

 

ETF Shares

 

(57,342

)

 

(99,387

)

Admiral Shares

 

(7,906

)

 

(16,715

)

Realized Capital Gain

 

 

 

 

 

 

ETF Shares

 

—

 

 

—

 

Admiral Shares

 

—

 

 

—

 

Total Distributions

 

(65,248

)

 

(116,102

)

Capital Share Transactions

 

 

 

 

 

 

ETF Shares

 

619,868

 

 

207,348

 

Admiral Shares

 

18,636

 

 

(152,708

)

Net Increase (Decrease) from Capital Share Transactions

 

638,504

 

 

54,640

 

Total Increase (Decrease)

 

661,827

 

 

47,757

 

Net Assets

 

 

 

 

 

 

Beginning of Period

 

4,569,960

 

 

4,522,203

 

End of Period

 

5,231,787

 

 

4,569,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

26

 

Consumer Staples Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$140.13

 

$140.15

 

$139.97

 

$123.72

 

$117.12

 

$101.97

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1.937

1

3.603

1

3.651

1

3.189

 

2.903

 

2.602

 

Net Realized and Unrealized Gain (Loss) on Investments

 

.948

 

(.033

)

.212

 

17.752

 

6.114

 

14.976

 

Total from Investment Operations

 

2.885

 

3.570

 

3.863

 

20.941

 

9.017

 

17.578

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.865

)

(3.590

)

(3.683

)

(4.691

)

(2.417

)

(2.428

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(1.865

)

(3.590

)

(3.683

)

(4.691

)

(2.417

)

(2.428

)

Net Asset Value, End of Period

 

$141.15

 

$140.13

 

$140.15

 

$139.97

 

$123.72

 

$117.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

2.06%

 

2.60%

 

2.83%

 

17.36%

 

7.67%

 

17.42%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$4,623

 

$3,983

 

$3,780

 

$3,518

 

$2,393

 

$1,936

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

2.81%

 

2.60%

 

2.63%

 

2.50%

 

2.53%

 

2.52%

 

Portfolio Turnover Rate2

 

5%

 

8%

 

5%

 

6%

 

6%

 

5%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

27

 

Consumer Staples Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$69.09

 

$69.10

 

$69.02

 

$61.01

 

$57.74

 

$50.28

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.956

1

1.776

1

1.7971

 

1.575

 

1.431

 

1.281

 

Net Realized and Unrealized Gain (Loss) on Investments

 

.473

 

(.018

)

.101

 

8.752

 

3.025

 

7.379

 

Total from Investment Operations

 

1.429

 

(1.758

)

1.898

 

10.327

 

4.456

 

8.660

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.919

)

(1.768

)

(1.818

)

(2.317

)

(1.186

)

(1.200

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.919

)

(1.768

)

(1.818

)

(2.317

)

(1.186

)

(1.200

)

Net Asset Value, End of Period

 

$69.60

 

$69.09

 

$69.10

 

$69.02

 

$61.01

 

$57.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

2.07%

 

2.59%

 

2.81%

 

17.37%

 

7.73%

 

17.41%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$609

 

$587

 

$742

 

$728

 

$319

 

$218

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

2.81%

 

2.60%

 

2.63%

 

2.50%

 

2.53%

 

2.52%

 

Portfolio Turnover Rate3

 

5%

 

8%

 

5%

 

6%

 

6%

 

5%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3   Excludes the value of portfolio securities received or delivered as result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

28

 

Consumer Staples Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Consumer Staples Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at February 28, 2019.

 

3. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until termination of the swap, at which time realized gain (loss) is recorded.

 

29

 

Consumer Staples Index Fund

 

 

 

 

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

During the six months ended February 28, 2019, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015—2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

30

 

Consumer Staples Index Fund

 

 

 

 

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $256,000, representing 0.00% of the fund’s net assets and 0.10% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

5,224,898

 

—

 

280

 

Temporary Cash Investments

 

4,662

 

2,486

 

—

 

Swap Contracts—Assets

 

—

 

212

 

—

 

Total

 

5,229,560

 

2,698

 

280

 

 

D. As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

5,023,324

 

Gross Unrealized Appreciation

 

539,838

 

Gross Unrealized Depreciation

 

(330,836

)

Net Unrealized Appreciation (Depreciation)

 

209,002

 

 

31

 

Consumer Staples Index Fund

 

 

 

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses totaling $64,127,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $1,151,838,000 of investment securities and sold $511,804,000 of investment securities, other than temporary cash investments. Purchases and sales include $955,203,000 and $392,980,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

 

Year Ended

 

 

 

February 28, 2019

 

 

August 31, 2018

 

 

 

Amount

 

Shares

 

 

Amount

 

Shares

 

 

 

($000

)

(000

)

 

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

 

Issued

 

1,016,922

 

7,252

 

 

928,324

 

6,677

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

 

—

 

—

 

Redeemed

 

(397,054

)

(2,925

)

 

(720,976

)

(5,225

)

Net Increase (Decrease)—ETF Shares

 

619,868

 

4,327

 

 

207,348

 

1,452

 

Admiral Shares

 

 

 

 

 

 

 

 

 

 

Issued

 

115,652

 

1,684

 

 

169,310

 

2,477

 

Issued in Lieu of Cash Distributions

 

6,492

 

93

 

 

14,196

 

207

 

Redeemed

 

(103,508

)

(1,523

)

 

(336,214

)

(4,927

)

Net Increase (Decrease)—Admiral Shares

 

18,636

 

254

 

 

(152,708

)

(2,243

)

 

At February 28, 2019, one shareholder was the record or beneficial owner of 26% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio.

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

32

 

Energy Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Coal & Consumable Fuels

 

0.4

%

Integrated Oil & Gas

 

42.7

 

Oil & Gas Drilling

 

1.4

 

Oil & Gas Equipment & Services

 

10.4

 

Oil & Gas Exploration & Production

 

26.0

 

Oil & Gas Refining & Marketing

 

9.8

 

Oil & Gas Storage & Transportation

 

9.3

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

33

 

Energy Index Fund

 

 

Financial Statements (unaudited)

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

Common Stocks (99.9%)1

 

 

 

 

 

Energy Equipment & Services (11.7%)

 

 

 

 

 

 

 

Oil & Gas Drilling (1.4%)

 

 

 

 

 

 

 

Helmerich & Payne Inc.

 

320,592

 

17,376

 

*

 

Transocean Ltd.

 

1,525,522

 

12,464

 

 

 

Patterson-UTI Energy Inc.

 

649,925

 

8,618

 

 

 

Ensco plc Class A

 

1,289,814

 

5,288

 

*

 

Rowan Cos. plc Class A

 

353,960

 

4,003

 

 

 

Nabors Industries Ltd.

 

1,002,986

 

3,250

 

*

 

Unit Corp.

 

158,973

 

2,472

 

*

 

Noble Corp. plc

 

727,328

 

2,189

 

*

 

Diamond Offshore Drilling Inc.

 

200,910

 

1,919

 

 

 

 

 

 

 

 

 

 

 

Oil & Gas Equipment & Services (10.3%)

 

 

 

 

 

 

 

Schlumberger Ltd.

 

4,071,571

 

179,393

 

 

 

Halliburton Co.

 

2,588,393

 

79,438

 

 

 

Baker Hughes a GE Co. Class A

 

1,489,331

 

39,289

 

 

 

National Oilwell Varco Inc.

 

1,125,122

 

31,661

 

 

 

TechnipFMC plc

 

1,269,753

 

28,303

 

*

 

Apergy Corp.

 

228,041

 

9,573

 

^

 

Core Laboratories NV

 

129,824

 

8,414

 

*

 

Dril-Quip Inc.

 

110,338

 

4,702

 

 

 

McDermott International Inc.

 

529,110

 

4,487

 

*

 

Oceaneering International Inc.

 

289,022

 

4,465

 

*

 

ProPetro Holding Corp.

 

221,468

 

4,398

 

 

 

Archrock Inc.

 

381,115

 

3,720

 

 

 

US Silica Holdings Inc.

 

228,314

 

3,402

 

*

 

C&J Energy Services Inc.

 

181,506

 

3,135

 

*

 

Helix Energy Solutions Group Inc.

 

412,939

 

3,056

 

*

 

Oil States International Inc.

 

167,686

 

2,874

 

*

 

Newpark Resources Inc.

 

268,125

 

2,370

 

*

 

SEACOR Holdings Inc.

 

51,080

 

2,281

 

*

 

Tidewater Inc.

 

95,131

 

2,182

 

*

 

Superior Energy Services Inc.

 

451,758

 

2,114

 

 

 

RPC Inc.

 

188,683

 

2,028

 

*,^

 

Weatherford International plc

 

2,934,705

 

1,895

 

*

 

Exterran Corp.

 

96,627

 

1,649

 

*

 

Matrix Service Co.

 

78,114

 

1,632

 

*

 

Keane Group Inc.

 

143,534

 

1,582

 

*

 

KLX Energy Services Holdings Inc.

 

59,781

 

1,576

 

*

 

Frank’s International NV

 

228,510

 

1,430

 

*

 

Nine Energy Service Inc.

 

47,490

 

1,245

 

*

 

Forum Energy Technologies Inc.

 

206,120

 

1,202

 

*

 

TETRA Technologies Inc.

 

365,385

 

873

 

*

 

RigNet Inc.

 

43,294

 

670

 

*

 

FTS International Inc.

 

63,640

 

655

 

*

 

SEACOR Marine Holdings Inc.

 

47,650

 

654

 

 

 

Mammoth Energy Services Inc.

 

26,083

 

600

 

*,^

 

Covia Holdings Corp.

 

92,651

 

441

 

*

 

Basic Energy Services Inc.

 

52,887

 

255

 

*

 

NCS Multistage Holdings Inc.

 

30,680

 

169

 

*,^

 

Bristow Group Inc.

 

106,922

 

126

 

*

 

Key Energy Services Inc.

 

25,268

 

65

 

 

 

 

 

 

 

495,583

 

Oil, Gas & Consumable Fuels (88.2%)

 

 

 

 

 

 

 

Coal & Consumable Fuels (0.4%)

 

 

 

 

 

 

 

Peabody Energy Corp.

 

232,433

 

7,170

 

 

 

Arch Coal Inc. Class A

 

54,549

 

5,082

 

*

 

CONSOL Energy Inc.

 

65,712

 

2,494

 

 

 

 

 

 

 

 

 

 

 

Integrated Oil & Gas (42.7%)

 

 

 

 

 

 

 

Exxon Mobil Corp.

 

12,439,055

 

983,059

 

 

 

Chevron Corp.

 

5,636,796

 

674,048

 

 

 

Occidental Petroleum Corp.

 

2,249,465

 

148,802

 

 

 

 

 

 

 

 

 

 

 

Oil & Gas Exploration & Production (26.0%)

 

 

 

 

 

 

 

ConocoPhillips

 

3,418,421

 

231,940

 

 

 

EOG Resources Inc.

 

1,704,859

 

160,257

 

 

 

Pioneer Natural Resources Co.

 

501,380

 

70,670

 

 

 

Anadarko Petroleum Corp.

 

1,506,555

 

65,535

 

 

 

Concho Resources Inc.

 

589,184

 

64,810

 

 

 

Diamondback Energy Inc.

 

458,654

 

47,209

 

 

 

Hess Corp.

 

793,746

 

45,918

 

 

 

Devon Energy Corp.

 

1,496,094

 

44,150

 

 

 

Marathon Oil Corp.

 

2,511,408

 

41,689

 

 

 

Apache Corp.

 

1,124,591

 

37,314

 

 

 

Cabot Oil & Gas Corp.

 

1,298,476

 

31,968

 

 

 

Noble Energy Inc.

 

1,420,519

 

31,464

 

 

 

Cimarex Energy Co.

 

283,241

 

20,368

 

*

 

WPX Energy Inc.

 

1,235,802

 

15,250

 

 

 

EQT Corp.

 

776,955

 

14,078

 

 

 

Murphy Oil Corp.

 

484,337

 

13,997

 

^

 

Texas Pacific Land Trust

 

18,325

 

13,627

 

*

 

Parsley Energy Inc. Class A

 

739,617

 

13,417

 

*

 

Continental Resources Inc.

 

276,525

 

12,336

 

*,^

 

Chesapeake Energy Corp.

 

3,837,896

 

11,360

 

 

 

Range Resources Corp.

 

732,200

 

7,835

 

*

 

Southwestern Energy Co.

 

1,725,966

 

7,301

 

*

 

PDC Energy Inc.

 

194,233

 

7,200

 

*

 

Whiting Petroleum Corp.

 

267,645

 

6,522

 

*

 

Matador Resources Co.

 

307,118

 

5,712

 

*

 

QEP Resources Inc.

 

699,700

 

5,430

 

*

 

CNX Resources Corp.

 

503,163

 

5,334

 

*

 

Antero Resources Corp.

 

607,842

 

5,264

 

 

 

SM Energy Co.

 

314,498

 

5,139

 

*

 

Callon Petroleum Co.

 

667,243

 

5,104

 

*

 

Kosmos Energy Ltd.

 

702,047

 

4,493

 

*

 

Oasis Petroleum Inc.

 

798,647

 

4,464

 

*

 

Centennial Resource Development Inc. Class A

 

465,139

 

4,219

 

*

 

Gulfport Energy Corp.

 

459,753

 

3,522

 

*

 

SRC Energy Inc.

 

711,718

 

3,274

 

*

 

California Resources Corp.

 

135,134

 

3,196

 

*

 

Carrizo Oil & Gas Inc.

 

270,322

 

2,968

 

*

 

Denbury Resources Inc.

 

1,362,508

 

2,616

 

*

 

Gran Tierra Energy Inc.

 

1,156,506

 

2,614

 

*,^

 

Tellurian Inc.

 

249,212

 

2,557

 

*,^

 

Resolute Energy Corp.

 

57,242

 

1,769

 

*

 

Laredo Petroleum Inc.

 

489,993

 

1,681

 

*

 

Penn Virginia Corp.

 

28,489

 

1,529

 

*

 

W&T Offshore Inc.

 

289,883

 

1,510

 

*

 

Jagged Peak Energy Inc.

 

159,233

 

1,508

 

*

 

Talos Energy Inc.

 

63,032

 

1,415

 

*

 

Extraction Oil & Gas Inc.

 

306,246

 

1,286

 

*

 

Ring Energy Inc.

 

168,580

 

1,040

 

*

 

Bonanza Creek Energy Inc.

 

44,874

 

1,031

 

*

 

HighPoint Resources Corp.

 

338,468

 

877

 

*

 

Northern Oil and Gas Inc.

 

302,454

 

717

 

*

 

Halcon Resources Corp.

 

376,988

 

565

 

*

 

SandRidge Energy Inc.

 

66,660

 

518

 

*

 

SilverBow Resources Inc.

 

16,651

 

375

 

*,^

 

Eclipse Resources Corp.

 

307,422

 

360

 

*

 

Midstates Petroleum Co. Inc.

 

39,469

 

341

 

*

 

Ultra Petroleum Corp.

 

458,521

 

308

 

*

 

Sanchez Energy Corp.

 

111

 

—

 

 

 

Jones Energy Inc. Class A

 

1

 

—

 

 

 

 

 

 

 

 

 

 

 

Oil & Gas Refining & Marketing (9.8%)

 

 

 

 

 

 

 

Marathon Petroleum Corp.

 

2,032,178

 

126,015

 

 

 

Phillips 66

 

1,297,388

 

125,016

 

 

 

Valero Energy Corp.

 

1,257,265

 

102,543

 

 

 

HollyFrontier Corp.

 

492,057

 

25,193

 

 

 

PBF Energy Inc. Class A

 

334,928

 

10,406

 

 

 

Delek US Holdings Inc.

 

234,767

 

8,306

 

 

 

World Fuel Services Corp.

 

200,338

 

5,547

 

 

 

CVR Energy Inc.

 

88,750

 

3,598

 

*

 

Renewable Energy Group Inc.

 

99,147

 

2,634

 

 

 

Green Plains Inc.

 

115,796

 

1,807

 

*

 

Par Pacific Holdings Inc.

 

88,888

 

1,502

 

*

 

REX American Resources Corp.

 

17,007

 

1,356

 

*

 

Clean Energy Fuels Corp.

 

412,917

 

946

 

 

 

 

 

 

 

 

 

 

 

Oil & Gas Storage & Transportation (9.3%)

 

 

 

 

 

 

 

Kinder Morgan Inc.

 

5,842,441

 

111,941

 

 

 

Williams Cos. Inc.

 

3,560,895

 

95,040

 

 

 

ONEOK Inc.

 

1,209,708

 

77,736

 

*

 

Cheniere Energy Inc.

 

633,913

 

40,856

 

 

 

Targa Resources Corp.

 

663,197

 

26,687

 

 

 

Equitrans Midstream Corp.

 

664,042

 

11,714

 

 

 

Plains GP Holdings LP Class A

 

440,924

 

10,225

 

 

34

 

Energy Index Fund

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

 

 

EnLink Midstream LLC

 

784,124

 

8,743

 

 

 

Tallgrass Energy LP Class A

 

211,316

 

4,782

 

^

 

Antero Midstream GP LP

 

219,811

 

2,807

 

 

 

SemGroup Corp. Class A

 

175,075

 

2,756

 

*

 

International Seaways Inc.

 

55,197

 

918

 

 

 

 

 

 

 

3,728,680

 

Total Common Stocks

(Cost $5,225,601)

 

 

 

4,224,263

 

Temporary Cash Investment (0.7%)1

 

 

 

 

 

Money Market Fund (0.7%)

 

 

 

 

 

2,3

 

Vanguard Market Liquidity Fund, 2.563% (Cost $31,025)

 

310,251

 

31,028

 

Total Investments (100.6%)

(Cost $5,256,626)

 

 

 

4,255,291

 

 

 

 

Amount

 

 

 

($000

)

Other Assets and Liabilities (-0.6%)

 

 

 

Other Assets

 

 

 

Investment in Vanguard

 

212

 

Receivables for Investment Securities Sold

 

1,388

 

Receivables for Accrued Income

 

23,455

 

Receivables for Capital Shares Issued

 

1,010

 

Total Other Assets

 

26,065

 

Liabilities

 

 

 

Payables for Investment Securities Purchased

 

(1,429

)

Collateral for Securities on Loan

 

(31,026

)

Payables for Capital Shares Redeemed

 

(299

)

Payables to Vanguard

 

(1,765

)

Unrealized Depreciation—OTC Swap Contracts

 

(165

)

Other Liabilities

 

(17,186

)

Total Liabilities

 

(51,870

)

Net Assets (100%)

 

4,229,486

 

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

 

($000

)

Paid-in Capital

 

5,886,682

 

Total Distributable Earnings (Loss)

 

(1,657,196

)

Net Assets

 

4,229,486

 

 

 

 

 

ETF Shares – Net Assets

 

 

 

Applicable to 41,751,724 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

3,672,320

 

Net Asset Value Per Share – ETF Shares

 

$87.96

 

 

 

 

 

Admiral Shares – Net Assets

 

 

 

Applicable to 12,680,468 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

557,166

 

Net Asset Value Per Share – Admiral Shares

 

$43.94

 

 

· See Note A in Notes to Financial Statements.

 

* Non-income-producing security.

 

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $29,015,000.

 

1 The fund invests a portion of its cash reserves in equity markets through the use of swap contracts. After giving effect to swap investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.6%, respectively, of net assets.

 

2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

3 Includes $31,026,000 of collateral received for securities on loan. OTC—Over the Counter.

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

Over-the-Counter Total Return Swaps

 

 

 

 

 

 

 

 

 

Floating

 

Value and

 

Value and

 

 

 

 

 

 

 

Notional

 

Interest Rate

 

Unrealized

 

Unrealized

 

 

 

Termination

 

 

 

Amount

 

Received

 

Appreciation

 

(Depreciation

)

Reference Entity

 

Date

 

Counterparty

 

($000

)

(Paid)

1

($000

)

($000

)

Tallgrass Energy LP Class A

 

2/4/20

 

GSI

 

5,706

 

(2.485%

)

—

 

(165

)

 

1   Payment received/paid monthly.

 

GSI—Goldman Sachs International.

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

35

 

Energy Index Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

 

February 28, 2019

 

 

($000)

Investment Income

 

 

Income

 

 

Dividends

 

66,505

Interest1

 

22

Securities Lending—Net

 

163

Total Income

 

66,690

Expenses

 

 

The Vanguard Group—Note B

 

 

Investment Advisory Services

 

616

Management and Administrative—ETF Shares

 

1,030

Management and Administrative—Admiral Shares

 

168

Marketing and Distribution—ETF Shares

 

87

Marketing and Distribution—Admiral Shares

 

20

Custodian Fees

 

82

Shareholders’ Reports and Proxy—ETF Shares

 

133

Shareholders’ Reports and Proxy—Admiral Shares

 

4

Trustees’ Fees and Expenses

 

1

Total Expenses

 

2,141

Net Investment Income

 

64,549

Realized Net Gain (Loss)

 

 

Investment Securities Sold1,2

 

28,054

Futures Contracts

 

(332)

Swap Contracts

 

83

Realized Net Gain (Loss)

 

27,805

Change in Unrealized Appreciation (Depreciation)

 

 

Investment Securities1

 

(735,803)

Swap Contracts

 

(165)

Change in Unrealized Appreciation (Depreciation)

 

(735,968)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(643,614)

 

1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $22,000, ($1,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

2 Includes $33,233,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28,

 

August 31,

 

 

 

2019

 

2018

 

 

 

($000

)

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

Operations

 

 

 

 

 

Net Investment Income

 

64,549

 

121,288

 

Realized Net Gain (Loss)

 

27,805

 

39,542

 

Change in Unrealized Appreciation (Depreciation)

 

(735,968

)

800,610

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(643,614

)

961,440

 

Distributions

 

 

 

 

 

Net Investment Income

 

 

 

 

 

ETF Shares

 

(55,666

)

(124,038

)

Admiral Shares

 

(8,301

)

(17,765

)

Realized Capital Gain

 

 

 

 

 

ETF Shares

 

—

 

—

 

Admiral Shares

 

—

 

—

 

Total Distributions

 

(63,967

)

(141,803

)

Capital Share Transactions

 

 

 

 

 

ETF Shares

 

1,747

 

(86,473

)

Admiral Shares

 

5,285

 

18,737

 

Net Increase (Decrease) from Capital Share Transactions

 

7,032

 

(67,736

)

Total Increase (Decrease)

 

(700,549

)

751,901

 

Net Assets

 

 

 

 

 

Beginning of Period

 

4,930,035

 

4,178,134

 

End of Period

 

4,229,486

 

4,930,035

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

36

 

Energy Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$103.13

 

$85.71

 

$95.06

 

$93.86

 

$142.26

 

$116.47

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1.365

1

2.519

1

2.819

1,2

2.470

 

2.9531

 

2.329

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(15.190

)

17.837

 

(9.801

)

2.587

 

(49.144

)

25.655

 

Total from Investment Operations

 

(13.825

)

20.356

 

(6.982

)

5.057

 

(46.191

)

27.984

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.345

)

(2.936

)

(2.368

)

(3.857

)

(2.209

)

(2.194

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(1.345

)

(2.936

)

(2.368

)

(3.857

)

(2.209

)

(2.194

)

Net Asset Value, End of Period

 

$87.96

 

$103.13

 

$85.71

 

$95.06

 

$93.86

 

$142.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-13.49%

 

24.06%

 

-7.55%

 

5.82%

 

-32.70%

 

24.31%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$3,672

 

$4,288

 

$3,656

 

$3,944

 

$3,736

 

$3,467

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

3.02%

 

2.56%

 

2.93%2

 

2.86%

 

2.65%

 

1.98%

 

Portfolio Turnover Rate3

 

6%

 

5%

 

11%

 

15%

 

4%

 

4%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2 Net investment income per share and the ratio of net investment income to average net assets include $.453 and 0.47%, respectively, from income received as a result of General Electric Co. and Baker Hughes Inc. merger in July 2017.

 

3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

37

 

Energy Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$51.52

 

$42.82

 

$47.49

 

$46.89

 

$71.06

 

$58.18

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.685

1

1.249

1

1.375

1,2

1.234

 

1.4951

 

1.164

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(7.593

)

8.916

 

(4.863

)

1.293

 

(24.561

)

12.815

 

Total from Investment Operations

 

(6.908

)

10.165

 

(3.488

)

2.527

 

(23.066

)

13.979

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.672

)

(1.465

)

(1.182

)

(1.927

)

(1.104

)

(1.099

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.672

)

(1.465

)

(1.182

)

(1.927

)

(1.104

)

(1.099

)

Net Asset Value, End of Period

 

$43.94

 

$51.52

 

$42.82

 

$47.49

 

$46.89

 

$71.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return3

 

-13.48%

 

24.06%

 

-7.56%

 

5.83%

 

-32.66%

 

24.32%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$557

 

$642

 

$523

 

$894

 

$733

 

$575

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

3.02%

 

2.56%

 

2.93%2

 

2.86%

 

2.65%

 

1.98%

 

Portfolio Turnover Rate4

 

6%

 

5%

 

11%

 

15%

 

4%

 

4%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Net investment income per share and the ratio of net investment income to average net assets include $.228 and 0.47%, respectively, from income received as a result of General Electric Co. and Baker Hughes Inc. merger in July 2017.

 

3   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

4   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

38

 

Energy Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Energy Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at February 28, 2019.

 

3. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until termination of the swap, at which time realized gain (loss) is recorded.

 

39

 

Energy Index Fund

 

 

 

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

During the six months ended February 28, 2019, the fund’s average amount of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

40

 

Energy Index Fund

 

 

 

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $212,000, representing 0.01% of the fund’s net assets and 0.08% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

4,224,263

 

—

 

—

 

Temporary Cash Investments

 

31,028

 

—

 

—

 

Swap Contracts—Liabilities

 

—

 

(165

)

—

 

Total

 

4,255,291

 

(165

)

—

 

 

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

5,256,626

 

Gross Unrealized Appreciation

 

170,224

 

Gross Unrealized Depreciation

 

(1,171,559

)

Net Unrealized Appreciation (Depreciation)

 

(1,001,335

)

 

41

 

Energy Index Fund

 

 

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $30,699,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $644,763,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $594,790,000 of investment securities and sold $590,805,000 of investment securities, other than temporary cash investments. Purchases and sales include $416,325,000 and $470,654,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28, 2019

 

August 31, 2018

 

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

 

($000

)

(000

)

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

Issued

 

472,511

 

5,475

 

746,982

 

7,479

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

 

Redeemed

 

(470,764

)

(5,300

)

(833,455

)

(8,550

)

Net Increase (Decrease)—ETF Shares

 

1,747

 

175

 

(86,473

)

(1,071

)

Admiral Shares

 

 

 

 

 

 

 

 

 

Issued

 

104,490

 

2,441

 

230,387

 

4,568

 

Issued in Lieu of Cash Distributions

 

7,396

 

158

 

15,446

 

324

 

Redeemed

 

(106,601

)

(2,383

)

(227,096

)

(4,632

)

Net Increase (Decrease)—Admiral Shares

 

5,285

 

216

 

18,737

 

260

 

 

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

42

 

Financials Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Asset Management & Custody Banks

 

6.7

%

Consumer Finance

 

5.5

 

Diversified Banks

 

28.6

 

Financial Exchanges & Data

 

6.6

 

Insurance Brokers

 

3.5

 

Investment Banking & Brokerage

 

6.5

 

Life & Health Insurance

 

4.9

 

Mortgage REITs

 

1.8

 

Multi-line Insurance

 

2.3

 

Multi-Sector Holdings

 

7.1

 

Other Diversified Financial Services

 

0.4

 

Property & Casualty Insurance

 

7.7

 

Regional Banks

 

16.0

 

Reinsurance

 

1.0

 

Thrifts & Mortgage Finance

 

1.4

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

43

 

Financials Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (99.9%)1

 

 

 

 

Banks (44.6%)

 

 

 

 

 

JPMorgan Chase & Co.

 

6,850,198

 

714,887

 

Bank of America Corp.

 

19,206,061

 

558,512

 

Wells Fargo & Co.

 

9,211,829

 

459,578

 

Citigroup Inc.

 

5,030,759

 

321,868

 

US Bancorp

 

3,162,483

 

163,469

 

PNC Financial Services Group Inc.

 

950,568

 

119,791

 

BB&T Corp.

 

1,587,417

 

80,911

 

SunTrust Banks Inc.

 

925,570

 

60,042

 

M&T Bank Corp.

 

274,686

 

47,537

 

KeyCorp

 

2,131,579

 

37,644

 

Fifth Third Bancorp

 

1,350,730

 

37,253

 

First Republic Bank

 

339,456

 

35,636

 

Citizens Financial Group Inc.

 

964,130

 

35,615

 

Regions Financial Corp.

 

2,130,366

 

34,938

 

Huntington Bancshares Inc.

 

2,186,926

 

31,514

 

Comerica Inc.

 

333,158

 

29,021

*

SVB Financial Group

 

109,726

 

27,120

 

Zions Bancorp NA

 

396,064

 

20,239

 

East West Bancorp Inc.

 

298,855

 

16,320

 

Signature Bank

 

114,049

 

15,483

 

People’s United Financial Inc.

 

775,498

 

13,773

 

Synovus Financial Corp.

 

341,597

 

13,555

 

Commerce Bancshares Inc.

 

206,694

 

13,007

 

Cullen/Frost Bankers Inc.

 

125,210

 

12,982

 

Popular Inc.

 

206,527

 

11,644

 

CIT Group Inc.

 

217,695

 

11,096

 

Webster Financial Corp.

 

190,080

 

10,914

 

PacWest Bancorp

 

251,076

 

10,299

 

Prosperity Bancshares Inc.

 

136,751

 

10,181

 

First Horizon National Corp.

 

634,669

 

9,920

*

Western Alliance Bancorp

 

207,422

 

9,597

 

Pinnacle Financial Partners Inc.

 

152,624

 

8,958

 

Sterling Bancorp

 

440,427

 

8,954

 

IBERIABANK Corp.

 

114,279

 

8,940

 

Wintrust Financial Corp.

 

116,332

 

8,570

 

Umpqua Holdings Corp.

 

453,994

 

8,254

*

United Bankshares Inc.

 

213,555

 

8,198

 

FNB Corp.

 

668,733

 

8,185

 

Bank OZK

 

242,626

 

7,958

 

Associated Banc-Corp

 

341,777

 

7,957

 

MB Financial Inc.

 

173,598

 

7,859

 

BankUnited Inc.

 

212,558

 

7,756

 

Hancock Whitney Corp.

 

175,655

 

7,673

 

Glacier Bancorp Inc.

 

174,204

 

7,634

 

First Hawaiian Inc.

 

277,930

 

7,493

 

TCF Financial Corp.

 

326,554

 

7,478

 

First Financial Bankshares Inc.

 

111,594

 

7,237

 

Bank of Hawaii Corp.

 

86,032

 

7,074

 

Community Bank System Inc.

 

105,468

 

6,833

 

Valley National Bancorp

 

646,299

 

6,825

 

Chemical Financial Corp.

 

147,388

 

6,755

 

Investors Bancorp Inc.

 

511,832

 

6,434

*

UMB Financial Corp.

 

92,565

 

6,369

 

BancorpSouth Bank

 

195,313

 

6,365

*

Texas Capital Bancshares Inc.

 

103,535

 

6,319

 

Home BancShares Inc.

 

322,199

 

6,276

 

Fulton Financial Corp.

 

363,032

 

6,237

 

Cathay General Bancorp

 

158,950

 

6,174

 

BOK Financial Corp.

 

67,454

 

6,101

 

First Citizens BancShares Inc. Class A

 

13,437

 

5,866

 

Old National Bancorp

 

325,160

 

5,781

 

Columbia Banking System Inc.

 

151,922

 

5,755

 

First Financial Bancorp

 

201,954

 

5,600

 

Cadence BanCorp Class A

 

275,191

 

5,501

 

Union Bankshares Corp.

 

151,518

 

5,390

 

South State Corp.

 

75,709

 

5,378

 

CVB Financial Corp.

 

232,849

 

5,307

 

First Midwest Bancorp Inc.

 

219,713

 

5,086

 

Independent Bank Corp.

 

57,868

 

4,926

 

Simmons First National Corp. Class A

 

181,431

 

4,868

 

First BanCorp

 

422,590

 

4,864

 

WesBanco Inc.

 

111,788

 

4,743

 

International Bancshares Corp.

 

115,485

 

4,714

 

Trustmark Corp.

 

132,197

 

4,690

 

First Merchants Corp.

 

115,548

 

4,667

 

Banner Corp.

 

72,977

 

4,534

 

Great Western Bancorp Inc.

 

118,463

 

4,448

 

CenterState Bank Corp.

 

167,879

 

4,442

 

United Community Banks Inc.

 

154,030

 

4,265

 

Independent Bank Group Inc.

 

72,450

 

4,199

 

LegacyTexas Financial Group Inc.

 

95,684

 

3,993

*

Eagle Bancorp Inc.

 

66,863

 

3,958

 

Renasant Corp.

 

103,136

 

3,948

 

Hope Bancorp Inc.

 

266,299

 

3,883

 

Towne Bank

 

135,104

 

3,725

 

Westamerica Bancorporation

 

55,111

 

3,543

 

NBT Bancorp Inc.

 

89,609

 

3,462

 

Ameris Bancorp

 

82,776

 

3,375

 

ServisFirst Bancshares Inc.

 

92,654

 

3,240

 

Heartland Financial USA Inc.

 

63,544

 

3,088

 

First Interstate BancSystem Inc. Class A

 

74,117

 

3,086

 

Pacific Premier Bancorp Inc.

 

102,323

 

3,054

 

S&T Bancorp Inc.

 

72,408

 

2,996

 

Hilltop Holdings Inc.

 

155,190

 

2,983

*

Seacoast Banking Corp. of Florida

 

100,592

 

2,919

 

Park National Corp.

 

29,005

 

2,905

 

First Commonwealth Financial Corp.

 

204,413

 

2,874

 

Veritex Holdings Inc.

 

95,495

 

2,675

 

Brookline Bancorp Inc.

 

163,552

 

2,614

 

City Holding Co.

 

32,362

 

2,593

 

Berkshire Hills Bancorp Inc.

 

80,209

 

2,512

 

Heritage Financial Corp.

 

75,566

 

2,488

 

First Busey Corp.

 

91,038

 

2,453

 

Sandy Spring Bancorp Inc.

 

69,123

 

2,424

 

First Bancorp

 

61,429

 

2,407

 

Lakeland Financial Corp.

 

49,434

 

2,389

 

Tompkins Financial Corp.

 

27,997

 

2,251

 

OFG Bancorp

 

105,662

 

2,186

 

TriCo Bancshares

 

53,801

 

2,164

 

Enterprise Financial Services Corp.

 

47,303

 

2,137

 

Boston Private Financial Holdings Inc.

 

173,191

 

2,059

 

Southside Bancshares Inc.

 

57,607

 

2,000

 

National Bank Holdings Corp. Class A

 

54,090

 

1,954

 

BancFirst Corp.

 

33,778

 

1,904

 

1st Source Corp.

 

38,152

 

1,814

 

Central Pacific Financial Corp.

 

59,919

 

1,748

 

Washington Trust Bancorp Inc.

 

31,492

 

1,650

*

Triumph Bancorp Inc.

 

48,277

 

1,635

 

Bryn Mawr Bank Corp.

 

40,055

 

1,633

 

Stock Yards Bancorp Inc.

 

45,634

 

1,625

 

Carolina Financial Corp.

 

44,171

 

1,618

 

Univest Financial Corp.

 

60,275

 

1,598

 

Preferred Bank

 

30,223

 

1,548

 

Lakeland Bancorp Inc.

 

92,326

 

1,545

 

Hanmi Financial Corp.

 

66,752

 

1,541

 

German American Bancorp Inc.

 

49,065

 

1,520

 

Fidelity Southern Corp.

 

45,509

 

1,483

 

Camden National Corp.

 

32,807

 

1,471

 

Banc of California Inc.

 

83,895

 

1,453

 

Community Trust Bancorp Inc.

 

33,497

 

1,433

 

Opus Bank

 

61,355

 

1,397

 

ConnectOne Bancorp Inc.

 

61,918

 

1,336

 

CBTX Inc.

 

39,855

 

1,328

*

Customers Bancorp Inc.

 

61,780

 

1,321

 

Origin Bancorp Inc.

 

36,271

 

1,308

*

National Commerce Corp.

 

29,646

 

1,295

 

Horizon Bancorp Inc.

 

73,086

 

1,291

 

Great Southern Bancorp Inc.

 

22,719

 

1,287

 

Blue Hills Bancorp Inc.

 

50,926

 

1,267

 

44

 

Financials Index Fund

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Flushing Financial Corp.

 

54,445

 

1,264

 

Peoples Bancorp Inc.

 

36,181

 

1,206

 

FB Financial Corp.

 

33,947

 

1,203

 

Bank of Marin Bancorp

 

26,775

 

1,191

 

Heritage Commerce Corp.

 

83,407

 

1,165

 

First of Long Island Corp.

 

49,605

 

1,159

 

Independent Bank Corp.

 

49,275

 

1,146

 

Bridge Bancorp Inc.

 

33,973

 

1,120

 

Midland States Bancorp Inc.

 

43,512

 

1,110

 

QCR Holdings Inc.

 

30,528

 

1,091

 

First Foundation Inc.

 

71,545

 

1,091

 

First Community Bankshares Inc.

 

30,218

 

1,083

*

Atlantic Capital Bancshares Inc.

 

55,414

 

1,068

 

Mercantile Bank Corp.

 

29,870

 

1,034

*

Nicolet Bankshares Inc.

 

17,372

 

998

 

Arrow Financial Corp.

 

28,056

 

994

*

Equity Bancshares Inc. Class A

 

29,213

 

993

 

HomeTrust Bancshares Inc.

 

36,192

 

986

 

Franklin Financial Network Inc.

 

29,477

 

967

 

First Bancshares Inc.

 

29,137

 

955

 

Peapack Gladstone Financial Corp.

 

32,569

 

947

 

People’s Utah Bancorp

 

31,828

 

934

*

Allegiance Bancshares Inc.

 

24,075

 

921

*

TriState Capital Holdings Inc.

 

40,689

 

920

 

Financial Institutions Inc.

 

30,371

 

915

 

First Financial Corp.

 

20,152

 

894

 

CNB Financial Corp.

 

30,007

 

834

 

Bar Harbor Bankshares

 

31,926

 

824

 

Live Oak Bancshares Inc.

 

49,122

 

796

 

Old Second Bancorp Inc.

 

55,109

 

787

 

Farmers National Banc Corp.

 

51,272

 

755

 

RBB Bancorp

 

33,294

 

721

 

Old Line Bancshares Inc.

 

25,076

 

718

 

West Bancorporation Inc.

 

31,024

 

717

*

Republic First Bancorp Inc.

 

108,687

 

696

 

MidWestOne Financial Group Inc.

 

21,940

 

682

 

Sierra Bancorp

 

25,190

 

679

*

Byline Bancorp Inc.

 

32,128

 

657

 

Capital City Bank Group Inc.

 

22,854

 

564

 

Southern National Bancorp of Virginia Inc.

 

35,022

 

555

*

HarborOne Bancorp Inc.

 

30,343

 

489

 

 

 

 

 

3,457,452

Capital Markets (19.7%)

 

 

 

 

 

Goldman Sachs Group Inc.

 

689,600

 

135,644

 

CME Group Inc.

 

736,876

 

134,045

 

Charles Schwab Corp.

 

2,503,483

 

115,185

 

Morgan Stanley

 

2,657,363

 

111,556

 

BlackRock Inc.

 

243,624

 

107,979

 

Bank of New York Mellon Corp.

 

2,036,497

 

106,875

 

S&P Global Inc.

 

516,754

 

103,542

·

Intercontinental Exchange Inc.

 

1,172,961

 

90,494

*

Moody’s Corp.

 

355,167

 

61,487

 

State Street Corp.

 

781,716

 

56,182

 

T. Rowe Price Group Inc.

 

495,634

 

49,777

 

Northern Trust Corp.

 

433,180

 

40,372

 

Ameriprise Financial Inc.

 

287,036

 

37,783

 

MSCI Inc. Class A

 

181,310

 

33,492

 

TD Ameritrade Holding Corp.

 

579,179

 

32,625

 

E*TRADE Financial Corp.

 

523,590

 

25,651

 

Cboe Global Markets Inc.

 

231,055

 

22,160

 

Raymond James Financial Inc.

 

265,545

 

21,929

 

Nasdaq Inc.

 

236,192

 

21,628

 

Franklin Resources Inc.

 

633,868

 

20,670

 

MarketAxess Holdings Inc.

 

77,401

 

18,877

 

FactSet Research Systems Inc.

 

78,371

 

18,430

 

Invesco Ltd.

 

847,189

 

16,393

 

SEI Investments Co.

 

272,822

 

14,391

 

LPL Financial Holdings Inc.

 

178,970

 

13,496

 

Affiliated Managers Group Inc.

 

108,721

 

11,917

 

Eaton Vance Corp.

 

239,443

 

10,021

 

Janus Henderson Group plc

 

389,958

 

9,554

 

Interactive Brokers Group Inc.

 

146,952

 

8,116

 

Stifel Financial Corp.

 

148,318

 

8,073

 

Evercore Inc. Class A

 

83,787

 

7,717

 

Federated Investors Inc. Class B

 

195,776

 

5,824

 

Legg Mason Inc.

 

174,941

 

5,117

 

Morningstar Inc.

 

39,744

 

5,030

 

Ares Management Corp.

 

198,622

 

4,691

 

Moelis & Co. Class A

 

94,993

 

4,238

 

Houlihan Lokey Inc. Class A

 

72,094

 

3,315

 

BGC Partners Inc. Class A

 

507,043

 

3,108

 

Waddell & Reed Financial Inc. Class A

 

163,148

 

3,020

 

Artisan Partners Asset Management Inc. Class A

 

106,148

 

2,792

*

Blucora Inc.

 

95,172

 

2,559

 

Virtu Financial Inc. Class A

 

98,810

 

2,484

 

BrightSphere Investment Group plc

 

164,707

 

2,331

 

WisdomTree Investments Inc.

 

266,523

 

2,074

 

Piper Jaffray Cos.

 

29,538

 

2,066

 

PJT Partners Inc.

 

42,436

 

1,962

 

Investment Technology Group Inc.

 

64,263

 

1,943

 

Cohen & Steers Inc.

 

43,971

 

1,836

 

Virtus Investment Partners Inc.

 

14,679

 

1,502

*

INTL. FCStone Inc.

 

32,918

 

1,432

*

Donnelley Financial Solutions Inc.

 

69,699

 

990

 

Diamond Hill Investment Group Inc.

 

6,777

 

962

 

Greenhill & Co. Inc.

 

37,991

 

894

*,^

Cowen Inc. Class A

 

48,247

 

747

 

Ladenburg Thalmann Financial Services Inc.

 

238,495

 

701

 

Westwood Holdings Group Inc.

 

15,686

 

606

 

Arlington Asset Investment Corp. Class A

 

71,870

 

596

 

B. Riley Financial Inc.

 

29,605

 

504

 

Pzena Investment Management Inc. Class A

 

35,904

 

358

 

Associated Capital Group Inc. Class A

 

7,008

 

298

 

GAMCO Investors Inc. Class A

 

11,071

 

227

 

 

 

 

 

1,530,268

Consumer Finance (5.5%)

 

 

 

 

 

American Express Co.

 

1,495,722

 

161,149

 

Capital One Financial Corp.

 

975,778

 

81,556

 

Discover Financial Services

 

692,115

 

49,562

 

Synchrony Financial

 

1,332,488

 

43,453

 

Ally Financial Inc.

 

851,031

 

23,054

*

Credit Acceptance Corp.

 

23,881

 

10,504

*

SLM Corp.

 

888,293

 

9,816

 

FirstCash Inc.

 

90,730

 

7,953

*

Green Dot Corp. Class A

 

97,966

 

6,324

 

Navient Corp.

 

505,158

 

6,173

 

OneMain Holdings Inc.

 

169,029

 

5,578

 

Santander Consumer USA Holdings Inc.

 

260,336

 

5,347

*

PRA Group Inc.

 

92,673

 

2,983

 

Nelnet Inc. Class A

 

42,698

 

2,341

*

World Acceptance Corp.

 

15,262

 

1,877

*

Encore Capital Group Inc.

 

53,746

 

1,838

*

LendingClub Corp.

 

607,639

 

1,805

*

Enova International Inc.

 

63,159

 

1,612

*

EZCORP Inc. Class A

 

103,475

 

1,011

*

Curo Group Holdings Corp.

 

27,142

 

299

 

 

 

 

 

424,235

Diversified Financial Services (7.5%)

 

 

 

 

*

Berkshire Hathaway Inc. Class B

 

2,666,805

 

536,828

 

Voya Financial Inc.

 

320,274

 

16,196

 

Jefferies Financial Group Inc.

 

598,902

 

12,140

 

AXA Equitable Holdings Inc.

 

490,627

 

9,381

*

Cannae Holdings Inc.

 

134,793

 

3,089

*

FGL Holdings

 

296,584

 

2,462

*

On Deck Capital Inc.

 

81,536

 

500

 

 

 

 

 

580,596

Equity Real Estate Investment Trusts

 

 

 

 

(REITs) (0.0%)

 

 

 

 

§

Winthrop Realty Trust

 

23,515

 

26

 

 

 

 

 

 

Insurance (19.4%)

 

 

 

 

 

Chubb Ltd.

 

949,156

 

127,092

 

Marsh & McLennan Cos. Inc.

 

1,037,570

 

96,515

 

Progressive Corp.

 

1,201,114

 

87,561

 

Aon plc

 

496,094

 

85,095

 

Prudential Financial Inc.

 

851,033

 

81,572

 

American International Group Inc.

 

1,822,388

 

78,727

 

MetLife Inc.

 

1,727,942

 

78,086

 

Aflac Inc.

 

1,567,862

 

77,045

 

Travelers Cos. Inc.

 

545,417

 

72,491

 

Allstate Corp.

 

709,435

 

66,956

 

Willis Towers Watson plc

 

267,631

 

46,038

 

Hartford Financial Services Group Inc.

 

738,873

 

36,471

 

Principal Financial Group Inc.

 

583,138

 

30,696

 

Arthur J Gallagher & Co.

 

378,164

 

30,359

*

Markel Corp.

 

28,603

 

28,743

 

Cincinnati Financial Corp.

 

318,352

 

27,639

 

Lincoln National Corp.

 

440,182

 

27,520

*

Arch Capital Group Ltd.

 

833,682

 

27,236

 

Loews Corp.

 

550,098

 

26,196

 

45

 

Financials Index Fund

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Fidelity National Financial Inc.

 

566,922

 

19,893

 

Alleghany Corp.

 

30,540

 

19,636

 

Everest Re Group Ltd.

 

83,722

 

18,930

 

Reinsurance Group of America Inc. Class A

 

129,570

 

18,722

 

Torchmark Corp.

 

217,988

 

17,997

 

Unum Group

 

450,755

 

16,840

 

WR Berkley Corp.

 

201,063

 

16,821

 

American Financial Group Inc.

 

156,193

 

15,566

 

Brown & Brown Inc.

 

494,600

 

14,650

*

Athene Holding Ltd. Class A

 

322,638

 

14,374

 

Old Republic International Corp.

 

592,109

 

12,351

 

RenaissanceRe Holdings Ltd.

 

82,922

 

12,194

 

First American Financial Corp.

 

230,286

 

11,696

 

Assurant Inc.

 

108,624

 

11,187

 

Primerica Inc.

 

88,223

 

11,031

 

Hanover Insurance Group Inc.

 

87,199

 

10,351

 

Axis Capital Holdings Ltd.

 

172,079

 

9,821

 

Kemper Corp.

 

113,368

 

9,421

 

Assured Guaranty Ltd.

 

217,562

 

9,085

*

Brighthouse Financial Inc.

 

220,643

 

8,543

 

Selective Insurance Group Inc.

 

121,307

 

8,001

 

White Mountains Insurance Group Ltd.

 

6,546

 

6,149

 

CNO Financial Group Inc.

 

341,213

 

5,811

 

American Equity Investment Life Holding Co.

 

176,930

 

5,600

 

RLI Corp.

 

78,095

 

5,507

 

Argo Group International Holdings Ltd.

 

69,655

 

4,842

 

ProAssurance Corp.

 

110,465

 

4,485

*

Genworth Financial Inc. Class A

 

1,025,503

 

3,969

*

Enstar Group Ltd.

 

20,537

 

3,664

 

National General Holdings Corp.

 

138,692

 

3,580

 

Navigators Group Inc.

 

49,135

 

3,429

 

Horace Mann Educators Corp.

 

83,875

 

3,287

 

Mercury General Corp.

 

57,166

 

3,028

 

Employers Holdings Inc.

 

67,320

 

2,805

 

Safety Insurance Group Inc.

 

29,892

 

2,671

 

Universal Insurance Holdings Inc.

 

67,961

 

2,653

 

Kinsale Capital Group Inc.

 

39,568

 

2,642

 

James River Group Holdings Ltd.

 

61,972

 

2,546

 

AMERISAFE Inc.

 

40,022

 

2,526

 

American National Insurance Co.

 

16,628

 

2,448

 

United Fire Group Inc.

 

44,416

 

2,165

*

Ambac Financial Group Inc.

 

93,782

 

1,854

 

Stewart Information Services Corp.

 

43,102

 

1,850

*

MBIA Inc.

 

174,364

 

1,731

*,^

Trupanion Inc.

 

55,482

 

1,684

*

Third Point Reinsurance Ltd.

 

155,622

 

1,664

 

National Western Life Group Inc. Class A

 

5,067

 

1,561

 

United Insurance Holdings Corp.

 

51,285

 

840

 

Heritage Insurance Holdings Inc.

 

46,214

 

690

 

HCI Group Inc.

 

14,715

 

679

*

Greenlight Capital Re Ltd. Class A

 

60,629

 

678

*,^

Citizens Inc. Class A

 

94,269

 

644

 

Protective Insurance Corp. Class B

 

18,683

 

394

 

Donegal Group Inc. Class A

 

25,266

 

340

 

Crawford & Co. Class B

 

21,060

 

217

 

Maiden Holdings Ltd.

 

144,735

 

178

 

EMC Insurance Group Inc.

 

6

 

—

 

 

 

 

 

1,507,959

Mortgage Real Estate Investment Trusts

 

 

 

 

(REITs) (1.8%)

 

 

 

 

 

Annaly Capital

 

 

 

 

 

Management Inc.

 

2,860,270

 

28,974

 

AGNC Investment Corp.

 

1,087,126

 

19,188

 

New Residential Investment Corp.

 

836,048

 

13,828

 

Starwood Property Trust Inc.

 

567,176

 

12,722

 

Blackstone Mortgage Trust Inc. Class A

 

236,827

 

8,166

 

Chimera Investment Corp.

 

385,813

 

7,134

 

Two Harbors Investment Corp.

 

511,191

 

7,090

 

MFA Financial Inc.

 

927,585

 

6,743

 

Apollo Commercial Real Estate Finance Inc.

 

248,340

 

4,510

 

Invesco Mortgage Capital Inc.

 

260,935

 

4,154

 

Redwood Trust Inc.

 

193,370

 

2,959

 

Ladder Capital Corp. Class A

 

160,904

 

2,953

 

PennyMac Mortgage Investment Trust

 

138,385

 

2,820

 

ARMOUR Residential REIT Inc.

 

120,980

 

2,426

 

New York Mortgage Trust Inc.

 

376,966

 

2,262

 

Granite Point Mortgage Trust Inc.

 

104,252

 

1,983

^

Arbor Realty Trust Inc.

 

147,879

 

1,914

 

Capstead Mortgage Corp.

 

188,912

 

1,568

 

TPG RE Finance Trust Inc.

 

67,773

 

1,357

 

AG Mortgage Investment Trust Inc.

 

64,673

 

1,150

 

Western Asset Mortgage Capital Corp.

 

98,113

 

984

 

Dynex Capital Inc.

 

142,156

 

867

 

Anworth Mortgage Asset Corp.

 

200,099

 

852

 

Ares Commercial Real Estate Corp.

 

52,813

 

806

^

Orchid Island Capital Inc.

 

106,187

 

709

 

Exantas Capital Corp.

 

61,799

 

670

 

Ready Capital Corp.

 

36,875

 

595

 

 

 

 

 

139,384

Other (0.0%)2

 

 

 

 

*,§

American International Group Inc. Warrants Exp. 01/19/2021

 

7,950

 

—

*,§

NewStar Financial Inc. CVR

 

42,593

 

11

 

 

 

 

 

11

Thrifts & Mortgage Finance (1.4%)

 

 

 

 

 

New York Community

 

 

 

 

 

Bancorp Inc.

 

1,009,863

 

12,633

*

MGIC Investment Corp.

 

746,270

 

9,687

 

Radian Group Inc.

 

439,498

 

8,948

*

Essent Group Ltd.

 

182,474

 

7,872

*,^

LendingTree Inc.

 

17,249

 

5,502

 

Washington Federal Inc.

 

167,747

 

5,146

*

Axos Financial Inc.

 

117,655

 

3,798

 

Northwest Bancshares Inc.

 

203,288

 

3,781

 

Capitol Federal Financial Inc.

 

275,140

 

3,679

 

Provident Financial Services Inc.

 

129,416

 

3,552

 

Walker & Dunlop Inc.

 

60,569

 

3,380

*

PennyMac Financial Services Inc.

 

127,727

 

2,979

*

NMI Holdings Inc. Class A

 

123,292

 

2,977

 

WSFS Financial Corp.

 

64,417

 

2,788

 

Kearny Financial Corp.

 

177,106

 

2,407

 

Beneficial Bancorp Inc.

 

136,273

 

2,197

 

Mr Cooper Group Inc.

 

158,586

 

2,165

 

Flagstar Bancorp Inc.

 

65,647

 

2,144

 

OceanFirst Financial Corp.

 

79,400

 

2,001

 

Meridian Bancorp Inc.

 

107,099

 

1,745

 

TrustCo Bank Corp. NY

 

198,780

 

1,684

 

United Financial Bancorp Inc.

 

104,908

 

1,629

 

Federal Agricultural Mortgage Corp.

 

19,129

 

1,566

 

Oritani Financial Corp.

 

85,282

 

1,531

*

Columbia Financial Inc.

 

94,949

 

1,522

*

HomeStreet Inc.

 

51,520

 

1,437

 

Northfield Bancorp Inc.

 

90,015

 

1,342

 

Meta Financial Group Inc.

 

57,467

 

1,342

 

First Defiance Financial Corp.

 

42,828

 

1,325

 

Dime Community Bancshares Inc.

 

65,000

 

1,299

 

United Community Financial Corp.

 

100,914

 

1,011

 

Waterstone Financial Inc.

 

49,851

 

839

*

Ocwen Financial Corp.

 

219,122

 

469

 

Hingham Institution for Savings

 

2,240

 

439

 

Sterling Bancorp Inc.

 

40,094

 

404

 

Merchants Bancorp

 

17,317

 

361

 

Luther Burbank Corp.

 

33,737

 

353

 

 

 

 

 

107,934

Total Common Stocks

 

 

 

 

(Cost $7,228,749)

 

 

 

7,747,865

 

46

 

Financials Index Fund

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Temporary Cash Investments (0.1%)1

 

 

 

 

Money Market Fund (0.1%)

 

 

 

 

3,4

Vanguard Market Liquidity Fund, 2.563%

 

65,794

 

6,580

 

 

 

 

 

 

 

 

 

Face

 

 

 

 

 

Amount

 

 

 

 

 

($000)

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

5

United States Treasury Bill,

 

 

 

 

 

2.432%, 4/18/19

 

700

 

698

Total Temporary Cash Investments

 

 

 

 

(Cost $7,278)

 

 

 

7,278

Total Investments (100.0%)

 

 

 

 

(Cost $7,236,027)

 

 

 

7,755,143

 

 

 

Amount

 

 

($000)

Other Assets and Liabilities (0.0%)

 

 

Other Assets

 

 

Investment in Vanguard

 

387

Receivables for Investment Securities Sold

 

40,343

Receivables for Accrued Income

 

14,221

Receivables for Capital Shares Issued

 

204

Other Assets4

 

72

Total Other Assets

 

55,227

Liabilities

 

 

Payables for Investment Securities Purchased

 

(40,732)

Collateral for Securities on Loan

 

(6,652)

Payables for Capital Shares Redeemed

 

(269)

Payables to Vanguard

 

(1,347)

Variation Margin Payable—Futures Contracts

 

(14)

Other Liabilities

 

(6,035)

Total Liabilities

 

(55,049)

Net Assets (100%)

 

7,755,321

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

($000)

Paid-in Capital

 

7,263,156

Total Distributable Earnings (Loss)

 

492,165

Net Assets

 

7,755,321

 

 

 

ETF Shares—Net Assets

 

 

Applicable to 106,852,301 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

7,155,459

Net Asset Value Per Share—ETF Shares

 

$66.97

 

 

 

Admiral Shares—Net Assets

 

 

Applicable to 17,874,180 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

599,862

Net Asset Value Per Share—Admiral Shares

 

$33.56

 

·      See Note A in Notes to Financial Statements.

*       Non-income-producing security.

^      Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $6,320,000.

§     Security value determined using significant unobservable inputs.

1     The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.

2     “Other” represents securities that are not classified by the fund’s benchmark index.

3     Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

4     Includes $6,652,000 of collateral received for securities on loan, of which $6,580,000 is held in Vanguard Market Liquidity Fund and $72,000 is held in cash.

5     Securities with a value of $399,000 have been segregated as initial margin for open futures contracts.

CVR—Contingent Value Rights.

REIT—Real Estate Investment Trust.

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

 

 

 

 

 

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($000)

 

 

 

 

 

 

 

 

Value and

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

Long (Short)

 

Notional

 

Appreciation

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation)

Long Futures Contracts

 

 

 

 

 

 

 

 

E-mini S&P 500 Index

 

March 2019

 

55

 

7,658

 

233

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

47

 

Financials Index Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000

)

Investment Income

 

 

 

Income

 

 

 

Dividends

 

96,806

 

Interest1

 

29

 

Securities Lending—Net

 

31

 

Total Income

 

96,866

 

Expenses

 

 

 

The Vanguard Group—Note B

 

 

 

Investment Advisory Services

 

1,088

 

Management and Administrative—ETF Shares

 

2,162

 

Management and Administrative—Admiral Shares

 

190

 

Marketing and Distribution—ETF Shares

 

206

 

Marketing and Distribution—Admiral Shares

 

21

 

Custodian Fees

 

71

 

Shareholders’ Reports—ETF Shares

 

192

 

Shareholders’ Reports—Admiral Shares

 

5

 

Trustees’ Fees and Expenses

 

2

 

Total Expenses

 

3,937

 

Net Investment Income

 

92,929

 

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold1,2

 

306,480

 

Futures Contracts

 

(1,295

)

Realized Net Gain (Loss)

 

305,185

 

Change in Unrealized Appreciation (Depreciation)

 

 

 

Investment Securities1

 

(963,551

)

Futures Contracts

 

233

 

Change in Unrealized Appreciation (Depreciation)

 

(963,318

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(565,204

)

 

1     Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $25,000, ($3,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.

2     Includes $298,460,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28,

 

August 31,

 

 

 

2019

 

2018

 

 

 

($000

)

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

Operations

 

 

 

 

 

Net Investment Income

 

92,929

 

155,827

 

Realized Net Gain (Loss)

 

305,185

 

321,793

 

Change in Unrealized Appreciation (Depreciation)

 

(963,318

)

692,718

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(565,204

)

1,170,338

 

Distributions

 

 

 

 

 

Net Investment Income

 

 

 

 

 

ETF Shares

 

(86,032

)

(137,850

)

Admiral Shares

 

(7,221

)

(11,634

)

Realized Capital Gain

 

 

 

 

 

ETF Shares

 

—

 

—

 

Admiral Shares

 

—

 

—

 

Total Distributions

 

(93,253

)

(149,484

)

Capital Share Transactions

 

 

 

 

 

ETF Shares

 

(746,390

)

1,442,638

 

Admiral Shares

 

(42,435

)

93,701

 

Net Increase (Decrease) from Capital Share Transactions

 

(788,825

)

1,536,339

 

Total Increase (Decrease)

 

(1,447,282

)

2,557,193

 

Net Assets

 

 

 

 

 

Beginning of Period

 

9,202,603

 

6,645,410

 

End of Period

 

7,755,321

 

9,202,603

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

48

 

Financials Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months
Ended

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

Net Asset Value, Beginning of Period

 

$71.60

 

$62.26

 

$50.81

 

$47.70

 

$47.32

 

$39.80

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.7711

 

1.2981

 

1.0351

 

1.108

 

.917

 

.876

Net Realized and Unrealized Gain (Loss) on Investments

 

(4.645)

 

9.307

 

11.387

 

3.070

 

.349

 

7.494

Total from Investment Operations

 

(3.874)

 

10.605

 

12.422

 

4.178

 

1.266

 

8.370

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.756)

 

(1.265)

 

(.972)

 

(1.068)

 

(.886)

 

(.850)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

Total Distributions

 

(.756)

 

(1.265)

 

(.972)

 

(1.068)

 

(.886)

 

(.850)

Net Asset Value, End of Period

 

$66.97

 

$71.60

 

$62.26

 

$50.81

 

$47.70

 

$47.32

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-5.38%

 

17.15%

 

24.65%

 

8.93%

 

2.63%

 

21.20%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$7,155

 

$8,512

 

$6,127

 

$3,735

 

$3,081

 

$2,191

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

Ratio of Net Investment Income to Average Net Assets

 

2.37%

 

1.87%

 

1.75%

 

2.39%

 

1.99%

 

2.00%

Portfolio Turnover Rate2

 

6%

 

3%

 

5%

 

21%

 

4%

 

5%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1     Calculated based on average shares outstanding.

2     Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

49

 

Financials Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months
Ended

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

Net Asset Value, Beginning of Period

 

$35.88

 

$31.20

 

$25.47

 

$23.91

 

$23.72

 

$19.95

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.3871

 

.6511

 

.5141

 

.556

 

.460

 

.438

Net Realized and Unrealized Gain (Loss) on Investments

 

(2.328)

 

4.663

 

5.704

 

1.539

 

.174

 

3.758

Total from Investment Operations

 

(1.941)

 

5.314

 

6.218

 

2.095

 

.634

 

4.196

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.379)

 

(.634)

 

(.488)

 

(.535)

 

(.444)

 

(.426)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

Total Distributions

 

(.379)

 

(.634)

 

(.488)

 

(.535)

 

(.444)

 

(.426)

Net Asset Value, End of Period

 

$33.56

 

$35.88

 

$31.20

 

$25.47

 

$23.91

 

$23.72

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-5.39%

 

17.16%

 

24.62%

 

8.96%

 

2.64%

 

21.19%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$600

 

$690

 

$518

 

$244

 

$204

 

$155

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

Ratio of Net Investment Income to Average Net Assets

 

2.37%

 

1.87%

 

1.75%

 

2.39%

 

1.99%

 

2.00%

Portfolio Turnover Rate3

 

6%

 

3%

 

5%

 

21%

 

4%

 

5%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1     Calculated based on average shares outstanding.

2     Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

3     Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

50

 

Financials Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Financials Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.      The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015—2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default

 

51

 

Financials Index Fund

 

 

 

 

 

(including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.      In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $387,000, representing 0.01% of the fund’s net assets and 0.15% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.      Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

52

 

Financials Index Fund

 

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

Investments

 

($000)

 

($000)

 

($000)

Common Stocks

 

7,747,828

 

—

 

37

Temporary Cash Investments

 

6,580

 

698

 

—

Futures Contracts—Liabilities1

 

(14)

 

—

 

—

Total

 

7,754,394

 

698

 

37

 

1 Represents variation margin on the last day of the reporting period.

 

 

D.      As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

($000)

Tax Cost

 

7,236,027

Gross Unrealized Appreciation

 

913,987

Gross Unrealized Depreciation

 

(394,871)

Net Unrealized Appreciation (Depreciation)

 

519,116

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $67,366,000, which may be used to offset future net capital gains through August 31, 2019. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.      During the six months ended February 28, 2019, the fund purchased $756,753,000 of investment securities and sold $1,549,858,000 of investment securities, other than temporary cash investments. Purchases and sales include $504,171,000 and $1,321,093,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F.       Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

Year Ended

 

 

February 28, 2019

 

August 31, 2018

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

($000)

 

(000)

 

($000)

 

(000)

ETF Shares

 

 

 

 

 

 

 

 

Issued

 

575,872

 

8,637

 

2,440,296

 

34,877

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

Redeemed

 

(1,322,262)

 

(20,675)

 

(997,658)

 

(14,400)

Net Increase (Decrease)—ETF Shares

 

(746,390)

 

(12,038)

 

1,442,638

 

20,477

Admiral Shares

 

 

 

 

 

 

 

 

Issued

 

89,731

 

2,743

 

383,758

 

10,937

Issued in Lieu of Cash Distributions

 

6,247

 

189

 

10,277

 

301

Redeemed

 

(138,413)

 

(4,295)

 

(300,334)

 

(8,610)

Net Increase (Decrease)—Admiral Shares

 

(42,435)

 

(1,363)

 

93,701

 

2,628

 

At February 28, 2019, one shareholder was the record or beneficial owner of 33% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio.

 

G.     Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

53

 

Health Care Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Biotechnology

 

19.8%

Health Care Distributors

 

1.7

Health Care Equipment

 

21.6

Health Care Facilities

 

1.7

Health Care Services

 

5.0

Health Care Supplies

 

1.9

Health Care Technology

 

1.4

Life Sciences Tools & Services

 

7.0

Managed Health Care

 

10.0

Pharmaceuticals

 

29.9

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

54

 

Health Care Index Fund

 

 

Financial Statements (unaudited)

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (99.9%)1

 

 

 

 

Biotechnology (19.8%)

 

 

 

 

 

Amgen Inc.

 

1,695,942

 

322,365

 

AbbVie Inc.

 

4,003,340

 

317,225

 

Gilead Sciences Inc.

 

3,442,971

 

223,862

*

Biogen Inc.

 

536,235

 

175,890

*

Celgene Corp.

 

1,861,052

 

154,691

*

Vertex Pharmaceuticals Inc.

 

680,162

 

128,381

*

Regeneron Pharmaceuticals Inc.

 

214,003

 

91,984

*

Alexion Pharmaceuticals Inc.

 

593,793

 

80,358

*

BioMarin Pharmaceutical Inc.

 

473,949

 

44,200

*

Incyte Corp.

 

481,461

 

41,516

*

Exact Sciences Corp.

 

326,815

 

29,740

*

Sarepta Therapeutics Inc.

 

178,263

 

25,713

*

Ionis Pharmaceuticals Inc.

 

348,249

 

24,722

*

Bluebird Bio Inc.

 

145,579

 

22,597

*

Seattle Genetics Inc.

 

298,355

 

22,162

*

Alnylam Pharmaceuticals Inc.

 

241,366

 

20,516

*

Sage Therapeutics Inc.

 

125,015

 

19,909

*

Neurocrine Biosciences Inc.

 

241,379

 

18,646

*

Exelixis Inc.

 

795,795

 

17,818

*

United Therapeutics Corp.

 

115,572

 

14,596

*

Alkermes plc

 

413,785

 

13,767

*

Array BioPharma Inc.

 

538,975

 

12,364

*

FibroGen Inc.

 

203,063

 

11,737

*

Spark Therapeutics Inc.

 

90,430

 

10,246

*

Agios Pharmaceuticals Inc.

 

139,404

 

9,043

*

Blueprint Medicines Corp.

 

105,265

 

8,652

*

Ultragenyx Pharmaceutical Inc.

 

128,261

 

8,227

*

ACADIA Pharmaceuticals Inc.

 

298,815

 

7,919

*,^

Ligand Pharmaceuticals Inc.

 

56,625

 

7,026

*

Global Blood Therapeutics Inc.

 

131,134

 

6,885

*

Emergent BioSolutions Inc.

 

115,298

 

6,728

*

Arena Pharmaceuticals Inc.

 

131,963

 

6,588

*

Myriad Genetics Inc.

 

199,051

 

6,177

*

Amicus Therapeutics Inc.

 

504,080

 

6,099

*

Insmed Inc.

 

205,197

 

6,084

*

Halozyme Therapeutics Inc.

 

346,636

 

5,979

*

Repligen Corp.

 

99,843

 

5,943

*,^

Immunomedics Inc.

 

350,888

 

5,530

*

Intercept Pharmaceuticals Inc.

 

54,926

 

5,478

*

Ironwood Pharmaceuticals Inc. Class A

 

373,021

 

5,312

*

Portola Pharmaceuticals Inc.

 

167,782

 

5,153

*

Acceleron Pharma Inc.

 

116,335

 

5,123

*

Heron Therapeutics Inc.

 

188,658

 

4,994

*

PTC Therapeutics Inc.

 

137,660

 

4,755

*

REGENXBIO Inc.

 

85,840

 

4,440

*

Genomic Health Inc.

 

57,618

 

4,377

*,^

Arrowhead Pharmaceuticals Inc.

 

210,750

 

4,114

*

Clovis Oncology Inc.

 

134,962

 

4,087

*

Xencor Inc.

 

134,148

 

4,070

*

Enanta Pharmaceuticals Inc.

 

38,653

 

3,963

*

Mirati Therapeutics Inc.

 

51,781

 

3,770

*,^

Denali Therapeutics Inc.

 

165,300

 

3,597

*

uniQure NV

 

64,492

 

3,482

*

AnaptysBio Inc.

 

49,875

 

3,435

*

Momenta Pharmaceuticals Inc.

 

239,057

 

3,368

*

Atara Biotherapeutics Inc.

 

85,753

 

3,071

*

Invitae Corp.

 

148,870

 

2,995

*,^

Esperion Therapeutics Inc.

 

64,253

 

2,962

*

Audentes Therapeutics Inc.

 

96,484

 

2,954

*

Iovance Biotherapeutics Inc.

 

276,828

 

2,843

*

Vanda Pharmaceuticals Inc.

 

140,340

 

2,840

*

Spectrum Pharmaceuticals Inc.

 

260,405

 

2,815

*

CareDx Inc.

 

88,690

 

2,760

*,^

Madrigal Pharmaceuticals Inc.

 

20,111

 

2,640

*

Aimmune Therapeutics Inc.

 

105,259

 

2,536

*

Sangamo Therapeutics Inc.

 

268,123

 

2,416

*

Biohaven Pharmaceutical Holding Co. Ltd.

 

54,892

 

2,414

*

MacroGenics Inc.

 

120,354

 

2,407

*

Puma Biotechnology Inc.

 

81,331

 

2,262

*,^

OPKO Health Inc.

 

884,458

 

2,255

*

Retrophin Inc.

 

97,601

 

2,202

*

Alder Biopharmaceuticals Inc.

 

171,607

 

2,200

*

Fate Therapeutics Inc.

 

139,826

 

2,197

*

Epizyme Inc.

 

158,113

 

2,049

*

Radius Health Inc.

 

103,231

 

1,957

*,^

CRISPR Therapeutics AG

 

55,211

 

1,954

*

Editas Medicine Inc.

 

93,029

 

1,919

*

ImmunoGen Inc.

 

397,193

 

1,875

*

Natera Inc.

 

110,144

 

1,745

*

BioCryst Pharmaceuticals Inc.

 

199,846

 

1,651

*

Coherus Biosciences Inc.

 

114,633

 

1,644

*

Akebia Therapeutics Inc.

 

222,524

 

1,620

*,^

Intrexon Corp.

 

201,141

 

1,603

*

Eagle Pharmaceuticals Inc.

 

31,750

 

1,590

*

Dynavax Technologies Corp.

 

167,073

 

1,537

*

Acorda Therapeutics Inc.

 

101,392

 

1,494

*,^

Cara Therapeutics Inc.

 

87,613

 

1,494

*

Apellis Pharmaceuticals Inc.

 

94,699

 

1,435

*,^

Viking Therapeutics Inc.

 

170,188

 

1,431

*

Prothena Corp. plc

 

106,331

 

1,425

*

PDL BioPharma Inc.

 

388,499

 

1,410

*

Ra Pharmaceuticals Inc.

 

72,064

 

1,389

*

Rhythm Pharmaceuticals Inc.

 

46,873

 

1,344

*

AMAG Pharmaceuticals Inc.

 

89,946

 

1,339

*

CytomX Therapeutics Inc.

 

112,400

 

1,261

*

G1 Therapeutics Inc.

 

66,764

 

1,232

*

TG Therapeutics Inc.

 

177,051

 

1,204

*,^

Athenex Inc.

 

89,249

 

1,175

 

Homology Medicines Inc.

 

38,556

 

1,137

*

GlycoMimetics Inc.

 

92,110

 

1,132

*

Deciphera Pharmaceuticals Inc.

 

39,654

 

1,126

*

Flexion Therapeutics Inc.

 

80,857

 

1,117

*

Five Prime Therapeutics Inc.

 

94,569

 

1,095

*,^

ZIOPHARM Oncology Inc.

 

354,174

 

1,045

*

Rigel Pharmaceuticals Inc.

 

476,047

 

1,043

*

Progenics Pharmaceuticals Inc.

 

225,510

 

997

*

Kura Oncology Inc.

 

63,943

 

974

*

Intellia Therapeutics Inc.

 

63,690

 

970

*

Inovio Pharmaceuticals Inc.

 

252,879

 

926

*,^

Corbus Pharmaceuticals Holdings Inc.

 

121,964

 

846

 

Arcus Biosciences Inc.

 

67,202

 

792

*

Achillion Pharmaceuticals Inc.

 

314,149

 

788

*

Agenus Inc.

 

253,928

 

785

*

Voyager Therapeutics Inc.

 

52,149

 

782

*

Concert Pharmaceuticals Inc.

 

51,379

 

780

*,^

Geron Corp.

 

522,038

 

762

*,^

Novavax Inc.

 

993,155

 

700

*

Minerva Neurosciences Inc.

 

83,597

 

663

*

Adamas Pharmaceuticals Inc.

 

58,423

 

654

 

Scholar Rock Holding Corp.

 

33,581

 

625

 

Forty Seven Inc.

 

37,228

 

622

*,^

MannKind Corp.

 

346,970

 

621

 

Avrobio Inc.

 

36,871

 

614

*,^

Lexicon Pharmaceuticals Inc.

 

112,475

 

598

*

Cytokinetics Inc.

 

79,519

 

574

*,^

Sorrento Therapeutics Inc.

 

269,314

 

547

*

Abeona Therapeutics Inc.

 

76,822

 

539

*

Aduro Biotech Inc.

 

117,110

 

504

*

Karyopharm Therapeutics Inc.

 

120,132

 

496

 

Kezar Life Sciences Inc.

 

24,026

 

489

*

Solid Biosciences Inc.

 

43,194

 

462

*,^

Insys Therapeutics Inc.

 

65,232

 

410

*

Syros Pharmaceuticals Inc.

 

55,894

 

379

*

Marker Therapeutics Inc.

 

55,637

 

346

*

Seres Therapeutics Inc.

 

54,596

 

335

*

La Jolla Pharmaceutical Co.

 

52,901

 

302

*

Ardelyx Inc.

 

95,235

 

268

*

Calyxt Inc.

 

16,461

 

264

*

Bellicum Pharmaceuticals Inc.

 

78,345

 

251

 

Aptinyx Inc.

 

36,231

 

192

*

Jounce Therapeutics Inc.

 

30,240

 

135

*,^

Axovant Sciences Ltd.

 

76,830

 

102

*,^

Achaogen Inc.

 

122,932

 

89

 

55

 

Health Care Index Fund

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

*

NantKwest Inc.

 

54,183

 

61

 

Aravive Inc.

 

1

 

—

 

Celldex Therapeutics Inc.

 

1

 

—

 

 

 

 

 

2,129,888

Health Care Equipment & Supplies (23.4%)

 

 

 

 

 

Abbott Laboratories

 

4,674,144

 

362,807

 

Medtronic plc

 

3,574,351

 

323,479

 

Danaher Corp.

 

1,678,805

 

213,242

 

Becton Dickinson and Co.

 

713,945

 

177,622

 

Stryker Corp.

 

896,270

 

168,956

*

Intuitive Surgical Inc.

 

304,025

 

166,473

*

Boston Scientific Corp.

 

3,682,507

 

147,742

 

Baxter International Inc.

 

1,345,418

 

100,543

*

Edwards Lifesciences Corp.

 

556,314

 

94,178

 

Zimmer Biomet Holdings Inc.

 

542,486

 

67,337

*

Align Technology Inc.

 

202,389

 

52,413

*

IDEXX Laboratories Inc.

 

229,395

 

48,409

 

ResMed Inc.

 

379,248

 

38,846

*

ABIOMED Inc.

 

113,875

 

38,091

 

Cooper Cos. Inc.

 

130,767

 

37,398

*

Hologic Inc.

 

757,443

 

35,815

 

Teleflex Inc.

 

122,372

 

35,468

*

DexCom Inc.

 

236,379

 

32,935

*

Varian Medical Systems Inc.

 

242,662

 

32,604

 

STERIS plc

 

224,829

 

27,195

 

Dentsply Sirona Inc.

 

592,273

 

24,733

 

West Pharmaceutical Services Inc.

 

197,091

 

20,645

 

Hill-Rom Holdings Inc.

 

179,039

 

18,987

*

Masimo Corp.

 

133,887

 

17,577

*

Insulet Corp.

 

157,239

 

14,766

*

LivaNova plc

 

129,729

 

12,091

*

Haemonetics Corp.

 

137,481

 

11,943

*

Penumbra Inc.

 

82,615

 

11,043

*

ICU Medical Inc.

 

43,442

 

10,676

*

Integra LifeSciences Holdings Corp.

 

192,354

 

10,597

*

Wright Medical Group NV

 

316,424

 

9,907

*

Globus Medical Inc.

 

202,306

 

9,850

*

Novocure Ltd.

 

173,168

 

9,301

*

Tandem Diabetes Care Inc.

 

137,339

 

9,005

*

Neogen Corp.

 

138,376

 

8,574

*

Merit Medical Systems Inc.

 

146,293

 

8,153

*

NuVasive Inc.

 

137,694

 

8,110

 

Cantel Medical Corp.

 

99,978

 

7,350

*

Integer Holdings Corp.

 

77,493

 

7,049

*

Glaukos Corp.

 

86,211

 

6,394

*

Avanos Medical Inc.

 

126,210

 

5,942

*

Quidel Corp.

 

88,391

 

5,795

 

CONMED Corp.

 

68,009

 

5,230

*

Inogen Inc.

 

48,315

 

5,192

*

iRhythm Technologies Inc.

 

48,764

 

4,671

*

Nevro Corp.

 

72,082

 

3,321

*

STAAR Surgical Co.

 

87,873

 

3,234

*

Tactile Systems Technology Inc.

 

42,437

 

3,226

*

Cardiovascular Systems Inc.

 

90,898

 

3,215

*

Varex Imaging Corp.

 

101,474

 

3,190

*

Orthofix Medical Inc.

 

50,344

 

3,076

 

Atrion Corp.

 

3,910

 

3,075

*

AtriCure Inc.

 

92,101

 

2,942

*

CryoLife Inc.

 

89,812

 

2,657

*

Natus Medical Inc.

 

91,548

 

2,530

*

Cerus Corp.

 

367,583

 

2,393

*

Lantheus Holdings Inc.

 

100,536

 

2,297

*

AngioDynamics Inc.

 

100,278

 

2,247

 

Meridian Bioscience Inc.

 

110,933

 

1,894

*

OraSure Technologies Inc.

 

163,074

 

1,753

*

Heska Corp.

 

19,757

 

1,616

*

AxoGen Inc.

 

86,652

 

1,600

*

Antares Pharma Inc.

 

372,887

 

1,339

 

LeMaitre Vascular Inc.

 

44,335

 

1,327

*

Anika Therapeutics Inc.

 

37,844

 

1,235

*

Accuray Inc.

 

247,781

 

1,194

*,^

ViewRay Inc.

 

140,082

 

1,188

*

GenMark Diagnostics Inc.

 

141,295

 

1,087

 

Invacare Corp.

 

87,786

 

854

*

OrthoPediatrics Corp.

 

15,939

 

655

*

Rockwell Medical Inc.

 

121,335

 

564

 

Neuronetics Inc.

 

19,343

 

338

 

Wright Medical Group Inc. CVR

 

14,554

 

—

 

 

 

 

 

2,519,181

Health Care Providers & Services (18.4%)

 

 

 

 

 

UnitedHealth Group Inc.

 

2,562,322

 

620,613

 

Anthem Inc.

 

688,322

 

206,999

 

CVS Health Corp.

 

3,441,647

 

199,030

*

Cigna Corp.

 

1,012,332

 

176,591

 

Humana Inc.

 

364,624

 

103,939

 

HCA Healthcare Inc.

 

731,603

 

101,766

*

Centene Corp.

 

1,092,943

 

66,549

 

McKesson Corp.

 

515,255

 

65,416

 

Cardinal Health Inc.

 

792,998

 

43,092

*

Laboratory Corp. of America Holdings

 

268,579

 

39,814

 

AmerisourceBergen Corp. Class A

 

423,028

 

35,238

*

WellCare Health Plans Inc.

 

133,022

 

33,732

 

Universal Health Services Inc. Class B

 

226,881

 

31,498

 

Quest Diagnostics Inc.

 

362,200

 

31,348

*

Henry Schein Inc.

 

403,835

 

23,930

*

Molina Healthcare Inc.

 

157,686

 

21,229

*

DaVita Inc.

 

353,438

 

20,111

 

Encompass Health Corp.

 

263,216

 

16,620

 

Chemed Corp.

 

42,734

 

14,081

*

HealthEquity Inc.

 

149,391

 

12,023

*

Amedisys Inc.

 

72,046

 

8,955

*

LHC Group Inc.

 

75,073

 

8,235

*

MEDNAX Inc.

 

238,175

 

7,838

*

Tenet Healthcare Corp.

 

272,378

 

7,785

*

BioTelemetry Inc.

 

88,682

 

6,626

 

Ensign Group Inc.

 

132,188

 

6,537

*

AMN Healthcare Services Inc.

 

124,001

 

6,201

*

Premier Inc. Class A

 

169,499

 

6,200

*

Acadia Healthcare Co. Inc.

 

233,793

 

6,146

*

Covetrus Inc.

 

162,435

 

5,812

 

Patterson Cos. Inc.

 

227,273

 

5,125

*

Magellan Health Inc.

 

64,584

 

4,399

*

Select Medical Holdings Corp.

 

287,649

 

4,263

 

US Physical Therapy Inc.

 

33,840

 

3,731

*

Brookdale Senior Living Inc

 

499,441

 

3,376

*

R1 RCM Inc.

 

237,027

 

2,344

*

Tivity Health Inc.

 

107,210

 

2,294

*

Providence Service Corp.

 

30,202

 

2,154

 

National HealthCare Corp.

 

24,789

 

2,018

*

CorVel Corp.

 

27,325

 

1,839

*

Addus HomeCare Corp.

 

25,001

 

1,680

*

Triple-S Management Corp. Class B

 

63,303

 

1,610

*,^

Community Health Systems Inc.

 

225,156

 

1,115

 

Owens & Minor Inc.

 

160,282

 

1,000

*

Diplomat Pharmacy Inc.

 

138,850

 

896

*

Cross Country Healthcare Inc.

 

96,542

 

844

*

Civitas Solutions Inc.

 

46,145

 

820

*,^

Surgery Partners Inc.

 

39,027

 

489

*

American Renal Associates Holdings Inc.

 

34,119

 

426

*

Capital Senior Living Corp.

 

66,756

 

334

*

Genesis Healthcare Inc.

 

174,230

 

239

 

 

 

 

 

1,974,950

Health Care Technology (1.4%)

 

 

 

 

*

Cerner Corp.

 

789,378

 

44,166

*

Veeva Systems Inc. Class A

 

345,534

 

40,135

*

Medidata Solutions Inc.

 

162,872

 

12,219

*

Teladoc Health Inc.

 

167,847

 

10,803

*

Omnicell Inc.

 

105,428

 

8,956

*

HMS Holdings Corp.

 

223,150

 

7,690

*

Allscripts Healthcare Solutions Inc.

 

465,173

 

4,987

*

Vocera Communications Inc.

 

76,509

 

2,535

*

Tabula Rasa HealthCare Inc

 

. 43,511

 

2,398

*,^

Inovalon Holdings Inc. Class A

 

177,767

 

2,336

*

NextGen Healthcare Inc.

 

131,722

 

2,305

*

Evolent Health Inc. Class A

 

157,043

 

2,071

 

HealthStream Inc.

 

67,869

 

1,887

 

Computer Programs & Systems Inc.

 

33,853

 

1,115

 

Inspire Medical Systems Inc.

 

17,028

 

1,056

*

Castlight Health Inc. Class B

 

222,334

 

709

 

Simulations Plus Inc.

 

31,614

 

648

 

 

 

 

 

146,016

Life Sciences Tools & Services (7.0%)

 

 

 

 

 

Thermo Fisher Scientific Inc.

 

1,071,409

 

278,106

*

Illumina Inc.

 

391,202

 

122,356

 

Agilent Technologies Inc.

 

848,357

 

67,393

*

IQVIA Holdings Inc.

 

412,696

 

58,361

*

Waters Corp.

 

201,394

 

48,782

*

Mettler-Toledo International Inc.

 

66,654

 

45,385

 

PerkinElmer Inc.

 

296,029

 

27,874

 

Bio-Techne Corp.

 

100,544

 

19,496

*

Charles River Laboratories International Inc.

 

127,998

 

18,197

*

PRA Health Sciences Inc.

 

155,607

 

16,647

*

Bio-Rad Laboratories Inc. Class A

 

56,240

 

15,235

 

Bruker Corp.

 

270,215

 

10,325

*

Syneos Health Inc.

 

163,774

 

6,841

*

NeoGenomics Inc.

 

239,914

 

4,702

*

Medpace Holdings Inc.

 

71,056

 

3,905

*

Cambrex Corp.

 

90,589

 

3,745

 

Luminex Corp.

 

114,387

 

2,915

*

Pacific Biosciences of California Inc.

 

358,722

 

2,622

*,^

Accelerate Diagnostics Inc.

 

86,584

 

1,851

*

Quanterix Corp.

 

23,265

 

575

 

 

 

 

 

755,313

Other (0.0%)2

 

 

 

 

*,^,§

Corium CVR

 

65,324

 

12

*,§

Clinical Data CVR

 

8,685

 

—

*

Advaxis Inc. Warrants Exp. 09/11/2024

 

7,710

 

—

 

 

 

 

 

12

 

56

 

Health Care Index Fund

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Pharmaceuticals (29.9%)

 

 

 

 

 

Johnson & Johnson

 

7,137,703

 

975,296

*

Pfizer Inc.

 

15,396,634

 

667,355

 

Merck & Co. Inc.

 

6,920,432

 

562,562

^

Eli Lilly & Co.

 

2,537,243

 

320,428

 

Bristol-Myers Squibb Co.

 

4,343,966

 

224,409

 

Allergan plc

 

897,654

 

123,616

 

Zoetis Inc.

 

1,278,692

 

120,491

*

Mylan NV

 

1,372,961

 

36,232

*

Jazz Pharmaceuticals plc

 

160,546

 

22,481

*

Nektar Therapeutics Class A

 

460,715

 

18,677

*

Catalent Inc.

 

387,535

 

16,749

 

Perrigo Co. plc

 

339,965

 

16,438

*

Horizon Pharma plc

 

443,746

 

12,873

*

Endo International plc

 

540,754

 

5,943

*,^

Elanco Animal Health Inc.

 

194,882

 

5,893

*

Zogenix Inc.

 

111,260

 

5,867

*

Supernus Pharmaceuticals Inc.

 

140,238

 

5,727

*

Mallinckrodt plc

 

221,058

 

5,518

*

Aerie Pharmaceuticals Inc.

 

108,880

 

5,081

*

Medicines Co.

 

196,636

 

4,851

*

Reata Pharmaceuticals Inc. Class A

 

51,341

 

4,844

*

Pacira Pharmaceuticals Inc.

 

110,181

 

4,537

*

Prestige Consumer Healthcare Inc.

 

137,166

 

4,013

*

MyoKardia Inc.

 

84,684

 

3,798

*

Corcept Therapeutics Inc.

 

280,958

 

3,504

*

Amneal Pharmaceuticals Inc.

 

244,970

 

3,314

*,^

TherapeuticsMD Inc.

 

546,417

 

3,126

*

Innoviva Inc.

 

185,595

 

2,914

*,^

Theravance Biopharma Inc.

 

116,330

 

2,823

*

Intersect ENT Inc.

 

76,492

 

2,600

*

Amphastar Pharmaceuticals Inc.

 

91,986

 

2,286

*

WaVe Life Sciences Ltd.

 

50,170

 

2,104

*,^

Omeros Corp.

 

126,336

 

1,822

*

Cymabay Therapeutics Inc.

 

150,335

 

1,775

*

Revance Therapeutics Inc.

 

100,790

 

1,707

*

Intra-Cellular Therapies Inc.

 

116,525

 

1,587

*,^

Akcea Therapeutics Inc.

 

45,827

 

1,559

*

ANI Pharmaceuticals Inc.

 

23,687

 

1,558

 

Phibro Animal Health Corp. Class A

 

52,309

 

1,533

*

Assembly Biosciences Inc.

 

56,348

 

1,205

*

Collegium Pharmaceutical Inc.

 

64,618

 

1,137

*

Akorn Inc.

 

243,654

 

987

 

Tricida Inc.

 

36,862

 

853

*

Dermira Inc.

 

84,253

 

704

*

Assertio Therapeutics Inc.

 

155,810

 

645

*

Aclaris Therapeutics Inc.

 

92,851

 

602

 

Xeris Pharmaceuticals Inc.

 

53,197

 

532

*

Eloxx Pharmaceuticals Inc.

 

39,837

 

512

*

Odonate Therapeutics Inc.

 

26,736

 

441

*

Kala Pharmaceuticals Inc.

 

38,771

 

325

*,^

Optinose Inc.

 

35,043

 

260

*

Sienna Biopharmaceuticals Inc.

 

81,766

 

209

*

Dova Pharmaceuticals Inc.

 

26,901

 

207

*

Teligent Inc.

 

121,448

 

192

 

Melinta Therapeutics Inc.

 

1

 

—

 

 

 

 

 

3,216,702

Total Common Stocks

 

 

 

 

(Cost $8,803,768)

 

 

 

10,742,062

 

 

 

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Temporary Cash Investments (0.7%)1

 

 

 

 

Money Market Fund (0.7%)

 

 

 

 

3,4

Vanguard Market Liquidity Fund, 2.563%

 

725,097

 

72,517

 

 

 

 

 

 

 

 

 

Face

 

 

 

 

 

Amount

 

 

 

 

 

($000)

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

 

United States Treasury Bill,

 

 

 

 

 

2.365%, 3/21/19

 

800

 

799

5

United States Treasury Bill,

 

 

 

 

 

2.427%, 4/18/19

 

1,500

 

1,495

 

 

 

 

 

2,294

Total Temporary Cash Investments

 

 

 

 

(Cost $74,806)

 

 

 

74,811

Total Investments (100.6%)

 

 

 

 

(Cost $8,878,574)

 

 

 

10,816,873

 

 

 

 

 

Amount

 

 

($000)

Other Assets and Liabilities (-0.6%)

 

 

Other Assets

 

 

Investment in Vanguard

 

537

Receivables for Investment Securities Sold

 

39,631

Receivables for Accrued Income

 

18,011

Receivables for Capital Shares Issued

 

1,164

Other Assets4

 

419

Total Other Assets

 

59,762

Liabilities

 

 

Payables for Investment Securities Purchased

 

(39,079)

Collateral for Securities on Loan

 

(72,926)

Payables for Capital Shares Redeemed

 

(4,252)

Payables to Vanguard

 

(2,030)

Variation Margin Payable—Futures Contracts

 

(30)

Other Liabilities

 

(8,284)

Total Liabilities

 

(126,601)

Net Assets (100%)

 

10,750,034

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

($000)

Paid-in Capital

 

8,831,403

Total Distributable Earnings (Loss)

 

1,918,631

Net Assets

 

10,750,034

 

 

 

ETF Shares—Net Assets

 

 

Applicable to 54,301,859 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

9,388,968

Net Asset Value Per Share—ETF Shares

 

$172.90

 

 

 

Admiral Shares—Net Assets

 

 

Applicable to 15,736,652 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

1,361,066

Net Asset Value Per Share—Admiral Shares

 

$86.49

 

·      See Note A in Notes to Financial Statements.

*       Non-income-producing security. ^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $67,377,000.

§     Security value determined using significant unobservable inputs.

1     The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.6%, respectively, of net assets.

2     “Other” represents securities that are not classified by the fund’s benchmark index.

3     Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

4     Includes $72,926,000 of collateral received for securities on loan, of which $72,507,000 is held in Vanguard Market Liquidity Fund and $419,000 is held in cash.

5     Securities with a value of $498,000 have been segregated as initial margin for open futures contracts.

CVR—Contingent Value Rights.

 

57

 

Health Care Index Fund

 

 

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

 

 

 

 

 

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($000)

 

 

 

 

 

 

 

 

Value and

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

Long (Short)

 

Notional

 

Appreciation

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation)

Long Futures Contracts

 

 

 

 

 

 

 

 

E-mini S&P 500 Index

 

March 2019

 

57

 

7,936

 

(26)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

58

 

Health Care Index Fund

 

 

Statement of Operations

 

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000

)

Investment Income

 

 

 

Income

 

 

 

Dividends

 

142,831

 

Interest1

 

57

 

Securities Lending—Net

 

483

 

Total Income

 

143,371

 

Expenses

 

 

 

The Vanguard Group—Note B

 

 

 

Investment Advisory Services

 

1,262

 

Management and Administrative—ETF Shares

 

2,872

 

Management and Administrative—Admiral Shares

 

421

 

Marketing and Distribution—ETF Shares

 

180

 

Marketing and Distribution—Admiral Shares

 

39

 

Custodian Fees

 

32

 

Shareholders’ Reports—ETF Shares

 

148

 

Shareholders’ Reports—Admiral Shares

 

4

 

Trustees’ Fees and Expenses

 

2

 

Total Expenses

 

4,960

 

Net Investment Income

 

138,411

 

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold1,2

 

156,525

 

Futures Contracts

 

204

 

Realized Net Gain (Loss)

 

156,729

 

Change in Unrealized Appreciation (Depreciation)

 

 

 

Investment Securities1

 

(465,555

)

Futures Contracts

 

(35

)

Change in Unrealized Appreciation (Depreciation)

 

(465,590

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(170,450

)

 

1     Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from affiliated companies of the fund were $45,000, ($9,000), and ($4,000), respectively.

 

2     Includes $169,011,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

Statement of Changes in Net Assets

 

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28,

 

August 31,

 

 

 

2019

 

2018

 

 

 

($000

)

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

Operations

 

 

 

 

 

Net Investment Income

 

138,411

 

115,866

 

Realized Net Gain (Loss)

 

156,729

 

303,245

 

Change in Unrealized Appreciation (Depreciation)

 

(465,590

)

1,070,942

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(170,450

)

1,490,053

 

Distributions

 

 

 

 

 

Net Investment Income

 

 

 

 

 

ETF Shares

 

(61,521

)

(97,160

)

Admiral Shares

 

(8,800

)

(13,600

)

Realized Capital Gain

 

 

 

 

 

ETF Shares

 

—

 

—

 

Admiral Shares

 

—

 

—

 

Total Distributions

 

(70,321

)

(110,760

)

Capital Share Transactions

 

 

 

 

 

ETF Shares

 

1,007,809

 

387,467

 

Admiral Shares

 

140,852

 

149,874

 

Net Increase (Decrease) from Capital Share Transactions

 

1,148,661

 

537,341

 

Total Increase (Decrease)

 

907,890

 

1,916,634

 

Net Assets

 

 

 

 

 

Beginning of Period

 

9,842,144

 

7,925,510

 

End of Period

 

10,750,034

 

9,842,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

59

 

 

Health Care Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months
Ended

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

Net Asset Value, Beginning of Period

 

$177.07

 

$151.13

 

$133.25

 

$132.34

 

$117.17

 

$89.94

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

2.3531

 

2.1941

 

1.9941

 

1.795

 

1.350

 

1.333

Net Realized and Unrealized Gain (Loss) on Investments

 

(5.319)

 

25.846

 

17.846

 

1.559

 

15.105

 

27.033

Total from Investment Operations

 

(2.966)

 

28.040

 

19.840

 

3.354

 

16.455

 

28.366

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.204)

 

(2.100)

 

(1.960)

 

(2.444)

 

(1.285)

 

(1.136)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

Total Distributions

 

(1.204)

 

(2.100)

 

(1.960)

 

(2.444)

 

(1.285)

 

(1.136)

Net Asset Value, End of Period

 

$172.90

 

$177.07

 

$151.13

 

$133.25

 

$132.34

 

$117.17

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-1.68%

 

18.75%

 

15.06%

 

2.61%

 

14.08%

 

31.76%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$9,389

 

$8,594

 

$7,002

 

$5,708

 

$5,826

 

$3,319

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.09%

 

0.12%

Ratio of Net Investment Income to Average Net Assets

 

2.79%

 

1.38%

 

1.46%

 

1.40%

 

1.25%

 

1.40%

Portfolio Turnover Rate2

 

6%

 

6%

 

4%

 

7%

 

4%

 

5%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1    Calculated based on average shares outstanding.

2    Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

60

 

Health Care Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months
Ended

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

Net Asset Value, Beginning of Period

 

$88.57

 

$75.60

 

$66.65

 

$66.20

 

$58.61

 

$44.99

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1.1841

 

1.1011

 

.9961

 

.898

 

.676

 

.666

Net Realized and Unrealized Gain (Loss) on Investments

 

(2.663)

 

12.920

 

8.934

 

.774

 

7.557

 

13.523

Total from Investment Operations

 

(1.479)

 

14.021

 

9.930

 

1.672

 

8.233

 

14.189

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.601)

 

(1.051)

 

(.980)

 

(1.222)

 

(.643)

 

(.569)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

Total Distributions

 

(.601)

 

(1.051)

 

(.980)

 

(1.222)

 

(.643)

 

(.569)

Net Asset Value, End of Period

 

$86.49

 

$88.57

 

$75.60

 

$66.65

 

$66.20

 

$58.61

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-1.67%

 

18.74%

 

15.07%

 

2.61%

 

14.11%

 

31.77%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$1,361

 

$1,248

 

$924

 

$800

 

$824

 

$413

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

Ratio of Net Investment Income to Average Net Assets

 

2.79%

 

1.38%

 

1.46%

 

1.40%

 

1.24%

 

1.40%

Portfolio Turnover Rate3

 

6%

 

6%

 

4%

 

7%

 

4%

 

5%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1    Calculated based on average shares outstanding.

2    Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

3    Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

61

 

Health Care Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Health Care Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default

 

62

 

Health Care Index Fund

 

 

 

 

 

 

(including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $537,000, representing 0.00% of the fund’s net assets and 0.21% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

63

 

Health Care Index Fund

 

 

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

Investments

 

($000)

 

($000)

 

($000)

Common Stocks

 

10,742,050

 

—

 

12

Temporary Cash Investments

 

72,517

 

2,294

 

—

Futures Contracts—Liabilities1

 

(30)

 

—

 

—

Total

 

10,814,537

 

2,294

 

12

 

1 Represents variation margin on the last day of the reporting period.

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

($000)

Tax Cost

 

8,878,654

Gross Unrealized Appreciation

 

2,629,200

Gross Unrealized Depreciation

 

(690,981)

Net Unrealized Appreciation (Depreciation)

 

1,938,219

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses totaling $99,109,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $1,915,666,000 of investment securities and sold $702,563,000 of investment securities, other than temporary cash investments. Purchases and sales include $1,381,487,000 and $421,281,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

Year Ended

 

 

February 28, 2019

 

August 31, 2018

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

($000)

 

(000)

 

($000)

 

(000)

ETF Shares

 

 

 

 

 

 

 

 

Issued

 

1,434,180

 

8,340

 

1,206,793

 

7,410

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

Redeemed

 

(426,371)

 

(2,575)

 

(819,326)

 

(5,200)

Net Increase (Decrease)—ETF Shares

 

1,007,809

 

5,765

 

387,467

 

2,210

Admiral Shares

 

 

 

 

 

 

 

 

Issued

 

291,458

 

3,440

 

369,026

 

4,634

Issued in Lieu of Cash Distributions

 

7,733

 

89

 

12,050

 

154

Redeemed

 

(158,339)

 

(1,881)

 

(231,202)

 

(2,921)

Net Increase (Decrease)—Admiral Shares

 

140,852

 

1,648

 

149,874

 

1,867

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

64

 

Industrials Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Aerospace & Defense

 

24.4%

Agricultural & Farm Machinery

 

2.1

Air Freight & Logistics

 

5.4

Airlines

 

4.1

Airport Services

 

0.1

Building Products

 

3.9

Commercial Printing

 

0.3

Construction & Engineering

 

1.7

Construction Machinery & Heavy Trucks

 

5.9

Diversified Support Services

 

1.6

Electrical Components & Equipment

 

5.4

Environmental & Facilities Services

 

3.7

Heavy Electrical Equipment

 

0.1

Human Resource & Employment Services

 

1.1

Industrial Conglomerates

 

12.4

Industrial Machinery

 

10.6

Marine

 

0.2

Office Services & Supplies

 

0.5

Railroads

 

8.2

Research & Consulting Services

 

3.5

Security & Alarm Services

 

0.1

Trading Companies & Distributors

 

3.2

Trucking

 

1.5

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

65

 

Industrials Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

Common Stocks (99.9%)1

 

 

 

 

 

Aerospace & Defense (24.3%)

 

 

 

 

 

 

 

Boeing Co.

 

671,451

 

295,412

 

 

 

United Technologies Corp.

 

1,020,278

 

128,218

 

 

 

Lockheed Martin Corp.

 

318,582

 

98,572

 

 

 

Raytheon Co.

 

354,166

 

66,052

 

 

 

Northrop Grumman Corp.

 

205,288

 

59,525

 

 

 

General Dynamics Corp.

 

313,280

 

53,327

 

*

 

TransDigm Group Inc.

 

59,085

 

25,648

 

 

 

Harris Corp.

 

146,433

 

24,151

 

 

 

L3 Technologies Inc.

 

97,945

 

20,740

 

 

 

Textron Inc.

 

302,387

 

16,420

 

 

 

Spirit AeroSystems Holdings Inc. Class A

 

131,928

 

13,035

 

 

 

Huntington Ingalls Industries Inc.

 

53,464

 

11,196

 

*

 

Teledyne Technologies Inc.

 

44,913

 

10,601

 

 

 

Arconic Inc.

 

541,316

 

10,009

 

 

 

Hexcel Corp.

 

107,180

 

7,732

 

 

 

HEICO Corp. Class A

 

93,880

 

7,509

 

 

 

BWX Technologies Inc.

 

122,900

 

6,434

 

 

 

Curtiss-Wright Corp.

 

51,761

 

6,382

 

 

 

HEICO Corp.

 

53,274

 

4,993

 

*

 

Esterline Technologies Corp.

 

33,114

 

4,032

 

*

 

Axon Enterprise Inc.

 

72,758

 

3,917

 

*

 

Mercury Systems Inc.

 

60,297

 

3,830

 

 

 

Moog Inc. Class A

 

40,339

 

3,790

 

*

 

Aerojet Rocketdyne Holdings Inc.

 

87,740

 

3,268

 

 

 

Cubic Corp.

 

36,200

 

2,234

 

*

 

Aerovironment Inc.

 

26,879

 

2,141

 

*

 

Kratos Defense & Security Solutions Inc.

 

109,624

 

1,884

 

 

 

AAR Corp.

 

41,520

 

1,517

 

 

 

Triumph Group Inc.

 

62,162

 

1,440

 

*

 

Astronics Corp.

 

27,471

 

988

 

 

 

National Presto Industries Inc.

 

6,100

 

684

 

*

 

Wesco Aircraft Holdings Inc.

 

68,833

 

584

 

*

 

Ducommun Inc.

 

13,326

 

565

 

*

 

KeyW Holding Corp.

 

59,192

 

438

 

 

 

 

 

 

 

897,268

 

Air Freight & Logistics (5.4%)

 

 

 

 

 

 

 

United Parcel Service Inc. Class B

 

865,243

 

95,350

 

 

 

FedEx Corp.

 

311,545

 

56,390

 

 

 

Expeditors International of Washington Inc.

 

214,828

 

16,101

 

 

 

CH Robinson Worldwide Inc.

 

171,140

 

15,468

 

*

 

XPO Logistics Inc.

 

158,008

 

7,956

 

 

 

Forward Air Corp.

 

36,436

 

2,356

 

*

 

Hub Group Inc. Class A

 

41,792

 

1,796

 

*

 

Air Transport Services Group Inc.

 

73,638

 

1,713

 

*

 

Atlas Air Worldwide Holdings Inc.

 

31,724

 

1,705

 

*

 

Echo Global Logistics Inc.

 

34,024

 

817

 

 

 

 

 

 

 

199,652

 

Airlines (4.1%)

 

 

 

 

 

 

 

Delta Air Lines Inc.

 

810,681

 

40,194

 

 

 

Southwest Airlines Co.

 

664,894

 

37,261

 

*

 

United Continental Holdings Inc.

 

305,209

 

26,800

 

 

 

American Airlines Group Inc.

 

515,948

 

18,383

 

 

 

Alaska Air Group Inc.

 

153,491

 

9,470

 

*

 

JetBlue Airways Corp.

 

379,479

 

6,337

 

*

 

Spirit Airlines Inc.

 

84,812

 

4,771

 

 

 

SkyWest Inc.

 

64,653

 

3,494

 

 

 

Allegiant Travel Co. Class A

 

16,020

 

2,116

 

 

 

Hawaiian Holdings Inc.

 

61,545

 

1,831

 

 

 

 

 

 

 

150,657

 

Building Products (3.9%)

 

 

 

 

 

 

 

Johnson Controls International plc

 

1,150,060

 

40,563

 

 

 

Masco Corp.

 

380,208

 

14,281

 

 

 

Lennox International Inc.

 

45,125

 

11,067

 

 

 

Allegion plc

 

118,310

 

10,643

 

 

 

AO Smith Corp.

 

179,225

 

9,307

 

 

 

Fortune Brands Home & Security Inc.

 

175,999

 

8,293

 

 

 

Owens Corning

 

136,067

 

6,794

 

*

 

Trex Co. Inc.

 

73,145

 

5,482

 

 

 

USG Corp.

 

112,812

 

4,863

 

*

 

Resideo Technologies Inc.

 

153,074

 

3,934

 

 

 

Armstrong World Industries Inc.

 

52,458

 

3,839

 

 

 

Simpson Manufacturing Co. Inc.

 

51,635

 

3,094

 

 

 

Universal Forest Products Inc.

 

76,899

 

2,382

 

 

 

AAON Inc.

 

51,692

 

2,060

 

*

 

Builders FirstSource Inc.

 

143,454

 

1,998

 

*

 

Masonite International Corp.

 

33,049

 

1,833

 

*

 

JELD-WEN Holding Inc.

 

89,617

 

1,811

 

*

 

Gibraltar Industries Inc.

 

40,163

 

1,627

 

*

 

American Woodmark Corp.

 

18,270

 

1,557

 

*

 

Continental Building Products Inc.

 

46,012

 

1,327

 

*

 

Patrick Industries Inc.

 

28,144

 

1,272

 

 

 

Advanced Drainage Systems Inc.

 

49,539

 

1,259

 

 

 

Apogee Enterprises Inc.

 

35,168

 

1,255

 

*

 

PGT Innovations Inc.

 

71,506

 

1,078

 

*

 

CSW Industrials Inc.

 

18,924

 

1,075

 

 

 

Griffon Corp.

 

39,983

 

713

 

 

 

Quanex Building Products Corp.

 

39,171

 

673

 

*

 

NCI Building Systems Inc.

 

85,583

 

601

 

 

 

Insteel Industries Inc.

 

22,502

 

512

 

*

 

Armstrong Flooring Inc.

 

26,443

 

379

 

 

 

 

 

 

 

145,572

 

Commercial Services & Supplies (6.3%)

 

 

 

 

 

 

 

Waste Management Inc.

 

530,626

 

53,726

 

 

 

Waste Connections Inc.

 

328,039

 

27,359

 

 

 

Cintas Corp.

 

113,110

 

23,369

 

 

 

Republic Services Inc. Class A

 

282,668

 

22,170

 

*

 

Copart Inc.

 

262,173

 

15,382

 

 

 

KAR Auction Services Inc.

 

167,593

 

7,902

 

 

 

Rollins Inc.

 

183,466

 

7,276

 

*

 

Stericycle Inc.

 

112,789

 

5,028

 

 

 

Brink’s Co.

 

62,941

 

4,967

 

 

 

MSA Safety Inc.

 

45,531

 

4,708

 

*

 

Clean Harbors Inc.

 

66,224

 

4,503

 

 

 

Tetra Tech Inc.

 

68,984

 

4,140

 

^

 

Healthcare Services Group Inc.

 

91,907

 

3,509

 

 

 

ABM Industries Inc.

 

82,021

 

2,925

 

 

 

Brady Corp. Class A

 

60,991

 

2,886

 

 

 

Herman Miller Inc.

 

73,598

 

2,700

 

 

 

Deluxe Corp.

 

57,690

 

2,684

 

 

 

UniFirst Corp.

 

18,164

 

2,612

 

 

 

Covanta Holding Corp.

 

146,986

 

2,496

 

*

 

Cimpress NV

 

28,886

 

2,383

 

 

 

HNI Corp.

 

54,671

 

2,112

 

*

 

Advanced Disposal Services Inc.

 

77,131

 

2,046

 

 

 

Mobile Mini Inc.

 

55,691

 

2,005

 

 

 

Steelcase Inc. Class A

 

107,262

 

1,878

 

 

 

McGrath RentCorp

 

29,938

 

1,792

 

*

 

Casella Waste Systems Inc. Class A

 

49,918

 

1,761

 

 

 

Pitney Bowes Inc.

 

232,313

 

1,670

 

 

 

US Ecology Inc.

 

27,594

 

1,583

 

 

 

Matthews International Corp. Class A

 

39,754

 

1,581

 

 

 

Viad Corp.

 

25,374

 

1,469

 

 

 

Interface Inc. Class A

 

74,182

 

1,317

 

 

 

Knoll Inc.

 

61,361

 

1,298

 

 

 

ACCO Brands Corp.

 

129,143

 

1,201

 

*

 

SP Plus Corp.

 

28,324

 

974

 

 

 

Multi-Color Corp.

 

17,758

 

885

 

 

 

Kimball International Inc. Class B

 

44,875

 

704

 

 

 

Ennis Inc.

 

32,433

 

688

 

 

 

Quad/Graphics Inc.

 

39,875

 

582

 

*

 

Team Inc.

 

35,300

 

551

 

 

 

RR Donnelley & Sons Co.

 

88,261

 

475

 

*

 

Civeo Corp.

 

171,883

 

447

 

 

 

BrightView Holdings Inc.

 

31,724

 

428

 

 

 

VSE Corp.

 

10,545

 

373

 

 

 

LSC Communications Inc.

 

42,668

 

361

 

*

 

CECO Environmental Corp.

 

35,851

 

273

 

*

 

PICO Holdings Inc.

 

25,491

 

262

 

 

 

 

 

 

 

231,441

 

 

66

 

Industrials Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

Construction & Engineering (1.7%)

 

 

 

 

 

 

 

Jacobs Engineering Group Inc.

 

159,414

 

11,761

 

 

 

Fluor Corp.

 

175,175

 

6,587

 

 

 

Quanta Services Inc.

 

182,517

 

6,505

 

*

 

AECOM

 

194,807

 

6,031

 

 

 

EMCOR Group Inc.

 

71,541

 

5,160

 

 

 

Valmont Industries Inc.

 

27,533

 

3,761

 

 

 

KBR Inc.

 

174,952

 

3,457

 

*

 

MasTec Inc.

 

78,409

 

3,386

 

 

 

Granite Construction Inc.

 

58,443

 

2,721

 

 

 

Comfort Systems USA Inc.

 

46,216

 

2,478

 

 

 

Arcosa Inc.

 

54,692

 

1,832

 

*

 

Dycom Industries Inc.

 

39,010

 

1,759

 

 

 

Primoris Services Corp.

 

50,692

 

1,185

 

*

 

NV5 Global Inc.

 

12,303

 

975

 

*

 

Tutor Perini Corp.

 

49,397

 

930

 

 

 

Argan Inc.

 

17,249

 

802

 

*

 

Aegion Corp. Class A

 

40,499

 

703

 

*

 

MYR Group Inc.

 

20,598

 

691

 

*

 

WillScot Corp. Class A

 

50,173

 

511

 

*

 

IES Holdings Inc.

 

10,147

 

186

 

 

 

 

 

 

 

61,421

 

Electrical Equipment (5.4%)

 

 

 

 

 

 

 

Emerson Electric Co.

 

779,343

 

53,112

 

 

 

Eaton Corp. plc

 

539,431

 

43,030

 

 

 

Rockwell Automation Inc.

 

150,222

 

26,824

 

 

 

AMETEK Inc.

 

288,981

 

22,997

 

*

 

Sensata Technologies Holding plc

 

204,350

 

10,367

 

 

 

Hubbell Inc. Class B

 

68,120

 

8,042

 

 

 

Acuity Brands Inc.

 

49,827

 

6,483

 

 

 

nVent Electric plc

 

212,230

 

5,832

 

 

 

Regal Beloit Corp.

 

53,729

 

4,500

 

*

 

Generac Holdings Inc.

 

77,309

 

3,986

 

 

 

EnerSys

 

52,382

 

3,867

 

*

 

Sunrun Inc.

 

104,481

 

1,620

 

 

 

Encore Wire Corp.

 

25,992

 

1,540

 

 

 

AZZ Inc.

 

32,197

 

1,482

 

*

 

Atkore International Group Inc.

 

58,683

 

1,356

 

 

 

GrafTech International Ltd.

 

89,793

 

1,295

 

*

 

Thermon Group Holdings Inc.

 

40,748

 

1,014

 

*

 

Vicor Corp.

 

22,778

 

724

 

*

 

TPI Composites Inc.

 

19,345

 

584

 

*,^

 

Plug Power Inc.

 

291,075

 

521

 

 

 

Powell Industries Inc.

 

11,033

 

354

 

*

 

Vivint Solar Inc.

 

43,613

 

228

 

*,^

 

Energous Corp.

 

24,695

 

142

 

*

 

Babcock & Wilcox Enterprises Inc.

 

109,305

 

70

 

 

 

 

 

 

 

199,970

 

Industrial Conglomerates (12.4%)

 

 

 

 

 

 

 

3M Co.

 

724,697

 

150,295

 

 

 

Honeywell International Inc.

 

921,435

 

141,966

 

 

 

General Electric Co.

 

10,825,612

 

112,478

 

 

 

Roper Technologies Inc.

 

128,732

 

41,664

 

 

 

Carlisle Cos. Inc.

 

74,027

 

9,111

 

 

 

Raven Industries Inc.

 

44,582

 

1,780

 

 

 

 

 

 

 

457,294

 

Machinery (18.6%)

 

 

 

 

 

 

 

Caterpillar Inc.

 

734,428

 

100,866

 

 

 

Deere & Co.

 

380,320

 

62,388

 

 

 

Illinois Tool Works Inc.

 

371,633

 

53,545

 

 

 

Ingersoll-Rand plc

 

305,712

 

32,271

 

 

 

Fortive Corp.

 

374,045

 

30,511

 

 

 

PACCAR Inc.

 

434,991

 

29,492

 

 

 

Cummins Inc.

 

189,821

 

29,250

 

 

 

Parker-Hannifin Corp.

 

164,696

 

29,013

 

 

 

Stanley Black & Decker Inc.

 

188,001

 

24,897

 

 

 

Xylem Inc.

 

223,660

 

16,897

 

 

 

Dover Corp.

 

182,104

 

16,486

 

 

 

IDEX Corp.

 

95,468

 

13,757

 

 

 

Wabtec Corp.

 

169,423

 

12,412

 

 

 

Snap-on Inc.

 

69,953

 

11,192

 

 

 

Graco Inc.

 

207,157

 

9,728

 

 

 

Toro Co.

 

131,053

 

8,988

 

*

 

WABCO Holdings Inc.

 

64,930

 

8,930

 

 

 

Nordson Corp.

 

65,136

 

8,843

 

 

 

Pentair plc

 

205,198

 

8,729

 

*

 

Middleby Corp.

 

69,504

 

8,520

 

 

 

Donaldson Co. Inc.

 

159,512

 

8,229

 

 

 

Allison Transmission Holdings Inc.

 

153,153

 

7,612

 

 

 

Flowserve Corp.

 

162,864

 

7,233

 

 

 

Oshkosh Corp.

 

89,484

 

6,963

 

 

 

Woodward Inc.

 

69,210

 

6,668

 

 

 

Lincoln Electric Holdings Inc.

 

76,216

 

6,587

 

 

 

ITT Inc.

 

109,168

 

6,306

 

 

 

AGCO Corp.

 

82,813

 

5,596

 

 

 

Crane Co.

 

59,121

 

5,000

 

*

 

RBC Bearings Inc.

 

30,836

 

4,322

 

*

 

Gardner Denver Holdings Inc.

 

160,699

 

4,315

 

 

 

Kennametal Inc.

 

102,225

 

3,853

 

 

 

Trinity Industries Inc.

 

163,868

 

3,836

 

 

 

Timken Co.

 

85,922

 

3,728

 

 

 

John Bean Technologies Corp.

 

39,287

 

3,681

 

*

 

Proto Labs Inc.

 

32,092

 

3,626

 

 

 

Barnes Group Inc.

 

60,677

 

3,524

 

*

 

Rexnord Corp.

 

130,315

 

3,475

 

 

 

Hillenbrand Inc.

 

77,698

 

3,441

 

 

 

Terex Corp.

 

91,940

 

3,088

 

*

 

Chart Industries Inc.

 

34,959

 

3,086

 

*

 

Colfax Corp.

 

109,320

 

2,893

 

 

 

Albany International Corp.

 

36,075

 

2,798

 

 

 

Watts Water Technologies Inc. Class A

 

34,461

 

2,775

 

*

 

Welbilt Inc.

 

166,039

 

2,652

 

 

 

Franklin Electric Co. Inc.

 

49,353

 

2,626

 

 

 

Altra Industrial Motion Corp.

 

76,249

 

2,425

 

 

 

Mueller Industries Inc.

 

68,520

 

2,265

 

*

 

Harsco Corp.

 

100,291

 

2,244

 

 

 

ESCO Technologies Inc.

 

32,365

 

2,239

 

*

 

Meritor Inc.

 

100,387

 

2,237

 

*

 

Navistar International Corp.

 

55,701

 

2,137

 

 

 

Mueller Water Products Inc. Class A

 

196,324

 

2,050

 

*

 

SPX Corp.

 

54,038

 

1,965

 

 

 

Actuant Corp. Class A

 

76,126

 

1,861

 

*

 

SPX FLOW Inc.

 

53,304

 

1,840

 

*

 

TriMas Corp.

 

56,622

 

1,831

 

 

 

Federal Signal Corp.

 

74,459

 

1,830

 

 

 

EnPro Industries Inc.

 

25,643

 

1,759

 

 

 

Sun Hydraulics Corp.

 

35,836

 

1,705

 

 

 

Greenbrier Cos. Inc.

 

40,373

 

1,665

 

 

 

Tennant Co.

 

21,358

 

1,350

 

 

 

Standex International Corp.

 

16,025

 

1,314

 

*

 

Evoqua Water Technologies Corp.

 

92,441

 

1,255

 

 

 

Lindsay Corp.

 

13,382

 

1,237

 

*

 

Milacron Holdings Corp.

 

87,615

 

1,226

 

 

 

Kadant Inc.

 

13,795

 

1,206

 

 

 

Alamo Group Inc.

 

12,493

 

1,200

 

 

 

Douglas Dynamics Inc.

 

28,438

 

1,200

 

 

 

Wabash National Corp.

 

70,583

 

1,047

 

 

 

Columbus McKinnon Corp.

 

26,318

 

986

 

 

 

Astec Industries Inc.

 

25,628

 

978

 

 

 

Global Brass & Copper Holdings Inc.

 

27,424

 

926

 

 

 

Gorman-Rupp Co.

 

22,671

 

766

 

*

 

Manitowoc Co. Inc.

 

41,449

 

746

 

 

 

Briggs & Stratton Corp.

 

53,263

 

698

 

 

 

Hyster-Yale Materials Handling Inc.

 

10,207

 

691

 

*

 

CIRCOR International Inc.

 

20,992

 

662

 

*

 

Lydall Inc.

 

21,852

 

615

 

 

 

NN Inc.

 

53,533

 

530

 

*

 

Energy Recovery Inc.

 

48,060

 

385

 

 

 

Titan International Inc.

 

61,460

 

385

 

 

 

Park-Ohio Holdings Corp.

 

10,470

 

333

 

 

 

REV Group Inc.

 

35,075

 

310

 

*

 

Blue Bird Corp.

 

16,320

 

304

 

 

 

 

 

 

 

685,031

 

Marine (0.2%)

 

 

 

 

 

*

 

Kirby Corp.

 

70,898

 

5,262

 

 

 

Matson Inc.

 

52,830

 

1,908

 

*

 

Genco Shipping & Trading Ltd.

 

20,750

 

169

 

 

 

 

 

 

 

7,339

 

Professional Services (4.6%)

 

 

 

 

 

*

 

IHS Markit Ltd.

 

490,651

 

26,088

 

*

 

Verisk Analytics Inc. Class A

 

194,669

 

24,612

 

*

 

CoStar Group Inc.

 

45,338

 

20,743

 

 

 

Equifax Inc.

 

150,075

 

16,435

 

 

 

TransUnion

 

230,675

 

14,892

 

 

 

Nielsen Holdings plc

 

441,843

 

11,576

 

 

 

Robert Half International Inc.

 

151,235

 

10,313

 

 

 

ManpowerGroup Inc.

 

76,991

 

6,486

 

 

 

Insperity Inc.

 

46,897

 

5,922

 

*

 

ASGN Inc.

 

65,371

 

4,211

 

 

 

Exponent Inc.

 

64,956

 

3,678

 

*

 

FTI Consulting Inc.

 

47,806

 

3,545

 

*

 

TriNet Group Inc.

 

57,087

 

3,499

 

 

 

Korn Ferry

 

67,356

 

3,286

 

 

 

ICF International Inc.

 

23,399

 

1,767

 

*

 

WageWorks Inc.

 

48,989

 

1,612

 

*

 

CBIZ Inc.

 

65,949

 

1,360

 

*

 

Huron Consulting Group Inc.

 

27,934

 

1,280

 

*

 

TrueBlue Inc.

 

50,434

 

1,161

 

 

 

Navigant Consulting Inc.

 

53,141

 

1,094

 

 

 

Kforce Inc.

 

28,912

 

1,070

 

 

 

Heidrick & Struggles International Inc.

 

23,408

 

1,009

 

 

 

Kelly Services Inc. Class A

 

39,272

 

948

 

 

 

Barrett Business Services Inc.

 

9,060

 

712

 

 

 

Resources Connection Inc.

 

37,870

 

658

 

 

 

Forrester Research Inc.

 

12,267

 

616

 

*

 

Mistras Group Inc.

 

20,785

 

328

 

*

 

InnerWorkings Inc.

 

59,741

 

290

 

*

 

GP Strategies Corp.

 

15,459

 

259

 

 

 

 

 

 

 

169,450

 

Road & Rail (9.7%)

 

 

 

 

 

 

 

Union Pacific Corp.

 

916,990

 

153,779

 

 

 

CSX Corp.

 

998,405

 

72,554

 

 

 

Norfolk Southern Corp.

 

318,966

 

57,191

 

 

 

Kansas City Southern

 

126,466

 

13,739

 

 

67

 

Industrials Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

 

 

JB Hunt Transport Services Inc.

 

108,721

 

11,706

 

 

 

Old Dominion Freight Line Inc.

 

76,265

 

11,498

 

*

 

Genesee & Wyoming Inc. Class A

 

72,703

 

5,962

 

 

 

Landstar System Inc.

 

51,222

 

5,567

 

 

 

Knight-Swift Transportation Holdings Inc.

 

162,959

 

5,480

 

 

 

AMERCO

 

10,983

 

4,224

 

 

 

Ryder System Inc.

 

66,234

 

4,117

 

*

 

Avis Budget Group Inc.

 

81,842

 

2,932

 

*

 

Saia Inc.

 

32,073

 

2,122

 

 

 

Werner Enterprises Inc.

 

57,432

 

1,983

 

*

 

Hertz Global Holdings Inc.

 

63,253

 

1,208

 

 

 

ArcBest Corp.

 

32,111

 

1,118

 

 

 

Heartland Express Inc.

 

55,601

 

1,117

 

 

 

Marten Transport Ltd.

 

51,084

 

953

 

*

 

YRC Worldwide Inc.

 

40,740

 

313

 

*

 

Daseke Inc.

 

55,662

 

264

 

 

 

 

 

 

 

357,827

 

Trading Companies & Distributors (3.2%)

 

 

 

 

 

 

 

Fastenal Co.

 

357,261

 

22,486

 

 

 

WW Grainger Inc.

 

59,580

 

18,158

 

*

 

United Rentals Inc.

 

100,942

 

13,586

 

*

 

HD Supply Holdings Inc.

 

217,279

 

9,345

 

 

 

Watsco Inc.

 

39,978

 

5,753

 

 

 

MSC Industrial Direct Co. Inc. Class A

 

56,536

 

4,772

 

 

 

Air Lease Corp. Class A

 

126,986

 

4,744

 

*

 

Univar Inc.

 

183,289

 

4,144

 

 

 

GATX Corp.

 

44,529

 

3,540

 

*

 

WESCO International Inc.

 

58,172

 

3,168

 

*

 

Beacon Roofing Supply Inc.

 

85,026

 

3,084

 

 

 

Applied Industrial Technologies Inc.

 

48,407

 

2,814

 

*

 

SiteOne Landscape Supply Inc.

 

48,295

 

2,594

 

 

 

Triton International Ltd.

 

64,654

 

2,128

 

*

 

NOW Inc.

 

134,272

 

1,938

 

*

 

MRC Global Inc.

 

112,989

 

1,905

 

 

 

Kaman Corp.

 

29,460

 

1,814

 

 

 

Rush Enterprises Inc. Class A

 

37,436

 

1,569

 

*

 

BMC Stock Holdings Inc.

 

79,444

 

1,520

 

 

 

Aircastle Ltd.

 

71,246

 

1,415

 

*

 

Herc Holdings Inc.

 

26,482

 

1,165

 

 

 

H&E Equipment Services Inc.

 

39,749

 

1,144

 

*

 

GMS Inc.

 

40,564

 

793

 

*

 

DXP Enterprises Inc.

 

20,540

 

727

 

*

 

Veritiv Corp.

 

14,700

 

425

 

*

 

Nexeo Solutions Inc.

 

40,098

 

398

 

 

 

Systemax Inc.

 

16,725

 

339

 

*

 

Foundation Building Materials Inc.

 

23,418

 

260

 

 

 

Rush Enterprises Inc. Class B

 

5,788

 

239

 

*

 

General Finance Corp.

 

20,366

 

220

 

^

 

EVI Industries Inc.

 

4,474

 

181

 

 

 

 

 

 

 

116,368

 

Transportation Infrastructure (0.1%)

 

 

 

 

 

 

 

Macquarie Infrastructure Corp.

 

101,334

 

4,143

 

Total Common Stocks

 

 

 

 

 

(Cost $3,319,496)

 

 

 

3,683,433

 

Temporary Cash Investment (0.1%)1

 

 

 

 

 

Money Market Fund (0.1%)

 

 

 

 

 

2,3

 

Vanguard Market Liquidity Fund, 2.563% (Cost $2,092)

 

20,922

 

2,092

 

Total Investments (100.0%)

 

 

 

 

 

(Cost $3,321,588)

 

 

 

3,685,525

 

 

 

 

 

Amount

 

 

 

($000

)

Other Assets and Liabilities (0.0%)

 

 

 

Other Assets

 

 

 

Investment in Vanguard

 

170

 

Receivables for Investment Securities Sold

 

8,113

 

Receivables for Accrued Income

 

9,373

 

Receivables for Capital Shares Issued

 

455

 

Total Other Assets

 

18,111

 

Liabilities

 

 

 

Payables for Investment Securities Purchased

 

(8,835

)

Collateral for Securities on Loan

 

(2,089

)

Payables for Capital Shares Redeemed

 

(2,115

)

Payables to Vanguard

 

(753

)

Unrealized Depreciation—OTC Swap Contracts

 

(56

)

Other Liabilities

 

(3,563

)

Total Liabilities

 

(17,411

)

Net Assets (100%)

 

3,686,225

 

 

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

 

($000

)

Paid-in Capital

 

3,348,473

 

Total Distributable Earnings (Loss)

 

337,752

 

Net Assets

 

3,686,225

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

Applicable to 24,431,584 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

3,479,853

 

Net Asset Value Per Share—ETF Shares

 

$142.43

 

 

 

 

 

Admiral Shares—Net Assets

 

 

 

Applicable to 2,820,304 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

206,372

 

Net Asset Value Per Share—Admiral Shares

 

$73.17

 

 

· See Note A in Notes to Financial Statements.

* Non-income-producing security.

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $1,948,000.

1 The fund invests a portion of its cash reserves in equity markets through the use of swap contracts. After giving effect to swap investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.

2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

3 Includes $2,089,000 of collateral received for securities on loan. OTC—Over-the-Counter.

 

68

 

Industrials Index Fund

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Over-the-Counter Total Return Swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Floating

 

Value and

 

Value and

 

 

 

 

 

 

 

Notional

 

Interest Rate

 

Unrealized

 

Unrealized

 

 

 

Termination

 

 

 

Amount

 

Received

 

Appreciation

 

(Depreciation

)

Reference Entity

 

Date

 

Counterparty

 

($000

)

(Paid

)1

($000

)

($000

)

Norfolk Southern

 

2/4/20

 

GSI

 

3,657

 

(2.485%

)

—

 

(56

)

 

1 Payment received/paid monthly.

GSI—Goldman Sachs International.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

69

 

Industrials Index Fund

 

 

Statement of Operations

 

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000

)

Investment Income

 

 

 

Income

 

 

 

Dividends

 

38,117

 

Interest1

 

23

 

Securities Lending—Net

 

172

 

Total Income

 

38,312

 

Expenses

 

 

 

The Vanguard Group—Note B

 

 

 

Investment Advisory Services

 

473

 

Management and Administrative—ETF Shares

 

1,076

 

Management and Administrative—Admiral Shares

 

60

 

Marketing and Distribution—ETF Shares

 

89

 

Marketing and Distribution—Admiral Shares

 

7

 

Custodian Fees

 

34

 

Shareholders’ Reports—ETF Shares

 

88

 

Shareholders’ Reports—Admiral Shares

 

2

 

Trustees’ Fees and Expenses

 

1

 

Total Expenses

 

1,830

 

Net Investment Income

 

36,482

 

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold1,2

 

193,575

 

Futures Contracts

 

44

 

Swap Contracts

 

616

 

Realized Net Gain (Loss)

 

194,235

 

Change in Unrealized Appreciation (Depreciation)

 

 

 

Investment Securities1

 

(383,844

)

Swap Contracts

 

(56

)

Change in Unrealized Appreciation (Depreciation)

 

(383,900

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(153,183

)

 

1 Interest income, realized net gain (loss), and the change in unrealized appreciation (depreciation) from an affiliated company of the fund were $15,000, ($1,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

2 Included $186,381,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

Statement of Changes in Net Assets

 

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28,

 

August 31,

 

 

 

2019

 

2018

 

 

 

($000

)

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

Operations

 

 

 

 

 

Net Investment Income

 

36,482

 

61,880

 

Realized Net Gain (Loss)

 

194,235

 

197,071

 

Change in Unrealized Appreciation (Depreciation)

 

(383,900

)

267,782

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(153,183

)

526,733

 

Distributions

 

 

 

 

 

Net Investment Income

 

 

 

 

 

ETF Shares

 

(33,686

)

(57,742

)

Admiral Shares

 

(1,815

)

(3,306

)

Realized Capital Gain

 

 

 

 

 

ETF Shares

 

—

 

—

 

Admiral Shares

 

—

 

—

 

Total Distributions

 

(35,501

)

(61,048

)

Capital Share Transactions

 

 

 

 

 

ETF Shares

 

(295,164

)

313,464

 

Admiral Shares

 

(239

)

13,333

 

Net Increase (Decrease) from Capital Share Transactions

 

(295,403

)

326,797

 

Total Increase (Decrease)

 

(484,087

)

792,482

 

Net Assets

 

 

 

 

 

Beginning of Period

 

4,170,312

 

3,377,830

 

End of Period

 

3,686,225

 

4,170,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

70

 

Industrials Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$146.12

 

$128.70

 

$111.57

 

$99.23

 

$103.95

 

$84.17

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1.337

1

2.263

1

2.383

1

2.083

 

1.914

 

1.508

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(3.786

)

17.412

 

16.998

 

13.204

 

(4.961

)

19.332

 

Total from Investment Operations

 

(2.449

)

19.675

 

19.381

 

15.287

 

(3.047

)

20.840

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.241

)

(2.255

)

(2.251

)

(2.947

)

(1.673

)

(1.060

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(1.241

)

(2.255

)

(2.251

)

(2.947

)

(1.673

)

(1.060

)

Net Asset Value, End of Period

 

$142.43

 

$146.12

 

$128.70

 

$111.57

 

$99.23

 

$103.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-1.63%

 

15.41%

 

17.55%

 

15.78%

 

-3.03%

 

24.83%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$3,480

 

$3,957

 

$3,202

 

$2,338

 

$1,898

 

$1,883

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.96%

 

1.62%

 

1.95%

 

2.08%

 

1.83%

 

1.69%

 

Portfolio Turnover Rate2

 

4%

 

4%

 

5%

 

8%

 

4%

 

5%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

71

 

Industrials Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$75.07

 

$66.12

 

$57.32

 

$50.98

 

$53.40

 

$43.24

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.696

1

1.154

1

1.237

1

1.069

 

.982

 

.780

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(1.959

)

8.955

 

8.721

 

6.783

 

(2.541

)

9.922

 

Total from Investment Operations

 

(1.263

)

10.109

 

9.958

 

7.852

 

(1.559

)

10.702

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.637

)

(1.159

)

(1.158

)

(1.512

)

(.861

)

(.542

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.637

)

(1.159

)

(1.158

)

(1.512

)

(.861

)

(.542

)

Net Asset Value, End of Period

 

$73.17

 

$75.07

 

$66.12

 

$57.32

 

$50.98

 

$53.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-1.65%

 

15.41%

 

17.55%

 

15.77%

 

-2.98%

 

24.84%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$206

 

$213

 

$176

 

$77

 

$66

 

$71

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.96%

 

1.62%

 

1.95%

 

2.08%

 

1.83%

 

1.69%

 

Portfolio Turnover Rate3

 

4%

 

4%

 

5%

 

8%

 

4%

 

5%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

72

 

Industrials Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Industrials Index Fund is registered under the Investment Company Act of 1940 as an openend investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at February 28, 2019.

 

3. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until termination of the swap, at which time realized gain (loss) is recorded.

 

73

 

Industrials Index Fund

 

 

 

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

During the six months ended February 28, 2019, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

74

 

Industrials Index Fund

 

 

 

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $170,000, representing 0.00% of the fund’s net assets and 0.07% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

3,683,433

 

—

 

—

 

Temporary Cash Investments

 

2,092

 

—

 

—

 

Swap Contracts—Liabilities

 

—

 

(56

)

—

 

Total

 

3,685,525

 

(56

)

—

 

 

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

3,321,598

 

Gross Unrealized Appreciation

 

693,835

 

Gross Unrealized Depreciation

 

(329,908

)

Net Unrealized Appreciation (Depreciation)

 

363,927

 

 

75

 

Industrials Index Fund

 

 

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $5,132,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $43,017,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $466,216,000 of investment securities and sold $760,147,000 of investment securities, other than temporary cash investments. Purchases and sales include $364,852,000 and $692,228,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

Year Ended

 

 

February 28, 2019

 

August 31, 2018

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

($000)

 

(000)

 

($000)

 

(000)

ETF Shares

 

 

 

 

 

 

 

 

Issued

 

399,383

 

2,851

 

895,688

 

6,351

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

Redeemed

 

(694,547)

 

(5,500)

 

(582,224)

 

(4,150)

Net Increase (Decrease)—ETF Shares

 

(295,164)

 

(2,649)

 

313,464

 

2,201

Admiral Shares

 

 

 

 

 

 

 

 

Issued

 

37,928

 

543

 

115,722

 

1,602

Issued in Lieu of Cash Distributions

 

1,535

 

22

 

2,828

 

40

Redeemed

 

(39,702)

 

(585)

 

(105,217)

 

(1,459)

Net Increase (Decrease)—Admiral Shares

 

(239)

 

(20)

 

13,333

 

183

 

At February 28, 2019, one shareholder was the record or beneficial owner of 47% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio.

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

76

 

Information Technology Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Application Software

 

11.8

%

Communications Equipment

 

6.0

 

Data Processing & Outsourced Services

 

16.3

 

Electronic Components

 

1.4

 

Electronic Equipment & Instruments

 

1.3

 

Electronic Manufacturing Services

 

1.0

 

Internet Services & Infrastructure

 

1.0

 

IT Consulting & Other Services

 

6.1

 

Semiconductor Equipment

 

2.2

 

Semiconductors

 

15.7

 

Systems Software

 

19.9

 

Technology Distributors

 

0.7

 

Technology Hardware, Storage & Peripherals

 

16.6

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

77

 

Information Technology Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000

)

Common Stocks (99.6%)1

 

 

 

 

 

Communications Equipment (5.9%)

 

 

 

 

 

 

Cisco Systems Inc.

 

16,458,202

 

852,041

 

 

Motorola Solutions Inc.

 

598,545

 

85,664

 

*

Arista Networks Inc.

 

193,348

 

55,152

 

*

F5 Networks Inc.

 

222,275

 

37,373

 

 

Juniper Networks Inc.

 

1,263,461

 

34,214

 

*

Ciena Corp.

 

523,900

 

22,350

 

*

ARRIS International plc

 

602,055

 

19,073

 

*

CommScope Holding Co. Inc.

 

706,067

 

16,458

 

*,^

ViaSat Inc.

 

207,757

 

15,696

 

*

Lumentum Holdings Inc.

 

273,423

 

13,603

 

^

Ubiquiti Networks Inc.

 

78,277

 

11,302

 

*

Viavi Solutions Inc.

 

844,549

 

11,089

 

*

Finisar Corp.

 

433,053

 

10,605

 

 

InterDigital Inc.

 

124,145

 

8,657

 

*

NetScout Systems Inc.

 

285,492

 

7,814

 

*

EchoStar Corp. Class A

 

176,093

 

6,790

 

 

Plantronics Inc.

 

122,316

 

6,145

 

*

Acacia Communications Inc.

 

88,403

 

4,716

 

*

NETGEAR Inc.

 

115,898

 

4,155

 

*

Extreme Networks Inc.

 

429,403

 

3,530

 

*

Infinera Corp.

 

643,770

 

3,290

 

 

ADTRAN Inc.

 

172,283

 

2,588

 

 

Comtech Telecommunications Corp.

 

84,258

 

2,233

 

*

CalAmp Corp.

 

128,460

 

1,786

 

*

Harmonic Inc.

 

312,276

 

1,724

 

*

Quantenna Communications Inc.

 

77,791

 

1,412

 

*

Calix Inc.

 

167,239

 

1,371

 

*

Casa Systems Inc.

 

109,687

 

1,118

 

*

Ribbon Communications Inc.

 

181,236

 

933

 

*,^

Applied Optoelectronics Inc.

 

67,674

 

914

 

 

 

 

 

 

1,243,796

 

Electronic Equipment, Instruments & Components (4.4%)

 

 

 

 

 

 

Amphenol Corp. Class A

 

1,102,890

 

103,639

 

 

TE Connectivity Ltd.

 

1,255,942

 

103,100

 

 

Corning Inc.

 

2,930,142

 

101,998

 

*

Keysight Technologies Inc.

 

686,918

 

57,983

 

 

CDW Corp.

 

548,957

 

51,542

 

*

Zebra Technologies Corp.

 

197,050

 

39,510

 

*

Trimble Inc.

 

920,050

 

36,811

 

 

Cognex Corp.

 

631,779

 

33,737

 

 

FLIR Systems Inc.

 

508,402

 

26,157

 

*

Arrow Electronics Inc.

 

317,905

 

25,337

 

 

National Instruments Corp.

 

460,927

 

21,544

 

*

IPG Photonics Corp.

 

136,408

 

21,147

 

*

Flex Ltd.

 

1,929,774

 

20,340

 

 

Littelfuse Inc.

 

92,232

 

17,809

 

 

Avnet Inc.

 

407,501

 

17,722

 

 

SYNNEX Corp.

 

159,585

 

15,658

 

 

Jabil Inc.

 

533,314

 

15,146

 

 

Dolby Laboratories Inc. Class A

 

233,509

 

15,131

 

*

Tech Data Corp.

 

134,264

 

13,724

 

*

Coherent Inc.

 

89,718

 

11,940

 

 

Vishay Intertechnology Inc.

 

487,361

 

10,683

 

*

Rogers Corp.

 

66,969

 

10,397

 

*

Novanta Inc.

 

120,187

 

9,823

 

*

II-VI Inc.

 

223,464

 

9,493

 

 

Belden Inc.

 

147,964

 

9,143

 

*

Sanmina Corp.

 

253,311

 

8,091

 

*

Fabrinet

 

133,089

 

7,786

 

*

Plexus Corp.

 

116,791

 

7,213

 

*

Insight Enterprises Inc.

 

128,218

 

7,157

 

*

Itron Inc.

 

131,388

 

6,965

 

*

Anixter International Inc.

 

115,764

 

6,793

 

 

Badger Meter Inc.

 

107,713

 

6,338

 

*

OSI Systems Inc.

 

64,304

 

5,585

 

*

Knowles Corp.

 

330,717

 

5,384

 

*

Fitbit Inc. Class A

 

760,333

 

4,501

 

*

ePlus Inc.

 

50,312

 

4,500

 

 

Benchmark Electronics Inc.

 

160,987

 

4,411

 

*

TTM Technologies Inc.

 

335,367

 

4,065

 

 

Methode Electronics Inc.

 

135,728

 

3,808

 

 

CTS Corp.

 

112,821

 

3,624

 

 

KEMET Corp.

 

186,848

 

3,541

 

 

MTS Systems Corp.

 

64,616

 

3,444

 

*

ScanSource Inc.

 

91,624

 

3,440

 

 

AVX Corp.

 

182,071

 

3,314

 

 

Mesa Laboratories Inc.

 

12,702

 

2,923

 

*

FARO Technologies Inc.

 

61,668

 

2,825

 

 

PC Connection Inc.

 

43,310

 

1,743

 

 

nLight Inc.

 

77,545

 

1,659

 

*

Control4 Corp.

 

89,813

 

1,617

 

*

Kimball Electronics Inc.

 

95,457

 

1,480

 

*

Arlo Technologies Inc.

 

279,578

 

1,211

 

 

Park Electrochemical Corp.

 

69,182

 

1,203

 

 

Daktronics Inc.

 

139,102

 

1,129

 

 

 

 

 

 

915,264

 

IT Services (23.3%)

 

 

 

 

 

 

Visa Inc. Class A

 

5,942,162

 

880,153

 

 

Mastercard Inc. Class A

 

3,363,791

 

756,079

 

 

International Business Machines Corp.

 

3,327,354

 

459,607

 

*

PayPal Holdings Inc.

 

4,097,966

 

401,888

 

 

Accenture plc Class A

 

2,337,043

 

377,152

 

 

Automatic Data Processing Inc.

 

1,602,315

 

245,202

 

 

Cognizant Technology Solutions Corp. Class A

 

2,120,040

 

150,480

 

 

Fidelity National Information Services Inc.

 

1,197,808

 

129,543

 

*

Fiserv Inc.

 

1,458,332

 

123,506

 

*

Worldpay Inc. Class A

 

1,105,137

 

105,872

 

*

Square Inc.

 

1,129,054

 

91,724

 

 

Paychex Inc.

 

1,183,022

 

91,116

 

*

FleetCor Technologies Inc.

 

324,643

 

75,733

 

 

Global Payments Inc.

 

579,334

 

75,534

 

*

VeriSign Inc.

 

398,221

 

70,899

 

 

DXC Technology Co.

 

1,024,882

 

67,499

 

 

Total System Services Inc.

 

602,130

 

56,841

 

*

First Data Corp. Class A

 

1,971,810

 

49,571

 

*

GoDaddy Inc. Class A

 

635,191

 

47,417

 

*

Gartner Inc.

 

332,723

 

47,347

 

 

Broadridge Financial Solutions Inc.

 

427,486

 

43,283

 

*,^

Twilio Inc. Class A

 

342,654

 

41,698

 

*

Akamai Technologies Inc.

 

596,561

 

41,557

 

 

Jack Henry & Associates Inc.

 

283,109

 

37,549

 

 

Leidos Holdings Inc.

 

521,622

 

33,692

 

 

Alliance Data Systems Corp.

 

179,331

 

31,024

 

*

EPAM Systems Inc.

 

187,983

 

30,412

 

 

Western Union Co.

 

1,620,553

 

28,959

 

*

WEX Inc.

 

158,334

 

28,193

 

 

Booz Allen Hamilton Holding Corp. Class A

 

522,834

 

27,637

 

*

Black Knight Inc.

 

518,314

 

27,082

 

*

Euronet Worldwide Inc.

 

188,750

 

25,353

 

 

Sabre Corp.

 

1,006,175

 

22,569

 

*

CACI International Inc. Class A

 

91,428

 

16,664

 

 

MAXIMUS Inc.

 

233,630

 

16,513

 

 

Science Applications International Corp.

 

195,775

 

14,624

 

*

LiveRamp Holdings Inc.

 

237,464

 

12,764

 

 

Perspecta Inc.

 

541,867

 

11,433

 

*

CoreLogic Inc.

 

292,855

 

10,739

 

*

Conduent Inc.

 

653,497

 

9,554

 

*

ExlService Holdings Inc.

 

125,361

 

7,697

 

 

Travelport Worldwide Ltd.

 

460,901

 

7,245

 

 

EVERTEC Inc.

 

227,497

 

6,511

 

 

ManTech International Corp. Class A

 

96,170

 

5,227

 

*

Virtusa Corp.

 

103,541

 

5,226

 

 

CSG Systems International Inc.

 

123,134

 

5,116

 

*

Cardtronics plc Class A

 

167,171

 

4,933

 

*

Sykes Enterprises Inc.

 

152,492

 

4,512

 

 

NIC Inc.

 

249,174

 

4,258

 

*,^

GTT Communications Inc.

 

118,739

 

3,712

 

*

Perficient Inc.

 

124,983

 

3,576

 

 

Cass Information Systems Inc.

 

52,308

 

2,732

 

*

Carbonite Inc.

 

117,097

 

2,725

 

*,^

Tucows Inc. Class A

 

32,754

 

2,539

 

*

Unisys Corp.

 

183,089

 

2,474

 

*

Everi Holdings Inc.

 

262,562

 

2,019

 

 

Presidio Inc.

 

120,257

 

2,000

 

 

TTEC Holdings Inc.

 

58,050

 

1,989

 

*

Endurance International Group Holdings Inc.

 

241,840

 

1,693

 

 

Hackett Group Inc.

 

94,362

 

1,534

 

*

Net 1 UEPS Technologies Inc.

 

204,039

 

798

 

 

78

 

Information Technology Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000

)

*

Internap Corp.

 

50,068

 

271

 

*

MoneyGram International Inc.

 

94,297

 

229

 

 

 

 

 

 

4,893,478

 

Semiconductors & Semiconductor Equipment (17.8%)

 

 

 

 

 

 

Intel Corp.

 

16,708,022

 

884,857

 

 

Broadcom Inc.

 

1,513,526

 

416,764

 

 

Texas Instruments Inc.

 

3,515,808

 

371,902

 

 

NVIDIA Corp.

 

2,121,529

 

327,267

 

 

QUALCOMM Inc.

 

4,437,293

 

236,907

 

*

Micron Technology Inc.

 

4,152,433

 

169,751

 

 

Analog Devices Inc.

 

1,355,807

 

145,017

 

 

Applied Materials Inc.

 

3,598,689

 

137,974

 

 

Xilinx Inc.

 

926,020

 

116,030

 

 

Lam Research Corp.

 

568,016

 

100,022

 

*

Advanced Micro Devices Inc.

 

3,475,686

 

81,783

 

 

Microchip Technology Inc.

 

865,655

 

75,199

 

 

KLA-Tencor Corp.

 

598,448

 

69,115

 

 

Maxim Integrated Products Inc.

 

1,014,152

 

55,200

 

 

Skyworks Solutions Inc.

 

649,215

 

53,015

 

 

Marvell Technology Group Ltd.

 

2,289,423

 

45,674

 

*

ON Semiconductor Corp.

 

1,539,074

 

33,059

 

*

Qorvo Inc.

 

457,189

 

32,067

 

 

Teradyne Inc.

 

656,122

 

26,789

 

 

Universal Display Corp.

 

155,230

 

23,167

 

*

Integrated Device Technology Inc.

 

473,892

 

22,903

 

*

Cree Inc.

 

375,373

 

20,424

 

 

Monolithic Power Systems Inc.

 

147,507

 

19,782

 

 

Versum Materials Inc.

 

400,869

 

19,643

 

 

Cypress Semiconductor Corp.

 

1,259,666

 

19,437

 

 

Entegris Inc.

 

518,690

 

18,325

 

*

Mellanox Technologies Ltd.

 

166,398

 

17,878

 

 

MKS Instruments Inc.

 

197,812

 

16,393

 

*

First Solar Inc.

 

289,599

 

15,218

 

*

Semtech Corp.

 

241,137

 

13,272

 

*

Silicon Laboratories Inc.

 

158,896

 

12,874

 

 

Cabot Microelectronics Corp.

 

106,016

 

11,990

 

*

Cirrus Logic Inc.

 

221,159

 

8,875

 

 

Brooks Automation Inc.

 

263,517

 

8,462

 

 

Power Integrations Inc.

 

108,669

 

7,939

 

*

Advanced Energy Industries Inc.

 

141,873

 

7,146

 

*

Inphi Corp.

 

147,380

 

6,370

 

*

MaxLinear Inc.

 

239,099

 

6,011

 

*

Diodes Inc.

 

146,795

 

5,920

 

 

Kulicke & Soffa Industries Inc.

 

245,235

 

5,719

 

*,^

SolarEdge Technologies Inc.

 

132,604

 

5,604

 

*

Synaptics Inc.

 

128,818

 

5,394

 

*

Lattice Semiconductor Corp.

 

449,621

 

5,306

 

*

Ambarella Inc.

 

115,649

 

4,669

 

*

FormFactor Inc.

 

267,859

 

4,246

 

 

Xperi Corp.

 

173,806

 

4,171

 

*

Rambus Inc.

 

392,462

 

4,031

 

*

Amkor Technology Inc.

 

391,252

 

3,435

 

*

MACOM Technology Solutions Holdings Inc.

 

165,431

 

3,158

 

*

Rudolph Technologies Inc.

 

117,801

 

2,660

 

 

Cohu Inc.

 

147,517

 

2,639

 

*

Axcelis Technologies Inc.

 

117,369

 

2,467

 

*

Photronics Inc.

 

250,956

 

2,462

 

*

Nanometrics Inc.

 

82,046

 

2,335

 

*

CEVA Inc.

 

78,993

 

2,198

 

*

Veeco Instruments Inc.

 

177,063

 

2,022

 

 

NVE Corp.

 

17,627

 

1,812

 

*,^

Ichor Holdings Ltd.

 

75,092

 

1,575

 

*

Ultra Clean Holdings Inc.

 

141,340

 

1,505

 

*,^

SunPower Corp. Class A

 

230,180

 

1,485

 

*

PDF Solutions Inc.

 

97,481

 

1,161

 

*

SMART Global Holdings Inc.

 

36,909

 

1,082

 

*

NeoPhotonics Corp.

 

126,781

 

1,014

 

*

Alpha & Omega Semiconductor Ltd.

 

73,037

 

786

 

*,^

Impinj Inc.

 

43,768

 

732

 

*

Aquantia Corp.

 

67,480

 

530

 

 

 

 

 

 

3,734,619

 

Software (31.7%)

 

 

 

 

 

 

Microsoft Corp.

 

26,696,737

 

2,990,835

 

 

Oracle Corp.

 

9,708,470

 

506,103

 

*

Adobe Inc.

 

1,786,941

 

469,072

 

*

salesforce.com Inc.

 

2,800,449

 

458,293

 

 

Intuit Inc.

 

902,583

 

223,055

 

*

ServiceNow Inc.

 

656,427

 

157,175

 

*

Autodesk Inc.

 

800,414

 

130,475

 

*

Red Hat Inc.

 

647,598

 

118,251

 

*

Workday Inc. Class A

 

545,487

 

107,968

 

*

Palo Alto Networks Inc.

 

347,259

 

85,519

 

*

Splunk Inc.

 

536,847

 

72,947

 

*

Cadence Design Systems Inc.

 

1,033,519

 

59,169

 

*

Synopsys Inc.

 

544,118

 

55,326

 

*

ANSYS Inc.

 

306,100

 

54,259

 

 

Symantec Corp.

 

2,339,639

 

52,618

 

 

Citrix Systems Inc.

 

494,157

 

52,134

 

 

VMware Inc. Class A

 

301,696

 

51,834

 

 

SS&C Technologies Holdings Inc.

 

826,056

 

50,869

 

*

Fortinet Inc.

 

529,976

 

45,997

 

*

PTC Inc.

 

412,829

 

38,319

 

*

Ultimate Software Group Inc.

 

108,723

 

36,042

 

*

Tableau Software Inc. Class A

 

261,923

 

34,548

 

*

Paycom Software Inc.

 

181,887

 

33,054

 

*

Zendesk Inc.

 

391,835

 

30,963

 

*

Tyler Technologies Inc.

 

135,086

 

27,664

 

*

Guidewire Software Inc.

 

296,952

 

27,242

 

*

RingCentral Inc. Class A

 

251,211

 

26,450

 

*

Fair Isaac Corp.

 

105,726

 

26,201

 

 

CDK Global Inc.

 

449,479

 

26,074

 

*

Aspen Technology Inc.

 

258,482

 

26,032

 

*

Nutanix Inc.

 

490,711

 

24,580

 

*

Proofpoint Inc.

 

200,175

 

23,639

 

*

Trade Desk Inc. Class A

 

119,403

 

23,587

 

*,^

HubSpot Inc.

 

136,531

 

22,989

 

*

Teradata Corp.

 

431,860

 

20,889

 

*

Nuance Communications Inc.

 

1,053,369

 

17,665

 

*

RealPage Inc.

 

275,506

 

16,864

 

*

New Relic Inc.

 

156,511

 

16,551

 

*

Coupa Software Inc.

 

170,087

 

16,021

 

*

2U Inc.

 

212,850

 

15,687

 

 

j2 Global Inc.

 

180,427

 

15,338

 

 

LogMeIn Inc.

 

188,407

 

14,967

 

 

Blackbaud Inc.

 

177,687

 

13,725

 

*

ACI Worldwide Inc.

 

423,083

 

13,484

 

*

Manhattan Associates Inc.

 

239,674

 

13,122

 

*

Ellie Mae Inc.

 

128,198

 

12,754

 

*

Verint Systems Inc.

 

237,951

 

12,671

 

*

FireEye Inc.

 

685,537

 

11,490

 

*

Cloudera Inc.

 

778,620

 

11,344

 

*

Five9 Inc.

 

205,814

 

10,916

 

*

CommVault Systems Inc.

 

160,957

 

10,847

 

*

Qualys Inc.

 

122,733

 

10,264

 

*

Paylocity Holding Corp.

 

116,118

 

10,168

 

*

Envestnet Inc.

 

166,378

 

10,151

 

*

Box Inc.

 

499,648

 

10,113

 

*

Cornerstone OnDemand Inc.

 

172,159

 

9,727

 

 

Pegasystems Inc.

 

142,569

 

9,368

 

*

Q2 Holdings Inc.

 

135,235

 

9,307

 

*

SailPoint Technologies Holding Inc.

 

289,700

 

8,934

 

 

Zscaler Inc.

 

178,879

 

8,887

 

*

Bottomline Technologies DE Inc.

 

158,095

 

7,886

 

*

Mimecast Ltd.

 

155,856

 

7,525

 

*

Alarm.com Holdings Inc.

 

112,892

 

7,409

 

*

SPS Commerce Inc.

 

65,389

 

6,982

 

*

Everbridge Inc.

 

98,652

 

6,976

 

*

8x8 Inc.

 

350,223

 

6,889

 

*

Blackline Inc.

 

118,275

 

6,191

 

*

Avaya Holdings Corp.

 

398,533

 

6,173

 

*

LivePerson Inc.

 

219,823

 

6,146

 

*

Varonis Systems Inc.

 

107,122

 

6,102

 

 

Progress Software Corp.

 

148,910

 

5,477

 

*

PROS Holdings Inc.

 

124,183

 

5,290

 

*

Rapid7 Inc.

 

111,555

 

5,135

 

*

Instructure Inc.

 

107,011

 

5,001

 

^

Ceridian HCM Holding Inc.

 

99,761

 

4,890

 

*

MicroStrategy Inc. Class A

 

33,867

 

4,792

 

 

Ebix Inc.

 

79,617

 

4,639

 

*

Workiva Inc.

 

92,205

 

4,560

 

 

TiVo Corp.

 

452,268

 

4,536

 

*

ForeScout Technologies Inc.

 

86,611

 

3,598

 

*

Appfolio Inc.

 

48,561

 

3,510

 

*

Yext Inc.

 

171,576

 

3,188

 

*

Benefitfocus Inc.

 

57,987

 

2,848

 

 

Monotype Imaging Holdings Inc.

 

134,622

 

2,639

 

*

OneSpan Inc.

 

115,364

 

2,457

 

*

Upland Software Inc.

 

57,056

 

2,003

 

*

Cision Ltd.

 

142,117

 

1,850

 

 

QAD Inc. Class A

 

36,822

 

1,667

 

*

A10 Networks Inc.

 

198,193

 

1,383

 

*

ShotSpotter Inc.

 

23,546

 

1,176

 

*

MobileIron Inc.

 

200,327

 

1,014

 

 

 

 

 

 

6,640,469

 

Technology Hardware, Storage & Peripherals (16.5%)

 

 

 

 

 

 

Apple Inc.

 

17,372,672

 

3,008,078

 

 

HP Inc.

 

5,794,865

 

114,333

 

 

Hewlett Packard Enterprise Co.

 

5,390,384

 

88,294

 

 

NetApp Inc.

 

922,356

 

60,138

 

 

Western Digital Corp.

 

1,057,744

 

53,205

 

 

Seagate Technology plc

 

994,725

 

46,314

 

*

Dell Technologies Inc.

 

568,414

 

31,729

 

 

Xerox Corp.

 

785,824

 

24,282

 

*

Pure Storage Inc. Class A

 

677,410

 

13,873

 

*

NCR Corp.

 

434,942

 

12,187

 

 

79

 

Information Technology Index Fund

 

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000

)

*,^

3D Systems Corp.

 

416,158

 

5,876

 

*

Electronics For Imaging Inc.

 

161,021

 

4,354

 

*

Cray Inc.

 

147,415

 

3,616

 

*

Diebold Nixdorf Inc.

 

234,897

 

2,159

 

*,^

USA Technologies Inc.

 

203,603

 

806

 

 

 

 

 

 

3,469,244

 

Total Common Stocks
(Cost $16,468,332)

 

 

 

20,896,870

 

Temporary Cash Investments (0.5%)1

 

 

 

 

 

Money Market Fund (0.5%)

 

 

 

 

 

2,3

Vanguard Market Liquidity Fund, 2.563%

 

1,059,051

 

105,915

 

 

 

 

 

 

 

 

 

 

 

Face

 

 

 

 

 

 

Amount

 

 

 

 

 

 

($000

)

 

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

 

4

United States Treasury Bill, 2.479%, 5/9/19

 

2,000

 

1,991

 

Total Temporary Cash Investments
(Cost $107,892)

 

 

 

107,906

 

Total Investments (100.1%)
(Cost $16,576,224)

 

 

 

21,004,776

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

 

 

 

($000

)

Other Assets and Liabilities (-0.1%)

 

 

 

 

 

Other Assets

 

 

 

 

 

Investment in Vanguard

 

 

 

1,005

 

Receivables for Investment Securities Sold

 

 

 

115,643

 

Receivables for Accrued Income

 

 

 

29,989

 

Receivables for Capital Shares Issued

 

 

 

2,071

 

Unrealized Appreciation—OTC Swap Contracts

 

 

 

6,571

 

Other Assets

 

 

 

210

 

Total Other Assets

 

 

 

155,489

 

Liabilities

 

 

 

 

 

Payables for Investment Securities Purchased

 

 

 

(116,009

)

Collateral for Securities on Loan

 

 

 

(55,253

)

Payables for Capital Shares Redeemed

 

 

 

(2,741

)

Payables to Vanguard

 

 

 

(3,029

)

Variation Margin Payable—Futures Contracts

 

 

 

(27

)

Other Liabilities

 

 

 

(159

)

Total Liabilities

 

 

 

(177,218

)

Net Assets (100%)

 

 

 

20,983,047

 

 

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

Amount

 

 

 

 

 

($000

)

Paid-in Capital

 

 

 

16,623,157

 

Total Distributable Earnings (Loss)

 

 

 

4,359,890

 

Net Assets

 

 

 

20,983,047

 

 

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

 

 

Applicable to 97,892,325 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

 

 

18,919,224

 

Net Asset Value Per Share—ETF Shares

 

 

 

$193.27

 

 

 

 

 

 

 

Admiral Shares—Net Assets

 

 

 

 

 

Applicable to 20,854,439 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

 

 

2,063,823

 

Net Asset Value Per Share—Admiral Shares

 

 

 

$98.96

 

 

·    See Note A in Notes to Financial Statements.

 

*     Non-income-producing security.

 

^    Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $53,392,000.

 

1   The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts and swap contracts. After giving effect to futures and swap investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.1%, respectively, of net assets.

 

2   Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

3   Includes $55,253,000 of collateral received for securities on loan.

 

4   Securities with a value of $597,000 have been segregated as initial margin for open futures contracts.

 

OTC—Over-the-Counter.

 

80

 

Information Technology Index Fund

 

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

($000

)

 

 

 

 

 

 

 

 

 

 

Value and

 

 

 

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

 

 

 

Long (Short

)

Notional

 

Appreciation

 

 

 

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation

)

Long Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

E-mini NASDAQ 100 Index

 

 

 

March 2019

 

71

 

10,086

 

199

 

 

 

Over-the-Counter Total Return Swaps

 

 

 

 

 

 

 

 

 

Floating

 

Value and

 

Value and

 

 

 

 

 

 

 

Notional

 

Interest Rate

 

Unrealized

 

Unrealized

 

 

 

Termination

 

 

 

Amount

 

Received

 

Appreciation

 

(Depreciation

)

Reference Entity

 

Date

 

Counterparty

 

($000

)

(Paid)

1

($000

)

($000

)

Visa Inc. Class A

 

9/4/19

 

BOANA

 

67,505

 

(2.414%

)

6,571

 

—

 

 

1   Payment received/paid monthly.

 

BOANA—Bank of America, NA.

 

At February 28, 2019, a counterparty had deposited in a segregated account securities with a value of $1,137,000 and cash of $5,000,000 in connection with open swap contracts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

81

 

Information Technology Index Fund

 

 

Statement of Operations

 

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000

)

Investment Income

 

 

 

Income

 

 

 

Dividends

 

159,013

 

Interest1

 

917

 

Securities Lending—Net

 

604

 

Total Income

 

160,534

 

Expenses

 

 

 

The Vanguard Group—Note B

 

 

 

Investment Advisory Services

 

1,582

 

Management and Administrative—ETF Shares

 

7,353

 

Management and Administrative—Admiral Shares

 

732

 

Marketing and Distribution—ETF Shares

 

446

 

Marketing and Distribution—Admiral Shares

 

66

 

Custodian Fees

 

34

 

Shareholders’ Reports—ETF Shares

 

393

 

Shareholders’ Reports—Admiral Shares

 

7

 

Trustees’ Fees and Expenses

 

4

 

Total Expenses

 

10,617

 

Expenses Paid Indirectly

 

(5

)

Net Expenses

 

10,612

 

Net Investment Income

 

149,922

 

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold1,2

 

1,663,263

 

Futures Contracts

 

(3,270

)

Swap Contracts

 

(1,422

)

Realized Net Gain (Loss)

 

1,658,571

 

Change in Unrealized Appreciation (Depreciation)

 

 

 

Investment Securities1

 

(3,117,206

)

Futures Contracts

 

191

 

Swap Contracts

 

1,500

 

Change in Unrealized Appreciation (Depreciation)

 

(3,115,515

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(1,307,022

)

 

1   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $891,000, ($5,000), and $3,000, respectively. Purchases and sales are for temporary cash investment purposes.

 

2   Includes $1,707,915,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

Statement of Changes in Net Assets

 

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28,

 

August 31,

 

 

 

2019

 

2018

 

 

 

($000

)

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

Operations

 

 

 

 

 

Net Investment Income

 

149,922

 

219,648

 

Realized Net Gain (Loss)

 

1,658,571

 

3,217,988

 

Change in Unrealized Appreciation (Depreciation)

 

(3,115,515

)

2,729,899

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(1,307,022

)

6,167,535

 

Distributions

 

 

 

 

 

Net Investment Income

 

 

 

 

 

ETF Shares

 

(141,089

)

(181,165

)

Admiral Shares

 

(13,351

)

(13,713

)

Realized Capital Gain

 

 

 

 

 

ETF Shares

 

—

 

—

 

Admiral Shares

 

—

 

—

 

Total Distributions

 

(154,440

)

(194,878

)

Capital Share Transactions

 

 

 

 

 

ETF Shares

 

(2,314,978

)

2,412,421

 

Admiral Shares

 

130,980

 

672,602

 

Net Increase (Decrease) from Capital Share Transactions

 

(2,183,998

)

3,085,023

 

Total Increase (Decrease)

 

(3,645,460

)

9,057,680

 

Net Assets

 

 

 

 

 

Beginning of Period

 

24,628,507

 

15,570,827

 

End of Period

 

20,983,047

 

24,628,507

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

82

 

Information Technology Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$202.82

 

$151.19

 

$117.82

 

$102.35

 

$101.41

 

$77.63

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1.289

1

1.921

1

1.646

1

1.566

 

1.277

 

1.135

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(9.550

)

51.430

 

33.329

 

16.049

 

.834

 

23.589

 

Total from Investment Operations

 

(8.261

)

53.351

 

34.975

 

17.615

 

2.111

 

24.724

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.289

)

(1.721

)

(1.605

)

(2.145

)

(1.171

)

(.944

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(1.289

)

(1.721

)

(1.605

)

(2.145

)

(1.171

)

(.944

)

Net Asset Value, End of Period

 

$193.27

 

$202.82

 

$151.19

 

$117.82

 

$102.35

 

$101.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-4.06%

 

35.52%

 

29.93%

 

17.48%

 

2.05%

 

32.04%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$18,919

 

$22,595

 

$14,638

 

$9,429

 

$7,259

 

$5,876

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.41%

 

1.10%

 

1.24%

 

1.50%

 

1.35%

 

1.38%

 

Portfolio Turnover Rate2

 

4%

 

7%

 

6%

 

5%

 

3%

 

6%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

83

 

Information Technology Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$103.86

 

$77.42

 

$60.33

 

$52.41

 

$51.93

 

$39.75

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.667

1

1.001

1

.850

1

.802

 

.655

 

.580

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(4.905

)

26.324

 

17.062

 

8.216

 

.426

 

12.079

 

Total from Investment Operations

 

(4.238

)

27.325

 

17.912

 

9.018

 

1.081

 

12.659

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.662

)

(.885

)

(.822

)

(1.098

)

(.601

)

(.479

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.662

)

(.885

)

(.822

)

(1.098

)

(.601

)

(.479

)

Net Asset Value, End of Period

 

$98.96

 

$103.86

 

$77.42

 

$60.33

 

$52.41

 

$51.93

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-4.06%

 

35.54%

 

29.94%

 

17.49%

 

2.09%

 

32.05%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$2,064

 

$2,033

 

$933

 

$456

 

$342

 

$241

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.41%

 

1.10%

 

1.24%

 

1.50%

 

1.35%

 

1.38%

 

Portfolio Turnover Rate3

 

4%

 

7%

 

6%

 

5%

 

3%

 

6%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

84

 

Information Technology Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Information Technology Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

3. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until termination of the swap, at which time realized gain (loss) is recorded.

 

85

 

Information Technology Index Fund

 

 

 

 

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

During the six months ended February 28, 2019, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015—2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

86

 

Information Technology Index Fund

 

 

 

 

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $1,005,000, representing 0.00% of the fund’s net assets and 0.40% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended February 28, 2019, custodian fee offset arrangements reduced the fund’s expenses by $5,000 (an annual rate of 0.00% of average net assets).

 

D.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

20,896,870

 

—

 

—

 

Temporary Cash Investments

 

105,915

 

1,991

 

—

 

Futures Contracts—Liabilities1

 

(27

)

—

 

—

 

Swap Contracts—Assets

 

—

 

6,571

 

—

 

Total

 

21,002,758

 

8,562

 

—

 

 

1 Represents variation margin on the last day of the reporting period.

 

87

 

Information Technology Index Fund

 

 

 

 

 

E.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

16,576,224

 

Gross Unrealized Appreciation

 

5,029,358

 

Gross Unrealized Depreciation

 

(600,806

)

Net Unrealized Appreciation (Depreciation)

 

4,428,552

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $20,327,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $61,476,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

F.  During the six months ended February 28, 2019, the fund purchased $1,625,408,000 of investment securities and sold $3,807,622,000 of investment securities, other than temporary cash investments. Purchases and sales include $964,952,000 and $3,350,507,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

G. Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

 

Year Ended

 

 

 

February 28, 2019

 

 

August 31, 2018

 

 

 

Amount

 

Shares

 

 

Amount

 

Shares

 

 

 

($000

)

(000

)

 

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

 

Issued

 

1,048,169

 

5,637

 

 

9,211,374

 

51,414

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

 

—

 

—

 

Redeemed

 

(3,363,147

)

(19,150

)

 

(6,798,953

)

(36,825

)

Net Increase (Decrease)—ETF Shares

 

(2,314,978

)

(13,513

)

 

2,412,421

 

14,589

 

Admiral Shares

 

 

 

 

 

 

 

 

 

 

Issued

 

442,502

 

4,674

 

 

1,079,669

 

12,095

 

Issued in Lieu of Cash Distributions

 

12,114

 

126

 

 

12,466

 

143

 

Redeemed

 

(323,636

)

(3,521

)

 

(419,533

)

(4,713

)

Net Increase (Decrease)—Admiral Shares

 

130,980

 

1,279

 

 

672,602

 

7,525

 

 

H.  Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

88

 

Materials Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Aluminum

 

0.9

%

Commodity Chemicals

 

5.6

 

Construction Materials

 

3.9

 

Copper

 

2.1

 

Diversified Chemicals

 

17.4

 

Diversified Metals & Mining

 

0.4

 

Fertilizers & Agricultural Chemicals

 

4.5

 

Forest Products

 

0.6

 

Gold

 

2.9

 

Industrial Gases

 

16.2

 

Metal & Glass Containers

 

5.4

 

Paper Packaging

 

8.0

 

Paper Products

 

1.0

 

Silver

 

0.2

 

Specialty Chemicals

 

24.4

 

Steel

 

6.5

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

89

 

Materials Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

 

Market

 

 

 

 

 

 

 

Value·

 

 

 

 

 

Shares

 

($000

)

Common Stocks (99.9%)1

 

 

 

 

 

Chemicals (68.0%)

 

 

 

 

 

 

 

DowDuPont Inc.

 

6,919,929

 

368,348

 

 

 

Linde plc

 

1,662,045

 

287,933

 

 

 

Ecolab Inc.

 

784,147

 

132,450

 

 

 

Air Products & Chemicals Inc.

 

662,131

 

119,965

 

 

 

Sherwin-Williams Co.

 

254,145

 

110,096

 

 

 

LyondellBasell Industries NV Class A

 

983,664

 

84,123

 

 

 

PPG Industries Inc.

 

723,554

 

81,016

 

 

 

Celanese Corp. Class A

 

403,441

 

41,268

 

 

 

FMC Corp.

 

406,136

 

36,349

 

 

 

Eastman Chemical Co.

 

422,397

 

34,928

 

 

 

Mosaic Co.

 

1,104,478

 

34,537

 

 

 

International Flavors & Fragrances Inc.

 

257,258

 

32,800

 

 

 

CF Industries Holdings Inc.

 

696,122

 

29,376

 

 

 

Albemarle Corp.

 

320,359

 

29,246

 

 

 

RPM International Inc.

 

400,297

 

23,165

 

 

 

Chemours Co.

 

516,092

 

19,627

 

*

 

Axalta Coating Systems Ltd.

 

647,982

 

17,320

 

 

 

Huntsman Corp.

 

646,920

 

16,037

 

*

 

Ingevity Corp.

 

126,600

 

14,587

 

 

 

Ashland Global Holdings Inc.

 

188,489

 

14,585

 

 

 

WR Grace & Co.

 

181,962

 

14,133

 

 

 

Olin Corp.

 

503,355

 

13,017

 

 

 

NewMarket Corp.

 

27,500

 

12,072

 

 

 

Valvoline Inc.

 

567,963

 

10,672

 

 

 

Scotts Miracle-Gro Co.

 

125,264

 

10,259

 

 

 

Balchem Corp.

 

97,396

 

8,642

 

 

 

Cabot Corp.

 

181,294

 

8,499

 

 

 

Quaker Chemical Corp.

 

40,269

 

8,416

 

 

 

Sensient Technologies Corp.

 

127,684

 

8,261

 

 

 

Westlake Chemical Corp.

 

116,999

 

8,175

 

 

 

PolyOne Corp.

 

240,607

 

7,849

 

*

 

Element Solutions Inc.

 

694,510

 

7,820

 

 

 

HB Fuller Co.

 

152,634

 

7,705

 

 

 

Trinseo SA

 

127,432

 

6,396

 

 

 

Minerals Technologies Inc.

 

106,452

 

6,302

 

*

 

GCP Applied Technologies Inc.

 

206,526

 

6,190

 

 

 

Innospec Inc.

 

73,612

 

6,026

 

 

 

Stepan Co.

 

61,006

 

5,741

 

*

 

Ferro Corp.

 

238,145

 

4,618

 

*

 

Kraton Corp.

 

96,568

 

3,436

 

 

 

Tronox Ltd. Class A

 

284,837

 

3,370

 

*

 

AdvanSix Inc.

 

89,728

 

2,939

 

 

 

Chase Corp.

 

22,766

 

2,198

 

 

 

Rayonier Advanced Materials Inc.

 

153,633

 

2,165

 

*

 

PQ Group Holdings Inc.

 

123,034

 

2,015

 

 

 

Innophos Holdings Inc.

 

58,890

 

1,955

 

 

 

American Vanguard Corp.

 

82,478

 

1,549

 

*

 

Koppers Holdings Inc.

 

61,749

 

1,518

 

 

 

FutureFuel Corp.

 

79,300

 

1,462

 

 

 

Tredegar Corp.

 

74,715

 

1,301

 

 

 

Hawkins Inc.

 

29,323

 

1,209

 

*

 

Intrepid Potash Inc.

 

296,885

 

1,128

 

*

 

OMNOVA Solutions Inc.

 

136,265

 

1,111

 

 

 

Kronos Worldwide Inc.

 

69,138

 

1,054

 

*

 

Venator Materials plc

 

161,600

 

952

 

*

 

AgroFresh Solutions Inc.

 

82,020

 

353

 

 

 

 

 

 

 

1,718,264

 

Construction Materials (3.9%)

 

 

 

 

 

 

 

Vulcan Materials Co.

 

398,248

 

44,389

 

 

 

Martin Marietta Materials Inc.

 

189,134

 

35,519

 

 

 

Eagle Materials Inc.

 

141,559

 

10,821

 

*

 

Summit Materials Inc. Class A

 

336,755

 

5,725

 

*

 

US Concrete Inc.

 

48,156

 

1,932

 

 

 

United States Lime & Minerals Inc.

 

6,938

 

499

 

*,^

 

Forterra Inc.

 

57,689

 

303

 

 

 

 

 

 

 

99,188

 

Containers & Packaging (13.4%)

 

 

 

 

 

 

 

Ball Corp.

 

971,931

 

53,242

 

 

 

International Paper Co.

 

1,160,605

 

53,179

 

 

 

Westrock Co.

 

764,788

 

28,588

 

 

 

Avery Dennison Corp.

 

261,547

 

28,258

 

 

 

Packaging Corp. of America

 

285,022

 

27,245

 

*

 

Crown Holdings Inc.

 

407,746

 

22,136

 

*

 

Berry Global Group Inc.

 

395,113

 

20,732

 

 

 

Sealed Air Corp.

 

473,339

 

20,647

 

 

 

AptarGroup Inc.

 

189,460

 

19,274

 

 

 

Sonoco Products Co.

 

301,053

 

17,428

 

 

 

Bemis Co. Inc.

 

274,584

 

14,525

 

 

 

Graphic Packaging Holding Co.

 

936,759

 

11,410

 

 

 

Owens-Illinois Inc.

 

478,665

 

9,535

 

 

 

Silgan Holdings Inc.

 

233,167

 

6,601

 

 

 

Greif Inc. Class A

 

78,352

 

3,150

 

 

 

Myers Industries Inc.

 

85,142

 

1,624

 

 

 

 

 

 

 

337,574

 

Metals & Mining (13.1%)

 

 

 

 

 

 

 

Nucor Corp.

 

946,888

 

57,353

 

 

 

Newmont Mining Corp.

 

1,606,576

 

54,816

 

 

 

Freeport-McMoRan Inc.

 

4,151,930

 

53,560

 

 

 

Steel Dynamics Inc.

 

692,426

 

25,841

 

 

 

Reliance Steel & Aluminum Co.

 

212,467

 

18,963

 

 

 

Royal Gold Inc.

 

197,579

 

17,468

 

*

 

Alcoa Corp.

 

562,476

 

16,593

 

 

 

United States Steel Corp.

 

534,935

 

11,988

 

*

 

Allegheny Technologies Inc.

 

379,372

 

10,861

 

 

 

Cleveland-Cliffs Inc.

 

854,812

 

9,480

 

 

 

Carpenter Technology Corp.

 

142,646

 

6,696

 

 

 

Commercial Metals Co.

 

354,252

 

5,863

 

 

 

Kaiser Aluminum Corp.

 

49,672

 

5,438

 

 

 

Compass Minerals International Inc.

 

102,237

 

5,355

 

 

 

Worthington Industries Inc.

 

133,664

 

5,254

 

 

 

Materion Corp.

 

60,861

 

3,517

 

 

 

Hecla Mining Co.

 

1,446,047

 

3,470

 

 

 

Warrior Met Coal Inc.

 

111,593

 

3,267

 

*

 

Coeur Mining Inc.

 

611,917

 

2,925

 

*

 

AK Steel Holding Corp.

 

955,029

 

2,884

 

 

 

Schnitzer Steel Industries Inc.

 

79,717

 

1,937

 

*

 

SunCoke Energy Inc.

 

176,871

 

1,755

 

^

 

McEwen Mining Inc.

 

812,574

 

1,471

 

*

 

TimkenSteel Corp.

 

114,122

 

1,422

 

*

 

Century Aluminum Co.

 

158,379

 

1,367

 

 

 

Haynes International Inc.

 

37,867

 

1,332

 

*

 

Ryerson Holding Corp.

 

52,042

 

441

 

 

 

 

 

 

 

331,317

 

Other (0.0%)2

 

 

 

 

 

*,§

 

A Schulman Inc. CVR

 

108,962

 

47

 

 

 

 

 

 

 

 

 

Paper & Forest Products (1.5%)

 

 

 

 

 

 

 

Louisiana-Pacific Corp.

 

426,189

 

10,770

 

 

 

Domtar Corp.

 

189,931

 

9,669

 

 

 

Schweitzer-Mauduit International Inc.

 

92,454

 

3,565

 

 

 

Neenah Inc.

 

50,799

 

3,433

 

 

 

Boise Cascade Co.

 

116,841

 

3,259

 

*

 

Verso Corp.

 

103,680

 

2,037

 

 

 

Mercer International Inc.

 

128,509

 

1,840

 

 

 

PH Glatfelter Co.

 

132,626

 

1,784

 

 

 

Resolute Forest Products Inc.

 

176,228

 

1,438

 

*

 

Clearwater Paper Corp.

 

49,565

 

1,418

 

 

 

 

 

 

 

39,213

 

Total Common Stocks
(Cost $2,741,794)

 

 

 

2,525,603

 

Temporary Cash Investments (0.1%)1

 

 

 

 

 

Money Market Fund (0.1%)

 

 

 

 

 

3,4

 

Vanguard Market Liquidity Fund, 2.563%

 

16,676

 

1,668

 

 

 

 

 

 

 

 

 

 

 

 

 

Face

 

 

 

 

 

 

 

Amount

 

 

 

 

 

 

 

($000

)

 

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

 

5

 

United States Treasury Bill, 2.480%, 5/9/19

 

200

 

199

 

Total Temporary Cash Investments
(Cost $1,866)

 

 

 

1,867

 

Total Investments (100.0%)
(Cost $2,743,660)

 

 

 

2,527,470

 

 

90

 

Materials Index Fund

 

 

 

 

 

 

Amount

 

 

 

($000

)

Other Assets and Liabilities (0.0%)

 

 

 

Other Assets

 

 

 

Investment in Vanguard

 

119

 

Receivables for Investment Securities Sold

 

6,547

 

Receivables for Accrued Income

 

5,257

 

Receivables for Capital Shares Issued

 

914

 

Total Other Assets

 

12,837

 

Liabilities

 

 

 

Payables for Investment Securities Purchased

 

(10,579

)

Collateral for Securities on Loan

 

(1,273

)

Payables for Capital Shares Redeemed

 

(316

)

Payables to Vanguard

 

(691

)

Variation Margin Payable—Futures Contracts

 

(4

)

Total Liabilities

 

(12,863

)

Net Assets (100%)

 

2,527,444

 

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

 

($000

)

Paid-in Capital

 

2,775,093

 

Total Distributable Earnings (Loss)

 

(247,649

)

Net Assets

 

2,527,444

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

Applicable to 16,842,323 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

2,076,242

 

Net Asset Value Per Share—ETF Shares

 

$123.28

 

 

 

 

 

Admiral Shares—Net Assets

 

 

 

Applicable to 7,183,389 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

451,202

 

Net Asset Value Per Share—Admiral Shares

 

$62.81

 

 

· See Note A in Notes to Financial Statements.

 

* Non-income-producing security.

 

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $1,150,000.

 

§ Security value determined using significant unobservable inputs.

 

1 The portfolio invests a portion of its cash reserves in equtiy markets through the use of index futures contracts. After giving effect to futures investments, the portfolio’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.

 

2 “Other” represents securities that are not classified by the fund’s benchmark index.

 

3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

4 Includes $1,273,000 of collateral received for securities on loan.

 

5 Securities with a value of $100,000 has been segregated as initial margin for open futures contracts.

 

CVR—Contingent Value Rights.

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

Futures Contracts

 

 

 

 

 

 

 

 

 

($000

)

 

 

 

 

 

 

 

 

Value and

 

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

 

Long (Short

)

Notional

 

Appreciation

 

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation

)

Long Futures Contracts

 

 

 

 

 

 

 

 

 

E-mini S&P 500 Index

 

March 2019

 

7

 

975

 

20

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

91

 

Materials Index Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

 

February 28, 2019

 

 

($000)

Investment Income

 

 

Income

 

 

Dividends

 

26,412

Interest1

 

23

Securities Lending—Net

 

28

Total Income

 

26,463

Expenses

 

 

The Vanguard Group—Note B

 

 

Investment Advisory Services

 

349

Management and Administrative—ETF Shares

 

638

Management and Administrative—Admiral Shares

 

129

Marketing and Distribution—ETF Shares

 

65

Marketing and Distribution—Admiral Shares

 

15

Custodian Fees

 

35

Shareholders’ Reports—ETF Shares

 

98

Shareholders’ Reports—Admiral Shares

 

3

Trustees’ Fees and Expenses

 

1

Total Expenses

 

1,333

Net Investment Income

 

25,130

Realized Net Gain (Loss)

 

 

Investment Securities Sold1,2

 

108,365

Futures Contracts

 

—

Realized Net Gain (Loss)

 

108,365

Change in Unrealized Appreciation (Depreciation)

 

 

Investment Securities2

 

(416,190)

Futures Contracts

 

20

Change in Unrealized Appreciation (Depreciation)

 

(416,170)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(282,675)

 

1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $14,000, ($1,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

2 Includes $92,360,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28,

 

August 31,

 

 

 

2019

 

2018

 

 

 

($000

)

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

Operations

 

 

 

 

 

Net Investment Income

 

25,130

 

49,739

 

Realized Net Gain (Loss)

 

108,365

 

100,559

 

Change in Unrealized Appreciation (Depreciation)

 

(416,170

)

70,395

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(282,675

)

220,693

 

Distributions

 

 

 

 

 

Net Investment Income

 

 

 

 

 

ETF Shares

 

(24,383

)

(40,107

)

Admiral Shares

 

(4,285

)

(7,107

)

Realized Capital Gain

 

 

 

 

 

ETF Shares

 

—

 

—

 

Admiral Shares

 

—

 

—

 

Total Distributions

 

(28,668

)

(47,214

)

Capital Share Transactions

 

 

 

 

 

ETF Shares

 

(400,275

)

692,426

 

Admiral Shares

 

37,807

 

50,459

 

Net Increase (Decrease) from Capital Share Transactions

 

(362,468

)

742,885

 

Total Increase (Decrease)

 

(673,811

)

916,364

 

Net Assets

 

 

 

 

 

Beginning of Period

 

3,201,255

 

2,284,891

 

End of Period

 

2,527,444

 

3,201,255

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

92

 

Materials Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$134.33

 

$124.29

 

$108.16

 

$96.39

 

$113.50

 

$90.94

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1.136

1

2.285

1

2.175

1

1.980

 

2.126

 

1.847

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(10.968

)

9.961

 

16.072

 

12.770

 

(17.344

)

22.612

 

Total from Investment Operations

 

(9.832

)

12.246

 

18.247

 

14.750

 

(15.218

)

24.459

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.218

)

(2.206

)

(2.117

)

(2.980

)

(1.892

)

(1.899

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(1.218

)

(2.206

)

(2.117

)

(2.980

)

(1.892

)

(1.899

)

Net Asset Value, End of Period

 

$123.28

 

$134.33

 

$124.29

 

$108.16

 

$96.39

 

$113.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-7.31%

 

9.91%

 

17.06%

 

15.83%

 

-13.56%

 

27.17%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$2,076

 

$2,749

 

$1,913

 

$1,448

 

$1,022

 

$1,323

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.88%

 

1.71%

 

1.87%

 

2.06%

 

1.86%

 

1.88%

 

Portfolio Turnover Rate2

 

3%

 

5%

 

5%

 

6%

 

4%

 

4%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

93

 

Materials Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$68.45

 

$63.33

 

$55.11

 

$49.12

 

$57.84

 

$46.34

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.573

1

1.159

1

1.104

1

1.008

 

1.088

 

.936

 

Net Realized and Unrealized Gain (Loss) on Investments

 

(5.592

)

5.084

 

8.195

 

6.505

 

(8.846

)

11.528

 

Total from Investment Operations

 

(5.019

)

6.243

 

9.299

 

7.513

 

(7.758

)

12.464

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.621

)

(1.123

)

(1.079

)

(1.523

)

(.962

)

(.964

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.621

)

(1.123

)

(1.079

)

(1.523

)

(.962

)

(.964

)

Net Asset Value, End of Period

 

$62.81

 

$68.45

 

$63.33

 

$55.11

 

$49.12

 

$57.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

-7.33%

 

9.91%

 

17.06%

 

15.80%

 

-13.54%

 

27.18%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$451

 

$452

 

$372

 

$235

 

$193

 

$175

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

1.88%

 

1.71%

 

1.87%

 

2.06%

 

1.86%

 

1.88%

 

Portfolio Turnover Rate3

 

3%

 

5%

 

5%

 

6%

 

4%

 

4%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1 Calculated based on average shares outstanding.

 

2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

94

 

Materials Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Materials Index Fund is registered under the Investment Company Act of 1940 as an openend investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties.

 

95

 

Materials Index Fund

 

 

 

 

The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $119,000, representing 0.00% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

96

 

Materials Index Fund

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

2,525,556

 

—

 

47

 

Temporary Cash Investments

 

1,668

 

199

 

—

 

Futures Contracts—Liabilities1

 

(4

)

—

 

—

 

Total

 

2,527,220

 

199

 

47

 

 

1 Represents variation margin on the last day of the reporting period.

 

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

2,743,660

 

Gross Unrealized Appreciation

 

149,351

 

Gross Unrealized Depreciation

 

(365,541

)

Net Unrealized Appreciation (Depreciation)

 

(216,190

)

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $21,133,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $33,170,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $462,176,000 of investment securities and sold $828,916,000 of investment securities, other than temporary cash investments. Purchases and sales include $225,944,000 and $786,599,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

Year Ended

 

 

 

February 28, 2019

 

August 31, 2018

 

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

 

($000

)

(000)

 

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

Issued

 

388,176

 

3,250

 

1,186,394

 

8,777

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

 

Redeemed

 

(788,451

)

(6,875)

 

(493,968

)

(3,700

)

Net Increase (Decrease)—ETF Shares

 

(400,275

)

(3,625)

 

692,426

 

5,077

 

Admiral Shares

 

 

 

 

 

 

 

 

 

Issued

 

94,325

 

1,514

 

172,752

 

2,524

 

Issued in Lieu of Cash Distributions

 

3,928

 

62

 

6,475

 

97

 

Redeemed

 

(60,446

)

(994)

 

(128,768

)

(1,894

)

Net Increase (Decrease)—Admiral Shares

 

37,807

 

582

 

50,459

 

727

 

 

At February 28, 2019, one shareholder was the record or beneficial owner of 25% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio.

 

G.  Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

97

 

Utilities Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Electric Utilities

 

56.2

%

Gas Utilities

 

5.5

 

Independent Power Producers & Energy Traders

 

3.8

 

Multi-Utilities

 

29.9

 

Renewable Electricity

 

0.8

 

Water Utilities

 

3.8

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

98

 

Utilities Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000

)

Common Stocks (99.9%)1

 

 

 

 

 

Electric Utilities (56.1%)

 

 

 

 

 

 

NextEra Energy Inc.

 

2,399,223

 

450,382

 

 

Duke Energy Corp.

 

3,578,458

 

320,845

 

 

Southern Co.

 

5,164,831

 

256,640

 

 

Exelon Corp.

 

4,853,961

 

235,854

 

 

American Electric Power Co. Inc.

 

2,475,432

 

200,881

 

 

Xcel Energy Inc.

 

2,579,986

 

141,538

 

 

PPL Corp.

 

3,615,416

 

116,308

 

 

Eversource Energy

 

1,591,002

 

111,068

 

 

FirstEnergy Corp.

 

2,567,621

 

104,631

 

 

Edison International

 

1,635,393

 

97,944

 

 

Entergy Corp.

 

909,430

 

84,877

 

 

Evergy Inc.

 

1,322,499

 

73,941

 

 

Pinnacle West Capital Corp.

 

562,576

 

52,736

 

 

Alliant Energy Corp.

 

1,087,857

 

49,900

 

 

OGE Energy Corp.

 

1,002,517

 

42,627

 

 

IDACORP Inc.

 

253,081

 

24,906

 

 

Portland General Electric Co.

 

448,165

 

22,471

 

 

Hawaiian Electric Industries Inc.

 

547,398

 

20,954

 

 

ALLETE Inc.

 

258,208

 

20,928

 

 

PNM Resources Inc.

 

399,893

 

17,467

 

 

Avangrid Inc.

 

310,863

 

15,030

 

 

MGE Energy Inc.

 

174,089

 

11,128

 

 

El Paso Electric Co.

 

204,451

 

10,999

 

 

Otter Tail Corp.

 

179,529

 

9,027

 

 

Spark Energy Inc. Class A

 

57,311

 

573

 

 

 

 

 

 

2,493,655

 

Gas Utilities (5.5%)

 

 

 

 

 

 

Atmos Energy Corp.

 

590,730

 

58,394

 

 

UGI Corp.

 

876,173

 

48,102

 

 

ONE Gas Inc.

 

266,538

 

23,042

 

 

Southwest Gas Holdings Inc.

 

267,711

 

21,936

 

 

New Jersey Resources Corp.

 

448,173

 

21,692

 

 

National Fuel Gas Co.

 

351,120

 

21,134

 

 

Spire Inc.

 

257,146

 

20,397

 

 

South Jersey Industries Inc.

 

431,985

 

12,506

 

 

Northwest Natural Holding Co.

 

147,198

 

9,453

 

 

Chesapeake Utilities Corp.

 

83,230

 

7,491

 

 

 

 

 

 

244,147

 

Independent Power and Renewable Electricity Producers (4.6%)

 

 

 

 

 

 

NRG Energy Inc.

 

1,454,790

 

60,636

 

 

AES Corp.

 

3,323,717

 

57,268

 

*

Vistra Energy Corp.

 

1,645,541

 

42,850

 

 

NextEra Energy Partners LP

 

281,258

 

12,147

 

 

Ormat Technologies Inc.

 

191,018

 

10,665

 

 

Pattern Energy Group Inc. Class A

 

419,008

 

8,740

 

 

Clearway Energy Inc.

 

289,179

 

4,335

 

 

TerraForm Power Inc. Class A

 

315,131

 

3,942

 

 

Clearway Energy Inc. Class A

 

252,874

 

3,732

 

 

 

 

 

 

204,315

 

Multi-Utilities (29.9%)

 

 

 

 

 

 

Dominion Energy Inc.

 

3,774,250

 

279,634

 

 

Sempra Energy

 

1,373,740

 

165,453

 

 

Public Service Enterprise Group Inc.

 

2,537,443

 

149,227

 

 

Consolidated Edison Inc.

 

1,563,724

 

128,929

 

 

WEC Energy Group Inc.

 

1,583,950

 

120,824

 

 

DTE Energy Co.

 

913,435

 

112,864

 

 

Ameren Corp.

 

1,226,301

 

87,362

 

 

CMS Energy Corp.

 

1,422,335

 

77,375

 

 

CenterPoint Energy Inc.

 

2,516,576

 

75,850

 

 

NiSource Inc.

 

1,866,880

 

50,368

 

 

MDU Resources Group Inc.

 

935,479

 

24,715

 

 

Black Hills Corp.

 

301,178

 

21,378

 

 

NorthWestern Corp.

 

252,777

 

17,325

 

 

Avista Corp.

 

330,057

 

13,338

 

 

Unitil Corp.

 

74,637

 

4,098

 

 

 

 

 

 

1,328,740

 

Water Utilities (3.8%)

 

 

 

 

 

 

American Water Works Co. Inc.

 

907,144

 

92,184

 

 

Aqua America Inc.

 

894,250

 

32,139

 

 

American States Water Co.

 

184,702

 

13,138

 

 

California Water Service Group

 

241,467

 

12,561

 

 

SJW Group

 

117,071

 

7,161

 

 

Middlesex Water Co.

 

82,137

 

4,835

 

 

Connecticut Water Service Inc.

 

60,538

 

4,061

 

 

York Water Co.

 

42,436

 

1,547

 

*

AquaVenture Holdings Ltd.

 

60,282

 

1,334

 

 

 

 

 

 

168,960

 

Total Common Stocks
(Cost $3,991,176)

 

 

 

4,439,817

 

Temporary Cash Investment (0.0%)1

 

 

 

 

 

Money Market Fund (0.0%)

 

 

 

 

 

2

Vanguard Market Liquidity Fund, 2.563% (Cost $351)

 

3,515

 

351

 

Total Investments (99.9%)
(Cost $3,991,527)

 

 

 

4,440,168

 

 

 

 

Amount

 

 

 

($000

)

Other Assets and Liabilities (0.1%)

 

 

 

Other Assets

 

 

 

Investment in Vanguard

 

210

 

Receivables for Investment Securities Sold

 

23,213

 

Receivables for Accrued Income

 

22,741

 

Receivables for Capital Shares Issued

 

3,081

 

Unrealized Appreciation—OTC Swap Contracts

 

83

 

Total Other Assets

 

49,328

 

Liabilities

 

 

 

Payables for Investment Securities Purchased

 

(31,394

)

Payables for Capital Shares Redeemed

 

(1,771

)

Payables to Vanguard

 

(1,078

)

Other Liabilities

 

(9,623

)

Total Liabilities

 

(43,866

)

Net Assets (100%)

 

4,445,630

 

 

 

At February 28, 2019, net assets consisted of:

 

 

 

Amount

 

 

 

($000

)

Paid-in Capital

 

4,117,961

 

Total Distributable Earnings (Loss)

 

327,669

 

Net Assets

 

4,445,630

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

Applicable to 26,720,935 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

3,391,820

 

Net Asset Value Per Share—ETF Shares

 

$126.93

 

 

 

 

 

Admiral Shares—Net Assets

 

 

 

Applicable to 16,547,520 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

1,053,810

 

Net Asset Value Per Share—Admiral Shares

 

$63.68

 

 

·    See Note A in Notes to Financial Statements.

 

*     Non-income-producing security.

 

1     The fund invests a portion of its cash reserves in equity markets through the use of swap contracts. After giving effect to swap investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and -0.1%, respectively, of net assets.

 

2     Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

OTC—Over-the-Counter.

 

99

 

Utilities Index Fund

 

 

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Over-the-Counter Total Return Swaps

 

 

 

 

 

 

 

 

 

Floating

 

Value and

 

Value and

 

 

 

 

 

 

 

Notional

 

Interest Rate

 

Unrealized

 

Unrealized

 

 

 

Termination

 

 

 

Amount

 

Received

 

Appreciation

 

(Depreciation

)

Reference Entity

 

Date

 

Counterparty

 

($000

)

(Paid

)1

($000

)

($000

)

Alliant Energy Corp.

 

2/4/20

 

GSI

 

4,318

 

(2.485

)

83

 

—

 

 

1     Payment received/paid monthly.

 

GSI—Goldman Sachs International.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

100

 

Utilities Index Fund

 

 

Statement of Operations

 

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000

)

Investment Income

 

 

 

Income

 

 

 

Dividends

 

69,801

 

Interest1

 

30

 

Total Income

 

69,831

 

Expenses

 

 

 

The Vanguard Group—Note B

 

 

 

Investment Advisory Services

 

500

 

Management and Administrative—ETF Shares

 

914

 

Management and Administrative—Admiral Shares

 

290

 

Marketing and Distribution—ETF Shares

 

85

 

Marketing and Distribution—Admiral Shares

 

31

 

Custodian Fees

 

59

 

Shareholders’ Reports—ETF Shares

 

75

 

Shareholders’ Reports—Admiral Shares

 

4

 

Trustees’ Fees and Expenses

 

1

 

Total Expenses

 

1,959

 

Net Investment Income

 

67,872

 

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold1,2

 

30,838

 

Futures Contracts

 

49

 

Swap Contracts

 

361

 

Realized Net Gain (Loss)

 

31,248

 

Change in Unrealized Appreciation (Depreciation)

 

 

 

Investment Securities1

 

224,251

 

Swap Contracts

 

83

 

Change in Unrealized Appreciation (Depreciation)

 

224,334

 

Net Increase (Decrease) in Net Assets Resulting from Operations

 

323,454

 

 

1   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from affiliated companies of the fund were $30,000, $1,000, and ($1,000), respectively.

 

2   Includes $157,993,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

Statement of Changes in Net Assets

 

 

 

 

Six Months Ended

 

 

Year Ended

 

 

 

February 28,

 

 

August 31,

 

 

 

2019

 

 

2018

 

 

 

($000

)

 

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

 

Operations

 

 

 

 

 

 

Net Investment Income

 

67,872

 

 

112,216

 

Realized Net Gain (Loss)

 

31,248

 

 

104,150

 

Change in Unrealized Appreciation (Depreciation)

 

224,334

 

 

(151,539

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

323,454

 

 

64,827

 

Distributions

 

 

 

 

 

 

Net Investment Income

 

 

 

 

 

 

ETF Shares

 

(48,883

)

 

(85,520

)

Admiral Shares

 

(14,724

)

 

(26,611

)

Realized Capital Gain

 

 

 

 

 

 

ETF Shares

 

—

 

 

—

 

Admiral Shares

 

—

 

 

—

 

Total Distributions

 

(63,607

)

 

(112,131

)

Capital Share Transactions

 

 

 

 

 

 

ETF Shares

 

383,729

 

 

156,610

 

Admiral Shares

 

124,404

 

 

34,023

 

Net Increase (Decrease) from Capital Share Transactions

 

508,133

 

 

190,633

 

Total Increase (Decrease)

 

767,980

 

 

143,329

 

Net Assets

 

 

 

 

 

 

Beginning of Period

 

3,677,650

 

 

3,534,321

 

End of Period

 

4,445,630

 

 

3,677,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

101

 

Utilities Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$119.32

 

$120.75

 

$107.35

 

$91.41

 

$94.61

 

$81.32

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

2.082

1

3.757

1

3.697

1

3.355

 

3.337

 

3.127

 

Net Realized and Unrealized Gain (Loss) on Investments

 

7.480

 

(1.434

)

13.374

 

15.889

 

(3.261

)

13.261

 

Total from Investment Operations

 

9.562

 

2.323

 

17.071

 

19.244

 

.076

 

16.388

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.952

)

(3.753

)

(3.671

)

(3.304

)

(3.276

)

(3.098

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(1.952

)

(3.753

)

(3.671

)

(3.304

)

(3.276

)

(3.098

)

Net Asset Value, End of Period

 

$126.93

 

$119.32

 

$120.75

 

$107.35

 

$91.41

 

$94.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

8.09%

 

2.05%

 

16.27%

 

21.40%

 

-0.02%

 

20.55%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$3,392

 

$2,809

 

$2,689

 

$2,249

 

$1,581

 

$1,711

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

3.46%

 

3.25%

 

3.33%

 

3.38%

 

3.39%

 

3.59%

 

Portfolio Turnover Rate2

 

5%

 

4%

 

4%

 

3%

 

7%

 

7%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

102

 

Utilities Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

 

 

 

 

 

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding

 

February 28,

 

Year Ended August 31,

 

Throughout Each Period

 

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

 

$59.86

 

$60.58

 

$53.86

 

$45.86

 

$47.47

 

$40.80

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1.037

1

1.883

1

1.863

1

1.683

 

1.676

 

1.569

 

Net Realized and Unrealized Gain (Loss) on Investments

 

3.762

 

(.719

)

6.698

 

7.974

 

(1.641

)

6.656

 

Total from Investment Operations

 

4.799

 

1.164

 

8.561

 

9.657

 

.035

 

8.225

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.979

)

(1.884

)

(1.841

)

(1.657

)

(1.645

)

(1.555

)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

 

(.979

)

(1.884

)

(1.841

)

(1.657

)

(1.645

)

(1.555

)

Net Asset Value, End of Period

 

$63.68

 

$59.86

 

$60.58

 

$53.86

 

$45.86

 

$47.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return2

 

8.09%

 

2.04%

 

16.24%

 

21.42%

 

-0.01%

 

20.58%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$1,054

 

$868

 

$845

 

$704

 

$447

 

$442

 

Ratio of Total Expenses to Average Net Assets

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

 

3.46%

 

3.25%

 

3.33%

 

3.38%

 

3.39%

 

3.59%

 

Portfolio Turnover Rate3

 

5%

 

4%

 

4%

 

3%

 

7%

 

7%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

103

 

Utilities Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Utilities Index Fund is registered under the Investment Company Act of 1940 as an openend investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at February 28, 2019.

 

3. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until termination of the swap, at which time realized gain (loss) is recorded.

 

104

 

Utilities Index Fund

 

 

 

 

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

During the six months ended February 28, 2019, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

105

 

Utilities Index Fund

 

 

 

 

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $210,000, representing 0.00% of the fund’s net assets and 0.08% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

4,439,817

 

—

 

—

 

Temporary Cash Investments

 

351

 

—

 

—

 

Swap Contracts—Assets

 

—

 

83

 

—

 

Total

 

4,440,168

 

83

 

—

 

 

D. As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

3,991,527

 

Gross Unrealized Appreciation

 

517,786

 

Gross Unrealized Depreciation

 

(69,145

)

Net Unrealized Appreciation (Depreciation)

 

448,641

 

 

106

 

Utilities Index Fund

 

 

 

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $3,363,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $15,791,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $1,272,495,000 of investment securities and sold $762,715,000 of investment securities, other than temporary cash investments. Purchases and sales include $851,716,000 and $661,122,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended

 

 

Year Ended

 

 

 

February 28, 2019

 

 

August 31, 2018

 

 

 

Amount

 

Shares

 

 

Amount

 

Shares

 

 

 

($000

)

(000

)

 

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

 

Issued

 

1,057,859

 

8,652

 

 

749,294

 

6,425

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

 

—

 

—

 

Redeemed

 

(674,130

)

(5,475

)

 

(592,684

)

(5,150

)

Net Increase (Decrease)—ETF Shares

 

383,729

 

3,177

 

 

156,610

 

1,275

 

Admiral Shares

 

 

 

 

 

 

 

 

 

 

Issued

 

225,156

 

3,709

 

 

232,790

 

4,021

 

Issued in Lieu of Cash Distributions

 

11,822

 

193

 

 

21,216

 

364

 

Redeemed

 

(112,574

)

(1,861

)

 

(219,983

)

(3,830

)

Net Increase (Decrease)—Admiral Shares

 

124,404

 

2,041

 

 

34,023

 

555

 

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

107

 

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P.O. Box 2600

 

Valley Forge, PA 19482-2600

 

Connect with Vanguard® > vanguard.com

 

 

Fund Information > 800-662-7447

 

Direct Investor Account Services > 800-662-2739

 

Institutional Investor Services > 800-523-1036

 

Text Telephone for People Who Are Deaf or Hard of Hearing > 800-749-7273

 

 

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities. The prospectus or the Statement of Additional Information contains a more detailed description of the limited relationship MSCI has with Vanguard and any related funds.

 

All comparative mutual fund data are from Lipper Inc., a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

Source for Bloomberg Barclays indexes: Bloomberg Index Services Limited. Copyright 2018, Bloomberg. All rights reserved.

 

 

 

 

 

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

 

All rights reserved.

 

U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749;

 

7,925,573; 8,090,646; 8,417,623; and 8,626,636.

 

Vanguard Marketing Corporation, Distributor.

 

 

 

Q4832 042019

 

 

 

 

 

Semiannual Report | February 28, 2019

 

 

Vanguard Extended Duration Treasury Index Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

 

 

About Your Fund’s Expenses

 

1

Financial Statements

4

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·   Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·   Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Six Months Ended February 28, 2019

 

 

 

 

Extended Duration Treasury Index Fund

Beginning
Account Value
8/31/2018

Ending
Account Value
2/28/2019

Expenses
Paid During
Period

Based on Actual Fund Return

 

 

 

ETF Shares

$1,000.00

$992.64

$0.35

Institutional Shares

1,000.00

992.62

0.30

Institutional Plus Shares

1,000.00

992.63

0.20

Based on Hypothetical 5% Yearly Return

 

 

 

ETF Shares

$1,000.00

$1,024.45

$0.35

Institutional Shares

1,000.00

1,024.50

0.30

Institutional Plus Shares

1,000.00

1,024.60

0.20

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.07% for ETF Shares, 0.06% for Institutional Shares, and 0.04% for Institutional Plus Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

 

2

 

Extended Duration Treasury Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Treasury/Agency

100.0%

The table reflects the fund’s market exposure. Any holdings in short-term reserves are excluded. The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

 

3

 

Extended Duration Treasury Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

 

 

Face

 

Market

 

 

 

 

 

 

Maturity

 

Amount

 

Value·

 

 

 

 

Coupon

Date

 

($000

)

($000

)

U.S. Government and Agency Obligations (100.0%)

 

 

 

 

 

 

 

U.S. Government Securities (100.0%)

 

 

 

 

 

 

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/39

 

28,010

 

15,195

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/39

 

79,640

 

42,800

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/39

 

91,263

 

48,633

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/39

 

87,480

 

46,132

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/40

 

64,933

 

33,922

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/40

 

30,840

 

15,924

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/40

 

74,588

 

38,127

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/40

 

76,580

 

38,822

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/41

 

67,678

 

33,976

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/41

 

56,445

 

28,050

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/41

 

71,165

 

35,021

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/41

 

48,959

 

23,898

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/42

 

57,755

 

27,907

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/42

 

74,765

 

35,777

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/42

 

64,880

 

30,793

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/42

 

57,225

 

26,918

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/43

 

65,290

 

30,447

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/43

 

79,900

 

36,967

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/43

 

57,620

 

26,401

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/43

 

35,125

 

15,960

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/44

 

56,095

 

25,278

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/44

 

71,735

 

32,057

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/44

 

72,870

 

32,308

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/44

 

41,910

 

18,466

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/45

 

45,755

 

20,010

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/45

 

72,015

 

31,293

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/45

 

61,260

 

26,409

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/45

 

65,520

 

28,025

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/46

 

71,105

 

30,170

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/46

 

67,455

 

28,405

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/46

 

50,343

 

21,046

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/46

 

54,800

 

22,789

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/47

 

77,883

 

32,121

 

 

United States Treasury Strip Coupon

 

0.000

%

5/15/47

 

64,420

 

26,312

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/47

 

52,503

 

21,247

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/47

 

79,610

 

31,919

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/48

 

79,118

 

31,542

 

 

4

 

Extended Duration Treasury Index Fund

 

 

 

 

 

 

 

 

 

 

Face

 

Market

 

 

 

 

 

 

Maturity

 

Amount

 

Value·

 

 

 

 

Coupon

Date

 

($000

)

($000

)

 

United States Treasury Strip Coupon

 

0.000

%

5/15/48

 

62,385

 

24,779

 

 

United States Treasury Strip Coupon

 

0.000

%

8/15/48

 

17,153

 

6,769

 

 

United States Treasury Strip Coupon

 

0.000

%

11/15/48

 

5,050

 

1,983

 

 

United States Treasury Strip Coupon

 

0.000

%

2/15/49

 

1,053

 

412

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/39

 

67,015

 

36,801

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/39

 

57,710

 

31,425

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/39

 

46,040

 

24,772

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/40

 

61,835

 

32,956

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/40

 

62,045

 

32,685

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/40

 

37,950

 

19,773

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/40

 

51,815

 

26,729

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/41

 

25,500

 

13,043

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/41

 

43,200

 

21,870

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/41

 

28,765

 

14,410

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/41

 

27,105

 

13,455

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/42

 

36,395

 

17,890

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/42

 

44,450

 

21,617

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/42

 

55,305

 

26,637

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/42

 

60,580

 

28,898

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/43

 

74,085

 

35,028

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/43

 

44,935

 

21,077

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/43

 

62,560

 

29,071

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/43

 

44,880

 

20,680

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/44

 

46,320

 

21,166

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/44

 

61,010

 

27,664

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/44

 

78,645

 

35,397

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/44

 

54,315

 

24,276

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/45

 

49,960

 

22,150

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/45

 

67,875

 

29,913

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/45

 

90,935

 

39,728

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/45

 

81,050

 

35,187

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/46

 

47,160

 

20,246

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/46

 

50,010

 

21,301

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/46

 

68,500

 

28,989

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/46

 

105,020

 

44,190

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/47

 

106,615

 

44,586

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/47

 

65,865

 

27,267

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/47

 

93,185

 

38,184

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/47

 

71,670

 

29,122

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/48

 

102,100

 

41,167

 

 

United States Treasury Strip Principal

 

0.000

%

5/15/48

 

97,210

 

38,906

 

 

United States Treasury Strip Principal

 

0.000

%

8/15/48

 

19,380

 

7,700

 

 

United States Treasury Strip Principal

 

0.000

%

11/15/48

 

39,050

 

15,443

 

 

United States Treasury Strip Principal

 

0.000

%

2/15/49

 

66,941

 

26,248

 

Total U.S. Government and Agency Obligations (Cost $2,262,594)

 

 

 

2,212,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Temporary Cash Investment (0.1%)

 

 

 

 

 

 

 

 

 

Money Market Fund (0.1%)

 

 

 

 

 

 

 

 

 

1 

Vanguard Market Liquidity Fund

 

 

 

 

 

 

 

 

 

 

(Cost $2,603)

 

2.563

%

 

 

26,028

 

2,603

 

Total Investments (100.1%) (Cost $2,265,197)

 

 

 

 

 

 

 

2,215,260

 

 

5

 

Extended Duration Treasury Index Fund

 

 

 

 

 

 

Amount

 

 

 

($000

)

Other Assets and Liabilities (-0.1%)

 

 

 

Other Assets

 

 

 

Investment in Vanguard

 

114

 

Receivables for Investment Securities Sold

 

52,652

 

Receivables for Accrued Income

 

2

 

Receivables for Capital Shares Issued

 

2,122

 

Total Other Assets

 

54,890

 

Liabilities

 

 

 

Payables for Investment Securities Purchased

 

(57,176

)

Payables to Vanguard

 

(411

)

Total Liabilities

 

(57,587

)

Net Assets (100%)

 

2,212,563

 

 

 

 

 

 

 

 

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

Amount

 

 

 

($000

)

Paid-in Capital

 

2,267,075

 

Total Distributable Earnings (Loss)

 

(54,512

)

Net Assets

 

2,212,563

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

Applicable to 8,300,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

919,947

 

Net Asset Value Per Share—ETF Shares

 

$110.84

 

 

 

 

 

Institutional Shares—Net Assets

 

 

 

Applicable to 22,817,698 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

764,039

 

Net Asset Value Per Share—Institutional Shares

 

$33.48

 

 

 

 

 

Institutional Plus Shares—Net Assets

 

 

 

Applicable to 6,288,479 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

528,577

 

Net Asset Value Per Share—Institutional Plus Shares

 

$84.05

 

 

· See Note A in Notes to Financial Statements.

 

1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

6

 

Extended Duration Treasury Index Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

February 28, 2019

 

($000)

Investment Income

 

Income

 

Interest1

30,511

Total Income

30,511

Expenses

 

The Vanguard Group—Note B

 

Investment Advisory Services

30

Management and Administrative—ETF Shares

195

Management and Administrative—Institutional Shares

205

Management and Administrative—Institutional Plus Shares

90

Marketing and Distribution—ETF Shares

21

Marketing and Distribution—Institutional Shares

10

Marketing and Distribution—Institutional Plus Shares

4

Custodian Fees

1

Shareholders’ Reports—ETF Shares

11

Shareholders’ Reports—Institutional Shares

—

Shareholders’ Reports—Institutional Plus Shares

—

Trustees’ Fees and Expenses

—

Total Expenses

567

Expenses Paid Indirectly

(1)

Net Expenses

566

Net Investment Income

29,945

Realized Net Gain (Loss)

 

Investment Securities Sold1,2

(11,400)

Futures Contracts

(16)

Realized Net Gain (Loss)

(11,416)

Change in Unrealized Appreciation (Depreciation) of Investment Securities1

(42,103)

Net Increase (Decrease) in Net Assets Resulting from Operations

(23,574)

 

1   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from affiliated companies of the fund were $8,000, ($1,000), and ($1,000), respectively.

2   Includes $1,933,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

7

 

Extended Duration Treasury Index Fund

 

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

 

Year Ended

 

February 28,

 

August 31,

 

2019

 

2018

 

($000)

 

($000)

Increase (Decrease) in Net Assets

 

 

 

Operations

 

 

 

Net Investment Income

29,945

 

51,694

Realized Net Gain (Loss)

(11,416)

 

17,987

Change in Unrealized Appreciation (Depreciation)

(42,103)

 

(134,305)

Net Increase (Decrease) in Net Assets Resulting from Operations

(23,574)

 

(64,624)

Distributions

 

 

 

Net Investment Income

 

 

 

ETF Shares

(9,349)

 

(16,702)

Institutional Shares

(11,689)

 

(19,467)

Institutional Plus Shares

(7,927)

 

(14,255)

Realized Capital Gain1

 

 

 

ETF Shares

—

 

(1,545)

Institutional Shares

—

 

(1,694)

Institutional Plus Shares

—

 

(1,371)

Total Distributions

(28,965)

 

(55,034)

Capital Share Transactions

 

 

 

ETF Shares

285,534

 

77,251

Institutional Shares

(5,651)

 

147,075

Institutional Plus Shares

7,357

 

201,519

Net Increase (Decrease) from Capital Share Transactions

287,240

 

425,845

Total Increase (Decrease)

234,701

 

306,187

Net Assets

 

 

 

Beginning of Period

1,977,862

 

1,671,675

End of Period

2,212,563

 

1,977,862

 

1 Includes fiscal 2019 and 2018 short-term gain distributions totaling $0 and $ 41,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

8

 

Extended Duration Treasury Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

For a Share Outstanding

Six Months
Ended
February 28,

 

Year Ended August 31,

 

Throughout Each Period

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

$113.39

 

$120.92

 

$139.77

 

$116.00

 

$113.24

 

$95.57

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

1.660

1

3.353

1

3.383

1

3.420

 

3.524

 

3.311

 

Net Realized and Unrealized Gain (Loss) on Investments2

(2.545

)

(7.272

)

(16.377

)

25.019

 

3.113

 

18.824

 

Total from Investment Operations

(.885

)

(3.919

)

(12.994

)

28.439

 

6.637

 

22.135

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(1.665

)

(3.314

)

(3.402

)

(3.414

)

(3.506

)

(3.236

)

Distributions from Realized Capital Gains

—

 

(.297

)

(2.454

)

(1.255

)

(.371

)

(1.229

)

Total Distributions

(1.665

)

(3.611

)

(5.856

)

(4.669

)

(3.877

)

(4.465

)

Net Asset Value, End of Period

$110.84

 

$113.39

 

$120.92

 

$139.77

 

$116.00

 

$113.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

-0.74%

 

-3.24%

 

-8.86%

 

25.30%

 

5.90%

 

24.17%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$920

 

$658

 

$623

 

$615

 

$365

 

$249

 

Ratio of Total Expenses to Average Net Assets

0.07%

 

0.07%

 

0.07%

 

0.07%

 

0.10%

 

0.12%

 

Ratio of Net Investment Income to Average Net Assets

3.07%

 

2.93%

 

2.90%

 

2.77%

 

2.93%

 

3.59%

 

Portfolio Turnover Rate3

17%

 

18%

 

18%

 

20%

 

16%

 

17%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1   Calculated based on average shares outstanding.

2   Includes increases from purchase fees of $0.00, $0.07, $0.16, $0.06, $0.05, and $0.19.

3   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

9

 

Extended Duration Treasury Index Fund

 

 

Financial Highlights

 

 

Institutional Shares

 

For a Share Outstanding

Six Months
Ended
February 28,

 

Year Ended August 31,

 

Throughout Each Period

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

$34.25

 

$36.52

 

$42.20

 

$35.02

 

$34.18

 

$28.85

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

.503

1

1.016

1

1.024

1

1.036

 

1.069

 

1.006

 

Net Realized and Unrealized Gain (Loss) on Investments2

(.769

)

(2.191

)

(4.934

)

7.558

 

.947

 

5.678

 

Total from Investment Operations

(.266

)

(1.175

)

(3.910

)

8.594

 

2.016

 

6.684

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(.504

)

(1.005

)

(1.030

)

(1.035

)

(1.064

)

(.983

)

Distributions from Realized Capital Gains

—

 

(.090

)

(.740

)

(.379

)

(.112

)

(.371

)

Total Distributions

(.504

)

(1.095

)

(1.770

)

(1.414

)

(1.176

)

(1.354

)

Net Asset Value, End of Period

$33.48

 

$34.25

 

$36.52

 

$42.20

 

$35.02

 

$34.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return3

-0.74%

 

-3.23%

 

-8.86%

 

25.33%

 

5.89%

 

24.27%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$764

 

$787

 

$682

 

$660

 

$484

 

$529

 

Ratio of Total Expenses to Average Net Assets

0.06%

 

0.06%

 

0.06%

 

0.06%

 

0.08%

 

0.10%

 

Ratio of Net Investment Income to Average Net Assets

3.08%

 

2.94%

 

2.91%

 

2.78%

 

2.95%

 

3.61%

 

Portfolio Turnover Rate4

17%

 

18%

 

18%

 

20%

 

16%

 

17%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1   Calculated based on average shares outstanding.

2   Includes increases from purchase fees of $0.00, $0.02, $0.05, $0.02, $0.01, and $0.06.

3   Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.

4   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

10

 

Extended Duration Treasury Index Fund

 

 

Financial Highlights

 

 

Institutional Plus Shares

 

For a Share Outstanding

Six Months
Ended
February 28,

 

Year Ended August 31,

 

Throughout Each Period

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

$85.99

 

$91.68

 

$105.93

 

$87.92

 

$85.80

 

$72.42

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

1.270

1

2.568

1

2.588

1

2.620

 

2.701

 

2.542

 

Net Realized and Unrealized Gain (Loss) on Investments2

(1.936

)

(5.492

)

(12.375

)

18.958

 

2.389

 

14.260

 

Total from Investment Operations

(.666

)

(2.924

)

(9.787

)

21.578

 

5.090

 

16.802

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(1.274

)

(2.541

)

(2.603

)

(2.616

)

(2.688

)

(2.491

)

Distributions from Realized Capital Gains

—

 

(.225

)

(1.860

)

(.952

)

(.282

)

(.931

)

Total Distributions

(1.274

)

(2.766

)

(4.463

)

(3.568

)

(2.970

)

(3.422

)

Net Asset Value, End of Period

$84.05

 

$85.99

 

$91.68

 

$105.93

 

$87.92

 

$85.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return3

-0.74%

 

-3.20%

 

-8.84%

 

25.34%

 

5.93%

 

24.31%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$529

 

$533

 

$367

 

$258

 

$250

 

$324

 

Ratio of Total Expenses to Average Net Assets

0.04%

 

0.04%

 

0.04%

 

0.04%

 

0.06%

 

0.08%

 

Ratio of Net Investment Income to Average Net Assets

3.10%

 

2.96%

 

2.93%

 

2.80%

 

2.97%

 

3.63%

 

Portfolio Turnover Rate4

17%

 

18%

 

18%

 

20%

 

16%

 

17%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1   Calculated based on average shares outstanding.

2   Includes increases from purchase fees of $0.00, $0.06, $0.12, $0.05, $0.04, and $0.15.

3   Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.

4   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

11

 

Extended Duration Treasury Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Extended Duration Treasury Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: ETF Shares, Institutional Shares, and Institutional Plus Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Bonds and temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.

 

2. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented 0% and less than 1% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at February 28, 2019.

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

12

 

Extended Duration Treasury Index Fund

 

 

 

 

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

5. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

6. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on capital share transactions are credited to paid-in capital.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $114,000, representing 0.01% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

13

 

Extended Duration Treasury Index Fund

 

 

 

 

 

C.  The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended February 28, 2019, custodian fee offset arrangements reduced the fund’s expenses by $1,000 (an annual rate of 0.00% of average net assets).

 

D.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

U.S. Government and Agency Obligations

 

—

 

2,212,657

 

—

 

Temporary Cash Investments

 

2,603

 

—

 

—

 

Total

 

2,603

 

2,212,657

 

—

 

 

E.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

2,265,197

 

Gross Unrealized Appreciation

 

35,292

 

Gross Unrealized Depreciation

 

(85,229

)

Net Unrealized Appreciation (Depreciation)

 

(49,937

)

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses totaling $1,478,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

F.  During the six months ended February 28, 2019, the fund purchased $548,833,000 of investment securities and sold $291,033,000 of investment securities, other than temporary cash investments. Purchases and sales include $376,342,000 and $91,549,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

14

 

Extended Duration Treasury Index Fund

 

 

 

 

 

G. Capital share transactions for each class of shares were:

 

 

 

Six Months Ended
February 28, 2019

 

Year Ended
August 31, 2018

 

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

 

($000

)

(000

)

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

Issued1

 

377,183

 

3,375

 

272,760

 

2,400

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

 

Redeemed

 

(91,649

)

(875

)

(195,509

)

(1,750

)

Net Increase (Decrease)—ETF Shares

 

285,534

 

2,500

 

77,251

 

650

 

Institutional Shares

 

 

 

 

 

 

 

 

 

Issued1

 

34,243

 

1,038

 

175,785

 

5,120

 

Issued in Lieu of Cash Distributions

 

11,578

 

353

 

20,957

 

603

 

Redeemed

 

(51,472

)

(1,553

)

(49,667

)

(1,417

)

Net Increase (Decrease)—Institutional Shares

 

(5,651

)

(162

)

147,075

 

4,306

 

Institutional Plus Shares

 

 

 

 

 

 

 

 

 

Issued1

 

93

 

1

 

188,992

 

2,053

 

Issued in Lieu of Cash Distributions

 

7,927

 

96

 

15,626

 

179

 

Redeemed

 

(663

)

(8

)

(3,099

)

(36

)

Net Increase (Decrease)—Institutional Plus Shares

 

7,357

 

89

 

201,519

 

2,196

 

 

1   Includes purchase fees for fiscal 2019 and 2018 of $226,000 and $1,274,000, respectively (fund totals).

 

H.  Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

15

 

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This page intentionally left blank.

 

 

 

 

 

 

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Valley Forge, PA 19482-2600

 

 

Connect with Vanguard® > vanguard.com

 

 

 

Fund Information > 800-662-7447

 

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Who Are Deaf or Hard of Hearing > 800-749-7273

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

All rights reserved.

U.S. Patent Nos. 6,879,964; 7,337,138;

7,720,749; 7,925,573; 8,090,646; 8,417,623; and 8,626,636.

Vanguard Marketing Corporation, Distributor.

 

 

 

Q12752 042019

 

 

 

 

 

Semiannual Report  |  February 28, 2019

 

 

Vanguard Mega Cap Index Funds

 

 

 

 

 

 

 

 

 

 

 

Vanguard Mega Cap Index Fund

 

Vanguard Mega Cap Growth Index Fund

 

Vanguard Mega Cap Value Index Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

 

 

About Your Fund’s Expenses

1

Mega Cap Index Fund

3

Mega Cap Growth Index Fund

18

Mega Cap Value Index Fund

32

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·   Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·   Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Six Months Ended February 28, 2019

 

Beginning

Ending

Expenses

 

Account Value

Account Value

Paid During

 

8/31/2018

2/28/2019

Period

Based on Actual Fund Return

 

 

 

Mega Cap Index Fund

 

 

 

ETF Shares

$1,000.00

$970.91

$0.34

Institutional Shares

1,000.00

970.77

0.29

Mega Cap Growth Index Fund

 

 

 

ETF Shares

$1,000.00

$946.02

$0.34

Institutional Shares

1,000.00

946.09

0.29

Mega Cap Value Index Fund

 

 

 

ETF Shares

$1,000.00

$991.75

$0.35

Institutional Shares

1,000.00

991.62

0.30

Based on Hypothetical 5% Yearly Return

 

 

 

Mega Cap Index Fund

 

 

 

ETF Shares

$1,000.00

$1,024.45

$0.35

Institutional Shares

1,000.00

1,024.50

0.30

Mega Cap Growth Index Fund

 

 

 

ETF Shares

$1,000.00

$1,024.45

$0.35

Institutional Shares

1,000.00

1,024.50

0.30

Mega Cap Value Index Fund

 

 

 

ETF Shares

$1,000.00

$1,024.45

$0.35

Institutional Shares

1,000.00

1,024.50

0.30

 

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Mega Cap Index Fund, 0.07% for ETF Shares and 0.06% for Institutional Shares; for the Mega Cap Growth Index Fund, 0.07% for ETF Shares and 0.06% for Institutional Shares; and for the Mega Cap Value Index Fund, 0.07% for ETF Shares and 0.06% for Institutional Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

 

2

 

Mega Cap Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Basic Materials

2.0%

Consumer Goods

7.7

Consumer Services

14.2

Financials

17.9

Health Care

14.4

Industrials

11.3

Oil & Gas

5.4

Technology

22.1

Telecommunications

2.4

Utilities

2.6

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. Sector categories are based on the Industry Classification Benchmark (“ICB”), except for the “Other” category (if applicable), which includes securities that have not been provided an ICB classification as of the effective reporting period.

 

3

 

Mega Cap Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (99.6%)1

 

 

 

 

Basic Materials (2.0%)

 

 

 

 

 

DowDuPont Inc.

 

201,325

 

10,716

 

Linde plc

 

48,337

 

8,374

 

Ecolab Inc.

 

22,815

 

3,853

 

Air Products & Chemicals Inc.

 

19,289

 

3,495

 

PPG Industries Inc.

 

21,253

 

2,380

 

LyondellBasell Industries NV Class A

 

26,904

 

2,301

 

Nucor Corp.

 

27,517

 

1,667

 

International Paper Co.

 

35,683

 

1,635

 

 

 

 

 

34,421

Consumer Goods (7.6%)

 

 

 

 

 

Procter & Gamble Co.

 

218,818

 

21,565

 

Coca-Cola Co.

 

336,107

 

15,239

 

PepsiCo Inc.

 

124,047

 

14,345

 

Philip Morris International Inc.

 

136,661

 

11,881

 

NIKE Inc. Class B

 

111,594

 

9,567

 

Altria Group Inc.

 

164,900

 

8,642

 

Mondelez International Inc. Class A

 

127,528

 

6,014

 

Colgate-Palmolive Co.

 

76,038

 

5,009

 

General Motors Co.

 

111,410

 

4,398

*

Tesla Inc.

 

11,356

 

3,633

 

Kimberly-Clark Corp.

 

30,446

 

3,557

 

Estee Lauder Cos. Inc. Class A

 

19,317

 

3,032

 

Ford Motor Co.

 

342,583

 

3,004

 

Activision Blizzard Inc.

 

63,605

 

2,680

*

Electronic Arts Inc.

 

26,489

 

2,537

 

General Mills Inc.

 

52,380

 

2,469

 

VF Corp.

 

27,921

 

2,439

*

Monster Beverage Corp.

 

36,342

 

2,320

 

Constellation Brands Inc. Class A

 

13,140

 

2,223

 

Archer-Daniels-Midland Co.

 

49,189

 

2,091

 

Kraft Heinz Co.

 

53,553

 

1,777

 

Hershey Co.

 

12,579

 

1,392

 

Kellogg Co.

 

24,425

 

1,374

 

Brown-Forman Corp. Class B

 

26,341

 

1,304

 

Aptiv plc

 

11,440

 

951

 

Tyson Foods Inc. Class A

 

13,008

 

802

 

Keurig Dr Pepper Inc.

 

9,154

 

230

 

 

 

 

 

134,475

Consumer Services (14.2%)

 

 

 

 

*

Amazon.com Inc.

 

36,513

 

59,875

 

Home Depot Inc.

 

99,133

 

18,354

 

Comcast Corp. Class A

 

398,316

 

15,403

 

Walt Disney Co.

 

124,104

 

14,004

*

Netflix Inc.

 

36,370

 

13,024

 

Walmart Inc.

 

128,454

 

12,716

 

McDonald’s Corp.

 

67,661

 

12,439

 

Costco Wholesale Corp.

 

38,476

 

8,416

 

Starbucks Corp.

 

103,422

 

7,266

 

Lowe’s Cos. Inc.

 

67,327

 

7,075

*

Booking Holdings Inc.

 

4,094

 

6,948

 

CVS Health Corp.

 

113,410

 

6,559

 

TJX Cos. Inc.

 

103,048

 

5,285

 

Walgreens Boots Alliance Inc.

 

70,671

 

5,031

*

Charter Communications Inc. Class A

 

14,072

 

4,854

 

Twenty-First Century Fox Inc. Class A

 

93,057

 

4,693

 

Target Corp.

 

45,710

 

3,320

 

Ross Stores Inc.

 

32,791

 

3,110

 

eBay Inc.

 

80,285

 

2,983

 

Sysco Corp.

 

43,453

 

2,935

 

Marriott International Inc.

 

22,447

 

2,812

 

Dollar General Corp.

 

23,196

 

2,748

 

Delta Air Lines Inc.

 

54,138

 

2,684

*

O’Reilly Automotive Inc.

 

7,045

 

2,620

 

Yum! Brands Inc.

 

27,342

 

2,584

 

Southwest Airlines Co.

 

44,389

 

2,488

 

McKesson Corp.

 

17,086

 

2,173

 

4

 

Mega Cap Index Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Hilton Worldwide Holdings Inc.

 

25,978

 

2,159

 

Las Vegas Sands Corp.

 

34,320

 

2,108

 

Twenty-First Century Fox Inc.

 

41,652

 

2,089

 

Kroger Co.

 

69,918

 

2,051

 

Carnival Corp.

 

34,541

 

1,995

 

CBS Corp. Class B

 

29,558

 

1,484

 

American Airlines Group Inc.

 

36,414

 

1,297

*

AutoZone Inc.

 

1,157

 

1,086

*

United Continental Holdings Inc.

 

10,138

 

890

 

Omnicom Group Inc.

 

9,884

 

748

 

Sirius XM Holdings Inc.

 

124,797

 

740

 

AmerisourceBergen Corp. Class A

 

6,907

 

575

 

CBS Corp. Class A

 

599

 

30

*

DISH Network Corp. Class A

 

16

 

1

 

 

 

 

 

249,652

Financials (17.8%)

 

 

 

 

*

Berkshire Hathaway Inc. Class B

 

164,483

 

33,110

 

JPMorgan Chase & Co.

 

292,137

 

30,487

 

Visa Inc. Class A

 

154,401

 

22,870

 

Bank of America Corp.

 

774,957

 

22,536

 

Wells Fargo & Co.

 

372,175

 

18,568

 

Mastercard Inc. Class A

 

80,621

 

18,121

 

Citigroup Inc.

 

214,281

 

13,710

 

American Tower Corp.

 

38,623

 

6,803

 

US Bancorp

 

127,610

 

6,596

 

American Express Co.

 

59,928

 

6,457

 

Goldman Sachs Group Inc.

 

29,375

 

5,778

 

CME Group Inc.

 

31,411

 

5,714

 

Chubb Ltd.

 

38,377

 

5,139

 

Simon Property Group Inc.

 

27,112

 

4,912

 

Charles Schwab Corp.

 

106,612

 

4,905

 

Morgan Stanley

 

113,149

 

4,750

 

PNC Financial Services Group Inc.

 

36,402

 

4,587

 

S&P Global Inc.

 

22,048

 

4,418

 

Crown Castle International Corp.

 

36,428

 

4,326

 

BlackRock Inc.

 

9,719

 

4,308

 

Marsh & McLennan Cos. Inc.

 

44,181

 

4,110

 

Bank of New York Mellon Corp.

 

78,106

 

4,099

 

Prologis Inc.

 

55,273

 

3,872

 

Intercontinental Exchange Inc.

 

49,955

 

3,854

 

Progressive Corp.

 

51,158

 

3,729

 

Aon plc

 

21,111

 

3,621

 

Capital One Financial Corp.

 

41,589

 

3,476

 

Prudential Financial Inc.

 

36,208

 

3,471

 

BB&T Corp.

 

67,570

 

3,444

 

American International Group Inc.

 

77,505

 

3,348

 

Aflac Inc.

 

66,838

 

3,284

 

Travelers Cos. Inc.

 

23,265

 

3,092

 

Equinix Inc.

 

7,074

 

2,996

 

MetLife Inc.

 

64,964

 

2,936

 

Allstate Corp.

 

30,267

 

2,857

 

Public Storage

 

13,022

 

2,754

 

SunTrust Banks Inc.

 

39,540

 

2,565

 

Welltower Inc.

 

32,931

 

2,447

 

Equity Residential

 

32,177

 

2,371

 

State Street Corp.

 

31,609

 

2,272

 

Discover Financial Services

 

29,376

 

2,104

 

T. Rowe Price Group Inc.

 

20,095

 

2,018

 

Ventas Inc.

 

31,194

 

1,957

 

Synchrony Financial

 

56,943

 

1,857

 

Boston Properties Inc.

 

13,492

 

1,790

 

Northern Trust Corp.

 

18,467

 

1,721

 

Weyerhaeuser Co.

 

65,869

 

1,640

 

Ameriprise Financial Inc.

 

12,268

 

1,615

 

Fifth Third Bancorp

 

57,717

 

1,592

*

Berkshire Hathaway Inc. Class A

 

5

 

1,511

 

TD Ameritrade Holding Corp.

 

24,542

 

1,382

 

AvalonBay Communities Inc.

 

6,186

 

1,204

 

Franklin Resources Inc.

 

12,332

 

402

 

Interactive Brokers Group Inc.

 

6,338

 

350

 

 

 

 

 

313,836

Health Care (14.3%)

 

 

 

 

 

Johnson & Johnson

 

235,575

 

32,189

*

Pfizer Inc.

 

508,006

 

22,022

 

UnitedHealth Group Inc.

 

84,500

 

20,468

 

Merck & Co. Inc.

 

228,442

 

18,570

 

Abbott Laboratories

 

154,098

 

11,961

 

Medtronic plc

 

118,107

 

10,689

 

Amgen Inc.

 

55,906

 

10,627

^

Eli Lilly & Co.

 

83,666

 

10,566

 

AbbVie Inc.

 

131,961

 

10,456

 

Thermo Fisher Scientific Inc.

 

35,329

 

9,170

 

Bristol-Myers Squibb Co.

 

143,159

 

7,396

 

Gilead Sciences Inc.

 

113,515

 

7,381

 

Anthem Inc.

 

22,760

 

6,845

 

Becton Dickinson and Co.

 

23,546

 

5,858

*

Cigna Corp.

 

33,386

 

5,824

*

Biogen Inc.

 

17,725

 

5,814

*

Intuitive Surgical Inc.

 

10,039

 

5,497

*

Celgene Corp.

 

61,375

 

5,101

 

5

 

Mega Cap Index Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Stryker Corp.

 

26,293

 

4,956

*

Boston Scientific Corp.

 

121,386

 

4,870

*

Vertex Pharmaceuticals Inc.

 

22,382

 

4,225

*

Illumina Inc.

 

13,093

 

4,095

 

Allergan plc

 

29,561

 

4,071

 

Zoetis Inc.

 

42,121

 

3,969

 

Humana Inc.

 

12,060

 

3,437

 

HCA Healthcare Inc.

 

24,159

 

3,359

 

Baxter International Inc.

 

44,363

 

3,315

*

Regeneron Pharmaceuticals Inc.

 

6,991

 

3,011

*

Alexion Pharmaceuticals Inc.

 

18,561

 

2,512

 

Zimmer Biomet Holdings Inc.

 

17,867

 

2,218

*

Mylan NV

 

43,110

 

1,138

 

Cardinal Health Inc.

 

13,138

 

714

 

 

 

 

 

252,324

Industrials (11.3%)

 

 

 

 

 

Boeing Co.

 

47,398

 

20,853

 

Union Pacific Corp.

 

64,698

 

10,850

 

3M Co.

 

51,108

 

10,599

 

Honeywell International Inc.

 

65,000

 

10,014

*

PayPal Holdings Inc.

 

98,223

 

9,633

 

Accenture plc Class A

 

55,999

 

9,037

 

United Technologies Corp.

 

71,909

 

9,037

 

General Electric Co.

 

763,162

 

7,929

 

Caterpillar Inc.

 

51,745

 

7,107

 

Danaher Corp.

 

55,385

 

7,035

 

United Parcel Service Inc. Class B

 

60,978

 

6,720

 

Lockheed Martin Corp.

 

21,230

 

6,569

 

Automatic Data Processing Inc.

 

36,516

 

5,588

 

CSX Corp.

 

70,432

 

5,118

 

Raytheon Co.

 

24,956

 

4,654

 

Deere & Co.

 

28,214

 

4,628

 

Northrop Grumman Corp.

 

15,278

 

4,430

 

Norfolk Southern Corp.

 

23,936

 

4,292

 

Waste Management Inc.

 

37,694

 

3,816

 

Illinois Tool Works Inc.

 

26,368

 

3,799

 

FedEx Corp.

 

20,779

 

3,761

 

General Dynamics Corp.

 

22,052

 

3,754

 

Emerson Electric Co.

 

55,031

 

3,750

 

Sherwin-Williams Co.

 

7,407

 

3,209

 

Fidelity National Information Services Inc.

 

28,689

 

3,103

 

Eaton Corp. plc

 

38,044

 

3,035

 

Johnson Controls International plc

 

81,080

 

2,860

 

TE Connectivity Ltd.

 

30,065

 

2,468

 

Ingersoll-Rand plc

 

21,529

 

2,273

 

Agilent Technologies Inc.

 

27,945

 

2,220

 

Paychex Inc.

 

28,693

 

2,210

 

Fortive Corp.

 

26,358

 

2,150

 

Parker-Hannifin Corp.

 

11,871

 

2,091

 

PACCAR Inc.

 

30,635

 

2,077

 

Cummins Inc.

 

13,364

 

2,059

 

Rockwell Automation Inc.

 

10,620

 

1,896

 

Stanley Black & Decker Inc.

 

13,243

 

1,754

 

Republic Services Inc. Class A

 

18,476

 

1,449

*

Square Inc.

 

12,858

 

1,045

 

Wabtec Corp.

 

24

 

2

 

 

 

 

 

198,874

Oil & Gas (5.4%)

 

 

 

 

 

Exxon Mobil Corp.

 

372,200

 

29,415

 

Chevron Corp.

 

167,709

 

20,055

 

ConocoPhillips

 

101,020

 

6,854

 

Schlumberger Ltd.

 

121,499

 

5,353

 

EOG Resources Inc.

 

50,835

 

4,778

 

Occidental Petroleum Corp.

 

66,176

 

4,378

 

Marathon Petroleum Corp.

 

60,638

 

3,760

 

Phillips 66

 

38,471

 

3,707

 

Kinder Morgan Inc.

 

164,506

 

3,152

 

Valero Energy Corp.

 

37,212

 

3,035

 

Williams Cos. Inc.

 

106,286

 

2,837

 

Halliburton Co.

 

72,891

 

2,237

 

Pioneer Natural Resources Co.

 

14,900

 

2,100

 

Anadarko Petroleum Corp.

 

44,368

 

1,930

 

Baker Hughes a GE Co. Class A

 

22,901

 

604

 

 

 

 

 

94,195

Technology (22.0%)

 

 

 

 

 

Microsoft Corp.

 

678,691

 

76,034

 

Apple Inc.

 

375,061

 

64,942

*

Facebook Inc. Class A

 

210,994

 

34,065

*

Alphabet Inc. Class A

 

26,239

 

29,559

*

Alphabet Inc. Class C

 

26,074

 

29,201

 

Intel Corp.

 

401,079

 

21,241

 

Cisco Systems Inc.

 

395,202

 

20,460

 

Oracle Corp.

 

232,693

 

12,130

*

Adobe Inc.

 

42,869

 

11,253

 

International Business Machines Corp.

 

79,735

 

11,014

*

salesforce.com Inc.

 

63,783

 

10,438

 

Broadcom Inc.

 

34,455

 

9,487

 

Texas Instruments Inc.

 

84,313

 

8,919

 

NVIDIA Corp.

 

50,886

 

7,850

 

QUALCOMM Inc.

 

106,390

 

5,680

 

Intuit Inc.

 

21,693

 

5,361

*

Micron Technology Inc.

 

99,490

 

4,067

 

Cognizant Technology Solutions Corp. Class A

 

50,817

 

3,607

 

6

 

Mega Cap Index Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Analog Devices Inc.

 

32,435

 

3,469

 

Applied Materials Inc.

 

86,202

 

3,305

 

HP Inc.

 

138,818

 

2,739

 

Corning Inc.

 

70,083

 

2,440

 

Lam Research Corp.

 

13,580

 

2,391

 

Hewlett Packard Enterprise Co.

 

129,298

 

2,118

*

ServiceNow Inc.

 

7,856

 

1,881

 

DXC Technology Co.

 

24,631

 

1,622

*

Workday Inc. Class A

 

6,494

 

1,285

 

VMware Inc. Class A

 

6,704

 

1,152

 

 

 

 

 

387,710

Telecommunications (2.4%)

 

 

 

 

 

Verizon Communications Inc.

 

362,918

 

20,657

 

AT&T Inc.

 

639,345

 

19,896

*

T-Mobile US Inc.

 

26,046

 

1,881

*

Sprint Corp.

 

53,027

 

337

 

 

 

 

 

42,771

Utilities (2.6%)

 

 

 

 

 

NextEra Energy Inc.

 

41,933

 

7,872

 

Duke Energy Corp.

 

62,509

 

5,605

 

Dominion Energy Inc.

 

65,931

 

4,885

 

Southern Co.

 

88,943

 

4,420

 

Exelon Corp.

 

84,855

 

4,123

 

American Electric Power Co. Inc.

 

43,256

 

3,510

 

Sempra Energy

 

22,835

 

2,750

 

Public Service Enterprise Group Inc.

 

44,334

 

2,607

 

Xcel Energy Inc.

 

45,153

 

2,477

 

Consolidated Edison Inc.

 

28,534

 

2,353

 

PPL Corp.

 

63,262

 

2,035

 

Edison International

 

28,935

 

1,733

*

PG&E Corp.

 

22,614

 

385

 

 

 

 

 

44,755

Total Common Stocks

(Cost $1,158,989)

 

 

 

1,753,013

Temporary Cash Investments (0.2%)1

 

 

 

 

Money Market Fund (0.2%)

 

 

 

 

2,3

Vanguard Market Liquidity Fund, 2.563%

 

30,307

 

3,031

 

 

 

 

 

 

 

 

 

Face

 

 

 

 

 

Amount

 

 

 

 

 

($000)

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

4

United States Treasury Bill, 2.477%, 7/18/19

 

600

 

594

Total Temporary Cash Investments

(Cost $3,625)

 

 

 

3,625

Total Investments (99.8%)

(Cost $1,162,614)

 

 

 

1,756,638

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

 

 

 

($000)

Other Assets and Liabilities (0.2%)

 

 

 

 

Other Assets

 

 

 

 

Investment in Vanguard

 

 

 

87

Receivables for Accrued Income

 

 

 

3,879

Other Assets

 

 

 

16

Total Other Assets

 

 

 

3,982

Liabilities

 

 

 

 

Payables for Investment Securities

 

 

 

 

Purchased

 

 

 

(9)

Collateral for Securities on Loan

 

 

 

(789)

Payables to Vanguard

 

 

 

(412)

Variation Margin Payable—Futures Contracts

 

 

 

(22)

Total Liabilities

 

 

 

(1,232)

Net Assets (100%)

 

 

 

1,759,388

 

7

 

Mega Cap Index Fund

 

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

 

Amount

 

 

 

 

 

($000)

Paid-in Capital

 

 

 

1,182,356

Total Distributable Earnings (Loss)

 

 

 

577,032

Net Assets

 

 

 

1,759,388

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

 

Applicable to 16,975,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

1,634,204

Net Asset Value Per Share—ETF Shares

 

 

 

$96.27

 

 

 

 

 

Institutional Shares—Net Assets

 

 

 

 

Applicable to 659,520 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

125,184

Net Asset Value Per Share—Institutional Shares

 

 

 

$189.81

 

·    See Note A in Notes to Financial Statements.

*     Non-income-producing security.

^    Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $773,000.

1   The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.9% and -0.1%, respectively, of net assets.

2   Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

3   Includes $789,000 of collateral received for securities on loan.

4   Securities with a value of $396,000 have been segregated as initial margin for open futures contracts.

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($000)

 

 

 

 

 

 

 

 

 

Value and

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

Long (Short)

 

Notional

 

Appreciation

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation)

Long Futures Contracts

 

 

 

 

 

 

 

 

E-mini S&P 500 Index

 

March 2019

 

42

 

5,848

 

429

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

8

 

Mega Cap Index Fund

 

 

Statement of Operations

 

 

Six Months Ended

 

February 28, 2019

 

($000)

Investment Income

 

Income

 

Dividends

19,090

Interest1

45

Securities Lending—Net

19

Total Income

19,154

Expenses

 

The Vanguard Group—Note B

 

Investment Advisory Services

222

Management and Administrative—ETF Shares

182

Management and Administrative—Institutional Shares

15

Marketing and Distribution—ETF Shares

30

Marketing and Distribution—Institutional Shares

2

Custodian Fees

14

Shareholders’ Reports—ETF Shares

92

Shareholders’ Reports—Institutional Shares

—

Total Expenses

557

Net Investment Income

18,597

Realized Net Gain (Loss)

 

Investment Securities Sold1,2

4,274

Futures Contracts

(767)

Realized Net Gain (Loss)

3,507

Change in Unrealized Appreciation (Depreciation)

 

Investment Securities1

(63,806)

Futures Contracts

312

Change in Unrealized Appreciation (Depreciation)

(63,494)

Net Increase (Decrease) in Net Assets Resulting from Operations

(41,390)

 

1   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $34,000, ($1,000), and $1,000, respectively. Purchases and sales are for temporary cash investment purposes.

2   Includes $1,510,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

9

 

Mega Cap Index Fund

 

 

Statement of Changes in Net Assets

 

 

Six Months Ended

 

Year Ended

 

February 28,

 

August 31,

 

2019

 

2018

 

($000)

 

($000)

Increase (Decrease) in Net Assets

 

 

 

Operations

 

 

 

Net Investment Income

18,597

 

29,430

Realized Net Gain (Loss)

3,507

 

26,638

Change in Unrealized Appreciation (Depreciation)

(63,494)

 

222,939

Net Increase (Decrease) in Net Assets Resulting from Operations

(41,390)

 

279,007

Distributions

 

 

 

Net Investment Income

 

 

 

ETF Shares

(15,648)

 

(26,493)

Institutional Shares

(1,219)

 

(2,518)

Realized Capital Gain

 

 

 

ETF Shares

—

 

—

Institutional Shares

—

 

—

Total Distributions

(16,867)

 

(29,011)

Capital Share Transactions

 

 

 

ETF Shares

146,798

 

80,628

Institutional Shares

7,485

 

(31,572)

Net Increase (Decrease) from Capital Share Transactions

154,283

 

49,056

Total Increase (Decrease)

96,026

 

299,052

Net Assets

 

 

 

Beginning of Period

1,663,362

 

1,364,310

End of Period

1,759,388

 

1,663,362

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

10

 

Mega Cap Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

For a Share Outstanding

Six Months
Ended
February 28,

 

Year Ended August 31,

 

Throughout Each Period

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

$100.26

 

$85.02

 

$74.19

 

$67.35

 

$68.69

 

$55.99

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

1.079

1

1.790

1

1.676

1

1.582

 

1.399

 

1.250

 

Net Realized and Unrealized Gain (Loss) on Investments

(4.073

)

15.214

 

10.788

 

6.793

 

(1.377

)

12.687

 

Total from Investment Operations

(2.994

)

17.004

 

12.464

 

8.375

 

.022

 

13.937

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(.996

)

(1.764

)

(1.634

)

(1.535

)

(1.362

)

(1.237

)

Distributions from Realized Capital Gains

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

(.996

)

(1.764

)

(1.634

)

(1.535

)

(1.362

)

(1.237

)

Net Asset Value, End of Period

$96.27

 

$100.26

 

$85.02

 

$74.19

 

$67.35

 

$68.69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

-2.91%

 

20.25%

 

17.01%

 

12.61%

 

-0.05%

 

25.13%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$1,634

 

$1,542

 

$1,233

 

$1,057

 

$970

 

$810

 

Ratio of Total Expenses to Average Net Assets

0.07%

 

0.07%

 

0.07%

 

0.07%

 

0.09%

 

0.11%

 

Ratio of Net Investment Income to Average Net Assets

2.32%

 

1.93%

 

2.12%

 

2.23%

 

2.02%

 

2.00%

 

Portfolio Turnover Rate2

3%

 

4%

 

6%

 

7%

 

8%

 

6%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1   Calculated based on average shares outstanding.

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

11

 

Mega Cap Index Fund

 

 

Financial Highlights

 

 

Institutional Shares

 

For a Share Outstanding

Six Months
Ended
February 28,

 

Year Ended August 31,

 

Throughout Each Period

2019

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net Asset Value, Beginning of Period

$197.68

 

$167.62

 

$146.25

 

$132.77

 

$135.41

 

$110.38

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

2.137

1

3.513

1

3.362

1

3.117

 

2.798

 

2.498

 

Net Realized and Unrealized Gain (Loss) on Investments

(8.035

)

30.038

 

21.220

 

13.419

 

(2.717

)

25.000

 

Total from Investment Operations

(5.898

)

33.551

 

24.582

 

16.536

 

.081

 

27.498

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(1.972

)

(3.491

)

(3.212

)

(3.056

)

(2.721

)

(2.468

)

Distributions from Realized Capital Gains

—

 

—

 

—

 

—

 

—

 

—

 

Total Distributions

(1.972

)

(3.491

)

(3.212

)

(3.056

)

(2.721

)

(2.468

)

Net Asset Value, End of Period

$189.81

 

$197.68

 

$167.62

 

$146.25

 

$132.77

 

$135.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

-2.92%

 

20.26%

 

17.02%

 

12.63%

 

-0.01%

 

25.15%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$125

 

$122

 

$132

 

$133

 

$298

 

$314

 

Ratio of Total Expenses to Average Net Assets

0.06%

 

0.06%

 

0.06%

 

0.06%

 

0.06%

 

0.08%

 

Ratio of Net Investment Income to Average Net Assets

2.33%

 

1.94%

 

2.13%

 

2.24%

 

2.05%

 

2.03%

 

Portfolio Turnover Rate2

3%

 

4%

 

6%

 

7%

 

8%

 

6%

 

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1   Calculated based on average shares outstanding.

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

12

 

Mega Cap Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Mega Cap Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

13

 

Mega Cap Index Fund

 

 

 

 

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

14

 

Mega Cap Index Fund

 

 

 

 

 

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $87,000, representing 0.00% of the fund’s net assets and 0.03% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

15

 

Mega Cap Index Fund

 

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

1,753,013

 

—

 

—

 

Temporary Cash Investments

 

3,031

 

594

 

—

 

Futures Contracts—Liabilities1

 

(22

)

—

 

—

 

Total

 

1,756,022

 

594

 

—

 

 

1 Represents variation margin on the last day of the reporting period.

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

1,162,614

 

Gross Unrealized Appreciation

 

643,374

 

Gross Unrealized Depreciation

 

(49,350

)

Net Unrealized Appreciation (Depreciation)

 

594,024

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $6,203,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $21,111,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $184,104,000 of investment securities and sold $29,739,000 of investment securities, other than temporary cash investments. Purchases and sales include $141,717,000 and $2,523,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

16

 

Mega Cap Index Fund

 

 

 

 

 

F.  Capital share transactions for each class of shares were:

 

 

 

Six Months Ended
February 28, 2019

 

Year Ended
August 31, 2018

 

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

 

($000

)

(000

)

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

Issued

 

149,322

 

1,625

 

146,233

 

1,575

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

 

Redeemed

 

(2,524

)

(25

)

(65,605

)

(700

)

Net Increase (Decrease)—ETF Shares

 

146,798

 

1,600

 

80,628

 

875

 

Institutional Shares

 

 

 

 

 

 

 

 

 

Issued

 

14,595

 

80

 

5,389

 

31

 

Issued in Lieu of Cash Distributions

 

325

 

2

 

1,242

 

7

 

Redeemed

 

(7,435

)

(39

)

(38,203

)

(207

)

Net Increase (Decrease)—Institutional Shares

 

7,485

 

43

 

(31,572

)

(169

)

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

17

 

Mega Cap Growth Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Basic Materials

 

1.6

%

Consumer Goods

 

6.6

 

Consumer Services

 

22.8

 

Financials

 

11.6

 

Health Care

 

10.5

 

Industrials

 

12.6

 

Oil & Gas

 

2.3

 

Technology

 

31.8

 

Telecommunications

 

0.2

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. Sector categories are based on the Industry Classification Benchmark (“ICB”), except for the “Other” category (if applicable), which includes securities that have not been provided an ICB classification as of the effective reporting period.

 

18

 

Mega Cap Growth Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (99.9%)1

 

 

 

 

Basic Materials (1.6%)

 

 

 

 

 

Linde plc

 

228,559

 

39,596

 

Ecolab Inc.

 

107,840

 

18,215

 

Nucor Corp.

 

130,309

 

7,893

 

 

 

 

 

65,704

Consumer Goods (6.6%)

 

 

 

 

 

Philip Morris International Inc.

 

644,638

 

56,045

 

NIKE Inc. Class B

 

527,926

 

45,259

 

Altria Group Inc.

 

779,148

 

40,835

 

Colgate-Palmolive Co.

 

359,643

 

23,690

*,^

Tesla Inc.

 

53,383

 

17,076

 

Estee Lauder Cos. Inc. Class A

 

91,283

 

14,326

 

Activision Blizzard Inc.

 

300,637

 

12,669

*

Electronic Arts Inc.

 

125,161

 

11,988

*

Monster Beverage Corp.

 

171,995

 

10,978

 

Constellation Brands Inc. Class A

 

62,045

 

10,496

 

Kraft Heinz Co.

 

252,914

 

8,394

 

Hershey Co.

 

58,669

 

6,494

 

Brown-Forman Corp. Class B

 

122,758

 

6,075

 

Keurig Dr Pepper Inc.

 

42,842

 

1,077

 

 

 

 

 

265,402

Consumer Services (22.7%)

 

 

 

 

*

Amazon.com Inc.

 

172,360

 

282,641

 

Home Depot Inc.

 

468,354

 

86,711

 

Comcast Corp. Class A

 

1,882,584

 

72,800

 

Walt Disney Co.

 

586,401

 

66,169

*

Netflix Inc.

 

171,787

 

61,517

 

McDonald’s Corp.

 

319,633

 

58,761

 

Costco Wholesale Corp.

 

181,712

 

39,748

 

Starbucks Corp.

 

488,672

 

34,334

 

Lowe’s Cos. Inc.

 

318,450

 

33,466

*

Booking Holdings Inc.

 

19,179

 

32,548

 

TJX Cos. Inc.

 

487,535

 

25,006

*

Charter Communications Inc. Class A

 

66,460

 

22,923

 

Ross Stores Inc.

 

154,812

 

14,681

 

Marriott International Inc. Class A

 

106,110

 

13,292

 

Dollar General Corp.

 

110,133

 

13,046

*

O’Reilly Automotive Inc.

 

33,233

 

12,361

 

Yum! Brands Inc.

 

129,622

 

12,249

 

Southwest Airlines Co.

 

209,887

 

11,762

 

Hilton Worldwide Holdings Inc.

 

122,926

 

10,215

*

AutoZone Inc.

 

5,251

 

4,931

 

Sirius XM Holdings Inc.

 

594,048

 

3,523

 

 

 

 

 

912,684

Financials (11.6%)

 

 

 

 

 

Visa Inc. Class A

 

729,765

 

108,093

 

Mastercard Inc. Class A

 

381,051

 

85,649

 

American Tower Corp.

 

182,594

 

32,164

 

Simon Property Group Inc.

 

128,247

 

23,233

 

Charles Schwab Corp.

 

504,045

 

23,191

 

S&P Global Inc.

 

104,084

 

20,855

 

Crown Castle International Corp.

 

171,983

 

20,423

 

Marsh & McLennan Cos. Inc.

 

208,901

 

19,432

 

Prologis Inc.

 

260,984

 

18,284

 

Intercontinental Exchange Inc.

 

236,164

 

18,220

 

Aon plc

 

99,903

 

17,136

 

Equinix Inc.

 

33,384

 

14,138

 

Public Storage

 

61,491

 

13,005

 

BlackRock Inc.

 

22,907

 

10,153

 

T. Rowe Price Group Inc.

 

94,844

 

9,525

 

Boston Properties Inc.

 

64,090

 

8,504

 

TD Ameritrade Holding Corp.

 

116,396

 

6,557

 

Welltower Inc.

 

77,992

 

5,796

 

AvalonBay Communities Inc.

 

28,624

 

5,571

 

19

 

Mega Cap Growth Index Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Ventas Inc.

 

73,860

 

4,635

 

Interactive Brokers Group Inc.

 

29,379

 

1,623

 

 

 

 

 

466,187

Health Care (10.5%)

 

 

 

 

 

Medtronic plc

 

558,173

 

50,515

 

AbbVie Inc.

 

623,727

 

49,424

 

Thermo Fisher Scientific Inc.

 

166,939

 

43,332

 

Bristol-Myers Squibb Co.

 

676,805

 

34,964

 

Becton Dickinson and Co.

 

111,247

 

27,677

*

Biogen Inc.

 

83,498

 

27,388

*

Intuitive Surgical Inc.

 

47,307

 

25,906

*

Celgene Corp.

 

289,882

 

24,095

 

Stryker Corp.

 

124,164

 

23,406

*

Boston Scientific Corp.

 

573,818

 

23,021

*

Vertex Pharmaceuticals Inc.

 

106,005

 

20,008

*

Illumina Inc.

 

61,716

 

19,303

 

Zoetis Inc.

 

199,202

 

18,771

*

Regeneron Pharmaceuticals Inc.

 

33,126

 

14,269

*

Alexion Pharmaceuticals Inc.

 

87,977

 

11,906

 

Baxter International Inc.

 

104,855

 

7,836

 

 

 

 

 

421,821

Industrials (12.6%)

 

 

 

 

 

Boeing Co.

 

223,748

 

98,440

 

Union Pacific Corp.

 

305,522

 

51,236

 

3M Co.

 

241,499

 

50,085

*

PayPal Holdings Inc.

 

464,068

 

45,511

 

Accenture plc Class A

 

264,722

 

42,721

 

United Parcel Service Inc. Class B

 

288,229

 

31,763

 

Lockheed Martin Corp.

 

100,249

 

31,018

 

Automatic Data Processing Inc.

 

172,456

 

26,391

 

Illinois Tool Works Inc.

 

123,884

 

17,849

 

Danaher Corp.

 

130,778

 

16,611

 

Sherwin-Williams Co.

 

34,915

 

15,125

 

Fidelity National Information Services Inc.

 

135,831

 

14,690

 

Raytheon Co.

 

58,951

 

10,994

 

Agilent Technologies Inc.

 

131,943

 

10,482

 

Paychex Inc.

 

134,072

 

10,326

 

Fortive Corp.

 

124,508

 

10,156

 

Rockwell Automation Inc.

 

50,036

 

8,934

 

FedEx Corp.

 

49,159

 

8,898

*

Square Inc.

 

60,717

 

4,933

 

 

 

 

 

506,163

Oil & Gas (2.3%)

 

 

 

 

 

Schlumberger Ltd.

 

574,221

 

25,300

 

EOG Resources Inc.

 

240,521

 

22,609

 

Occidental Petroleum Corp.

 

313,107

 

20,712

 

Pioneer Natural Resources Co.

 

70,622

 

9,954

 

Anadarko Petroleum Corp.

 

209,147

 

9,098

 

Baker Hughes a GE Co. Class A

 

106,822

 

2,818

 

 

 

 

 

90,491

Technology (31.8%)

 

 

 

 

 

Apple Inc.

 

1,770,961

 

306,642

 

Microsoft Corp.

 

1,602,498

 

179,528

*

Facebook Inc. Class A

 

996,205

 

160,837

*

Alphabet Inc. Class A

 

123,951

 

139,637

*

Alphabet Inc. Class C

 

123,186

 

137,958

*

Adobe Inc.

 

202,372

 

53,123

*

salesforce.com Inc.

 

301,325

 

49,312

 

Broadcom Inc.

 

162,861

 

44,845

 

Texas Instruments Inc.

 

398,273

 

42,129

 

NVIDIA Corp.

 

240,347

 

37,076

 

Intuit Inc.

 

102,286

 

25,278

*

Micron Technology Inc.

 

470,335

 

19,227

 

Cognizant Technology Solutions Corp. Class A

 

240,065

 

17,040

 

Analog Devices Inc.

 

153,437

 

16,412

 

Applied Materials Inc.

 

407,583

 

15,627

 

Lam Research Corp.

 

64,344

 

11,330

*

ServiceNow Inc.

 

37,219

 

8,912

*

Workday Inc. Class A

 

30,834

 

6,103

 

VMware Inc. Class A

 

31,585

 

5,427

 

 

 

 

 

1,276,443

Telecommunications (0.2%)

 

 

 

 

*

T-Mobile US Inc.

 

123,116

 

8,890

Total Common Stocks

(Cost $2,803,668)

 

 

 

4,013,785

Temporary Cash Investments (0.1%)1

 

 

 

 

Money Market Fund (0.1%)

 

 

 

 

2,3

Vanguard Market Liquidity Fund, 2.563%

 

37,999

 

3,800

 

 

 

 

 

 

 

 

 

Face

 

 

 

 

 

Amount

 

 

 

 

 

($000)

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

4

United States Treasury Bill, 2.479%, 5/9/19

 

600

 

598

Total Temporary Cash Investments

(Cost $4,398)

 

 

 

4,398

Total Investments (100.0%)

(Cost $2,808,066)

 

 

 

4,018,183

 

20

 

Mega Cap Growth Index Fund

 

 

 

 

 

 

Amount

 

 

 

 

 

($000)

Other Assets and Liabilities (0.0%)

 

 

 

 

Other Assets

 

 

 

 

Investment in Vanguard

 

 

 

201

Receivables for Accrued Income

 

 

 

3,945

Total Other Assets

 

 

 

4,146

Liabilities

 

 

 

 

Payables for Investment Securities Purchased

 

 

 

(7)

Collateral for Securities on Loan

 

 

 

(2,351)

Payables for Capital Shares Redeemed

 

 

 

(83)

Payables to Vanguard

 

 

 

(682)

Variation Margin Payable—Futures Contracts

 

 

 

(14)

Total Liabilities

 

 

 

(3,137)

Net Assets (100%)

 

 

 

4,019,192

 

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

 

Amount

 

 

 

 

 

($000)

Paid-in Capital

 

 

 

2,908,185

Total Distributable Earnings (Loss)

 

 

 

1,111,007

Net Assets

 

 

 

4,019,192

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

 

Applicable to 33,039,005 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

3,977,275

Net Asset Value Per Share— ETF Shares

 

 

 

$120.38

 

Institutional Shares—Net Assets

 

 

 

 

Applicable to 175,304 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

41,917

Net Asset Value Per Share— Institutional Shares

 

 

 

$239.11

 

·    See Note A in Notes to Financial Statements.

*     Non-income-producing security.

^    Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $2,335,000.

1   The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.

2   Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

3   Includes $2,351,000 of collateral received for securities on loan.

4   Securities with a value of $348,000 have been segregated as initial margin for open futures contracts.

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($000)

 

 

 

 

 

 

 

 

 

Value and

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

Long (Short)

 

Notional

 

Appreciation

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation)

Long Futures Contracts

 

 

 

 

 

 

 

 

E-mini S&P 500 Index

 

March 2019

 

27

 

3,759

 

262

E-mini NASDAQ 100 Index

 

March 2019

 

11

 

1,563

 

—

 

 

 

 

 

 

 

 

262

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

21

 

Mega Cap Growth Index Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

February 28, 2019

 

 

($000)

Investment Income

 

 

Income

 

 

Dividends

 

26,626

Interest1

 

603

Securities Lending—Net

 

104

Total Income

 

27,333

Expenses

 

 

The Vanguard Group—Note B

 

 

Investment Advisory Services

 

520

Management and Administrative—ETF Shares

 

678

Management and Administrative—Institutional Shares

 

6

Marketing and Distribution—ETF Shares

 

80

Marketing and Distribution—Institutional Shares

 

—

Custodian Fees

 

11

Shareholders’ Reports—ETF Shares

 

52

Shareholders’ Reports—Institutional Shares

 

—

Trustees’ Fees and Expenses

 

1

Total Expenses

 

1,348

Net Investment Income

 

25,985

Realized Net Gain (Loss)

 

 

Investment Securities Sold1,2

 

40,058

Futures Contracts

 

259

Swap Contracts

 

(17,126)

Realized Net Gain (Loss)

 

23,191

Change in Unrealized Appreciation (Depreciation)

 

 

Investment Securities1

 

(276,107)

Futures Contracts

 

(9)

Swap Contracts

 

(4,297)

Change in Unrealized Appreciation (Depreciation)

 

(280,413)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(231,237)

 

1   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $595,000, ($5,000), and ($13,000), respectively. Purchases and sales are for temporary cash investment purposes.

2   Includes $65,720,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

22

 

Mega Cap Growth Index Fund

 

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

 

Year Ended

 

 

February 28,

 

August 31,

 

 

2019

 

2018

 

 

($000)

 

($000)

Increase (Decrease) in Net Assets

 

 

 

 

Operations

 

 

 

 

Net Investment Income

 

25,985

 

47,049

Realized Net Gain (Loss)

 

23,191

 

161,806

Change in Unrealized Appreciation (Depreciation)

 

(280,413)

 

584,011

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(231,237)

 

792,866

Distributions

 

 

 

 

Net Investment Income

 

 

 

 

ETF Shares

 

(16,777)

 

(45,748)

Institutional Shares

 

(162)

 

(494)

Realized Capital Gain

 

 

 

 

ETF Shares

 

—

 

—

Institutional Shares

 

—

 

—

Total Distributions

 

(16,939)

 

(46,242)

Capital Share Transactions

 

 

 

 

ETF Shares

 

71,070

 

278,307

Institutional Shares

 

1,235

 

538

Net Increase (Decrease) from Capital Share Transactions

 

72,305

 

278,845

Total Increase (Decrease)

 

(175,871)

 

1,025,469

Net Assets

 

 

 

 

Beginning of Period

 

4,195,063

 

3,169,594

End of Period

 

4,019,192

 

4,195,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

23

 

Mega Cap Growth Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

 

Six Months

Ended

February 28,

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding
Throughout Each Period

 

 

 

 

 

 

Year Ended August 31,

 

 

2018

 

2017

 

2016

 

2015

 

2014

Net Asset Value, Beginning of Period

 

$127.79

 

$104.09

 

$87.15

 

$80.22

 

$79.16

 

$62.69

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

.7831

 

1.4851

 

1.3511

 

1.269

 

1.148

 

.994

Net Realized and Unrealized Gain (Loss) on Investments

 

(7.680)

 

23.677

 

16.920

 

6.897

 

1.013

 

16.475

Total from Investment Operations

 

(6.897)

 

25.162

 

18.271

 

8.166

 

2.161

 

17.469

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(.513)

 

(1.462)

 

(1.331)

 

(1.236)

 

(1.101)

 

(.999)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

Total Distributions

 

(.513)

 

(1.462)

 

(1.331)

 

(1.236)

 

(1.101)

 

(.999)

Net Asset Value, End of Period

 

$120.38

 

$127.79

 

$104.09

 

$87.15

 

$80.22

 

$79.16

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-5.40%

 

24.38%

 

21.17%

 

10.28%

 

2.70%

 

28.05%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$3,977

 

$4,152

 

$3,135

 

$2,247

 

$1,928

 

$1,520

Ratio of Total Expenses to Average Net Assets

 

0.07%

 

0.07%

 

0.07%

 

0.07%

 

0.09%

 

0.11%

Ratio of Net Investment Income to Average Net Assets

 

1.37%

 

1.29%

 

1.43%

 

1.55%

 

1.43%

 

1.40%

Portfolio Turnover Rate2

 

12%

 

9%

 

8%

 

12%

 

9%

 

11%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1   Calculated based on average shares outstanding.

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

24

 

Mega Cap Growth Index Fund

 

 

Financial Highlights

 

 

Institutional Shares

 

 

 

Six Months

Ended

February 28,

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For a Share Outstanding
Throughout Each Period

 

 

 

 

 

 

Year Ended August 31,

 

 

2018

 

2017

 

2016

 

2015

 

2014

Net Asset Value, Beginning of Period

 

$253.80

 

$206.74

 

$173.07

 

$159.31

 

$157.21

 

$124.49

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

1.5401

 

2.9631

 

2.6991

 

2.528

 

2.293

 

1.978

Net Realized and Unrealized Gain (Loss) on Investments

 

(15.214)

 

47.023

 

33.622

 

13.693

 

2.011

 

32.732

Total from Investment Operations

 

(13.674)

 

49.986

 

36.321

 

16.221

 

4.304

 

34.710

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

 

(1.016)

 

(2.926)

 

(2.651)

 

(2.461)

 

(2.204)

 

(1.990)

Distributions from Realized Capital Gains

 

—

 

—

 

—

 

—

 

—

 

—

Total Distributions

 

(1.016)

 

(2.926)

 

(2.651)

 

(2.461)

 

(2.204)

 

(1.990)

Net Asset Value, End of Period

 

$239.11

 

$253.80

 

$206.74

 

$173.07

 

$159.31

 

$157.21

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return

 

-5.39%

 

24.39%

 

21.20%

 

10.28%

 

2.71%

 

28.07%

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

 

$42

 

$43

 

$35

 

$30

 

$35

 

$15

Ratio of Total Expenses to Average Net Assets

 

0.06%

 

0.06%

 

0.06%

 

0.06%

 

0.08%

 

0.10%

Ratio of Net Investment Income to Average Net Assets

 

1.38%

 

1.30%

 

1.44%

 

1.56%

 

1.44%

 

1.41%

Portfolio Turnover Rate2

 

12%

 

9%

 

8%

 

12%

 

9%

 

11%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

1   Calculated based on average shares outstanding.

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

25

 

Mega Cap Growth Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Mega Cap Growth Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

 

26

 

Mega Cap Growth Index Fund

 

 

 

 

 

3. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

The notional amounts of swap contracts are not recorded in the Statement of Net Assets. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until termination of the swap, at which time realized gain (loss) is recorded.

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

During the six months ended February 28, 2019, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period. The fund had no open swap contracts at February 28, 2019.

 

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

27

 

Mega Cap Growth Index Fund

 

 

 

 

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

28

 

Mega Cap Growth Index Fund

 

 

 

 

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $201,000, representing 0.01% of the fund’s net assets and 0.08% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

Common Stocks

 

4,013,785

 

—

 

—

 

Temporary Cash Investments

 

3,800

 

598

 

—

 

Futures Contracts—Liabilities1

 

(14

)

—

 

—

 

Total

 

4,017,571

 

598

 

—

 

 

1 Represents variation margin on the last day of the reporting period.

 

29

 

Mega Cap Growth Index Fund

 

 

 

 

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

2,808,066

 

Gross Unrealized Appreciation

 

1,308,283

 

Gross Unrealized Depreciation

 

(98,166

)

Net Unrealized Appreciation (Depreciation)

 

1,210,117

 

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $4,562,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $68,763,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $513,021,000 of investment securities and sold $369,286,000 of investment securities, other than temporary cash investments. Purchases and sales include $192,616,000 and $126,108,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

The fund purchased securities from and sold securities to other Vanguard funds or accounts managed by Vanguard or its affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the six months ended February 28, 2019, such purchases and sales were $12,198,000 and $58,382,000, respectively; these amounts are included in the purchases and sales of investment securities noted above.

 

30

 

Mega Cap Growth Index Fund

 

 

 

 

 

F. Capital share transactions for each class of shares were:

 

 

 

Six Months Ended
February 28, 2019

 

Year Ended
August 31, 2018

 

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

 

($000

)

(000)

 

($000

)

(000

)

ETF Shares

 

 

 

 

 

 

 

 

 

Issued

 

198,169

 

1,700

 

649,537

 

5,625

 

Issued in Lieu of Cash Distributions

 

—

 

—

 

—

 

—

 

Redeemed

 

(127,099

)

(1,150)

 

(371,230

)

(3,250

)

Net Increase (Decrease)—ETF Shares

 

71,070

 

550

 

278,307

 

2,375

 

Institutional Shares

 

 

 

 

 

 

 

 

 

Issued

 

18,467

 

79

 

3,509

 

14

 

Issued in Lieu of Cash Distributions

 

120

 

—

 

344

 

2

 

Redeemed

 

(17,352

)

(75)

 

(3,315

)

(14

)

Net Increase (Decrease)—Institutional Shares

 

1,235

 

4

 

538

 

2

 

 

G. Due to an index rebalance in March 2019, and in order to closely track the composition of the fund’s target index, more than 25% of the fund’s total assets are invested in issuers representing more than 5% of the fund’s total assets. As a result, the fund is nondiversified under the Investment Company Act of 1940, although it continues to hold more than 100 stocks across a number of sectors.

 

Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

31

 

Mega Cap Value Index Fund

 

 

Sector Diversification

As of February 28, 2019

 

Basic Materials

 

2.3

%

Consumer Goods

 

8.7

 

Consumer Services

 

6.3

 

Financials

 

23.8

 

Health Care

 

18.0

 

Industrials

 

10.1

 

Oil & Gas

 

8.3

 

Technology

 

13.0

 

Telecommunications

 

4.5

 

Utilities

 

5.0

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. Sector categories are based on the Industry Classification Benchmark (“ICB”), except for the “Other” category (if applicable), which includes securities that have not been provided an ICB classification as of the effective reporting period.

 

32

 

Mega Cap Value Index Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (99.9%)1

 

 

 

 

Basic Materials (2.3%)

 

 

 

 

 

DowDuPont Inc.

 

538,459

 

28,662

 

Air Products & Chemicals Inc.

 

51,533

 

9,337

 

PPG Industries Inc.

 

56,343

 

6,309

 

LyondellBasell Industries NV Class A

 

71,958

 

6,154

 

International Paper Co.

 

95,119

 

4,358

 

 

 

 

 

54,820

Consumer Goods (8.7%)

 

 

 

 

 

Procter & Gamble Co.

 

584,755

 

57,628

 

Coca-Cola Co.

 

899,138

 

40,767

 

PepsiCo Inc.

 

331,363

 

38,319

 

Mondelez International Inc. Class A

 

341,249

 

16,093

 

General Motors Co.

 

298,143

 

11,771

 

Kimberly-Clark Corp.

 

81,264

 

9,494

 

Ford Motor Co.

 

917,733

 

8,048

 

General Mills Inc.

 

139,789

 

6,588

 

VF Corp.

 

74,399

 

6,499

 

Archer-Daniels-Midland Co.

 

131,473

 

5,588

 

Kellogg Co.

 

65,188

 

3,667

 

Aptiv plc

 

30,797

 

2,560

 

Tyson Foods Inc. Class A

 

34,675

 

2,138

 

 

 

 

 

209,160

Consumer Services (6.2%)

 

 

 

 

 

Walmart Inc.

 

343,728

 

34,026

 

CVS Health Corp.

 

303,489

 

17,551

 

Walgreens Boots Alliance Inc.

 

189,407

 

13,484

 

Twenty-First Century Fox Inc. Class A

 

247,213

 

12,467

 

Target Corp.

 

122,506

 

8,899

 

eBay Inc.

 

214,821

 

7,980

 

Sysco Corp.

 

116,096

 

7,842

 

Delta Air Lines Inc.

 

144,790

 

7,179

 

McKesson Corp.

 

45,867

 

5,832

 

Twenty-First Century Fox Inc.

 

113,286

 

5,682

 

Las Vegas Sands Corp.

 

92,021

 

5,653

 

Kroger Co.

 

187,008

 

5,485

 

Carnival Corp.

 

92,759

 

5,358

 

CBS Corp. Class B

 

78,797

 

3,956

 

American Airlines Group Inc.

 

97,498

 

3,474

*

United Continental Holdings Inc.

 

27,251

 

2,393

 

Omnicom Group Inc.

 

26,182

 

1,982

 

AmerisourceBergen Corp. Class A

 

18,729

 

1,560

 

CBS Corp. Class A

 

1,851

 

93

 

 

 

 

 

150,896

Financials (23.8%)

 

 

 

 

*

Berkshire Hathaway Inc. Class B

 

456,466

 

91,887

 

JPMorgan Chase & Co.

 

780,517

 

81,455

 

Bank of America Corp.

 

2,073,237

 

60,290

 

Wells Fargo & Co.

 

994,352

 

49,608

 

Citigroup Inc.

 

573,184

 

36,672

 

US Bancorp

 

341,366

 

17,645

 

American Express Co.

 

160,377

 

17,279

 

Goldman Sachs Group Inc.

 

78,613

 

15,463

 

CME Group Inc.

 

83,932

 

15,268

 

Chubb Ltd.

 

102,819

 

13,767

 

Morgan Stanley

 

302,836

 

12,713

 

PNC Financial Services Group Inc.

 

97,461

 

12,282

 

Bank of New York Mellon Corp.

 

208,836

 

10,960

 

Progressive Corp.

 

136,828

 

9,975

 

Prudential Financial Inc.

 

96,974

 

9,295

 

Capital One Financial Corp.

 

111,184

 

9,293

 

BB&T Corp.

 

180,886

 

9,220

 

American International Group Inc.

 

207,692

 

8,972

 

33

 

Mega Cap Value Index Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Aflac Inc.

 

178,624

 

8,778

 

Travelers Cos. Inc.

 

62,227

 

8,271

 

MetLife Inc.

 

173,478

 

7,840

 

Allstate Corp.

 

80,995

 

7,644

 

SunTrust Banks Inc.

 

105,295

 

6,831

 

Equity Residential

 

86,275

 

6,358

 

State Street Corp.

 

84,699

 

6,087

 

BlackRock Inc.

 

12,976

 

5,751

 

Discover Financial Services

 

78,919

 

5,651

 

Synchrony Financial

 

151,760

 

4,949

 

Northern Trust Corp.

 

49,342

 

4,599

 

Weyerhaeuser Co.

 

175,823

 

4,376

 

Ameriprise Financial Inc.

 

32,660

 

4,299

 

Fifth Third Bancorp

 

154,361

 

4,257

 

Welltower Inc.

 

44,131

 

3,279

 

Ventas Inc.

 

42,031

 

2,637

 

Franklin Resources Inc.

 

32,921

 

1,074

*

Berkshire Hathaway Inc. Class A

 

1

 

302

 

 

 

 

 

575,027

Health Care (18.0%)

 

 

 

 

 

Johnson & Johnson

 

629,515

 

86,017

*

Pfizer Inc.

 

1,356,771

 

58,816

 

UnitedHealth Group Inc.

 

225,841

 

54,703

 

Merck & Co. Inc.

 

610,300

 

49,611

 

Abbott Laboratories

 

412,261

 

32,000

 

Amgen Inc.

 

149,530

 

28,423

^

Eli Lilly & Co.

 

223,723

 

28,254

 

Gilead Sciences Inc.

 

303,653

 

19,743

 

Anthem Inc.

 

60,751

 

18,270

*

Cigna Corp.

 

89,329

 

15,582

 

Allergan plc

 

79,201

 

10,907

 

Humana Inc.

 

32,231

 

9,187

 

HCA Healthcare Inc.

 

64,667

 

8,991

 

Zimmer Biomet Holdings Inc.

 

47,821

 

5,935

 

Baxter International Inc.

 

59,234

 

4,427

*

Mylan NV

 

115,179

 

3,040

 

Cardinal Health Inc.

 

34,831

 

1,893

 

 

 

 

 

435,799

Industrials (10.1%)

 

 

 

 

 

Honeywell International Inc.

 

173,695

 

26,761

 

United Technologies Corp.

 

192,377

 

24,176

 

General Electric Co.

 

2,041,696

 

21,213

 

Caterpillar Inc.

 

138,490

 

19,020

 

CSX Corp.

 

188,320

 

13,685

 

Deere & Co.

 

75,484

 

12,382

 

Northrop Grumman Corp.

 

40,813

 

11,834

 

Norfolk Southern Corp.

 

63,918

 

11,461

 

Waste Management Inc.

 

100,090

 

10,134

 

General Dynamics Corp.

 

59,027

 

10,048

 

Emerson Electric Co.

 

146,957

 

10,015

 

Danaher Corp.

 

74,065

 

9,408

 

Eaton Corp. plc

 

101,753

 

8,117

 

Johnson Controls International plc

 

217,124

 

7,658

 

TE Connectivity Ltd.

 

80,632

 

6,619

 

Raytheon Co.

 

33,356

 

6,221

 

Ingersoll-Rand plc

 

57,536

 

6,074

 

PACCAR Inc.

 

81,935

 

5,555

 

Cummins Inc.

 

35,841

 

5,523

 

Parker-Hannifin Corp.

 

31,029

 

5,466

 

FedEx Corp.

 

27,790

 

5,030

 

Stanley Black & Decker Inc.

 

35,499

 

4,701

 

Republic Services Inc. Class A

 

49,576

 

3,888

 

 

 

 

 

244,989

Oil & Gas (8.3%)

 

 

 

 

 

Exxon Mobil Corp.

 

993,711

 

78,533

 

Chevron Corp.

 

448,502

 

53,632

 

ConocoPhillips

 

270,200

 

18,333

 

Marathon Petroleum Corp.

 

162,137

 

10,054

 

Phillips 66

 

102,849

 

9,911

 

Kinder Morgan Inc.

 

440,519

 

8,440

 

Valero Energy Corp.

 

99,696

 

8,131

 

Williams Cos. Inc.

 

284,435

 

7,592

 

Halliburton Co.

 

195,060

 

5,986

 

 

 

 

 

200,612

Technology (13.0%)

 

 

 

 

 

Microsoft Corp.

 

907,089

 

101,621

 

Intel Corp.

 

1,071,271

 

56,734

 

Cisco Systems Inc.

 

1,055,298

 

54,633

 

Oracle Corp.

 

622,458

 

32,449

 

International Business Machines Corp.

 

213,339

 

29,469

 

QUALCOMM Inc.

 

284,518

 

15,190

 

HP Inc.

 

371,543

 

7,331

 

Corning Inc.

 

187,931

 

6,542

 

Hewlett Packard Enterprise Co.

 

345,888

 

5,666

 

DXC Technology Co.

 

65,568

 

4,318

 

 

 

 

 

313,953

Telecommunications (4.5%)

 

 

 

 

 

Verizon Communications Inc.

 

969,876

 

55,205

 

AT&T Inc.

 

1,708,297

 

53,162

*

Sprint Corp.

 

143,701

 

913

 

 

 

 

 

109,280

Utilities (5.0%)

 

 

 

 

 

NextEra Energy Inc.

 

112,139

 

21,051

 

Duke Energy Corp.

 

167,316

 

15,002

 

Dominion Energy Inc.

 

176,428

 

13,072

 

Southern Co.

 

238,023

 

11,827

 

34

 

Mega Cap Value Index Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Exelon Corp.

 

226,615

 

11,011

 

American Electric Power Co. Inc.

 

115,750

 

9,393

 

Sempra Energy

 

61,050

 

7,353

 

Public Service Enterprise Group Inc.

 

118,799

 

6,987

 

Xcel Energy Inc.

 

120,837

 

6,629

 

Consolidated Edison Inc.

 

76,186

 

6,281

 

PPL Corp.

 

168,898

 

5,433

 

Edison International

 

76,453

 

4,579

*

PG&E Corp.

 

60,553

 

1,031

 

 

 

 

 

119,649

Total Common Stocks
(Cost $1,926,557)

 

 

 

2,414,185

Temporary Cash Investments (0.1%)1

 

 

 

 

Money Market Fund (0.1%)

 

 

 

 

2,3

Vanguard Market Liquidity Fund, 2.563%

 

21,030

 

2,103

 

 

 

 

 

 

 

 

 

Face

 

 

 

 

 

Amount

 

 

 

 

 

($000)

 

 

U.S. Government and Agency Obligations (0.0%)

 

 

 

 

 

United States Treasury Bill, 2.365%, 3/21/19

 

100

 

100

4

United States Treasury Bill, 2.429%, 4/11/19

 

500

 

499

 

 

 

 

 

599

Total Temporary Cash Investments
(Cost $2,702)

 

 

 

2,702

Total Investments (100.0%)
(Cost $1,929,259)

 

 

 

2,416,887

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

 

 

 

($000)

Other Assets and Liabilities (0.0%)

 

 

 

 

Other Assets

 

 

 

 

Investment in Vanguard

 

 

 

121

Receivables for Accrued Income

 

 

 

8,123

Receivables for Capital Shares Issued

 

 

 

3

Total Other Assets

 

 

 

8,247

Liabilities

 

 

 

 

Payables for Investment Securities Purchased

 

 

 

(2)

Collateral for Securities on Loan

 

 

 

(2,101)

Payables for Capital Shares Redeemed

 

 

 

(144)

Payables to Vanguard

 

 

 

(447)

Variation Margin Payable—Futures Contracts

 

 

 

(8)

Other Liabilities

 

 

 

(5,080)

Total Liabilities

 

 

 

(7,782)

Net Assets (100%)

 

 

 

2,417,352

 

35

 

Mega Cap Value Index Fund

 

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

 

Amount

 

 

 

 

 

($000)

Paid-in Capital

 

 

 

1,944,734

Total Distributable Earnings (Loss)

 

 

 

472,618

Net Assets

 

 

 

2,417,352

 

 

 

 

 

ETF Shares—Net Assets

 

 

 

 

Applicable to 29,434,057 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

2,300,063

Net Asset Value Per Share— ETF Shares

 

 

 

$78.14

 

 

 

 

 

Institutional Shares—Net Assets

 

 

 

 

Applicable to 756,952 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

117,289

Net Asset Value Per Share— Institutional Shares

 

 

 

$154.95

 

·    See Note A in Notes to Financial Statements.

 

^    Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $2,057,000.

 

*     Non-income-producing security.

 

1   The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.

 

2   Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

3   Includes $2,101,000 of collateral received for securities on loan.

 

4   Securities with a value of $349,000 have been segregated as initial margin for open futures contracts.

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($000

)

 

 

 

 

 

 

 

 

Value and

 

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

 

Long (Short)

 

Notional

 

Appreciation

 

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation

)

Long Futures Contracts

 

 

 

 

 

 

 

 

 

E-mini S&P 500 Index

 

March 2019

 

24

 

3,342

 

27

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

36

 

Mega Cap Value Index Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

February 28, 2019

 

($000)

Investment Income

 

Income

 

Dividends

36,678

Interest1

23

Total Income

36,701

Expenses

 

The Vanguard Group—Note B

 

Investment Advisory Services

305

Management and Administrative—ETF Shares

377

Management and Administrative—Institutional Shares

18

Marketing and Distribution—ETF Shares

46

Marketing and Distribution—Institutional Shares

1

Custodian Fees

8

Shareholders’ Reports—ETF Shares

21

Shareholders’ Reports—Institutional Shares

1

Total Expenses

777

Net Investment Income

35,924

Realized Net Gain (Loss)

 

Investment Securities Sold1,2

61,600

Futures Contracts

269

Realized Net Gain (Loss)

61,869

Change in Unrealized Appreciation (Depreciation)

 

Investment Securities1

(116,361)

Futures Contracts

(33)

Change in Unrealized Appreciation (Depreciation)

(116,394)

Net Increase (Decrease) in Net Assets Resulting from Operations

(18,601)

 

1   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $17,000, $1,000, and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

2   Includes $57,590,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

37

 

Mega Cap Value Index Fund

 

 

Statement of Changes in Net Assets

 

 

 

Six Months Ended

Year Ended

 

February 28,

August 31,

 

2019

 

2018

 

($000)

($000)

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net Investment Income

35,924

51,263

Realized Net Gain (Loss)

61,869

33,613

Change in Unrealized Appreciation (Depreciation)

(116,394)

228,709

Net Increase (Decrease) in Net Assets Resulting from Operations

(18,601)

313,585

Distributions

 

 

Net Investment Income

 

 

ETF Shares

(27,997)

(47,205)

Institutional Shares

(1,590)

(3,196)

Realized Capital Gain

 

 

ETF Shares

—

—

Institutional Shares

—

—

Total Distributions

(29,587)

(50,401)

Capital Share Transactions

 

 

ETF Shares

226,006

156,383

Institutional Shares

(10,606)

(11,494)

Net Increase (Decrease) from Capital Share Transactions

215,400

144,889

Total Increase (Decrease)

167,212

408,073

Net Assets

 

 

Beginning of Period

2,250,140

1,842,067

End of Period

2,417,352

2,250,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

38

 

Mega Cap Value Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

Six Months

 

 

 

 

 

 

Ended

 

 

 

 

 

For a Share Outstanding

February 28,

 

Year Ended August 31,

Throughout Each Period

2019

2018

2017

2016

2015

2014

Net Asset Value, Beginning of Period

$79.89

$70.19

$63.52

$56.89

$59.60

$49.65

Investment Operations

 

 

 

 

 

 

Net Investment Income

1.2211

1.8931

1.8431

1.638

1.484

1.338

Net Realized and Unrealized Gain (Loss) on Investments

(1.956)

9.668

6.557

6.583

(2.733)

9.911

Total from Investment Operations

(.735)

11.561

8.400

8.221

(1.249)

11.249

Distributions

 

 

 

 

 

 

Dividends from Net Investment Income

(1.015)

(1.861)

(1.730)

(1.591)

(1.461)

(1.299)

Distributions from Realized Capital Gains

—

—

—

—

—

—

Total Distributions

(1.015)

(1.861)

(1.730)

(1.591)

(1.461)

(1.299)

Net Asset Value, End of Period

$78.14

$79.89

$70.19

$63.52

$56.89

$59.60

 

 

 

 

 

 

 

Total Return

-0.82%

16.71%

13.40%

14.71%

-2.22%

22.92%

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$2,300

$2,120

$1,717

$1,322

$957

$870

Ratio of Total Expenses to Average Net Assets

0.07%

0.07%

0.07%

0.07%

0.09%

0.11%

Ratio of Net Investment Income to Average Net Assets

3.21%

2.50%

2.73%

2.84%

2.51%

2.47%

Portfolio Turnover Rate2

5%

8%

8%

8%

5%

8%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

39

 

Mega Cap Value Index Fund

 

 

Financial Highlights

 

 

Institutional Shares

 

 

Six Months

 

 

 

 

 

 

Ended

 

 

 

 

 

For a Share Outstanding

February 28,

 

Year Ended August 31,

Throughout Each Period

2019

2018

2017

2016

2015

2014

Net Asset Value, Beginning of Period

$158.41

$139.18

$125.94

$112.80

$118.18

$98.45

Investment Operations

 

 

 

 

 

 

Net Investment Income

2.3791

3.7431

3.5961

3.259

2.976

2.687

Net Realized and Unrealized Gain (Loss) on Investments

(3.820)

19.188

13.077

13.063

(5.427)

19.649

Total from Investment Operations

(1.441)

22.931

16.673

16.322

(2.451)

22.336

Distributions

 

 

 

 

 

 

Dividends from Net Investment Income

(2.019)

(3.701)

(3.433)

(3.182)

(2.929)

(2.606)

Distributions from Realized Capital Gains

—

—

—

—

—

—

Total Distributions

(2.019)

(3.701)

(3.433)

(3.182)

(2.929)

(2.606)

Net Asset Value, End of Period

$154.95

$158.41

$139.18

$125.94

$112.80

$118.18

 

 

 

 

 

 

 

Total Return

-0.84%

16.71%

13.41%

14.72%

-2.19%

22.95%

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$117

$131

$125

$207

$213

$212

Ratio of Total Expenses to Average Net Assets

0.06%

0.06%

0.06%

0.06%

0.06%

0.08%

Ratio of Net Investment Income to Average Net Assets

3.22%

2.51%

2.74%

2.85%

2.54%

2.50%

Portfolio Turnover Rate2

5%

8%

8%

8%

5%

8%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Calculated based on average shares outstanding.

 

2   Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

40

 

Mega Cap Value Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Mega Cap Value Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

41

 

Mega Cap Value Index Fund

 

 

 

 

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2015–2018), and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

42

 

Mega Cap Value Index Fund

 

 

 

 

 

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $121,000, representing 0.01% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

43

 

Mega Cap Value Index Fund

 

 

 

 

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

Level 1

Level 2

Level 3

Investments

($000)

($000)

($000)

Common Stocks

2,414,185

—

—

Temporary Cash Investments

2,103

599

—

Futures Contracts—Liabilities1

(8)

—

—

Total

2,416,280

599

—

 

1 Represents variation margin on the last day of the reporting period.

 

D.  As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

Amount

 

($000)

Tax Cost

1,929,259

Gross Unrealized Appreciation

571,434

Gross Unrealized Depreciation

(83,806)

Net Unrealized Appreciation (Depreciation)

487,628

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses including $4,326,000, which may be used to offset future net capital gains through August 31, 2019, as well as capital losses of $33,322,000 that may be carried forward indefinitely but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E.  During the six months ended February 28, 2019, the fund purchased $405,819,000 of investment securities and sold $182,250,000 of investment securities, other than temporary cash investments. Purchases and sales include $333,170,000 and $128,779,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

44

 

Mega Cap Value Index Fund

 

 

 

 

 

F. Capital share transactions for each class of shares were:

 

 

Six Months Ended

 

Year Ended

 

February 28, 2019

 

August 31, 2018

 

Amount

Shares

 

Amount

Shares

 

($000)

(000)

 

($000)

(000)

ETF Shares

 

 

 

 

 

Issued

356,339

4,704

 

261,009

3,450

Issued in Lieu of Cash Distributions

—

—

 

—

—

Redeemed

(130,333)

(1,800)

 

(104,626)

(1,375)

Net Increase (Decrease)—ETF Shares

226,006

2,904

 

156,383

2,075

Institutional Shares

 

 

 

 

 

Issued

4,105

26

 

100

1

Issued in Lieu of Cash Distributions

839

6

 

1,611

11

Redeemed

(15,550)

(100)

 

(13,205)

(89)

Net Increase (Decrease)—Institutional Shares

(10,606)

(68)

 

(11,494)

(77)

 

G. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

45

 

 

 

 

 

 

 

P.O. Box 2600

 

Valley Forge, PA 19482-2600

 

 

 

Connect with Vanguard® > vanguard.com

 

 

 

Fund Information > 800-662-7447

 

Direct Investor Account Services > 800-662-2739

 

Institutional Investor Services > 800-523-1036

 

Text Telephone for People

Who Are Deaf or Hard of Hearing > 800-749-7273

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

Source for Bloomberg Barclays indexes: Bloomberg Index Services Limited. Copyright 2019, Bloomberg. All rights reserved.

 

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

 

All rights reserved.

 

U.S. Patent Nos. 6,879,964; 7,337,138;

 

7,720,749; 7,925,573; 8,090,646; 8,417,623; and 8,626,636.

 

Vanguard Marketing Corporation, Distributor.

 

 

 

Q8282 042019

 

 

 

 

 

 

Semiannual Report  |  February 28, 2019

 

 

Vanguard Global Wellington TM Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

 

About Your Fund’s Expenses

1

Financial Statements

4

Trustees Approve Advisory Arrangement

31

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·     Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·     Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Six Months Ended February 28, 2019

 

 

Beginning

Ending

Expenses

 

Account Value

Account Value

Paid During

Global Wellington Fund

8/31/2018

2/28/2019

Period

Based on Actual Fund Return

 

 

 

Investor Shares

$1,000.00

$1,001.29

$2.28

Admiral™ Shares

1,000.00

1,001.82

1.74

Based on Hypothetical 5% Yearly Return

 

 

 

Investor Shares

$1,000.00

$1,022.51

$2.31

Admiral Shares

1,000.00

1,023.06

1.76

 

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for the period are 0.46% for Investor Shares and 0.35% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

 

2

 

Global Wellington Fund

 

 

Sector Diversification

As of February 28, 2019

 

Equity Exposure

 

Communication Services

4.8%

Consumer Discretionary

8.5

Consumer Staples

9.7

Energy

7.1

Financials

18.2

Health Care

13.5

Industrials

19.3

Information Technology

11.2

Materials

1.6

Real Estate

2.2

Utilities

3.9

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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 Exposure

 

Asset-Backed

5.9%

Commercial Mortgage-Backed

2.1

Finance

23.0

Foreign

12.5

Government Mortgage-Backed

6.2

Industrial

35.7

Treasury/Agency

5.5

Utilities

6.5

Other

2.6

 

The table reflects the fund’s market exposure. Any holdings in short-term reserves are excluded. The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

3

 

Global Wellington Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (66.2%)

 

 

 

 

Canada (3.8%)

 

 

 

 

 

Suncor Energy Inc.

 

427,142

 

14,723

 

Canadian National Railway Co. (New York Shares)

 

64,974

 

5,580

 

Canadian Natural Resources Ltd.

 

187,749

 

5,333

 

Dollarama Inc.

 

191,360

 

5,180

 

Bank of Nova Scotia

 

51,589

 

2,866

 

 

 

 

 

33,682

France (4.3%)

 

 

 

 

 

TOTAL SA

 

184,842

 

10,521

 

Vinci SA

 

108,470

 

10,353

 

BNP Paribas SA

 

123,851

 

6,340

 

Legrand SA

 

90,437

 

5,964

 

Schneider Electric SE

 

68,452

 

5,319

 

 

 

 

 

38,497

Germany (1.1%)

 

 

 

 

 

Deutsche Post AG

 

207,831

 

6,446

 

Bayerische Motoren Werke AG

 

38,021

 

3,214

 

 

 

 

 

9,660

Italy (0.5%)

 

 

 

 

 

Assicurazioni Generali SPA

 

266,894

 

4,759

 

 

 

 

 

 

Japan (8.0%)

 

 

 

 

^

Seven & i Holdings Co. Ltd.

 

288,418

 

12,694

 

Tokio Marine Holdings Inc.

 

235,442

 

11,508

 

Mitsubishi UFJ Financial Group Inc.

 

1,404,102

 

7,286

 

Isuzu Motors Ltd.

 

506,374

 

7,279

 

SMC Corp.

 

19,251

 

6,735

 

Marui Group Co. Ltd.

 

346,500

 

6,105

 

Sumitomo Mitsui Financial Group Inc.

 

147,921

 

5,256

 

Takeda Pharmaceutical Co. Ltd.

 

120,165

 

4,836

 

Nippon Telegraph & Telephone Corp.

 

104,322

 

4,509

 

Daiwa House Industry Co. Ltd.

 

97,359

 

3,015

 

Eisai Co. Ltd.

 

28,795

 

2,380

 

 

 

 

 

71,603

 

4

 

Global Wellington Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Netherlands (2.3%)

 

 

 

 

 

Koninklijke Philips NV

 

226,097

 

8,997

 

ING Groep NV

 

582,287

 

7,697

 

ASML Holding NV

 

21,419

 

3,918

 

 

 

 

 

20,612

South Korea (0.9%)

 

 

 

 

 

Samsung Electronics Co. Ltd.

 

199,766

 

7,995

 

 

 

 

 

 

Spain (1.5%)

 

 

 

 

*

Iberdrola SA

 

1,220,705

 

10,213

 

CaixaBank SA

 

994,018

 

3,542

 

 

 

 

 

13,755

Switzerland (4.9%)

 

 

 

 

 

Novartis AG

 

212,774

 

19,391

 

Nestle SA

 

133,167

 

12,046

 

Julius Baer Group Ltd.

 

169,663

 

7,393

 

Zurich Insurance Group AG

 

13,803

 

4,553

 

 

 

 

 

43,383

Taiwan (0.8%)

 

 

 

 

 

Taiwan Semiconductor Manufacturing Co. Ltd.

 

934,000

 

7,167

 

 

 

 

 

 

United Kingdom (2.4%)

 

 

 

 

 

AstraZeneca plc ADR

 

213,569

 

8,880

 

BAE Systems plc

 

1,272,262

 

7,845

 

Diageo plc

 

117,391

 

4,546

 

 

 

 

 

21,271

United States (35.7%)

 

 

 

 

 

Cisco Systems Inc.

 

274,864

 

14,230

 

Chubb Ltd.

 

98,787

 

13,228

 

Sempra Energy

 

108,420

 

13,058

 

General Dynamics Corp.

 

71,324

 

12,141

 

Deere & Co.

 

70,920

 

11,634

 

PepsiCo Inc.

 

95,359

 

11,027

 

Verizon Communications Inc.

 

192,950

 

10,983

 

Medtronic plc

 

119,917

 

10,852

 

McDonald’s Corp.

 

58,169

 

10,694

 

Microsoft Corp.

 

92,114

 

10,320

 

Bank of America Corp.

 

339,204

 

9,864

 

American Tower Corp.

 

55,018

 

9,691

 

Lockheed Martin Corp.

 

30,865

 

9,550

 

TJX Cos. Inc.

 

179,146

 

9,188

 

United Parcel Service Inc. Class B

 

83,157

 

9,164

 

PNC Financial Services Group Inc.

 

72,278

 

9,108

 

Mondelez International Inc. Class A

 

192,652

 

9,085

^

Autoliv Inc.

 

108,339

 

8,863

 

Merck & Co. Inc.

 

102,715

 

8,350

 

Union Pacific Corp.

 

49,646

 

8,326

 

Linde plc

 

44,871

 

7,812

 

Colgate-Palmolive Co.

 

118,388

 

7,798

 

Schlumberger Ltd.

 

175,314

 

7,724

*

Alphabet Inc. Class A

 

6,628

 

7,467

 

5

 

Global Wellington Fund

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Abbott Laboratories

 

78,561

 

6,098

 

KLA-Tencor Corp.

 

52,380

 

6,049

 

UnitedHealth Group Inc.

 

23,872

 

5,782

 

Caterpillar Inc.

 

41,683

 

5,725

 

JPMorgan Chase & Co.

 

53,486

 

5,582

 

Comcast Corp. Class A

 

138,011

 

5,337

 

United Technologies Corp.

 

40,984

 

5,150

 

Cognizant Technology Solutions Corp. Class A

 

68,468

 

4,860

 

Accenture plc Class A

 

30,050

 

4,849

 

Bristol-Myers Squibb Co.

 

85,154

 

4,399

 

Honeywell International Inc.

 

28,232

 

4,350

 

Intel Corp.

 

72,804

 

3,856

 

Chevron Corp.

 

31,185

 

3,729

 

Principal Financial Group Inc.

 

60,412

 

3,180

 

Marsh & McLennan Cos. Inc.

 

34,165

 

3,178

 

Texas Instruments Inc.

 

27,860

 

2,947

 

Prudential Financial Inc.

 

25,368

 

2,432

 

International Paper Co.

 

38,078

 

1,745

 

 

 

 

 

319,405

Total Common Stocks (Cost $580,046)

 

 

 

591,789

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

 

U.S. Government and Agency Obligations (4.5%)

 

 

 

 

 

 

 

 

United States (4.5%)

 

 

 

 

 

 

 

 

1,2

Fannie Mae Pool

 

3.000%

 

12/1/47

 

841

 

822

1,2

Fannie Mae Pool

 

4.000%

 

10/1/48–12/1/48

 

1,443

 

1,471

1,2, 3

Fannie Mae Pool

 

3.500%

 

3/1/49

 

4,707

 

4,709

1,2

Fannie Mae REMICS

 

2.000%

 

9/25/40

 

170

 

164

1,2

Fannie Mae REMICS

 

3.500%

 

6/25/44–2/25/48

 

1,730

 

1,758

1,2

Fannie Mae REMICS

 

2.500%

 

5/25/45

 

545

 

534

1,2

Freddie Mac Gold Pool

 

3.000%

 

11/1/47–12/1/47

 

2,311

 

2,264

1,2

Freddie Mac Gold Pool

 

3.500%

 

11/1/47–12/1/47

 

6,632

 

6,643

1,2

Freddie Mac Gold Pool

 

4.000%

 

10/1/48–12/1/48

 

2,013

 

2,054

1,2

Freddie Mac REMICS

 

4.000%

 

12/15/39–8/15/40

 

1,462

 

1,519

1,2

Freddie Mac REMICS

 

3.500%

 

9/15/40–11/15/40

 

544

 

548

1,2

Freddie Mac REMICS

 

1.750%

 

9/15/42

 

1,407

 

1,352

1

Government National Mortgage Assn.

 

2.750%

 

9/20/44

 

281

 

278

 

United States Treasury Inflation Indexed Bonds

 

0.750%

 

7/15/28

 

1,510

 

1,512

4

United States Treasury Note/Bond

 

1.500%

 

10/31/19

 

265

 

263

 

United States Treasury Note/Bond

 

2.875%

 

10/31/20

 

1,990

 

2,000

 

United States Treasury Note/Bond

 

1.875%

 

9/30/22

 

615

 

602

 

United States Treasury Note/Bond

 

2.125%

 

12/31/22

 

785

 

774

 

United States Treasury Note/Bond

 

2.500%

 

3/31/23

 

1,560

 

1,559

 

United States Treasury Note/Bond

 

2.750%

 

7/31/23

 

785

 

792

 

United States Treasury Note/Bond

 

2.875%

 

9/30/23

 

645

 

655

 

United States Treasury Note/Bond

 

2.875%

 

8/15/28

 

880

 

891

 

United States Treasury Note/Bond

 

3.125%

 

11/15/28

 

1,585

 

1,639

4

United States Treasury Note/Bond

 

2.750%

 

11/15/47

 

2,420

 

2,263

 

6

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

 

United States Treasury Note/Bond

 

3.000%

 

2/15/48

 

1,260

 

1,238

 

United States Treasury Note/Bond

 

3.125%

 

5/15/48

 

445

 

448

 

United States Treasury Note/Bond

 

3.000%

 

8/15/48

 

715

 

703

 

United States Treasury Strip Principal

 

0.000%

 

5/15/47

 

660

 

273

 

United States Treasury Strip Principal

 

0.000%

 

8/15/47

 

755

 

309

Total U.S. Government and Agency Obligations (Cost $40,202)

 

 

 

40,037

Asset-Backed/Commercial Mortgage-Backed Securities (1.9%)

 

 

 

 

Australia (0.1%)

 

 

 

 

 

 

 

 

5

National Australia Bank Ltd.

 

2.400%

 

12/7/21

 

575

 

566

 

 

 

 

 

 

 

 

 

 

Canada (0.1%)

 

 

 

 

 

 

 

 

1,5,6

CARDS II Trust 2017-2A, 1M USD LIBOR + 0.260%

 

2.749%

 

10/17/22

 

720

 

720

1,5,6

Master Credit Card Trust II Series 2018-1A, 1M USD LIBOR + 0.490%

 

2.972%

 

7/21/24

 

765

 

762

 

 

 

 

 

 

 

 

 

1,482

Cayman Islands (0.6%)

 

 

 

 

 

 

 

 

1,5,6

Atlas Senior Loan Fund V Ltd., 3M USD LIBOR + 1.260%

 

4.039%

 

7/16/29

 

750

 

747

1,5,6

KKR CLO 17 Ltd., 3M USD LIBOR + 1.340%

 

4.127%

 

4/15/29

 

730

 

731

1,5,6

Madison Park Funding XVIII Ltd., 3M USD LIBOR + 1.190%

 

3.951%

 

10/21/30

 

730

 

728

1,5,6

Madison Park Funding XXX Ltd., 3M USD LIBOR + 0.750%

 

3.537%

 

4/15/29

 

1,400

 

1,377

1,5,6

Magnetite VII Ltd., 3M USD LIBOR + 0.800%

 

3.587%

 

1/15/28

 

1,375

 

1,357

1,5,6

Race Point IX CLO Ltd., 3M USD LIBOR + 1.210%

 

3.997%

 

10/15/30

 

730

 

729

 

 

 

 

 

 

 

 

 

5,669

Spain (0.1%)

 

 

 

 

 

 

 

 

7

Bankia SA

 

4.125%

 

3/24/36

 

450

 

689

 

 

 

 

 

 

 

 

 

 

United States (1.0%)

 

 

 

 

 

 

 

 

1,5,6

Angel Oak Mortgage Trust I LLC 2018-3

 

3.649%

 

9/25/48

 

655

 

655

1,5

ARI Fleet Lease Trust 2018-A

 

2.550%

 

10/15/26

 

225

 

224

1,5,6

Bristol Park CLO Ltd., 3M USD LIBOR + 1.420%

 

4.207%

 

4/15/29

 

685

 

686

1,5

Chesapeake Funding II LLC 2018-2A

 

1.990%

 

5/15/29

 

437

 

433

1,5

Chesapeake Funding II LLC 2018-2A

 

3.230%

 

8/15/30

 

870

 

871

1,5

Chrysler Capital Auto Receivables Trust 2016-A

 

3.250%

 

6/15/22

 

245

 

246

1,5,6

COLT 2018-1 Mortgage Loan Trust

 

2.930%

 

2/25/48

 

168

 

166

1,5,6

COLT 2018-3 Mortgage Loan Trust

 

3.692%

 

10/26/48

 

220

 

220

1,5,6

Deephaven Residential Mortgage Trust 2018-1

 

2.976%

 

12/25/57

 

261

 

259

1,5

Enterprise Fleet Financing LLC Series 2018-1

 

2.870%

 

10/20/23

 

707

 

705

1,5

First Investors Auto Owner Trust

 

2.000%

 

3/15/22

 

209

 

208

1,5

First Investors Auto Owner Trust

 

2.410%

 

12/15/22

 

120

 

119

1,5

GreatAmerica Leasing Receivables Funding LLC Series 2018-1

 

2.600%

 

6/15/21

 

255

 

254

 

7

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

1,5

GreatAmerica Leasing Receivables Funding LLC Series 2018-1

 

2.830%

 

6/17/24

 

167

 

166

1,5

Hyundai Auto Lease Securitization Trust 2018-A

 

2.550%

 

8/17/20

 

354

 

353

1,5,6

KKR CLO 16 Ltd., 3M USD LIBOR + 1.490%

 

4.251%

 

1/20/29

 

360

 

360

1,5

MMAF Equipment Finance LLC 2016-A

 

1.480%

 

6/15/20

 

87

 

87

1,5

MMAF Equipment Finance LLC 2017-B

 

2.210%

 

10/17/22

 

170

 

168

1,5

OneMain Direct Auto Receivables Trust 2017-2

 

2.310%

 

12/14/21

 

582

 

580

1

Santander Drive Auto Receivables Trust 2014-4

 

3.100%

 

11/16/20

 

111

 

112

1

Santander Drive Auto Receivables Trust 2016-3

 

1.890%

 

6/15/21

 

196

 

196

1,5

Sofi Consumer Loan Program 2018-2 Trust

 

2.930%

 

4/26/27

 

227

 

227

1,5,6

Towd Point Mortgage Trust 2018-1

 

3.000%

 

1/25/58

 

290

 

286

1,5

Vantage Data Centers Issuer, LLC 2018-1A

 

4.072%

 

2/16/43

 

297

 

299

1,5

Westlake Automobile Receivables Trust

 

2.980%

 

1/18/22

 

700

 

701

1,5

Westlake Automobile Receivables Trust 2018-1

 

2.240%

 

12/15/20

 

313

 

312

 

 

 

 

 

 

 

 

 

8,893

Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $17,389)

 

 

 

17,299

Corporate Bonds (21.3%)

 

 

 

 

 

 

 

 

Australia (0.2%)

 

 

 

 

 

 

 

 

1,5

Macquarie Group Ltd.

 

4.150%

 

3/27/24

 

1,025

 

1,029

 

Westpac Banking Corp.

 

2.300%

 

5/26/20

 

198

 

196

5

WEA Finance LLC

 

4.125%

 

9/20/28

 

595

 

602

5

WEA Finance LLC

 

4.625%

 

9/20/48

 

220

 

221

 

 

 

 

 

 

 

 

 

2,048

Belgium (0.0%)

 

 

 

 

 

 

 

 

8

Anheuser-Busch InBev SA

 

1.750%

 

3/7/25

 

250

 

319

 

 

 

 

 

 

 

 

 

 

Canada (0.6%)

 

 

 

 

 

 

 

 

9

Bell Canada Inc.

 

3.350%

 

3/22/23

 

975

 

752

6

Canadian Imperial Bank of Commerce, 3M USD LIBOR + 0.720%

 

3.508%

 

6/16/22

 

570

 

571

 

Emera US Finance LP

 

2.700%

 

6/15/21

 

400

 

393

 

Fortis Inc.

 

3.055%

 

10/4/26

 

775

 

723

 

Nutrien Ltd.

 

3.150%

 

10/1/22

 

275

 

271

9

Royal Bank of Canada

 

2.949%

 

5/1/23

 

1,875

 

1,444

9

Toronto-Dominion Bank

 

1.680%

 

6/8/21

 

740

 

555

 

TransCanada PipeLines Ltd.

 

4.875%

 

1/15/26

 

400

 

421

 

 

 

 

 

 

 

 

 

5,130

China (0.3%)

 

 

 

 

 

 

 

 

 

Alibaba Group Holding Ltd.

 

3.125%

 

11/28/21

 

825

 

822

 

Alibaba Group Holding Ltd.

 

3.400%

 

12/6/27

 

660

 

628

5

Tencent Holdings Ltd.

 

3.595%

 

1/19/28

 

1,035

 

1,000

 

 

 

 

 

 

 

 

 

2,450

France (1.9%)

 

 

 

 

 

 

 

 

1,7

AXA SA

 

5.125%

 

7/4/43

 

600

 

780

7

Banque Federative du Credit Mutuel SA

 

1.250%

 

1/14/25

 

800

 

938

7

BNP Paribas SA

 

1.500%

 

11/17/25

 

2,800

 

3,230

 

8

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

7

BPCE SA

 

1.125%

 

1/18/23

 

700

 

806

5

BPCE SA

 

5.700%

 

10/22/23

 

400

 

418

5

BPCE SA

 

3.250%

 

1/11/28

 

525

 

497

7

Credit Agricole SA

 

1.000%

 

9/16/24

 

1,400

 

1,634

7

Orange SA

 

1.000%

 

5/12/25

 

1,300

 

1,496

7

PSA Banque France SA

 

0.500%

 

1/17/20

 

1,925

 

2,201

7

RCI Banque SA

 

0.750%

 

9/26/22

 

500

 

566

7

RCI Banque SA

 

1.375%

 

3/8/24

 

475

 

537

7

Societe Generale SA

 

1.000%

 

4/1/22

 

600

 

692

7

Total Capital Canada Ltd.

 

1.875%

 

7/9/20

 

2,500

 

2,919

7

Veolia Environnement SA

 

1.590%

 

1/10/28

 

400

 

473

 

 

 

 

 

 

 

 

 

17,187

Germany (1.6%)

 

 

 

 

 

 

 

 

5

Bayer US Finance II LLC

 

4.250%

 

12/15/25

 

535

 

536

7

Daimler AG

 

0.875%

 

1/12/21

 

2,575

 

2,968

7

Deutsche Telekom International Finance BV

 

4.250%

 

3/16/20

 

1,200

 

1,425

8

E.ON International Finance BV

 

5.875%

 

10/30/37

 

150

 

267

7

E.ON SE

 

0.375%

 

8/23/21

 

1,800

 

2,055

7

E.ON SE

 

1.625%

 

5/22/29

 

565

 

646

8

innogy Finance BV

 

4.750%

 

1/31/34

 

600

 

936

5

Siemens Financieringsmaatschappij NV

 

2.900%

 

5/27/22

 

650

 

647

7

Volkswagen International Finance NV

 

2.000%

 

1/14/20

 

1,525

 

1,764

7

Volkswagen Leasing GmbH

 

2.625%

 

1/15/24

 

425

 

509

7

Volkswagen Leasing GmbH

 

1.375%

 

1/20/25

 

950

 

1,053

7

Vonovia Finance BV

 

1.750%

 

1/25/27

 

900

 

1,037

 

 

 

 

 

 

 

 

 

13,843

Hong Kong (0.1%)

 

 

 

 

 

 

 

 

5

CK Hutchison International 17 II Ltd.

 

2.750%

 

3/29/23

 

1,275

 

1,242

 

 

 

 

 

 

 

 

 

 

Italy (0.1%)

 

 

 

 

 

 

 

 

5

Enel Finance International NV

 

4.875%

 

6/14/29

 

1,000

 

1,000

5

Eni SPA

 

4.750%

 

9/12/28

 

200

 

200

 

 

 

 

 

 

 

 

 

1,200

Japan (0.5%)

 

 

 

 

 

 

 

 

7

JT International Financial Services BV

 

1.125%

 

9/28/25

 

1,550

 

1,775

10

Toyota Finance Australia Ltd.

 

2.500%

 

12/7/20

 

1,625

 

1,155

7

Toyota Motor Credit Corp.

 

1.800%

 

7/23/20

 

1,250

 

1,458

 

 

 

 

 

 

 

 

 

4,388

Mexico (0.3%)

 

 

 

 

 

 

 

 

7

America Movil SAB de CV

 

4.125%

 

10/25/19

 

575

 

671

 

America Movil SAB de CV

 

6.375%

 

3/1/35

 

350

 

422

 

Coca-Cola Femsa SAB de CV

 

3.875%

 

11/26/23

 

540

 

549

5

Infraestructura Energetica Nova SAB de CV

 

4.875%

 

1/14/48

 

980

 

786

 

 

 

 

 

 

 

 

 

2,428

Netherlands (0.4%)

 

 

 

 

 

 

 

 

7

ABN AMRO Bank NV

 

2.500%

 

11/29/23

 

855

 

1,064

8

Cooperatieve Rabobank UA

 

4.625%

 

5/23/29

 

200

 

294

7

ING Groep NV

 

2.000%

 

9/20/28

 

1,100

 

1,288

 

Shell International Finance BV

 

4.000%

 

5/10/46

 

475

 

472

 

 

 

 

 

 

 

 

 

3,118

South Korea (0.0%)

 

 

 

 

 

 

 

 

5

SK Telecom Co. Ltd.

 

3.750%

 

4/16/23

 

200

 

202

 

9

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

Spain (0.7%)

 

 

 

 

 

 

 

 

7

CaixaBank SA

 

1.750%

 

10/24/23

 

1,800

 

2,043

7

Iberdrola International BV

 

2.875%

 

11/11/20

 

1,800

 

2,148

7

Telefonica Emisiones SAU

 

2.242%

 

5/27/22

 

700

 

841

7

Telefonica Emisiones SAU

 

1.715%

 

1/12/28

 

500

 

572

 

Telefonica Emisiones SAU

 

4.665%

 

3/6/38

 

630

 

577

 

 

 

 

 

 

 

 

 

6,181

Sweden (0.3%)

 

 

 

 

 

 

 

 

7

Skandinaviska Enskilda Banken AB

 

2.000%

 

2/19/21

 

550

 

650

7

Skandinaviska Enskilda Banken AB

 

0.300%

 

2/17/22

 

1,750

 

1,998

 

 

 

 

 

 

 

 

 

2,648

Switzerland (1.0%)

 

 

 

 

 

 

 

 

7

Credit Suisse AG

 

4.750%

 

8/5/19

 

2,350

 

2,729

1,7

Credit Suisse Group AG

 

1.250%

 

7/17/25

 

1,425

 

1,616

8

LafargeHolcim Sterling Finance Netherlands BV

 

3.000%

 

5/12/32

 

455

 

557

5

Roche Holdings Inc.

 

2.625%

 

5/15/26

 

1,100

 

1,050

5

UBS AG

 

4.500%

 

6/26/48

 

225

 

242

5,6

UBS AG, 3M USD LIBOR + 0.480%

 

3.218%

 

12/1/20

 

2,250

 

2,254

 

 

 

 

 

 

 

 

 

8,448

United Kingdom (1.6%)

 

 

 

 

 

 

 

 

 

AstraZeneca plc

 

4.000%

 

1/17/29

 

305

 

308

 

BAT Capital Corp.

 

3.222%

 

8/15/24

 

575

 

549

 

BAT Capital Corp.

 

3.557%

 

8/15/27

 

925

 

848

7

BAT International Finance plc

 

2.250%

 

1/16/30

 

1,000

 

1,070

 

BP Capital Markets plc

 

3.814%

 

2/10/24

 

475

 

488

9

BP Capital Markets plc

 

3.470%

 

5/15/25

 

1,350

 

1,047

8

CPUK Finance Ltd.

 

3.588%

 

8/28/25

 

975

 

1,348

7

FCE Bank plc

 

0.869%

 

9/13/21

 

1,800

 

1,992

8

Heathrow Funding Ltd.

 

6.750%

 

12/3/26

 

450

 

775

1,7

Heathrow Funding Ltd.

 

1.500%

 

2/11/32

 

750

 

840

6

HSBC Holdings plc, 3M USD LIBOR + 1.000%

 

3.683%

 

5/18/24

 

245

 

243

7

Imperial Brands Finance plc

 

2.250%

 

2/26/21

 

1,825

 

2,145

7

Imperial Brands Finance plc

 

1.375%

 

1/27/25

 

530

 

594

5

Imperial Brands Finance plc

 

4.250%

 

7/21/25

 

800

 

798

5

Sky plc

 

3.125%

 

11/26/22

 

725

 

717

 

Trinity Acquisition plc

 

4.400%

 

3/15/26

 

724

 

733

 

 

 

 

 

 

 

 

 

14,495

United States (11.7%)

 

 

 

 

 

 

 

 

 

21st Century Fox America Inc.

 

6.200%

 

12/15/34

 

640

 

792

 

Abbott Laboratories

 

3.400%

 

11/30/23

 

500

 

505

 

Alabama Power Co.

 

4.300%

 

7/15/48

 

255

 

257

 

Allergan Funding SCS

 

3.800%

 

3/15/25

 

735

 

726

 

Amazon.com Inc.

 

4.800%

 

12/5/34

 

300

 

333

 

Amazon.com Inc.

 

4.250%

 

8/22/57

 

225

 

228

 

Ameren Illinois Co.

 

3.800%

 

5/15/28

 

410

 

421

 

American Electric Power Co. Inc.

 

3.200%

 

11/13/27

 

950

 

907

7

American Express Credit Corp.

 

0.625%

 

11/22/21

 

1,900

 

2,186

7

American International Group Inc.

 

1.500%

 

6/8/23

 

700

 

810

7

American International Group Inc.

 

1.875%

 

6/21/27

 

750

 

844

 

American Tower Corp.

 

5.000%

 

2/15/24

 

1,050

 

1,109

 

American Tower Corp.

 

4.400%

 

2/15/26

 

300

 

306

 

10

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

 

Amgen Inc.

 

3.625%

 

5/22/24

 

275

 

278

 

Amgen Inc.

 

4.663%

 

6/15/51

 

350

 

335

 

Andeavor Logistics LP / Tesoro Logistics Finance Corp.

 

3.500%

 

12/1/22

 

1,405

 

1,398

5

Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide Inc.

 

4.900%

 

2/1/46

 

775

 

739

 

Anheuser-Busch InBev Worldwide Inc.

 

4.375%

 

4/15/38

 

170

 

157

 

Anheuser-Busch InBev Worldwide Inc.

 

4.600%

 

4/15/48

 

85

 

78

 

Anthem Inc.

 

3.500%

 

8/15/24

 

275

 

274

 

Anthem Inc.

 

4.101%

 

3/1/28

 

610

 

617

 

Anthem Inc.

 

4.375%

 

12/1/47

 

415

 

398

 

Apple Inc.

 

2.750%

 

1/13/25

 

780

 

763

7

AT&T Inc.

 

1.875%

 

12/4/20

 

2,450

 

2,861

 

AT&T Inc.

 

4.125%

 

2/17/26

 

800

 

800

 

AT&T Inc.

 

4.900%

 

8/15/37

 

475

 

460

 

Bank of America Corp.

 

3.300%

 

1/11/23

 

570

 

572

1

Bank of America Corp.

 

3.593%

 

7/21/28

 

1,885

 

1,841

1

Bank of America Corp.

 

4.271%

 

7/23/29

 

665

 

681

6

Bank of New York Mellon Corp., 3M USD LIBOR + 1.050%

 

3.800%

 

10/30/23

 

415

 

420

 

BB&T Corp.

 

3.200%

 

9/3/21

 

510

 

513

 

BB&T Corp.

 

3.700%

 

6/5/25

 

770

 

784

 

Berkshire Hathaway Energy Co.

 

5.150%

 

11/15/43

 

10

 

11

 

Boston Scientific Corp.

 

4.000%

 

3/1/29

 

60

 

60

 

Brandywine Operating Partnership LP

 

3.950%

 

11/15/27

 

665

 

638

 

Broadcom Corp. / Broadcom Cayman Finance Ltd.

 

3.625%

 

1/15/24

 

1,190

 

1,156

5

Brooklyn Union Gas Co.

 

4.273%

 

3/15/48

 

965

 

944

 

Capital One Financial Corp.

 

4.200%

 

10/29/25

 

1,075

 

1,071

 

Cardinal Health Inc.

 

4.500%

 

11/15/44

 

380

 

327

5

Cargill Inc.

 

4.760%

 

11/23/45

 

340

 

366

 

Catholic Health Initiatives Colorado

 

4.200%

 

8/1/23

 

770

 

786

 

Charter Communications Operating LLC / Charter Communications Operating Capital

 

6.384%

 

10/23/35

 

410

 

438

5

Cigna Corp.

 

4.375%

 

10/15/28

 

420

 

424

 

Citigroup Inc.

 

2.700%

 

3/30/21

 

345

 

343

 

Citigroup Inc.

 

4.600%

 

3/9/26

 

535

 

547

1

Citigroup Inc.

 

3.520%

 

10/27/28

 

2,380

 

2,306

 

Citigroup Inc.

 

4.750%

 

5/18/46

 

70

 

69

 

Comcast Corp.

 

3.950%

 

10/15/25

 

250

 

258

 

Comcast Corp.

 

6.500%

 

11/15/35

 

635

 

777

 

Comcast Corp.

 

4.600%

 

10/15/38

 

255

 

262

 

Comcast Corp.

 

4.000%

 

3/1/48

 

40

 

37

 

Comcast Corp.

 

3.999%

 

11/1/49

 

120

 

112

 

Comcast Corp.

 

4.049%

 

11/1/52

 

20

 

18

 

Commonwealth Edison Co.

 

3.650%

 

6/15/46

 

35

 

32

 

Commonwealth Edison Co.

 

4.000%

 

3/1/48

 

245

 

240

 

Conagra Brands Inc.

 

4.600%

 

11/1/25

 

200

 

203

 

Conagra Brands Inc.

 

5.300%

 

11/1/38

 

150

 

142

 

Consolidated Edison Co. of New York Inc.

 

6.300%

 

8/15/37

 

75

 

91

 

Consolidated Edison Co. of New York Inc.

 

4.625%

 

12/1/54

 

290

 

290

 

Consolidated Edison Co. of New York Inc.

 

4.500%

 

5/15/58

 

300

 

296

5

Cox Communications Inc.

 

4.600%

 

8/15/47

 

800

 

726

 

11

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

 

Crown Castle International Corp.

 

3.800%

 

2/15/28

 

905

 

876

 

CSX Corp.

 

4.300%

 

3/1/48

 

365

 

353

 

CVS Health Corp.

 

4.100%

 

3/25/25

 

1,185

 

1,197

 

CVS Health Corp.

 

2.875%

 

6/1/26

 

1,455

 

1,348

 

Devon Energy Corp.

 

3.250%

 

5/15/22

 

570

 

567

 

Dignity Health California

 

3.812%

 

11/1/24

 

594

 

600

 

Dignity Health California

 

4.500%

 

11/1/42

 

166

 

158

 

Discover Bank

 

4.200%

 

8/8/23

 

575

 

585

 

Dominion Energy Gas Holdings LLC

 

4.600%

 

12/15/44

 

660

 

662

 

Duke Energy Progress LLC

 

4.100%

 

3/15/43

 

707

 

708

 

Duke Energy Progress LLC

 

4.200%

 

8/15/45

 

285

 

288

 

Energy Transfer Partners LP

 

4.900%

 

3/15/35

 

1,075

 

998

 

Enterprise Products Operating LLC

 

3.900%

 

2/15/24

 

535

 

548

 

EQT Midstream Partners LP

 

4.750%

 

7/15/23

 

1,010

 

1,016

5

ERAC USA Finance LLC

 

4.500%

 

2/15/45

 

640

 

597

 

FirstEnergy Corp.

 

3.900%

 

7/15/27

 

675

 

668

 

Florida Power & Light Co.

 

3.700%

 

12/1/47

 

275

 

263

 

Ford Motor Credit Co. LLC

 

3.096%

 

5/4/23

 

1,275

 

1,172

5

Fox Corp.

 

4.030%

 

1/25/24

 

160

 

163

 

General Motors Co.

 

4.200%

 

10/1/27

 

475

 

443

 

General Motors Financial Co. Inc.

 

3.450%

 

4/10/22

 

1,310

 

1,302

7

General Motors Financial Co. Inc.

 

0.955%

 

9/7/23

 

900

 

989

 

Georgia Power Co.

 

4.300%

 

3/15/42

 

945

 

889

 

Goldman Sachs Group Inc.

 

2.625%

 

4/25/21

 

575

 

568

1

Goldman Sachs Group Inc.

 

3.272%

 

9/29/25

 

1,375

 

1,334

1

Goldman Sachs Group Inc.

 

3.814%

 

4/23/29

 

335

 

325

1

Goldman Sachs Group Inc.

 

4.223%

 

5/1/29

 

600

 

601

 

Goldman Sachs Group Inc.

 

4.750%

 

10/21/45

 

250

 

253

 

HCP Inc.

 

4.000%

 

6/1/25

 

375

 

376

 

Humana Inc.

 

2.900%

 

12/15/22

 

590

 

577

7

International Business Machines Corp.

 

1.250%

 

1/29/27

 

2,350

 

2,690

 

International Paper Co.

 

4.350%

 

8/15/48

 

500

 

446

 

John Deere Capital Corp.

 

3.450%

 

3/13/25

 

985

 

996

7

JPMorgan Chase & Co.

 

3.875%

 

9/23/20

 

1,300

 

1,569

1

JPMorgan Chase & Co.

 

3.782%

 

2/1/28

 

775

 

773

1

JPMorgan Chase & Co.

 

3.964%

 

11/15/48

 

975

 

918

 

Kaiser Foundation Hospitals

 

4.875%

 

4/1/42

 

45

 

50

 

Kaiser Foundation Hospitals

 

4.150%

 

5/1/47

 

285

 

290

5

KeySpan Gas East Corp.

 

2.742%

 

8/15/26

 

400

 

375

8

Kraft Heinz Foods Co.

 

4.125%

 

7/1/27

 

500

 

688

 

Kraft Heinz Foods Co.

 

4.375%

 

6/1/46

 

720

 

600

 

Lockheed Martin Corp.

 

4.700%

 

5/15/46

 

253

 

272

 

Lockheed Martin Corp.

 

4.090%

 

9/15/52

 

97

 

94

 

Marsh & McLennan Cos. Inc.

 

4.375%

 

3/15/29

 

310

 

319

 

Medtronic Inc.

 

3.150%

 

3/15/22

 

550

 

554

 

Memorial Sloan-Kettering Cancer Center New York

 

4.125%

 

7/1/52

 

150

 

149

 

Mercy Health

 

3.555%

 

8/1/27

 

410

 

395

5

Metropolitan Life Global Funding I

 

3.000%

 

9/19/27

 

775

 

742

 

Microsoft Corp.

 

3.700%

 

8/8/46

 

1,125

 

1,089

 

MidAmerican Energy Co.

 

4.250%

 

5/1/46

 

10

 

10

9

Molson Coors International LP

 

2.840%

 

7/15/23

 

1,875

 

1,392

 

Morgan Stanley

 

2.750%

 

5/19/22

 

1,375

 

1,356

 

Morgan Stanley

 

3.125%

 

7/27/26

 

1,850

 

1,766

 

12

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

1

Morgan Stanley

 

3.772%

 

1/24/29

 

145

 

143

 

Mylan NV

 

3.950%

 

6/15/26

 

1,730

 

1,614

 

National Retail Properties Inc.

 

3.900%

 

6/15/24

 

330

 

333

 

National Rural Utilities Cooperative Finance Corp.

 

2.950%

 

2/7/24

 

400

 

396

5

Northwestern Mutual Life Insurance Co.

 

3.850%

 

9/30/47

 

230

 

213

 

Oglethorpe Power Corp.

 

5.250%

 

9/1/50

 

200

 

207

 

Oracle Corp.

 

3.400%

 

7/8/24

 

575

 

579

 

Oracle Corp.

 

3.250%

 

11/15/27

 

240

 

236

 

Oracle Corp.

 

4.000%

 

11/15/47

 

220

 

211

5

Penske Truck Leasing Co. LP / PTL Finance Corp.

 

3.375%

 

2/1/22

 

145

 

143

5

Penske Truck Leasing Co. LP / PTL Finance Corp.

 

4.250%

 

1/17/23

 

1,405

 

1,419

5

Penske Truck Leasing Co. LP / PTL Finance Corp.

 

3.950%

 

3/10/25

 

270

 

266

7

Philip Morris International Inc.

 

2.125%

 

5/30/19

 

1,525

 

1,744

 

Philip Morris International Inc.

 

2.500%

 

11/2/22

 

575

 

562

7

Philip Morris International Inc.

 

2.875%

 

3/3/26

 

425

 

534

 

PNC Bank NA

 

3.250%

 

1/22/28

 

910

 

894

1

Providence St. Joseph Health Obligated Group

 

3.930%

 

10/1/48

 

225

 

212

 

Santander Holdings USA Inc.

 

3.700%

 

3/28/22

 

1,750

 

1,746

5

SBA Tower Trust

 

2.877%

 

7/9/21

 

805

 

796

5

SBA Tower Trust

 

3.448%

 

3/15/23

 

675

 

670

 

Sierra Pacific Power Co.

 

2.600%

 

5/1/26

 

149

 

140

 

South Carolina Electric & Gas Co.

 

4.250%

 

8/15/28

 

650

 

679

 

South Carolina Electric & Gas Co.

 

6.625%

 

2/1/32

 

156

 

191

 

South Carolina Electric & Gas Co.

 

5.300%

 

5/15/33

 

113

 

125

 

South Carolina Electric & Gas Co.

 

5.450%

 

2/1/41

 

300

 

341

 

South Carolina Electric & Gas Co.

 

4.600%

 

6/15/43

 

230

 

242

 

Southern California Edison Co.

 

3.700%

 

8/1/25

 

30

 

29

 

Southern California Edison Co.

 

3.900%

 

3/15/43

 

8

 

7

 

Southern California Edison Co.

 

4.000%

 

4/1/47

 

5

 

5

 

Southern California Edison Co.

 

4.125%

 

3/1/48

 

625

 

575

 

Southwestern Public Service Co.

 

3.700%

 

8/15/47

 

24

 

22

1,5

Sprint Spectrum Co LLC / Sprint Spectrum Co II LLC / Sprint Spectrum Co III LLC

 

4.738%

 

3/20/25

 

805

 

806

 

SSM Health Care Corp.

 

3.823%

 

6/1/27

 

320

 

319

 

Stanford Health Care

 

3.795%

 

11/15/48

 

50

 

48

 

Starbucks Corp.

 

4.500%

 

11/15/48

 

320

 

308

 

SunTrust Bank

 

3.300%

 

5/15/26

 

450

 

438

 

Synchrony Bank

 

3.000%

 

6/15/22

 

450

 

435

5

Teachers Insurance & Annuity Assn. of America

 

4.900%

 

9/15/44

 

860

 

916

7

Thermo Fisher Scientific Inc.

 

1.400%

 

1/23/26

 

375

 

432

7

Thermo Fisher Scientific Inc.

 

1.950%

 

7/24/29

 

700

 

813

 

Union Pacific Corp.

 

3.700%

 

3/1/29

 

210

 

208

 

Union Pacific Corp.

 

4.300%

 

3/1/49

 

130

 

127

1

United Airlines 2018-1 Class B Pass Through Trust

 

4.600%

 

3/1/26

 

70

 

70

7

United Technologies Corp.

 

1.150%

 

5/18/24

 

380

 

435

 

United Technologies Corp.

 

3.950%

 

8/16/25

 

285

 

290

 

UnitedHealth Group Inc.

 

3.850%

 

6/15/28

 

395

 

404

 

13

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

 

UnitedHealth Group Inc.

 

4.625%

 

7/15/35

 

185

 

201

 

UnitedHealth Group Inc.

 

4.200%

 

1/15/47

 

65

 

66

 

UnitedHealth Group Inc.

 

4.250%

 

6/15/48

 

445

 

454

 

Verizon Communications Inc.

 

3.500%

 

11/1/24

 

275

 

278

 

Verizon Communications Inc.

 

4.522%

 

9/15/48

 

1,625

 

1,593

 

Verizon Communications Inc.

 

4.672%

 

3/15/55

 

225

 

219

 

Viacom Inc.

 

4.250%

 

9/1/23

 

800

 

816

 

Warner Media LLC

 

3.600%

 

7/15/25

 

850

 

836

7

Wells Fargo & Co.

 

2.250%

 

9/3/20

 

2,500

 

2,938

9

Wells Fargo & Co.

 

2.975%

 

5/19/26

 

625

 

463

 

Wells Fargo & Co.

 

4.300%

 

7/22/27

 

275

 

280

 

Wells Fargo & Co.

 

4.750%

 

12/7/46

 

800

 

809

 

Welltower Inc.

 

4.000%

 

6/1/25

 

275

 

277

 

 

 

 

 

 

 

 

 

104,873

Total Corporate Bonds (Cost $194,818)

 

 

 

 

 

 

 

190,200

Sovereign Bonds (4.1%)

 

 

 

 

 

 

 

 

Australia (0.1%)

 

 

 

 

 

 

 

 

10

Commonwealth of Australia

 

2.250%

 

11/21/22

 

1,260

 

912

10

Commonwealth of Australia

 

2.750%

 

11/21/27

 

135

 

101

10

Commonwealth of Australia

 

2.250%

 

5/21/28

 

380

 

273

 

 

 

 

 

 

 

 

 

1,286

Canada (0.6%)

 

 

 

 

 

 

 

 

9

Canada

 

0.750%

 

3/1/21

 

2,110

 

1,571

9

Canada

 

2.750%

 

12/1/48

 

235

 

200

5,9

Canada Housing Trust No 1

 

2.350%

 

9/15/23

 

975

 

749

9

City of Toronto

 

3.200%

 

8/1/48

 

1,000

 

734

9

Province of Ontario

 

2.900%

 

6/2/28

 

1,910

 

1,478

11

Province of Ontario

 

0.250%

 

6/28/29

 

985

 

985

 

 

 

 

 

 

 

 

 

5,717

Chile (0.1%)

 

 

 

 

 

 

 

 

 

Corp. Nacional del Cobre de Chile

 

3.625%

 

8/1/27

 

650

 

641

 

 

 

 

 

 

 

 

 

 

China (0.3%)

 

 

 

 

 

 

 

 

5

Sinopec Group Overseas Development 2017 Ltd.

 

3.000%

 

4/12/22

 

1,025

 

1,011

5

State Grid Overseas Investment 2016 Ltd.

 

2.750%

 

5/4/22

 

2,135

 

2,095

 

 

 

 

 

 

 

 

 

3,106

Japan (1.1%)

 

 

 

 

 

 

 

 

12

Japan

 

0.100%

 

6/20/28

 

105,200

 

956

12

Japan

 

0.100%

 

12/20/28

 

879,000

 

7,972

 

Japan Bank for International Cooperation

 

2.250%

 

2/24/20

 

450

 

448

 

 

 

 

 

 

 

 

 

9,376

Mexico (0.4%)

 

 

 

 

 

 

 

 

7

Petroleos Mexicanos

 

3.750%

 

2/21/24

 

2,595

 

2,956

 

Petroleos Mexicanos

 

6.350%

 

2/12/48

 

210

 

173

 

 

 

 

 

 

 

 

 

3,129

Qatar (0.3%)

 

 

 

 

 

 

 

 

5

State of Qatar

 

2.375%

 

6/2/21

 

1,400

 

1,377

5

State of Qatar

 

3.875%

 

4/23/23

 

550

 

563

5

State of Qatar

 

5.103%

 

4/23/48

 

255

 

275

 

 

 

 

 

 

 

 

 

2,215

 

14

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

Saudi Arabia (0.3%)

 

 

 

 

 

 

 

 

5

Kingdom of Saudi Arabia

 

2.875%

 

3/4/23

 

2,740

 

2,695

5

Kingdom of Saudi Arabia

 

4.000%

 

4/17/25

 

200

 

203

 

 

 

 

 

 

 

 

 

2,898

Singapore (0.1%)

 

 

 

 

 

 

 

 

5

Temasek Financial I Ltd.

 

3.625%

 

8/1/28

 

510

 

524

 

 

 

 

 

 

 

 

 

 

United Arab Emirates (0.1%)

 

 

 

 

 

 

 

 

 

Emirate of Abu Dhabi

 

3.125%

 

10/11/27

 

1,235

 

1,205

 

 

 

 

 

 

 

 

 

 

United Kingdom (0.7%)

 

 

 

 

 

 

 

 

8

United Kingdom

 

1.500%

 

1/22/21

 

1,015

 

1,363

8

United Kingdom

 

0.500%

 

7/22/22

 

430

 

563

8

United Kingdom

 

0.750%

 

7/22/23

 

1,210

 

1,589

8

United Kingdom

 

1.250%

 

7/22/27

 

155

 

206

8

United Kingdom

 

3.500%

 

1/22/45

 

1,565

 

2,786

 

 

 

 

 

 

 

 

 

6,507

Total Sovereign Bonds (Cost $37,580)

 

 

 

 

 

 

 

36,604

Taxable Municipal Bonds (0.8%)

 

 

 

 

 

 

 

 

 

Bay Area Toll Authority California Toll Bridge Revenue (San Francisco Bay Area)

 

6.907%

 

10/1/50

 

75

 

109

 

California GO

 

7.550%

 

4/1/39

 

345

 

507

 

California GO

 

7.350%

 

11/1/39

 

140

 

197

 

California GO

 

7.625%

 

3/1/40

 

20

 

29

 

Chicago IL Transit Authority Transfer Tax Receipts Revenue

 

6.899%

 

12/1/40

 

355

 

452

 

Chicago IL Transit Authority

 

6.300%

 

12/1/21

 

55

 

58

 

Connecticut GO

 

2.990%

 

1/15/23

 

765

 

758

 

Connecticut GO

 

5.770%

 

3/15/25

 

275

 

305

 

Georgia Municipal Electric Power Authority Revenue

 

6.637%

 

4/1/57

 

424

 

450

 

Georgia Municipal Electric Power Authority Revenue

 

6.655%

 

4/1/57

 

95

 

107

 

Illinois GO

 

5.100%

 

6/1/33

 

1,060

 

1,005

13

Kansas Development Finance Authority

 

5.371%

 

5/1/26

 

775

 

830

 

North Texas Tollway Authority System Revenue

 

6.718%

 

1/1/49

 

125

 

175

 

Port Authority of New York & New Jersey Revenue

 

4.458%

 

10/1/62

 

270

 

285

 

Sales Tax Securitization Corp. Illinois Revenue

 

4.787%

 

1/1/48

 

665

 

675

 

San Jose California Redevelopment Agency Successor Agency Tax Allocation

 

3.375%

 

8/1/34

 

195

 

186

 

South Carolina Public Service Authority Revenue

 

2.388%

 

12/1/23

 

1,275

 

1,218

 

University of California Regents Medical Center Revenue

 

6.548%

 

5/15/48

 

190

 

253

Total Taxable Municipal Bonds (Cost $7,821)

 

 

 

 

 

 

 

7,599

 

15

 

Global Wellington Fund

 

 

 

 

 

Coupon

 

 

 

Shares

 

Market

Value·

($000)

Temporary Cash Investment (3.3%)

 

 

 

 

 

 

 

 

Money Market Fund (3.3%)

 

 

 

 

 

 

 

 

14,15

 Vanguard Market Liquidity Fund (Cost $29,064)

 

2.563%

 

 

 

290,610

 

29,064

Total Investments (102.1%) (Cost $906,920)

 

 

 

 

 

 

 

912,592

 

 

 

 

 

 

 

 

 

 

Amount

($000)

Other Assets and Liabilities (-2.1%)

 

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

 

 

Investment in Vanguard

 

 

 

 

 

 

 

46

Receivables for Investment Securities Sold

 

 

 

 

 

 

 

453

Receivables for Accrued Income

 

 

 

 

 

 

 

3,751

Receivables for Capital Shares Issued

 

 

 

 

 

 

 

807

Variation Margin Receivable—Futures Contracts

 

 

 

 

 

 

 

72

Unrealized Appreciation—Forward Currency Contracts

 

 

 

 

 

54

Other Assets

 

 

 

 

 

 

 

1,911

Total Other Assets

 

 

 

 

 

 

 

7,094

Liabilities

 

 

 

 

 

 

 

 

Payables for Investment Securities Purchased

 

 

 

 

 

 

 

(6,508)

Collateral for Securities on Loan

 

 

 

 

 

 

 

(17,241)

Payables for Capital Shares Redeemed

 

 

 

 

 

 

 

(942)

Payables to Vanguard

 

 

 

 

 

 

 

(80)

Payables to Investment Advisor

 

 

 

 

 

 

 

(332)

Variation Margin Payable—Futures Contracts

 

 

 

 

 

 

 

(112)

Unrealized Depreciation—Forward Currency Contracts

 

 

 

 

 

(502)

Other Liabilities

 

 

 

 

 

 

 

(123)

Total Liabilities

 

 

 

 

 

 

 

(25,840)

Net Assets (100%)

 

 

 

 

 

 

 

893,846

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

 

 

 

 

 

Amount

($000)

Paid-in Capital

 

 

 

 

 

 

 

890,792

Total Distributable Earnings (Loss)

 

 

 

 

 

 

 

3,054

Net Assets

 

 

 

 

 

 

 

893,846

 

Investor Shares—Net Assets

 

 

 

 

 

 

 

 

Applicable to 8,026,616 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

162,737

Net Asset Value Per Share—Investor Shares

 

 

 

 

 

 

 

$20.27

 

16

 

Global Wellington Fund

 

 

 

 

 

 

 

 

 

 

 

Amount

($000)

Admiral Shares—Net Assets

 

 

 

 

 

 

 

 

Applicable to 28,840,829 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

 

 

731,109

Net Asset Value Per Share—Admiral Shares

 

 

 

 

 

 

 

$25.35

 

· See Note A in Notes to Financial Statements.

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $16,226,000.

* Non-income-producing security.

1 The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.

2 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.

3 Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of February 28, 2019.

4 Securities with a value of $740,000 have been segregated as initial margin for open futures contracts.

5 Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At February 28, 2019, the aggregate value of these securities was $49,540,000, representing 5.5% of net assets.

6 Adjustable-rate security; rate shown is effective rate at period end. Certain adjustable-rate securities are not based on a published reference rate and spread but are determined by the issuer or agent based on current market conditions.

7 Face amount denominated in euro.

8 Face amount denominated in British pounds.

9 Face amount denominated in Canadian dollars.

10 Face amount denominated in Australian dollars.

11 Face amount denominated in Swiss francs.

12 Face amount denominated in Japanese yen.

13 Scheduled principal and interest payments are guaranteed by AGM (Assured Guaranty Municipal Corporation).

14 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

15 Includes $17,241,000 of collateral received for securities on loan.

ADR—American Depositary Receipt.

GO—General Obligation Bond.

LIBOR—London Inter-bank Offered Rate.

REMICS—Real Estate Mortgage Investment Conduits.

 

17

 

Global Wellington Fund

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts

 

 

 

 

 

 

 

 

 

($000)

 

 

 

 

 

 

 

 

Value and

 

 

 

 

Number of

 

 

 

Unrealized

 

 

 

 

Long (Short

)

Notional

 

Appreciation

 

 

Expiration

 

Contracts

 

Amount

 

(Depreciation)

Long Futures Contracts

 

 

 

 

 

 

 

 

5-Year U.S. Treasury Note

 

June 2019

 

121

 

13,862

 

(13)

Euro-Buxl

 

March 2019

 

23

 

4,815

 

129

Euro-Bund

 

March 2019

 

18

 

3,385

 

22

Long Gilt

 

June 2019

 

6

 

1,001

 

(11)

Euro-Bobl

 

March 2019

 

4

 

604

 

(2)

 

 

 

 

 

 

 

 

 

125

 

Short Futures Contracts

 

 

 

 

 

 

 

 

10-Year U.S. Treasury Note

 

June 2019

 

(114

)

(13,908

)

53

Euro-Schatz

 

March 2019

 

(76

)

(9,666

)

8

Ten-Year Government of Canada Bond

 

June 2019

 

(26

)

(2,681

)

7

Ultra Long U.S. Treasury Bond

 

June 2019

 

(17

)

(2,713

)

39

Ultra 10-Year U.S. Treasury Note

 

June 2019

 

(4

)

(518

)

2

 

 

 

 

 

 

 

 

 

109

 

 

 

 

 

 

 

 

 

234

 

18

 

Global Wellington Fund

 

 

Forward Currency Contracts

 

 

Contract

 

 

 

 

Unrealized

Unrealized

 

Settlement

 

Contract Amount (000)

Appreciation

(Depreciation)

Counterparty

Date

 

Receive

 

Deliver

($000)

($000)

Goldman Sachs International

3/29/19

USD

77,252

EUR

67,958

—

(243)

J.P. Morgan Securities LLC

4/11/19

USD

11,598

GBP

8,905

—

(240)

Bank of America, N.A.

3/29/19

USD

10,197

CAD

13,430

—

(16)

J.P. Morgan Securities LLC

3/29/19

USD

8,883

JPY

982,486

48

—

Goldman Sachs International

3/29/19

USD

2,407

AUD

3,382

6

—

J.P. Morgan Securities LLC

3/29/19

USD

966

CHF

964

—

(3)

Goldman Sachs International

3/29/19

USD

331

CAD

435

—

—

 

 

 

 

 

 

54

(502)

 

AUD—Australian dollar.

 

CAD—Canadian dollar.

 

CHF—Swiss franc.

 

EUR—euro.

 

GBP—British pound.

 

JPY—Japanese yen.

 

USD—U.S. dollar.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

19

 

Global Wellington Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

February 28, 2019

 

($000)

Investment Income

 

Income

 

Dividends1

6,216

Interest2

3,870

Securities Lending—Net

50

Total Income

10,136

Expenses

 

Investment Advisory Fees—Note B

 

Basic Fee

647

Performance Adjustment

9

The Vanguard Group—Note C

 

Management and Administrative—Investor Shares

219

Management and Administrative—Admiral Shares

663

Marketing and Distribution—Investor Shares

15

Marketing and Distribution—Admiral Shares

25

Custodian Fees

8

Shareholders’ Reports—Investor Shares

6

Shareholders’ Reports—Admiral Shares

7

Trustees’ Fees and Expenses

1

Total Expenses

1,600

Expenses Paid Indirectly

(8)

Net Expenses

1,592

Net Investment Income

8,544

Realized Net Gain (Loss)

 

Investment Securities Sold2

(5,055)

Futures Contracts

293

Forward Currency Contracts

2,958

Foreign Currencies

(104)

Realized Net Gain (Loss)

(1,908)

Change in Unrealized Appreciation (Depreciation)

 

Investment Securities2

(3,869)

Futures Contracts

137

Forward Currency Contracts

(281)

Foreign Currencies

18

Change in Unrealized Appreciation (Depreciation)

(3,995)

Net Increase (Decrease) in Net Assets Resulting from Operations

2,641

 

1   Dividends are net of foreign withholding taxes of $234,000.

 

2   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $183,000, $1,000, and ($4,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

20

 

Global Wellington Fund

 

 

Statement of Changes in Net Assets

 

 

 

 

October 18,

 

Six Months Ended

20171, to

 

February 28,

August 31,

 

 

2019

 

2018

 

 

($000)

 

($000)

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net Investment Income

8,544

16,103

Realized Net Gain (Loss)

(1,908)

(2,181)

Change in Unrealized Appreciation (Depreciation)

(3,995)

9,449

Net Increase (Decrease) in Net Assets Resulting from Operations

2,641

23,371

Distributions

 

 

Net Investment Income

 

 

Investor Shares

(1,836)

(2,453)

Admiral Shares

(8,100)

(8,954)

Realized Capital Gain

 

 

Investor Shares

(303)

—

Admiral Shares

(1,312)

—

Total Distributions

(11,551)

(11,407)

Capital Share Transactions

 

 

Investor Shares

(7,302)

169,692

Admiral Shares

23,088

705,314

Net Increase (Decrease) from Capital Share Transactions

15,786

875,006

Total Increase (Decrease)

6,876

886,970

Net Assets

 

 

Beginning of Period

886,970

—

End of Period

893,846

886,970

 

1   Commencement of subscription period for the fund.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

21

 

Global Wellington Fund

 

 

Financial Highlights

 

 

Investor Shares

 

 

Six Months

Oct. 18,

 

Ended

20171 to

 

Feb. 28,

Aug. 31,

For a Share Outstanding Throughout Each Period

2019

2018

Net Asset Value, Beginning of Period

$20.51

$20.00

Investment Operations

 

 

Net Investment Income2

.187

.392

Net Realized and Unrealized Gain (Loss) on Investments

(.168)

.379

Total from Investment Operations

.019

.771

Distributions

 

 

Dividends from Net Investment Income

(.222)

(.261)

Distributions from Realized Capital Gains

(.037)

—

Total Distributions

(.259)

(.261)

Net Asset Value, End of Period

$20.27

$20.51

 

 

 

Total Return3

0.13%

3.88%

 

 

 

Ratios/Supplemental Data

 

 

Net Assets, End of Period (Millions)

$163

$172

Ratio of Total Expenses to Average Net Assets

0.46%4

0.46%5,6

Ratio of Net Investment Income to Average Net Assets

1.91%

2.32%6

Portfolio Turnover Rate

59%

44%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Subscription period for the fund was October 18, 2017, to November 1, 2017, during which time all assets were held in cash. Performance measurement began November 2, 2017, the first business day after the subscription period, at a net asset value of $20.00.

 

2   Calculated based on average shares outstanding.

 

3   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

4   Includes performance-based investment advisory fee increases (decreases) of 0.00%.

 

5   The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.45%.

 

6   Annualized.

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

22

 

Global Wellington Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

Six Months

Oct. 18,

 

Ended

20171 to

 

Feb. 28,

Aug. 31,

For a Share Outstanding Throughout Each Period

2019

2018

Net Asset Value, Beginning of Period

$25.65

$25.00

Investment Operations

 

 

Net Investment Income2

.248

.511

Net Realized and Unrealized Gain (Loss) on Investments

(.212)

.480

Total from Investment Operations

.036

.991

Distributions

 

 

Dividends from Net Investment Income

(.290)

(.341)

Distributions from Realized Capital Gains

(.046)

—

Total Distributions

(.336)

(.341)

Net Asset Value, End of Period

$25.35

$25.65

 

 

 

Total Return3

0.18%

3.99%

 

 

 

Ratios/Supplemental Data

 

 

Net Assets, End of Period (Millions)

$731

$715

Ratio of Total Expenses to Average Net Assets

0.35%4

0.36%5,6

Ratio of Net Investment Income to Average Net Assets

2.02%

2.42%6

Portfolio Turnover Rate

59%

44%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Subscription period for the fund was October 18, 2017, to November 1, 2017, during which time all assets were held in cash. Performance measurement began November 2, 2017, the first business day after the subscription period, at a net asset value of $25.00.

 

2   Calculated based on average shares outstanding.

 

3   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

4   Includes performance-based investment advisory fee increases (decreases) of 0.00%.

 

5   The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.35%.

 

6   Annualized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

23

 

Global Wellington Fund

 

 

Notes to Financial Statements

 

 

Vanguard Global Wellington Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. To minimize the currency risk associated with investment in bonds denominated in currencies other than the U.S. dollar, the fund attempts to hedge its currency exposures. The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Bonds and temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities.

 

2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

 

3. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between

 

24

 

Global Wellington Fund

 

 

 

 

 

 

changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts represented 3% and 4% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

4. Forward Currency Contracts: The fund enters into forward currency contracts to protect the value of securities and related receivables and payables against changes in future foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized forward currency contract gains (losses).

 

25

 

Global Wellington Fund

 

 

 

 

 

 

During the six months ended February 28, 2019, the fund’s average investment in forward currency contracts represented 12% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

5. To Be Announced (TBA) Transactions: A TBA transaction is an agreement to buy or sell mortgage-backed securities with agreed-upon characteristics (face amount, coupon, maturity) for settlement at a future date. The fund may be a seller of TBA transactions to reduce its exposure to the mortgage-backed securities market or in order to sell mortgage-backed securities it owns under delayed-delivery arrangements. When the fund is a buyer of TBA transactions, it maintains cash or short-term investments in an amount sufficient to meet the purchase price at the settlement date of the TBA transaction. The primary risk associated with TBA transactions is that a counterparty may default on its obligations. The fund mitigates its counterparty risk by, among other things, performing a credit analysis of counterparties, allocating transactions among numerous counterparties, and monitoring its exposure to each counterparty. The fund may also enter into a Master Securities Forward Transaction Agreement (MSFTA) with certain counterparties and require them to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. Under an MSFTA, upon a counterparty default (including bankruptcy), the fund may terminate any TBA transactions with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements.

 

6. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for the open federal income tax period ended August 31, 2018, and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

7. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

8. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees

 

26

 

Global Wellington Fund

 

 

 

 

 

 

charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

9. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

10. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  Wellington Management Company LLP provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. The basic fee is subject to quarterly adjustments based on the fund’s performance relative to the Global Wellington Composite Index, comprising the FTSE Developed Index and the Bloomberg Barclays Fixed Income Composite Index, since December 1, 2017. For the six months ended February 28, 2019, the investment advisory fee represented an effective annual basic rate of 0.15% of the fund’s average net assets before an increase of $9,000 (0.00%) based on performance.

 

C.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees, and are generally settled twice a month.

 

27

 

Global Wellington Fund

 

 

 

 

 

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $46,000, representing 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

D.  The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended February 28, 2019, custodian fee offset arrangements reduced the fund’s expenses by $8,000 (an annual rate of 0.00% of average net assets).

 

E.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

Level 1

Level 2

Level 3

Investments

($000)

($000)

($000)

Common Stocks

354,156

237,633

—

U.S. Government and Agency Obligations

—

40,037

—

Asset-Backed/Commercial Mortgage-Backed Securities

—

17,299

—

Corporate Bonds

—

190,200

—

Sovereign Bonds

—

36,604

—

Taxable Municipal Bonds

—

7,599

—

Temporary Cash Investments

29,064

—

—

Futures Contracts—Assets1

72

—

—

Futures Contracts—Liabilities1

(112)

—

—

Forward Currency Contracts—Assets

—

54

—

Forward Currency Contracts—Liabilities

—

(502)

—

Total

383,180

528,924

—

 

1 Represents variation margin on the last day of the reporting period.

 

28

 

Global Wellington Fund

 

 

 

 

 

 

F.  At February 28, 2019, the fair values of derivatives were reflected in the Statement of Net Assets as follows:

 

 

Interest Rate

Currency

 

 

Contracts

Contracts

Total

Statement of Net Assets Caption

($000)

($000)

($000)

Variation Margin Receivable—Futures Contracts

72

—

72

Unrealized Appreciation—Forward Currency Contracts

—

54

54

Total Assets

72

54

126

 

 

 

 

Variation Margin Payable—Futures Contracts

(112)

—

(112)

Unrealized Depreciation—Forward Currency Contracts

—

(502)

(502)

Total Liabilities

(112)

(502)

(614)

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 28, 2019, were:

 

 

Interest Rate

Currency

 

 

Contracts

Contracts

Total

Realized Net Gain (Loss) on Derivatives

($000)

($000)

($000)

Futures Contracts

293

—

293

Forward Currency Contracts

—

2,958

2,958

Realized Net Gain (Loss) on Derivatives

293

2,958

3,251

 

 

 

 

Change in Unrealized Appreciation (Depreciation) on Derivatives

 

 

 

Futures Contracts

137

—

137

Forward Currency Contracts

—

(281)

(281)

Change in Unrealized Appreciation (Depreciation) on Derivatives

137

(281)

(144)

 

 

G. As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

Amount

 

($000)

Tax Cost

906,943

Gross Unrealized Appreciation

46,356

Gross Unrealized Depreciation

(40,707)

Net Unrealized Appreciation (Depreciation)

5,649

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2018, the fund had available capital losses totaling $2,136,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2019; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

29

 

Global Wellington Fund

 

 

 

 

 

 

H.  During the six months ended February 28, 2019, the fund purchased $226,641,000 of investment securities and sold $197,431,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $59,970,000 and $51,864,000, respectively.

 

I.   Capital share transactions for each class of shares were:

 

 

Six Months Ended

 

October 18, 20171 to

 

February 28, 2019

 

August 31, 2018

 

Amount

Shares

 

Amount

Shares

 

($000)

(000)

 

($000)

(000)

Investor Shares

 

 

 

 

 

Issued

30,316

1,534

 

300,032

14,826

Issued in Lieu of Cash Distributions

1,887

96

 

2,158

107

Redeemed

(39,505)

(1,998)

 

(132,498)

(6,538)

Net Increase (Decrease)—Investor Shares

(7,302)

(368)

 

169,692

8,395

Admiral Shares

 

 

 

 

 

Issued

187,679

7,655

 

965,403

38,145

Issued in Lieu of Cash Distributions

8,018

325

 

7,432

294

Redeemed

(172,609)

(7,009)

 

(267,521)

(10,570)

Net Increase (Decrease)—Admiral Shares

23,088

971

 

705,314

27,869

 

1   Commencement of subscription period for the fund.

 

J.  Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

30

 

Trustees Approve Advisory Arrangement

 

 

The board of trustees of Vanguard Global Wellington Fund has renewed the fund’s investment advisory arrangement with Wellington Management Company LLP (Wellington Management). The board determined that continuing the investment advisory arrangement was in the best interests of the fund and its shareholders.

 

The board based its decision upon an evaluation of the 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 advisor 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 throughout 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 arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.

 

Nature, extent, and quality of services

The board considered the quality of the investment management services provided to the fund since its inception in 2017 and took into account the organizational depth and stability of the advisor. The board considered that Wellington Management, founded in 1928, is among the nation’s oldest and most respected institutional managers. For the equity portion of the fund, Wellington Management focuses on high-quality companies in out-of-favor industries that generate superior returns. The equity sub-portfolio includes large- and mid-capitalization stocks with a valuation discount, premium dividend yield, and market-like earnings growth. The advisor primarily invests the fixed income portion of the fund in government and mortgage securities, in addition to high-quality corporate bonds. The fund’s bond portion will maintain an intermediate-term duration. Wellington Management has advised the fund since its inception in 2017.

 

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

 

Investment performance

The board considered the fund’s performance since its inception, including any periods of out-performance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that the advisory arrangement should continue.

 

31

 

Cost

The board concluded that, while the fund had not yet been in existence for a full fiscal year, the fund’s estimated expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s annualized advisory fee rate was also well below the peer-group average.

 

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

 

The benefit of economies of scale

The board concluded that the fund’s shareholders will benefit from economies of scale because of breakpoints in the fund’s advisory fee schedule. The breakpoints reduce the effective rate of the fee as the fund’s assets increase.

 

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

 

32

 

This page intentionally left blank.

 

 

 

 

 

 

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This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

CFA® is a registered trademark owned by CFA Institute.

 

 

© 2019 The Vanguard Group, Inc.

 

All rights reserved.

 

Vanguard Marketing Corporation, Distributor.

 

 

 

Q15672 042019

 

 

 

 

 

Semiannual Report  |  February 28, 2019

 

 

Vanguard Global Wellesley® Income Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

 

 

About Your Fund’s Expenses

1

 

 

Financial Statements

4

 

 

Trustees Approve Advisory Arrangement

30

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·   Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·   Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Six Months Ended February 28, 2019

 

 

Beginning

Ending

Expenses

 

Account Value

Account Value

Paid During

Global Wellesley Income Fund

8/31/2018

2/28/2019

Period

Based on Actual Fund Return

 

 

 

Investor Shares

$1,000.00

$999.11

$2.08

Admiral™ Shares

1,000.00

999.74

1.59

Based on Hypothetical 5% Yearly Return

 

 

 

Investor Shares

$1,000.00

$1,022.71

$2.11

Admiral Shares

1,000.00

1,023.21

1.61

 

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for the period are 0.42% for Investor Shares and 0.32% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

 

2

 

Global Wellesley Income Fund

 

 

Sector Diversification

As of February 28, 2019

 

Equity Exposure

 

Communication Services

7.4%

Consumer Discretionary

6.3

Consumer Staples

8.7

Energy

12.6

Financials

19.5

Health Care

11.0

Industrials

9.4

Information Technology

11.6

Materials

3.2

Real Estate

3.5

Utilities

6.8

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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 Exposure

 

Asset-Backed

6.5%

Commercial Mortgage-Backed

2.7

Finance

23.2

Foreign

13.3

Government Mortgage-Backed

5.9

Industrial

36.4

Treasury/Agency

3.0

Utilities

6.0

Other

3.0

 

The table reflects the fund’s market exposure. Any holdings in short-term reserves are excluded. The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

 

3

 

Global Wellesley Income Fund

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

U.S. Government and Agency Obligations (6.9%)

United States (6.9%)

1,2

Fannie Mae Pool

 

3.000%

 

12/1/47

 

1,565

 

1,530

1,2

Fannie Mae Pool

 

4.000%

 

11/1/48

 

1,294

 

1,320

1,2,3

Fannie Mae Pool

 

3.500%

 

3/1/49

 

3,080

 

3,081

1,2

Fannie Mae REMICS

 

2.000%

 

9/25/40

 

207

 

200

1,2

Fannie Mae REMICS

 

3.500%

 

6/25/44–2/25/48

 

1,840

 

1,870

1,2

Fannie Mae REMICS

 

2.500%

 

5/25/45

 

655

 

642

1,2

Freddie Mac Gold Pool

 

3.000%

 

11/1/47–12/1/47

 

2,777

 

2,722

1,2

Freddie Mac Gold Pool

 

3.500%

 

11/1/47–12/1/47

 

5,145

 

5,154

1,2

Freddie Mac Gold Pool

 

4.000%

 

10/1/48–12/1/48

 

1,764

 

1,800

1,2

Freddie Mac REMICS

 

4.000%

 

12/15/39–8/15/40

 

1,761

 

1,830

1,2

Freddie Mac REMICS

 

3.500%

 

9/15/40–11/15/40

 

652

 

659

1,2

Freddie Mac REMICS

 

1.750%

 

9/15/42

 

1,656

 

1,591

1

Government National Mortgage Assn.

 

2.750%

 

9/20/44

 

334

 

330

 

United States Treasury Inflation Indexed Bonds

 

0.750%

 

7/15/28

 

1,450

 

1,452

4

United States Treasury Note/Bond

 

1.500%

 

10/31/19

 

665

 

660

 

United States Treasury Note/Bond

 

2.875%

 

9/30/23

 

2,105

 

2,136

 

United States Treasury Note/Bond

 

3.125%

 

11/15/28

 

1,570

 

1,623

 

United States Treasury Note/Bond

 

3.125%

 

5/15/48

 

635

 

640

 

United States Treasury Note/Bond

 

3.000%

 

8/15/48

 

725

 

713

 

United States Treasury Strip Principal

 

0.000%

 

5/15/47

 

585

 

242

 

United States Treasury Strip Principal

 

0.000%

 

8/15/47

 

1,450

 

594

Total U.S. Government and Agency Obligations (Cost $31,052)

 

 

 

30,789

Asset-Backed/Commercial Mortgage-Backed Securities (3.8%)

 

 

 

 

Canada (0.2%)

 

 

 

 

 

 

 

 

1,5,6

Master Credit Card Trust II Series 2018-1A, 3M USD LIBOR + 0.490%

 

2.972%

 

7/21/24

 

835

 

831

 

 

 

 

 

 

 

 

 

 

Cayman Islands (1.4%)

 

 

 

 

 

 

 

 

1,5,6

Atlas Senior Loan Fund V Ltd., 3M USD LIBOR + 1.260%

 

4.039%

 

7/16/29

 

900

 

896

1,5,6

KKR CLO 17 Ltd., 3M USD LIBOR + 1.340%

 

4.127%

 

4/15/29

 

875

 

876

1,5,6

Madison Park Funding XVIII Ltd., 3M USD LIBOR + 1.190%

 

3.951%

 

10/21/30

 

875

 

873

1,5,6

Madison Park Funding XXX Ltd., 3M USD LIBOR + 0.750%

 

3.537%

 

4/15/29

 

1,570

 

1,544

 

4

 

Global Wellesley Income Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

1,5,6

Magnetite VII Ltd., 3M USD LIBOR + 0.800%

 

3.587%

 

1/15/28

 

1,510

 

1,491

1,5,6

Race Point IX CLO Ltd., 3M USD LIBOR + 1.210%

 

3.997%

 

10/15/30

 

870

 

869

 

 

 

 

 

 

 

 

 

6,549

Spain (0.2%)

 

 

 

 

 

 

 

 

7

Bankia SA

 

4.125%

 

3/24/36

 

550

 

842

 

 

 

 

 

 

 

 

 

 

United States (2.0%)

 

 

 

 

 

 

 

 

1,5,6

Angel Oak Mortgage Trust I LLC 2018-3

 

3.649%

 

9/25/48

 

687

 

687

1,5

ARI Fleet Lease Trust 2018-A

 

2.550%

 

10/15/26

 

244

 

243

1,5,6

Bristol Park CLO Ltd., 3M USD LIBOR + 1.420%

 

4.207%

 

4/15/29

 

815

 

816

1,5

Chesapeake Funding II LLC 2018-2A

 

1.990%

 

5/15/29

 

486

 

481

1,5

Chesapeake Funding II LLC 2018-2A

 

3.230%

 

8/15/30

 

865

 

866

1,5

Chrysler Capital Auto Receivables Trust 2016-A

 

3.250%

 

6/15/22

 

295

 

296

1,5,6

COLT 2018-1 Mortgage Loan Trust

 

2.930%

 

2/25/48

 

190

 

188

1,5,6

COLT 2018-3 Mortgage Loan Trust

 

3.692%

 

10/26/48

 

229

 

229

1,5,6

Deephaven Residential Mortgage Trust 2018-1

 

2.976%

 

12/25/57

 

285

 

283

1,5

Enterprise Fleet Financing LLC Series 2018-1

 

2.870%

 

10/20/23

 

773

 

771

1,5

First Investors Auto Owner Trust

 

2.000%

 

3/15/22

 

238

 

237

1,5

First Investors Auto Owner Trust

 

2.410%

 

12/15/22

 

140

 

139

1,5

GreatAmerica Leasing Receivables Funding LLC Series 2018-1

 

2.600%

 

6/15/21

 

255

 

254

1,5

GreatAmerica Leasing Receivables Funding LLC Series 2018-1

 

2.830%

 

6/17/24

 

183

 

182

1,5,6

KKR CLO 16 Ltd., 3M USD LIBOR + 1.490%

 

4.251%

 

1/20/29

 

435

 

435

1,5

MMAF Equipment Finance LLC 2016-A

 

1.480%

 

6/15/20

 

103

 

102

1,5

MMAF Equipment Finance LLC 2017-B

 

2.210%

 

10/17/22

 

205

 

202

1,5

OneMain Direct Auto Receivables Trust 2017-2

 

2.310%

 

12/14/21

 

728

 

725

1

Santander Drive Auto Receivables Trust 2014-4

 

3.100%

 

11/16/20

 

127

 

127

1

Santander Drive Auto Receivables Trust 2016-3

 

1.890%

 

6/15/21

 

219

 

219

1,5

Sofi Consumer Loan Program 2018-2 Trust

 

2.930%

 

4/26/27

 

251

 

251

1,5,6

Towd Point Mortgage Trust 2018-1

 

3.000%

 

1/25/58

 

316

 

311

1,5

Vantage Data Centers Issuer, LLC 2018-1A

 

4.072%

 

2/16/43

 

327

 

328

1,5

Westlake Automobile Receivables Trust

 

2.980%

 

1/18/22

 

695

 

696

 

 

 

 

 

 

 

 

 

9,068

Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $17,379)

 

 

 

17,290

Corporate Bonds (38.8%)

 

 

 

 

 

 

 

 

Australia (0.4%)

 

 

 

 

 

 

 

1,5

Macquarie Group Ltd.

 

4.150%

 

3/27/24

 

1,125

 

1,129

5

WEA Finance LLC

 

4.125%

 

9/20/28

 

610

 

618

5

WEA Finance LLC

 

4.625%

 

9/20/48

 

225

 

225

 

 

 

 

 

 

 

 

 

1,972

 

5

 

Global Wellesley Income Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

Belgium (0.1%)

 

 

 

 

 

 

 

 

8

Anheuser-Busch InBev SA

 

1.750%

 

3/7/25

 

325

 

415

 

 

 

 

 

 

 

 

 

 

Canada (1.1%)

 

 

 

 

 

 

 

 

9

Bell Canada Inc.

 

3.350%

 

3/22/23

 

950

 

733

6

Canadian Imperial Bank of Commerce, 3M USD LIBOR + 0.720%

 

3.508%

 

6/16/22

 

700

 

702

 

Emera US Finance LP

 

2.700%

 

6/15/21

 

475

 

467

 

Fortis Inc.

 

3.055%

 

10/4/26

 

625

 

583

9

Royal Bank of Canada

 

2.949%

 

5/1/23

 

1,825

 

1,405

9

Toronto-Dominion Bank

 

1.680%

 

6/8/21

 

900

 

675

 

TransCanada PipeLines Ltd.

 

4.875%

 

1/15/26

 

475

 

500

 

 

 

 

 

 

 

 

 

5,065

China (0.5%)

 

 

 

 

 

 

 

 

 

Alibaba Group Holding Ltd.

 

3.125%

 

11/28/21

 

1,000

 

996

 

Alibaba Group Holding Ltd.

 

3.400%

 

12/6/27

 

690

 

657

5

Tencent Holdings Ltd.

 

3.595%

 

1/19/28

 

690

 

667

 

 

 

 

 

 

 

 

 

2,320

France (3.7%)

 

 

 

 

 

 

 

 

1,7

AXA SA

 

5.125%

 

7/4/43

 

750

 

975

7

Banque Federative du Credit Mutuel SA

 

1.250%

 

1/14/25

 

1,100

 

1,289

7

BNP Paribas SA

 

1.500%

 

11/17/25

 

2,550

 

2,942

7

BPCE SA

 

1.125%

 

1/18/23

 

900

 

1,036

5

BPCE SA

 

5.700%

 

10/22/23

 

400

 

419

5

BPCE SA

 

3.250%

 

1/11/28

 

500

 

473

7

Credit Agricole SA

 

1.000%

 

9/16/24

 

1,300

 

1,517

7

Orange SA

 

1.000%

 

5/12/25

 

1,200

 

1,381

7

PSA Banque France SA

 

0.500%

 

1/17/20

 

950

 

1,086

7

RCI Banque SA

 

0.750%

 

9/26/22

 

625

 

708

7

RCI Banque SA

 

1.375%

 

3/8/24

 

575

 

651

7

Societe Generale SA

 

1.000%

 

4/1/22

 

600

 

692

7

Total Capital Canada Ltd.

 

1.875%

 

7/9/20

 

2,300

 

2,685

7

Veolia Environnement SA

 

1.590%

 

1/10/28

 

400

 

473

 

 

 

 

 

 

 

 

 

16,327

Germany (2.8%)

 

 

 

 

 

 

 

 

5

Bayer US Finance II LLC

 

4.250%

 

12/15/25

 

565

 

566

7

Daimler AG

 

0.875%

 

1/12/21

 

3,100

 

3,573

8

E.ON International Finance BV

 

5.875%

 

10/30/37

 

200

 

356

7

E.ON SE

 

0.375%

 

8/23/21

 

1,775

 

2,027

8

innogy Finance BV

 

4.750%

 

1/31/34

 

500

 

780

5

Siemens Financieringsmaatschappij NV

 

2.900%

 

5/27/22

 

800

 

796

7

Volkswagen International Finance NV

 

2.000%

 

1/14/20

 

1,600

 

1,851

7

Volkswagen Leasing GmbH

 

2.625%

 

1/15/24

 

525

 

628

7

Volkswagen Leasing GmbH

 

1.375%

 

1/20/25

 

800

 

887

7

Vonovia Finance BV

 

1.750%

 

1/25/27

 

1,000

 

1,152

 

 

 

 

 

 

 

 

 

12,616

Hong Kong (0.2%)

 

 

 

 

 

 

 

 

5

CK Hutchison International 17 II Ltd.

 

2.750%

 

3/29/23

 

975

 

949

 

 

 

 

 

 

 

 

 

 

Italy (0.3%)

 

 

 

 

 

 

 

 

5

Enel Finance International NV

 

4.875%

 

6/14/29

 

1,000

 

1,000

5

Eni SPA

 

4.750%

 

9/12/28

 

200

 

200

 

 

 

 

 

 

 

 

 

1,200

 

6

 

Global Wellesley Income Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

Japan (0.7%)

 

 

 

 

 

 

 

 

7

JT International Financial Services BV

 

1.125%

 

9/28/25

 

1,400

 

1,603

10

Toyota Finance Australia Ltd.

 

2.500%

 

12/7/20

 

2,075

 

1,475

 

 

 

 

 

 

 

 

 

3,078

Mexico (0.5%)

 

 

 

 

 

 

 

 

7

America Movil SAB de CV

 

4.125%

 

10/25/19

 

700

 

817

 

Coca-Cola Femsa SAB de CV

 

3.875%

 

11/26/23

 

650

 

661

5

Infraestructura Energetica Nova SAB de CV

 

4.875%

 

1/14/48

 

1,090

 

874

 

 

 

 

 

 

 

 

 

2,352

Netherlands (0.7%)

 

 

 

 

 

 

 

 

7

ABN AMRO Bank NV

 

2.500%

 

11/29/23

 

1,025

 

1,276

8

Cooperatieve Rabobank UA

 

4.625%

 

5/23/29

 

200

 

294

7

ING Groep NV

 

2.000%

 

9/20/28

 

1,100

 

1,288

 

Shell International Finance BV

 

4.000%

 

5/10/46

 

425

 

422

 

 

 

 

 

 

 

 

 

3,280

South Korea (0.1%)

 

 

 

 

 

 

 

 

5

SK Telecom Co. Ltd.

 

3.750%

 

4/16/23

 

200

 

202

 

 

 

 

 

 

 

 

 

 

Spain (1.3%)

 

 

 

 

 

 

 

 

7

CaixaBank SA

 

1.750%

 

10/24/23

 

1,700

 

1,930

7

Iberdrola International BV

 

2.875%

 

11/11/20

 

1,800

 

2,148

7

Telefonica Emisiones SAU

 

2.242%

 

5/27/22

 

800

 

961

 

Telefonica Emisiones SAU

 

4.665%

 

3/6/38

 

845

 

774

 

Telefonica Emisiones SAU

 

4.895%

 

3/6/48

 

155

 

142

 

 

 

 

 

 

 

 

 

5,955

Sweden (0.6%)

 

 

 

 

 

 

 

 

7

Skandinaviska Enskilda Banken AB

 

2.000%

 

2/19/21

 

675

 

798

7

Skandinaviska Enskilda Banken AB

 

0.300%

 

2/17/22

 

1,475

 

1,684

 

 

 

 

 

 

 

 

 

2,482

Switzerland (1.3%)

 

 

 

 

 

 

 

 

7

Credit Suisse AG

 

4.750%

 

8/5/19

 

2,450

 

2,845

1,7

Credit Suisse Group AG

 

1.250%

 

7/17/25

 

1,225

 

1,389

8

LafargeHolcim Sterling Finance Netherlands BV

 

3.000%

 

5/12/32

 

410

 

502

5

Roche Holdings Inc.

 

2.625%

 

5/15/26

 

850

 

811

5

UBS AG

 

4.500%

 

6/26/48

 

235

 

253

 

 

 

 

 

 

 

 

 

5,800

United Kingdom (3.2%)

 

 

 

 

 

 

 

 

 

AstraZeneca plc

 

4.000%

 

1/17/29

 

320

 

323

 

BAT Capital Corp.

 

3.222%

 

8/15/24

 

675

 

644

 

BAT Capital Corp.

 

3.557%

 

8/15/27

 

825

 

756

7

BAT International Finance plc

 

2.250%

 

1/16/30

 

1,050

 

1,124

9

BP Capital Markets plc

 

3.470%

 

5/15/25

 

1,325

 

1,028

8

CPUK Finance Ltd.

 

3.588%

 

8/28/25

 

1,200

 

1,659

7

FCE Bank plc

 

0.869%

 

9/13/21

 

500

 

553

8

Heathrow Funding Ltd.

 

6.750%

 

12/3/26

 

550

 

948

1,7

Heathrow Funding Ltd.

 

1.500%

 

2/11/32

 

875

 

980

6

HSBC Holdings plc, 3M USD LIBOR + 1.000%

 

3.683%

 

5/18/24

 

255

 

253

7

Imperial Brands Finance plc

 

2.250%

 

2/26/21

 

2,525

 

2,968

7

Imperial Brands Finance plc

 

1.375%

 

1/27/25

 

335

 

375

 

7

 

Global Wellesley Income Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

5

Imperial Brands Finance plc

 

4.250%

 

7/21/25

 

1,000

 

998

5

Sky plc

 

3.125%

 

11/26/22

 

825

 

816

 

Trinity Acquisition plc

 

4.400%

 

3/15/26

 

888

 

899

 

 

 

 

 

 

 

 

 

14,324

United States (21.3%)

 

 

 

 

 

 

 

 

 

21st Century Fox America Inc.

 

6.200%

 

12/15/34

 

650

 

804

 

Alabama Power Co.

 

4.300%

 

7/15/48

 

275

 

277

 

Allergan Funding SCS

 

3.800%

 

3/15/25

 

550

 

543

 

Amazon.com Inc.

 

4.800%

 

12/5/34

 

350

 

389

 

Amazon.com Inc.

 

4.250%

 

8/22/57

 

275

 

279

7

American International Group Inc.

 

1.500%

 

6/8/23

 

875

 

1,012

7

American International Group Inc.

 

1.875%

 

6/21/27

 

725

 

816

 

American Tower Corp.

 

5.000%

 

2/15/24

 

550

 

581

 

American Tower Corp.

 

4.400%

 

2/15/26

 

325

 

331

 

Amgen Inc.

 

4.663%

 

6/15/51

 

375

 

359

 

Andeavor Logistics LP / Tesoro Logistics Finance Corp.

 

3.500%

 

12/1/22

 

1,325

 

1,318

5

Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide Inc.

 

4.900%

 

2/1/46

 

700

 

667

 

Anheuser-Busch InBev Worldwide Inc.

 

4.375%

 

4/15/38

 

180

 

166

 

Anheuser-Busch InBev Worldwide Inc.

 

4.600%

 

4/15/48

 

90

 

83

 

Anthem Inc.

 

3.500%

 

8/15/24

 

325

 

324

 

Anthem Inc.

 

4.101%

 

3/1/28

 

665

 

673

 

Anthem Inc.

 

4.375%

 

12/1/47

 

400

 

384

 

Apple Inc.

 

2.750%

 

1/13/25

 

645

 

631

7

AT&T Inc.

 

1.875%

 

12/4/20

 

2,425

 

2,831

 

AT&T Inc.

 

4.125%

 

2/17/26

 

700

 

700

 

AT&T Inc.

 

4.900%

 

8/15/37

 

500

 

484

 

Bank of America Corp.

 

3.300%

 

1/11/23

 

700

 

703

1

Bank of America Corp.

 

3.593%

 

7/21/28

 

1,550

 

1,514

1

Bank of America Corp.

 

4.271%

 

7/23/29

 

685

 

702

6

Bank of New York Mellon Corp., 3M USD LIBOR + 1.050%

 

3.800%

 

10/30/23

 

505

 

511

 

BB&T Corp.

 

3.700%

 

6/5/25

 

805

 

820

 

Boston Scientific Corp.

 

4.000%

 

3/1/29

 

55

 

55

 

Brandywine Operating Partnership LP

 

3.950%

 

11/15/27

 

800

 

768

 

Broadcom Corp. / Broadcom Cayman Finance Ltd.

 

3.625%

 

1/15/24

 

850

 

826

5

Brooklyn Union Gas Co.

 

4.273%

 

3/15/48

 

760

 

744

 

Capital One Financial Corp.

 

4.200%

 

10/29/25

 

1,000

 

996

 

Cardinal Health Inc.

 

4.500%

 

11/15/44

 

350

 

301

5

Cargill Inc.

 

4.760%

 

11/23/45

 

400

 

431

 

Catholic Health Initiatives Colorado

 

4.200%

 

8/1/23

 

895

 

914

 

Charter Communications Operating LLC / Charter Communications Operating Capital

 

6.384%

 

10/23/35

 

500

 

534

5

Cigna Corp.

 

4.375%

 

10/15/28

 

435

 

439

1

Citigroup Inc.

 

3.520%

 

10/27/28

 

2,030

 

1,967

 

Comcast Corp.

 

3.950%

 

10/15/25

 

255

 

263

 

Comcast Corp.

 

6.500%

 

11/15/35

 

775

 

948

 

Comcast Corp.

 

4.600%

 

10/15/38

 

265

 

272

 

Comcast Corp.

 

4.000%

 

3/1/48

 

20

 

19

 

Comcast Corp.

 

3.999%

 

11/1/49

 

60

 

56

 

Comcast Corp.

 

4.049%

 

11/1/52

 

10

 

9

 

Conagra Brands Inc.

 

4.600%

 

11/1/25

 

200

 

203

 

8

 

Global Wellesley Income Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

 

Conagra Brands Inc.

 

5.300%

 

11/1/38

 

145

 

137

5

Cox Communications Inc.

 

4.600%

 

8/15/47

 

650

 

590

 

Crown Castle International Corp.

 

3.800%

 

2/15/28

 

1,035

 

1,001

 

CSX Corp.

 

4.300%

 

3/1/48

 

405

 

392

 

CVS Health Corp.

 

4.100%

 

3/25/25

 

1,370

 

1,384

 

CVS Health Corp.

 

2.875%

 

6/1/26

 

1,325

 

1,227

 

Dignity Health California

 

3.812%

 

11/1/24

 

659

 

666

 

Dignity Health California

 

4.500%

 

11/1/42

 

202

 

192

 

Discover Bank

 

4.200%

 

8/8/23

 

700

 

713

 

Dominion Energy Gas Holdings LLC

 

4.600%

 

12/15/44

 

625

 

627

 

Duke Energy Progress LLC

 

4.100%

 

3/15/43

 

725

 

726

 

Duke Energy Progress LLC

 

4.200%

 

8/15/45

 

350

 

353

 

Energy Transfer Partners LP

 

4.900%

 

3/15/35

 

975

 

905

 

EQT Midstream Partners LP

 

4.750%

 

7/15/23

 

1,100

 

1,106

5

ERAC USA Finance LLC

 

4.500%

 

2/15/45

 

500

 

467

 

FirstEnergy Corp.

 

3.900%

 

7/15/27

 

825

 

817

 

Ford Motor Credit Co. LLC

 

3.096%

 

5/4/23

 

1,150

 

1,057

5

Fox Corp.

 

4.030%

 

1/25/24

 

145

 

148

 

General Motors Co.

 

4.200%

 

10/1/27

 

550

 

513

 

General Motors Financial Co. Inc.

 

3.450%

 

4/10/22

 

1,535

 

1,525

7

General Motors Financial Co. Inc.

 

0.955%

 

9/7/23

 

800

 

879

 

Georgia Power Co.

 

4.300%

 

3/15/42

 

1,130

 

1,063

 

Goldman Sachs Group Inc.

 

2.625%

 

4/25/21

 

700

 

691

1

Goldman Sachs Group Inc.

 

3.272%

 

9/29/25

 

1,425

 

1,382

1

Goldman Sachs Group Inc.

 

3.814%

 

4/23/29

 

235

 

228

1

Goldman Sachs Group Inc.

 

4.223%

 

5/1/29

 

635

 

636

 

Goldman Sachs Group Inc.

 

4.750%

 

10/21/45

 

300

 

304

 

HCP Inc.

 

4.000%

 

6/1/25

 

475

 

476

7

International Business Machines Corp.

 

1.250%

 

1/29/27

 

2,140

 

2,449

 

International Paper Co.

 

4.350%

 

8/15/48

 

475

 

423

 

John Deere Capital Corp.

 

3.450%

 

3/13/25

 

1,080

 

1,093

7

JPMorgan Chase & Co.

 

3.875%

 

9/23/20

 

1,400

 

1,690

1

JPMorgan Chase & Co.

 

3.782%

 

2/1/28

 

700

 

698

1

JPMorgan Chase & Co.

 

3.964%

 

11/15/48

 

975

 

918

 

Kaiser Foundation Hospitals

 

4.875%

 

4/1/42

 

55

 

61

 

Kaiser Foundation Hospitals

 

4.150%

 

5/1/47

 

165

 

168

5

KeySpan Gas East Corp.

 

2.742%

 

8/15/26

 

500

 

469

8

Kraft Heinz Foods Co.

 

4.125%

 

7/1/27

 

550

 

757

 

Kraft Heinz Foods Co.

 

4.375%

 

6/1/46

 

795

 

662

 

Lockheed Martin Corp.

 

4.090%

 

9/15/52

 

118

 

114

 

Marsh & McLennan Cos. Inc.

 

4.375%

 

3/15/29

 

280

 

288

 

Medtronic Inc.

 

3.150%

 

3/15/22

 

675

 

679

 

Mercy Health

 

3.555%

 

8/1/27

 

535

 

516

5

Metropolitan Life Global Funding I

 

3.000%

 

9/19/27

 

700

 

670

 

Microsoft Corp.

 

3.700%

 

8/8/46

 

650

 

629

9

Molson Coors International LP

 

2.840%

 

7/15/23

 

1,825

 

1,355

 

Morgan Stanley

 

2.750%

 

5/19/22

 

700

 

691

 

Morgan Stanley

 

3.125%

 

7/27/26

 

2,100

 

2,004

1

Morgan Stanley

 

3.772%

 

1/24/29

 

215

 

212

 

Mylan NV

 

3.950%

 

6/15/26

 

1,765

 

1,647

 

National Retail Properties Inc.

 

3.900%

 

6/15/24

 

400

 

403

5

Northwestern Mutual Life Insurance Co.

 

3.850%

 

9/30/47

 

280

 

259

 

Oglethorpe Power Corp.

 

4.550%

 

6/1/44

 

20

 

19

 

Oglethorpe Power Corp.

 

4.250%

 

4/1/46

 

81

 

73

 

9

 

Global Wellesley Income Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

 

Oglethorpe Power Corp.

 

5.250%

 

9/1/50

 

250

 

258

 

Oracle Corp.

 

3.400%

 

7/8/24

 

700

 

705

 

Oracle Corp.

 

3.250%

 

11/15/27

 

285

 

280

 

Oracle Corp.

 

4.000%

 

11/15/47

 

265

 

254

5

Penske Truck Leasing Co. LP / PTL Finance Corp.

 

4.250%

 

1/17/23

 

1,125

 

1,136

5

Penske Truck Leasing Co. LP / PTL Finance Corp.

 

3.950%

 

3/10/25

 

415

 

409

7

Philip Morris International Inc.

 

2.125%

 

5/30/19

 

1,750

 

2,002

 

Philip Morris International Inc.

 

2.500%

 

11/2/22

 

700

 

685

7

Philip Morris International Inc.

 

2.875%

 

3/3/26

 

500

 

629

 

PNC Bank NA

 

3.250%

 

1/22/28

 

990

 

972

1

Providence St. Joseph Health Obligated Group

 

3.930%

 

10/1/48

 

245

 

230

 

Santander Holdings USA Inc.

 

3.700%

 

3/28/22

 

1,700

 

1,696

5

SBA Tower Trust

 

2.877%

 

7/9/21

 

885

 

875

5

SBA Tower Trust

 

3.448%

 

3/15/23

 

755

 

750

 

Sierra Pacific Power Co.

 

2.600%

 

5/1/26

 

180

 

169

 

South Carolina Electric & Gas Co.

 

4.250%

 

8/15/28

 

690

 

721

 

South Carolina Electric & Gas Co.

 

6.625%

 

2/1/32

 

156

 

191

 

South Carolina Electric & Gas Co.

 

5.300%

 

5/15/33

 

129

 

142

 

South Carolina Electric & Gas Co.

 

5.450%

 

2/1/41

 

250

 

285

 

South Carolina Electric & Gas Co.

 

4.600%

 

6/15/43

 

280

 

295

 

Southern California Edison Co.

 

3.700%

 

8/1/25

 

30

 

29

 

Southern California Edison Co.

 

3.900%

 

3/15/43

 

8

 

7

 

Southern California Edison Co.

 

4.000%

 

4/1/47

 

5

 

5

 

Southern California Edison Co.

 

4.125%

 

3/1/48

 

675

 

621

1,5

Sprint Spectrum Co LLC / Sprint Spectrum Co II LLC / Sprint Spectrum Co III LLC

 

4.738%

 

3/20/25

 

1,100

 

1,101

 

SSM Health Care Corp.

 

3.823%

 

6/1/27

 

380

 

379

 

Stanford Health Care

 

3.795%

 

11/15/48

 

55

 

52

 

Starbucks Corp.

 

4.500%

 

11/15/48

 

335

 

323

 

SunTrust Bank

 

3.300%

 

5/15/26

 

550

 

535

 

Synchrony Bank

 

3.000%

 

6/15/22

 

550

 

531

5

Teachers Insurance & Annuity Assn. of America

 

4.900%

 

9/15/44

 

635

 

676

7

Thermo Fisher Scientific Inc.

 

1.400%

 

1/23/26

 

475

 

548

7

Thermo Fisher Scientific Inc.

 

1.950%

 

7/24/29

 

625

 

726

 

Union Pacific Corp.

 

3.700%

 

3/1/29

 

190

 

189

 

Union Pacific Corp.

 

4.300%

 

3/1/49

 

120

 

117

1

United Airlines 2018-1 Class B Pass Through Trust

 

4.600%

 

3/1/26

 

75

 

75

7

United Technologies Corp.

 

1.150%

 

5/18/24

 

395

 

453

 

United Technologies Corp.

 

3.950%

 

8/16/25

 

310

 

316

 

UnitedHealth Group Inc.

 

3.850%

 

6/15/28

 

415

 

424

 

UnitedHealth Group Inc.

 

4.625%

 

7/15/35

 

220

 

239

 

UnitedHealth Group Inc.

 

4.200%

 

1/15/47

 

80

 

81

 

UnitedHealth Group Inc.

 

4.250%

 

6/15/48

 

465

 

474

 

Verizon Communications Inc.

 

4.522%

 

9/15/48

 

1,675

 

1,642

 

Verizon Communications Inc.

 

4.672%

 

3/15/55

 

275

 

267

 

Warner Media LLC

 

3.600%

 

7/15/25

 

950

 

935

7

Wells Fargo & Co.

 

2.250%

 

9/3/20

 

2,625

 

3,084

9

Wells Fargo & Co.

 

2.975%

 

5/19/26

 

600

 

444

 

10

 

Global Wellesley Income Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

 

Wells Fargo & Co.

 

4.300%

 

7/22/27

 

325

 

331

 

Wells Fargo & Co.

 

4.750%

 

12/7/46

 

700

 

708

 

Welltower Inc.

 

4.000%

 

6/1/25

 

325

 

327

 

 

 

 

 

 

 

 

 

95,122

Total Corporate Bonds (Cost $177,846)

 

 

 

 

 

 

 

173,459

Sovereign Bonds (7.9%)

 

 

 

 

 

 

 

 

Australia (0.3%)

 

 

 

 

 

 

 

 

10

Commonwealth of Australia

 

2.250%

 

11/21/22

 

1,185

 

858

10

Commonwealth of Australia

 

2.750%

 

11/21/27

 

160

 

120

10

Commonwealth of Australia

 

2.250%

 

5/21/28

 

420

 

301

 

 

 

 

 

 

 

 

 

1,279

Canada (0.9%)

 

 

 

 

 

 

 

 

9

Canada

 

2.750%

 

12/1/48

 

65

 

56

5,9

Canada Housing Trust No 1

 

2.350%

 

9/15/23

 

1,110

 

852

9

City of Toronto

 

3.200%

 

8/1/48

 

1,000

 

734

9

Province of Ontario

 

2.900%

 

6/2/28

 

1,815

 

1,405

11

Province of Ontario

 

0.250%

 

6/28/29

 

1,075

 

1,075

 

 

 

 

 

 

 

 

 

4,122

Chile (0.2%)

 

 

 

 

 

 

 

 

 

Corp. Nacional del Cobre de Chile

 

3.625%

 

8/1/27

 

800

 

788

 

 

 

 

 

 

 

 

 

 

China (0.8%)

 

 

 

 

 

 

 

 

5

Sinopec Group Overseas Development 2017 Ltd.

 

3.000%

 

4/12/22

 

1,225

 

1,208

5

State Grid Overseas Investment 2016 Ltd.

 

2.750%

 

5/4/22

 

2,485

 

2,439

 

 

 

 

 

 

 

 

 

3,647

Japan (1.9%)

 

 

 

 

 

 

 

 

12

Japan

 

0.100%

 

6/20/28

 

71,100

 

646

12

Japan

 

0.100%

 

12/20/28

 

849,850

 

7,708

 

 

 

 

 

 

 

 

 

8,354

Mexico (0.7%)

 

 

 

 

 

 

 

 

7

Petroleos Mexicanos

 

3.750%

 

2/21/24

 

2,350

 

2,677

 

Petroleos Mexicanos

 

6.350%

 

2/12/48

 

325

 

268

 

 

 

 

 

 

 

 

 

2,945

Qatar (0.7%)

 

 

 

 

 

 

 

 

5

State of Qatar

 

2.375%

 

6/2/21

 

1,850

 

1,820

5

State of Qatar

 

3.875%

 

4/23/23

 

785

 

804

5

State of Qatar

 

5.103%

 

4/23/48

 

285

 

307

 

 

 

 

 

 

 

 

 

2,931

Saudi Arabia (0.7%)

 

 

 

 

 

 

 

 

5

Kingdom of Saudi Arabia

 

2.875%

 

3/4/23

 

3,280

 

3,226

 

 

 

 

 

 

 

 

 

 

Singapore (0.1%)

 

 

 

 

 

 

 

 

5

Temasek Financial I Ltd.

 

3.625%

 

8/1/28

 

530

 

544

 

 

 

 

 

 

 

 

 

 

United Arab Emirates (0.3%)

 

 

 

 

 

 

 

 

 

Emirate of Abu Dhabi

 

3.125%

 

10/11/27

 

1,435

 

1,400

 

 

 

 

 

 

 

 

 

 

United Kingdom (1.3%)

 

 

 

 

 

 

 

 

8

United Kingdom

 

1.750%

 

7/22/19

 

285

 

379

8

United Kingdom

 

1.500%

 

1/22/21

 

955

 

1,282

 

11

 

Global Wellesley Income Fund

 

 

 

 

 

Coupon

 

Maturity

Date

 

Face

Amount

($000

)

Market

Value·

($000)

8

United Kingdom

 

0.500%

 

7/22/22

 

775

 

1,015

8

United Kingdom

 

1.250%

 

7/22/27

 

445

 

593

8

United Kingdom

 

3.500%

 

1/22/45

 

1,500

 

2,670

 

 

 

 

 

 

 

 

 

5,939

Total Sovereign Bonds (Cost $36,066)

 

 

 

 

 

 

 

35,175

Taxable Municipal Bonds (1.8%)

 

 

 

 

 

 

 

 

 

California GO

 

7.550%

 

4/1/39

 

420

 

617

 

California GO

 

7.625%

 

3/1/40

 

25

 

37

 

Chicago IL Transit Authority Transfer Tax Receipts Revenue

 

6.899%

 

12/1/40

 

425

 

541

 

Chicago IL Transit Authority

 

6.300%

 

12/1/21

 

65

 

68

 

Connecticut GO

 

2.990%

 

1/15/23

 

835

 

827

 

Connecticut GO

 

5.770%

 

3/15/25

 

250

 

277

 

Georgia Municipal Electric Power Authority Revenue

 

6.637%

 

4/1/57

 

360

 

382

 

Georgia Municipal Electric Power Authority Revenue

 

6.655%

 

4/1/57

 

100

 

113

 

Illinois GO

 

5.100%

 

6/1/33

 

1,240

 

1,176

13

Kansas Development Finance Authority

 

5.371%

 

5/1/26

 

960

 

1,028

 

North Texas Tollway Authority System Revenue

 

6.718%

 

1/1/49

 

75

 

105

 

Port Authority of New York & New Jersey Revenue

 

4.458%

 

10/1/62

 

310

 

327

 

Sales Tax Securitization Corp. Illinois Revenue

 

4.787%

 

1/1/48

 

555

 

563

 

San Jose California Redevelopment Agency Successor Agency Tax Allocation

 

3.375%

 

8/1/34

 

240

 

230

 

South Carolina Public Service Authority Revenue

 

2.388%

 

12/1/23

 

1,425

 

1,361

 

University of California Regents Medical Center Revenue

 

6.548%

 

5/15/48

 

225

 

300

Total Taxable Municipal Bonds (Cost $8,188)

 

7,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Common Stocks (37.9%)

 

 

 

 

Australia (0.4%)

 

 

 

 

 

Sydney Airport

 

 

 

 

 

362,662

 

1,853

 

 

 

 

 

 

 

 

 

 

Belgium (0.6%)

 

 

 

 

 

 

 

 

 

Anheuser-Busch InBev SA

 

 

 

 

 

33,228

 

2,596

 

 

 

 

 

 

 

 

 

 

Canada (0.9%)

 

 

 

 

 

 

 

 

 

TransCanada Corp.

 

 

 

 

 

56,031

 

2,506

 

BCE Inc.

 

 

 

 

 

38,100

 

1,694

 

 

 

 

 

 

 

 

 

4,200

China (2.1%)

 

 

 

 

 

 

 

 

 

China Mobile Ltd.

 

 

 

 

 

231,000

 

2,440

 

China Longyuan Power Group Corp. Ltd.

 

 

 

 

 

3,210,000

 

2,396

 

Jiangsu Expressway Co. Ltd.

 

 

 

 

 

1,662,000

 

2,290

 

China Construction Bank Corp.

 

 

 

 

 

2,254,000

 

2,007

 

 

 

 

 

 

 

 

 

9,133

 

12

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

 

Shares

 

Market

Value·

($000)

Finland (0.4%)

 

 

 

 

 

 

 

 

 

Nokia Oyj

 

 

 

 

 

310,280

 

1,876

 

 

 

 

 

 

 

 

 

 

France (2.1%)

 

 

 

 

 

 

 

 

 

TOTAL SA

 

 

 

 

 

71,989

 

4,098

 

Nexity SA

 

 

 

 

 

40,082

 

1,955

5

Elior Group SA

 

 

 

 

 

127,943

 

1,844

 

SES SA Class A

 

 

 

 

 

77,127

 

1,549

 

 

 

 

 

 

 

 

 

9,446

Germany (1.8%)

 

 

 

 

 

 

 

 

 

Volkswagen AG Preference Shares

 

 

 

 

 

13,172

 

2,259

 

E.ON SE

 

 

 

 

 

204,224

 

2,246

 

Siemens AG

 

 

 

 

 

20,386

 

2,227

 

Deutsche Post AG

 

 

 

 

 

43,790

 

1,358

 

 

 

 

 

 

 

 

 

8,090

Hong Kong (0.5%)

 

 

 

 

 

 

 

 

 

Sands China Ltd.

 

 

 

 

 

434,400

 

2,167

 

 

 

 

 

 

 

 

 

 

Italy (1.3%)

 

 

 

 

 

 

 

 

 

Assicurazioni Generali SPA

 

 

 

 

 

113,173

 

2,018

 

Intesa Sanpaolo SPA (Registered)

 

 

 

 

 

806,169

 

1,983

 

Banca Generali SPA

 

 

 

 

 

72,932

 

1,820

 

 

 

 

 

 

 

 

 

5,821

Japan (1.0%)

 

 

 

 

 

 

 

 

 

Tokio Marine Holdings Inc.

 

 

 

 

 

55,200

 

2,698

 

Resona Holdings Inc.

 

 

 

 

 

357,100

 

1,618

 

 

 

 

 

 

 

 

 

4,316

Netherlands (2.0%)

 

 

 

 

 

 

 

 

 

Unilever NV

 

 

 

 

 

61,990

 

3,357

 

ING Groep NV

 

 

 

 

 

215,848

 

2,853

 

Koninklijke Philips NV

 

 

 

 

 

65,451

 

2,605

 

 

 

 

 

 

 

 

 

8,815

Norway (0.8%)

 

 

 

 

 

 

 

 

 

Subsea 7 SA

 

 

 

 

 

157,634

 

1,928

 

Telenor ASA

 

 

 

 

 

94,297

 

1,839

 

 

 

 

 

 

 

 

 

3,767

Portugal (0.4%)

 

 

 

 

 

 

 

 

 

EDP - Energias de Portugal SA

 

 

 

 

 

456,741

 

1,675

 

 

 

 

 

 

 

 

 

 

Sweden (0.7%)

 

 

 

 

 

 

 

 

*

Nordea Bank Abp

 

 

 

 

 

194,137

 

1,759

 

Millicom International Cellular SA

 

 

 

 

 

23,581

 

1,419

 

 

 

 

 

 

 

 

 

3,178

Switzerland (3.2%)

 

 

 

 

 

 

 

 

 

Roche Holding AG

 

 

 

 

 

19,917

 

5,527

 

Zurich Insurance Group AG

 

 

 

 

 

11,288

 

3,724

 

Novartis AG

 

 

 

 

 

37,144

 

3,385

 

ABB Ltd.

 

 

 

 

 

88,829

 

1,749

 

 

 

 

 

 

 

 

 

14,385

 

13

 

Global Wellesley Income Fund

 

 

 

 

 

Shares

 

Market

Value·

($000)

Taiwan (0.5%)

 

 

 

 

 

Taiwan Semiconductor Manufacturing Co. Ltd.

 

260,000

 

1,995

 

 

 

 

 

 

United Kingdom (3.7%)

 

 

 

 

 

Royal Dutch Shell plc Class B

 

156,311

 

4,903

 

AstraZeneca plc

 

52,384

 

4,269

 

British American Tobacco plc

 

93,083

 

3,413

 

BAE Systems plc

 

323,251

 

1,993

 

BT Group plc

 

666,440

 

1,901

 

 

 

 

 

16,479

United States (15.5%)

 

 

 

 

 

Chevron Corp.

 

40,310

 

4,820

 

Intel Corp.

 

77,451

 

4,102

 

Wells Fargo & Co.

 

72,822

 

3,633

 

Philip Morris International Inc.

 

41,556

 

3,613

 

Cisco Systems Inc.

 

59,023

 

3,056

 

Kinder Morgan Inc.

 

157,676

 

3,021

 

Bristol-Myers Squibb Co.

 

55,780

 

2,882

 

International Paper Co.

 

62,680

 

2,872

 

Dominion Energy Inc.

 

37,100

 

2,749

 

QUALCOMM Inc.

 

49,603

 

2,648

 

DowDuPont Inc.

 

48,179

 

2,565

 

Citigroup Inc.

 

39,643

 

2,536

 

Edison International

 

41,026

 

2,457

 

KLA-Tencor Corp.

 

20,900

 

2,414

 

MetLife Inc.

 

52,027

 

2,351

 

Eaton Corp. plc

 

29,393

 

2,345

 

Brixmor Property Group Inc.

 

121,902

 

2,128

 

Caterpillar Inc.

 

15,090

 

2,072

 

PNC Financial Services Group Inc.

 

16,142

 

2,034

 

JPMorgan Chase & Co.

 

17,969

 

1,875

 

Maxim Integrated Products Inc.

 

33,632

 

1,831

 

Western Digital Corp.

 

35,500

 

1,786

 

Park Hotels & Resorts Inc.

 

56,315

 

1,759

 

Verizon Communications Inc.

 

30,644

 

1,744

 

Newell Brands Inc.

 

103,975

 

1,688

 

Kraft Heinz Co.

 

50,100

 

1,663

 

Tapestry Inc.

 

42,500

 

1,485

 

L Brands Inc.

 

44,695

 

1,168

 

 

 

 

 

69,297

Total Common Stocks (Cost $180,271)

 

 

 

169,089

 

 

 

 

 

 

 

 

Coupon

 

 

 

 

 

Temporary Cash Investment (2.6%)

 

 

 

 

 

 

Money Market Fund (2.6%)

 

 

 

 

 

 

14

Vanguard Market Liquidity Fund (Cost $11,657)

2.563%

 

 

116,560

 

11,657

Total Investments (99.7%) (Cost $462,459)

 

 

 

 

 

445,411

 

14

 

Global Wellesley Income Fund

 

 

 

Amount

 

($000)

Other Assets and Liabilities (0.3%)

 

Other Assets

 

Investment in Vanguard

23

Receivables for Investment Securities Sold

520

Receivables for Accrued Income

2,681

Receivables for Capital Shares Issued

987

Variation Margin Receivable—Futures Contracts

61

Unrealized Appreciation—Forward Currency Contracts

63

Other Assets

1,388

Total Other Assets

5,723

Liabilities

 

Payables for Investment Securities Purchased

(3,277)

Payables for Capital Shares Redeemed

(157)

Payables to Vanguard

(40)

Payables to Investment Advisor

(125)

Variation Margin Payable—Futures Contracts

(100)

Unrealized Depreciation—Forward Currency Contracts

(587)

Other Liabilities

(128)

Total Liabilities

(4,414)

Net Assets (100%)

446,720

 

15

 

Global Wellesley Income Fund

 

 

At February 28, 2019, net assets consisted of:

 

Amount

 

($000)

Paid-in Capital

466,892

Total Distributable Earnings (Loss)

(20,172)

Net Assets

446,720

 

 

Investor Shares—Net Assets

 

Applicable to 4,256,176 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

82,127

Net Asset Value Per Share—Investor Shares

$19.30

 

 

Admiral Shares—Net Assets

 

Applicable to 15,112,634 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

364,593

Net Asset Value Per Share—Admiral Shares

$24.13

 

·    See Note A in Notes to Financial Statements.

 

*     Non-income-producing security.

 

1   The average or expected maturity is shorter than the final maturity shown because of the possibility of interim principal payments and prepayments or the possibility of the issue being called.

 

2   The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.

 

3   Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of February 28, 2019.

 

4   Securities with a value of $561,000 have been segregated as initial margin for open futures contracts.

 

5   Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At February 28, 2019, the aggregate value of these securities was $49,973,000, representing 11.2% of net assets.

 

6   Adjustable-rate security, rate shown is effective rate at period end. Certain adjustable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent based on current market conditions.

 

7   Face amount denominated in euro.

 

8   Face amount denominated in British pounds.

 

9   Face amount denominated in Canadian dollars.

 

10 Face amount denominated in Australian dollars.

 

11 Face amount denominated in Swiss francs.

 

12 Face amount denominated in Japanese yen.

 

13 Scheduled principal and interest payments are guaranteed by AGM (Assured Guaranty Municipal Corporation).

 

14     Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

GO—General Obligation Bond.

 

LIBOR—London Inter-bank Offered Rate.

 

REMICS—Real Estate Mortgage Investment Conduits.

 

16

 

Global Wellesley Income Fund

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

 

 

 

 

 

 

 

Futures Contracts

 

 

 

 

 

 

 

 

 

 

($000)

 

 

 

 

Value and

 

 

Number of

 

Unrealized

 

 

Long (Short)

Notional

Appreciation

 

Expiration

Contracts

Amount

(Depreciation)

Long Futures Contracts

 

 

 

 

5-Year U.S. Treasury Note

June 2019

91

10,425

(9)

Euro-Buxl

March 2019

20

4,187

112

Euro-Bund

March 2019

20

3,761

19

Long Gilt

June 2019

1

167

(2)

 

 

 

 

 

120

 

 

 

 

 

Short Futures Contracts

 

 

 

 

10-Year U.S. Treasury Note

June 2019

(94)

(11,468)

43

Euro-Schatz

March 2019

(64)

(8,140)

7

Ten-Year Government of Canada Bond

June 2019

(21)

(2,166)

6

Ultra 10-Year U.S. Treasury Note

June 2019

(16)

(2,071)

7

Euro-Bobl

March 2019

(8)

(1,208)

2

 

 

 

 

 

65

 

 

 

 

 

185

 

17

 

Global Wellesley Income Fund

 

 

Forward Currency Contracts

 

 

 

 

 

 

 

 

Contract

 

 

 

 

Unrealized

Unrealized

 

Settlement

 

Contract Amount (000)

Appreciation

(Depreciation)

Counterparty

Date

 

Receive

 

Deliver

($000)

($000)

Goldman Sachs International

3/29/19

USD

68,475

EUR

60,237

—

(215)

J.P. Morgan Securities LLC

4/11/19

USD

11,581

GBP

8,892

—

(240)

Bank of America, N.A.

3/29/19

USD

8,647

CAD

11,388

—

(13)

J.P. Morgan Securities LLC

3/29/19

USD

8,310

JPY

919,155

44

—

Bank of America, N.A.

3/20/19

USD

3,863

EUR

3,380

12

—

Goldman Sachs International

3/29/19

USD

2,719

AUD

3,821

7

—

Bank of America, N.A.

3/20/19

USD

2,407

GBP

1,895

—

(109)

Bank of America, N.A.

3/29/19

USD

1,738

EUR

1,530

—

(7)

J.P. Morgan Securities LLC

3/29/19

USD

1,054

CHF

1,052

—

(3)

 

 

 

 

 

 

 

63

(587)

 

AUD—Australian dollar.

CAD—Canadian dollar.

CHF—Swiss franc.

EUR—euro.

GBP—British pound.

JPY—Japanese yen.

USD—U.S. dollar.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

18

 

Global Wellesley Income Fund

 

 

Statement of Operations

 

 

 

Six Months Ended

 

 

 

February 28, 2019

 

 

 

($000

)

Investment Income

 

 

 

Income

 

 

 

Dividends1

 

2,338

 

Interest2

 

3,637

 

Securities Lending—Net

 

17

 

Total Income

 

5,992

 

Expenses

 

 

 

Investment Advisory Fees—Note B

 

 

 

Basic Fee

 

273

 

Performance Adjustment

 

(6

)

The Vanguard Group—Note C

 

 

 

Management and Administrative—Investor Shares

 

115

 

Management and Administrative—Admiral Shares

 

351

 

Marketing and Distribution—Investor Shares

 

8

 

Marketing and Distribution—Admiral Shares

 

13

 

Custodian Fees

 

7

 

Shareholders’ Reports—Investor Shares

 

3

 

Shareholders’ Reports—Admiral Shares

 

3

 

Total Expenses

 

767

 

Expenses Paid Indirectly

 

(7

)

Net Expenses

 

760

 

Net Investment Income

 

5,232

 

Realized Net Gain (Loss)

 

 

 

Investment Securities Sold2

 

(5,463

)

Futures Contracts

 

362

 

Forward Currency Contracts

 

3,309

 

Foreign Currencies

 

(33

)

Realized Net Gain (Loss)

 

(1,825

)

Change in Unrealized Appreciation (Depreciation)

 

 

 

Investment Securities2

 

(4,536

)

Futures Contracts

 

60

 

Forward Currency Contracts

 

(511

)

Foreign Currencies

 

23

 

Change in Unrealized Appreciation (Depreciation)

 

(4,964

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(1,557

)

 

1   Dividends are net of foreign withholding taxes of $115,000.

 

2   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $73,000, ($1,000), and ($2,000), respectively. Purchases and sales are for temporary cash investment purposes.

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

19

 

Global Wellesley Income Fund

 

 

Statement of Changes in Net Assets

 

 

 

 

 

 

October 18,

 

 

 

Six Months Ended

 

 

20171, to

 

 

 

February 28,

 

 

August 31,

 

 

 

2019

 

 

2018

 

 

 

($000

)

 

($000

)

Increase (Decrease) in Net Assets

 

 

 

 

 

 

Operations

 

 

 

 

 

 

Net Investment Income

 

5,232

 

 

10,864

 

Realized Net Gain (Loss)

 

(1,825

)

 

4,280

 

Change in Unrealized Appreciation (Depreciation)

 

(4,964

)

 

(12,418

)

Net Increase (Decrease) in Net Assets Resulting from Operations

 

(1,557

)

 

2,726

 

Distributions

 

 

 

 

 

 

Net Investment Income

 

 

 

 

 

 

Investor Shares

 

(1,158

)

 

(1,499

)

Admiral Shares

 

(5,251

)

 

(6,250

)

Realized Capital Gain

 

 

 

 

 

 

Investor Shares2

 

(1,201

)

 

—

 

Admiral Shares2

 

(5,132

)

 

—

 

Total Distributions

 

(12,742

)

 

(7,749

)

Capital Share Transactions

 

 

 

 

 

 

Investor Shares

 

(8,158

)

 

93,990

 

Admiral Shares

 

(32,047

)

 

412,257

 

Net Increase (Decrease) from Capital Share Transactions

 

(40,205

)

 

506,247

 

Total Increase (Decrease)

 

(54,504

)

 

501,224

 

Net Assets

 

 

 

 

 

 

Beginning of Period

 

501,224

 

 

—

 

End of Period

 

446,720

 

 

501,224

 

 

1   Commencement of subscription period for the fund.

 

2 Includes fiscal 2019 and 2018 short-term gain distributions totaling $2,406,000 and $0, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

20

 

Global Wellesley Income Fund

 

 

Financial Highlights

 

 

Investor Shares

 

 

 

Six Months

Oct. 18,

 

 

Ended

20171 to

 

 

Feb. 28,

Aug. 31,

For a Share Outstanding Throughout Each Period

 

2019

2018

Net Asset Value, Beginning of Period

 

$19.87

$20.00

Investment Operations

 

 

 

Net Investment Income2

 

.211

.443

Net Realized and Unrealized Gain (Loss) on Investments

 

(.243)

(.269)

Total from Investment Operations

 

(.032)

.174

Distributions

 

 

 

Dividends from Net Investment Income

 

(.259)

(.304)

Distributions from Realized Capital Gains

 

(.279)

—

Total Distributions

 

(.538)

(.304)

Net Asset Value, End of Period

 

$19.30

$19.87

 

 

 

 

Total Return3

 

-0.09%

0.88%

 

 

 

 

Ratios/Supplemental Data

 

 

 

Net Assets, End of Period (Millions)

 

$82

$93

Ratio of Total Expenses to Average Net Assets

 

0.42%4

0.43%5,6

Ratio of Net Investment Income to Average Net Assets

 

2.24%

2.68%6

Portfolio Turnover Rate

 

63%

40%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Subscription period for the fund was October 18, 2017, to November 1, 2017, during which time all assets were held in cash. Performance measurement began November 2, 2017, the first business day after the subscription period, at a net asset value of $20.00.

 

2   Calculated based on average shares outstanding.

 

3   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

4   Includes performance-based investment advisory fee increases (decreases) of 0.00%.

 

5   The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.42%.

 

6   Annualized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

21

 

Global Wellesley Income Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

 

 

Six Months

Oct. 18,

 

 

Ended

20171 to

 

 

Feb. 28,

Aug. 31,

For a Share Outstanding Throughout Each Period

 

2019

2018

Net Asset Value, Beginning of Period

 

$24.84

$25.00

Investment Operations

 

 

 

Net Investment Income2

 

.278

.577

Net Realized and Unrealized Gain (Loss) on Investments

 

(.303)

(.341)

Total from Investment Operations

 

(.025)

.236

Distributions

 

 

 

Dividends from Net Investment Income

 

(.336)

(.396)

Distributions from Realized Capital Gains

 

(.349)

—

Total Distributions

 

(.685)

(.396)

Net Asset Value, End of Period

 

$24.13

$24.84

 

 

 

 

Total Return3

 

-0.03%

0.96%

 

 

 

 

Ratios/Supplemental Data

 

 

 

Net Assets, End of Period (Millions)

 

$365

$408

Ratio of Total Expenses to Average Net Assets

 

0.32%4

0.33%5,6

Ratio of Net Investment Income to Average Net Assets

 

2.34%

2.78%6

Portfolio Turnover Rate

 

63%

39%

 

The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.

 

1   Subscription period for the fund was October 18, 2017, to November 1, 2017, during which time all assets were held in cash. Performance measurement began November 2, 2017, the first business day after the subscription period, at a net asset value of $25.00.

 

2   Calculated based on average shares outstanding.

 

3   Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

4   Includes performance-based investment advisory fee increases (decreases) of 0.00%.

 

5   The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.32%.

 

6   Annualized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

22

 

Global Wellesley Income Fund

 

 

Notes to Financial Statements

 

 

Vanguard Global Wellesley Income Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. Certain of the fund’s investments are in corporate debt instruments; the issuers’ abilities to meet their obligations may be affected by economic developments in their respective industries. The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. To minimize the currency risk associated with investment in bonds denominated in currencies other than the U.S. dollar, the fund attempts to hedge its currency exposures. The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.

 

A.  The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Bonds and temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Structured debt securities, including mortgages and asset-backed securities, are valued using the latest bid prices or using valuations based on a matrix system that considers such factors as issuer, tranche, nominal or option-adjusted spreads, weighted average coupon, weighted average maturity, credit enhancements, and collateral. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities.

 

2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

 

3. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The

 

23

 

Global Wellesley Income Fund

 

 

 

 

 

primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

 

During the six months ended February 28, 2019, the fund’s average investments in long and short futures contracts each represented 6% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

 

4. Forward Currency Contracts: The fund enters into forward currency contracts to protect the value of securities and related receivables and payables against changes in future foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized forward currency contract gains (losses).

 

24

 

Global Wellesley Income Fund

 

 

 

 

 

During the six months ended February 28, 2019, the fund’s average investment in forward currency contracts represented 24% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

5. To Be Announced (TBA) Transactions: A TBA transaction is an agreement to buy or sell mortgage-backed securities with agreed-upon characteristics (face amount, coupon, maturity) for settlement at a future date. The fund may be a seller of TBA transactions to reduce its exposure to the mortgage-backed securities market or in order to sell mortgage-backed securities it owns under delayed-delivery arrangements. When the fund is a buyer of TBA transactions, it maintains cash or short-term investments in an amount sufficient to meet the purchase price at the settlement date of the TBA transaction. The primary risk associated with TBA transactions is that a counterparty may default on its obligations. The fund mitigates its counterparty risk by, among other things, performing a credit analysis of counterparties, allocating transactions among numerous counterparties, and monitoring its exposure to each counterparty. The fund may also enter into a Master Securities Forward Transaction Agreement (MSFTA) with certain counterparties and require them to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. Under an MSFTA, upon a counterparty default (including bankruptcy), the fund may terminate any TBA transactions with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements.

 

6. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for the open federal income tax period ended August 31, 2018, and for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

7. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

8. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees

 

25

 

Global Wellesley Income Fund

 

 

 

 

 

charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

9. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion. No other term changes were significant.

 

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period then ended.

 

10. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.  Wellington Management Company LLP provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. The basic fee is subject to quarterly adjustments based on the fund’s performance relative to the Global Wellesley Income Composite Index, comprising the FTSE Developed Index and the Bloomberg Barclays Fixed Income Composite Index, since December 1, 2017. For the six months ended February 28, 2019, the investment advisory fee represented an effective annual basic rate of 0.12% of the fund’s average net assets before a decrease of $6,000 (0.00%) based on performance.

 

C.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees, and are generally settled twice a month.

 

26

 

Global Wellesley Income Fund

 

 

 

 

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $23,000, representing 0.01% of the fund’s net assets and 0.01% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

D.  The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended February 28, 2019, custodian fee offset arrangements reduced the fund’s expenses by $7,000 (an annual rate of 0.00% of average net assets).

 

E.  Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

 

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

 

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

 

Level 1

 

Level 2

 

Level 3

 

Investments

 

($000

)

($000

)

($000

)

U.S. Government and Agency Obligations

 

—

 

30,789

 

—

 

Asset-Backed/Commercial Mortgage-Backed Securities

 

—

 

17,290

 

—

 

Corporate Bonds

 

—

 

173,459

 

—

 

Sovereign Bonds

 

—

 

35,175

 

—

 

Taxable Municipal Bonds

 

—

 

7,952

 

—

 

Common Stocks

 

73,497

 

95,592

 

 

 

Temporary Cash Investments

 

11,657

 

—

 

—

 

Futures Contracts—Assets1

 

61

 

—

 

—

 

Futures Contracts—Liabilities1

 

(100

)

—

 

—

 

Forward Currency Contracts—Assets

 

—

 

63

 

—

 

Forward Currency Contracts—Liabilities

 

—

 

(587

)

—

 

Total

 

85,115

 

359,733

 

—

 

 

1 Represents variation margin on the last day of the reporting period.

 

27

 

Global Wellesley Income Fund

 

 

 

 

 

F.  At February 28, 2019, the fair values of derivatives were reflected in the Statement of Net Assets as follows:

 

 

 

Interest Rate

 

Currency

 

 

 

 

 

Contracts

 

Contracts

 

Total

 

Statement of Net Assets Caption

 

($000

)

($000

)

($000

)

Variation Margin Receivable—Futures Contracts

 

61

 

—

 

61

 

Unrealized Appreciation—Forward Currency Contracts

 

—

 

63

 

63

 

Total Assets

 

61

 

63

 

124

 

 

 

 

 

 

 

 

 

Variation Margin Payable—Futures Contracts

 

(100

)

—

 

(100

)

Unrealized Depreciation—Forward Currency Contracts

 

—

 

(587

)

(587

)

Total Liabilities

 

(100

)

(587

)

(687

)

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 28, 2019, were:

 

 

 

Interest Rate

 

Currency

 

 

 

 

 

Contracts

 

Contracts

 

Total

 

Realized Net Gain (Loss) on Derivatives

 

($000

)

($000

)

($000

)

Futures Contracts

 

362

 

—

 

362

 

Forward Currency Contracts

 

—

 

3,309

 

3,309

 

Realized Net Gain (Loss) on Derivatives

 

362

 

3,309

 

3,671

 

 

 

 

 

 

 

 

 

Change in Unrealized Appreciation (Depreciation) on Derivatives

 

 

 

 

 

 

 

Futures Contracts

 

60

 

—

 

60

 

Forward Currency Contracts

 

—

 

(511

)

(511

)

Change in Unrealized Appreciation (Depreciation) on Derivatives

 

60

 

(511

)

(451

)

 

G. As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

 

($000

)

Tax Cost

 

462,681

 

Gross Unrealized Appreciation

 

8,431

 

Gross Unrealized Depreciation

 

(25,701

)

Net Unrealized Appreciation (Depreciation)

 

(17,270

)

 

H.  During the six months ended February 28, 2019, the fund purchased $88,827,000 of investment securities and sold $125,132,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $51,320,000 and $53,104,000, respectively.

 

28

 

Global Wellesley Income Fund

 

 

 

 

 

I.   Capital share transactions for each class of shares were:

 

 

 

Six Months Ended
February 28, 2019

 

October 18, 20171 to
August 31, 2018

 

 

 

Amount

 

Shares

 

Amount

 

Shares

 

 

 

($000

)

(000)

 

($000

)

(000

)

Investor Shares

 

 

 

 

 

 

 

 

 

Issued

 

14,622

 

766

 

167,104

 

8,345

 

Issued in Lieu of Cash Distributions

 

2,030

 

108

 

1,272

 

64

 

Redeemed

 

(24,810

)

(1,295)

 

(74,386

)

(3,732

)

Net Increase (Decrease)—Investor Shares

 

(8,158

)

(421)

 

93,990

 

4,677

 

Admiral Shares

 

 

 

 

 

 

 

 

 

Issued

 

70,680

 

2,972

 

596,215

 

23,834

 

Issued in Lieu of Cash Distributions

 

9,020

 

382

 

5,296

 

214

 

Redeemed

 

(111,747

)

(4,679)

 

(189,254

)

(7,610

)

Net Increase (Decrease)—Admiral Shares

 

(32,047

)

(1,325)

 

412,257

 

16,438

 

 

1 Commencement of subscription period for the fund.

 

 

J.  Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

29

 

Trustees Approve Advisory Arrangement

 

 

The board of trustees of Vanguard Global Wellesley Income Fund has renewed the fund’s investment advisory arrangement with Wellington Management Company LLP (Wellington Management). The board determined that continuing the investment advisory arrangement was in the best interests of the fund and its shareholders.

 

The board based its decision upon an evaluation of the 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 advisor 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 throughout 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 arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.

 

Nature, extent, and quality of services

 

The board considered the quality of the investment management services provided to the fund since its inception in 2017 and took into account the organizational depth and stability of the advisor. The board considered that Wellington Management, founded in 1928, is among the nation’s oldest and most respected institutional managers. For the equity portion of the fund, Wellington Management focuses on global companies whose stocks pay above-average levels of dividend income and are considered to have the potential for capital appreciation. The advisor primarily invests the fixed income portion of the fund in government and mortgage securities in addition to high-quality corporate bonds. The fund’s bond portion will maintain an intermediate-term duration. Wellington Management has advised the fund since its inception.

 

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

 

Investment performance

 

The board considered the fund’s performance since its inception, including any periods of out-performance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that that advisory arrangement should continue.

 

30

 

Cost

 

The board concluded that, while the fund had not yet been in existence for a full fiscal year, the fund’s estimated expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s annualized advisory fee rate was also well below the peer-group average.

 

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

 

The benefit of economies of scale

 

The board concluded that the fund’s shareholders will benefit from economies of scale because of breakpoints in the fund’s advisory fee schedule. The breakpoints reduce the effective rate of the fee as the fund’s assets increase.

 

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

 

31

 

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P.O. Box 2600

 

Valley Forge, PA 19482-2600

 

 

Connect with Vanguard® > vanguard.com

 

 

 

Fund Information > 800-662-7447

 

Direct Investor Account Services > 800-662-2739

 

Institutional Investor Services > 800-523-1036

 

Text Telephone for People

 

Who Are Deaf or Hard of Hearing > 800-749-7273

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

CFA® is a registered trademark owned by CFA Institute.

 

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

All rights reserved.

Vanguard Marketing Corporation, Distributor.

 

 

 

Q14962 042019

 

 

 

 

 

 

Semiannual Report  |  February 28, 2019

 

 

Vanguard ESG U.S. Stock ETF

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

 

About Your Fund’s Expenses

1

Financial Statements

4

Trustees Approve Advisory Arrangement

27

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·   Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·   Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Period Ended February 28, 2019

 

 

 

ESG U.S. Stock ETF

Beginning
Account Value
9/18/2018

Ending
Account Value
2/28/2019

Expenses
Paid During
Period

Based on Actual Fund Return

$1,000.00

$968.46

$0.57

Based on Hypothetical 5% Yearly Return

1,000.00

1,021.75

0.59

 

The calculations are based on expenses incurred in the period from the fund’s September 18, 2018, inception through February 28, 2019. The fund’s annualized expense ratio for that period is 0.13%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period from inception through February 28, 2019, multiplied by the number of days in that period, then divided by the number of days in the most recent 12-month period (164/365).

 

2

 

ESG U.S. Stock ETF

 

 

Sector Diversification

As of February 28, 2019

 

Basic Materials

2.7

%

Consumer Goods

8.0

 

Consumer Services

14.3

 

Financials

20.1

 

Health Care

14.4

 

Industrials

10.6

 

Oil & Gas

1.7

 

Technology

24.7

 

Telecommunications

2.3

 

Utilities

1.2

 

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. Sector categories are based on the Industry Classification Benchmark (“ICB”), except for the “Other” category (if applicable), which includes securities that have not been provided an ICB classification as of the effective reporting period.

 

3

 

ESG U.S. Stock ETF

 

 

Financial Statements (unaudited)

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Common Stocks (100.0%)

 

 

 

 

Basic Materials (2.7%)

 

 

 

 

 

DowDuPont Inc.

 

27,030

 

1,439

 

Linde plc

 

6,490

 

1,124

 

Ecolab Inc.

 

2,999

 

507

 

Air Products & Chemicals Inc.

 

2,579

 

467

 

LyondellBasell Industries NV Class A

 

3,698

 

316

 

Nucor Corp.

 

3,715

 

225

 

International Paper Co.

 

4,815

 

221

 

Newmont Mining Corp.

 

6,277

 

214

 

Celanese Corp. Class A

 

1,571

 

161

 

International Flavors & Fragrances Inc.

 

1,187

 

151

 

FMC Corp.

 

1,575

 

141

 

Eastman Chemical Co.

 

1,658

 

137

 

Mosaic Co.

 

4,125

 

129

 

CF Industries Holdings Inc.

 

2,710

 

114

 

Albemarle Corp.

 

1,242

 

113

 

Avery Dennison Corp.

 

1,017

 

110

 

Steel Dynamics Inc.

 

2,604

 

97

 

RPM International Inc.

 

1,541

 

89

 

Reliance Steel & Aluminum Co.

 

815

 

73

 

Royal Gold Inc.

 

768

 

68

*

Axalta Coating Systems Ltd.

 

2,480

 

66

*

Alcoa Corp.

 

2,203

 

65

 

Huntsman Corp.

 

2,561

 

63

 

Versum Materials Inc.

 

1,273

 

62

 

WR Grace & Co.

 

778

 

60

*

Ingevity Corp.

 

494

 

57

 

Ashland Global Holdings Inc.

 

732

 

57

 

United States Steel Corp.

 

2,088

 

47

 

NewMarket Corp.

 

90

 

40

 

Cleveland-Cliffs Inc.

 

3,487

 

39

 

Scotts Miracle-Gro Co.

 

472

 

39

 

Domtar Corp.

 

719

 

37

 

Balchem Corp.

 

372

 

33

 

Cabot Corp.

 

693

 

33

 

Sensient Technologies Corp.

 

494

 

32

 

Quaker Chemical Corp.

 

151

 

32

*

Univar Inc.

 

1,347

 

30

 

PolyOne Corp.

 

925

 

30

 

Westlake Chemical Corp.

 

427

 

30

 

HB Fuller Co.

 

587

 

30

 

Carpenter Technology Corp.

 

553

 

26

 

Trinseo SA

 

500

 

25

*

GCP Applied Technologies Inc.

 

836

 

25

 

Minerals Technologies Inc.

 

415

 

25

 

Innospec Inc.

 

280

 

23

 

Commercial Metals Co.

 

1,383

 

23

 

Stepan Co.

 

233

 

22

 

Kaiser Aluminum Corp.

 

194

 

21

*

Ferro Corp.

 

962

 

19

 

Orion Engineered Carbons SA

 

559

 

16

 

Neenah Inc.

 

213

 

14

 

Tronox Ltd. Class A

 

1,211

 

14

 

US Silica Holdings Inc.

 

924

 

14

 

Hecla Mining Co.

 

5,676

 

14

*

Constellium NV Class A

 

1,416

 

13

*

Kraton Corp.

 

369

 

13

*

AK Steel Holding Corp.

 

4,081

 

12

*

Coeur Mining Inc.

 

2,537

 

12

 

Rayonier Advanced Materials Inc.

 

764

 

11

 

Innophos Holdings Inc.

 

315

 

10

 

PH Glatfelter Co.

 

742

 

10

 

Schnitzer Steel Industries Inc.

 

201

 

5

 

Nexa Resources SA

 

313

 

3

*

Koppers Holdings Inc.

 

119

 

3

*

TimkenSteel Corp.

 

224

 

3

*

Century Aluminum Co.

 

320

 

3

 

Tredegar Corp.

 

136

 

2

*

Venator Materials plc

 

247

 

1

 

Ferroglobe plc

 

194

 

1

 

 

 

 

 

7,161

 

4

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Consumer Goods (8.0%)

 

 

 

 

 

Procter & Gamble Co.

 

29,326

 

2,890

 

Coca-Cola Co.

 

45,025

 

2,041

 

PepsiCo Inc.

 

16,677

 

1,928

 

NIKE Inc. Class B

 

14,782

 

1,267

 

Mondelez International Inc. Class A

 

16,800

 

792

 

Colgate-Palmolive Co.

 

10,027

 

660

*

Tesla Inc.

 

1,612

 

516

 

Kimberly-Clark Corp.

 

4,098

 

479

 

Ford Motor Co.

 

45,931

 

403

 

Estee Lauder Cos. Inc. Class A

 

2,516

 

395

 

Activision Blizzard Inc.

 

8,866

 

374

*

Electronic Arts Inc.

 

3,491

 

334

 

VF Corp.

 

3,813

 

333

 

General Mills Inc.

 

6,974

 

329

*

Monster Beverage Corp.

 

4,689

 

299

 

Archer-Daniels-Midland Co.

 

6,562

 

279

 

Aptiv plc

 

3,111

 

259

 

Clorox Co.

 

1,508

 

238

 

Kraft Heinz Co.

 

7,098

 

236

 

Tyson Foods Inc. Class A

 

3,419

 

211

 

McCormick & Co. Inc.

 

1,428

 

194

 

Church & Dwight Co. Inc.

 

2,869

 

189

 

Genuine Parts Co.

 

1,683

 

183

 

Hershey Co.

 

1,647

 

182

*

Lululemon Athletica Inc.

 

1,123

 

169

 

Kellogg Co.

 

2,919

 

164

 

Lennar Corp. Class A

 

3,369

 

162

 

DR Horton Inc.

 

4,051

 

157

 

Hormel Foods Corp.

 

3,182

 

138

 

JM Smucker Co.

 

1,293

 

137

 

Conagra Brands Inc.

 

5,675

 

133

 

Lamb Weston Holdings Inc.

 

1,719

 

119

 

Tapestry Inc.

 

3,395

 

119

 

Hasbro Inc.

 

1,369

 

116

*

Take-Two Interactive Software Inc.

 

1,328

 

116

 

Lear Corp.

 

752

 

114

 

Garmin Ltd.

 

1,337

 

112

*

Wayfair Inc.

 

672

 

111

 

Whirlpool Corp.

 

734

 

104

 

PVH Corp.

 

902

 

104

*

LKQ Corp.

 

3,728

 

103

 

Coca-Cola European Partners plc

 

2,133

 

100

 

BorgWarner Inc.

 

2,451

 

99

*

Mohawk Industries Inc.

 

731

 

99

*

US Foods Holding Corp.

 

2,525

 

89

 

Bunge Ltd.

 

1,652

 

88

*

WABCO Holdings Inc.

 

612

 

84

 

Autoliv Inc.

 

1,024

 

84

 

Newell Brands Inc.

 

5,098

 

83

 

PulteGroup Inc.

 

2,991

 

81

 

Ralph Lauren Corp. Class A

 

638

 

80

*

Middleby Corp.

 

644

 

79

 

Hanesbrands Inc.

 

4,227

 

79

 

Fortune Brands Home & Security Inc.

 

1,653

 

78

*

Post Holdings Inc.

 

759

 

77

 

Ingredion Inc.

 

829

 

77

*

Capri Holdings Ltd.

 

1,653

 

75

*

Campbell Soup Co.

 

2,083

 

75

*

Herbalife Nutrition Ltd.

 

1,271

 

71

 

Harley-Davidson Inc.

 

1,914

 

71

 

Leggett & Platt Inc.

 

1,536

 

70

 

Jefferies Financial Group Inc.

 

3,421

 

69

 

Gentex Corp.

 

3,158

 

64

 

Coty Inc. Class A

 

5,476

 

60

 

Polaris Industries Inc.

 

691

 

59

*

Mattel Inc.

 

4,051

 

58

 

Toll Brothers Inc.

 

1,602

 

57

 

Goodyear Tire & Rubber Co.

 

2,731

 

54

 

Brunswick Corp.

 

1,023

 

54

 

Keurig Dr Pepper Inc.

 

2,095

 

53

 

Carter’s Inc.

 

533

 

52

*

Deckers Outdoor Corp.

 

342

 

51

*

Under Armour Inc. Class C

 

2,490

 

50

*

Under Armour Inc. Class A

 

1,949

 

44

 

Flowers Foods Inc.

 

2,088

 

43

 

Valvoline Inc.

 

2,236

 

42

*

Darling Ingredients Inc.

 

1,902

 

42

*

iRobot Corp.

 

315

 

39

*

Nomad Foods Ltd.

 

1,932

 

39

 

Nu Skin Enterprises Inc. Class A

 

644

 

39

 

Wolverine World Wide Inc.

 

1,081

 

39

*

TreeHouse Foods Inc.

 

636

 

38

 

Columbia Sportswear Co.

 

357

 

37

*

Helen of Troy Ltd.

 

309

 

35

 

Lancaster Colony Corp.

 

218

 

34

 

Steven Madden Ltd.

 

1,019

 

34

 

Dana Inc.

 

1,702

 

34

*

Tempur Sealy International Inc.

 

543

 

32

*

Visteon Corp.

 

339

 

29

 

WD-40 Co.

 

157

 

28

*

Edgewell Personal Care Co.

 

627

 

28

 

Sanderson Farms Inc.

 

237

 

27

 

J&J Snack Foods Corp.

 

172

 

27

*

Fox Factory Holding Corp.

 

419

 

27

 

Spectrum Brands Holdings Inc.

 

475

 

26

 

Herman Miller Inc.

 

686

 

25

*

Dorman Products Inc.

 

311

 

25

*

Welbilt Inc.

 

1,524

 

24

 

LCI Industries

 

284

 

23

 

KB Home

 

998

 

23

*

Taylor Morrison Home Corp. Class A

 

1,354

 

23

 

Delphi Technologies plc

 

1,008

 

22

 

5

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Adient plc

 

1,097

 

21

*

Meritor Inc.

 

945

 

21

*

American Axle & Manufacturing Holdings Inc.

 

1,296

 

21

*

TRI Pointe Group Inc.

 

1,638

 

21

 

Tenneco Inc. Class A

 

588

 

20

*

Meritage Homes Corp.

 

440

 

19

 

HNI Corp.

 

499

 

19

 

Medifast Inc.

 

149

 

19

 

Callaway Golf Co.

 

1,102

 

19

 

B&G Foods Inc.

 

763

 

19

 

Cooper Tire & Rubber Co.

 

587

 

19

 

La-Z-Boy Inc.

 

540

 

19

*

Hain Celestial Group Inc.

 

931

 

18

*

G-III Apparel Group Ltd.

 

508

 

18

 

Tupperware Brands Corp.

 

570

 

17

*

Crocs Inc.

 

667

 

17

 

Steelcase Inc. Class A

 

961

 

17

*

American Woodmark Corp.

 

197

 

17

 

Coca-Cola Consolidated Inc.

 

67

 

17

*

Sleep Number Corp.

 

380

 

17

*

Avon Products Inc.

 

5,326

 

16

*

Gentherm Inc.

 

399

 

16

 

Cal-Maine Foods Inc.

 

363

 

16

 

Calavo Growers Inc.

 

187

 

16

 

Oxford Industries Inc.

 

200

 

16

*

Hostess Brands Inc. Class A

 

1,301

 

16

 

Knoll Inc.

 

741

 

16

 

Inter Parfums Inc.

 

209

 

15

 

Interface Inc. Class A

 

866

 

15

 

MDC Holdings Inc.

 

527

 

15

*

Cavco Industries Inc.

 

108

 

15

 

Nutrisystem Inc.

 

343

 

15

*

USANA Health Sciences Inc.

 

147

 

14

*

Central Garden & Pet Co. Class A

 

510

 

14

*

Cooper-Standard Holdings Inc.

 

228

 

14

*

LGI Homes Inc.

 

230

 

14

 

Winnebago Industries Inc.

 

397

 

13

 

Andersons Inc.

 

346

 

13

 

ACCO Brands Corp.

 

1,340

 

12

 

National Beverage Corp.

 

171

 

12

*

Adecoagro SA

 

1,484

 

11

*

Modine Manufacturing Co.

 

696

 

10

*

GoPro Inc. Class A

 

1,786

 

10

 

Tootsie Roll Industries Inc.

 

268

 

10

 

Fresh Del Monte Produce Inc.

 

358

 

10

 

Acushnet Holdings Corp.

 

270

 

7

 

Camping World Holdings Inc. Class A

 

197

 

2

 

Ethan Allen Interiors Inc.

 

106

 

2

 

Dean Foods Co.

 

439

 

2

 

 

 

 

 

21,169

Consumer Services (14.3%)

 

 

 

 

*

Amazon.com Inc.

 

4,788

 

7,852

 

Home Depot Inc.

 

13,576

 

2,513

 

Comcast Corp. Class A

 

53,811

 

2,081

 

Walt Disney Co.

 

17,566

 

1,982

*

Netflix Inc.

 

4,906

 

1,757

 

McDonald’s Corp.

 

9,146

 

1,681

 

Costco Wholesale Corp.

 

5,143

 

1,125

 

Lowe’s Cos. Inc.

 

9,615

 

1,010

 

Starbucks Corp.

 

14,222

 

999

*

Booking Holdings Inc.

 

558

 

947

 

CVS Health Corp.

 

15,123

 

875

 

TJX Cos. Inc.

 

14,578

 

748

*

Charter Communications Inc. Class A

 

2,055

 

709

 

Walgreens Boots Alliance Inc.

 

9,533

 

679

 

Target Corp.

 

6,204

 

451

 

Ross Stores Inc.

 

4,299

 

408

 

eBay Inc.

 

10,661

 

396

 

Sysco Corp.

 

5,602

 

378

 

Dollar General Corp.

 

3,129

 

371

*

O’Reilly Automotive Inc.

 

930

 

346

 

McKesson Corp.

 

2,295

 

292

*

AutoZone Inc.

 

300

 

282

 

Kroger Co.

 

9,330

 

274

 

Carnival Corp.

 

4,706

 

272

*

Dollar Tree Inc.

 

2,762

 

266

*

MercadoLibre Inc.

 

483

 

222

*

Ulta Beauty Inc.

 

665

 

208

 

Omnicom Group Inc.

 

2,620

 

198

 

CBS Corp. Class B

 

3,829

 

192

 

Best Buy Co. Inc.

 

2,772

 

191

 

Expedia Group Inc.

 

1,417

 

175

*

Chipotle Mexican Grill Inc. Class A

 

286

 

174

 

Yum China Holdings Inc.

 

4,104

 

171

 

Darden Restaurants Inc.

 

1,457

 

163

*

Liberty Global plc

 

6,112

 

155

 

AmerisourceBergen Corp. Class A

 

1,852

 

154

*

Norwegian Cruise Line Holdings Ltd.

 

2,581

 

143

*

Copart Inc.

 

2,379

 

140

 

Tractor Supply Co.

 

1,435

 

137

 

Tiffany & Co.

 

1,432

 

136

*

Burlington Stores Inc.

 

784

 

133

 

Advance Auto Parts Inc.

 

822

 

133

 

Kohl’s Corp.

 

1,966

 

133

*

CarMax Inc.

 

2,050

 

127

 

Domino’s Pizza Inc.

 

488

 

122

 

Viacom Inc. Class B

 

4,160

 

122

 

Sirius XM Holdings Inc.

 

19,561

 

116

 

Nielsen Holdings plc

 

4,191

 

110

 

6

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

*

Discovery Communications Inc.

 

4,015

 

109

*

Henry Schein Inc.

 

1,781

 

106

 

Interpublic Group of Cos. Inc.

 

4,523

 

104

 

FactSet Research Systems Inc.

 

439

 

103

 

Delta Air Lines Inc.

 

2,057

 

102

*

Etsy Inc.

 

1,395

 

99

 

Vail Resorts Inc.

 

472

 

98

 

Southwest Airlines Co.

 

1,667

 

93

 

Altice USA Inc. Class A

 

4,263

 

93

*

Live Nation Entertainment Inc.

 

1,624

 

92

 

Macy’s Inc.

 

3,601

 

89

 

Aramark

 

2,873

 

87

*

GrubHub Inc.

 

1,061

 

87

*

DISH Network Corp. Class A

 

2,614

 

85

 

Service Corp. International

 

2,053

 

85

 

Foot Locker Inc.

 

1,343

 

80

*

Trade Desk Inc. Class A

 

389

 

77

*

Five Below Inc.

 

637

 

77

*

Liberty Media Corp-Liberty SiriusXM Class C

 

1,859

 

77

 

KAR Auction Services Inc.

 

1,579

 

74

 

Sabre Corp.

 

3,241

 

73

*

ServiceMaster Global Holdings Inc.

 

1,600

 

72

*

Liberty Media Corp-Liberty Formula One

 

2,288

 

71

*

United Continental Holdings Inc.

 

809

 

71

 

L Brands Inc.

 

2,696

 

70

 

Dunkin’ Brands Group Inc.

 

972

 

69

 

Rollins Inc.

 

1,688

 

67

 

Nordstrom Inc.

 

1,385

 

65

 

Gap Inc.

 

2,546

 

65

*

Grand Canyon Education Inc.

 

557

 

64

*

Madison Square Garden Co. Class A

 

217

 

63

*

Liberty Global plc Class A

 

2,371

 

62

*

Planet Fitness Inc. Class A

 

1,032

 

61

 

Wyndham Hotels & Resorts Inc.

 

1,147

 

60

 

H&R Block Inc.

 

2,426

 

59

 

Casey’s General Stores Inc.

 

425

 

57

 

Williams-Sonoma Inc.

 

941

 

55

*

Discovery Communications Inc. Class A

 

1,851

 

54

 

Nexstar Media Group Inc. Class A

 

524

 

51

*

Ollie’s Bargain Outlet Holdings Inc.

 

580

 

51

 

New York Times Co. Class A

 

1,537

 

50

*

Chegg Inc.

 

1,267

 

50

 

Texas Roadhouse Inc. Class A

 

791

 

50

*

LiveRamp Holdings Inc.

 

913

 

49

 

American Airlines Group Inc.

 

1,366

 

49

 

Tribune Media Co. Class A

 

1,030

 

48

 

Cinemark Holdings Inc.

 

1,261

 

47

 

Cable One Inc.

 

50

 

47

 

Dolby Laboratories Inc. Class A

 

721

 

47

*

Performance Food Group Co.

 

1,186

 

46

*

Liberty Media Corp-Liberty SiriusXM Class A

 

1,081

 

44

 

Marriott Vacations Worldwide Corp.

 

454

 

44

 

Aaron’s Inc.

 

808

 

44

 

World Wrestling Entertainment Inc. Class A

 

502

 

42

 

Extended Stay America Inc.

 

2,220

 

41

 

American Eagle Outfitters Inc.

 

1,885

 

38

 

Wendy’s Co.

 

2,179

 

38

*

Cracker Barrel Old Country Store Inc.

 

224

 

36

*

Hilton Grand Vacations Inc.

 

1,134

 

36

 

BJ’s Wholesale Club Holdings Inc.

 

1,403

 

36

*

RH

 

231

 

35

*

Yelp Inc. Class A

 

949

 

35

*

Sprouts Farmers Market Inc.

 

1,462

 

34

 

Dick’s Sporting Goods Inc.

 

872

 

34

*

AMC Networks Inc. Class A

 

515

 

34

*

Roku Inc.

 

506

 

34

 

Graham Holdings Co. Class B

 

49

 

34

 

TEGNA Inc.

 

2,537

 

33

*

Adtalem Global Education Inc.

 

685

 

33

 

Hillenbrand Inc.

 

727

 

32

 

Strategic Education Inc.

 

245

 

32

 

Choice Hotels International Inc.

 

400

 

32

 

Sinclair Broadcast Group Inc. Class A

 

792

 

29

 

Monro Inc.

 

372

 

28

*

Avis Budget Group Inc.

 

778

 

28

 

John Wiley & Sons Inc. Class A

 

522

 

27

 

Morningstar Inc.

 

212

 

27

*

Urban Outfitters Inc.

 

868

 

27

 

Meredith Corp.

 

461

 

26

 

Bed Bath & Beyond Inc.

 

1,571

 

26

*

Belmond Ltd. Class A

 

1,039

 

26

 

Jack in the Box Inc.

 

318

 

26

*

frontdoor Inc.

 

798

 

26

*

Sally Beauty Holdings Inc.

 

1,408

 

25

*

Cargurus Inc.

 

584

 

25

*

National Vision Holdings Inc.

 

736

 

25

 

Dine Brands Global Inc.

 

240

 

24

 

7

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Office Depot Inc.

 

6,861

 

24

 

Dave & Buster’s Entertainment Inc.

 

463

 

24

 

DSW Inc. Class A

 

801

 

24

*

Liberty Latin America Ltd.

 

1,217

 

24

 

Lithia Motors Inc. Class A

 

259

 

23

 

Cheesecake Factory Inc.

 

491

 

23

 

Travelport Worldwide Ltd.

 

1,465

 

23

 

Alaska Air Group Inc.

 

371

 

23

*

AutoNation Inc.

 

647

 

23

 

Brinker International Inc.

 

451

 

21

*

Stamps.com Inc.

 

205

 

19

 

Lions Gate Entertainment Corp. Class B

 

1,295

 

19

*

Cars.com Inc.

 

807

 

19

 

Penske Automotive Group Inc.

 

416

 

18

*

Sotheby’s

 

415

 

18

*

Shutterfly Inc.

 

401

 

18

 

Children’s Place Inc.

 

186

 

18

 

Abercrombie & Fitch Co.

 

794

 

17

 

Bloomin’ Brands Inc.

 

841

 

17

*

SeaWorld Entertainment Inc.

 

637

 

17

 

Signet Jewelers Ltd.

 

607

 

17

*

Groupon Inc. Class A

 

5,186

 

17

*

MSG Networks Inc.

 

693

 

17

 

Core-Mark Holding Co. Inc.

 

530

 

17

 

PriceSmart Inc.

 

253

 

16

*

Asbury Automotive Group Inc.

 

226

 

16

 

Caleres Inc.

 

517

 

16

 

Big Lots Inc.

 

508

 

16

*

JetBlue Airways Corp.

 

954

 

16

 

Gannett Co. Inc.

 

1,355

 

16

*

Shake Shack Inc. Class A

 

287

 

16

 

Guess? Inc.

 

668

 

15

 

Viad Corp.

 

257

 

15

 

Matthews International Corp. Class A

 

371

 

15

 

BJ’s Restaurants Inc.

 

304

 

15

*

IMAX Corp.

 

633

 

15

 

GameStop Corp. Class A

 

1,235

 

14

*

Herc Holdings Inc.

 

324

 

14

 

Scholastic Corp.

 

334

 

14

 

International Speedway Corp. Class A

 

322

 

14

 

Group 1 Automotive Inc.

 

222

 

14

*

Liberty TripAdvisor Holdings Inc. Class A

 

886

 

13

*

MakeMyTrip Ltd.

 

473

 

13

*

Hertz Global Holdings Inc.

 

691

 

13

 

Papa John’s International Inc.

 

298

 

13

 

EW Scripps Co. Class A

 

610

 

13

*

Genesco Inc.

 

260

 

13

 

SpartanNash Co.

 

660

 

13

*

Rite Aid Corp.

 

16,620

 

12

*

Liberty Latin America Ltd. Class A

 

619

 

12

*

Rent-A-Center Inc.

 

650

 

12

*

Houghton Mifflin Harcourt Co.

 

1,459

 

12

 

Chico’s FAS Inc.

 

1,902

 

11

 

Tailored Brands Inc.

 

820

 

11

*

Liberty Media Corp-Liberty Formula One Class A

 

328

 

10

*

At Home Group Inc.

 

388

 

10

 

Lions Gate Entertainment Corp. Class A

 

450

 

7

 

New Media Investment Group Inc.

 

477

 

6

*

United Natural Foods Inc.

 

407

 

6

*

Weight Watchers International Inc.

 

279

 

6

 

National CineMedia Inc.

 

644

 

5

*

TrueCar Inc.

 

617

 

4

*

Regis Corp.

 

218

 

4

 

Allegiant Travel Co. Class A

 

27

 

4

 

Buckle Inc.

 

168

 

3

*

JC Penney Co. Inc.

 

1,904

 

3

 

Speedway Motorsports Inc.

 

136

 

2

*

Diplomat Pharmacy Inc.

 

369

 

2

*

Lumber Liquidators Holdings Inc.

 

193

 

2

*

Express Inc.

 

423

 

2

*

Red Robin Gourmet Burgers Inc.

 

71

 

2

 

Weis Markets Inc.

 

42

 

2

 

Hawaiian Holdings Inc.

 

69

 

2

*

Fiesta Restaurant Group Inc.

 

127

 

2

 

Sonic Automotive Inc. Class A

 

127

 

2

*

Biglari Holdings Inc. Class B

 

14

 

2

*

Lands’ End Inc.

 

58

 

1

 

 

 

 

 

37,992

Financials (20.1%)

 

 

 

 

 

JPMorgan Chase & Co.

 

38,984

 

4,068

 

Bank of America Corp.

 

107,753

 

3,133

 

Visa Inc. Class A

 

20,747

 

3,073

 

Mastercard Inc. Class A

 

10,820

 

2,432

 

Citigroup Inc.

 

28,775

 

1,841

 

US Bancorp

 

17,831

 

922

 

American Tower Corp.

 

5,165

 

910

 

American Express Co.

 

7,800

 

840

 

Goldman Sachs Group Inc.

 

4,105

 

807

 

CME Group Inc.

 

4,163

 

757

 

Chubb Ltd.

 

5,396

 

723

 

PNC Financial Services Group Inc.

 

5,471

 

689

 

Simon Property Group Inc.

 

3,629

 

657

 

Charles Schwab Corp.

 

14,144

 

651

 

Morgan Stanley

 

15,300

 

642

 

8

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

BlackRock Inc.

 

1,428

 

633

 

S&P Global Inc.

 

2,958

 

593

 

Crown Castle International Corp.

 

4,876

 

579

 

Bank of New York Mellon Corp.

 

10,769

 

565

 

Marsh & McLennan Cos. Inc.

 

5,969

 

555

 

Prologis Inc.

 

7,369

 

516

 

Intercontinental Exchange Inc.

 

6,610

 

510

 

Progressive Corp.

 

6,821

 

497

 

Aon plc

 

2,827

 

485

 

Capital One Financial Corp.

 

5,642

 

472

 

Prudential Financial Inc.

 

4,857

 

466

 

BB&T Corp.

 

9,074

 

462

 

American International Group Inc.

 

10,470

 

452

 

MetLife Inc.

 

9,940

 

449

 

Aflac Inc.

 

8,985

 

442

 

Travelers Cos. Inc.

 

3,111

 

413

 

Equinix Inc.

 

944

 

400

 

Allstate Corp.

 

4,068

 

384

 

Public Storage

 

1,747

 

369

 

SunTrust Banks Inc.

 

5,289

 

343

*

Moody’s Corp.

 

1,962

 

340

 

Welltower Inc.

 

4,378

 

325

 

State Street Corp.

 

4,419

 

318

 

AvalonBay Communities Inc.

 

1,623

 

316

 

Equity Residential

 

4,217

 

311

 

Discover Financial Services

 

3,994

 

286

 

M&T Bank Corp.

 

1,651

 

286

 

Synchrony Financial

 

8,755

 

285

 

T. Rowe Price Group Inc.

 

2,779

 

279

 

Digital Realty Trust Inc.

 

2,419

 

274

 

Ventas Inc.

 

4,188

 

263

 

Boston Properties Inc.

 

1,818

 

241

 

Realty Income Corp.

 

3,470

 

240

*

IHS Markit Ltd.

 

4,490

 

239

*

SBA Communications Corp. Class A

 

1,319

 

238

 

Northern Trust Corp.

 

2,402

 

224

 

Ameriprise Financial Inc.

 

1,638

 

216

 

KeyCorp

 

12,142

 

214

 

Fifth Third Bancorp

 

7,727

 

213

 

Hartford Financial Services Group Inc.

 

4,203

 

207

 

Citizens Financial Group Inc.

 

5,521

 

204

 

First Republic Bank

 

1,924

 

202

 

Regions Financial Corp.

 

12,192

 

200

 

MSCI Inc. Class A

 

1,023

 

189

 

TD Ameritrade Holding Corp.

 

3,313

 

187

*

CBRE Group Inc. Class A

 

3,738

 

186

 

Huntington Bancshares Inc.

 

12,458

 

180

 

Principal Financial Group Inc.

 

3,284

 

173

 

Alexandria Real Estate Equities Inc.

 

1,251

 

170

 

Arthur J Gallagher & Co.

 

2,117

 

170

 

HCP Inc.

 

5,519

 

170

 

Host Hotels & Resorts Inc.

 

8,611

 

169

 

Comerica Inc.

 

1,901

 

166

 

Annaly Capital Management Inc.

 

16,304

 

165

*

Markel Corp.

 

160

 

161

 

Lincoln National Corp.

 

2,505

 

157

 

Cincinnati Financial Corp.

 

1,798

 

156

 

Loews Corp.

 

3,256

 

155

*

SVB Financial Group

 

622

 

154

*

Arch Capital Group Ltd.

 

4,538

 

148

 

E*TRADE Financial Corp.

 

2,994

 

147

 

UDR Inc.

 

3,109

 

138

 

Mid-America Apartment Communities Inc.

 

1,331

 

138

 

WP Carey Inc.

 

1,865

 

138

 

Ally Financial Inc.

 

5,042

 

137

 

Vornado Realty Trust

 

2,029

 

137

 

Raymond James Financial Inc.

 

1,543

 

127

 

Nasdaq Inc.

 

1,358

 

124

 

Duke Realty Corp.

 

4,184

 

124

 

Iron Mountain Inc.

 

3,338

 

118

 

Regency Centers Corp.

 

1,784

 

116

 

Franklin Resources Inc.

 

3,540

 

115

 

Zions Bancorp NA

 

2,238

 

114

 

Sun Communities Inc.

 

985

 

112

 

Equity LifeStyle Properties Inc.

 

1,001

 

109

 

Fidelity National Financial Inc.

 

3,097

 

109

 

Alleghany Corp.

 

168

 

108

 

AGNC Investment Corp.

 

6,100

 

108

 

Everest Re Group Ltd.

 

474

 

107

 

Reinsurance Group of America Inc. Class A

 

735

 

106

 

MarketAxess Holdings Inc.

 

430

 

105

 

Camden Property Trust

 

1,039

 

102

 

Torchmark Corp.

 

1,209

 

100

 

Western Union Co.

 

5,268

 

94

 

East West Bancorp Inc.

 

1,703

 

93

 

WR Berkley Corp.

 

1,105

 

92

 

Invesco Ltd.

 

4,774

 

92

 

Voya Financial Inc.

 

1,826

 

92

 

VEREIT Inc.

 

11,402

 

91

 

Unum Group

 

2,431

 

91

 

SL Green Realty Corp.

 

969

 

88

 

Jones Lang LaSalle Inc.

 

532

 

88

*

Black Knight Inc.

 

1,669

 

87

 

Signature Bank

 

637

 

86

 

9

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Kilroy Realty Corp.

 

1,158

 

85

 

Kimco Realty Corp.

 

4,778

 

84

 

American Financial Group Inc.

 

839

 

84

 

Omega Healthcare Investors Inc.

 

2,322

 

83

*

Athene Holding Ltd. Class A

 

1,862

 

83

 

Liberty Property Trust

 

1,731

 

82

 

Invitation Homes Inc.

 

3,515

 

81

 

Brown & Brown Inc.

 

2,718

 

81

 

People’s United Financial Inc.

 

4,390

 

78

 

Lamar Advertising Co. Class A

 

991

 

77

 

LPL Financial Holdings Inc.

 

1,009

 

76

 

SEI Investments Co.

 

1,439

 

76

 

Synovus Financial Corp.

 

1,893

 

75

 

Park Hotels & Resorts Inc.

 

2,356

 

74

 

Commerce Bancshares Inc.

 

1,169

 

74

 

STORE Capital Corp.

 

2,243

 

73

 

Douglas Emmett Inc.

 

1,881

 

73

 

Starwood Property Trust Inc.

 

3,146

 

71

 

New York Community Bancorp Inc.

 

5,601

 

70

 

Cullen/Frost Bankers Inc.

 

675

 

70

 

Macerich Co.

 

1,600

 

70

 

Old Republic International Corp.

 

3,312

 

69

 

Healthcare Trust of America Inc. Class A

 

2,419

 

69

 

RenaissanceRe Holdings Ltd.

 

465

 

68

 

Affiliated Managers Group Inc.

 

617

 

68

 

CubeSmart

 

2,178

 

67

 

Popular Inc.

 

1,160

 

65

 

First American Financial Corp.

 

1,271

 

65

*

GCI Liberty Inc. Class A

 

1,186

 

63

 

EPR Properties

 

863

 

63

 

CIT Group Inc.

 

1,243

 

63

 

Primerica Inc.

 

502

 

63

 

Assurant Inc.

 

606

 

62

 

Brixmor Property Group Inc.

 

3,547

 

62

 

Webster Financial Corp.

 

1,075

 

62

 

CyrusOne Inc.

 

1,230

 

61

 

Hudson Pacific Properties Inc.

 

1,810

 

60

*

Zillow Group Inc.

 

1,436

 

60

 

First Horizon National Corp.

 

3,821

 

60

 

Hanover Insurance Group Inc.

 

495

 

59

 

Prosperity Bancshares Inc.

 

782

 

58

 

Janus Henderson Group plc

 

2,338

 

57

 

Eaton Vance Corp.

 

1,336

 

56

 

Highwoods Properties Inc.

 

1,191

 

55

*

MGIC Investment Corp.

 

4,218

 

55

 

Axis Capital Holdings Ltd.

 

958

 

55

*

Brighthouse Financial Inc.

 

1,409

 

55

*

Western Alliance Bancorp

 

1,158

 

54

 

Sterling Bancorp

 

2,629

 

53

 

Radian Group Inc.

 

2,521

 

51

 

Lazard Ltd. Class A

 

1,367

 

51

 

Pebblebrook Hotel Trust

 

1,595

 

51

 

Kemper Corp.

 

613

 

51

 

IBERIABANK Corp.

 

650

 

51

*

Howard Hughes Corp.

 

454

 

51

 

Assured Guaranty Ltd.

 

1,205

 

50

 

JBG SMITH Properties

 

1,221

 

49

 

First Financial Bankshares Inc.

 

755

 

49

 

Wintrust Financial Corp.

 

657

 

48

 

First Industrial Realty Trust Inc.

 

1,443

 

48

*

Essent Group Ltd.

 

1,120

 

48

 

Blackstone Mortgage Trust Inc. Class A

 

1,381

 

48

 

Umpqua Holdings Corp.

 

2,581

 

47

 

Cousins Properties Inc.

 

4,892

 

47

 

Healthcare Realty Trust Inc.

 

1,435

 

45

 

FirstCash Inc.

 

515

 

45

 

Associated Banc-Corp

 

1,935

 

45

*

United Bankshares Inc.

 

1,163

 

45

 

Rayonier Inc.

 

1,510

 

44

 

AXA Equitable Holdings Inc.

 

2,322

 

44

 

TCF Financial Corp.

 

1,938

 

44

 

Selective Insurance Group Inc.

 

671

 

44

 

Equity Commonwealth

 

1,353

 

44

 

Stifel Financial Corp.

 

808

 

44

 

MB Financial Inc.

 

967

 

44

 

CoreSite Realty Corp.

 

427

 

44

 

Hancock Whitney Corp.

 

995

 

43

 

BankUnited Inc.

 

1,190

 

43

 

Evercore Inc. Class A

 

471

 

43

 

Glacier Bancorp Inc.

 

988

 

43

 

EastGroup Properties Inc.

 

406

 

43

 

Ryman Hospitality Properties Inc.

 

520

 

42

 

First Citizens BancShares Inc. Class A

 

93

 

41

 

Chimera Investment Corp.

 

2,185

 

40

 

Weingarten Realty Investors

 

1,398

 

40

 

Two Harbors Investment Corp.

 

2,883

 

40

 

Sunstone Hotel Investors Inc.

 

2,655

 

40

 

Valley National Bancorp

 

3,777

 

40

 

Bank of Hawaii Corp.

 

483

 

40

 

Physicians Realty Trust

 

2,124

 

38

 

Chemical Financial Corp.

 

836

 

38

 

MFA Financial Inc.

 

5,236

 

38

 

Navient Corp.

 

3,113

 

38

 

Community Bank System Inc.

 

584

 

38

 

RLJ Lodging Trust

 

2,030

 

38

 

Sabra Health Care REIT Inc.

 

2,079

 

38

 

10

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Taubman Centers Inc.

 

695

 

37

 

National Health Investors Inc.

 

472

 

37

*

Green Dot Corp. Class A

 

569

 

37

 

Rexford Industrial Realty Inc.

 

1,067

 

37

 

Outfront Media Inc.

 

1,625

 

36

*

UMB Financial Corp.

 

529

 

36

 

Home BancShares Inc.

 

1,862

 

36

*

Texas Capital Bancshares Inc.

 

590

 

36

 

Senior Housing Properties Trust

 

2,772

 

36

 

BancorpSouth Bank

 

1,100

 

36

 

Investors Bancorp Inc.

 

2,834

 

36

 

Cathay General Bancorp

 

904

 

35

 

Union Bankshares Corp.

 

977

 

35

 

Fulton Financial Corp.

 

2,010

 

35

 

Federated Investors Inc. Class B

 

1,128

 

34

 

PS Business Parks Inc.

 

225

 

33

 

American Equity Investment Life Holding Co.

 

1,040

 

33

 

White Mountains Insurance Group Ltd.

 

35

 

33

 

CNO Financial Group Inc.

 

1,908

 

32

 

Brandywine Realty Trust

 

2,054

 

32

 

Columbia Banking System Inc.

 

852

 

32

 

RLI Corp.

 

451

 

32

 

Colony Capital Inc.

 

5,659

 

31

 

Corporate Office Properties Trust

 

1,206

 

31

 

Old National Bancorp

 

1,762

 

31

 

Retail Properties of America Inc.

 

2,511

 

31

 

STAG Industrial Inc.

 

1,129

 

31

 

First Financial Bancorp

 

1,114

 

31

 

Piedmont Office Realty Trust Inc. Class A

 

1,507

 

31

 

OneMain Holdings Inc.

 

921

 

30

 

South State Corp.

 

425

 

30

 

First Midwest Bancorp Inc.

 

1,303

 

30

 

Kennedy-Wilson Holdings Inc.

 

1,451

 

30

*

SLM Corp.

 

2,701

 

30

 

Columbia Property Trust Inc.

 

1,375

 

30

*

LendingTree Inc.

 

93

 

30

 

Washington Federal Inc.

 

964

 

30

 

CVB Financial Corp.

 

1,295

 

30

 

Legg Mason Inc.

 

992

 

29

 

Brookfield Property REIT Inc. Class A

 

1,477

 

29

 

CenterState Bank Corp.

 

1,094

 

29

 

Santander Consumer USA Holdings Inc.

 

1,407

 

29

 

Bank of NT Butterfield & Son Ltd.

 

706

 

29

 

Americold Realty Trust

 

998

 

29

 

First BanCorp

 

2,472

 

28

 

Simmons First National Corp. Class A

 

1,056

 

28

 

International Bancshares Corp.

 

688

 

28

 

PotlatchDeltic Corp.

 

773

 

28

 

Terreno Realty Corp.

 

668

 

27

 

Trustmark Corp.

 

770

 

27

*

Zillow Group Inc. Class A

 

646

 

27

 

Independent Bank Corp.

 

314

 

27

 

Acadia Realty Trust

 

930

 

26

 

Apollo Commercial Real Estate Finance Inc.

 

1,438

 

26

 

Great Western Bancorp Inc.

 

691

 

26

 

Urban Edge Properties

 

1,335

 

26

 

Argo Group International Holdings Ltd.

 

372

 

26

 

DiamondRock Hospitality Co.

 

2,413

 

26

 

Xenia Hotels & Resorts Inc.

 

1,311

 

26

 

WesBanco Inc.

 

602

 

26

 

United Community Banks Inc.

 

912

 

25

 

Agree Realty Corp.

 

383

 

25

 

ProAssurance Corp.

 

614

 

25

 

QTS Realty Trust Inc. Class A

 

591

 

25

*

Enstar Group Ltd.

 

138

 

25

 

Lexington Realty Trust

 

2,582

 

24

 

SITE Centers Corp.

 

1,787

 

24

 

Banner Corp.

 

383

 

24

 

First Merchants Corp.

 

575

 

23

 

Moelis & Co. Class A

 

520

 

23

 

Washington REIT

 

870

 

23

 

LegacyTexas Financial Group Inc.

 

551

 

23

*

Genworth Financial Inc. Class A

 

5,860

 

23

 

Retail Opportunity Investments Corp.

 

1,306

 

22

*

Axos Financial Inc.

 

688

 

22

 

Independent Bank Group Inc.

 

381

 

22

 

Provident Financial Services Inc.

 

803

 

22

 

Mack-Cali Realty Corp.

 

1,049

 

22

*

Eagle Bancorp Inc.

 

371

 

22

 

NBT Bancorp Inc.

 

551

 

21

 

Renasant Corp.

 

556

 

21

 

Hope Bancorp Inc.

 

1,448

 

21

 

Four Corners Property Trust Inc.

 

768

 

21

 

Towne Bank

 

761

 

21

 

Bank OZK

 

638

 

21

 

Invesco Mortgage Capital Inc.

 

1,303

 

21

 

Chesapeake Lodging Trust

 

682

 

21

 

WSFS Financial Corp.

 

472

 

20

 

Ameris Bancorp

 

496

 

20

 

11

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

LTC Properties Inc.

 

453

 

20

 

Northwest Bancshares Inc.

 

1,081

 

20

 

Employers Holdings Inc.

 

475

 

20

 

Capitol Federal Financial Inc.

 

1,480

 

20

 

HFF Inc. Class A

 

436

 

20

 

BGC Partners Inc. Class A

 

3,208

 

20

 

National General Holdings Corp.

 

743

 

19

 

American Assets Trust Inc.

 

440

 

19

 

Uniti Group Inc.

 

1,973

 

19

 

Westamerica Bancorporation

 

295

 

19

 

ServisFirst Bancshares Inc.

 

540

 

19

 

Realogy Holdings Corp.

 

1,384

 

19

 

Horace Mann Educators Corp.

 

471

 

18

*

Redfin Corp.

 

922

 

18

*

Cannae Holdings Inc.

 

796

 

18

 

Hilltop Holdings Inc.

 

948

 

18

*

Alexander & Baldwin Inc.

 

788

 

18

 

Kite Realty Group Trust

 

1,113

 

18

 

Safety Insurance Group Inc.

 

193

 

17

*

PRA Group Inc.

 

531

 

17

 

Office Properties Income Trust

 

559

 

17

 

S&T Bancorp Inc.

 

408

 

17

 

Mercury General Corp.

 

318

 

17

 

Waddell & Reed Financial Inc. Class A

 

902

 

17

 

Navigators Group Inc.

 

236

 

16

 

Heartland Financial USA Inc.

 

337

 

16

 

First Commonwealth Financial Corp.

 

1,147

 

16

 

Pacific Premier Bancorp Inc.

 

531

 

16

 

CNA Financial Corp.

 

361

 

16

 

PennyMac Mortgage Investment Trust

 

761

 

16

 

City Holding Co.

 

192

 

15

 

Walker & Dunlop Inc.

 

273

 

15

 

Global Net Lease Inc.

 

842

 

15

 

Berkshire Hills Bancorp Inc.

 

476

 

15

 

Artisan Partners Asset Management Inc. Class A

 

561

 

15

 

Summit Hotel Properties Inc.

 

1,285

 

15

 

United Fire Group Inc.

 

299

 

15

 

Redwood Trust Inc.

 

951

 

15

 

Brookline Bancorp Inc.

 

909

 

15

 

Virtus Investment Partners Inc.

 

139

 

14

 

Piper Jaffray Cos.

 

200

 

14

 

Sandy Spring Bancorp Inc.

 

398

 

14

 

Flagstar Bancorp Inc.

 

427

 

14

 

BrightSphere Investment Group plc

 

985

 

14

 

InfraREIT Inc.

 

642

 

14

 

Washington Prime Group Inc.

 

2,354

 

14

*

Encore Capital Group Inc.

 

390

 

13

 

BancFirst Corp.

 

235

 

13

 

WisdomTree Investments Inc.

 

1,669

 

13

 

Investment Technology Group Inc.

 

429

 

13

*

LendingClub Corp.

 

4,305

 

13

 

Nelnet Inc. Class A

 

232

 

13

*

MBIA Inc.

 

1,275

 

13

 

Clearway Energy Inc.

 

834

 

12

 

Boston Private Financial Holdings Inc.

 

1,032

 

12

 

Getty Realty Corp.

 

369

 

12

 

Universal Health Realty Income Trust

 

162

 

12

*

Cushman & Wakefield plc

 

628

 

12

 

NorthStar Realty Europe Corp.

 

638

 

11

 

Kearny Financial Corp.

 

840

 

11

*

Third Point Reinsurance Ltd.

 

1,055

 

11

 

Capstead Mortgage Corp.

 

1,350

 

11

*

Marcus & Millichap Inc.

 

290

 

11

 

Franklin Street Properties Corp.

 

1,544

 

11

*

Columbia Financial Inc.

 

696

 

11

 

TrustCo Bank Corp. NY

 

1,284

 

11

 

FBL Financial Group Inc. Class A

 

155

 

11

 

Hersha Hospitality Trust Class A

 

570

 

11

 

Stock Yards Bancorp Inc.

 

301

 

11

 

Oritani Financial Corp.

 

590

 

11

 

Investors Real Estate Trust

 

174

 

11

 

Dime Community Bancshares Inc.

 

507

 

10

 

Saul Centers Inc.

 

178

 

10

 

RPT Realty

 

787

 

10

 

CorePoint Lodging Inc.

 

709

 

10

 

iStar Inc.

 

1,128

 

10

 

State Auto Financial Corp.

 

292

 

10

 

1st Source Corp.

 

200

 

10

 

Community Trust Bancorp Inc.

 

215

 

9

 

First Financial Corp.

 

201

 

9

 

Weyerhaeuser Co.

 

351

 

9

 

TFS Financial Corp.

 

474

 

8

 

Urstadt Biddle Properties Inc. Class A

 

387

 

8

 

Cohen & Steers Inc.

 

191

 

8

 

Alexander’s Inc.

 

20

 

8

 

Washington Trust Bancorp Inc.

 

137

 

7

 

ARMOUR Residential REIT Inc.

 

341

 

7

 

Clearway Energy Inc. Class A

 

443

 

7

 

Beneficial Bancorp Inc.

 

382

 

6

 

Flushing Financial Corp.

 

240

 

6

 

RMR Group Inc. Class A

 

75

 

5

 

Greenhill & Co. Inc.

 

155

 

4

 

12

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

*

St. Joe Co.

 

208

 

3

 

Front Yard Residential Corp.

 

280

 

3

 

Pennsylvania REIT

 

421

 

3

 

Ashford Hospitality Trust Inc.

 

438

 

2

 

Retail Value Inc.

 

75

 

2

 

New Senior Investment Group Inc.

 

444

 

2

 

Republic Bancorp Inc. Class A

 

49

 

2

 

CBL & Associates Properties Inc.

 

814

 

2

 

 

 

 

 

53,407

Health Care (14.4%)

 

 

 

 

*

Pfizer Inc.

 

68,299

 

2,961

 

UnitedHealth Group Inc.

 

11,257

 

2,727

 

Merck & Co. Inc.

 

30,633

 

2,490

 

Abbott Laboratories

 

20,147

 

1,564

 

Medtronic plc

 

15,934

 

1,442

 

Amgen Inc.

 

7,503

 

1,426

 

AbbVie Inc.

 

17,842

 

1,414

 

Eli Lilly & Co.

 

11,065

 

1,397

 

Thermo Fisher Scientific Inc.

 

4,721

 

1,225

 

Bristol-Myers Squibb Co.

 

19,252

 

995

 

Gilead Sciences Inc.

 

15,233

 

990

 

Anthem Inc.

 

3,063

 

921

*

Biogen Inc.

 

2,367

 

776

 

Becton Dickinson and Co.

 

3,118

 

776

*

Cigna Corp.

 

4,388

 

765

 

Stryker Corp.

 

4,021

 

758

*

Intuitive Surgical Inc.

 

1,322

 

724

*

Celgene Corp.

 

8,257

 

686

*

Boston Scientific Corp.

 

16,216

 

651

*

Vertex Pharmaceuticals Inc.

 

2,999

 

566

 

Allergan plc

 

3,987

 

549

*

Illumina Inc.

 

1,726

 

540

 

Zoetis Inc.

 

5,694

 

537

 

Humana Inc.

 

1,619

 

461

 

HCA Healthcare Inc.

 

3,211

 

446

 

Baxter International Inc.

 

5,887

 

440

*

Edwards Lifesciences Corp.

 

2,470

 

418

*

Regeneron Pharmaceuticals Inc.

 

936

 

403

*

Alexion Pharmaceuticals Inc.

 

2,515

 

340

 

Zimmer Biomet Holdings Inc.

 

2,396

 

297

*

Centene Corp.

 

4,772

 

291

*

IQVIA Holdings Inc.

 

1,915

 

268

*

Align Technology Inc.

 

932

 

241

*

IDEXX Laboratories Inc.

 

1,009

 

213

*

BioMarin Pharmaceutical Inc.

 

2,071

 

193

 

Cardinal Health Inc.

 

3,506

 

191

*

Incyte Corp.

 

2,059

 

178

*

Laboratory Corp. of America Holdings

 

1,183

 

175

 

ResMed Inc.

 

1,653

 

169

*

ABIOMED Inc.

 

502

 

168

 

Cooper Cos. Inc.

 

568

 

162

*

Mylan NV

 

6,028

 

159

 

Teleflex Inc.

 

535

 

155

*

Hologic Inc.

 

3,188

 

150

*

WellCare Health Plans Inc.

 

585

 

148

*

Varian Medical Systems Inc.

 

1,073

 

144

*

DexCom Inc.

 

1,026

 

143

 

Quest Diagnostics Inc.

 

1,595

 

138

 

Universal Health Services Inc. Class B

 

981

 

136

*

Exact Sciences Corp.

 

1,405

 

128

 

STERIS plc

 

981

 

119

*

Sarepta Therapeutics Inc.

 

779

 

112

 

Dentsply Sirona Inc.

 

2,571

 

107

*

Ionis Pharmaceuticals Inc.

 

1,465

 

104

*

Bluebird Bio Inc.

 

635

 

99

*

Molina Healthcare Inc.

 

730

 

98

*

Jazz Pharmaceuticals plc

 

689

 

96

*

Seattle Genetics Inc.

 

1,270

 

94

*

Sage Therapeutics Inc.

 

571

 

91

 

West Pharmaceutical Services Inc.

 

856

 

90

*

Alnylam Pharmaceuticals Inc.

 

1,048

 

89

*

ICON plc

 

636

 

89

*

DaVita Inc.

 

1,524

 

87

 

Bio-Techne Corp.

 

436

 

85

 

Hill-Rom Holdings Inc.

 

775

 

82

*

Neurocrine Biosciences Inc.

 

1,045

 

81

*

Charles River Laboratories International Inc.

 

554

 

79

*

Exelixis Inc.

 

3,442

 

77

*

Catalent Inc.

 

1,688

 

73

 

Perrigo Co. plc

 

1,496

 

73

*

PRA Health Sciences Inc.

 

678

 

73

 

Encompass Health Corp.

 

1,148

 

73

*

Masimo Corp.

 

540

 

71

*

Bio-Rad Laboratories Inc. Class A

 

248

 

67

*

Insulet Corp.

 

686

 

64

*

United Therapeutics Corp.

 

501

 

63

*

Alkermes plc

 

1,802

 

60

 

Chemed Corp.

 

181

 

60

*

Spark Therapeutics Inc.

 

521

 

59

*

Array BioPharma Inc.

 

2,498

 

57

*

Horizon Pharma plc

 

1,952

 

57

*

LivaNova plc

 

568

 

53

*

Haemonetics Corp.

 

604

 

52

*

FibroGen Inc.

 

884

 

51

*

HealthEquity Inc.

 

632

 

51

*

Teladoc Health Inc.

 

781

 

50

*

Penumbra Inc.

 

359

 

48

*

Novocure Ltd.

 

857

 

46

*

Integra LifeSciences Holdings Corp.

 

831

 

46

 

13

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

*

Wright Medical Group NV

 

1,449

 

45

*

ICU Medical Inc.

 

183

 

45

 

Bruker Corp.

 

1,175

 

45

*

Globus Medical Inc.

 

847

 

41

*

Blueprint Medicines Corp.

 

481

 

40

*

Amedisys Inc.

 

310

 

39

*

Agios Pharmaceuticals Inc.

 

591

 

38

*

Omnicell Inc.

 

450

 

38

*

LHC Group Inc.

 

342

 

38

*

Neogen Corp.

 

584

 

36

*

Ultragenyx Pharmaceutical Inc.

 

555

 

36

*

NuVasive Inc.

 

601

 

35

*

Merit Medical Systems Inc.

 

620

 

35

*

MEDNAX Inc.

 

1,024

 

34

*

HMS Holdings Corp.

 

961

 

33

 

Healthcare Services Group Inc.

 

861

 

33

 

Cantel Medical Corp.

 

432

 

32

*

Insmed Inc.

 

1,037

 

31

*

Emergent BioSolutions Inc.

 

524

 

31

*

Global Blood Therapeutics Inc.

 

581

 

31

*

ACADIA Pharmaceuticals Inc.

 

1,144

 

30

*

Syneos Health Inc.

 

723

 

30

*

Ligand Pharmaceuticals Inc.

 

243

 

30

*

Arena Pharmaceuticals Inc.

 

576

 

29

*

Endo International plc

 

2,608

 

29

 

Ensign Group Inc.

 

578

 

29

*

Tenet Healthcare Corp.

 

977

 

28

*

Immunomedics Inc.

 

1,711

 

27

*

iRhythm Technologies Inc.

 

280

 

27

*

Repligen Corp.

 

449

 

27

*

Acadia Healthcare Co. Inc.

 

1,016

 

27

*

Amicus Therapeutics Inc.

 

2,199

 

27

*

Quidel Corp.

 

398

 

26

*

Avanos Medical Inc.

 

546

 

26

*

Myriad Genetics Inc.

 

815

 

25

*

Halozyme Therapeutics Inc.

 

1,435

 

25

*

Mallinckrodt plc

 

956

 

24

*

Portola Pharmaceuticals Inc.

 

757

 

23

*

Supernus Pharmaceuticals Inc.

 

569

 

23

*

Inogen Inc.

 

208

 

22

 

Patterson Cos. Inc.

 

954

 

22

*

Heron Therapeutics Inc.

 

798

 

21

 

CONMED Corp.

 

266

 

20

*

Ironwood Pharmaceuticals Inc. Class A

 

1,404

 

20

*

Enanta Pharmaceuticals Inc.

 

194

 

20

*

Medicines Co.

 

798

 

20

*

Acceleron Pharma Inc.

 

447

 

20

*

Magellan Health Inc.

 

286

 

19

*

REGENXBIO Inc.

 

372

 

19

*

Aerie Pharmaceuticals Inc.

 

412

 

19

*

Pacira Pharmaceuticals Inc.

 

461

 

19

*

Select Medical Holdings Corp.

 

1,257

 

19

*

Genomic Health Inc.

 

239

 

18

*

MyoKardia Inc.

 

394

 

18

*

Prestige Consumer Healthcare Inc.

 

597

 

17

*

Atara Biotherapeutics Inc.

 

486

 

17

*

AnaptysBio Inc.

 

245

 

17

*

Clovis Oncology Inc.

 

554

 

17

*

Xencor Inc.

 

539

 

16

*

Cambrex Corp.

 

389

 

16

*

Spectrum Pharmaceuticals Inc.

 

1,467

 

16

*

Nevro Corp.

 

340

 

16

*

WageWorks Inc.

 

463

 

15

*

Orthofix Medical Inc.

 

247

 

15

 

Luminex Corp.

 

587

 

15

*

Brookdale Senior Living Inc.

 

2,210

 

15

*

Corcept Therapeutics Inc.

 

1,176

 

15

*

Amneal Pharmaceuticals Inc.

 

1,079

 

15

*

Innoviva Inc.

 

921

 

14

*

TherapeuticsMD Inc.

 

2,456

 

14

*

Momenta Pharmaceuticals Inc.

 

990

 

14

*

Varex Imaging Corp.

 

441

 

14

*

CorVel Corp.

 

205

 

14

*

Esperion Therapeutics Inc.

 

287

 

13

 

Taro Pharmaceutical Industries Ltd.

 

129

 

13

*

Theravance Biopharma Inc.

 

535

 

13

*

Aimmune Therapeutics Inc.

 

538

 

13

*

Natus Medical Inc.

 

450

 

12

*

Madrigal Pharmaceuticals Inc.

 

92

 

12

*

Puma Biotechnology Inc.

 

410

 

11

*

Tivity Health Inc.

 

522

 

11

 

Meridian Bioscience Inc.

 

643

 

11

*

Acorda Therapeutics Inc.

 

730

 

11

*

Editas Medicine Inc.

 

496

 

10

*

Intra-Cellular Therapies Inc.

 

733

 

10

*

Intrexon Corp.

 

1,226

 

10

*

OPKO Health Inc.

 

3,318

 

8

*

Radius Health Inc.

 

360

 

7

*

Alder Biopharmaceuticals Inc.

 

416

 

5

*

Prothena Corp. plc

 

363

 

5

*

AxoGen Inc.

 

243

 

5

 

Owens & Minor Inc.

 

532

 

3

*

Nektar Therapeutics Class A

 

81

 

3

*

Eagle Pharmaceuticals Inc.

 

57

 

3

*

Akorn Inc.

 

564

 

2

*

Five Prime Therapeutics Inc.

 

185

 

2

*

Aduro Biotech Inc.

 

385

 

2

*

Lannett Co. Inc.

 

163

 

2

*

Lexicon Pharmaceuticals Inc.

 

123

 

1

 

 

 

 

 

38,195

 

14

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

Industrials (10.6%)

 

 

 

 

 

Union Pacific Corp.

 

8,709

 

1,460

*

PayPal Holdings Inc.

 

13,989

 

1,372

 

Accenture plc Class A

 

7,574

 

1,222

 

Caterpillar Inc.

 

6,747

 

927

 

Danaher Corp.

 

7,275

 

924

 

United Parcel Service Inc. Class B

 

8,136

 

897

 

Automatic Data Processing Inc.

 

5,189

 

794

 

CSX Corp.

 

9,453

 

687

 

Deere & Co.

 

3,809

 

625

 

Norfolk Southern Corp.

 

3,202

 

574

 

Illinois Tool Works Inc.

 

3,908

 

563

 

FedEx Corp.

 

2,877

 

521

 

Waste Management Inc.

 

5,011

 

507

 

Sherwin-Williams Co.

 

980

 

425

 

Fidelity National Information Services Inc.

 

3,842

 

415

*

Fiserv Inc.

 

4,692

 

397

 

Johnson Controls International plc

 

10,863

 

383

*

Worldpay Inc. Class A

 

3,523

 

337

 

Ingersoll-Rand plc

 

2,881

 

304

 

Agilent Technologies Inc.

 

3,745

 

297

 

Fortive Corp.

 

3,453

 

282

*

Square Inc.

 

3,441

 

280

 

PACCAR Inc.

 

4,039

 

274

 

Cummins Inc.

 

1,750

 

270

 

Willis Towers Watson plc

 

1,525

 

262

 

Rockwell Automation Inc.

 

1,414

 

252

 

Global Payments Inc.

 

1,870

 

244

*

FleetCor Technologies Inc.

 

1,033

 

241

*

Verisk Analytics Inc. Class A

 

1,884

 

238

 

Stanley Black & Decker Inc.

 

1,779

 

236

 

Ball Corp.

 

3,927

 

215

*

Waters Corp.

 

883

 

214

 

Fastenal Co.

 

3,378

 

213

*

Shopify Inc. Class A

 

1,110

 

210

 

Republic Services Inc. Class A

 

2,552

 

200

 

Total System Services Inc.

 

2,120

 

200

*

Mettler-Toledo International Inc.

 

288

 

196

*

CoStar Group Inc.

 

420

 

192

*

Keysight Technologies Inc.

 

2,194

 

185

 

Vulcan Materials Co.

 

1,546

 

172

 

WW Grainger Inc.

 

534

 

163

*

First Data Corp. Class A

 

6,398

 

161

 

Xylem Inc.

 

2,106

 

159

 

Dover Corp.

 

1,702

 

154

 

Expeditors International of Washington Inc.

 

2,025

 

152

 

CH Robinson Worldwide Inc.

 

1,608

 

145

 

TransUnion

 

2,162

 

140

 

Martin Marietta Materials Inc.

 

738

 

139

 

Broadridge Financial Solutions Inc.

 

1,362

 

138

 

Masco Corp.

 

3,568

 

134

 

Kansas City Southern

 

1,200

 

130

 

IDEX Corp.

 

899

 

130

*

Zebra Technologies Corp.

 

619

 

124

 

Spirit AeroSystems Holdings Inc. Class A

 

1,244

 

123

 

PerkinElmer Inc.

 

1,290

 

121

 

Jack Henry & Associates Inc.

 

904

 

120

*

Trimble Inc.

 

2,922

 

117

 

Old Dominion Freight Line Inc.

 

771

 

116

 

Westrock Co.

 

2,960

 

111

 

JB Hunt Transport Services Inc.

 

1,021

 

110

 

Snap-on Inc.

 

659

 

105

 

Packaging Corp. of America

 

1,101

 

105

 

Cognex Corp.

 

1,938

 

103

 

Lennox International Inc.

 

418

 

103

 

Allegion plc

 

1,110

 

100

 

Alliance Data Systems Corp.

 

558

 

97

*

Sensata Technologies Holding plc

 

1,900

 

96

 

Robert Half International Inc.

 

1,386

 

94

 

Arconic Inc.

 

5,083

 

94

*

HD Supply Holdings Inc.

 

2,172

 

93

 

Nordson Corp.

 

679

 

92

 

Graco Inc.

 

1,939

 

91

 

Booz Allen Hamilton Holding Corp. Class A

 

1,636

 

86

*

WEX Inc.

 

485

 

86

 

AO Smith Corp.

 

1,653

 

86

 

Carlisle Cos. Inc.

 

685

 

84

*

Fair Isaac Corp.

 

337

 

84

 

Toro Co.

 

1,208

 

83

*

Crown Holdings Inc.

 

1,519

 

82

*

Berry Global Group Inc.

 

1,549

 

81

 

FLIR Systems Inc.

 

1,572

 

81

*

Arrow Electronics Inc.

 

1,011

 

81

 

Sealed Air Corp.

 

1,840

 

80

*

Euronet Worldwide Inc.

 

578

 

78

 

Donaldson Co. Inc.

 

1,504

 

78

 

Xerox Corp.

 

2,448

 

76

 

Universal Display Corp.

 

500

 

75

 

AptarGroup Inc.

 

730

 

74

*

XPO Logistics Inc.

 

1,472

 

74

 

Wabtec Corp.

 

1,011

 

74

 

Hexcel Corp.

 

1,007

 

73

 

HEICO Corp. Class A

 

846

 

68

 

Sonoco Products Co.

 

1,154

 

67

*

Flex Ltd.

 

6,189

 

65

 

15

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Owens Corning

 

1,266

 

63

 

Quanta Services Inc.

 

1,719

 

61

 

ManpowerGroup Inc.

 

723

 

61

 

Acuity Brands Inc.

 

468

 

61

 

Genpact Ltd.

 

1,827

 

61

 

Woodward Inc.

 

624

 

60

 

National Instruments Corp.

 

1,286

 

60

 

Insperity Inc.

 

446

 

56

 

Bemis Co. Inc.

 

1,063

 

56

*

Genesee & Wyoming Inc. Class A

 

685

 

56

 

Avnet Inc.

 

1,285

 

56

 

Littelfuse Inc.

 

281

 

54

 

Watsco Inc.

 

373

 

54

 

MAXIMUS Inc.

 

746

 

53

 

Jabil Inc.

 

1,844

 

52

 

AGCO Corp.

 

767

 

52

 

nVent Electric plc

 

1,885

 

52

*

Kirby Corp.

 

697

 

52

*

Trex Co. Inc.

 

684

 

51

*

Pagseguro Digital Ltd. Class A

 

1,810

 

51

 

Brink’s Co.

 

586

 

46

 

HEICO Corp.

 

490

 

46

 

Graphic Packaging Holding Co.

 

3,639

 

44

 

MSC Industrial Direct Co. Inc. Class A

 

521

 

44

*

Stericycle Inc.

 

971

 

43

 

Air Lease Corp. Class A

 

1,136

 

42

 

Regal Beloit Corp.

 

503

 

42

 

Louisiana-Pacific Corp.

 

1,640

 

41

 

Eagle Materials Inc.

 

542

 

41

*

Clean Harbors Inc.

 

602

 

41

 

MSA Safety Inc.

 

394

 

41

 

USG Corp.

 

939

 

40

 

Trinity Industries Inc.

 

1,706

 

40

*

RBC Bearings Inc.

 

278

 

39

 

Macquarie Infrastructure Corp.

 

937

 

38

*

ASGN Inc.

 

591

 

38

 

Ryder System Inc.

 

609

 

38

*

Coherent Inc.

 

283

 

38

 

Owens-Illinois Inc.

 

1,867

 

37

*

Generac Holdings Inc.

 

703

 

36

*

Axon Enterprise Inc.

 

670

 

36

*

Proto Labs Inc.

 

315

 

36

*

Mercury Systems Inc.

 

547

 

35

 

Valmont Industries Inc.

 

254

 

35

 

GATX Corp.

 

436

 

35

*

CoreLogic Inc.

 

945

 

35

 

John Bean Technologies Corp.

 

365

 

34

*

Integer Holdings Corp.

 

375

 

34

 

Vishay Intertechnology Inc.

 

1,533

 

34

*

Rogers Corp.

 

213

 

33

*

Conduent Inc.

 

2,238

 

33

*

FTI Consulting Inc.

 

441

 

33

 

Korn Ferry

 

664

 

32

*

Rexnord Corp.

 

1,213

 

32

*

MasTec Inc.

 

743

 

32

*

II-VI Inc.

 

732

 

31

*

TriNet Group Inc.

 

507

 

31

*

Novanta Inc.

 

379

 

31

 

Simpson Manufacturing Co. Inc.

 

496

 

30

*

WESCO International Inc.

 

544

 

30

*

Paylocity Holding Corp.

 

337

 

29

 

Belden Inc.

 

470

 

29

*

Beacon Roofing Supply Inc.

 

794

 

29

 

Franklin Electric Co. Inc.

 

536

 

29

*

AMN Healthcare Services Inc.

 

537

 

27

 

Watts Water Technologies Inc. Class A

 

333

 

27

 

Albany International Corp.

 

336

 

26

 

Brady Corp. Class A

 

546

 

26

 

Applied Industrial Technologies Inc.

 

441

 

26

*

SiteOne Landscape Supply Inc.

 

472

 

25

*

Sanmina Corp.

 

790

 

25

 

UniFirst Corp.

 

175

 

25

 

Deluxe Corp.

 

536

 

25

*

TopBuild Corp.

 

413

 

25

*

Fabrinet

 

415

 

24

 

Granite Construction Inc.

 

515

 

24

*

ExlService Holdings Inc.

 

388

 

24

 

Terex Corp.

 

688

 

23

 

Covanta Holding Corp.

 

1,360

 

23

 

Comfort Systems USA Inc.

 

429

 

23

 

Forward Air Corp.

 

350

 

23

 

Otter Tail Corp.

 

448

 

23

*

Summit Materials Inc. Class A

 

1,306

 

22

*

Advanced Disposal Services Inc.

 

829

 

22

*

Plexus Corp.

 

353

 

22

 

Mueller Industries Inc.

 

659

 

22

*

Cimpress NV

 

256

 

21

 

Universal Forest Products Inc.

 

677

 

21

*

Harsco Corp.

 

934

 

21

*

Itron Inc.

 

390

 

21

 

ESCO Technologies Inc.

 

293

 

20

 

EVERTEC Inc.

 

707

 

20

*

Anixter International Inc.

 

337

 

20

 

Triton International Ltd.

 

598

 

20

*

Saia Inc.

 

295

 

20

 

Badger Meter Inc.

 

327

 

19

 

AAON Inc.

 

473

 

19

*

OSI Systems Inc.

 

216

 

19

 

Mueller Water Products Inc. Class A

 

1,790

 

19

 

16

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Werner Enterprises Inc.

 

541

 

19

 

Mobile Mini Inc.

 

515

 

19

*

Builders FirstSource Inc.

 

1,300

 

18

*

SPX Corp.

 

498

 

18

 

Cubic Corp.

 

293

 

18

 

Federal Signal Corp.

 

726

 

18

*

JELD-WEN Holding Inc.

 

860

 

17

*

Dycom Industries Inc.

 

382

 

17

*

TriMas Corp.

 

527

 

17

*

Gibraltar Industries Inc.

 

418

 

17

 

McGrath RentCorp

 

276

 

17

*

Masonite International Corp.

 

297

 

16

*

Knowles Corp.

 

1,006

 

16

*

Hub Group Inc. Class A

 

381

 

16

 

Raven Industries Inc.

 

409

 

16

 

Greenbrier Cos. Inc.

 

393

 

16

 

Sun Hydraulics Corp.

 

335

 

16

*

Ambarella Inc.

 

391

 

16

 

Benchmark Electronics Inc.

 

550

 

15

*

TTM Technologies Inc.

 

1,243

 

15

*

Sykes Enterprises Inc.

 

499

 

15

 

Methode Electronics Inc.

 

518

 

15

 

Rush Enterprises Inc. Class A

 

346

 

14

 

AAR Corp.

 

397

 

14

 

US Ecology Inc.

 

252

 

14

 

Aircastle Ltd.

 

714

 

14

 

Apogee Enterprises Inc.

 

397

 

14

 

Greif Inc. Class A

 

352

 

14

 

Tennant Co.

 

222

 

14

*

Cardtronics plc Class A

 

473

 

14

 

CTS Corp.

 

434

 

14

 

Encore Wire Corp.

 

235

 

14

 

Heartland Express Inc.

 

684

 

14

*

BMC Stock Holdings Inc.

 

718

 

14

*

CBIZ Inc.

 

660

 

14

*

Patrick Industries Inc.

 

292

 

13

 

Schneider National Inc. Class B

 

582

 

13

*

Huron Consulting Group Inc.

 

277

 

13

 

Lindsay Corp.

 

136

 

13

*

Installed Building Products Inc.

 

282

 

12

 

H&E Equipment Services Inc.

 

425

 

12

*

Evolent Health Inc. Class A

 

919

 

12

 

Ship Finance International Ltd.

 

974

 

12

*

MACOM Technology Solutions Holdings Inc.

 

626

 

12

*

Scorpio Tankers Inc.

 

645

 

12

 

AVX Corp.

 

643

 

12

 

GrafTech International Ltd.

 

806

 

12

*

ADT Inc.

 

1,444

 

12

 

Boise Cascade Co.

 

413

 

12

 

Astec Industries Inc.

 

299

 

11

 

Kelly Services Inc. Class A

 

466

 

11

*

FARO Technologies Inc.

 

243

 

11

*

SEACOR Holdings Inc.

 

244

 

11

 

Hyster-Yale Materials Handling Inc.

 

154

 

10

 

Quanex Building Products Corp.

 

594

 

10

 

Griffon Corp.

 

565

 

10

 

Seaspan Corp. Class A

 

1,094

 

10

 

Briggs & Stratton Corp.

 

713

 

9

*

Aegion Corp. Class A

 

496

 

9

 

Primoris Services Corp.

 

345

 

8

*

TrueBlue Inc.

 

329

 

8

 

Advanced Drainage Systems Inc.

 

292

 

7

 

Navigant Consulting Inc.

 

354

 

7

*

Frontline Ltd.

 

831

 

5

*

Tutor Perini Corp.

 

253

 

5

 

GasLog Ltd.

 

288

 

5

*

Manitowoc Co. Inc.

 

248

 

4

 

Myers Industries Inc.

 

223

 

4

*

CIRCOR International Inc.

 

113

 

4

 

Moog Inc. Class A

 

36

 

3

*

Atlas Air Worldwide Holdings Inc.

 

56

 

3

*

Veeco Instruments Inc.

 

263

 

3

*

Donnelley Financial Solutions Inc.

 

203

 

3

 

TTEC Holdings Inc.

 

79

 

3

*

Wesco Aircraft Holdings Inc.

 

308

 

3

 

Matson Inc.

 

60

 

2

 

Caesarstone Ltd.

 

128

 

2

 

LSC Communications Inc.

 

228

 

2

 

Teekay Corp.

 

227

 

1

 

 

 

 

 

28,195

Oil & Gas (1.7%)

 

 

 

 

 

Schlumberger Ltd.

 

16,296

 

718

 

Marathon Petroleum Corp.

 

7,880

 

489

 

Phillips 66

 

4,889

 

471

 

Kinder Morgan Inc.

 

22,271

 

427

 

Valero Energy Corp.

 

4,982

 

406

 

Williams Cos. Inc.

 

14,277

 

381

 

ONEOK Inc.

 

4,805

 

309

 

Baker Hughes a GE Co. Class A

 

6,024

 

159

 

National Oilwell Varco Inc.

 

4,466

 

126

 

Targa Resources Corp.

 

2,644

 

106

 

OGE Energy Corp.

 

2,313

 

98

 

Helmerich & Payne Inc.

 

1,237

 

67

*

First Solar Inc.

 

961

 

51

*

Transocean Ltd.

 

6,018

 

49

 

Equitrans Midstream Corp.

 

2,473

 

44

 

Delek US Holdings Inc.

 

946

 

33

 

Patterson-UTI Energy Inc.

 

2,492

 

33

 

Core Laboratories NV

 

505

 

33

*

Chart Industries Inc.

 

358

 

32

 

Golar LNG Ltd.

 

1,090

 

23

 

17

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Ensco plc Class A

 

5,053

 

21

*

SolarEdge Technologies Inc.

 

472

 

20

 

Arcosa Inc.

 

564

 

19

*

NOW Inc.

 

1,250

 

18

 

McDermott International Inc.

 

2,085

 

18

 

Cosan Ltd.

 

1,500

 

17

 

SemGroup Corp. Class A

 

1,091

 

17

*

Rowan Cos. plc Class A

 

1,493

 

17

*

MRC Global Inc.

 

970

 

16

 

Nabors Industries Ltd.

 

5,043

 

16

*

C&J Energy Services Inc.

 

920

 

16

 

Archrock Inc.

 

1,551

 

15

*

Oil States International Inc.

 

854

 

15

*

ProPetro Holding Corp.

 

714

 

14

*

Helix Energy Solutions Group Inc.

 

1,755

 

13

*

Noble Corp. plc

 

3,903

 

12

*

Newpark Resources Inc.

 

1,273

 

11

 

CVR Energy Inc.

 

267

 

11

 

Green Plains Inc.

 

655

 

10

*

Weatherford International plc

 

7,383

 

5

*

Forum Energy Technologies Inc.

 

725

 

4

 

HollyFrontier Corp.

 

81

 

4

 

RPC Inc.

 

377

 

4

*

Exterran Corp.

 

202

 

3

*

KLX Energy Services Holdings Inc.

 

124

 

3

*

SunPower Corp. Class A

 

364

 

2

*

Covia Holdings Corp.

 

207

 

1

 

 

 

 

 

4,377

Technology (24.7%)

 

 

 

 

 

Microsoft Corp.

 

89,255

 

9,999

 

Apple Inc.

 

55,927

 

9,684

*

Facebook Inc. Class A

 

28,004

 

4,521

*

Alphabet Inc. Class C

 

3,612

 

4,045

*

Alphabet Inc. Class A

 

3,493

 

3,935

 

Intel Corp.

 

53,803

 

2,849

 

Cisco Systems Inc.

 

53,400

 

2,765

 

Oracle Corp.

 

30,001

 

1,564

*

Adobe Inc.

 

5,790

 

1,520

 

International Business Machines Corp.

 

10,820

 

1,495

*

salesforce.com Inc.

 

8,468

 

1,386

 

Broadcom Inc.

 

4,849

 

1,335

 

Texas Instruments Inc.

 

11,315

 

1,197

 

NVIDIA Corp.

 

6,854

 

1,057

 

QUALCOMM Inc.

 

14,274

 

762

 

Intuit Inc.

 

2,870

 

709

*

Micron Technology Inc.

 

13,321

 

545

*

ServiceNow Inc.

 

2,092

 

501

 

Cognizant Technology Solutions Corp. Class A

 

6,875

 

488

 

Analog Devices Inc.

 

4,338

 

464

 

Applied Materials Inc.

 

11,561

 

443

*

Autodesk Inc.

 

2,580

 

421

*

Red Hat Inc.

 

2,083

 

380

 

Xilinx Inc.

 

2,993

 

375

 

NXP Semiconductors NV

 

4,047

 

370

 

HP Inc.

 

18,607

 

367

*

Workday Inc. Class A

 

1,708

 

338

 

Corning Inc.

 

9,255

 

322

 

Lam Research Corp.

 

1,824

 

321

 

Hewlett Packard Enterprise Co.

 

17,287

 

283

 

Motorola Solutions Inc.

 

1,905

 

273

*

Palo Alto Networks Inc.

 

1,070

 

264

*

Twitter Inc.

 

8,421

 

259

*

Advanced Micro Devices Inc.

 

11,014

 

259

 

Microchip Technology Inc.

 

2,703

 

235

*

Splunk Inc.

 

1,722

 

234

 

KLA-Tencor Corp.

 

1,930

 

223

*

VeriSign Inc.

 

1,238

 

220

 

DXC Technology Co.

 

3,306

 

218

*

Cerner Corp.

 

3,725

 

208

 

NetApp Inc.

 

3,076

 

201

*

Arista Networks Inc.

 

678

 

193

*

Cadence Design Systems Inc.

 

3,283

 

188

 

Maxim Integrated Products Inc.

 

3,264

 

178

*

Synopsys Inc.

 

1,740

 

177

 

Western Digital Corp.

 

3,408

 

171

 

Skyworks Solutions Inc.

 

2,099

 

171

*

Check Point Software Technologies Ltd.

 

1,398

 

171

 

Symantec Corp.

 

7,483

 

168

 

Citrix Systems Inc.

 

1,592

 

168

 

CDW Corp.

 

1,717

 

161

 

Seagate Technology plc

 

3,350

 

156

 

SS&C Technologies Holdings Inc.

 

2,425

 

149

*

Gartner Inc.

 

1,042

 

148

*

GoDaddy Inc. Class A

 

1,984

 

148

*

Fortinet Inc.

 

1,655

 

144

 

VMware Inc. Class A

 

835

 

143

*

Atlassian Corp. plc Class A

 

1,284

 

138

*

Akamai Technologies Inc.

 

1,863

 

130

 

Marvell Technology Group Ltd.

 

6,505

 

130

*

PTC Inc.

 

1,372

 

127

*

Twilio Inc. Class A

 

1,033

 

126

*

F5 Networks Inc.

 

716

 

120

*

Ultimate Software Group Inc.

 

357

 

118

 

Juniper Networks Inc.

 

4,000

 

108

 

Leidos Holdings Inc.

 

1,660

 

107

*

Yandex NV Class A

 

3,099

 

107

*

Paycom Software Inc.

 

583

 

106

 

18

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

*

ON Semiconductor Corp.

 

4,891

 

105

*

Qorvo Inc.

 

1,464

 

103

*

Dell Technologies Inc.

 

1,759

 

98

*

Zendesk Inc.

 

1,236

 

98

*

EPAM Systems Inc.

 

602

 

97

 

Amdocs Ltd.

 

1,682

 

93

*

Tyler Technologies Inc.

 

449

 

92

 

CDK Global Inc.

 

1,525

 

88

 

Teradyne Inc.

 

2,098

 

86

*

Okta Inc.

 

1,007

 

85

*

Aspen Technology Inc.

 

839

 

85

*

RingCentral Inc. Class A

 

802

 

84

*

Nutanix Inc.

 

1,645

 

82

*

Integrated Device Technology Inc.

 

1,509

 

73

*

HubSpot Inc.

 

432

 

73

*

Ciena Corp.

 

1,667

 

71

*

Proofpoint Inc.

 

591

 

70

*

Teradata Corp.

 

1,392

 

67

 

Cypress Semiconductor Corp.

 

4,187

 

65

*

Cree Inc.

 

1,172

 

64

*

ARRIS International plc

 

1,912

 

61

*

Coupa Software Inc.

 

636

 

60

*

Mellanox Technologies Ltd.

 

546

 

59

 

Entegris Inc.

 

1,649

 

58

*

Nuance Communications Inc.

 

3,360

 

56

*

New Relic Inc.

 

527

 

56

*

InterXion Holding NV

 

824

 

54

*

CommScope Holding Co. Inc.

 

2,226

 

52

 

MKS Instruments Inc.

 

624

 

52

*

RealPage Inc.

 

840

 

51

*

Medidata Solutions Inc.

 

672

 

50

*

ViaSat Inc.

 

645

 

49

*

DocuSign Inc. Class A

 

864

 

48

 

SYNNEX Corp.

 

484

 

48

*

2U Inc.

 

643

 

47

 

j2 Global Inc.

 

547

 

47

*

CyberArk Software Ltd.

 

414

 

45

*

Tech Data Corp.

 

444

 

45

 

Science Applications International Corp.

 

591

 

44

 

Blackbaud Inc.

 

564

 

44

*

Lumentum Holdings Inc.

 

866

 

43

*

ACI Worldwide Inc.

 

1,334

 

43

*

Manhattan Associates Inc.

 

764

 

42

*

Semtech Corp.

 

756

 

42

*

Silicon Laboratories Inc.

 

498

 

40

*

Ellie Mae Inc.

 

405

 

40

*

Verint Systems Inc.

 

752

 

40

*

Wix.com Ltd.

 

365

 

40

*

Pure Storage Inc. Class A

 

1,916

 

39

*

NCR Corp.

 

1,377

 

39

*

FireEye Inc.

 

2,269

 

38

 

Cabot Microelectronics Corp.

 

329

 

37

*

Cornerstone OnDemand Inc.

 

634

 

36

*

Five9 Inc.

 

669

 

36

*

Viavi Solutions Inc.

 

2,641

 

35

*

Cloudera Inc.

 

2,342

 

34

*

Finisar Corp.

 

1,365

 

33

*

Qualys Inc.

 

397

 

33

*

Envestnet Inc.

 

520

 

32

*

CommVault Systems Inc.

 

464

 

31

*

Q2 Holdings Inc.

 

436

 

30

*

Box Inc.

 

1,443

 

29

 

Pegasystems Inc.

 

440

 

29

*

Cirrus Logic Inc.

 

697

 

28

 

InterDigital Inc.

 

398

 

28

*

Globant SA

 

381

 

26

 

Brooks Automation Inc.

 

807

 

26

*

Covetrus Inc.

 

712

 

25

 

Ubiquiti Networks Inc.

 

175

 

25

*

SailPoint Technologies Holding Inc.

 

813

 

25

*

Bottomline Technologies DE Inc.

 

492

 

25

 

Power Integrations Inc.

 

329

 

24

*

Alarm.com Holdings Inc.

 

364

 

24

 

Cogent Communications Holdings Inc.

 

489

 

24

*

NetScout Systems Inc.

 

868

 

24

*

Insight Enterprises Inc.

 

404

 

23

*

Blackline Inc.

 

428

 

22

*

Advanced Energy Industries Inc.

 

442

 

22

*

Premier Inc. Class A

 

605

 

22

*

Allscripts Healthcare Solutions Inc.

 

2,029

 

22

*

Inphi Corp.

 

502

 

22

 

Ceridian HCM Holding Inc.

 

411

 

20

*

Avaya Holdings Corp.

 

1,293

 

20

 

Plantronics Inc.

 

387

 

19

*

Lattice Semiconductor Corp.

 

1,625

 

19

 

Progress Software Corp.

 

519

 

19

 

Kulicke & Soffa Industries Inc.

 

808

 

19

*

Varonis Systems Inc.

 

328

 

19

*

Diodes Inc.

 

463

 

19

*

MaxLinear Inc.

 

737

 

19

*

Yext Inc.

 

969

 

18

*

Stratasys Ltd.

 

632

 

18

*

3D Systems Corp.

 

1,267

 

18

*

Acacia Communications Inc.

 

318

 

17

*

Synaptics Inc.

 

399

 

17

*

Virtusa Corp.

 

330

 

17

*

MicroStrategy Inc. Class A

 

117

 

17

 

CSG Systems International Inc.

 

387

 

16

*

Rambus Inc.

 

1,546

 

16

 

19

 

ESG U.S. Stock ETF

 

 

 

 

 

 

 

Market

 

 

 

 

 

Value·

 

 

 

Shares

 

($000)

 

Pitney Bowes Inc.

 

2,185

 

16

*

Mimecast Ltd.

 

323

 

16

*

Blucora Inc.

 

577

 

16

 

TiVo Corp.

 

1,538

 

15

 

Ebix Inc.

 

261

 

15

 

Xperi Corp.

 

597

 

14

*

Electronics For Imaging Inc.

 

529

 

14

*

NETGEAR Inc.

 

386

 

14

*

Luxoft Holding Inc. Class A

 

236

 

14

 

NIC Inc.

 

779

 

13

*

Cray Inc.

 

522

 

13

*

NextGen Healthcare Inc.

 

702

 

12

*

ScanSource Inc.

 

327

 

12

*

Perficient Inc.

 

420

 

12

*

Amkor Technology Inc.

 

1,364

 

12

 

Monotype Imaging Holdings Inc.

 

583

 

11

*

Infinera Corp.

 

2,079

 

11

 

ADTRAN Inc.

 

701

 

11

 

Shutterstock Inc.

 

203

 

9

 

Forrester Research Inc.

 

186

 

9

 

Monolithic Power Systems Inc.

 

27

 

4

*

Loral Space & Communications Inc.

 

81

 

3

*

Endurance International Group Holdings Inc.

 

428

 

3

 

 

 

 

 

65,565

Telecommunications (2.3%)

 

 

 

 

 

Verizon Communications Inc.

 

48,718

 

2,773

 

AT&T Inc.

 

85,611

 

2,664

*

T-Mobile US Inc.

 

3,607

 

260

 

CenturyLink Inc.

 

11,260

 

149

*

Zayo Group Holdings Inc.

 

2,668

 

66

*

Sprint Corp.

 

7,645

 

49

 

Telephone & Data Systems Inc.

 

1,148

 

37

*

Vonage Holdings Corp.

 

2,587

 

27

 

Shenandoah Telecommunications Co.

 

539

 

24

*

Iridium Communications Inc.

 

1,118

 

24

*

8x8 Inc.

 

1,109

 

22

*

GTT Communications Inc.

 

496

 

15

 

Consolidated Communications Holdings Inc.

 

1,132

 

11

*

United States Cellular Corp.

 

220

 

10

 

ATN International Inc.

 

65

 

4

*

Cincinnati Bell Inc.

 

251

 

2

 

 

 

 

 

6,137

Utilities (1.2%)

 

 

 

 

 

Sempra Energy

 

3,217

 

387

 

Consolidated Edison Inc.

 

3,653

 

301

 

PPL Corp.

 

8,478

 

273

 

Eversource Energy

 

3,698

 

258

 

Edison International

 

3,736

 

224

 

American Water Works Co. Inc.

 

2,118

 

215

 

CMS Energy Corp.

 

3,271

 

178

 

CenterPoint Energy Inc.

 

5,869

 

177

 

Atmos Energy Corp.

 

1,283

 

127

 

Alliant Energy Corp.

 

2,745

 

126

 

NiSource Inc.

 

4,243

 

115

 

UGI Corp.

 

2,028

 

111

 

Aqua America Inc.

 

2,080

 

75

 

IDACORP Inc.

 

580

 

57

 

ONE Gas Inc.

 

607

 

52

 

Portland General Electric Co.

 

1,024

 

51

 

New Jersey Resources Corp.

 

1,014

 

49

 

Hawaiian Electric Industries Inc.

 

1,244

 

48

 

Southwest Gas Holdings Inc.

 

572

 

47

 

Spire Inc.

 

575

 

46

 

NorthWestern Corp.

 

574

 

39

 

Avangrid Inc.

 

644

 

31

 

Avista Corp.

 

761

 

31

 

American States Water Co.

 

418

 

30

 

South Jersey Industries Inc.

 

998

 

29

 

California Water Service Group

 

553

 

29

 

Ormat Technologies Inc.

 

467

 

26

 

MGE Energy Inc.

 

400

 

26

 

El Paso Electric Co.

 

467

 

25

 

Pattern Energy Group Inc. Class A

 

1,061

 

22

 

Northwest Natural Holding Co.

 

329

 

21

 

SJW Group

 

247

 

15

 

Atlantica Yield plc

 

719

 

14

*

Evoqua Water Technologies Corp.

 

996

 

14

 

WEC Energy Group Inc.

 

135

 

10

 

Evergy Inc.

 

144

 

8

 

TerraForm Power Inc. Class A

 

594

 

7

 

 

 

 

 

3,294

Total Investments (100.0%)

(Cost $257,482)

 

 

 

265,492

Other Assets and Liabilities (0.0%)

 

 

 

 

Other Assets

 

 

 

100,410

Liabilities

 

 

 

(100,373)

 

 

 

 

37

Net Assets (100%)

 

 

 

 

Applicable to 5,500,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

265,529

Net Asset Value Per Share

 

 

 

$48.28

 

20

 

ESG U.S. Stock ETF

 

 

 

 

 

 

Amount

 

 

 

 

($000)

Statement of Assets and Liabilities

 

 

 

 

Assets

 

 

 

 

Investments in Securities, at Value

 

 

 

265,492

Investment in Vanguard

 

 

 

8

Receivables for Accrued Income

 

 

 

221

Receivables for Capital Shares Issued

 

 

 

100,181

Total Assets

 

 

 

365,902

Liabilities

 

 

 

 

Payables for Investment Securities Purchased

 

 

 

100,225

Payables to Vanguard

 

 

 

8

Other Liabilities

 

 

 

140

Total Liabilities

 

 

 

100,373

Net Assets

 

 

 

265,529

 

At February 28, 2019, net assets consisted of:

 

 

 

 

 

Amount

 

 

 

 

($000)

Paid-in Capital

 

 

 

257,286

Total Distributable Earnings (Loss)

 

 

 

8,243

Net Assets

 

 

 

265,529

 

·    See Note A in Notes to Financial Statements.

 

*     Non-income-producing security.

 

REIT—Real Estate Investment Trust.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

21

 

ESG U.S. Stock ETF

 

 

Statement of Operations

 

 

 

 

September 18, 20181 to

 

 

February 28, 2019

 

 

($000)

Investment Income

 

 

Income

 

 

Dividends

 

693

Interest2

 

1

Total Income

 

694

Expenses

 

 

The Vanguard Group—Note B

 

 

Investment Advisory Services

 

14

Management and Administrative

 

17

Marketing and Distribution

 

1

Custodian Fees

 

14

Shareholders’ Reports

 

1

Trustees’ Fees and Expenses

 

—

Total Expenses

 

47

Expenses Paid Indirectly

 

(5)

Net Expenses

 

42

Net Investment Income

 

652

Realized Net Gain (Loss) on Investment Securities Sold2

 

(171)

Change in Unrealized Appreciation (Depreciation) of Investment Securities2

 

8,010

Net Increase (Decrease) in Net Assets Resulting from Operations

 

8,491

 

1   Inception.

 

2   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $1,000, $1,000, and $0, respectively. Purchases and sales are for temporary cash investment purposes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

22

 

ESG U.S. Stock ETF

 

 

Statement of Changes in Net Assets

 

 

 

 

September 18, 20181 to

 

 

February 28, 2019

 

 

($000)

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net Investment Income

 

652

Realized Net Gain (Loss)

 

(171)

Change in Unrealized Appreciation (Depreciation)

 

8,010

Net Increase (Decrease) in Net Assets Resulting from Operations

 

8,491

Distributions

 

 

Net Investment Income

 

(248)

Realized Capital Gain

 

—

Total Distributions

 

(248)

Capital Share Transactions

 

 

Issued

 

257,286

Issued in Lieu of Cash Distributions

 

—

Redeemed

 

—

Net Increase (Decrease) from Capital Share Transactions

 

257,286

Total Increase (Decrease)

 

265,529

Net Assets

 

 

Beginning of Period

 

—

End of Period

 

265,529

 

1   Inception.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

23

 

ESG U.S. Stock ETF

 

 

Financial Highlights

 

 

 

 

September 18, 20181 to

For a Share Outstanding Throughout the Period

 

February 28, 2019

Net Asset Value, Beginning of Period

 

$50.00

Investment Operations

 

 

Net Investment Income2

 

.385

Net Realized and Unrealized Gain (Loss) on Investments

 

(1.986)

Total from Investment Operations

 

(1.601)

Distributions

 

 

Dividends from Net Investment Income

 

(.119)

Distributions from Realized Capital Gains

 

—

Total Distributions

 

(.119)

Net Asset Value, End of Period

 

$48.28

 

 

 

Total Return

 

-3.15%

 

 

 

Ratios/Supplemental Data

 

 

Net Assets, End of Period (Millions)

 

$266

Ratio of Total Expenses to Average Net Assets

 

0.13%3,4

Ratio of Net Investment Income to Average Net Assets

 

1.85%3

Portfolio Turnover Rate

 

8%3

 

1   Inception.

 

2   Calculated based on average shares outstanding.

 

3   Annualized.

 

4   The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.12%.

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

24

 

ESG U.S. Stock ETF

 

 

Notes to Financial Statements

 

 

Vanguard ESG U.S. Stock ETF is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. ETF Shares are listed for trading on Cboe BZX Exchange; they can be purchased and sold through a broker.

 

A.      The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.

 

2. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

3. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

4. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

B.      In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between The Vanguard Group (“Vanguard”) and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees, and are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $8,000, representing 0.00% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.      The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the period ended February 28, 2019, custodian fee offset arrangements reduced the fund’s expenses by $5,000 (an annual rate of 0.01% of average net assets).

 

D.      Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

25

 

ESG U.S. Stock ETF

 

 

 

 

 

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

At February 28, 2019, 100% of the market value of the fund’s investments was determined based on Level 1 inputs.

 

E.      As of February 28, 2019, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

 

 

 

Amount

 

 

($000)

Tax Cost

 

257,482

Gross Unrealized Appreciation

 

11,721

Gross Unrealized Depreciation

 

(3,711)

Net Unrealized Appreciation (Depreciation)

 

8,010

 

F.       During the period ended February 28, 2019, the fund purchased $261,791,000 of investment securities and sold $4,128,000 of investment securities, other than temporary cash investments. Purchases and sales include $61,010,000 and $0, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

G.     Capital shares issued and redeemed were:

 

 

 

September 18, 20181 to

 

 

February 28, 2019

 

 

Shares

 

 

(000)

Issued

 

5,500

Issued in Lieu of Cash Distributions

 

—

Redeemed

 

—

Net Increase (Decrease) in Shares Outstanding

 

5,500

 

1   Inception.

 

H.      Subsequent to the report date, the fund was added to a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually. The facility includes the fund and certain other funds managed by Vanguard; each fund is individually liable for its borrowings, if any, under the credit facility.

 

Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

26

 

Trustees Approve Advisory Arrangement

 

 

Effective September 2018, the board of Vanguard World Fund approved the launch of Vanguard ESG U.S. Stock ETF, which utilizes an internalized management structure whereby The Vanguard Group, Inc. (Vanguard), through its Equity Index Group, provides investment advisory services to the fund. The board determined that the investment advisory arrangement with Vanguard was in the best interests of the fund and its prospective shareholders.

 

The board based its decision upon an evaluation of the 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 trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.

 

Nature, extent, and quality of services

The board considered the quality of the investment management services to be provided to the fund and took into account the organizational depth and stability of the advisor. The board noted that Vanguard has been managing investments for more than four decades. The Equity Index Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.

 

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

 

Investment performance

The board determined that the Equity Index Group, in its management of other Vanguard funds, has a track record of consistent performance and disciplined investment processes.

 

Cost

The board concluded that the fund’s expense ratio will be well below the average expense ratio charged by funds in its peer group.

 

The board does not conduct a profitability analysis of Vanguard because of Vanguard’s unique structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees.

 

The benefit of economies of scale

The board concluded that Vanguard’s arrangement with the fund ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as fund assets increase.

 

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

 

27

 

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This page intentionally left blank.

 

 

 

 

 

 

 

 

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Connect with Vanguard® > vanguard.com

 

 

 

Fund Information > 800-662-7447

 

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Who Are Deaf or Hard of Hearing > 800-749-7273

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

 

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

 

All rights reserved.

 

Vanguard Marketing Corporation, Distributor.

 

 

 

Q43932 042019

 

 

 

 

 

Semiannual Report  |  February 28, 2019

 

 

Vanguard ESG International Stock ETF

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents

 

 

 

About Your Fund’s Expenses

1

Financial Statements

4

Trustees Approve Advisory Arrangement

36

 

 

About Your Fund’s Expenses

 

 

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

 

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

 

The accompanying table illustrates your fund’s costs in two ways:

 

·   Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

 

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading “Expenses Paid During Period.”

 

·   Based on hypothetical 5% yearly return. This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

 

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

 

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

 

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

 

1

 

Period Ended February 28, 2019

 

 

Beginning

Ending

Expenses

 

Account Value

Account Value

Paid During

ESG International Stock ETF

9/18/2018

2/28/2019

Period

Based on Actual Fund Return

$1,000.00

$976.84

$0.84

Based on Hypothetical 5% Yearly Return

1,000.00

1,021.48

0.86

 

The calculations are based on expenses incurred in the period from the fund’s September 18, 2018, inception through February 28, 2019. The fund’s annualized expense ratio for that period is 0.19%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period from inception through February 28, 2019, multiplied by the number of days in that period, then divided by the number of days in the most recent 12-month period (164/365).

 

2

 

ESG International Stock ETF

 

 

Sector Diversification

As of February 28, 2019

 

Basic Materials

5.8%

Consumer Goods

14.3

Consumer Services

9.8

Financials

32.3

Health Care

9.7

Industrials

11.1

Oil & Gas

1.8

Technology

9.3

Telecommunications

4.2

Utilities

1.7

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. Sector categories are based on the Industry Classification Benchmark (“ICB”), except for the “Other” category (if applicable), which includes securities that have not been provided an ICB classification as of the effective reporting period.

 

3

 

ESG International Stock ETF

 

 

 

Financial Statements (unaudited)

 

 

 

Statement of Net Assets

As of February 28, 2019

 

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov.

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

Common Stocks (96.7%)1

 

 

Australia (5.1%)

 

 

 

Commonwealth Bank of Australia

11,970

628

 

CSL Ltd.

3,278

449

 

Westpac Banking Corp.

22,853

437

 

Australia & New Zealand Banking Group Ltd.

19,363

385

 

National Australia Bank Ltd.

17,031

304

 

Macquarie Group Ltd.

1,960

179

 

Transurban Group

17,869

158

 

Newcrest Mining Ltd.

7,606

131

 

Goodman Group

13,395

122

 

Insurance Australia Group Ltd.

21,329

111

 

Brambles Ltd.

12,903

108

 

QBE Insurance Group Ltd.

12,049

106

 

ASX Ltd.

2,130

105

 

Dexus

12,103

103

*

Afterpay Touch Group Ltd.

7,692

100

 

Fortescue Metals Group Ltd.

22,141

95

 

Bendigo & Adelaide Bank Ltd.

13,256

93

 

Suncorp Group Ltd.

9,556

92

 

Amcor Ltd.

8,380

89

 

Sonic Healthcare Ltd.

5,062

87

 

Scentre Group

30,467

84

 

GPT Group

19,147

79

 

Mirvac Group

41,395

76

 

Orica Ltd.

5,806

73

 

Telstra Corp. Ltd.

31,615

70

 

Medibank Pvt Ltd.

34,327

69

 

APA Group

9,214

65

 

Stockland

26,012

65

 

SEEK Ltd.

4,904

64

 

Ramsay Health Care Ltd.

1,369

63

 

Caltex Australia Ltd.

2,987

61

 

James Hardie Industries plc

4,694

59

 

Sydney Airport

11,401

58

 

BlueScope Steel Ltd.

6,089

58

 

Lendlease Group

6,327

58

 

Vicinity Centres

32,374

57

 

Alumina Ltd.

31,063

56

 

Incitec Pivot Ltd.

22,433

54

 

AMP Ltd.

30,474

51

 

Boral Ltd.

11,447

40

 

Cochlear Ltd.

326

39

 

Challenger Ltd.

6,643

38

 

Computershare Ltd.

2,859

35

 

Downer EDI Ltd.

5,610

30

 

Bank of Queensland Ltd.

4,527

29

 

Orora Ltd.

9,680

22

 

Link Administration Holdings Ltd.

3,970

21

 

Northern Star Resources Ltd.

2,524

17

 

Atlas Arteria Ltd.

3,202

16

 

REA Group Ltd.

272

16

*

Xero Ltd.

456

15

 

Ansell Ltd.

811

14

 

Magellan Financial Group Ltd.

556

14

 

AusNet Services

10,494

13

 

nib holdings Ltd.

3,070

13

 

Qube Holdings Ltd.

6,338

12

 

Healthscope Ltd.

6,901

12

 

Iluka Resources Ltd.

1,862

12

 

Qantas Airways Ltd.

2,959

12

 

Charter Hall Retail REIT

3,628

12

 

InvoCare Ltd.

1,072

11

 

carsales.com Ltd.

1,207

11

 

BWP Trust

3,891

10

 

Altium Ltd.

423

10

 

Evolution Mining Ltd.

3,586

9

 

Metcash Ltd.

4,742

9

*

Healius Ltd.

4,179

8

 

Appen Ltd.

497

8

 

Flight Centre Travel Group Ltd.

241

8

 

Domino’s Pizza Enterprises Ltd.

255

7

 

Navitas Ltd.

1,531

6

 

TPG Telecom Ltd.

1,272

6

 

4

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

*

Saracen Mineral Holdings Ltd.

3,052

6

 

G8 Education Ltd.

2,409

5

*

Pilbara Minerals Ltd.

9,709

5

 

WiseTech Global Ltd.

360

5

2

MYOB Group Ltd.

1,984

5

 

Charter Hall Group

747

5

 

Steadfast Group Ltd.

1,842

4

 

DuluxGroup Ltd.

786

4

 

Premier Investments Ltd.

323

4

 

GrainCorp Ltd. Class A

540

4

 

Shopping Centres Australasia Property Group

2,172

4

*

Lynas Corp. Ltd.

2,705

3

 

OZ Minerals Ltd.

453

3

 

Cleanaway Waste Management Ltd.

1,948

3

 

Regis Resources Ltd.

786

3

 

Perpetual Ltd.

98

3

 

IOOF Holdings Ltd.

595

3

*

NEXTDC Ltd.

606

3

 

JB Hi-Fi Ltd.

174

3

 

Breville Group Ltd.

239

3

 

St. Barbara Ltd.

837

3

*

Vocus Group Ltd.

996

3

 

Independence Group NL

746

3

 

Pendal Group Ltd.

399

2

 

Adelaide Brighton Ltd.

713

2

 

Harvey Norman Holdings Ltd.

917

2

 

Webjet Ltd.

205

2

 

CSR Ltd.

934

2

 

IRESS Ltd.

254

2

 

Mineral Resources Ltd.

199

2

 

Nine Entertainment Co. Holdings Ltd.

1,628

2

 

Nufarm Ltd.

511

2

 

Sims Metal Management Ltd.

234

2

 

Costa Group Holdings Ltd.

463

2

 

Blackmores Ltd.

23

1

*

Mayne Pharma Group Ltd.

2,482

1

 

 

 

5,748

Austria (0.3%)

 

 

 

Erste Group Bank AG

3,511

132

 

Raiffeisen Bank International AG

1,746

45

 

ANDRITZ AG

852

43

*

IMMOFINANZ AG

788

20

 

Wienerberger AG

721

16

 

Verbund AG

311

15

 

CA Immobilien Anlagen AG

383

13

 

Vienna Insurance Group AG Wiener Versicherung Gruppe

96

2

 

Oesterreichische Post AG

56

2

*,2

BAWAG Group AG

49

2

 

UNIQA Insurance Group AG

218

2

 

S IMMO AG

107

2

 

Telekom Austria AG Class A

256

2

 

Lenzing AG

18

2

 

 

 

298

Belgium (0.6%)

 

 

 

KBC Group NV

2,100

155

 

UCB SA

1,303

109

 

Ackermans & van Haaren NV

634

100

 

Ageas

1,626

80

 

Solvay SA Class A

713

80

 

Proximus SADP

930

24

 

Melexis NV

300

20

 

KBC Ancora

313

15

 

Elia System Operator SA/NV

161

11

 

Colruyt SA

151

11

*

Tessenderlo Chemie NV (Voting Shares)

292

10

 

Telenet Group Holding NV

195

9

 

Cofinimmo SA

61

8

 

Ontex Group NV

367

8

 

Bekaert SA

209

6

 

Gimv NV

68

4

 

Aedifica SA

41

4

 

Befimmo SA

59

3

 

Barco NV

17

3

 

bpost SA

149

1

 

 

 

661

Brazil (1.6%)

 

 

 

Itau Unibanco Holding SA Preference Shares

33,300

312

 

Banco Bradesco SA

26,100

268

 

Banco Bradesco SA Preference Shares

18,600

214

 

B3 SA - Brasil Bolsa Balcao

18,900

165

 

Banco do Brasil SA

9,500

128

 

Lojas Renner SA

9,800

113

 

BB Seguridade Participacoes SA

10,200

74

 

Telefonica Brasil SA Preference Shares

5,100

63

 

Suzano Papel e Celulose SA

4,200

53

 

Kroton Educacional SA

16,300

48

 

Klabin SA

7,900

38

 

Raia Drogasil SA

1,900

33

 

Localiza Rent a Car SA

2,875

26

 

Lojas Americanas SA

5,700

23

 

Cia Brasileira de Distribuicao Grupo Pao de Acucar Preference Shares

900

22

 

CCR SA

5,000

19

 

Banco Santander Brasil SA

1,500

18

 

Hypera SA

2,100

15

*

BRF SA

2,700

15

 

5

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Transmissora Alianca de Energia Eletrica SA

1,800

12

 

Cia de Saneamento Basico do Estado de Sao Paulo

1,100

11

 

BR Malls Participacoes SA

3,000

11

 

Cia Energetica de Minas Gerais

2,200

10

 

EDP - Energias do Brasil SA

2,100

10

 

Magazine Luiza SA

200

9

 

Cyrela Brazil Realty SA Empreendimentos e Participacoes

2,000

9

 

Braskem SA Preference Shares

600

9

 

TIM Participacoes SA

2,600

8

 

Fleury SA

1,500

8

 

CVC Brasil Operadora e Agencia de Viagens SA

500

8

 

TOTVS SA

800

8

 

Bradespar SA Preference Shares

800

6

 

Lojas Americanas SA Preference Shares

1,100

6

 

Cia Energetica de Sao Paulo Preference Shares

900

6

 

Engie Brasil Energia SA

500

5

 

Atacadao Distribuicao Comercio e Industria Ltda

1,000

5

 

M Dias Branco SA

400

5

 

Metalurgica Gerdau SA Preference Shares Class A

2,600

5

 

Linx SA

600

5

 

Natura Cosmeticos SA

300

4

 

Cia Siderurgica Nacional SA

1,100

4

 

Sul America SA

400

3

 

Porto Seguro SA

200

3

 

 

 

1,817

Canada (7.7%)

 

 

 

Toronto-Dominion Bank

10,660

611

 

Royal Bank of Canada

7,516

587

 

Enbridge Inc.

12,922

478

 

Canadian National Railway Co. (Toronto Shares)

4,864

417

 

Bank of Nova Scotia

7,026

391

 

TransCanada Corp.

6,200

277

 

Nutrien Ltd.

4,490

244

 

Bank of Montreal

3,086

241

 

Manulife Financial Corp.

13,458

227

 

Canadian Pacific Railway Ltd.

996

206

 

Alimentation Couche-Tard Inc. Class B

3,166

178

 

Canadian Imperial Bank of Commerce

2,040

173

 

Waste Connections Inc.

1,944

162

 

Sun Life Financial Inc.

3,850

146

 

Pembina Pipeline Corp.

3,956

145

 

National Bank of Canada

3,038

143

 

Wheaton Precious Metals Corp.

6,122

133

 

Magna International Inc.

2,506

132

 

Rogers Communications Inc. Class B

2,392

132

 

H&R REIT

7,656

132

 

Fortis Inc.

3,526

127

*

CGI Inc.

1,782

119

 

Fairfax Financial Holdings Ltd.

240

119

 

Intact Financial Corp.

1,396

117

 

Algonquin Power & Utilities Corp.

9,178

102

 

Agnico Eagle Mines Ltd.

2,356

100

 

Goldcorp Inc.

9,462

100

 

Open Text Corp.

2,630

100

 

RioCan REIT

5,160

99

 

Shaw Communications Inc. Class B

4,742

98

*

Thomson Reuters Corp.

1,734

94

 

iA Financial Corp. Inc.

2,408

92

 

Inter Pipeline Ltd.

5,554

89

*

BlackBerry Ltd.

9,880

86

 

Saputo Inc.

2,628

86

 

Loblaw Cos. Ltd.

1,666

83

 

CI Financial Corp.

5,600

79

 

Metro Inc.

2,016

76

 

Finning International Inc.

4,002

75

 

CCL Industries Inc. Class B

1,826

75

 

First Quantum Minerals Ltd.

6,492

74

 

BCE Inc.

1,616

72

 

Gildan Activewear Inc.

2,002

72

*

Kinross Gold Corp.

21,392

71

 

Toromont Industries Ltd.

1,280

67

 

Canadian Apartment Properties REIT

1,736

66

2

Hydro One Ltd.

4,094

64

 

Ritchie Bros Auctioneers Inc.

1,716

64

 

TELUS Corp.

1,610

58

 

Methanex Corp.

1,016

57

 

Chartwell Retirement Residences

4,727

54

*

Pretium Resources Inc.

6,168

50

 

TMX Group Ltd.

784

49

 

Power Financial Corp.

1,948

43

 

CAE Inc.

1,962

41

*

Bombardier Inc. Class B

18,510

39

 

Canadian Tire Corp. Ltd. Class A

344

38

 

West Fraser Timber Co. Ltd.

756

37

 

Kirkland Lake Gold Ltd.

1,016

37

 

Empire Co. Ltd.

1,114

26

 

Great-West Lifeco Inc.

916

21

 

George Weston Ltd.

250

18

 

6

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Canadian Utilities Ltd. Class A

660

18

*

Descartes Systems Group Inc.

500

17

 

Granite REIT

360

17

 

Choice Properties REIT

1,618

17

*

Air Canada Class B

600

15

 

Atco Ltd.

428

14

 

Colliers International Group Inc.

200

14

 

Lundin Mining Corp.

2,600

13

*

Kinaxis Inc.

200

13

 

Hudbay Minerals Inc.

1,800

12

*

Ivanhoe Mines Ltd.

4,600

12

 

ECN Capital Corp.

3,630

11

 

Yamana Gold Inc.

4,200

11

 

Winpak Ltd.

300

10

 

Gibson Energy Inc.

600

10

*

Canada Goose Holdings Inc.

167

10

 

Pan American Silver Corp.

700

9

 

Boyd Group Income Fund

100

9

 

FirstService Corp.

100

9

 

Element Fleet Management Corp.

1,500

9

*

SSR Mining Inc.

600

8

*

Endeavour Mining Corp.

500

8

 

Enerflex Ltd.

500

8

 

BRP Inc.

236

7

*

Home Capital Group Inc. Class B

500

7

*

NovaGold Resources Inc.

1,500

6

 

Premium Brands Holdings Corp.

100

6

 

Quebecor Inc. Class B

200

5

 

Canadian Western Bank

200

5

 

Cominar REIT

500

5

 

Osisko Gold Royalties Ltd.

400

4

 

Innergex Renewable Energy Inc.

400

4

 

Maple Leaf Foods Inc.

200

4

 

Russel Metals Inc.

200

4

 

Emera Inc.

100

4

 

Genworth MI Canada Inc.

100

3

 

First Capital Realty Inc.

200

3

 

OceanaGold Corp.

1,000

3

 

Boardwalk REIT

100

3

 

Dream Global REIT

300

3

 

Laurentian Bank of Canada

100

3

*

Detour Gold Corp.

300

3

 

Alamos Gold Inc. Class A

600

3

*

Celestica Inc.

300

3

 

NFI Group Inc.

100

3

 

IGM Financial Inc.

100

3

 

Norbord Inc.

100

3

*

IAMGOLD Corp.

700

2

 

CES Energy Solutions Corp.

900

2

 

Cineplex Inc.

100

2

 

Transcontinental Inc. Class A

100

1

*

Canfor Corp.

100

1

 

 

 

8,568

Chile (0.3%)

 

 

 

Enel Americas SA

452,241

79

 

Banco Santander Chile

745,830

59

 

Sociedad Quimica y Minera de Chile SA Preference Shares Class B

1,343

56

 

Banco de Chile

277,021

44

 

SACI Falabella

5,069

39

 

Empresas CMPC SA

8,424

32

 

Banco de Credito e Inversiones SA

244

17

 

Cencosud SA

7,738

14

 

Itau CorpBanca

424,764

4

 

Parque Arauco SA

1,293

4

 

Enel Chile SA

33,005

3

 

Colbun SA

13,257

3

 

Aguas Andinas SA Class A

4,775

3

 

 

 

357

China (4.8%)

 

 

*

Alibaba Group Holding Ltd. ADR

8,498

1,555

 

Industrial & Commercial Bank of China Ltd.

542,000

418

 

Ping An Insurance Group Co. of China Ltd.

35,000

370

*

Baidu Inc. ADR

2,148

349

 

Bank of China Ltd.

542,000

253

 

China Overseas Land & Investment Ltd.

40,000

147

 

China Merchants Bank Co. Ltd.

31,000

142

*

TAL Education Group ADR

3,172

113

 

Geely Automobile Holdings Ltd.

56,000

105

 

China Pacific Insurance Group Co. Ltd.

25,400

96

 

PICC Property & Casualty Co. Ltd.

74,000

89

 

Lenovo Group Ltd.

98,000

88

 

China Unicom Hong Kong Ltd.

72,000

85

 

Hengan International Group Co. Ltd.

10,500

85

 

New China Life Insurance Co. Ltd.

17,100

83

 

China Telecom Corp. Ltd.

152,000

82

 

Bank of Communications Co. Ltd.

97,000

81

 

Guangdong Investment Ltd.

38,000

73

 

7

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

China Conch Venture Holdings Ltd.

21,000

70

 

Sinopharm Group Co. Ltd.

15,600

69

*

Autohome Inc. ADR

712

67

 

China Vanke Co. Ltd.

17,300

66

*

Momo Inc. ADR

1,929

64

 

BYD Co. Ltd.

10,000

64

 

China Evergrande Group

20,000

62

 

Sino Biopharmaceutical Ltd.

67,000

58

 

China Taiping Insurance Holdings Co. Ltd.

18,200

56

 

Shenzhou International Group Holdings Ltd.

3,800

47

 

Longfor Group Holdings Ltd.

12,500

37

 

China National Building Material Co. Ltd.

28,000

22

2

People’s Insurance Co. Group of China Ltd.

48,000

22

 

Shimao Property Holdings Ltd.

9,000

21

*

China Beidahuang Industry Group Holdings Ltd.

1,088,000

21

 

Zhuzhou CRRC Times Electric Co. Ltd.

3,400

19

 

Fullshare Holdings Ltd.

92,500

19

 

Shanghai Jinjiang International Travel Co. Ltd. Class B

9,300

18

2

China Resources Pharmaceutical Group Ltd.

13,000

17

 

China Cinda Asset Management Co. Ltd.

58,000

17

 

Haitong Securities Co. Ltd.

12,000

16

 

Beijing Enterprises Water Group Ltd.

26,000

16

 

Huaneng Power International Inc.

22,000

14

 

Far East Horizon Ltd.

12,000

13

*

Vipshop Holdings Ltd. ADR

1,700

12

2

China Huarong Asset Management Co. Ltd.

51,000

12

 

Logan Property Holdings Co. Ltd.

8,000

11

 

Chinasoft International Ltd.

18,000

11

 

China Resources Cement Holdings Ltd.

10,000

11

2

China Merchants Securities Co. Ltd.

7,400

11

 

China Communications Services Corp. Ltd.

10,000

10

 

Kingdee International Software Group Co. Ltd.

9,000

10

*

GOME Retail Holdings Ltd.

107,000

10

 

Enerchina Holdings Ltd.

99,000

9

 

China Resources Gas Group Ltd.

2,000

9

 

Zhaojin Mining Industry Co. Ltd.

6,500

7

*

GCL-Poly Energy Holdings Ltd.

79,000

7

 

Yihai International Holding Ltd.

2,000

6

 

China Water Affairs Group Ltd.

6,000

6

 

Great Wall Motor Co. Ltd.

6,500

5

 

GF Securities Co. Ltd.

2,800

5

*,2

Meitu Inc.

11,000

4

 

Air China Ltd.

4,000

4

 

COSCO SHIPPING Ports Ltd.

4,000

4

 

Sino-Ocean Group Holding Ltd.

9,000

4

 

China Reinsurance Group Corp.

16,000

4

 

Shanghai Fosun Pharmaceutical Group Co. Ltd.

1,000

4

*

Li Ning Co. Ltd.

2,500

4

 

Shandong Weigao Group Medical Polymer Co. Ltd.

4,000

3

2

3SBio Inc.

2,000

3

*

AVIC International Holding HK Ltd.

104,000

3

 

Shanghai Pharmaceuticals Holding Co. Ltd.

1,300

3

2

Fuyao Glass Industry Group Co. Ltd.

800

3

 

China Oriental Group Co. Ltd.

4,000

3

 

China Traditional Chinese Medicine Holdings Co. Ltd.

4,000

3

2

Legend Holdings Corp.

900

3

 

Agile Group Holdings Ltd.

2,000

3

*

BEST Inc. ADR

400

2

 

Huaneng Renewables Corp. Ltd.

8,000

2

 

Hilong Holding Ltd.

20,000

2

2

Sinopec Engineering Group Co. Ltd.

2,500

2

2

Luye Pharma Group Ltd.

3,000

2

 

China Medical System Holdings Ltd.

2,000

2

 

Nine Dragons Paper Holdings Ltd.

2,000

2

 

8

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

2

Dali Foods Group Co. Ltd.

3,000

2

 

SSY Group Ltd.

2,000

2

*

China First Capital Group Ltd.

4,000

2

 

 

 

5,336

Colombia (0.1%)

 

 

 

Bancolombia SA Preference Shares

7,111

86

 

Interconexion Electrica SA ESP

2,220

10

 

Almacenes Exito SA

2,040

10

 

Bancolombia SA

505

6

 

Banco Davivienda SA Preference Shares

258

3

 

Grupo Aval Acciones y Valores Preference Shares

6,384

2

 

 

 

117

Czech Republic (0.1%)

 

 

 

Komercni banka as

1,138

48

*

PFNonwovens SA

312

10

 

 

 

58

Denmark (1.3%)

 

 

 

Novo Nordisk A/S Class B

11,663

572

 

Vestas Wind Systems A/S

1,647

137

 

DSV A/S

1,240

103

*

Genmab A/S

539

93

 

Coloplast A/S Class B

849

85

 

Chr Hansen Holding A/S

811

83

 

Novozymes A/S

1,593

72

 

Schouw & Co. A/S

781

62

 

GN Store Nord A/S

1,240

60

 

Pandora A/S

939

49

 

ISS A/S

1,148

36

*

William Demant Holding A/S

839

25

 

SimCorp A/S

229

21

 

Tryg A/S

673

18

 

Ambu A/S Class B

720

17

 

Jyske Bank A/S

423

17

*

ALK-Abello A/S

50

8

 

H Lundbeck A/S

141

6

 

Topdanmark A/S

62

3

 

Sydbank A/S

115

3

 

Dfds A/S

50

2

*

Nilfisk Holding A/S

49

2

 

 

 

1,474

Egypt (0.1%)

 

 

 

Commercial International Bank Egypt SAE

15,140

61

 

Oriental Weavers

4,369

3

*

Palm Hills Developments SAE

16,134

3

*

Pioneers Holding for Financial Investments SAE

5,824

2

 

 

 

69

Finland (1.1%)

 

 

 

Nokia Oyj

52,918

320

 

Kone Oyj Class B

2,503

122

 

Sampo Oyj Class A

2,297

111

*

Nordea Bank Abp (XSTO)

10,756

97

*

Nordea Bank Abp (XHEL)

8,724

79

 

Metsa Board Oyj

11,287

78

 

Metso Oyj

1,755

60

 

Kesko Oyj Class B

855

51

 

Elisa Oyj

1,198

50

 

Orion Oyj Class B

1,352

48

 

Nokian Renkaat Oyj

1,287

46

 

Wartsila OYJ Abp

2,794

45

 

Stora Enso Oyj

2,924

39

 

Amer Sports Oyj

775

35

 

Valmet Oyj

500

13

 

Huhtamaki Oyj

343

12

 

Tieto Oyj

279

8

 

YIT Oyj

1,180

7

 

Cargotec Oyj Class B

72

3

 

DNA Oyj

98

2

 

Outokumpu Oyj

382

2

 

 

 

1,228

France (5.6%)

 

 

 

Sanofi

7,370

615

 

L’Oreal SA

1,461

368

 

BNP Paribas SA

6,940

355

 

Air Liquide SA

2,302

287

 

Danone SA

3,731

282

 

Kering SA

514

280

 

AXA SA

9,163

232

 

Vivendi SA

6,774

198

 

Orange SA

11,749

180

 

EssilorLuxottica SA

1,471

178

 

Societe Generale SA

5,376

165

 

Cie Generale des Etablissements Michelin SCA

1,361

163

 

Legrand SA

2,296

151

 

Getlink SE

8,156

120

2

Euronext NV

1,887

115

 

Hermes International

168

106

 

Credit Agricole SA

8,302

106

 

Peugeot SA

4,122

105

 

Carrefour SA

4,987

102

 

STMicroelectronics NV

6,211

102

 

Publicis Groupe SA

1,823

101

 

Renault SA

1,367

94

 

TechnipFMC plc

4,125

91

 

Edenred

2,049

91

 

Teleperformance

509

91

 

Veolia Environnement SA

4,062

89

 

Arkema SA

837

84

 

9

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Sodexo SA

766

84

 

Orpea

713

84

 

Ipsen SA

563

78

 

Lagardere SCA

2,889

75

 

Rexel SA

5,331

66

 

Covivio

638

65

 

Valeo SA

1,891

59

 

Sopra Steria Group

472

55

 

Gecina SA

355

53

 

Ingenico Group SA

757

51

 

Faurecia SA

1,058

50

 

Eurofins Scientific SE

107

45

 

Rubis SCA

752

45

 

Suez

3,456

44

 

Wendel SA

331

42

 

Aeroports de Paris

214

42

 

Eutelsat Communications SA

1,869

37

 

Klepierre SA

1,046

37

 

SES SA Class A

1,798

36

 

Natixis SA

6,476

36

 

BioMerieux

429

35

2

Amundi SA

510

34

 

CNP Assurances

1,194

28

 

SCOR SE

612

28

 

Eurazeo SE

308

23

*

Air France-KLM

1,697

21

 

SEB SA

101

17

 

Imerys SA

236

13

 

Iliad SA

104

11

 

Casino Guichard Perrachon SA

197

10

 

IPSOS

389

10

 

Nexity SA

210

10

 

ICADE

118

10

 

JCDecaux SA

304

9

 

Societe BIC SA

98

9

 

Neopost SA

340

9

 

Metropole Television SA

487

9

2

Europcar Mobility Group

786

7

 

Coface SA

676

6

*

Rothschild & Co.

174

6

 

Sartorius Stedim Biotech

45

5

 

Altarea SCA

21

4

*

Fnac Darty SA

36

3

 

Cie Plastic Omnium SA

96

3

 

Korian SA

70

3

 

Gaztransport Et Technigaz SA

29

3

2

Maisons du Monde SA

97

3

*

SOITEC

29

2

2

Elior Group SA

150

2

*

CGG SA

1,007

2

*

DBV Technologies SA

82

1

*

Bourbon Corp.

267

1

 

 

 

6,272

Germany (6.1%)

 

 

 

SAP SE

6,283

672

 

Allianz SE

2,456

547

 

Bayer AG

6,702

535

 

Daimler AG

5,603

335

 

adidas AG

1,365

331

 

Wirecard AG

1,935

265

 

Infineon Technologies AG

9,909

218

 

Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen

923

217

 

Deutsche Post AG

6,966

216

 

Fresenius SE & Co. KGaA

2,925

164

 

Vonovia SE

3,326

161

 

Deutsche Boerse AG

1,215

153

 

Deutsche Bank AG

14,473

134

 

Henkel AG & Co. KGaA Preference Shares

1,319

132

 

Bayerische Motoren Werke AG Preference Shares

1,760

130

 

Continental AG

786

129

 

Fresenius Medical Care AG & Co. KGaA

1,610

126

 

Bayerische Motoren Werke AG

1,373

116

 

HeidelbergCement AG

1,530

113

 

Merck KGaA

1,013

105

 

MTU Aero Engines AG

448

96

 

HUGO BOSS AG

1,280

95

2

Scout24 AG

1,734

91

 

Symrise AG Class A

1,006

89

 

Brenntag AG

1,733

86

2

Covestro AG

1,507

86

*

Commerzbank AG

9,619

79

 

LEG Immobilien AG

703

78

 

Beiersdorf AG

806

75

 

Hannover Rueck SE

497

74

 

K&S AG

3,681

70

*

MorphoSys AG

668

69

*

Aroundtown SA

6,579

55

 

Sartorius AG Preference Shares

340

54

*,2

Zalando SE

1,447

53

 

KION Group AG

848

48

 

Puma SE

80

45

 

GEA Group AG

1,870

45

 

Evonik Industries AG

1,580

44

 

OSRAM Licht AG

1,003

43

 

Fuchs Petrolub SE Preference Shares

874

39

 

GRENKE AG

379

39

*

QIAGEN NV

894

34

*,2

Delivery Hero SE

839

33

 

S&T AG

1,312

32

 

10

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

LANXESS AG

400

22

 

Henkel AG & Co. KGaA

227

21

 

Deutsche Lufthansa AG

815

21

 

ProSiebenSat.1 Media SE

1,061

19

 

Fraport AG Frankfurt Airport Services Worldwide

239

19

 

TAG Immobilien AG

718

17

 

DIC Asset AG

1,490

17

2

Innogy SE

329

15

 

Freenet AG

682

14

 

HOCHTIEF AG

89

14

 

Aareal Bank AG

419

14

 

Grand City Properties SA

561

13

 

Hella GmbH & Co. KGaA

287

13

2

Deutsche Pfandbriefbank AG

1,055

13

 

TLG Immobilien AG

428

12

 

Bechtle AG

139

12

 

METRO AG

704

12

 

Axel Springer SE

200

11

 

alstria office REIT-AG

747

11

 

RTL Group SA

198

11

 

Rational AG

17

11

 

Siltronic AG

114

11

*

Evotec AG

469

11

 

Nemetschek SE

70

10

 

Aurubis AG

179

10

 

Gerresheimer AG

127

10

*

Dialog Semiconductor plc

295

9

 

Telefonica Deutschland Holding AG

2,401

8

 

FUCHS PETROLUB SE

178

7

2

Befesa SA

155

7

*

Hypoport AG

31

6

 

Suedzucker AG

389

6

 

MAN SE

51

5

*

zooplus AG

35

5

 

CTS Eventim AG & Co. KGaA

83

4

 

Software AG

90

3

 

Jungheinrich AG Preference Shares

91

3

 

Stroeer SE & Co. KGaA

47

3

 

Duerr AG

66

3

*

Jenoptik AG

74

3

2

ADO Properties SA

46

3

 

Talanx AG

66

3

 

Norma Group SE

46

2

 

CompuGroup Medical SE

37

2

 

Salzgitter AG

68

2

 

CANCOM SE

49

2

 

Wacker Chemie AG

19

2

 

Krones AG

20

2

*

CECONOMY AG

292

2

*

AIXTRON SE

183

2

 

Leoni AG

59

2

 

 

 

6,811

Greece (0.0%)

 

 

 

Hellenic Telecommunications Organization SA

718

9

*

Alpha Bank AE

6,213

9

 

Titan Cement Co. SA

186

4

 

JUMBO SA

214

4

 

National Bank of Greece SA

1,347

2

*

Eurobank Ergasias SA

3,082

2

*

Piraeus Bank SA

1,100

2

 

 

 

32

Hong Kong (2.6%)

 

 

 

AIA Group Ltd.

79,200

790

 

Hong Kong Exchanges & Clearing Ltd.

8,700

300

 

CK Asset Holdings Ltd.

21,500

178

 

Link REIT

13,000

147

 

Wheelock & Co. Ltd.

20,000

136

 

New World Development Co. Ltd.

83,000

133

 

Hang Seng Bank Ltd.

4,900

121

 

BOC Hong Kong Holdings Ltd.

26,000

109

 

China Mengniu Dairy Co. Ltd.

35,000

108

 

Swire Pacific Ltd. Class A

7,500

89

 

Bank of East Asia Ltd.

25,600

89

 

Sino Land Co. Ltd.

44,000

82

 

CK Infrastructure Holdings Ltd.

9,000

75

 

Hang Lung Properties Ltd.

31,000

73

 

AAC Technologies Holdings Inc.

10,000

59

 

MTR Corp. Ltd.

10,000

57

 

VTech Holdings Ltd.

4,000

42

2

Samsonite International SA

12,000

36

 

Wharf Holdings Ltd.

11,000

34

 

Swire Properties Ltd.

8,200

33

 

ASM Pacific Technology Ltd.

2,200

23

 

Yip’s Chemical Holdings Ltd.

64,000

20

 

Yue Yuen Industrial Holdings Ltd.

5,500

19

 

Henderson Land Development Co. Ltd.

3,000

17

 

Hysan Development Co. Ltd.

3,000

16

 

Kerry Properties Ltd.

3,000

13

 

PCCW Ltd.

20,000

12

 

Hongkong & Shanghai Hotels Ltd.

7,500

11

 

HKBN Ltd.

6,500

10

 

Luk Fook Holdings International Ltd.

3,000

10

 

NWS Holdings Ltd.

4,000

10

 

Sun Art Retail Group Ltd.

9,500

10

 

11

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

SITC International Holdings Co. Ltd.

9,000

9

 

Vitasoy International Holdings Ltd.

2,000

9

 

Pacific Basin Shipping Ltd.

37,000

8

 

Minth Group Ltd.

2,000

8

 

Hopewell Holdings Ltd.

1,500

7

 

Hang Lung Group Ltd.

2,000

6

 

PRADA SPA

1,800

6

 

IGG Inc.

4,000

6

 

L’Occitane International SA

3,000

6

 

Great Eagle Holdings Ltd.

1,000

5

 

Fortune REIT

4,000

5

2

BOC Aviation Ltd.

400

3

 

Champion REIT

4,000

3

 

Li & Fung Ltd.

8,000

1

 

 

 

2,944

Hungary (0.1%)

 

 

 

OTP Bank Nyrt

2,042

86

 

Richter Gedeon Nyrt

1,016

20

 

 

 

106

Indonesia (0.4%)

 

 

 

Bank Rakyat Indonesia Persero Tbk PT

442,700

121

 

Telekomunikasi Indonesia Persero Tbk PT

393,700

108

 

Bank Mandiri Persero Tbk PT

173,200

88

 

Unilever Indonesia Tbk PT

12,700

44

 

Bank Negara Indonesia Persero Tbk PT

51,200

32

 

Ace Hardware Indonesia Tbk PT

65,600

8

 

Pakuwon Jati Tbk PT

147,600

6

 

Ciputra Development Tbk PT

90,300

6

 

Indofood Sukses Makmur Tbk PT

9,500

5

 

Kalbe Farma Tbk PT

35,900

4

 

Indofood CBP Sukses Makmur Tbk PT

4,500

3

*

Pabrik Kertas Tjiwi Kimia Tbk PT

2,200

2

 

 

 

427

Ireland (0.3%)

 

 

 

Kerry Group plc Class A

1,217

125

 

Bank of Ireland Group plc

9,856

64

 

AIB Group plc

7,747

36

 

Kingspan Group plc

698

33

 

Glanbia plc

835

17

 

Irish Continental Group plc

1,849

10

 

Green REIT plc

2,166

4

 

Dalata Hotel Group plc

423

3

 

Hibernia REIT plc

1,810

3

*

Cairn Homes plc

1,278

2

 

 

 

297

Israel (0.4%)

 

 

*

Teva Pharmaceutical Industries Ltd.

6,874

116

 

Israel Discount Bank Ltd. Class A

21,037

75

*

Nice Ltd.

546

64

 

Bank Leumi Le-Israel BM

9,420

62

 

Bank Hapoalim BM

7,684

53

 

Israel Chemicals Ltd.

5,771

32

 

Gazit-Globe Ltd.

1,409

11

 

Mizrahi Tefahot Bank Ltd.

500

10

*

Tower Semiconductor Ltd.

466

8

 

Bezeq The Israeli Telecommunication Corp. Ltd.

9,146

8

 

Harel Insurance Investments & Financial Services Ltd.

1,042

7

 

Reit 1 Ltd.

1,249

5

 

First International Bank Of Israel Ltd.

157

4

*

Evogene Ltd.

1,286

3

 

Azrieli Group Ltd.

49

3

 

 

 

461

Italy (1.7%)

 

 

 

Intesa Sanpaolo SPA (Registered)

109,589

270

 

UniCredit SPA

16,885

229

 

CNH Industrial NV

15,369

166

 

Ferrari NV

951

122

*

Fiat Chrysler Automobiles NV

8,155

121

 

Assicurazioni Generali SPA

5,458

97

 

Terna Rete Elettrica Nazionale SPA

13,401

83

 

Snam SPA

15,563

77

 

Mediobanca Banca di Credito Finanziario SPA

7,354

74

 

EXOR NV

1,113

68

 

Moncler SPA

1,620

62

*

Telecom Italia SPA (Registered)

100,934

61

 

FinecoBank Banca Fineco SPA

4,493

56

 

Tenaris SA

3,898

52

2

Poste Italiane SPA

5,597

50

*

Banco BPM SPA

19,169

46

 

Unione di Banche Italiane SPA

13,928

41

 

Telecom Italia SPA (Bearer)

53,941

29

 

12

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

*,2

Pirelli & C SPA

4,326

29

 

Italgas SPA

2,736

17

 

Hera SPA

4,463

15

 

Recordati SPA

384

14

 

A2A SPA

7,749

14

 

Interpump Group SPA

421

14

 

Unipol Gruppo SPA

2,940

13

 

Cerved Group SPA

1,213

11

 

ERG SPA

539

11

 

Brembo SPA

884

11

*

Saipem SPA

1,691

9

 

MARR SPA

335

8

2

Technogym SPA

590

8

 

De’ Longhi SPA

287

8

 

Societa Iniziative Autostradali e Servizi SPA

396

7

 

Salvatore Ferragamo SPA

294

6

 

Societa Cattolica di Assicurazioni SC

386

4

 

Buzzi Unicem SPA

265

3

*

Safilo Group SPA

3,854

3

2

Infrastrutture Wireless Italiane SPA

316

3

 

Azimut Holding SPA

180

3

 

Banca Generali SPA

101

3

 

Banca Mediolanum SPA

360

3

 

UnipolSai Assicurazioni SPA

948

2

 

BPER Banca

545

2

2

Enav SPA

447

2

 

Autogrill SPA

255

2

 

Banca Popolare di Sondrio SCPA

746

2

 

Iren SPA

854

2

 

Brunello Cucinelli SPA

54

2

 

Reply SPA

32

2

2

Anima Holding SPA

418

2

 

IMA Industria Macchine Automatiche SPA

27

2

 

 

 

1,941

Japan (18.2%)

 

 

 

Toyota Motor Corp.

16,500

997

 

SoftBank Group Corp.

6,400

594

 

Sony Corp.

9,100

437

 

Takeda Pharmaceutical Co. Ltd.

8,357

336

 

Kao Corp.

4,100

311

 

Recruit Holdings Co. Ltd.

11,000

308

 

Mitsubishi UFJ Financial Group Inc.

57,900

300

 

Murata Manufacturing Co. Ltd.

1,900

296

 

Honda Motor Co. Ltd.

10,400

294

 

KDDI Corp.

11,900

288

 

Sumitomo Mitsui Financial Group Inc.

7,700

274

 

Nidec Corp.

2,100

255

 

Tokyo Electron Ltd.

1,800

246

 

Tokio Marine Holdings Inc.

4,600

225

 

Mizuho Financial Group Inc.

141,100

222

 

East Japan Railway Co.

2,300

220

 

Astellas Pharma Inc.

14,100

219

 

Seven & i Holdings Co. Ltd.

4,800

211

 

Shin-Etsu Chemical Co. Ltd.

2,500

209

 

Oriental Land Co. Ltd.

1,900

209

 

Nippon Telegraph & Telephone Corp.

4,600

199

 

Dai-ichi Life Holdings Inc.

11,400

174

 

Eisai Co. Ltd.

2,100

174

 

Daiichi Sankyo Co. Ltd.

4,600

172

 

Sysmex Corp.

2,800

169

 

Otsuka Holdings Co. Ltd.

4,000

167

 

Shiseido Co. Ltd.

2,500

165

 

Secom Co. Ltd.

1,900

164

 

Canon Inc.

5,600

161

 

Mitsui Fudosan Co. Ltd.

6,700

159

 

Hoya Corp.

2,400

147

 

NTT DOCOMO Inc.

6,300

147

 

West Japan Railway Co.

1,900

143

 

Daiwa House Industry Co. Ltd.

4,600

142

 

Terumo Corp.

2,300

141

 

Shionogi & Co. Ltd.

2,200

141

 

Sumitomo Mitsui Trust Holdings Inc.

3,600

137

 

Mazda Motor Corp.

11,600

137

 

Chugai Pharmaceutical Co. Ltd.

2,000

136

 

Panasonic Corp.

14,600

135

 

Suzuki Motor Corp.

2,600

134

 

ORIX Corp.

9,000

130

 

Fujitsu Ltd.

1,900

128

 

MEIJI Holdings Co. Ltd.

1,600

127

 

Mitsubishi Estate Co. Ltd.

7,300

125

 

Aeon Co. Ltd.

5,900

124

 

Kyocera Corp.

2,200

122

 

Yakult Honsha Co. Ltd.

1,800

121

 

Kubota Corp.

8,900

120

 

Subaru Corp.

4,600

117

 

Kajima Corp.

7,800

116

 

Denso Corp.

2,600

112

 

Nintendo Co. Ltd.

400

110

 

FUJIFILM Holdings Corp.

2,400

108

 

Fuji Seal International Inc.

2,800

105

 

Nissin Foods Holdings Co. Ltd.

1,500

104

 

Nitto Denko Corp.

1,900

102

 

Alfresa Holdings Corp.

3,500

102

 

Aozora Bank Ltd.

3,500

101

 

Sekisui Chemical Co. Ltd.

6,400

101

 

NEC Corp.

3,000

100

 

13

 

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Toyota Industries Corp.

1,900

98

 

Chubu Electric Power Co. Inc.

6,200

98

 

Japan Exchange Group Inc.

5,500

97

 

Fast Retailing Co. Ltd.

200

94

 

Nagoya Railroad Co. Ltd.

3,300

91

 

Sumitomo Electric Industries Ltd.

6,500

91

 

Sompo Holdings Inc.

2,400

90

 

Pan Pacific International Holdings Corp.

1,500

90

 

Tobu Railway Co. Ltd.

3,200

89

 

Sekisui House Ltd.

5,900

89

 

Yamaha Corp.

1,800

89

 

Nippon Express Co. Ltd.

1,500

89

 

Haseko Corp.

6,900

86

 

Asahi Kasei Corp.

7,900

86

 

Nisshin Seifun Group Inc.

4,000

86

 

Kintetsu Group Holdings Co. Ltd.

1,900

86

 

Toray Industries Inc.

12,300

85

 

Shizuoka Bank Ltd.

10,700

85

 

Seiko Epson Corp.

5,700

84

 

Santen Pharmaceutical Co. Ltd.

5,400

84

 

Ono Pharmaceutical Co. Ltd.

4,100

84

 

Hisamitsu Pharmaceutical Co. Inc.

1,700

84

 

Daifuku Co. Ltd.

1,700

84

 

Dentsu Inc.

2,000

84

 

Dai Nippon Printing Co. Ltd.

3,600

83

 

Mitsui Chemicals Inc.

3,400

83

 

Mitsubishi Materials Corp.

3,000

82

 

Omron Corp.

1,900

82

 

Suzuken Co. Ltd.

1,500

82

 

Kuraray Co. Ltd.

6,100

82

 

Ajinomoto Co. Inc.

5,400

82

 

MS&AD Insurance Group Holdings Inc.

2,700

81

 

Bank of Kyoto Ltd.

1,800

81

 

Unicharm Corp.

2,500

80

 

Suntory Beverage & Food Ltd.

1,800

79

 

Nissan Motor Co. Ltd.

9,100

79

 

Keihan Holdings Co. Ltd.

1,900

79

 

Aisin Seiki Co. Ltd.

2,000

79

 

Ricoh Co. Ltd.

7,700

78

 

Brother Industries Ltd.

4,100

75

 

Mitsubishi Chemical Holdings Corp.

10,000

74

 

Pigeon Corp.

1,800

73

 

Isuzu Motors Ltd.

5,100

73

 

Nippon Paint Holdings Co. Ltd.

1,900

73

 

Keikyu Corp.

4,400

73

 

NH Foods Ltd.

2,000

73

 

Nomura Holdings Inc.

18,700

73

 

T&D Holdings Inc.

6,000

73

 

TOTO Ltd.

1,900

72

 

Fukuoka Financial Group Inc.

3,300

72

 

Resona Holdings Inc.

15,700

71

 

Showa Denko KK

1,900

71

 

Hamamatsu Photonics KK

2,000

71

 

Konami Holdings Corp.

1,700

70

 

Sumitomo Metal Mining Co. Ltd.

2,300

67

 

Yamaha Motor Co. Ltd.

3,300

67

 

Kyowa Hakko Kirin Co. Ltd.

3,500

67

 

Konica Minolta Inc.

6,800

66

 

Yaskawa Electric Corp.

2,300

66

 

Teijin Ltd.

3,900

65

 

Yamato Holdings Co. Ltd.

2,500

65

 

NSK Ltd.

7,000

65

 

M3 Inc.

3,900

65

 

Shimadzu Corp.

2,600

64

 

ANA Holdings Inc.

1,700

63

 

Rakuten Inc.

7,900

62

 

Japan Airlines Co. Ltd.

1,700

62

 

Daiwa Securities Group Inc.

12,200

62

 

Taiheiyo Cement Corp.

1,800

62

 

MINEBEA MITSUMI Inc.

3,800

61

 

Sumitomo Chemical Co. Ltd.

12,200

61

 

Chiba Bank Ltd.

9,800

60

 

Otsuka Corp.

1,600

58

 

Seibu Holdings Inc.

3,200

57

 

Marui Group Co. Ltd.

3,200

56

 

Mitsubishi Tanabe Pharma Corp.

3,900

56

 

Nikon Corp.

3,700

56

 

Yamada Denki Co. Ltd.

11,000

53

 

Japan Post Holdings Co. Ltd.

4,300

52

 

Coca-Cola Bottlers Japan Holdings Inc.

2,000

52

 

Tohoku Electric Power Co. Inc.

3,900

51

 

CyberAgent Inc.

1,600

50

 

Advantest Corp.

2,100

50

 

NTT Data Corp.

4,500

49

 

Sumitomo Realty & Development Co. Ltd.

1,300

49

 

Concordia Financial Group Ltd.

11,800

48

 

Lion Corp.

2,300

47

 

LIXIL Group Corp.

3,300

45

 

SBI Holdings Inc.

2,100

44

 

Casio Computer Co. Ltd.

3,200

44

 

NGK Spark Plug Co. Ltd.

1,900

41

 

Kobayashi Pharmaceutical Co. Ltd.

500

40

 

ZOZO Inc.

2,100

40

 

14

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Alps Alpine Co. Ltd.

2,000

39

 

TDK Corp.

500

39

 

J Front Retailing Co. Ltd.

3,400

38

 

Bandai Namco Holdings Inc.

800

34

 

Kurita Water Industries Ltd.

1,300

33

 

Tokyu Corp.

1,900

32

 

AGC Inc.

900

31

 

Daito Trust Construction Co. Ltd.

200

28

 

Yahoo Japan Corp.

9,900

27

 

Toyo Suisan Kaisha Ltd.

700

26

 

Stanley Electric Co. Ltd.

900

26

 

Showa Shell Sekiyu KK

1,700

26

 

Azbil Corp.

1,100

24

 

Ryohin Keikaku Co. Ltd.

100

24

 

FamilyMart UNY Holdings Co. Ltd.

800

23

 

Hulic Co. Ltd.

2,400

22

 

Sohgo Security Services Co. Ltd.

500

22

 

JSR Corp.

1,300

22

 

Odakyu Electric Railway Co. Ltd.

900

21

 

Oji Holdings Corp.

3,400

20

 

Kansai Paint Co. Ltd.

1,100

20

 

Rohm Co. Ltd.

300

19

 

COMSYS Holdings Corp.

700

19

 

Hikari Tsushin Inc.

100

18

 

Toho Co. Ltd.

500

18

 

Sumitomo Dainippon Pharma Co. Ltd.

700

17

 

THK Co. Ltd.

700

17

 

Autobacs Seven Co. Ltd.

1,000

17

 

Kose Corp.

100

16

 

Kyowa Exeo Corp.

600

16

 

JTEKT Corp.

1,300

16

 

Kewpie Corp.

700

16

 

Anritsu Corp.

800

16

 

Rohto Pharmaceutical Co. Ltd.

600

16

 

SUMCO Corp.

1,200

15

 

Nichirei Corp.

600

15

 

Kaken Pharmaceutical Co. Ltd.

300

14

 

Mitsui OSK Lines Ltd.

600

14

 

Tokyo Tatemono Co. Ltd.

1,200

14

 

Disco Corp.

100

14

 

Tokyu Fudosan Holdings Corp.

2,500

14

 

Miura Co. Ltd.

600

14

 

AEON Financial Service Co. Ltd.

700

14

 

Daicel Corp.

1,300

14

 

Hoshizaki Corp.

200

14

 

Nippon Electric Glass Co. Ltd.

500

14

 

Air Water Inc.

800

13

 

DIC Corp.

400

13

 

Nippon Shinyaku Co. Ltd.

200

13

 

Tokai Carbon Co. Ltd.

900

13

 

Duskin Co. Ltd.

500

12

 

Daiseki Co. Ltd.

500

12

 

Goldwin Inc.

100

12

 

House Foods Group Inc.

300

12

 

Kaneka Corp.

300

12

 

Mitsubishi UFJ Lease & Finance Co. Ltd.

2,300

12

 

MediPal Holdings Corp.

500

12

 

HIS Co. Ltd.

300

11

 

Takasago Thermal Engineering Co. Ltd.

700

11

 

Sumitomo Bakelite Co. Ltd.

300

11

 

Daiwabo Holdings Co. Ltd.

200

11

 

Pola Orbis Holdings Inc.

400

11

 

Benesse Holdings Inc.

400

11

 

Yaoko Co. Ltd.

200

11

 

Fuyo General Lease Co. Ltd.

200

11

 

PALTAC Corp.

200

10

 

Hirose Electric Co. Ltd.

100

10

 

Mandom Corp.

400

10

 

Taisho Pharmaceutical Holdings Co. Ltd.

100

10

 

Japan Post Bank Co. Ltd.

900

10

 

Kakaku.com Inc.

500

10

 

Morinaga Milk Industry Co. Ltd.

300

10

 

H2O Retailing Corp.

700

10

 

Sony Financial Holdings Inc.

500

9

 

Itochu Techno-Solutions Corp.

400

9

 

NET One Systems Co. Ltd.

400

9

 

Asics Corp.

700

9

 

Nihon Kohden Corp.

300

9

 

Hitachi Transport System Ltd.

300

9

 

Hanwa Co. Ltd.

300

9

 

Tokyo Ohka Kogyo Co. Ltd.

300

9

 

Yamazaki Baking Co. Ltd.

500

9

 

Sumitomo Mitsui Construction Co. Ltd.

1,300

9

 

Calbee Inc.

300

8

 

Oki Electric Industry Co. Ltd.

700

8

 

Nomura Research Institute Ltd.

200

8

 

Takuma Co. Ltd.

600

8

 

Taiyo Yuden Co. Ltd.

400

8

 

Tokyo Seimitsu Co. Ltd.

300

8

 

Oracle Corp. Japan

100

7

 

Tsubakimoto Chain Co.

200

7

 

Megmilk Snow Brand Co. Ltd.

300

7

 

Hitachi Metals Ltd.

700

7

 

Okamura Corp.

600

7

 

Taiyo Nippon Sanso Corp.

500

7

 

Resorttrust Inc.

500

7

 

Rinnai Corp.

100

7

 

15

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

United Arrows Ltd.

200

7

 

Yoshinoya Holdings Co. Ltd.

400

6

 

Sushiro Global Holdings Ltd.

100

6

 

Tomy Co. Ltd.

600

6

 

FP Corp.

100

6

 

Lawson Inc.

100

6

 

Capcom Co. Ltd.

300

6

 

Sawai Pharmaceutical Co. Ltd.

100

6

 

Sangetsu Corp.

300

6

 

Orient Corp.

5,000

5

 

Shimachu Co. Ltd.

200

5

 

Nankai Electric Railway Co. Ltd.

200

5

 

Nabtesco Corp.

200

5

 

Ezaki Glico Co. Ltd.

100

5

 

Daiichikosho Co. Ltd.

100

5

 

Nippon Yusen KK

300

5

 

Shiga Bank Ltd.

200

5

 

Sharp Corp.

400

5

 

Mirait Holdings Corp.

300

5

 

Mani Inc.

100

5

 

DeNA Co. Ltd.

300

5

 

Fancl Corp.

200

5

 

Ito En Ltd.

100

5

 

Morinaga & Co. Ltd.

100

4

 

ADEKA Corp.

300

4

 

Tokyo Century Corp.

100

4

 

Nagase & Co. Ltd.

300

4

 

Toagosei Co. Ltd.

400

4

 

Descente Ltd.

200

4

 

SCSK Corp.

100

4

 

Sugi Holdings Co. Ltd.

100

4

 

Suruga Bank Ltd.

900

4

 

Daido Steel Co. Ltd.

100

4

 

Hachijuni Bank Ltd.

1,000

4

 

Fuji Soft Inc.

100

4

 

Shinsei Bank Ltd.

300

4

 

Yokohama Rubber Co. Ltd.

200

4

 

GS Yuasa Corp.

200

4

 

SCREEN Holdings Co. Ltd.

100

4

 

Nippon Paper Industries Co. Ltd.

200

4

 

Sumitomo Forestry Co. Ltd.

300

4

 

Iyo Bank Ltd.

700

4

 

Sumitomo Rubber Industries Ltd.

300

4

 

Hitachi High-Technologies Corp.

100

4

 

Nomura Real Estate Holdings Inc.

200

4

 

Chugoku Bank Ltd.

400

4

 

Nippon Kayaku Co. Ltd.

300

4

 

Welcia Holdings Co. Ltd.

100

4

 

Lasertec Corp.

100

4

 

Sanwa Holdings Corp.

300

3

 

Kyudenko Corp.

100

3

 

Citizen Watch Co. Ltd.

600

3

 

Ushio Inc.

300

3

 

Hiroshima Bank Ltd.

600

3

 

Fuji Oil Holdings Inc.

100

3

 

Maruha Nichiro Corp.

100

3

 

Dowa Holdings Co. Ltd.

100

3

 

Iwatani Corp.

100

3

 

Aeon Mall Co. Ltd.

200

3

 

NOK Corp.

200

3

 

Seven Bank Ltd.

1,100

3

 

Toda Corp.

500

3

 

Tsumura & Co.

100

3

 

Furukawa Electric Co. Ltd.

100

3

 

Sotetsu Holdings Inc.

100

3

 

Kokuyo Co. Ltd.

200

3

 

TS Tech Co. Ltd.

100

3

 

San-In Godo Bank Ltd.

400

3

 

Ibiden Co. Ltd.

200

3

 

Toyobo Co. Ltd.

200

3

 

NTN Corp.

900

3

*

Kawasaki Kisen Kaisha Ltd.

200

3

 

Hino Motors Ltd.

300

3

 

Topcon Corp.

200

3

 

Miraca Holdings Inc.

100

3

 

Takashimaya Co. Ltd.

200

3

 

Nipro Corp.

200

3

 

Nihon Unisys Ltd.

100

3

 

Rengo Co. Ltd.

300

3

 

Kagome Co. Ltd.

100

3

 

Nisshinbo Holdings Inc.

300

3

 

KH Neochem Co. Ltd.

100

3

 

Toyo Tire Corp.

200

3

 

Fujikura Ltd.

600

3

 

Mitsubishi Logistics Corp.

100

3

 

Wacoal Holdings Corp.

100

3

 

Tokuyama Corp.

100

3

 

Glory Ltd.

100

2

 

Nishi-Nippon Railroad Co. Ltd.

100

2

 

Hitachi Capital Corp.

100

2

 

Nishimatsu Construction Co. Ltd.

100

2

 

Lintec Corp.

100

2

 

Japan Post Insurance Co. Ltd.

100

2

 

Colowide Co. Ltd.

100

2

 

Sanrio Co. Ltd.

100

2

 

Hazama Ando Corp.

300

2

 

Zeon Corp.

200

2

 

NHK Spring Co. Ltd.

200

2

 

Hitachi Chemical Co. Ltd.

100

2

 

Tokai Tokyo Financial Holdings Inc.

400

2

 

Leopalace21 Corp.

400

1

 

 

 

20,416

 

16

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

Kuwait (0.0%)

 

 

*

National Industries Group Holding SAK

9,710

5

 

 

 

 

Malaysia (0.8%)

 

 

 

Public Bank Bhd. (Local)

25,600

157

 

Malayan Banking Bhd.

45,100

106

 

Tenaga Nasional Bhd.

28,148

93

 

CIMB Group Holdings Bhd.

64,600

93

 

DiGi.Com Bhd.

57,300

64

 

IHH Healthcare Bhd.

45,500

64

 

Maxis Bhd.

46,100

61

 

Axiata Group Bhd.

52,600

54

 

Dialog Group Bhd.

57,900

46

 

Petronas Chemicals Group Bhd.

18,300

41

 

Petronas Gas Bhd.

8,600

38

 

PPB Group Bhd.

4,200

19

 

Hong Leong Bank Bhd.

3,100

16

 

MISC Bhd.

6,400

11

 

AMMB Holdings Bhd.

9,200

10

 

Inari Amertron Bhd.

22,200

9

 

Press Metal Aluminium Holdings Bhd.

8,200

8

 

Hartalega Holdings Bhd.

6,200

8

 

Top Glove Corp. Bhd.

6,000

7

 

RHB Bank Bhd.

2,300

3

 

Malaysia Airports Holdings Bhd.

1,300

3

 

HAP Seng Consolidated Bhd.

900

2

 

AirAsia Group Bhd.

3,200

2

 

Gamuda Bhd.

2,900

2

 

YTL Corp. Bhd.

7,300

2

 

 

 

919

Mexico (0.7%)

 

 

 

Fomento Economico Mexicano SAB de CV

17,300

157

 

America Movil SAB de CV

187,100

135

 

Grupo Financiero Banorte SAB de CV

21,200

115

*

Cemex SAB de CV

140,700

69

 

Grupo Aeroportuario del Pacifico SAB de CV Class B

6,600

61

 

Grupo Televisa SAB

25,100

59

 

Grupo Bimbo SAB de CV Class A

28,200

56

 

Grupo Financiero Inbursa SAB de CV

26,700

40

 

Coca-Cola Femsa SAB de CV

3,900

24

 

Mexichem SAB de CV

9,100

22

 

Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand

8,000

11

 

PLA Administradora Industrial S de RL de CV

7,300

11

 

Arca Continental SAB de CV

1,800

10

 

Infraestructura Energetica Nova SAB de CV

2,200

8

*

Regional SAB de CV

600

3

 

Grupo Aeroportuario del Centro Norte SAB de CV Class B

500

3

 

Alsea SAB de CV

1,000

2

 

Grupo Carso SAB de CV

600

2

 

Kimberly-Clark de Mexico SAB de CV Class A

1,300

2

 

Gentera SAB de CV

2,100

2

 

 

 

792

Netherlands (2.9%)

 

 

 

ASML Holding NV

2,911

532

 

Unilever NV

9,565

518

 

ING Groep NV

27,633

365

 

Koninklijke Philips NV

6,267

249

 

Koninklijke Ahold Delhaize NV

8,062

208

 

Wolters Kluwer NV

2,255

149

*

Unibail-Rodamco-Westfield

881

142

 

Koninklijke DSM NV

1,281

138

 

Akzo Nobel NV

1,502

136

 

NN Group NV

2,660

116

 

IMCD NV

1,329

104

 

Koninklijke KPN NV

30,675

95

 

Aegon NV

15,480

83

2

ABN AMRO Group NV

3,426

83

 

ASR Nederland NV

1,669

73

 

Randstad NV

1,270

68

*

Gemalto NV

1,087

63

2

Signify NV

628

17

*,2

Adyen NV

21

16

 

TKH Group NV

284

14

 

SBM Offshore NV

568

11

*

OCI NV

428

10

 

NSI NV

202

8

*,2

Basic-Fit NV

192

6

*

VEON Ltd.

2,209

6

 

Wereldhave NV

143

4

 

ASM International NV

75

4

2

Flow Traders

136

4

 

Boskalis Westminster

123

3

 

Sligro Food Group NV

90

3

 

Corbion NV

102

3

 

Koninklijke Vopak NV

56

3

*

BE Semiconductor Industries NV

108

3

 

17

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

2

Intertrust NV

138

3

 

APERAM SA

76

2

*,2

Takeaway.com NV

30

2

 

PostNL NV

676

2

*

TomTom NV

199

2

 

 

 

3,248

New Zealand (0.4%)

 

 

 

Auckland International Airport Ltd.

13,162

70

 

Spark New Zealand Ltd.

26,207

66

*

a2 Milk Co. Ltd.

6,707

65

 

Fisher & Paykel Healthcare Corp. Ltd.

5,788

58

 

Ryman Healthcare Ltd.

6,130

46

*

Fletcher Building Ltd.

11,978

40

 

Contact Energy Ltd.

2,714

12

 

Goodman Property Trust

8,559

10

 

Air New Zealand Ltd.

4,685

8

 

Z Energy Ltd.

1,348

6

 

Chorus Ltd.

995

3

 

Trade Me Group Ltd.

752

3

 

Mainfreight Ltd.

145

3

 

Meridian Energy Ltd.

1,142

3

 

Kiwi Property Group Ltd.

2,916

3

 

Mercury NZ Ltd.

1,011

2

 

EBOS Group Ltd.

151

2

 

 

 

400

Norway (0.7%)

 

 

 

DNB ASA

7,078

136

 

Telenor ASA

5,019

98

 

Mowi ASA

3,938

91

 

Storebrand ASA

10,198

81

 

Orkla ASA

8,511

67

 

Yara International ASA

1,493

63

 

Norsk Hydro ASA

14,693

61

 

TGS NOPEC Geophysical Co. ASA

1,605

44

 

Gjensidige Forsikring ASA

652

12

 

SpareBank 1 SR-Bank ASA

1,041

12

2

Sbanken ASA

1,173

11

 

Schibsted ASA Class A

268

11

 

Tomra Systems ASA

389

10

 

Schibsted ASA Class B

227

8

 

Bakkafrost P/F

164

8

 

Veidekke ASA

714

7

 

Borregaard ASA

780

7

 

Salmar ASA

145

7

 

Leroy Seafood Group ASA

794

6

 

SpareBank 1 SMN

296

3

2

Entra ASA

150

2

 

Atea ASA

146

2

*

Norwegian Finans Holding ASA

217

2

 

Austevoll Seafood ASA

155

2

 

 

 

751

Peru (0.1%)

 

 

 

Credicorp Ltd. (XNYS)

387

94

 

Credicorp Ltd. (XLIM)

66

16

 

 

 

110

Philippines (0.2%)

 

 

 

Ayala Land Inc.

79,900

68

 

BDO Unibank Inc.

24,800

61

 

SM Prime Holdings Inc.

80,900

60

 

Bank of the Philippine Islands

9,090

15

 

PLDT Inc.

680

13

 

Robinsons Retail Holdings Inc.

5,100

9

 

Puregold Price Club Inc.

9,000

8

 

Manila Electric Co.

940

7

 

Security Bank Corp.

850

3

 

Globe Telecom Inc.

55

2

 

 

 

246

Poland (0.2%)

 

 

 

Powszechna Kasa Oszczednosci Bank Polski SA

8,348

84

 

Powszechny Zaklad Ubezpieczen SA

5,823

63

 

Bank Polska Kasa Opieki SA

1,161

35

 

KRUK SA

302

13

 

Santander Bank Polska SA

110

11

*

CD Projekt SA

205

10

*

KGHM Polska Miedz SA

290

8

 

LPP SA

3

7

 

Asseco Poland SA

384

5

 

mBank SA

20

2

*

Bank Millennium SA

948

2

*

Alior Bank SA

131

2

 

CCC SA

38

2

 

 

 

244

Portugal (0.1%)

 

 

 

Jeronimo Martins SGPS SA

3,893

59

*

Banco Comercial Portugues SA

10,682

3

 

 

 

62

Qatar (0.0%)

 

 

 

Ooredoo QPSC

1,727

32

 

 

 

 

Russia (0.3%)

 

 

 

Sberbank of Russia PJSC

72,660

228

 

Mobile TeleSystems PJSC

12,240

47

 

Alrosa PJSC

26,210

38

 

VTB Bank PJSC

23,220,000

13

 

Moscow Exchange MICEX-RTS PJSC

4,760

7

 

Inter RAO UES PJSC

107,000

6

 

18

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Novolipetsk Steel PJSC

2,550

6

 

RusHydro PJSC

510,000

4

 

Aeroflot PJSC

2,430

3

 

Magnitogorsk Iron & Steel Works PJSC

3,000

2

 

 

 

354

Saudi Arabia (0.0%)

 

 

*

Saudi Basic Industries Corp.

100

3

*

Al Rajhi Bank

100

3

*

National Commercial Bank

85

1

 

 

 

7

Singapore (1.2%)

 

 

 

DBS Group Holdings Ltd.

11,800

216

 

Oversea-Chinese Banking Corp. Ltd.

24,800

202

 

United Overseas Bank Ltd.

9,100

168

 

Singapore Exchange Ltd.

18,900

109

 

Singapore Telecommunications Ltd.

48,600

108

 

Ascendas REIT

45,500

94

 

Keppel Corp. Ltd.

17,700

81

 

CapitaLand Mall Trust

44,200

78

 

CapitaLand Ltd.

30,700

78

 

Wilmar International Ltd.

17,700

42

 

ComfortDelGro Corp. Ltd.

12,400

22

 

City Developments Ltd.

3,300

22

 

Singapore Press Holdings Ltd.

11,400

21

 

UOL Group Ltd.

4,200

21

 

CapitaLand Commercial Trust

9,900

14

 

Frasers Logistics & Industrial Trust

9,800

8

 

Golden Agri-Resources Ltd.

35,600

7

 

Keppel REIT

3,900

4

 

NetLink NBN Trust

5,900

3

 

Sembcorp Industries Ltd.

1,800

3

 

Mapletree Logistics Trust

3,100

3

 

Mapletree Industrial Trust

2,000

3

 

Mapletree North Asia Commercial Trust

3,000

3

 

Hutchison Port Holdings Trust

9,100

2

 

ESR-REIT

4,700

2

 

 

 

1,314

South Africa (1.9%)

 

 

 

Naspers Ltd.

2,979

642

 

Standard Bank Group Ltd.

10,508

144

 

FirstRand Ltd.

24,096

110

 

Absa Group Ltd.

8,161

104

 

Remgro Ltd.

7,312

104

 

Sanlam Ltd.

14,286

80

 

Mr Price Group Ltd.

4,872

74

 

Nedbank Group Ltd.

3,664

74

 

Bidvest Group Ltd.

4,916

72

 

Bid Corp. Ltd.

3,291

69

 

Shoprite Holdings Ltd.

5,080

62

 

Growthpoint Properties Ltd.

34,148

59

 

NEPI Rockcastle plc

6,341

53

 

Discovery Ltd.

4,372

48

 

Vodacom Group Ltd.

5,693

47

 

Aspen Pharmacare Holdings Ltd.

3,147

31

 

Sappi Ltd.

5,336

27

 

Capitec Bank Holdings Ltd.

272

25

*

MultiChoice Group Ltd.

2,979

22

 

Foschini Group Ltd.

1,724

21

 

Redefine Properties Ltd.

29,817

20

 

Clicks Group Ltd.

1,498

19

 

RMB Holdings Ltd.

3,289

19

 

Tiger Brands Ltd.

933

18

 

Netcare Ltd.

6,502

12

 

Mondi Ltd.

500

12

*

MMI Holdings Ltd.

10,419

11

 

Gold Fields Ltd.

2,806

11

 

PSG Group Ltd.

603

11

 

Telkom SA SOC Ltd.

2,199

11

 

SPAR Group Ltd.

769

11

 

Anglo American Platinum Ltd.

199

11

 

Fortress REIT Ltd. Class A

7,406

10

*

Northam Platinum Ltd.

2,210

9

*

Impala Platinum Holdings Ltd.

2,006

9

*

Super Group Ltd.

3,557

8

 

AVI Ltd.

1,239

8

 

Resilient REIT Ltd.

1,780

8

 

Kumba Iron Ore Ltd.

217

6

 

Truworths International Ltd.

704

4

 

Rand Merchant Investment Holdings Ltd.

1,382

3

 

Barloworld Ltd.

330

3

 

Hyprop Investments Ltd.

499

3

 

Pick n Pay Stores Ltd.

536

3

 

Investec Ltd.

370

2

*

Motus Holdings Ltd.

259

2

 

Imperial Logistics Ltd.

259

1

 

 

 

2,113

South Korea (3.2%)

 

 

 

Samsung Electronics Co. Ltd.

33,108

1,325

 

SK Hynix Inc.

4,035

251

 

Samsung Electronics Co. Ltd. Preference Shares

6,073

194

 

Shinhan Financial Group Co. Ltd.

4,849

189

 

KB Financial Group Inc.

4,056

160

 

LG Chem Ltd.

431

149

 

Samsung Life Insurance Co. Ltd.

1,662

131

 

19

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Hyundai Mobis Co. Ltd.

636

125

 

Hana Financial Group Inc.

3,192

110

 

Samsung Fire & Marine Insurance Co. Ltd.

402

108

 

Kia Motors Corp.

3,115

101

 

LG Household & Health Care Ltd.

79

87

*

Woori Financial Group Inc.

5,035

66

 

Lotte Chemical Corp.

205

58

 

Samsung Electro-Mechanics Co. Ltd.

560

53

 

S-Oil Corp.

577

51

 

Amorepacific Corp.

235

42

 

LG Display Co. Ltd.

2,032

38

 

Coreana Cosmetics Co. Ltd.

6,697

28

*

ViroMed Co. Ltd.

111

27

 

Hankook Tire Co. Ltd.

645

25

 

DB Insurance Co. Ltd.

291

19

*

Hyundai Merchant Marine Co. Ltd.

5,073

18

 

Amorepacific Corp. Preference Shares

181

18

 

LG Household & Health Care Ltd. Preference Shares

23

15

 

Cheil Worldwide Inc.

607

14

 

Samsung Securities Co. Ltd.

431

13

*

Samsung Engineering Co. Ltd.

930

13

 

Mirae Asset Daewoo Co. Ltd.

1,873

13

 

Industrial Bank of Korea

1,013

13

2

Orange Life Insurance Ltd.

382

12

*

Hanall Biopharma Co. Ltd.

364

12

 

Meritz Fire & Marine Insurance Co. Ltd.

585

12

 

BNK Financial Group Inc.

1,754

11

*

HLB Inc.

135

11

 

CJ CheilJedang Corp.

36

10

 

Fila Korea Ltd.

207

10

 

Koh Young Technology Inc.

135

10

 

Youngone Corp.

290

9

*

Pearl Abyss Corp.

48

8

 

Hanwha Chemical Corp.

225

5

 

KCC Corp.

15

4

 

Samsung Card Co. Ltd.

140

4

 

Lotte Shopping Co. Ltd.

23

4

 

Hyundai Marine & Fire Insurance Co. Ltd.

108

4

 

Hyundai Glovis Co. Ltd.

28

3

*

Samsung Pharmaceutical Co. Ltd.

1,399

3

 

AMOREPACIFIC Group

52

3

 

LVMC Holdings

1,331

3

 

Hansol Holdings Co. Ltd.

799

3

 

iMarketKorea Inc.

368

3

 

LG Innotek Co. Ltd.

26

3

 

Com2uSCorp

21

2

 

POSCO Chemtech Co. Ltd.

36

2

 

Hyundai Elevator Co. Ltd.

21

2

 

 

 

3,607

Spain (2.2%)

 

 

 

Banco Santander SA

100,687

490

 

Banco Bilbao Vizcaya Argentaria SA

47,990

298

 

Telefonica SA

27,061

233

 

Industria de Diseno Textil SA

6,770

204

 

Amadeus IT Group SA

2,660

200

2

Aena SME SA

755

135

 

Grifols SA Preference Shares

5,216

100

 

CaixaBank SA

27,700

99

*

Ferrovial SA

3,845

89

 

Red Electrica Corp. SA

3,621

78

 

Bankinter SA

9,263

76

2

Cellnex Telecom SA

2,909

75

 

Enagas SA

2,316

66

 

Banco de Sabadell SA

56,889

65

 

Bankia SA

20,284

62

 

Merlin Properties Socimi SA

4,136

54

 

Grifols SA

1,377

36

 

Inmobiliaria Colonial Socimi SA

1,205

12

 

Mapfre SA

3,910

11

 

Viscofan SA

158

9

2

Gestamp Automocion SA

1,513

9

*

Fomento de Construcciones y Contratas SA

619

9

 

Acerinox SA

851

9

2

Euskaltel SA

978

9

 

Ence Energia y Celulosa SA

731

5

 

Bolsas y Mercados Espanoles SHMSF SA

119

3

 

Faes Farma SA

863

3

*

Masmovil Ibercom SA

145

3

 

Zardoya Otis SA

327

3

 

Ebro Foods SA

126

3

*

Indra Sistemas SA

239

3

*,2

Neinor Homes SA

191

3

 

Grupo Catalana Occidente SA

68

2

 

Cia de Distribucion Integral Logista Holdings SA

94

2

 

Prosegur Cia de Seguridad SA

403

2

2

Unicaja Banco SA

1,805

2

 

CIE Automotive SA

73

2

 

Corp Financiera Alba SA

41

2

*

Almirall SA

112

2

 

 

 

2,468

 

20

 

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

Sweden (2.4%)

 

 

 

Telefonaktiebolaget LM Ericsson Class B

22,002

201

 

Volvo AB Class B

9,485

140

 

Essity AB Class B

4,809

134

 

Assa Abloy AB Class B

6,160

127

*

Atlas Copco AB Class B

5,039

126

 

Svenska Handelsbanken AB Class A

10,244

117

 

Swedbank AB Class A

6,346

117

 

Skandinaviska Enskilda Banken AB Class A

10,529

107

 

Hennes & Mauritz AB Class B

6,971

106

*

Boliden AB

3,717

102

*

Atlas Copco AB Class A

3,379

92

 

Trelleborg AB Class B

5,530

91

 

Telia Co. AB

20,842

90

 

SKF AB

5,213

88

 

Nibe Industrier AB Class B

6,280

79

 

Industrivarden AB Class A

3,686

78

 

Investor AB Class A

1,693

75

 

Electrolux AB Class B

2,777

73

 

Kinnevik AB

2,301

58

 

Tele2 AB

4,309

57

 

Svenska Cellulosa AB SCA Class B

6,015

55

 

Castellum AB

3,028

55

 

Hemfosa Fastigheter AB

5,776

49

 

Elekta AB Class B

4,029

46

 

Skanska AB Class B

2,389

43

*

Swedish Orphan Biovitrum AB

1,890

41

*

Fabege AB

2,577

35

 

Securitas AB Class B

1,803

28

 

Peab AB

2,389

21

 

Husqvarna AB

1,979

16

2

Thule Group AB

588

13

 

Loomis AB Class B

330

12

2

Dometic Group AB

1,311

11

 

Investor AB Class B

243

11

 

ICA Gruppen AB

278

11

 

Hexpol AB

1,185

11

 

SSAB AB Class B

3,146

10

 

Klovern AB Preference Shares

279

10

*

AAK AB

668

10

 

Intrum AB

330

10

 

Modern Times Group MTG AB Class B

271

9

 

Getinge AB

771

9

 

Industrivarden AB

395

8

 

BillerudKorsnas AB

590

8

2

Resurs Holding AB

1,152

7

 

Mycronic AB

472

7

*

Vitrolife AB

322

7

*

Holmen AB

294

6

 

Arjo AB

1,525

6

 

Avanza Bank Holding AB

102

4

 

Indutrade AB

143

4

2

Bravida Holding AB

415

3

 

Pandox AB Class B

173

3

 

Kungsleden AB

382

3

*

Wihlborgs Fastigheter AB

215

3

 

Axfood AB

142

3

 

Investment AB Latour Class B

184

2

 

NCC AB Class B

159

2

 

Sweco AB Class B

100

2

 

Hufvudstaden AB Class A

141

2

 

Wallenstam AB

240

2

 

Svenska Handelsbanken AB Class B

185

2

 

Bonava AB

173

2

 

JM AB

104

2

*

Nyfosa AB

211

1

 

 

 

2,663

Switzerland (6.2%)

 

 

 

Nestle SA

20,741

1,876

 

Roche Holding AG

3,234

898

 

Roche Holding AG (Bearer)

1,830

505

 

Cie Financiere Richemont SA

3,649

279

 

UBS Group AG

21,008

267

 

Zurich Insurance Group AG

683

225

 

Swiss Re AG

1,784

176

 

Givaudan SA

66

165

 

Swiss Life Holding AG

355

154

 

Credit Suisse Group AG

11,968

148

 

Lonza Group AG

498

138

 

Baloise Holding AG

846

138

 

Fanhua Inc. ADR

5,204

131

 

Helvetia Holding AG

207

124

 

Geberit AG

308

123

 

Swiss Prime Site AG

1,432

121

 

Swisscom AG

223

103

 

Julius Baer Group Ltd.

2,246

98

 

Sonova Holding AG

449

84

 

Flughafen Zurich AG

466

83

 

Temenos AG

538

78

 

Partners Group Holding AG

106

77

 

Dufry AG

710

72

 

Kuehne & Nagel International AG

540

70

 

Straumann Holding AG

90

70

 

Vifor Pharma AG

526

66

 

Schindler Holding AG (Registered)

283

63

 

Clariant AG

2,817

60

 

21

 

ESG International Stock ETF

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Chocoladefabriken Lindt & Spruengli AG

8

52

 

Georg Fischer AG

54

48

 

Logitech International SA

1,161

44

 

Mobimo Holding AG

171

41

 

Cembra Money Bank AG

378

36

 

Adecco Group AG

611

32

 

ams AG

899

28

 

Schindler Holding AG

112

25

2

Galenica AG

537

24

 

Valora Holding AG

88

24

 

Zehnder Group AG

636

23

2

Sunrise Communications Group AG

261

19

 

Inficon Holding AG

30

15

 

Intershop Holding AG

28

14

 

Ypsomed Holding AG

120

14

 

HBM HLTHCR-I

83

14

 

Tecan Group AG

54

12

*

Idorsia Ltd.

650

11

 

dormakaba Holding AG

15

9

 

Interroll Holding AG

5

9

*

COSMO Pharmaceuticals NV

59

5

 

Banque Cantonale Vaudoise

6

5

 

Belimo Holding AG

1

5

 

St. Galler Kantonalbank AG

9

4

 

Valiant Holding AG

35

4

 

Panalpina Welttransport Holding AG

23

4

 

Emmi AG

4

3

 

Landis&Gyr Group AG

50

3

 

Bucher Industries AG

10

3

 

Forbo Holding AG

2

3

 

Siegfried Holding AG

7

3

 

Vontobel Holding AG

42

2

*

Aryzta AG

2,035

2

 

Daetwyler Holding AG

14

2

 

Conzzeta AG

2

2

 

GAM Holding AG

312

1

 

 

 

6,937

Taiwan (4.0%)

 

 

 

Taiwan Semiconductor Manufacturing Co. Ltd.

165,000

1,266

 

MediaTek Inc.

28,000

253

 

Hon Hai Precision Industry Co. Ltd.

80,400

189

 

E.Sun Financial Holding Co. Ltd.

195,000

140

 

Formosa Plastics Corp.

41,000

136

 

First Financial Holding Co. Ltd.

184,000

124

 

Hua Nan Financial Holdings Co. Ltd.

191,000

117

 

Taiwan Cooperative Financial Holding Co. Ltd.

184,000

114

 

China Steel Corp.

134,000

111

 

Mega Financial Holding Co. Ltd.

124,000

109

 

Taishin Financial Holding Co. Ltd.

237,000

107

 

Nan Ya Plastics Corp.

43,000

107

 

Uni-President Enterprises Corp.

43,000

105

 

Delta Electronics Inc.

21,000

104

 

Quanta Computer Inc.

56,000

104

 

Cathay Financial Holding Co. Ltd.

64,000

94

 

Chunghwa Telecom Co. Ltd.

24,000

83

 

Far EasTone Telecommunications Co. Ltd.

34,000

79

 

Formosa Chemicals & Fibre Corp.

23,000

79

 

Chailease Holding Co. Ltd.

20,000

79

 

ASE Technology Holding Co. Ltd.

37,000

75

 

Taiwan Cement Corp.

53,000

66

 

AU Optronics Corp.

167,000

61

 

Taiwan Mobile Co. Ltd.

17,000

61

*

PharmaEssentia Corp.

11,000

61

 

Far Eastern New Century Corp.

58,000

57

 

United Microelectronics Corp.

132,000

49

*

AGV Products Corp.

135,000

31

 

Infortrend Technology Inc.

72,000

29

 

Catcher Technology Co. Ltd.

3,000

23

 

Yageo Corp.

2,000

22

 

President Chain Store Corp.

2,000

21

 

Innolux Corp.

62,000

21

 

Shin Kong Financial Holding Co. Ltd.

66,172

20

 

Formosa Petrochemical Corp.

5,000

19

 

Phison Electronics Corp.

2,000

18

 

Eva Airways Corp.

35,862

18

 

TCI Co. Ltd.

1,000

15

 

Pou Chen Corp.

11,000

14

 

Asia Cement Corp.

11,000

14

 

Bank of Kaohsiung Co. Ltd.

43,000

13

 

Lite-On Technology Corp.

9,000

13

 

Airtac International Group

1,000

12

 

Makalot Industrial Co. Ltd.

2,000

12

 

Walsin Technology Corp.

2,000

12

 

Ruentex Development Co. Ltd.

7,000

11

 

Globalwafers Co. Ltd.

1,000

11

 

Cheng Shin Rubber Industry Co. Ltd.

7,000

10

 

WPG Holdings Ltd.

7,680

10

 

22

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Powertech Technology Inc.

4,000

9

 

Hiwin Technologies Corp.

1,000

9

 

Nien Made Enterprise Co. Ltd.

1,000

9

 

Synnex Technology International Corp.

7,000

8

 

China Life Insurance Co. Ltd.

9,000

8

 

Foxconn Technology Co. Ltd.

4,000

8

*

Tatung Co. Ltd.

8,000

7

 

Feng TAY Enterprise Co. Ltd.

1,000

6

*

HTC Corp.

5,000

6

 

Realtek Semiconductor Corp.

1,000

6

 

Win Semiconductors Corp.

1,000

6

 

Giant Manufacturing Co. Ltd.

1,000

5

 

Taiwan Business Bank

13,000

5

 

Inventec Corp.

6,000

5

 

Ability Enterprise Co. Ltd.

10,000

5

 

Chipbond Technology Corp.

2,000

4

 

Teco Electric and Machinery Co. Ltd.

7,000

4

 

Taiwan High Speed Rail Corp.

4,000

4

 

Chroma ATE Inc.

1,000

4

 

Advanced International Multitech Co. Ltd.

3,000

4

*

Phihong Technology Co. Ltd.

11,000

4

 

Accton Technology Corp.

1,000

3

 

Ruentex Industries Ltd.

1,200

3

 

Tripod Technology Corp.

1,000

3

 

Winbond Electronics Corp.

6,000

3

 

Walsin Lihwa Corp.

5,000

3

 

TA Chen Stainless Pipe

2,000

3

 

Wowprime Corp.

1,000

3

 

Micro-Star International Co. Ltd.

1,000

3

 

Acer Inc.

4,000

3

 

Sino-American Silicon Products Inc.

1,000

2

 

Macronix International

3,000

2

 

Nanya Technology Corp.

1,000

2

 

 

 

4,458

Thailand (1.0%)

 

 

*

Siam Cement PCL

8,200

123

*

CP ALL PCL (Local)

49,300

122

*

Siam Commercial Bank PCL (Local)

25,700

109

*

Krung Thai Bank PCL

151,700

93

 

Kasikornbank PCL

13,600

85

*

Minor International PCL

64,600

79

 

Airports of Thailand PCL

34,200

73

*

Central Pattana PCL

28,300

68

*

Bangkok Dusit Medical Services PCL

84,800

63

*

Advanced Info Service PCL (Local)

10,000

58

*

PTT Global Chemical PCL

22,500

51

 

Kasikornbank PCL (Foreign)

6,700

42

 

Bangkok Bank PCL (Foreign)

2,500

17

*

Kiatnakin Bank PCL

7,500

17

*

Indorama Ventures PCL

9,100

15

*

BTS Rail Mass Transit Growth Infrastructure Fund

35,600

13

*

Intouch Holdings PCL

7,300

13

*

Digital Telecommunications Infrastructure Fund

24,900

12

*

Jasmine Broadband Internet Infrastructure Fund

34,600

11

*

Home Product Center PCL

23,400

11

 

Intouch Holdings PCL NVDR

5,900

10

*

Glow Energy PCL

3,200

9

*

Delta Electronics Thailand PCL

3,700

8

*

Total Access Communication PCL (Local)

4,100

7

*

Muangthai Capital PCL

3,700

6

*

Thanachart Capital PCL

2,800

5

*

Bangkok Expressway & Metro PCL

13,700

5

*

BTS Group Holdings PCL

12,000

4

*

Bumrungrad Hospital PCL

600

4

*

Tisco Financial Group PCL

1,200

3

*

Ratchaburi Electricity Generating Holding PCL (Local)

1,600

3

*

TMB Bank PCL

36,300

3

*

Thai Oil PCL

1,100

3

*

True Corp. PCL

14,700

3

*

IRPC PCL

12,200

2

*

Krungthai Card PCL

2,200

2

 

 

 

1,152

Turkey (0.2%)

 

 

 

Tupras Turkiye Petrol Rafinerileri AS

3,703

99

*

Besiktas Futbol Yatirimlari Sanayi ve Ticaret AS

48,685

15

 

Haci Omer Sabanci Holding AS (Bearer)

7,241

12

 

Is Gayrimenkul Yatirim Ortakligi AS

58,162

12

 

Turkiye Is Bankasi AS

10,613

11

*

Afyon Cimento Sanayi TAS

10,150

9

 

Eregli Demir ve Celik Fabrikalari TAS

5,120

9

 

Akbank T.A.S.

6,466

8

 

Turkiye Garanti Bankasi AS

4,417

7

*

Sekerbank Turk AS

21,999

5

*

Turcas Petrol AS

15,214

5

 

KOC Holding AS

1,293

4

*

Vakif Gayrimenkul Yatirim Ortakligi AS

8,982

4

 

23

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

*

Turk Hava Yollari AO

1,331

4

*

Bizim Toptan Satis Magazalari AS

2,193

3

 

Tat Gida Sanayi AS

3,263

3

 

Albaraka Turk Katilim Bankasi AS

5,995

2

*

Akenerji Elektrik Uretim AS

13,871

2

 

Konya Cimento Sanayii AS

43

2

 

 

 

216

United Arab Emirates (0.1%)

 

 

 

First Abu Dhabi Bank PJSC

18,045

75

 

Abu Dhabi Commercial Bank PJSC

22,793

59

 

DP World Ltd.

661

11

*

Amlak Finance PJSC

30,188

3

 

 

 

148

United Kingdom (9.4%)

 

 

 

AstraZeneca plc

8,521

694

 

Unilever plc

6,739

359

 

Lloyds Banking Group plc

405,708

342

 

Prudential plc

15,977

337

 

Vodafone Group plc

172,434

307

 

Reckitt Benckiser Group plc

3,988

305

 

RELX plc

12,073

277

 

Barclays plc

111,527

243

 

Compass Group plc

10,260

227

 

CRH plc

6,360

201

 

National Grid plc

17,641

199

 

Tesco plc

61,989

186

 

BT Group plc

58,107

166

 

Standard Chartered plc

18,967

151

 

Experian plc

5,538

144

 

London Stock Exchange Group plc

1,802

108

 

Smith & Nephew plc

5,513

105

 

Ferguson plc

1,489

103

 

Ashtead Group plc

3,850

102

 

Aviva plc

18,148

102

 

Persimmon plc

3,077

99

 

WPP plc

9,056

99

 

Royal Bank of Scotland Group plc

27,864

98

 

Informa plc

10,397

97

 

Micro Focus International plc

3,865

96

 

Legal & General Group plc

25,783

96

 

IG Group Holdings plc

12,811

96

 

Taylor Wimpey plc

39,614

95

 

Burberry Group plc

3,774

95

*

Phoenix Group Holdings plc

10,183

94

 

Whitbread plc

1,393

90

 

Sage Group plc

9,944

87

 

Barratt Developments plc

10,927

87

 

Bunzl plc

2,663

84

 

SSP Group plc

9,486

84

 

DCC plc

956

83

 

Rentokil Initial plc

17,386

81

*

Standard Life Aberdeen plc

24,087

79

 

Pearson plc

6,888

78

 

Rightmove plc

12,108

77

 

Bellway plc

1,845

74

 

Next plc

1,099

74

 

Associated British Foods plc

2,467

73

 

St. James’s Place plc

5,618

72

 

British Land Co. plc

9,057

72

 

3i Group plc

5,756

72

 

Johnson Matthey plc

1,748

72

 

Intermediate Capital Group plc

5,005

70

 

Direct Line Insurance Group plc

14,633

69

 

Land Securities Group plc

5,778

69

 

Carnival plc

1,198

67

 

Travis Perkins plc

3,498

67

 

Marks & Spencer Group plc

18,421

67

 

Howden Joinery Group plc

10,187

66

 

Croda International plc

1,037

66

2

Merlin Entertainments plc

13,698

66

 

Beazley plc

9,038

66

 

Berkeley Group Holdings plc

1,248

65

 

Kingfisher plc

20,144

65

 

Admiral Group plc

2,202

64

 

Smiths Group plc

3,344

63

 

ITV plc

36,226

63

 

Spectris plc

1,794

63

 

Derwent London plc

1,442

62

*

Just Eat plc

6,242

62

 

Coca-Cola HBC AG

1,809

61

2

Auto Trader Group plc

9,476

60

 

Hiscox Ltd.

2,811

60

 

Smurfit Kappa Group plc

2,078

59

 

Severn Trent plc

2,181

58

 

RSA Insurance Group plc

8,514

58

 

Wm Morrison Supermarkets plc

18,576

57

 

Halma plc

2,718

56

 

Tate & Lyle plc

6,078

56

 

HomeServe plc

4,399

56

 

Inchcape plc

7,405

55

 

easyJet plc

3,383

55

 

International Consolidated Airlines Group SA (London Shares)

6,675

53

 

Investec plc

8,097

53

 

DS Smith plc

11,784

52

 

Spirax-Sarco Engineering plc

589

52

*

Ocado Group plc

3,757

52

 

Victrex plc

1,586

49

 

United Utilities Group plc

4,415

49

 

Man Group plc

26,062

48

 

24

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

Pennon Group plc

4,501

46

 

Cineworld Group plc

12,357

46

 

Segro plc

5,177

45

 

Hammerson plc

8,934

45

 

Hays plc

22,154

45

 

BBA Aviation plc

13,352

43

 

Hargreaves Lansdown plc

1,767

41

*

Metro Bank plc

3,378

40

 

Hikma Pharmaceuticals plc

1,750

39

 

B&M European Value Retail SA

8,045

38

 

J Sainsbury plc

12,062

37

 

RPC Group plc

3,331

35

 

Mondi plc

1,509

35

 

CYBG plc

13,229

34

 

Royal Mail plc

8,851

33

 

Schroders plc

847

31

 

Britvic plc

2,455

30

*

BTG plc

2,692

30

 

Electrocomponents plc

3,749

27

 

NMC Health plc

733

26

2

ConvaTec Group plc

14,784

26

 

Schroder REIT Ltd.

30,657

23

 

UNITE Group plc

1,647

20

 

Close Brothers Group plc

886

18

 

Shaftesbury plc

1,475

17

 

Sanne Group plc

2,498

17

 

Dechra Pharmaceuticals plc

479

16

 

Capital & Counties Properties plc

3,605

12

 

Renishaw plc

216

12

 

WH Smith plc

419

12

*

Provident Financial plc

1,321

10

 

Primary Health Properties plc

6,354

10

 

Aggreko plc

1,062

10

 

TP ICAP plc

2,221

9

 

Jardine Lloyd Thompson Group plc

355

9

 

Dixons Carphone plc

4,870

9

 

IWG plc

2,771

8

 

Marshalls plc

1,163

8

 

JD Sports Fashion plc

1,339

8

 

Inmarsat plc

1,500

8

 

Polymetal International plc

692

8

 

BCA Marketplace plc

2,772

7

 

Fresnillo plc

648

7

2

McCarthy & Stone plc

4,086

7

 

Mediclinic International plc

1,583

7

 

Rhi Magnesita NV

101

6

2

Sophos Group plc

1,349

6

 

TalkTalk Telecom Group plc

4,266

6

2

Equiniti Group plc

2,016

5

 

Hill & Smith Holdings plc

338

5

 

Intu Properties plc

3,142

5

 

Grainger plc

1,327

4

2

John Laing Group plc

802

4

 

Bovis Homes Group plc

283

4

 

Greggs plc

167

4

 

Moneysupermarket.com Group plc

860

4

 

Savills plc

331

4

 

Saga plc

2,403

4

 

Lancashire Holdings Ltd.

438

4

 

Vesuvius plc

464

4

 

Great Portland Estates plc

354

4

 

LondonMetric Property plc

1,363

3

 

Grafton Group plc

316

3

 

Pagegroup plc

554

3

 

Jupiter Fund Management plc

728

3

 

Safestore Holdings plc

400

3

2

Countryside Properties plc

747

3

 

National Express Group plc

571

3

 

Coats Group plc

2,600

3

 

Genus plc

104

3

 

Essentra plc

595

3

 

Ashmore Group plc

523

3

 

Brewin Dolphin Holdings plc

703

3

 

Diploma plc

163

3

 

QinetiQ Group plc

710

3

 

Assura plc

3,753

3

 

Daily Mail & General Trust plc

335

3

 

Ascential plc

576

3

 

Redrow plc

340

3

 

Drax Group plc

580

3

 

Entertainment One Ltd.

502

3

 

UDG Healthcare plc

356

3

 

Rathbone Brothers plc

87

3

 

Cranswick plc

81

3

 

Bodycote plc

256

3

 

Domino’s Pizza Group plc

823

3

 

OneSavings Bank plc

484

2

 

Paragon Banking Group plc

423

2

 

Crest Nicholson Holdings plc

463

2

 

Just Group plc

1,738

2

 

Workspace Group plc

182

2

 

Elementis plc

962

2

2

Ibstock plc

677

2

 

Synthomer plc

409

2

*

Firstgroup plc

1,732

2

 

Softcat plc

203

2

 

Greencore Group plc

743

2

 

Computacenter plc

127

2

 

Games Workshop Group plc

45

2

 

Petrofac Ltd.

327

2

 

Galliford Try plc

180

2

*

Indivior plc

811

1

*

Bank of Cyprus Holdings plc

844

1

 

Thomas Cook Group plc

2,253

1

 

 

 

10,466

 

25

 

ESG International Stock ETF

 

 

 

 

 

 

Market

 

 

 

Value·

 

 

Shares

($000)

 

United States (0.0%)

 

 

*

YY Inc. ADR

400

28

*

China Biologic Products Holdings Inc.

100

8

*

21Vianet Group Inc. ADR

400

4

 

 

 

40

Total Common Stocks

 

 

(Cost $103,977)

 

108,190

Temporary Cash Investments (2.7%)1

 

 

Money Market Fund (2.3%)

 

 

3

Vanguard Market Liquidity Fund, 2.563%

25,765

2,577

 

 

 

 

 

 

Face

 

 

 

Amount

 

 

 

($000)

 

U.S. Government and Agency Obligations (0.4%)

 

 

4

United States Treasury Bill, 2.402%, 4/11/19

500

498

Total Temporary Cash Investments

 

 

(Cost $3,075)

 

3,075

Total Investments (99.4%)

 

 

(Cost $107,052)

 

111,265

 

 

 

 

 

 

 

Amount

 

 

 

($000)

Other Assets and Liabilities (0.6%)

 

 

Other Assets

 

 

Investment in Vanguard

 

6

Receivables for Accrued Income

 

178

Variation Margin Receivable—Futures Contracts

 

7

Unrealized Appreciation—Forward Currency Contracts

 

4

Other Assets5

 

459

Total Other Assets

 

654

Liabilities

 

 

Payables for Investment Securities Purchased

 

(6)

Payables to Vanguard

 

(7)

Variation Margin Payable—Futures Contracts

 

(4)

Total Liabilities

 

(17)

Net Assets (100%)

 

 

 

 

 

 

 

Amount

 

 

($000)

Applicable to 2,300,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

 

111,902

Net Asset Value Per Share

 

$48.65

 

 

 

 

 

 

At February 28, 2019, net assets consisted of:

 

 

 

 

Amount

 

 

($000)

Paid-in Capital

 

107,689

Total Distributable Earnings (Loss)

 

4,213

Net Assets

 

111,902

 

·      See Note A in Notes to Financial Statements.

*       Non-income-producing security.

1     The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.9% and -0.5%, respectively, of net assets.

2     Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At February 28, 2019, the aggregate value of these securities was $1,392,000, representing 1.2% of net assets.

3     Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

4     Securities with a value of $498,000 have been segregated as initial margin for open futures contracts.

5     Cash of $374,000 has been segregated as initial margin for open futures contracts.

ADR—American Depositary Receipt.

NVDR—Non-Voting Depository Receipt.

REIT—Real Estate Investment Trust.

 

26

 

ESG International Stock ETF

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Futures Contracts

 

 

 

 

 

 

($000)

 

 

 

 

 

Value and

 

 

 

Number of

 

Unrealized

 

 

 

Long (Short)

Notional

Appreciation

 

 

Expiration

Contracts

Amount

(Depreciation)

Long Futures Contracts

 

 

 

 

 

SGX NIFTY 50 Index

 

March 2019

133

2,891

6

MSCI EAFE Index

 

March 2019

6

561

41

MSCI Emerging Markets Index

 

March 2019

4

209

12

 

 

 

 

 

59

 

 

Forward Currency Contracts

 

 

 

 

 

 

 

 

 

Contract

Settlement

Date

 

 

 

 

Unrealized

Appreciation

($000)

Unrealized

(Depreciation)

($000)

 

Contract Amount (000)

Counterparty

 

Receive

 

Deliver

BNP Paribas

3/29/19

   INR

202,626

   USD

2,834

4

—

 

INR—Indian rupee.

USD—U.S. dollar.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

27

 

ESG International Stock ETF

 

 

 

Statement of Operations

 

 

 

September 18, 20181 to

 

 

February 28, 2019

 

 

($000)

Investment Income

 

 

Income

 

 

Dividends2

 

389

Interest3

 

19

Total Income

 

408

Expenses

 

 

The Vanguard Group—Note B

 

 

Investment Advisory Services

 

10

Management and Administrative

 

3

Marketing and Distribution

 

1

Custodian Fees

 

31

Shareholders’ Reports

 

2

Trustees’ Fees and Expenses

 

—

Total Expenses

 

47

Expenses Paid Indirectly

 

(9)

Net Expenses

 

38

Net Investment Income

 

370

Realized Net Gain (Loss)

 

 

Investment Securities Sold3

 

(87)

Futures Contracts

 

(139)

Forward Currency Contracts

 

19

Foreign Currencies

 

(23)

Realized Net Gain (Loss)

 

(230)

Change in Unrealized Appreciation (Depreciation)

 

 

Investment Securities3

 

4,213

Futures Contracts

 

59

Forward Currency Contracts

 

4

Foreign Currencies

 

2

Change in Unrealized Appreciation (Depreciation)

 

4,278

Net Increase (Decrease) in Net Assets Resulting from Operations

 

4,418

 

1   Inception.

 

2   Dividends are net of foreign withholding taxes of $37,000.

 

3   Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $16,000, ($1,000), and $1,000, respectively. Purchases and sales are for temporary cash investment purposes.

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

28

 

ESG International Stock ETF

 

 

 

Statement of Changes in Net Assets

 

 

 

September 18, 20181 to

 

 

February 28, 2019

 

 

($000)

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net Investment Income

 

370

Realized Net Gain (Loss)

 

(230)

Change in Unrealized Appreciation (Depreciation)

 

4,278

Net Increase (Decrease) in Net Assets Resulting from Operations

 

4,418

Distributions

 

 

Net Investment Income

 

(205)

Realized Capital Gain

 

—

Total Distributions

 

(205)

Capital Share Transactions

 

 

Issued

 

107,689

Issued in Lieu of Cash Distributions

 

—

Redeemed

 

—

Net Increase (Decrease) from Capital Share Transactions

 

107,689

Total Increase (Decrease)

 

111,902

Net Assets

 

 

Beginning of Period

 

—

End of Period

 

111,902

 

1 Inception.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

29

 

ESG International Stock ETF

 

 

 

Financial Highlights

 

 

 

September 18, 20181 to

For a Share Outstanding Throughout the Period

 

February 28, 2019

Net Asset Value, Beginning of Period

 

$50.00

Investment Operations

 

 

Net Investment Income2

 

.309

Net Realized and Unrealized Gain (Loss) on Investments

 

(1.488)

Total from Investment Operations

 

(1.179)

Distributions

 

 

Dividends from Net Investment Income

 

(.171)

Distributions from Realized Capital Gains

 

—

Total Distributions

 

(.171)

Net Asset Value, End of Period

 

$48.65

 

 

 

Total Return

 

-2.32%

 

 

 

Ratios/Supplemental Data

 

 

Net Assets, End of Period (Millions)

 

$112

Ratio of Total Expenses to Average Net Assets

 

0.19%3,4

Ratio of Net Investment Income to Average Net Assets

 

1.35%3

Portfolio Turnover Rate

 

8%3

 

1 Inception.

 

2 Calculated based on average shares outstanding.

 

3 Annualized.

 

4 The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.15%.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

30

 

ESG International Stock ETF

 

 

Notes to Financial Statements

 

 

Vanguard ESG International Stock ETF is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. ETF Shares are listed for trading on Cboe BZX Exchange; they can be purchased and sold through a broker.

 

A.      The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

 

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

 

2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

 

3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.

 

31

 

ESG International Stock ETF

 

 

 

 

 

The fund also enters into forward currency contracts to provide the appropriate currency exposure related to any open futures contracts. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

 

Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.

 

During the period ended February 28, 2019, the fund’s average investments in long and short futures contracts represented 4% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund’s average investment in forward currency contracts represented 2% of net assets, based on the average of the notional amounts at each quarter-end during the period.

 

4. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for the period ended February 28, 2019, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.

 

6. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income

 

32

 

ESG International Stock ETF

 

 

 

 

 

over the lives of the respective securities. Taxes on foreign dividends and capital gains have been provided for in accordance with the fund’s understanding of the applicable countries’ tax rules and rates. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

B.      In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between The Vanguard Group (“Vanguard”) and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees, and are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of $6,000, representing 0.01% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.      The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the period ended February 28, 2019, custodian fee offset arrangements reduced the fund’s expenses by $9,000 (an annual rate of 0.04% of average net assets).

 

D.      Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

 

Level 1—Quoted prices in active markets for identical securities.

 

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

 

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.

 

The following table summarizes the market value of the fund’s investments as of February 28, 2019, based on the inputs used to value them:

 

 

Level 1

Level 2

Level 3

Investments

($000)

($000)

($000)

Common Stocks—North and South America

11,801

—

—

Common Stocks—Other

2,162

94,227

—

Temporary Cash Investments

2,577

498

—

Futures Contracts—Assets1

7

—

—

Futures Contracts—Liabilities1

(4)

—

—

Forward Currency Contracts—Assets

—

4

—

Total

16,543

94,729

—

 

1   Represents variation margin on the last day of the reporting period.

 

33

 

ESG International Stock ETF

 

 

 

 

 

E.      At February 28, 2019, the fair values of derivatives were reflected in the Statement of Net Assets as follows:

 

 

 

Foreign

 

 

Equity

Exchange

 

 

Contracts

Contracts

Total

Statement of Net Assets Caption

($000)

($000)

($000)

Variation Margin Receivable—Futures Contracts

7

—

7

Unrealized Appreciation—Forward Currency Contracts

—

4

4

Total Assets

7

4

11

Variation Margin Payable—Futures Contracts

(4)

—

(4)

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the period ended February 28, 2019, were:

 

 

 

Foreign

 

 

Equity

Exchange

 

 

Contracts

Contracts

Total

Realized Net Gain (Loss) on Derivatives

($000)

($000)

($000)

Futures Contracts

(139)

—

(139)

Forward Currency Contracts

—

19

19

Realized Net Gain (Loss) on Derivatives

(139)

19

(120)

 

 

 

 

Change in Unrealized Appreciation (Depreciation) on Derivatives

 

 

 

Futures Contracts

59

—

59

Forward Currency Contracts

—

4

4

Change in Unrealized Appreciation (Depreciation) on Derivatives

59

4

63

 

F.       As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

 

Amount

 

($000)

Tax Cost

107,055

Gross Unrealized Appreciation

6,622

Gross Unrealized Depreciation

(2,412)

Net Unrealized Appreciation (Depreciation)

4,210

 

34

 

ESG International Stock ETF

 

 

 

 

 

G.     During the period ended February 28, 2019, the fund purchased $106,327,000 of investment securities and sold $2,269,000 of investment securities, other than temporary cash investments. Purchases and sales include $51,502,000 and $0, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

H.      Capital shares issued and redeemed were:

 

 

September 18, 20181 to

 

February 28, 2019

 

Shares

 

(000)

Issued

2,300

Issued in Lieu of Cash Distributions

—

Redeemed

—

Net Increase (Decrease) in Shares Outstanding

2,300

 

1 Inception.

 

 

I.           Subsequent to the report date, the fund was added to a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually. The facility includes the fund and certain other funds managed by Vanguard; each fund is individually liable for its borrowings, if any, under the credit facility.

 

Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

 

35

 

Trustees Approve Advisory Arrangement

 

 

Effective September 2018, the board of Vanguard World Fund approved the launch of Vanguard ESG International Stock ETF, which utilizes an internalized management structure whereby The Vanguard Group, Inc. (Vanguard), through its Equity Index Group, provides investment advisory services to the fund. The board determined that the investment advisory arrangement with Vanguard was in the best interests of the fund and its prospective shareholders.

 

The board based its decision upon an evaluation of the 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 trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.

 

Nature, extent, and quality of services

 

The board considered the quality of the investment management services to be provided to the fund and took into account the organizational depth and stability of the advisor. The board noted that Vanguard has been managing investments for more than four decades. The Equity Index Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.

 

The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted approval of the advisory arrangement.

 

Investment performance

 

The board determined that the Equity Index Group, in its management of other Vanguard funds, has a track record of consistent performance and disciplined investment processes.

 

Cost

 

The board concluded that the fund’s expense ratio will be well below the average expense ratio charged by funds in its peer group.

 

The board does not conduct a profitability analysis of Vanguard because of Vanguard’s unique structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees.

 

The benefit of economies of scale

 

The board concluded that Vanguard’s arrangement with the fund ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as fund assets increase.

 

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

 

36

 

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P.O. Box 2600

Valley Forge, PA 19482-2600

 

 

 

Connect with Vanguard® > vanguard.com

 

 

 

Fund Information > 800-662-7447

 

Direct Investor Account Services > 800-662-2739

 

Institutional Investor Services > 800-523-1036

 

Text Telephone for People

 

Who Are Deaf or Hard of Hearing > 800-749-7273

 

This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

 

All comparative mutual fund data are from Lipper, a Thomson Reuters Company, or Morningstar, Inc., unless otherwise noted.

 

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or sec.gov.

 

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.

 

 

 

 

 

© 2019 The Vanguard Group, Inc.

 

All rights reserved.

 

Vanguard Marketing Corporation, Distributor.

 

 

 

Q43942 042019

 

 

Item 2: Code of Ethics.

 

Not Applicable.

 

Item 3: Audit Committee Financial Expert.

 

Not Applicable.

 

 

Item 4: Principal Accountant Fees and Services.

 

(a)        Audit Fees.

 

Not Applicable.

 

Item 5: Audit Committee of Listed Registrants.

 

Not Applicable.

 

Item 6: Investments.

 

Not Applicable.

 

Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Not Applicable.

 

Item 8: Portfolio Managers of Closed-End Management Investment Companies.

 

Not Applicable.

 

Item 9: Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not Applicable.

 

Item 10: Submission of Matters to a Vote of Security Holders.

 

Not Applicable.

 

Item 11: Controls and Procedures.

 

(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

 

(b) Internal Control Over Financial Reporting. There were no significant changes in Registrant’s Internal Control Over Financial Reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

Item 12: Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

 

Not Applicable.

 

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 WORLD FUND

 

 

BY:

/s/ MORTIMER J. BUCKLEY*

 

 

 

 

 

     MORTIMER J. BUCKLEY

 

 

CHIEF EXECUTIVE OFFICER

 

 

Date:  April 19, 2019

 

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 WORLD FUND

 

 

BY:

/s/ MORTIMER J. BUCKLEY*

 

 

 

 

 

     MORTIMER J. BUCKLEY

 

 

CHIEF EXECUTIVE OFFICER

 

 

Date:  April 19, 2019

 

 

VANGUARD WORLD FUND

 

 

BY:

/s/ THOMAS J. HIGGINS*

 

 

 

 

 

     THOMAS J. HIGGINS

 

 

CHIEF FINANCIAL OFFICER

 

 

Date: April 19, 2019

 

* 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.

 

 EX-99.CERT 2 a19-6275_1ex99dcert.htm EX-99.CERT

Exhibit 99.CERT

 

CERTIFICATIONS

 

I, Mortimer J. Buckley, certify that:

 

1. I have reviewed this report on Form N-CSR of Vanguard World Fund;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  April 19, 2019

 

/s/ Mortimer J. Buckley

 

 

Mortimer J. Buckley

 

 

Chief Executive Officer

 

 

 

CERTIFICATIONS

 

I, Thomas J. Higgins, certify that:

 

1. I have reviewed this report on Form N-CSR of Vanguard World Fund;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:    April 19, 2019

 

/s/ Thomas J. Higgins

 

 

/s/ Thomas J. Higgins

 

 

Chief Financial Officer

 

 

 EX-99.906CERT 3 a19-6275_1ex99d906cert.htm EX-99.906CERT

Exhibit 99.906CERT

 

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

Name of Issuer: Vanguard World Fund

 

In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his knowledge, that:

 

1.                         The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.                         The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

 

 

Date:    April 19, 2019

 

 

/s/ Mortimer J. Buckley

 

 

Mortimer J. Buckley

 

 

Chief Executive Officer

 

 

 

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

 

Name of Issuer:  Vanguard World Fund

 

In connection with the Report on Form N-CSR of the above-named issuer that is accompanied by this certification, the undersigned hereby certifies, to his knowledge, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

 

 

Date:    April 19, 2019

 

 

/s/ Thomas J. Higgins

 

 

/s/ Thomas J. Higgins

 

 

Chief Financial Officer

 

 

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