N-CSRS 1 tm2014794-4_ncsrs.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, 2019—February 29, 2020

 

 

 

Item 1: Reports to Shareholders

 

 

 

 

 

 

   
   
   
   
Semiannual Report | February 29, 2020  
   
   
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 21

 

 

 

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 29, 2020

 

  Beginning Ending Expenses
  Account Value Account Value Paid During
U.S. Growth Fund 8/31/2019 2/29/2020 Period
Based on Actual Fund Return      
Investor Shares $1,000.00 $1,073.72 $1.96
Admiral™ Shares 1,000.00 1,074.25 1.44
Based on Hypothetical 5% Yearly Return      
Investor Shares $1,000.00 $1,022.97 $1.91
Admiral Shares 1,000.00 1,023.47 1.41

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 0.38% for Investor Shares and 0.28% 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 (182/366).

 

2

 

 

U.S. Growth Fund

 

Sector Diversification

As of February 29, 2020

 

Communication Services   12.5%
Consumer Discretionary   17.3 
Consumer Staples   3.3 
Energy   0.2 
Financials   5.5 
Health Care   11.2 
Industrials   7.6 
Information Technology   39.4 
Materials   1.0 
Other   0.1 
Real Estate   1.7 
Utilities   0.2 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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)

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value•
    Shares ($000)
Common Stocks (97.2%)    
Communication Services (12.3%)  
* Alphabet Inc. Class C 634,388 849,655
* Netflix Inc. 1,774,078 654,688
* Facebook Inc. 3,330,063 640,937
* Alphabet Inc. Class A 407,020 545,101
* Charter Communications Inc. 398,153 196,357
* Take-Two Interactive Software Inc. 1,111,795 119,496
*,^ Roku Inc. 907,327 103,136
* Zillow Group Inc. Class A 885,658 49,305
  Activision Blizzard Inc. 769,202 44,714
* Zynga Inc. 3,488,124 23,405
* Eventbrite Inc. Class A 1,257,484 18,372
* Electronic Arts Inc. 161,716 16,393
*,^ Match Group Inc. 139,075 9,040
* Spotify Technology SA 50,103 6,870
  Comcast Corp. 77,490 3,133
* T-Mobile US Inc. 24,266 2,188
      3,282,790
Consumer Discretionary (17.1%)  
* Amazon.com Inc. 883,002 1,663,355
* Tesla Inc. 1,067,153 712,848
* Alibaba Group Holding Ltd. ADR 1,515,128 315,147
  Home Depot Inc. 1,138,330 247,974
  NIKE Inc. 2,118,536 189,355
  Lululemon Athletica Inc. 772,437 167,935
  Domino’s Pizza Inc. 376,700 127,875
  adidas AG 407,428 114,712
  Kering SA 189,825 107,044
*,^ Wayfair Inc. 1,654,941 104,609
* Chegg Inc. 2,351,282 92,194
* Grubhub Inc. 1,734,410 83,442
  Hilton Worldwide Holdings Inc. 742,830 72,203
* O’Reilly Automotive Inc. 175,750 64,803
* Chewy Inc. 1,966,218 58,200
  Ross Stores Inc. 519,864 56,551
  Hasbro Inc. 614,154 47,443
*,^ Stitch Fix Inc. Class A 1,802,463 43,313
* Booking Holdings Inc. 22,586 38,298
  TJX Cos. Inc. 617,063 36,900
  eBay Inc. 707,919 24,522
  H&R Block Inc. 947,422 19,583
  Target Corp. 189,894 19,559
* NVR Inc. 5,001 18,340
  Las Vegas Sands Corp. 309,373 18,040
  Expedia Group Inc. 178,315 17,585
  Best Buy Co. Inc. 204,197 15,447
* Under Armour Inc. Class A 1,010,164 14,334
* Norwegian Cruise Line Holdings Ltd. 364,820 13,593
  Hanesbrands Inc. 766,600 10,150
  Starbucks Corp. 98,503 7,726
* Under Armour Inc. Class C 591,621 7,383
* Planet Fitness Inc. 107,287 7,241
* LKQ Corp. 224,394 6,638
  Wyndham Destinations Inc. 127,553 5,089
  Polaris Inc. 41,931 3,461
  Gentex Corp. 125,746 3,357
* frontdoor Inc. 78,340 3,322
* Etsy Inc. 45,016 2,602
  Lowe’s Cos. Inc. 19,986 2,130
      4,564,303
Consumer Staples (3.0%)    
  Constellation Brands Inc. Class A 1,561,523 269,175
  Costco Wholesale Corp. 594,131 167,034
  Estee Lauder Cos. Inc. Class A 782,494 143,666
* Monster Beverage Corp. 1,444,988 90,182
  Coca-Cola Co. 536,626 28,704
  Sysco Corp. 382,526 25,495
  Hershey Co. 156,034 22,467
  PepsiCo Inc. 159,564 21,067
  Campbell Soup Co. 452,563 20,420
  Procter & Gamble Co. 168,107 19,035

 

4

 

 

U.S. Growth Fund    
     
      Market
      Value•
    Shares ($000)
  Casey’s General Stores Inc. 19,572 3,191
* Pilgrim’s Pride Corp. 141,188 2,988
      813,424
Energy (0.0%)    
  ConocoPhillips 99,198 4,803
     
Financials (5.1%)    
  MarketAxess Holdings Inc. 571,676 185,412
  CME Group Inc. 756,877 150,482
  KKR & Co. Inc. Class A 5,250,197 150,156
  S&P Global Inc. 496,704 132,079
  Progressive Corp. 1,775,874 129,923
  Charles Schwab Corp. 3,122,709 127,250
  First Republic Bank 1,112,404 111,874
* Markel Corp. 91,373 107,966
  Marsh & McLennan Cos. Inc. 616,359 64,447
  MSCI Inc. 170,390 50,340
  Interactive Brokers Group Inc. 953,568 48,727
* Athene Holding Ltd. Class A 486,561 20,071
  Discover Financial Services 277,040 18,168
  Synchrony Financial 518,579 15,091
  LPL Financial Holdings Inc. 180,816 14,371
  OneMain Holdings Inc 362,102 13,307
  CIT Group Inc. 197,909 7,859
* Arch Capital Group Ltd. 159,777 6,460
  Lazard Ltd. 105,444 3,777
  Voya Financial Inc. 61,213 3,222
  Everest Re Group Ltd. 7,334 1,818
      1,362,800
Health Care (10.8%)    
  UnitedHealth Group Inc. 1,257,062 320,501
* Illumina Inc. 1,193,016 316,949
* IQVIA Holdings Inc. 1,430,334 199,517
* ABIOMED Inc. 941,155 141,418
  AstraZeneca plc ADR 3,136,341 137,372
* Edwards Lifesciences Corp. 652,509 133,660
  Intuitive Surgical Inc. 244,589 130,601
* Penumbra Inc. 697,841 115,744
  Boston Scientific Corp. 2,424,453 90,650
* Novocure Ltd. 1,238,715 90,117
  BioMarin Pharmaceutical Inc. 978,409 88,419
  Thermo Fisher Scientific Inc. 298,104 86,689
* Alnylam Pharmaceuticals Inc. 656,199 77,208
  Vertex Pharmaceuticals Inc. 322,912 72,342
* Mettler-Toledo International Inc. 99,352 69,715
  Zoetis Inc. 506,694 67,507
*,^ Teladoc Health Inc. 483,712 60,445
  AbbVie Inc. 659,864 56,557
* Glaukos Corp. 1,248,930 54,928
  Danaher Corp. 308,053 44,538
  Eli Lilly & Co. 315,145 39,749
* Seattle Genetics Inc. 336,522 38,316
  Johnson & Johnson 267,792 36,013
*,^ Denali Therapeutics Inc. 1,800,679 35,599
  Bristol-Myers Squibb Co. 586,703 34,651
  Merck & Co. Inc. 406,640 31,132
*,^ Moderna Inc. 1,131,513 29,340
* Biogen Inc. 94,790 29,232
* Veeva Systems Inc. 177,049 25,136
  HCA Healthcare Inc. 191,653 24,342
* Align Technology Inc. 101,750 22,217
  Humana Inc. 68,800 21,994
* Centene Corp. 390,614 20,710
* PRA Health Sciences Inc. 214,688 20,224
  AmerisourceBergen Corp. Class A 219,370 18,497
* Henry Schein Inc. 227,189 13,845
* DexCom Inc. 41,315 11,403
* Charles River Laboratories International Inc. 73,242 11,394
  Amgen Inc. 48,977 9,782
* IDEXX Laboratories Inc. 33,437 8,510
  Bruker Corp. 158,088 6,886
  Agilent Technologies Inc. 77,202 5,950
  STERIS plc 35,295 5,598
  Becton Dickinson and Co. 22,692 5,397
  Gilead Sciences Inc. 76,984 5,340
  McKesson Corp. 37,514 5,247
  Avantor Inc. 232,577 3,663
  Abbott Laboratories 40,648 3,131
  Stryker Corp. 10,538 2,008
      2,880,183
Industrials (7.3%)    
* Uber Technologies Inc. 7,700,750 260,824
  Boeing Co. 607,059 167,008
  Lockheed Martin Corp. 442,623 163,713
  TransUnion 1,603,349 142,570
  IHS Markit Ltd. 1,603,701 114,248
  Safran SA 794,448 109,975
  Northrop Grumman Corp. 311,108 102,305
* CoStar Group Inc. 149,505 99,808
  Equifax Inc. 647,967 92,037
  Airbus SE 718,327 86,702
  Union Pacific Corp. 540,676 86,405
  Watsco Inc. 467,287 73,355

 

5

 

 

U.S. Growth Fund    
     
      Market
      Value•
    Shares ($000)
  Canadian National Railway Co. 757,650 64,332
* Copart Inc. 680,333 57,475
  HEICO Corp. Class A 508,922 44,953
  Fortive Corp. 639,478 44,226
  Rockwell Automation Inc. 133,182 24,439
* Lyft Inc. Class A 564,278 21,510
  Armstrong World Industries Inc. 203,618 20,392
  AMETEK Inc. 222,689 19,151
  Delta Air Lines Inc. 391,040 18,039
  Nielsen Holdings plc 964,470 17,563
  Spirit AeroSystems Holdings Inc. 285,158 15,068
* JetBlue Airways Corp. 949,915 14,990
  Allison Transmission Holdings Inc. 341,587 13,868
  Illinois Tool Works Inc. 71,027 11,917
  WW Grainger Inc. 41,440 11,501
  Landstar System Inc. 107,171 10,821
  United Parcel Service Inc. 115,189 10,423
  Honeywell International Inc. 47,373 7,683
  Caterpillar Inc. 44,128 5,482
  Hubbell Inc. 29,449 3,924
  KAR Auction Services Inc. 137,710 2,651
  Alaska Air Group Inc. 31,798 1,605
  Acuity Brands Inc. 15,056 1,549
      1,942,512
Information Technology (39.1%)  
  Microsoft Corp. 11,167,916 1,809,314
  Apple Inc. 4,195,817 1,146,969
  Mastercard Inc. 3,191,333 926,284
  Visa Inc. 3,961,298 720,006
* salesforce.com Inc. 3,010,302 512,955
* Shopify Inc. 1,012,143 468,936
* Adobe Inc. 1,268,561 437,806
* ServiceNow Inc. 1,278,060 416,763
* PayPal Holdings Inc. 3,805,048 410,907
  NVIDIA Corp. 1,422,746 384,241
* Workday Inc. 1,865,827 323,255
* Autodesk Inc. 1,335,243 254,871
* Trade Desk Inc. 688,126 197,664
* FleetCor Technologies Inc. 586,753 155,953
* Advanced Micro Devices Inc. 3,331,276 151,506
  Fidelity National Information Services Inc. 1,013,317 141,581
  Global Payments Inc. 654,798 120,463
1 Adyen NV 132,144 116,307
  Coupa Software Inc. 758,367 113,565
* DocuSign Inc. Class A 1,300,759 112,269
  SS&C Technologies Holdings Inc. 1,979,516 109,863
  Applied Materials Inc. 1,828,705 106,284
^ Microchip Technology Inc. 1,146,677 104,015
* Arista Networks Inc. 443,036 85,559
*,^ Slack Technologies Inc. Class A 3,147,609 85,048
  Broadcom Inc. 305,222 83,210
* Splunk Inc. 563,180 82,973
* Zoom Video Communications Inc. Class A 627,311 65,868
  CDW Corp. 498,758 56,968
* Tyler Technologies Inc. 181,498 56,872
  Texas Instruments Inc. 429,311 49,002
* Ceridian HCM Holding Inc. 680,437 48,127
  Accenture plc Class A 255,450 46,132
* Yext Inc. 2,420,515 36,695
*,^ Appian Corp. Class A 809,482 35,739
* Square Inc. 347,654 28,970
* New Relic Inc. 498,635 28,053
* Atlassian Corp. plc    
  Class A 188,444 27,317
  Lam Research Corp. 91,991 26,993
  Cisco Systems Inc. 673,536 26,894
* Cadence Design Systems Inc. 398,317 26,345
* Fortinet Inc. 246,115 25,118
  Booz Allen Hamilton Holding Corp. 346,677 24,718
* Synopsys Inc. 178,908 24,677
* Paycom Software Inc. 84,298 23,827
  Teradyne Inc. 380,541 22,361
  HP Inc. 1,055,767 21,949
* Manhattan Associates Inc. 289,457 19,498
* 2U Inc. 768,511 18,068
  Jabil Inc. 522,768 16,755
* Dell Technologies Inc. 372,934 15,089
* Fair Isaac Corp. 30,493 11,466
  Oracle Corp. 224,897 11,123
* VMware Inc. 78,091 9,412
* Teradata Corp. 431,745 8,609
* Paylocity Holding Corp. 62,120 8,046
* ON Semiconductor Corp. 417,959 7,799
* GoDaddy Inc. 89,373 6,254
  QUALCOMM Inc. 76,325 5,976
  Sabre Corp. 227,052 3,091
  CoreLogic Inc. 66,282 3,007
* Euronet Worldwide Inc. 22,066 2,737
      10,428,122

 

6

 

 

U.S. Growth Fund    
     
      Market
      Value•
    Shares ($000)
Materials (0.9%)    
  Ball Corp. 2,850,453 200,843
* Element Solutions Inc. 1,821,928 18,930
  Scotts Miracle-Gro Co. 124,113 13,154
* Axalta Coating Systems Ltd. 165,291 4,119
  CF Industries Holdings Inc.    48,451 1,786
  Sealed Air Corp. 56,882 1,724
      240,556
Other (0.0%)    
*,§,2 The We Company    
  Class A PP 19,046 125
     
Real Estate (1.6%)    
  American Tower Corp. 612,092 138,823
* Redfin Corp. 2,915,252 78,887
  Crown Castle International Corp. 495,381 70,983
  Equinix Inc. 117,598 67,360
  Iron Mountain Inc. 662,870 20,158
  Simon Property Group Inc. 154,426 19,007
  American Homes 4 Rent 716,502 18,550
  Omega Healthcare Investors Inc. 307,200 12,165
* CBRE Group Inc. 121,645 6,829
      432,762
Utilities (0.0%)    
  NRG Energy Inc. 171,224 5,686
Total Common Stocks    
(Cost $16,246,065)   25,958,066
Preferred Stocks (0.1%)    
*,§,2,3 Airbnb Inc., 8.000% 128,123 16,738
*,§,2,3 The We Company Pfd. D1 PP 260,418 2,901
*,§,2,3 The We Company Pfd. D2 PP 204,614 2,280
Total Preferred Stocks (Cost $19,671) 21,919
Temporary Cash Investments (4.2%)  
Money Market Fund (4.0%)    
4,5 Vanguard Market Liquidity Fund, 1.706% 10,572,695 1,057,587

 

    Face Market
    Amount Value•
    ($000) ($000)
Repurchase Agreement (0.1%)    
  Bank of America Securities, LLC 1.600%, 3/2/20 (Dated 2/28/20, Repurchase Value $21,903,000, collateralized by Federal Farm Credit Bank, 2.480%, 10/19/29 and Federal Home Loan Mortgage Corp. 0.000%, 7/15/32, with a value of $22,338,000) 21,900 21,900
       
U.S. Government and Agency Obligations (0.1%)
6 United States Treasury Bill, 1.515%, 4/9/20 500 499
6 United States Treasury Bill, 1.543%, 4/16/20 4,970 4,962
6 United States Treasury Bill, 1.551%, 5/14/20 23,500 23,439
      28,900
Total Temporary Cash Investments  
(Cost $1,108,123)   1,108,387
Total Investments (101.5%)    
(Cost $17,373,859)   27,088,372
Other Assets and Liabilities—Net (-1.5%)5   (396,268)
Net Assets (100%)   26,692,104

Cost rounded to $000.

•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 $293,846,000.

§Security value determined using significant unobservable inputs.
1Security 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 29, 2020, the value of this security represented 0.4% of net assets.
2Restricted securities totaling $22,044,000, representing 0.1% of net assets. See Restricted Securities table for additional information.

3Perpetual security with no stated maturity date.

4Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

5Collateral of $309,816,000 was received for securities on loan.

6Securities with a value of $27,345,000 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

 

 

       Acquisition 
   Acquisition   Cost 
Security Name  Date   ($000) 
The We Company Pfd. D1 PP   December 2014    4,336 
The We Company Pfd. D2 PP   December 2014    3,407 
The We Company Class A PP   December 2014    317 
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 2020    3,519    519,246    (54,578)
E-mini S&P Mid-Cap 400 Index   March 2020    262    47,480    (5,679)
                   (60,257)

 

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

 

8

 

 

U.S. Growth Fund

  

Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $16,316,522) 26,030,785
Affiliated Issuers (Cost $1,057,337) 1,057,587
Total Investments in Securities 27,088,372
Investment in Vanguard 1,240
Receivables for Investment Securities Sold 39,322
Receivables for Accrued Income 22,352
Receivables for Capital Shares Issued 75,450
Variation Margin Receivable—Futures Contracts 1,076
Total Assets 27,227,812
Liabilities  
Due to Custodian 34,057
Payables for Investment Securities Purchased 39,746
Collateral for Securities on Loan 309,816
Payables to Investment Advisor 10,758
Payables for Capital Shares Redeemed 121,197
Payables to Vanguard 17,071
Variation Margin Payable—Futures Contracts 3,063
Total Liabilities 535,708
Net Assets 26,692,104
   
At February 29, 2020, net assets consisted of:
   
Paid-in Capital 16,579,484
Total Distributable Earnings (Loss) 10,112,620
Net Assets 26,692,104
   
Investor Shares—Net Assets  
Applicable to 211,783,712 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 8,963,036
Net Asset Value Per Share—Investor Shares $42.32
   
Admiral Shares—Net Assets  
Applicable to 161,718,345 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 17,729,068
Net Asset Value Per Share—Admiral Shares $109.63

  

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

 

9

 

U.S. Growth Fund

 

Statement of Operations

  

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Dividends—Unaffiliated Issuers1 89,180
Dividends—Affiliated Issuers 371
Interest—Unaffiliated Issuers 816
Interest—Affiliated Issuers 6,585
Securities Lending—Net 2,355
Total Income 99,307
Expenses  
Investment Advisory Fees—Note B  
Basic Fee 18,712
Performance Adjustment 2,479
The Vanguard Group—Note C  
Management and Administrative—Investor Shares 9,826
Management and Administrative—Admiral Shares 10,590
Marketing and Distribution—Investor Shares 357
Marketing and Distribution—Admiral Shares 396
Custodian Fees 97
Shareholders’ Reports—Investor Shares 41
Shareholders’ Reports—Admiral Shares 25
Trustees’ Fees and Expenses 19
Total Expenses 42,542
Expenses Paid Indirectly (185)
Net Expenses 42,357
Net Investment Income 56,950
Realized Net Gain (Loss)  
Investment Securities Sold—Unaffiliated Issuers 568,852
Investment Securities Sold—Affiliated Issuers 15,270
Futures Contracts 39,801
Foreign Currencies (215)
Realized Net Gain (Loss) 623,708
Change in Unrealized Appreciation (Depreciation)  
Investment Securities—Unaffiliated Issuers 1,248,118
Investment Securities—Affiliated Issuers (5,412)
Futures Contracts (62,333)
Foreign Currencies 73
Change in Unrealized Appreciation (Depreciation) 1,180,446
Net Increase (Decrease) in Net Assets Resulting from Operations 1,861,104

1Dividends are net of foreign withholding taxes of $170,000.

 

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

 

10

 

 

U.S. Growth Fund

  

Statement of Changes in Net Assets

  

   Six Months Ended    Year Ended  
   February 29,    August 31,  
   2020    2019  
   ($000)  ($000)
Increase (Decrease) in Net Assets        
Operations        
Net Investment Income  56,950   84,993 
Realized Net Gain (Loss)  623,708   1,097,123 
Change in Unrealized Appreciation (Depreciation)  1,180,446   (357,242)
Net Increase (Decrease) in Net Assets Resulting from Operations  1,861,104   824,874 
Distributions1        
Investor Shares  (357,080)  (342,379)
Admiral Shares  (704,479)  (477,858)
Total Distributions  (1,061,559)  (820,237)
Capital Share Transactions        
Investor Shares  (146,570)  4,292,730 
Admiral Shares  159,605   10,751,352 
Net Increase (Decrease) from Capital Share Transactions  13,035   15,044,082 
Total Increase (Decrease)  812,580   15,048,719 
Net Assets        
Beginning of Period  25,879,524   10,830,805 
End of Period  26,692,104   25,879,524 
1Certain prior period numbers have been reclassified to conform with current period presentation.

 

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

 

11

 

U.S. Growth Fund

 

Financial Highlights

 

Investor Shares

 

   Six Months           
   Ended           
For a Share Outstanding  February 29,    Year Ended August 31,  
Throughout Each Period  2020    2019    2018    2017    2016    2015  
Net Asset Value, Beginning of Period  $41.02   $43.31   $35.62   $30.32   $30.89   $31.03 
Investment Operations                        
Net Investment Income  .0771  .1761  .1341  .1511  .151   .169 
Net Realized and Unrealized Gain (Loss) on Investments  2.932   .771   9.394   5.590   1.944   2.168 
Total from Investment Operations  3.009   .947   9.528   5.741   2.095   2.337 
Distributions                        
Dividends from Net Investment Income  (.119)  (.132)  (.146)  (.121)  (.147)  (.194)
Distributions from Realized Capital Gains  (1.590)  (3.105)  (1.692)  (.320)  (2.518)  (2.283)
Total Distributions  (1.709)  (3.237)  (1.838)  (.441)  (2.665)  (2.477)
Net Asset Value, End of Period  $42.32   $41.02   $43.31   $35.62   $30.32   $30.89 
Total Return2  7.37%  3.70%  27.64%  19.24%  6.89%  7.96%
Ratios/Supplemental Data                        
Net Assets, End of Period (Millions)  $8,963   $8,819   $4,582   $4,113   $3,794   $3,975 
Ratio of Total Expenses to Average Net Assets3  0.38%  0.39%  0.42%  0.43%  0.46%  0.47%
Ratio of Net Investment Income to Average Net Assets  0.36%  0.44%  0.35%  0.47%  0.50%  0.53%
Portfolio Turnover Rate  16%  41%  33%  27%  32%  38%

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

1Calculated based on average shares outstanding.
2Total 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.

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

 

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

 

12

 

 

U.S. Growth Fund

  

Financial Highlights

  

Admiral Shares

 

   Six Months           
   Ended           
For a Share Outstanding  February 29,    Year Ended August 31,  
Throughout Each Period  2020    2019    2018    2017    2016    2015  
Net Asset Value, Beginning of Period  $106.30   $112.28   $92.24   $78.52   $80.01   $80.37 
Investment Operations                        
Net Investment Income  .2551  .5721  .4761  .5021  .506   .563 
Net Realized and Unrealized Gain (Loss) on Investments  7.596   1.963   24.323   14.480   5.018   5.607 
Total from Investment Operations  7.851   2.535   24.799   14.982   5.524   6.170 
Distributions                        
Dividends from Net Investment Income  (.401)  (.464)  (.375)  (.433)  (.499)  (.623)
Distributions from Realized Capital Gains  (4.120)  (8.051)  (4.384)  (.829)  (6.515)  (5.907)
Total Distributions  (4.521)  (8.515)  (4.759)  (1.262)  (7.014)  (6.530)
Net Asset Value, End of Period  $109.63   $106.30   $112.28   $92.24   $78.52   $80.01 
Total Return2  7.42%  3.80%  27.78%  19.42%  7.03%  8.12%
Ratios/Supplemental Data                        
Net Assets, End of Period (Millions)  $17,729   $17,060   $6,249   $3,791   $3,066   $2,421 
Ratio of Total Expenses to Average Net Assets3  0.28%  0.28%  0.30%  0.30%  0.32%  0.33%
Ratio of Net Investment Income to Average Net Assets  0.46%  0.55%  0.47%  0.60%  0.64%  0.67%
Portfolio Turnover Rate  16%  41%  33%  27%  32%  38%

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

1Calculated based on average shares outstanding.
2Total 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.
3Includes performance-based investment advisory fee increases (decreases) of 0.02%, 0.01%, 0.01%, (0.01%), 0.02%, and 0.03%.

 

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

 

13

 

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 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 Schedule of Investments.

 

14

 

U.S. Growth Fund 

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, the fund’s average investments in long and short futures contracts represented 2% 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 prequalified 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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 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,

 

15

 

U.S. Growth 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 and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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 Jennison Associates LLC, Wellington Management Company LLP, Baillie Gifford Overseas Ltd., and Jackson Square Partners, 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 Jennison Associates LLC, Wellington Management

 

16

 

U.S. Growth Fund

  

Company LLP, and Jackson Square Partners, 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 the S&P 500 Index for the preceding three years.

 

Vanguard provides investment advisory services to a portion of the fund as described below; the fund paid Vanguard advisory fees of $691,000 for the six months ended February 29, 2020.

 

For the six months ended February 29, 2020, the aggregate investment advisory fee paid to all advisors represented an effective annual basic rate of 0.14% of the fund’s average net assets, before a net increase of $2,479,000 (0.02%) 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 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $1,240,000, representing less than 0.01% of the fund’s net assets and 0.50% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, these arrangements reduced the fund’s management and administrative expenses by $182,000 and custodian fees by $3,000. The total expense reduction represented an effective annual rate of less than 0.01% 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 Schedule of Investments.

 

17

 

U.S. Growth Fund

  

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
Common Stocks 25,423,201 534,740 125 25,958,066
Preferred Stocks — — 21,919 21,919
Temporary Cash Investments 1,057,587 50,800 — 1,108,387
Total 26,480,788 585,540 22,044 27,088,372
Derivative Financial Instruments        
Assets        
Futures Contracts1 1,076 — — 1,076
Liabilities        
Futures Contracts1 3,063 — — 3,063

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

 

F. As of February 29, 2020, 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 17,373,859
Gross Unrealized Appreciation 10,431,497
Gross Unrealized Depreciation (777,241)
Net Unrealized Appreciation (Depreciation) 9,654,256

 

G. During the six months ended February 29, 2020, the fund purchased $4,019,144,000 of investment securities and sold $4,777,725,000 of investment securities, other than temporary cash investments.

 

18

 

 

U.S. Growth Fund

 

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

 

  Six Months Ended       Year Ended
  February 29, 2020     August 31, 2019
  Amount Shares     Amount Shares
  ($000) (000)     ($000) (000)
Investor Shares            
Issued 560,907 12,821     975,070 24,941
Issued in Connection with Acquisition of Vanguard Morgan Growth Fund — —     4,276,013 107,224
Issued in Lieu of Cash Distributions 347,590 8,288     333,194 9,768
Redeemed (1,055,067) (24,320)     (1,291,547) (32,733)
Net Increase (Decrease)—Investor Shares (146,570) (3,211)     4,292,730 109,200
Admiral Shares            
Issued 1,368,197 12,001     2,236,862 21,975
Issued in Connection with Acquisition of Vanguard Morgan Growth Fund — —     10,459,067 101,244
Issued in Lieu of Cash Distributions 662,452 6,098     449,504 5,088
Redeemed (1,871,044) (16,873)     (2,394,081) (23,467)
Net Increase (Decrease)—Admiral Shares 159,605 1,226     10,751,352 104,840

 

I. 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 208 million shares of the fund for 275 million shares of Vanguard Morgan Growth Fund. Each class of shares for Vanguard Morgan Growth Fund was exchanged for the like share class of the fund. The fund’s net assets of $11.4 billion were combined with Vanguard Morgan Growth Fund’s net assets of $14.7 billion, including $4.5 billion of unrealized appreciation, resulting in combined net assets of $26.1 billion.

 

19

 

 

U.S. Growth Fund

 

Assuming that the acquisition had been completed on September 1, 2018, the beginning of the fund’s reporting period, the fund’s pro forma results of operations for the year ended August 31, 2019, would be:

 

  Amount
  ($000)
Net Investment Income 140,696
Realized Net Gain (Loss) 2,794,376
Change in Unrealized Appreciation (Depreciation) (2,051,846)
Net Increase (Decrease) in Net Assets Resulting from Operations 883,226

 

Because the combined funds have been managed as a single integrated fund since the acquisition was completed, it is not practical to separate the results of operations of Vanguard Morgan Growth Fund that have been included in the fund’s operations since April 5, 2019.

 

J. 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. 29,
  2019   from Net Change in   Capital Gain 2020
  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 95,486 — 105,127 15,249 (5,608) 371 — —
Vanguard Market Liquidity Fund 989,536 NA1 NA1 21 196 6,585 — 1,057,587
Total 1,085,022     15,270 (5,412) 6,956 — 1,057,587

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

 

K. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

20

 

 

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), Wellington Management Company LLP (Wellington Management), and The Vanguard Group, Inc. (Vanguard), through its Quantitative Equity Group. Please note that in December 2018, the board approved the addition of Vanguard, through its Quantitative Equity Group, as an advisor to the fund and Vanguard began managing a portion of the fund in April 2019. The board determined that renewing the fund’s advisory arrangements was in the best interests of the fund and its shareholders.

 

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

 

The board, or an investment committee made up of board members, also received information 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, and strong free-cash-flow generation that is attractively priced compared with 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.

  

21

 

 

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.

 

Vanguard. Vanguard has been managing investments for more than four decades. The Quantitative Equity Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth. Vanguard has managed a portion of the fund since 2019.

 

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 index 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 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 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 also concluded that the fund’s arrangement with Vanguard ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as the fund’s assets managed by Vanguard increase.

 

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

 

22

 

 

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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.

 

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, www.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 www.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.

 

 © 2020 The Vanguard Group, Inc.
   All rights reserved.
   Vanguard Marketing Corporation, Distributor.
    
   Q232 042020

 

 

 

 

   
   
   
  Semiannual Report | February 29, 2020
   
   
  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 29, 2020

 

  Beginning Ending Expenses
  Account Value Account Value Paid During
International Growth Fund 8/31/2019 2/29/2020 Period
Based on Actual Fund Return      
Investor Shares $1,000.00 $1,095.69 $2.29
Admiral™ Shares 1,000.00 1,096.29 1.72
Based on Hypothetical 5% Yearly Return      
Investor Shares $1,000.00 $1,022.68 $2.21
Admiral Shares 1,000.00 1,023.22 1.66

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 0.44% for Investor Shares and 0.33% 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 (182/366).

 

2 

 

 

International Growth Fund

 

Sector Diversification 

As of February 29, 2020

 

Communication Services   10.7%
Consumer Discretionary   36.1 
Consumer Staples   5.2 
Energy   0.8 
Financials   11.6 
Health Care   11.3 
Industrials   8.3 
Information Technology   11.6 
Materials   3.3 
Other   0.6 
Utilities   0.5 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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)

 

Schedule of Investments 

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

         Market 
         Value● 
      Shares   ($000)
Common Stocks (98.1%)          
Austria (0.4%)          
  Erste Group Bank AG   4,933,241    168,883 
           
Belgium (1.2%)          
  Umicore SA   11,594,371    488,251 
           
Brazil (0.6%)          
  B3 SA - Brasil Bolsa          
  Balcao   11,674,291    125,308 
  Raia Drogasil SA   4,032,510    108,119 
           233,427 
Canada (0.8%)          
  Toronto-Dominion Bank   3,133,272    161,163 
  Nutrien Ltd.   3,665,128    148,134 
           309,297 
China (19.1%)          
* Alibaba Group Holding          
  Ltd. ADR   11,394,039    2,369,960 
  Tencent Holdings Ltd.   45,107,500    2,287,163 
* TAL Education Group          
  ADR   18,485,132    1,005,406 
* Meituan Dianping          
  Class B   39,299,430    507,041 
  Ping An Insurance          
  Group Co. of China          
  Ltd.   37,534,500    427,608 
* Baidu Inc. ADR   2,434,459    292,087 
* Trip.com Group Ltd.          
  ADR   7,312,030    221,993 
  China Mengniu Dairy          
  Co. Ltd.   33,524,000    122,520 
  China Pacific Insurance          
  Group Co. Ltd.   28,807,200    96,638 
^,* NIO Inc. ADR   17,591,617    72,653 
^,* iQIYI Inc. ADR   2,918,602    65,464 
           7,468,533 

Denmark (3.0%)          
* Genmab A/S   2,594,661    586,740 
  Vestas Wind Systems          
  A/S   2,343,705    226,122 
^ Ambu A/S Class B   5,449,774    124,115 
  Novozymes A/S   2,401,809    123,130 
  Chr Hansen Holding          
  A/S   1,658,818    119,590 
           1,179,697 
France (7.3%)          
  Kering SA   1,457,626    821,969 
  L’Oreal SA   2,310,130    620,932 
  Schneider Electric SE   5,203,061    528,633 
  EssilorLuxottica SA   1,942,580    266,291 
  Danone SA   3,081,319    217,477 
  Vivendi SA   6,504,608    166,189 
  Total SA   3,833,791    165,707 
  Alstom SA   1,245,851    61,510 
           2,848,708 
Germany (6.7%)          
*,1 Delivery Hero SE   6,275,610    480,077 
*,1 Zalando SE   10,466,867    467,736 
*,2 HelloFresh SE   10,552,945    257,326 
  Bayerische Motoren          
  Werke AG   3,606,936    237,998 
  Infineon Technologies          
  AG   10,158,551    216,822 
  SAP SE   1,667,180    208,137 
  adidas AG   567,658    159,824 
  Continental AG   1,296,308    148,244 
  GEA Group AG   5,087,264    136,131 
  Basf Se   2,275,881    134,697 
* MorphoSys AG   664,989    71,678 
*,1 Rocket Internet SE   2,762,933    60,614 
^,*,2 Jumia Technologies          
  AG ADR   6,724,836    27,639 
*,2 Home24 SE   1,862,256    8,201 
           2,615,124 

 

4 

 

 

International Growth Fund  

 

         Market 
         Value● 
      Shares   ($000)
Hong Kong (3.9%)          
  AIA Group Ltd.   104,493,600    1,047,281 
  Hong Kong Exchanges          
  & Clearing Ltd.   9,052,130    302,848 
  Jardine Matheson          
  Holdings Ltd.   3,239,027    177,216 
           1,527,345 
India (1.7%)          
  Housing Development          
  Finance Corp. Ltd.   11,680,736    354,420 
* HDFC Bank Ltd.   12,874,558    211,321 
  Larsen & Toubro Ltd.   3,123,055    51,854 
*,§,3 ANI Technologies   166,185    48,934 
           666,529 
Indonesia (0.4%)          
  Bank Central Asia          
  Tbk PT   66,399,100    146,670 
           
Israel (0.6%)          
* Wix.com Ltd.   917,880    123,023 
* Check Point Software          
  Technologies Ltd.   1,003,311    104,144 
           227,167 
Italy (2.3%)          
  Ferrari NV   4,745,012    747,431 
  Fiat Chrysler          
  Automobiles NV   13,737,294    173,100 
           920,531 
Japan (9.7%)          
  M3 Inc.   26,545,800    685,310 
  SMC Corp.   1,172,100    467,207 
  SoftBank Group Corp.   9,578,400    444,996 
  Recruit Holdings Co.          
  Ltd.   7,609,700    266,132 
  Nidec Corp.   2,080,800    245,063 
  Nintendo Co. Ltd.   645,900    216,528 
  Sony Corp.   3,375,700    208,105 
  Takeda Pharmaceutical          
  Co. Ltd.   5,032,400    173,787 
  Keyence Corp.   404,000    128,999 
  Kubota Corp.   8,488,000    119,017 
  Murata Manufacturing          
  Co. Ltd.   2,240,300    117,363 
  ORIX Corp.   7,045,400    114,192 
  Toyota Motor Corp.   1,725,900    113,331 
  Pigeon Corp.   3,300,800    111,534 
  Sekisui Chemical Co.          
  Ltd.   7,428,700    111,110 
  Suzuki Motor Corp.   2,605,000    104,815 
^ SBI Holdings Inc.   4,470,400    90,174 
  Bridgestone Corp.   2,506,300    83,060 
           3,800,723 

Netherlands (7.7%)          
  ASML Holding NV   7,358,957    2,040,607 
*,1 Adyen NV   462,877    407,403 
  Exor NV   3,303,396    235,925 
  Koninklijke Philips NV   4,557,391    195,168 
^,* Argenx SE   901,391    126,346 
           3,005,449 
Norway (0.7%)          
  Dnb ASA   8,741,639    146,416 
  Norsk Hydro ASA   38,345,698    111,672 
           258,088 
Singapore (0.4%)          
  Oversea-Chinese          
  Banking Corp. Ltd.   19,070,500    146,805 
           
South Korea (1.2%)          
  Samsung Electronics          
  Co. Ltd.   7,380,761    332,218 
  Samsung SDI Co. Ltd.   596,623    145,021 
           477,239 
Spain (2.8%)          
  Industria de Diseno          
  Textil SA   21,245,632    662,847 
  Banco Bilbao Vizcaya          
  Argentaria SA   51,899,765    248,565 
* Iberdrola SA   16,855,742    192,970 
           1,104,382 
Sweden (3.6%)          
* Spotify Technology          
  SA   4,839,569    663,602 
  Atlas Copco AB          
  Class A   8,919,796    318,035 
* Kinnevik AB   10,340,628    210,596 
  Assa Abloy AB          
  Class B   6,577,550    147,923 
^ Elekta AB Class B   6,427,670    68,223 
           1,408,379 
Switzerland (5.4%)          
  Roche Holding AG   1,956,391    629,046 
  Nestle SA   4,751,751    488,983 
  Temenos AG   1,611,775    230,447 
  Lonza Group AG   574,461    229,232 
  Novartis AG   2,634,439    221,617 
  Cie Financiere          
  Richemont SA   2,311,487    158,455 
* Alcon Inc.   1,663,929    101,751 
  Straumann Holding AG   63,241    59,415 
           2,118,946 
Taiwan (1.1%)          
  Taiwan Semiconductor          
  Manufacturing Co. Ltd.   41,599,000    428,877 

 

5 

 

 

International Growth Fund    

 

         Market 
         Value● 
      Shares   ($000)
Thailand (0.2%)          
  Kasikornbank PCL          
  (Foreign)   20,944,156    80,133 
           
Turkey (0.2%)          
* Turkiye Garanti          
  Bankasi AS   39,634,985    60,677 
           
United Kingdom (5.7%)          
  Rolls-Royce Holdings          
  plc   46,651,516    375,437 
  Diageo plc   9,490,097    338,607 
* Ocado Group plc   19,221,816    266,288 
  GlaxoSmithKline plc   9,564,058    192,999 
  BHP Group plc   8,794,634    160,731 
  Burberry Group plc   6,851,592    147,652 
  Whitbread plc   2,910,764    146,806 
  Smith & Nephew plc   6,481,401    145,415 
  Royal Dutch Shell plc          
  Class A   6,669,211    145,344 
  Lloyds Banking Group          
  plc   170,979,423    110,984 
  Next plc   1,327,095    104,598 
  Bunzl plc   3,607,328    86,621 
^,*,1 Aston Martin Lagonda          
  Global Holdings plc   6,130,091    26,890 
           2,248,372 
United States (11.4%)          
* Tesla Inc.   2,241,608    1,497,372 
* MercadoLibre Inc.   1,888,555    1,163,406 
* Amazon.com Inc.   514,765    969,689 
* Booking Holdings Inc.   64,730    109,760 
* Illumina Inc.   2,734,956    726,596 
           4,466,823 
Total Common Stocks          
(Cost $25,834,084)        38,405,055 
Preferred Stocks (0.4%)          
*,§,2,3,4 You & Mr. Jones   44,800,000    143,808 
*,§,3,4   CureVac GmbH   12,600    17,818 
Total Preferred Stocks          
(Cost $75,682)        161,626 
Temporary Cash Investments (2.5%)          
Money Market Fund (2.4%)          
5,6 Vanguard Market          
  Liquidity Fund,          
  1.706%   9,509,221    951,207 

 

      Face
Amount●
($000)		    Market
Value●
($000)		 
U.S. Government and Agency Obligations (0.1%)          
7 United States Treasury        
  Bill, 1.546%, 3/26/20   2,500    2,498 
7 United States Treasury          
  Bill, 1.506%, 4/9/20   400    399 
7 United States Treasury          
  Bill, 1.543%, 4/16/20   6,178    6,168 
7 United States Treasury          
  Bill, 1.527%–1.541%,          
  4/30/20   4,000    3,991 
7 United States Treasury          
  Bill, 1.551%, 5/14/20   17,000    16,956 
           30,012 
Total Temporary Cash Investments          
(Cost $980,994)        981,219 
Total Investments (101.0%)          
(Cost $26,890,760)        39,547,900 
Other Assets and Liabilities—          
Net (-1.0%)6,8        (400,479)
Net Assets (100%)        39,147,421 

Cost rounded to $000.

●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 $259,883,000.
*Non-income-producing security.
§Security value determined using significant unobservable inputs.
1Security 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 29, 2020, the aggregate value of these securities was $1,442,720,000, representing 3.7% of net assets.
2Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.
3Restricted securities totaling $210,560,000, representing 0.5% of net assets. See Restricted Securities table for additional information.

4Perpetual security with no stated maturity date.

5Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

6Collateral of $295,631,000 was received for securities on loan, of which $293,088,000 is held in Vanguard Market Liquidity Fund and $2,543,000 is held in cash.

7Securities with a value of $19,288,000 have been segregated as initial margin for open futures contracts.

8Cash of $7,470,000 has been segregated as collateral for open forward currency contracts.

ADR—American Depositary Receipt.

 

6 

 

 

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 
           
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 2020 4,547 166,353 (15,072)
Topix Index March 2020 832 115,667 (12,242)
S&P ASX 200 Index March 2020 804 83,462 (5,252)
FTSE 100 Index March 2020 647 54,158 (5,406)
        (37,972)

 

Forward Currency Contracts                  
  Contract             Unrealized Unrealized
  Settlement   Contract Amount (000)   Appreciation (Depreciation)
Counterparty Date   Receive   Deliver   ($000) ($000)
BNP Paribas 4/2/20 EUR 89,870 USD 100,680   — (1,261)
Barclays Bank plc 4/2/20 JPY 8,591,020 USD 79,605 194 —
Toronto-Dominion Bank 4/2/20 GBP 39,820 USD 53,308   — (2,204)
Barclays Bank plc 4/2/20 AUD 38,186 USD 26,288   — (1,392)
BNP Paribas 4/2/20 AUD 31,773 USD 21,880   — (1,165)
JPMorgan Chase Bank, N.A. 4/2/20 EUR 10,100 USD 11,183   — (10)
Royal Bank of Canada 4/2/20 JPY 415,200 USD 3,813 44 —
Royal Bank of Canada 4/2/20 GBP 2,827 USD 3,705   — (76)
Royal Bank of Canada 4/2/20 AUD 4,747 USD 3,243   — (148)
                238 (6,256)

AUD—Australian dollar. 

EUR—euro. 

GBP—British pound. 

JPY—Japanese yen. 

USD—U.S. dollar.

 

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

 

7 

 

 

International Growth Fund

 

Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $25,565,666) 38,159,719
Affiliated Issuers (Cost $1,325,094) 1,388,181
Total Investments in Securities 39,547,900
Investment in Vanguard 1,770
Cash 1,780
Foreign Currency, at Value (Cost $39,756) 39,871
Cash Collateral Pledged—Forward Currency Contracts 7,470
Receivables for Accrued Income 47,827
Receivables for Capital Shares Issued 52,105
Unrealized Appreciation—Forward Currency Contracts 238
Other Assets 2,630
Total Assets 39,701,591
Liabilities  
Payables for Investment Securities Purchased 124,827
Collateral for Securities on Loan 295,631
Payables for Capital Shares Redeemed 84,256
Payables to Investment Advisor 10,758
Payables to Vanguard 30,470
Variation Margin Payable—Futures Contracts 1,972
Unrealized Depreciation—Forward Currency Contracts 6,256
Total Liabilities 554,170
Net Assets 39,147,421

 

8 

 

 

International Growth Fund

 

At February 29, 2020, net assets consisted of:  
   
($000s, except shares and per-share amounts) Amount
Paid-in Capital 26,521,670
Total Distributable Earnings (Loss) 12,625,751
Net Assets 39,147,421
   
Investor Shares—Net Assets  
Applicable to 238,448,878 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 7,302,878
Net Asset Value Per Share—Investor Shares $30.63
   
Admiral Shares—Net Assets  
Applicable to 326,867,600 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 31,844,543
Net Asset Value Per Share—Admiral Shares $97.42

 

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

  

9 

 

 

International Growth Fund

 

Statement of Operations

 

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Dividends—Unaffiliated Issuers1 193,587
Dividends—Affiliated Issuers 397
Interest—Unaffiliated Issuers 183
Interest—Affiliated Issuers 5,002
Securities Lending—Net 14,863
Total Income 214,032
Expenses  
Investment Advisory Fees—Note B  
Basic Fee 27,717
Performance Adjustment 7,458
The Vanguard Group—Note C  
Management and Administrative—Investor Shares 8,880
Management and Administrative—Admiral Shares 20,894
Marketing and Distribution—Investor Shares 453
Marketing and Distribution—Admiral Shares 1,082
Custodian Fees 1,839
Shareholders’ Reports—Investor Shares 64
Shareholders’ Reports—Admiral Shares 127
Trustees’ Fees and Expenses 27
Total Expenses 68,541
Net Investment Income 145,491
Realized Net Gain (Loss)  
Investment Securities Sold—Unaffiliated Issuers 214,688
Investment Securities Sold—Affiliated Issuers 13,089
Futures Contracts 19,251
Forward Currency Contracts (1,388)
Foreign Currencies (827)
Realized Net Gain (Loss) 244,813
Change in Unrealized Appreciation (Depreciation)  
Investment Securities—Unaffiliated Issuers 2,956,288
Investment Securities—Affiliated Issuers 82,971
Futures Contracts (36,661)
Forward Currency Contracts (600)
Foreign Currencies 1,025
Change in Unrealized Appreciation (Depreciation) 3,003,023
Net Increase (Decrease) in Net Assets Resulting from Operations 3,393,327
1Dividends are net of foreign withholding taxes of $17,172,000.

 

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

 

10 

 

 

International Growth Fund

 

Statement of Changes in Net Assets

 

  Six Months Ended Year Ended
  February 29, August 31,
  2020 2019
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 145,491 457,175
Realized Net Gain (Loss) 244,813 (32,262)
Change in Unrealized Appreciation (Depreciation) 3,003,023 (2,156,633)
Net Increase (Decrease) in Net Assets Resulting from Operations 3,393,327 (1,731,720)
Distributions1    
Investor Shares (94,219) (336,132)
Admiral Shares (424,749) (1,277,967)
Total Distributions (518,968) (1,614,099)
Capital Share Transactions    
Investor Shares (336,560) (284,833)
Admiral Shares 1,004,423 1,992,089
Net Increase (Decrease) from Capital Share Transactions 667,863 1,707,256
Total Increase (Decrease) 3,542,222 (1,638,563)
Net Assets    
Beginning of Period 35,605,199 37,243,762
End of Period 39,147,421 35,605,199
1Certain prior period numbers have been reclassified to conform with current period presentation.

 

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

 

11 

 

 

International Growth Fund

 

Financial Highlights

 

Investor Shares

 

  Six Months            
    Ended     Year Ended August 31,  
For a Share Outstanding February 29,      
Throughout Each Period   2020 2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $28.30 $31.23 $28.38 $22.38 $20.83 $23.79  
Investment Operations                
Net Investment Income   .1031 .3421 .3811 .2401 .304 .308  
Net Realized and Unrealized Gain (Loss)              
on Investments   2.616 (1.941) 2.722 6.028 1.539 (2.774)  
Total from Investment Operations   2.719 (1.599) 3.103 6.268 1.843 (2.466)  
Distributions                
Dividends from Net Investment Income (.389) (.403) (.253) (.268) (.293) (.494)  
Distributions from Realized Capital Gains — (.928) — — — —  
Total Distributions   (.389) (1.331) (.253) (.268) (.293) (.494)  
Net Asset Value, End of Period   $30.63 $28.30 $31.23 $28.38 $22.38 $20.83  
Total Return2   9.57% -4.58% 10.97% 28.43% 8.95% -10.46%  
                 
Ratios/Supplemental Data                
Net Assets, End of Period (Millions)   $7,303 $7,056 $8,074 $7,731 $6,700 $7,172  
Ratio of Total Expenses to                
Average Net Assets3   0.44% 0.43% 0.45% 0.45% 0.46% 0.47%  
Ratio of Net Investment Income to                
Average Net Assets   0.67% 1.23% 1.25% 1.01% 1.47% 1.34%  
Portfolio Turnover Rate   8% 13% 16% 15% 29% 29%  

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

1Calculated based on average shares outstanding.
2Total 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.
3Includes performance-based investment advisory fee increases (decreases) of 0.04%, 0.03%, 0.03%, 0.03%, 0.04%, and 0.03%.

 

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

 

12 

 

 

International Growth Fund

 

Financial Highlights

 

Admiral Shares

 

  Six Months              
  Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period 2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $90.05 $99.45 $90.24 $71.19 $66.28 $75.70  
Investment Operations                
Net Investment Income .3761 1.2031 1.3651 .8791 1.062 1.088  
Net Realized and Unrealized Gain (Loss)                
on Investments 8.332 (6.230) 8.652 19.127 4.877 (8.821)  
Total from Investment Operations 8.708 (5.027) 10.017 20.006 5.939 (7.733)  
Distributions                
Dividends from Net Investment Income (1.338) (1.418) (.807) (.956) (1.029) (1.687)  
Distributions from Realized Capital Gains — (2.955) — — — —  
Total Distributions (1.338) (4.373) (.807) (.956) (1.029) (1.687)  
Net Asset Value, End of Period $97.42 $90.05 $99.45 $90.24 $71.19 $66.28  
 
Total Return2		 9.63% -4.50% 11.14% 28.57% 9.07% -10.32%  
 
Ratios/Supplemental Data		                
Net Assets, End of Period (Millions) $31,845 $28,549 $29,170 $23,101 $15,704 $13,752  
Ratio of Total Expenses to                
Average Net Assets3 0.33% 0.32% 0.32% 0.32% 0.33% 0.34%  
Ratio of Net Investment Income to                
Average Net Assets 0.77% 1.34% 1.38% 1.14% 1.60% 1.47%  
Portfolio Turnover Rate 8% 13% 16% 15% 29% 29%  

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

1Calculated based on average shares outstanding.
2Total 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.
3Includes performance-based investment advisory fee increases (decreases) of 0.04%, 0.03%, 0.03%, 0.03%, 0.04%, and 0.03%.

 

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

 

13 

 

 

 

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 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

 

14 

 

International 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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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.

 

4. Forward Currency Contracts: 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 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 Schedule of Investments.

 

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 Schedule of Investments. 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 forward currency contract gains (losses).

 

During the six months ended February 29, 2020, the fund’s average investment in forward currency contracts represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

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International Growth Fund

 

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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 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 and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans

 

16 

 

International Growth Fund

 

may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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. 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 their 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 fee 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 29, 2020, 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 $7,458,000 (0.04%) 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 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);

 

17 

 

International Growth Fund

 

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 29, 2020, the fund had contributed to Vanguard capital in the amount of $1,770,000, representing less than 0.01% of the fund’s net assets and 0.71% of Vanguard’s capital received pursuant to the FSA. 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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
Common Stocks—North and South America 5,009,547 — — 5,009,547
Common Stocks—Other 4,945,971 28,400,603 48,934 33,395,508
Preferred Stocks — — 161,626 161,626
Temporary Cash Investments 951,207 30,012 — 981,219
Total 10,906,725 28,430,615 210,560 39,547,900
Derivative Financial Instruments        
Assets        
Forward Currency Contracts — 238 — 238
Liabilities        
Futures Contracts1 1,972 — — 1,972
Forward Currency Contracts — 6,256 — 6,256
Total 1,972 6,256 — 8,228

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

 

18 

 

International Growth Fund

 

E. At February 29, 2020, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:

 

    Foreign  
  Equity Exchange  
  Contracts Contracts Total
Statement of Assets and Liabilities Caption ($000) ($000) ($000)
Unrealized Appreciation—Forward Currency Contracts — 238 238
Total Assets — 238 238
       
Variation Margin Payable—Futures Contracts 1,972 — 1,972
Unrealized Depreciation—Forward Currency Contracts — 6,256 6,256
Total Liabilities 1,972 6,256 8,228

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 29, 2020, were:

 

    Foreign  
  Equity Exchange  
  Contracts Contracts Total
Realized Net Gain (Loss) on Derivatives ($000) ($000) ($000)
Futures Contracts 19,251 — 19,251
Forward Currency Contracts — (1,388) (1,388)
Realized Net Gain (Loss) on Derivatives 19,251 (1,388) 17,863

 

Change in Unrealized Appreciation (Depreciation) on Derivatives

      
Futures Contracts (36,661) — (36,661)
Forward Currency Contracts — (600) (600)
Change in Unrealized Appreciation (Depreciation) on Derivatives (36,661) (600) (37,261)

 

F. As of February 29, 2020, 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 26,911,097
Gross Unrealized Appreciation 14,984,333
Gross Unrealized Depreciation (2,391,520)
Net Unrealized Appreciation (Depreciation) 12,592,813

 

G. During the six months ended February 29, 2020, the fund purchased $3,206,412,000 of investment securities and sold $3,109,983,000 of investment securities, other than temporary cash investments.

 

19 

 

International Growth Fund

 

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

 

  Six Months Ended     Year Ended
  February 29, 2020   August 31, 2019
  Amount Shares   Amount Shares
  ($000) (000)   ($000) (000)
Investor Shares          
Issued 405,780 12,854   945,569 33,667
Issued in Lieu of Cash Distributions 90,043 2,857   322,714 12,842
Redeemed (832,383) (26,636)   (1,553,116) (55,661)
Net Increase (Decrease)—Investor Shares (336,560) (10,925)   (284,833) (9,152)
Admiral Shares          
Issued 2,644,916 26,488   5,613,299 63,290
Issued in Lieu of Cash Distributions 382,469 3,816   1,174,401 14,695
Redeemed (2,022,962) (20,467)   (4,795,611) (54,277)
Net Increase (Decrease)—Admiral Shares 1,004,423 9,837   1,992,089 23,708

 

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 Realized       Feb. 29,
  2019     from Net Change in   Capital Gain 2020
  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 137,965   — — — 119,361 — — 257,326
Home24 SE 6,147   — — — 2,054 — — 8,201
Jumia Technologies                  
AG ADR 74,982   — — — (47,343) — — 27,639
Vanguard FTSE                  
All-World ex-US ETF    55,124   — 60,670 12,869 (7,323) 397 — —
Vanguard Market                  
Liquidity Fund 1,243,718   NA1 NA1 220 94 5,002 — 951,207
You & Mr. Jones 127,680   — — — 16,128 — — 143,808
Total 1,645,616   — 60,670 13,089 82,971 5,399 — 1,388,181

 

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

 

20 

 

International Growth Fund

 

J. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, 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 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 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 subportfolio, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that 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 

 

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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.

 

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, www.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 www.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.

 

 

© 2020 The Vanguard Group, Inc.

All rights reserved.

Vanguard Marketing Corporation, Distributor.

 

Q812 042020

 

 

 

 

 

  

 

 
 
 
Semiannual Report | February 29, 2020
 
 
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 29, 2020

 

  Beginning Ending Expenses
  Account Value Account Value Paid During
FTSE Social Index Fund 8/31/2019 2/29/2020 Period
Based on Actual Fund Return      
Admiral™ Shares $1,000.00 $1,038.22 $0.71
Institutional Shares 1,000.00 1,038.56 0.61
Based on Hypothetical 5% Yearly Return      
Admiral Shares $1,000.00 $1,024.17 $0.70
Institutional Shares 1,000.00 1,024.27 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 0.14% for Admiral Shares 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 (182/366).

 

2

 

 

FTSE Social Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Basic Materials   1.8%
Consumer Goods   8.0 
Consumer Services   9.1 
Financials   21.1 
Health Care   15.8 
Industrials   9.2 
Oil & Gas   2.2 
Technology   31.5 
Telecommunications   0.2 
Utilities   1.1 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

3

 

 

FTSE Social Index Fund

 

 

Financial Statements (unaudited)

 

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value·
    Shares ($000)
Common Stocks (99.9%)    
Basic Materials (1.8%)    
  Linde plc 200,727 38,341
  Air Products & Chemicals Inc. 82,133 18,037
  Ecolab Inc. 93,668 16,902
  Newmont Corp. 305,846 13,650
  PPG Industries Inc. 88,905 9,286
  LyondellBasell Industries NV 101,878 7,280
  Nucor Corp. 123,894 5,123
  International Flavors & Fragrances Inc. 40,519 4,853
  FMC Corp. 49,010 4,563
  Avery Dennison Corp. 31,040 3,554
  Albemarle Corp. 41,460 3,394
  CF Industries Holdings Inc.   85,439 3,149
  Mosaic Co. 144,554 2,462
  Steel Dynamics Inc. 86,800 2,312
  Ashland Global Holdings Inc. 23,558 1,685
  Westlake Chemical Corp. 5,400 302
      134,893
Consumer Goods (8.0%)    
  Procter & Gamble Co. 923,147 104,528
  PepsiCo Inc. 522,470 68,982
  NIKE Inc. 439,642 39,295
* Tesla Inc. 54,006 36,075
  Mondelez International Inc. 529,017 27,932
  Colgate-Palmolive Co. 314,366 21,242
  Kimberly-Clark Corp. 126,400 16,582
  Activision Blizzard Inc. 283,129 16,458
  Estee Lauder Cos. Inc. Class A 81,531 14,969
  General Motors Co. 465,485 14,197
* Electronic Arts Inc. 108,335 10,982
  General Mills Inc. 223,859 10,969
  Ford Motor Co. 1,468,447 10,220
* Lululemon Athletica Inc. 43,541 9,466
* Monster Beverage Corp. 143,545 8,959
  VF Corp. 115,343 8,305
  Hershey Co. 52,768 7,598
  Aptiv plc 96,551 7,542
  Clorox Co. 47,262 7,534
  Tyson Foods Inc. 107,554 7,295
  DR Horton Inc. 127,612 6,798
  McCormick & Co. Inc. 45,364 6,632
  Lennar Corp. Class A 106,241 6,411
  Church & Dwight Co. Inc. 91,796 6,382
  Kraft Heinz Co. 238,373 5,904
  Kellogg Co. 90,675 5,483
  Garmin Ltd. 55,528 4,908
  Conagra Brands Inc. 182,004 4,858
  Genuine Parts Co. 55,009 4,799
  Lamb Weston Holdings Inc. 54,318 4,720
* Take-Two Interactive Software Inc. 42,100 4,525
  JM Smucker Co. 42,153 4,341
  Hormel Foods Corp. 102,825 4,278
  PulteGroup Inc. 96,580 3,882
* LKQ Corp. 118,691 3,511
  Coca-Cola European Partners plc 65,098 3,317
  Fortune Brands Home & Security Inc. 52,431 3,238
  Whirlpool Corp. 24,718 3,160
  Campbell Soup Co. 62,908 2,838
  Lear Corp. 23,756 2,642
  Bunge Ltd. 55,999 2,629
  BorgWarner Inc. 83,090 2,626
  Tapestry Inc. 110,086 2,582
  Gentex Corp. 89,145 2,380
  Newell Brands Inc. 151,627 2,340
  Autoliv Inc. 33,745 2,252
* Keurig Dr Pepper Inc. 79,467 2,216
  PVH Corp. 29,856 2,213
  Ingredion Inc. 25,946 2,161
  Leggett & Platt Inc. 54,179 2,149
  Ralph Lauren Corp. 19,437 2,051
  Toll Brothers Inc. 54,699 2,025
  Hanesbrands Inc. 148,760 1,970
  Harley-Davidson Inc. 60,881 1,855

 

4

 
FTSE Social Index Fund    
     
     
      Market
      Value·
    Shares ($000)
  Polaris Inc. 22,190 1,831
* Capri Holdings Ltd. 61,818 1,596
* Herbalife Nutrition Ltd. 42,529 1,376
  Coty Inc. 118,300 1,092
* Under Armour Inc. Class C 81,937 1,023
* Under Armour Inc. Class A 67,150 953
* Mohawk Industries Inc. 6,543 793
  Goodyear Tire & Rubber Co.  4,900 47
      581,917
Consumer Services (9.0%)    
  Home Depot Inc. 412,126 89,778
  Walt Disney Co. 654,051 76,949
* Netflix Inc. 158,181 58,374
  McDonald’s Corp. 281,442 54,648
  Starbucks Corp. 441,254 34,608
  Lowe’s Cos. Inc. 289,212 30,821
  CVS Health Corp. 485,346 28,723
  TJX Cos. Inc. 453,352 27,110
* Booking Holdings Inc. 15,695 26,613
  Dollar General Corp. 96,503 14,504
  Ross Stores Inc. 131,010 14,251
  Sysco Corp. 177,812 11,851
* MercadoLibre Inc. 17,000 10,473
* O’Reilly Automotive Inc. 27,995 10,322
  Delta Air Lines Inc. 211,559 9,759
  McKesson Corp. 67,704 9,469
* AutoZone Inc. 8,941 9,232
  Southwest Airlines Co. 173,550 8,016
* Dollar Tree Inc. 90,676 7,529
* Chipotle Mexican Grill Inc. 9,534 7,375
  Best Buy Co. Inc. 84,723 6,409
* Copart Inc. 74,200 6,268
  Tiffany & Co. 45,327 6,055
  Yum China Holdings Inc. 137,582 6,025
  Omnicom Group Inc. 81,733 5,663
* Ulta Beauty Inc. 21,539 5,538
* CarMax Inc. 61,464 5,366
* United Airlines Holdings Inc. 86,200 5,309
  Expedia Group Inc. 53,590 5,285
  Domino’s Pizza Inc. 15,500 5,262
  AmerisourceBergen Corp. Class A 57,248 4,827
  Darden Restaurants Inc. 46,233 4,508
  Fox Corp. Class A 133,766 4,112
  Tractor Supply Co. 45,438 4,022
  Advance Auto Parts Inc. 25,725 3,421
  Vail Resorts Inc. 15,200 3,232
* Discovery Communications Inc. 127,898 3,210
  Aramark 91,717 3,186
  Interpublic Group of Cos. Inc. 147,713 3,155
  American Airlines Group Inc. 156,450 2,980
  Kohl’s Corp. 65,266 2,555
  Alaska Air Group Inc. 43,454 2,193
  Rollins Inc. 56,700 2,123
  Fox Corp. Class B 65,672 2,000
  L Brands Inc. 91,139 1,974
  Wyndham Hotels & Resorts Inc. 36,700 1,870
  H&R Block Inc. 77,806 1,608
  Foot Locker Inc. 44,268 1,605
^ Nordstrom Inc. 45,431 1,576
^,* Discovery Inc. 59,666 1,533
  Gap Inc. 96,493 1,383
  Nielsen Holdings plc 17,959 327
  Macy’s Inc. 1,700 23
      655,008
Financials (21.1%)    
  JPMorgan Chase & Co. 1,163,278 135,068
  Visa Inc. 641,118 116,530
  Mastercard Inc. 331,542 96,230
  Bank of America Corp. 3,041,141 86,673
  Wells Fargo & Co. 1,426,565 58,275
  Citigroup Inc. 816,357 51,806
  American Tower Corp. 164,605 37,332
  American Express Co. 250,852 27,576
  CME Group Inc. 132,365 26,317
  US Bancorp 528,131 24,526
  Chubb Ltd. 168,037 24,370
  S&P Global Inc. 91,643 24,369
  Goldman Sachs Group Inc. 119,783 24,049
  Truist Financial Corp. 501,273 23,129
  Prologis Inc. 273,998 23,093
  Crown Castle International Corp. 155,494 22,281
  BlackRock Inc. 44,217 20,473
  PNC Financial Services Group Inc. 161,398 20,401
  Marsh & McLennan Cos. Inc. 188,401 19,699
  Morgan Stanley 436,986 19,678
  Intercontinental Exchange Inc. 204,632 18,257
  Equinix Inc. 31,751 18,187
  Aon plc 86,663 18,026
  Charles Schwab Corp. 432,826 17,638
  Progressive Corp. 218,770 16,005
  Capital One Financial Corp. 174,262 15,380
  Moody’s Corp. 61,180 14,685
  Simon Property Group Inc. 117,546 14,468
  American International Group Inc. 327,348 13,801
  MetLife Inc. 289,520 12,368
  Allstate Corp. 117,398 12,356

 

5

 
FTSE Social Index Fund    
     
     
      Market
      Value·
    Shares ($000)
  Bank of New York Mellon Corp. 308,962 12,328
  Prudential Financial Inc. 154,685 11,671
  Aflac Inc. 270,482 11,590
  Travelers Cos. Inc. 96,605 11,574
  Public Storage 55,227 11,549
  Welltower Inc. 152,237 11,390
  SBA Communications Corp. 42,300 11,213
  IHS Markit Ltd. 146,729 10,453
  AvalonBay Communities Inc. 51,841 10,399
  Equity Residential 134,515 10,102
  T. Rowe Price Group Inc. 83,698 9,877
  Digital Realty Trust Inc. 78,596 9,440
  State Street Corp. 137,363 9,356
  MSCI Inc. 30,950 9,144
  Realty Income Corp. 122,162 8,843
  Discover Financial Services 118,777 7,789
  Ventas Inc. 141,198 7,592
  Boston Properties Inc. 57,467 7,410
  Weyerhaeuser Co. 283,365 7,362
* CBRE Group Inc. 126,074 7,078
  Synchrony Financial 241,753 7,035
  M&T Bank Corp. 48,739 6,842
  Hartford Financial Services Group Inc. 133,725 6,680
  Ameriprise Financial Inc. 47,246 6,676
  Arthur J Gallagher & Co. 67,789 6,609
  Equifax Inc. 46,018 6,536
  Northern Trust Corp. 74,110 6,504
  Alexandria Real Estate Equities Inc. 42,500 6,455
  Fifth Third Bancorp 264,382 6,451
  First Republic Bank 62,637 6,299
  KeyCorp 369,473 6,041
  Healthpeak Properties Inc. 185,750 5,877
* Markel Corp. 4,952 5,851
  Invitation Homes Inc. 197,741 5,673
* Arch Capital Group Ltd. 139,172 5,627
  Citizens Financial Group Inc. 165,641 5,249
  Annaly Capital Management Inc. 591,333 5,239
  Mid-America Apartment Communities Inc. 40,126 5,187
  Cincinnati Financial Corp. 55,551 5,180
  Regions Financial Corp. 369,283 4,993
  Huntington Bancshares Inc. 393,437 4,828
  UDR Inc. 106,833 4,805
  Principal Financial Group Inc. 106,245 4,716
  Duke Realty Corp. 136,602 4,436
  Loews Corp. 95,455 4,356
  TD Ameritrade Holding Corp. 102,860 4,344
* SVB Financial Group 20,700 4,309
  Nasdaq Inc. 41,856 4,292
  E*TRADE Financial Corp. 89,298 4,088
  Host Hotels & Resorts Inc. 280,900 4,068
  Raymond James Financial Inc. 47,566 3,978
  Fidelity National Financial Inc. 97,913 3,795
  Regency Centers Corp. 64,602 3,711
  Ally Financial Inc. 147,348 3,694
  Everest Re Group Ltd. 14,901 3,694
  Lincoln National Corp. 81,283 3,690
  Brown & Brown Inc. 85,500 3,677
  VEREIT Inc 416,494 3,607
  Globe Life Inc. 38,905 3,605
  WR Berkley Corp. 53,531 3,594
  Western Union Co. 158,027 3,538
  AGNC Investment Corp. 206,890 3,525
* Alleghany Corp. 5,168 3,474
  Vornado Realty Trust 64,258 3,443
  Iron Mountain Inc. 113,024 3,437
* Equitable Holdings Inc. 157,911 3,379
  Comerica Inc. 59,404 3,127
  Kimco Realty Corp. 157,944 2,740
  RenaissanceRe Holdings Ltd. 16,035 2,732
  Zions Bancorp NA 67,346 2,691
  Assurant Inc. 22,118 2,667
  Voya Financial Inc. 50,153 2,640
  People’s United Financial Inc. 187,025 2,617
* Zillow Group Inc. Class C 46,300 2,584
  SEI Investments Co. 46,031 2,518
  SL Green Realty Corp. 31,818 2,496
  Franklin Resources Inc. 111,400 2,424
  Invesco Ltd. 157,941 2,274
  Commerce Bancshares Inc. 34,817 2,125
  Old Republic International Corp. 106,100 2,092
  Unum Group 85,698 1,998
  Jefferies Financial Group Inc. 100,800 1,987
  New York Community Bancorp Inc. 181,779 1,965
  Park Hotels & Resorts Inc. 106,100 1,937
  Axis Capital Holdings Ltd. 30,562 1,715
  CIT Group Inc. 41,100 1,632
       

 

6

 

FTSE Social Index Fund

 

       
      Market
      Value·
    Shares ($000)
  Affiliated Managers Group Inc. 21,500 1,617
  Janus Henderson Group plc 62,000 1,314
  Service Properties Trust 71,798 1,298
* Zillow Group Inc. Class A 22,050 1,228
^ Santander Consumer USA Holdings Inc. 38,498 939
  CNA Financial Corp. 9,900 412
  Macerich Co. 3,100 63
      1,526,125
Health Care (15.8%)    
  Johnson & Johnson 994,461 133,735
  UnitedHealth Group Inc. 353,943 90,241
  Merck & Co. Inc. 954,665 73,089
  Pfizer Inc. 2,086,536 69,732
  Bristol-Myers Squibb Co. 876,296 51,754
  Medtronic plc 501,961 50,532
  Abbott Laboratories 645,194 49,699
  AbbVie Inc. 554,829 47,554
  Amgen Inc. 224,572 44,854
  Eli Lilly & Co. 318,733 40,202
  Gilead Sciences Inc. 478,841 33,212
  Cigna Corp. 137,546 25,163
  Stryker Corp. 129,210 24,626
  Anthem Inc. 95,275 24,494
  Becton Dickinson and Co. 100,793 23,971
  Zoetis Inc. 179,066 23,857
  Allergan plc 122,843 23,422
* Intuitive Surgical Inc. 43,169 23,051
* Vertex Pharmaceuticals Inc. 96,410 21,599
* Biogen Inc. 67,645 20,861
* Boston Scientific Corp. 522,675 19,543
* Edwards Lifesciences Corp. 78,013 15,980
  Humana Inc. 49,696 15,887
  Baxter International Inc. 181,246 15,129
* Illumina Inc. 55,565 14,762
* Regeneron Pharmaceuticals Inc. 30,815 13,699
  HCA Healthcare Inc. 101,566 12,900
* Centene Corp. 217,988 11,558
  Zimmer Biomet Holdings Inc. 76,972 10,480
* IQVIA Holdings Inc. 67,067 9,355
  ResMed Inc. 52,324 8,317
* IDEXX Laboratories Inc. 32,091 8,168
* Alexion Pharmaceuticals Inc. 81,298 7,644
* Align Technology Inc. 29,748 6,495
* Laboratory Corp. of America Holdings 36,057 6,335
* BioMarin Pharmaceutical Inc. 68,414 6,183
  Cooper Cos. Inc. 18,519 6,011
  Cardinal Health Inc. 113,313 5,906
  Teleflex Inc. 17,400 5,829
  Quest Diagnostics Inc. 49,197 5,218
* Incyte Corp. 67,756 5,109
* Hologic Inc. 102,627 4,836
* Alnylam Pharmaceuticals Inc. 40,688 4,787
* Varian Medical Systems Inc. 35,463 4,361
  Dentsply Sirona Inc. 84,399 4,156
  Universal Health Services Inc. 29,670 3,671
* Mylan NV 202,435 3,480
* Henry Schein Inc. 54,554 3,325
* DaVita Inc. 37,023 2,874
  Perrigo Co. plc 49,108 2,489
* Jazz Pharmaceuticals plc 21,154 2,424
* ABIOMED Inc. 1,980 298
* Alkermes plc 1,400 29
      1,142,886
Industrials (9.2%)    
* PayPal Holdings Inc. 441,467 47,674
  Accenture plc Class A 237,313 42,856
  Union Pacific Corp. 260,759 41,672
  Fidelity National Information Services Inc. 228,707 31,955
  Automatic Data Processing Inc. 162,846 25,199
  United Parcel Service Inc. 261,649 23,677
* Fiserv Inc. 211,436 23,123
  Global Payments Inc. 111,824 20,572
  Illinois Tool Works Inc. 117,934 19,787
  CSX Corp. 279,926 19,721
  Deere & Co. 118,196 18,495
  Norfolk Southern Corp. 98,293 17,924
  Waste Management Inc. 157,214 17,421
  Sherwin-Williams Co. 30,984 16,011
  Eaton Corp. plc 154,574 14,023
  FedEx Corp. 93,021 13,132
* Square Inc. 129,800 10,816
  Johnson Controls International plc 291,469 10,659
  Amphenol Corp. Class A 108,400 9,938
  Verisk Analytics Inc. 59,815 9,278
* CoStar Group Inc. 13,600 9,079
  Willis Towers Watson plc 47,946 9,074
  Agilent Technologies Inc. 116,825 9,004
* FleetCor Technologies Inc. 32,300 8,585
  Ball Corp. 120,189 8,468
  Cummins Inc. 55,884 8,455
  PACCAR Inc. 125,679 8,408
  Stanley Black & Decker Inc. 57,605 8,278

 

7

 
FTSE Social Index Fund    
     
       
      Market
      Value·
    Shares ($000)
  Rockwell Automation Inc. 43,568 7,995
  Fortive Corp. 111,976 7,744
  Fastenal Co. 216,486 7,408
  Republic Services Inc. 75,632 6,826
* Keysight Technologies Inc. 70,666 6,696
* Mettler-Toledo International Inc. 9,087 6,376
  TransUnion 70,600 6,278
  Vulcan Materials Co. 49,606 5,966
  Kansas City Southern 36,651 5,523
  Dover Corp. 53,018 5,447
  Martin Marietta Materials Inc. 23,390 5,322
  Xylem Inc. 67,753 5,240
* Waters Corp. 24,509 4,777
  Westinghouse Air Brake Technologies Corp. 68,001 4,672
  Old Dominion Freight Line Inc. 24,050 4,661
  WW Grainger Inc. 16,347 4,537
  Expeditors International of Washington Inc. 64,387 4,534
  Masco Corp. 109,500 4,524
  Broadridge Financial Solutions Inc. 42,988 4,486
  Arconic Inc. 143,689 4,217
  Allegion plc 34,659 3,985
* United Rentals Inc. 29,309 3,883
* Trimble Inc. 94,650 3,737
^ CH Robinson Worldwide Inc. 51,397 3,541
  Packaging Corp. of America 35,420 3,210
  JB Hunt Transport Services Inc. 32,551 3,139
  Snap-on Inc. 20,019 2,898
* XPO Logistics Inc. 34,500 2,552
* Sensata Technologies Holding plc 62,077 2,533
  Robert Half International Inc. 46,107 2,324
* Flex Ltd. 199,000 2,211
  Xerox Holdings Corp. 67,017 2,158
* Arrow Electronics Inc. 31,588 2,118
  MDU Resources Group Inc. 74,815 2,075
  Sealed Air Corp. 61,737 1,871
  ManpowerGroup Inc. 23,911 1,816
  Jabil Inc. 56,155 1,800
  Acuity Brands Inc. 15,938 1,639
  nVent Electric plc 60,900 1,462
  Avnet Inc. 39,384 1,208
  Alliance Data Systems Corp. 700 60
      666,733
Oil & Gas (2.2%)    
  ConocoPhillips 423,228 20,493
  Kinder Morgan Inc. 757,165 14,515
  EOG Resources Inc. 228,829 14,476
  Phillips 66 172,800 12,936
  Marathon Petroleum Corp. 246,948 11,710
  Occidental Petroleum Corp. 348,832 11,421
  ONEOK Inc. 160,881 10,734
  Valero Energy Corp. 157,815 10,455
  Williams Cos. Inc. 483,636 9,213
  Pioneer Natural Resources Co. 66,002 8,104
  Hess Corp. 107,300 6,028
  Concho Resources Inc. 81,959 5,575
  Diamondback Energy Inc. 68,250 4,231
  Baker Hughes Co. 256,612 4,129
  Targa Resources Corp. 102,321 3,315
  Marathon Oil Corp. 376,741 3,119
  HollyFrontier Corp. 63,560 2,141
  Helmerich & Payne Inc. 50,879 1,877
  Murphy Oil Corp. 73,299 1,381
  Apache Corp. 51,328 1,279
  Devon Energy Corp. 36,509 593
  Cabot Oil & Gas Corp. 7,100 99
      157,824
Technology (31.5%)    
  Microsoft Corp. 2,831,248 458,690
  Apple Inc. 1,664,295 454,952
* Facebook Inc. 895,317 172,322
* Alphabet Inc. Class C 112,796 151,071
* Alphabet Inc. Class A 111,651 149,529
  Intel Corp. 1,628,497 90,414
  Cisco Systems Inc. 1,605,585 64,111
* Adobe Inc. 181,810 62,746
  NVIDIA Corp. 218,589 59,034
* salesforce.com Inc. 315,201 53,710
  Texas Instruments Inc. 349,575 39,900
  Broadcom Inc. 144,724 39,455
  Oracle Corp. 767,921 37,981
  QUALCOMM Inc. 428,049 33,516
  Intuit Inc. 92,938 24,708
* ServiceNow Inc. 69,893 22,791
* Micron Technology Inc. 415,090 21,817
  Applied Materials Inc. 344,412 20,017
* Advanced Micro Devices Inc. 385,161 17,517
  Lam Research Corp. 53,771 15,778
* Autodesk Inc. 82,624 15,771
  Analog Devices Inc. 138,300 15,082
  Cognizant Technology Solutions Corp. 207,937 12,670

 

8

 
FTSE Social Index Fund    
     
       
      Market
      Value·
    Shares ($000)
  NXP Semiconductors NV 104,248 11,852
  HP Inc. 553,687 11,511
* Workday Inc. 61,406 10,639
  Motorola Solutions Inc. 63,486 10,518
* Twitter Inc. 286,999 9,528
  KLA Corp. 59,550 9,153
* Splunk Inc. 58,458 8,613
  Cerner Corp. 116,972 8,103
  Xilinx Inc. 96,475 8,055
  Microchip Technology Inc. 88,100 7,992
* Synopsys Inc. 56,015 7,726
* VeriSign Inc. 40,039 7,597
  Corning Inc. 292,305 6,974
* Cadence Design Systems Inc. 104,500 6,912
* Palo Alto Networks Inc. 35,818 6,613
  Skyworks Solutions Inc. 64,147 6,426
  Hewlett Packard Enterprise Co. 500,961 6,407
  Western Digital Corp. 112,423 6,246
  CDW Corp. 53,108 6,066
  Maxim Integrated Products Inc. 101,396 5,640
  Marvell Technology Group Ltd. 255,400 5,440
* Akamai Technologies Inc. 60,103 5,200
  Citrix Systems Inc. 45,838 4,739
* GoDaddy Inc. 66,800 4,675
  Seagate Technology plc 97,471 4,674
  SS&C Technologies Holdings Inc. 83,700 4,645
* Yandex NV 109,720 4,456
* Qorvo Inc. 43,700 4,395
* Arista Networks Inc. 22,642 4,373
* Check Point Software Technologies Ltd. 42,058 4,366
* Gartner Inc. 33,600 4,347
  NetApp Inc. 92,465 4,320
  NortonLifeLock Inc. 216,083 4,112
* VMware Inc. 29,174 3,516
  Amdocs Ltd. 48,525 3,093
* PTC Inc. 40,300 3,045
* F5 Networks Inc. 23,444 2,812
  Juniper Networks Inc. 129,625 2,751
  DXC Technology Co. 107,905 2,602
* Dell Technologies Inc. 58,253 2,357
  CDK Global Inc. 47,850 2,202
      2,278,273
Telecommunications (0.2%)    
* T-Mobile US Inc. 117,014 10,550
* Sprint Corp. 224,941 2,067
      12,617
Utilities (1.1%)    
  WEC Energy Group Inc. 116,320 10,740
  Eversource Energy 120,484 10,417
  Consolidated Edison Inc. 124,025 9,776
  PPL Corp. 273,037 8,194
  American Water Works Co. Inc. 65,197 8,062
  CMS Energy Corp. 104,805 6,332
  Evergy Inc. 84,800 5,542
  Alliant Energy Corp. 88,400 4,607
  CenterPoint Energy Inc. 198,916 4,579
  AES Corp. 252,900 4,231
  NiSource Inc. 144,292 3,899
  Avangrid Inc. 20,659 1,026
      77,405
Total Common Stocks (Cost $5,558,295)   7,233,681
Temporary Cash Investments (0.1%)  
Money Market Fund (0.1%)    
1,2 Vanguard Market Liquidity Fund, 1.706% 28,289 2,830
       
    Face  
    Amount  
    ($000)  
U.S. Government and Agency Obligations (0.0%)
3 United States Treasury Bill, 1.527%–1.541%, 4/30/20 1,240 1,237
Total Temporary Cash Investments (Cost $4,066)   4,067
Total Investments (100.0%) (Cost $5,562,361)   7,237,748
Other Assets and Liabilities—Net (0.0%)2   116
Net Assets (100%)   7,237,864

Cost rounded to $000.

·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 $2,642,000.
1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2Collateral of $2,788,000 was received for securities on loan.
3Securities with a value of $589,000 have been segregated as initial margin for open futures contracts.

 

9

 

 

FTSE Social 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 2020 61 9,001 (401 )

 

 

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

 

10

 

 

FTSE Social Index Fund

 

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $5,559,532) 7,234,918
Affiliated Issuers (Cost $2,829) 2,830
Total Investments in Securities 7,237,748
Investment in Vanguard 337
Receivables for Investment Securities Sold 19,626
Receivables for Accrued Income 11,071
Receivables for Capital Shares Issued 14,433
Total Assets 7,283,215
Liabilities  
Due to Custodian 8,531
Payables for Investment Securities Purchased 36
Collateral for Securities on Loan 2,788
Payables for Capital Shares Redeemed 32,867
Payables to Vanguard 1,043
Variation Margin Payable—Futures Contracts 86
Total Liabilities 45,351
Net Assets 7,237,864

At February 29, 2020, net assets consisted of:

  
   
Paid-in Capital 5,596,464
Total Distributable Earnings (Loss) 1,641,400
Net Assets 7,237,864
   
Admiral Shares—Net Assets  
Applicable to 147,151,805 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 4,130,942
Net Asset Value Per Share—Admiral Shares $28.07
   
Institutional Shares—Net Assets  
Applicable to 153,743,565 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 3,106,922
Net Asset Value Per Share—Institutional Shares $20.21

 

 

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

 

11

 

 

FTSE Social Index Fund

 

 

Statement of Operations

 

   Six Months Ended  
   February 29, 2020  
   ($000)
Investment Income    
Income    
Dividends  63,679 
Interest1  175 
Securities Lending—Net  23 
Total Income  63,877 
Expenses    
The Vanguard Group—Note B    
Investment Advisory Services  518 
Management and Administrative—Investor Shares  9 
Management and Administrative—Admiral Shares  2,392 
Management and Administrative—Institutional Shares  1,521 
Marketing and Distribution—Admiral Shares  94 
Marketing and Distribution—Institutional Shares  69 
Custodian Fees  34 
Shareholders’ Reports—Admiral Shares  23 
Shareholders’ Reports—Institutional Shares  20 
Trustees’ Fees and Expenses  2 
Total Expenses  4,682 
Net Investment Income  59,195 
Realized Net Gain (Loss)    
Investment Securities Sold1  (18,191)
Futures Contracts  535 
Realized Net Gain (Loss)  (17,656)
Change in Unrealized Appreciation (Depreciation)    
Investment Securities1  149,228 
Futures Contracts  (560)
Change in Unrealized Appreciation (Depreciation)  148,668 
Net Increase (Decrease) in Net Assets Resulting from Operations  190,207 
1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $171,000, $6,000, 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.

 

 

12

 

FTSE Social Index Fund

 

 

Statement of Changes in Net Assets

 

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   59,195    86,372 
Realized Net Gain (Loss)   (17,656)   229,971 
Change in Unrealized Appreciation (Depreciation)   148,668    (79,504)
Net Increase (Decrease) in Net Assets Resulting from Operations   190,207    236,839 
Distributions1          
Investor Shares   (124)   (40,288)
Admiral Shares   (33,563)   (8,771)
Institutional Shares   (26,193)   (36,429)
Total Distributions   (59,880)   (85,488)
Capital Share Transactions          
Investor Shares   (59,575)   (2,824,591)
Admiral Shares   581,925    3,456,334 
Institutional Shares   348,045    288,120 
Net Increase (Decrease) from Capital Share Transactions   870,395    919,863 
Total Increase (Decrease)   1,000,722    1,071,214 
Net Assets          
Beginning of Period   6,237,142    5,165,928 
End of Period   7,237,864    6,237,142 

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

13

 

 

FTSE Social Index Fund

 

 

Financial Highlights

 

 

Investor Shares

 

  September 1,            
  2019 to     Year Ended August 31,  
For a Share Outstanding November 7,      
Throughout Each Period 20191 2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $19.62 $19.27 $16.14 $13.95 $12.99 $12.74  

Investment Operations

Net Investment Income .0642 .2932 .2902 .2562 .241 .183  
Net Realized and Unrealized Gain (Loss) on Investments 1.140 .362 3.108  2.175 1.025 .231  
Total from Investment Operations 1.204 .655 3.398  2.431 1.266 .414  
Distributions              
Dividends from Net Investment Income (.084) (.305) (.268) (.241) (.306) (.164)  
Distributions from Realized Capital Gains — — — — — —  
Total Distributions (.084) (.305) (.268) (.241) (.306) (.164)  
Net Asset Value, End of Period $20.741 $19.62 $19.27 $16.14 $13.95 $12.99  
Total Return3 6.15% 3.53% 21.27% 17.61% 9.95% 3.25%  
Ratios/Supplemental Data              
Net Assets, End of Period (Millions) $— $59 $2,817 $1,952 $1,435 $1,131  
Ratio of Total Expenses to Average Net Assets 0.18% 0.18% 0.18% 0.20% 0.22% 0.25%  
Ratio of Net Investment Income to Average Net Assets 1.71% 1.43% 1.65% 1.71% 1.87% 1.63%  
Portfolio Turnover Rate 2%4 11%5 8%5 11%5 16%5 20%5  

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

1Net asset value as of November 7, 2019, on which date the remaining Investor Shares were converted to Admiral Shares.

2Calculated based on average shares outstanding.

3Total 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.

4Reflects the fund’s portfolio turnover for the six months ended February 29, 2020.

5Excludes 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

 

 

Admiral Shares

 

 

  Six Months Feb. 7,
  Ended 20191 to
  Feb. 29, Aug. 31,
For a Share Outstanding Throughout Each Period 2020 2019
Net Asset Value, Beginning of Period $27.27 $25.00
Investment Operations    
Net Investment Income2 .243 .273
Net Realized and Unrealized Gain (Loss) on Investments .807 2.183
Total from Investment Operations 1.050 2.456
Distributions    
Dividends from Net Investment Income (.250) (.186)
Distributions from Realized Capital Gains —  — 
Total Distributions (.250) (.186)
Net Asset Value, End of Period $28.07 $27.27
Total Return3 3.82% 9.85%
Ratios/Supplemental Data    
Net Assets, End of Period (Millions) $4,131 $3,478
Ratio of Total Expenses to Average Net Assets 0.14% 0.14%4
Ratio of Net Investment Income to Average Net Assets 1.63% 1.79%4
Portfolio Turnover Rate 2% 11%5,6

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

1Inception.

2Calculated based on average shares outstanding.

3Total 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.

4Annualized.

5Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.

6Reflects the fund’s portfolio turnover for the fiscal year ended August 31, 2019.

 

 

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

 

15

 

 

FTSE Social Index Fund

 

 

Financial Highlights

 

 

Institutional Shares

 

 

  Six Months            
  Ended     Year Ended August 31,  
For a Share Outstanding February 29,      
Throughout Each Period 2020 2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $19.63 $19.28 $16.15 $13.96 $13.00 $12.75  

Investment Operations

Net Investment Income .1771 .3141 .3051 .2711 .254 .193  
Net Realized and Unrealized Gain (Loss) on Investments .586 .351 3.105 2.175 1.029 .233  
Total from Investment Operations .763 .665 3.410 2.446 1.283 .426  
Distributions              
Dividends from Net Investment Income (.183) (.315) (.280) (.256) (.323) (.176)  
Distributions from Realized Capital Gains — — — — — —  
Total Distributions (.183) (.315) (.280) (.256) (.323) (.176)  
Net Asset Value, End of Period $20.21 $19.63 $19.28 $16.15 $13.96 $13.00  
Total Return 3.86% 3.58% 21.34% 17.72% 10.09% 3.34%  
Ratios/Supplemental Data              
Net Assets, End of Period (Millions) $3,107 $2,701 $2,349 $1,443 $876 $706  
Ratio of Total Expenses to Average Net Assets 0.12% 0.12% 0.12% 0.12% 0.12% 0.15%  
Ratio of Net Investment Income to Average Net Assets 1.65% 1.49% 1.71% 1.79% 1.97% 1.73%  
Portfolio Turnover Rate 2% 11%2 8%2 11%2 16%2 20%2  

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

1Calculated based on average shares outstanding.

2Excludes 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.

 

16

 

 

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 two classes of 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. Prior to November 7, 2019, the fund offered Investor Shares. Effective at the close of business on November 7, 2019, the remaining Investor Shares were converted to Admiral Shares.

 

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 clearing-house 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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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.

 

17

 

 

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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and

 

18

 

 

FTSE Social Index Fund

 

 

borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $337,000, representing less than 0.01% of the fund’s net assets and 0.13% of Vanguard’s capital received pursuant to the FSA. 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.

  

19

 

 

FTSE Social Index Fund

 

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                
Assets                
Common Stocks  7,233,681   —   —   7,233,681 
Temporary Cash Investments  2,830   1,237   —   4,067 
Total  7,236,511   1,237   —   7,237,748 
Derivative Financial Instruments                
Liabilities                
Futures Contracts1  86   —   —   86 
1Represents variation margin on the last day of the reporting period.

 

D.   As of February 29, 2020, 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  5,562,361 
Gross Unrealized Appreciation  1,982,425 
Gross Unrealized Depreciation  (307,439)
Net Unrealized Appreciation (Depreciation)  1,674,986 

 

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, 2019, the fund had available capital losses totaling $35,619,000 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, 2020; 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 29, 2020, the fund purchased $1,017,206,000 of investment securities and sold $138,723,000 of investment securities, other than temporary cash investments.

 

20

 

 

FTSE Social Index Fund

 

 

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

 

   Six Months Ended   Year Ended 
   February 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)  (000)  ($000)  (000)
Investor Shares                
Issued  922   45   1,047,133   55,926 
Issued in Lieu of Cash Distributions  124   6   35,663   1,980 
Redeemed1  (60,621)  (3,047)  (3,907,387)  (201,067)
Net Increase (Decrease)—Investor Shares  (59,575)  (2,996)  (2,824,591)  (143,161)
Admiral Shares2                
Issued1  842,100   28,435   3,569,059   131,708 
Issued in Lieu of Cash Distributions  29,420   1,013   7,410   274 
Redeemed  (289,595)  (9,818)  (120,135)  (4,460)
Net Increase (Decrease)—Admiral Shares  581,925   19,630   3,456,334   127,522 
Institutional Shares                
Issued  532,746   24,875   1,010,600   53,651 
Issued in Lieu of Cash Distributions  25,522   1,221   35,748   1,947 
Redeemed  (210,223)  (9,934)  (758,228)  (39,850)
Net Increase (Decrease)—Institutional Shares  348,045   16,162   288,120   15,748 
1In November 2018, the fund announced changes to the availability and minimum investment criteria of the Investor and Admiral share classes. As a result, all of the outstanding Investor Shares automatically converted to Admiral Shares beginning in April 2019. Investor Shares—Redeemed and Admiral Shares—Issued include 68,000 and 49,000 shares, respectively, in the amount of $1,355,000 from the conversion during the six months ended February 29, 2020. Investor Shares—Redeemed and Admiral Shares—Issued include 160,408,000 and 115,388,000 shares, respectively, in the amount of $3,361,780,000 from the conversion during the year ended August 31, 2019.
2Inception was February 7, 2019, for Admiral Shares.

 

G.   Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management continues to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 license. All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but 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 their 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 Indices or the fitness or suitability of the Indices for any particular purpose to which they might be put. The London Stock Exchange Group companies do not provide investment advice and nothing in this document should be taken as constituting financial or investment advice. The London Stock Exchange Group companies make no representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the London Stock Exchange Group companies. Distribution of the London Stock Exchange Group companies’ index values and the use of their indexes to create financial products require a license with FTSE, FTSE TMX, MTS and/or Russell and/or its licensors.

 

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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.

 

 

 

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, www.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 www.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.

 

 

 

 

 

  © 2020 The Vanguard Group, Inc.
All rights reserved.
  Vanguard Marketing Corporation, Distributor.
   
  Q2132 042020

 

 

 

 

 

 

 

 
 
 
Semiannual Report | February 29, 2020
 
 
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 14
Consumer Staples Index Fund 26
Energy Index Fund 37
Financials Index Fund 48
Health Care Index Fund 61
Industrials Index Fund 73
Information Technology Index Fund 85
Materials Index Fund 98
Utilities Index Fund 109

 

 

 

 

 

 

 

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 29, 2020

 

    Beginning Ending Expenses
    Account Value Account Value Paid During
Index Fund Share Class 8/31/2019 2/29/2020 Period
Based on Actual Fund Return        
Communication Services ETF $1,000.00 $1,028.46 $0.50
  Admiral™ 1,000.00 1,028.48 0.50
Consumer Discretionary ETF $1,000.00 $998.41 $0.50
  Admiral 1,000.00 998.39 0.50
Consumer Staples ETF $1,000.00 $965.22 $0.49
  Admiral 1,000.00 965.25 0.49
Energy ETF $1,000.00 $822.32 $0.45
  Admiral 1,000.00 822.29 0.45
Financials ETF $1,000.00 $995.09 $0.50
  Admiral 1,000.00 995.27 0.50
Health Care ETF $1,000.00 $1,040.52 $0.51
  Admiral 1,000.00 1,040.45 0.51
Industrials ETF $1,000.00 $982.96 $0.49
  Admiral 1,000.00 983.05 0.49
Information Technology ETF $1,000.00 $1,109.61 $0.52
  Admiral 1,000.00 1,109.65 0.52
Materials ETF $1,000.00 $939.22 $0.48
  Admiral 1,000.00 939.27 $0.48
Utilities ETF $1,000.00 $994.87 $0.50
  Admiral 1,000.00 995.06 0.50
Based on Hypothetical 5% Yearly Return      
Communication Services ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Consumer Discretionary ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Consumer Staples ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Energy ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Financials ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Health Care ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Industrials ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Information Technology ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Materials ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50
Utilities ETF $1,000.00 $1,024.37 $0.50
  Admiral 1,000.00 1,024.37 0.50

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 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 (182/366).

 

2 

 

 

Communication Services Index Fund

 

 

Sector Diversification

As of February 29, 2020

  

 

Advertising   1.8%
Alternative Carriers   3.5 
Broadcasting   4.2 
Cable & Satellite   13.0 
Integrated Telecommunication Services   12.7 
Interactive Home Entertainment   4.6 
Interactive Media & Services   42.8 
Movies & Entertainment   12.3 
Publishing   1.7 
Wireless Telecommunication Services   3.4 

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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)

 

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

         Market 
         Value• 
      Shares   ($000)
Common Stocks (99.7%)          
Diversified Telecommunication Services (16.2%)          
  Alternative Carriers (3.5%)          
  CenturyLink Inc.   1,381,095    16,670 
* Zayo Group Holdings Inc.   448,981    15,710 
* GCI Liberty Inc. Class A   153,083    10,580 
  Cogent Communications Holdings Inc.   123,101    8,988 
* Iridium Communications Inc.   272,425    7,374 
* Vonage Holdings Corp.   639,163    5,727 
* Bandwidth Inc. Class A   47,132    2,964 
* Anterix Inc.   36,159    1,694 
* ORBCOMM Inc.   208,090    689 
*,^ Globalstar Inc.   1,616,905    660 
             
  Integrated Telecommunication Services (12.7%)          
  AT&T Inc.   4,401,655    155,026 
  Verizon Communications Inc.   1,768,162    95,764 
  ATN International Inc.   31,528    1,699 
* Cincinnati Bell Inc.   128,229    1,673 
  Consolidated Communications Holdings Inc.   202,645    1,261 
           326,479 
           
Entertainment (16.8%)          
  Interactive Home Entertainment (4.5%)          
  Activision Blizzard Inc.   631,776    36,725 
* Electronic Arts Inc.   271,037    27,475 
* Take-Two Interactive Software Inc.   136,355    14,655 
* Zynga Inc.   1,529,180    10,261 
* Glu Mobile Inc.   328,012    2,336 
             
  Movies & Entertainment (12.3%)          
* Netflix Inc.   257,998    95,209 
  Walt Disney Co.   737,345    86,749 
* Live Nation Entertainment Inc.   181,901    11,054 
* Liberty Media Corp-Liberty Formula One Class C   274,269    10,713 
* Roku Inc.   88,023    10,005 
* Madison Square Garden Co.     28,914    7,744 
  Cinemark Holdings Inc.   202,316    5,252 
  World Wrestling Entertainment Inc.   103,722    4,851 
* Liberty Media Corp-Liberty Formula One Class A   77,941    2,922 
* Liberty Media Corp-Liberty Braves Class C   100,995    2,624 
* IMAX Corp.   155,201    2,418 
* Lions Gate Entertainment Corp. Class B   299,118    2,213 
  Marcus Corp.   58,276    1,557 
* Lions Gate Entertainment Corp. Class A   185,386    1,474 
^ AMC Entertainment Holdings Inc.   144,877    907 
* Liberty Media Corp-Liberty Braves Class A   24,510    638 
* Reading International Inc.   46,327    386 
           338,168 
           
Interactive Media & Services (42.7%)          
  Interactive Media & Services (42.7%)          
* Facebook Inc.   1,562,584    300,751 
* Alphabet Inc. Class C   169,728    227,322 
* Alphabet Inc. Class A   163,276    218,667 
* Twitter Inc.   647,284    21,490 
* IAC/InterActiveCorp   78,198    15,948 
*,^ Zillow Group Inc. Class C   220,773    12,321 
* Snap Inc.   821,914    11,647 
* Zillow Group Inc. Class A   166,966    9,295 
*,^ Match Group Inc.   121,254    7,881 
  Pinterest Inc. Class A   338,241    6,596 
* Yelp Inc.   192,154    6,009 
  TripAdvisor Inc.   218,936    5,134 
* Cargurus Inc.   176,069    4,488 
* Eventbrite Inc. Class A   138,521    2,024 
* QuinStreet Inc.   129,798    1,672 
* Cars.com Inc.   178,329    1,619 
*,^ ANGI Homeservices Inc.   216,172    1,541 
* Meet Group Inc.   190,816    973 
* Liberty TripAdvisor Holdings Inc.   204,472    890 
* EverQuote Inc. Class A   21,247    863 
* TrueCar Inc.   243,491    640 
           857,771 
           
Media (20.7%)          
  Advertising (1.8%)          
  Omnicom Group Inc.   222,251    15,398 
  Interpublic Group of Cos. Inc.   499,731    10,674 
* Cardlytics Inc.   53,939    4,282 
* Clear Channel Outdoor Holdings Inc.   1,048,137    2,170 
* TechTarget Inc.   67,060    1,551 
  National CineMedia Inc.   179,557    1,381 
* comScore Inc.   167,854    588 
  Emerald Holding Inc.   70,325    482 
* Boston Omaha Corp.   24,620    479 
             
  Broadcasting (4.2%)          
  ViacomCBS Inc. Class B   613,557    15,100 
  Fox Corp. Class A   387,635    11,916 
* Discovery Communications Inc.   387,889    9,736 
  Nexstar Media Group Inc.   76,820    8,833 
*,^ Discovery Inc.   300,761    7,730 
  Fox Corp. Class B   238,187    7,253 
  TEGNA Inc.   472,637    6,768 
* Gray Television Inc.   261,921    4,955 
  Sinclair Broadcast Group Inc.   166,848    3,872 
* AMC Networks Inc.   122,731    3,805 

  EW Scripps Co.   136,210    1,621 
  Entercom Communications Corp. Class A   337,269    1,170 
* Hemisphere Media Group Inc.   51,398    649 
  Entravision Communications Corp. Class A   165,496    333 
             
  Cable & Satellite (13.0%)          
  Comcast Corp.   2,213,247    89,481 
* Charter Communications Inc.   129,219    63,727 
* Liberty Broadband Corp. Class C   129,488    16,301 
  Cable One Inc.   7,960    12,521 
* DISH Network Corp.   346,450    11,613 
* Liberty Media Corp-Liberty SiriusXM Class C   247,822    11,058 
* Liberty Global plc   472,152    8,777 
  Sirius XM Holdings Inc.   1,367,865    8,672 
* Liberty Broadband Corp. Class A   69,710    8,622 
* Liberty Media Corp-Liberty SiriusXM Class A   185,739    8,297 
* Altice USA Inc.   246,056    6,363 
* Liberty Global plc Class A   287,551    5,613 
* Liberty Latin America Ltd.   319,388    4,851 
* Liberty Latin America Ltd. Class A   131,533    1,993 
* MSG Networks Inc.   124,590    1,575 
* Loral Space & Communications Inc.   33,377    1,037 
* WideOpenWest Inc.   70,367    443 
             
  Publishing (1.7%)          
  New York Times Co.   246,563    9,236 
  News Corp. Class A   678,330    8,191 
  John Wiley & Sons Inc.   124,900    4,645 
  News Corp. Class B   361,550    4,498 
  Meredith Corp.   113,106    2,980 
  Scholastic Corp.   83,683    2,685 
* Gannett Co. Inc.   303,544    1,275 
  Tribune Publishing Co.   45,910    527 
           415,727 
Wireless Telecommunication Services (3.3%)
  Wireless Telecommunication Services (3.3%)          
* T-Mobile US Inc.   366,229    33,019 
* Sprint Corp.   2,099,149    19,291 
  Shenandoah Telecommunications Co.   131,584    5,846 
  Telephone & Data Systems Inc.   282,973    5,699 
* Boingo Wireless Inc.   124,093    1,572 
* United States Cellular Corp.      37,359    1,174 
*,^ Gogo Inc.   162,903    588 
           67,189 
Total Common Stocks (Cost $2,028,213)        2,005,334 

 

4 

 

 

Communication Services Index Fund

  

 

         Market 
         Value• 
      Shares   ($000)
Temporary Cash Investment (1.2%)        
Money Market Fund (1.2%)        
1,2 Vanguard Market Liquidity Fund, 1.706%          
  (Cost $23,635)   236,325    23,640 
Total Investments (100.9%) (Cost $2,051,848)        2,028,974 
Other Assets and Liabilities—Net (-0.9%)1,3        (18,388)
Net Assets (100%)        2,010,586 

Cost rounded to $000. 

•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 $17,905,000.

1Collateral of $18,909,000 was received for securities on loan.

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

3Cash of $510,000 has been segregated as collateral for open over-the-counter swap contracts.

  

 

Derivative Financial Instruments Outstanding as of Period End                
                         
Over-the-Counter Total Return Swaps                
       Floating         
               Interest Rate   Value and   Value and 
           Notional   Received   Unrealized   Unrealized 
   Termination       Amount   (Paid)1  Appreciation   (Depreciation)
Reference Entity   Date    Counterparty   ($000)   (%)  ($000)  ($000)
Sirius XM Holdings Inc.   2/2/21    GSI    4,706    (1.647)   —    (578)
1Payment 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 Assets and Liabilities

As of February 29, 2020

 

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $2,028,213) 2,005,334
Affiliated Issuers (Cost $23,635) 23,640
Total Investments in Securities 2,028,974
Investment in Vanguard 97
Cash Collateral Pledged—Over-the-Counter Swap Contracts 510
Receivables for Investment Securities Sold 47,290
Receivables for Accrued Income 273
Receivables for Capital Shares Issued 140
Total Assets 2,077,284
Liabilities  
Payables for Investment Securities Purchased 46,710
Collateral for Securities on Loan 18,909
Payables for Capital Shares Redeemed 157
Payables to Vanguard 344
Unrealized Depreciation—Over-the-Counter Swap Contracts 578
Total Liabilities 66,698
Net Assets 2,010,586

 

 

  
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 2,314,154
Total Distributable Earnings (Loss) (303,568)
Net Assets 2,010,586
   
ETF Shares—Net Assets  
Applicable to 21,991,985 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 1,961,675
Net Asset Value Per Share—ETF Shares $89.20
   
Admiral Shares—Net Assets  
Applicable to 1,075,991 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 48,911
Net Asset Value Per Share—Admiral Shares $45.46

 

 

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

 

6 

 

 

Communication Services Index Fund

 

 

Statement of Operations

 

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   11,611 
Interest1   33 
Securities Lending—Net   194 
Total Income   11,838 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   162 
Management and Administrative—ETF Shares   750 
Management and Administrative—Admiral Shares   19 
Marketing and Distribution—ETF Shares   70 
Marketing and Distribution—Admiral Shares   2 
Custodian Fees   14 
Shareholders’ Reports—ETF Shares   79 
Shareholders’ Reports—Admiral Shares   — 
Trustees’ Fees and Expenses   1 
Total Expenses   1,097 
Net Investment Income   10,741 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   65,961 
Swap Contracts   801 
Realized Net Gain (Loss)   66,762 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   (26,537)
Swap Contracts   (713)
Change in Unrealized Appreciation (Depreciation)   (27,250)
Net Increase (Decrease) in Net Assets Resulting from Operations   50,253 

1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $ 33,000, $1,000, and $5,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $71,148,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   10,741    18,049 
Realized Net Gain (Loss)   66,762    21,279 
Change in Unrealized Appreciation (Depreciation)   (27,250)   (5,789)
Net Increase (Decrease) in Net Assets Resulting from Operations   50,253    33,539 
Distributions1          
ETF Shares   (12,205)   (14,813)
Admiral Shares   (301)   (463)
Total Distributions   (12,506)   (15,276)
Capital Share Transactions          
ETF Shares   (91,290)   983,508 
Admiral Shares   (2,097)   3,352 
Net Increase (Decrease) from Capital Share Transactions   (93,387)   986,860 
Total Increase (Decrease)   (55,640)   1,005,123 
Net Assets          
Beginning of Period   2,066,226    1,061,103 
End of Period   2,010,586    2,066,226 

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

7 

 

 

Communication Services Index Fund

 

 

Financial Highlights 

 

 

ETF Shares

 

 

  Six Months            
    Ended       Year Ended August 31,    
For a Share Outstanding February 29,      
Throughout Each Period   2020   2019 2018 2017 2016 2015   
Net Asset Value, Beginning of Period $87.24 $86.83 $93.54 $95.16 $83.80 $88.44   
Investment Operations                
Net Investment Income   .4501 .9171 3.0671 3.1081 2.622 2.789 
Net Realized and Unrealized Gain (Loss) on Investments   2.036 .316 (6.297) (1.587) 12.811 (5.178)
Total from Investment Operations   2.486 1.233 (3.230) 1.521 15.433 (2.389)
Distributions                
Dividends from Net Investment Income (.526) (.823) (3.480) (3.141) (4.073) (2.251)
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (.526) (.823) (3.480) (3.141) (4.073) (2.251)
Net Asset Value, End of Period   $89.20 $87.24 $86.83 $93.54 $95.16 $83.80   
               
Total Return   2.85% 1.47% -3.50% 1.62% 19.14% -2.72%   
               
Ratios/Supplemental Data                
Net Assets, End of Period (Millions)   $1,962 $2,016 $1,015 $1,388 $1,483 $795   
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10% 0.10% 0.10% 0.10%   
Ratio of Net Investment Income to Average Net Assets   0.95% 1.09% 3.48% 3.26% 3.10% 3.20%   
Portfolio Turnover Rate2   6% 33% 84% 18% 20% 18%   

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

1Calculated based on average shares outstanding.

2Excludes 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

 

 

Financial Highlights

 

 

Admiral Shares

 

 

  Six Months            
    Ended       Year Ended August 31,   
For a Share Outstanding February 29,      
Throughout Each Period   2020   2019 2018 2017 2016 2015   
Net Asset Value, Beginning of Period $44.46 $44.25 $47.67 $48.50 $42.71 $45.07   
Investment Operations                
Net Investment Income   .2301 .4701 1.5541 1.6011 1.337 1.419 
Net Realized and Unrealized Gain (Loss) on Investments   1.038 .157 (3.199) (.829) 6.529 (2.637)
Total from Investment Operations   1.268 .627 (1.645) .772 7.866 (1.218)
Distributions                
Dividends from Net Investment Income (.268) (.417) (1.775) (1.602) (2.076) (1.142)
Distributions from Realized Capital Gains —   — — — — — 
Total Distributions   (.268) (.417) (1.775) (1.602) (2.076) (1.142)
Net Asset Value, End of Period   $45.46 $44.46 $44.25 $47.67 $48.50 $42.71   
               
Total Return2   2.85% 1.46% -3.48% 1.61% 19.14% -2.66%   
               
Ratios/Supplemental Data                
Net Assets, End of Period (Millions)   $49 $50 $46 $50 $65 $24   
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10% 0.10% 0.10% 0.10%   
Ratio of Net Investment Income to Average Net Assets   0.95% 1.09% 3.48% 3.26% 3.10% 3.20%   
Portfolio Turnover Rate3   6% 33% 84% 18% 20% 18%   

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

1Calculated based on average shares outstanding.
2Total 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.

3Excludes 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 

 

 

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. 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 Schedule of Investments. 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.

 

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 Schedule of Investments. 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 29, 2020, 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.

 

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, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

10 

 

 

Communication Services Index Fund

 

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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.

 

11 

 

 

Communication Services Index Fund

 

 

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 29, 2020, the fund had contributed to Vanguard capital in the amount of $97,000, representing less than 0.01% of the fund’s net assets and 0.04% of Vanguard’s capital received pursuant to the FSA. 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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   2,005,334    —    —    2,005,334 
Temporary Cash Investments   23,640    —    —    23,640 
Total   2,028,974    —    —    2,028,974 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    578    —    578 

 

D.  As of February 29, 2020, 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   2,051,848 
Gross Unrealized Appreciation   133,207 
Gross Unrealized Depreciation   (156,659)
Net Unrealized Appreciation (Depreciation)   (23,452)

 

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, 2019, the fund had available capital losses totaling $350,254,000 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, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

12 

 

Communication Services Index Fund

 

 

E.   During the six months ended February 29, 2020, the fund purchased $566,385,000 of investment securities and sold $662,867,000 of investment securities, other than temporary cash investments. Purchases and sales include $415,644,000 and $527,574,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   436,747    4,727    1,833,068    21,800 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (528,037)   (5,850)   (849,560)   (10,375)
Net Increase (Decrease)—ETF Shares   (91,290)   (1,123)   983,508    11,425 
Admiral Shares                    
Issued   11,508    243    27,900    653 
Issued in Lieu of Cash Distributions   246    5    387    9 
Redeemed   (13,851)   (292)   (24,935)   (584)
Net Increase (Decrease)—Admiral Shares   (2,097)   (44)   3,352    78 

 

G.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

 

13 

 

 

Consumer Discretionary Index Fund

 

 

Sector Diversification 

As of February 29, 2020

 

Apparel Retail   5.3%
Apparel, Accessories & Luxury Goods   3.3 
Auto Parts & Equipment   2.4 
Automobile Manufacturers   4.8 
Automotive Retail   3.4 
Casinos & Gaming   2.4 
Computer & Electronics Retail   0.7 
Consumer Electronics   0.5 
Department Stores   0.6 
Distributors   1.1 
Education Services   1.1 
Footwear   4.3 
General Merchandise Stores   3.9 
Home Furnishings   0.7 
Home Improvement Retail   11.0 
Homebuilding   3.2 
Homefurnishing Retail   0.5 
Hotels, Resorts & Cruise Lines   4.2 
Household Appliances   0.5 
Housewares & Specialties   0.2 
Internet & Direct Marketing Retail   28.6 
Leisure Facilities   0.6 
Leisure Products   1.2 
Motorcycle Manufacturers   0.2 
Other   0.0 
Restaurants   12.3 
Specialized Consumer Services   0.9 
Specialty Stores   2.0 
Tires & Rubber   0.1 

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

 

14 

 

 

Consumer Discretionary Index Fund

 

 

Financial Statements (unaudited) 

 

 

Schedule of Investments 

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value•
    Shares ($000)
Common Stocks (99.3%)    
Auto Components (2.6%)    
  Aptiv plc 264,623 20,670
  Gentex Corp. 270,878 7,232
  BorgWarner Inc. 221,966 7,014
  Lear Corp. 61,819 6,874
  Autoliv Inc. 89,600 5,979
* Fox Factory Holding Corp. 44,654 2,831
  LCI Industries 29,149 2,814
  Goodyear Tire & Rubber Co. 272,203 2,636
* Adient plc 104,894 2,510
  Dana Inc. 169,692 2,440
* Visteon Corp. 33,500 2,179
* Dorman Products Inc. 33,719 2,045
* Gentherm Inc. 42,324 1,726
  Cooper Tire & Rubber Co. 65,901 1,680
*,^ Veoneer Inc. 135,247 1,665
* Delphi Technologies plc 113,982 1,609
  Standard Motor Products Inc. 28,507 1,254
*  American Axle & Manufacturing Holdings Inc. 162,626 1,029
* Stoneridge Inc. 41,967 928
  Tenneco Inc. 93,215 855
* Garrett Motion Inc. 120,246 835
* Motorcar Parts of America Inc. 40,839 684
* Modine Manufacturing Co. 89,552 668
* Cooper-Standard Holdings Inc. 27,764 480
      78,637
Automobiles (5.0%)    
* Tesla Inc. 108,123 72,225
  General Motors Co. 1,321,982 40,320
  Ford Motor Co. 4,016,034 27,952
  Harley-Davidson Inc. 169,041 5,151
  Thor Industries Inc. 60,879 4,591
  Winnebago Industries Inc. 39,277 2,038
      152,277
Distributors (1.1%)    
  Genuine Parts Co. 152,100 13,269
* LKQ Corp. 324,351 9,594
  Pool Corp. 42,486 8,963
  Core-Mark Holding Co. Inc. 63,380 1,459
* Funko Inc. 63,294 513
      33,798
Diversified Consumer Services (2.0%)  
*  Bright Horizons Family Solutions Inc. 61,552 9,673
  Service Corp. International 194,073 9,275
* ServiceMaster Global Holdings Inc. 149,100 5,333
* Chegg Inc. 120,880 4,740
  H&R Block Inc. 221,809 4,585

* Grand Canyon Education Inc. 53,816 4,342
* frontdoor Inc. 95,171 4,035
  Strategic Education Inc. 24,753 3,648
  Graham Holdings Co. 5,202 2,616
* Laureate Education Inc. 136,672 2,556
* Adtalem Global Education Inc. 67,053 2,070
* WW International Inc. 58,741 1,762
* Perdoceo Education Corp. 95,170 1,421
* K12 Inc. 63,739 1,267
  OneSpaWorld Holdings Ltd. 73,854 902
* Houghton Mifflin Harcourt Co. 142,826 781
* American Public Education Inc. 32,342 720
  Carriage Services Inc. Class A 33,591 710
* Regis Corp. 54,531 696
      61,132
Hotels, Restaurants & Leisure (19.4%)  
  McDonald’s Corp. 772,662 150,028
  Starbucks Corp. 1,230,366 96,498
  Marriott International Inc. 288,254 35,743
  Yum! Brands Inc. 311,902 27,837
  Hilton Worldwide Holdings Inc. 281,967 27,407
* Chipotle Mexican Grill Inc. 27,316 21,131
  Las Vegas Sands Corp. 357,778 20,862
  Royal Caribbean Cruises Ltd. 185,071 14,882
  Carnival Corp. 438,716 14,679
  Domino’s Pizza Inc. 40,924 13,892
  MGM Resorts International 522,355 12,829
  Darden Restaurants Inc. 128,171 12,497
  Wynn Resorts Ltd. 101,389 10,948
  Aramark 263,533 9,155
  Vail Resorts Inc. 42,694 9,077
* Norwegian Cruise Line Holdings Ltd. 224,672 8,371
* Caesars Entertainment Corp. 581,535 7,391
  Dunkin’ Brands Group Inc. 89,652 5,964
* Planet Fitness Inc. 87,964 5,937
  Wyndham Hotels & Resorts Inc. 103,709 5,284
  Churchill Downs Inc. 38,933 4,891
  Texas Roadhouse Inc. 73,588 4,137
  Wyndham Destinations Inc. 100,323 4,003
  Marriott Vacations  Worldwide Corp. 39,945 3,866
  Wendy’s Co. 204,633 3,863
  Choice Hotels International  Inc. 40,683 3,713
* Eldorado Resorts Inc. 73,300 3,678
* Penn National Gaming Inc. 123,273 3,645
  Cracker Barrel Old Country  Store Inc. 23,221 3,328

  Hyatt Hotels Corp. 41,937 3,212
  Wingstop Inc. 33,927 2,865
* Hilton Grand Vacations Inc. 99,355 2,649
  Boyd Gaming Corp. 96,711 2,583
  Extended Stay America Inc. 218,096 2,395
* Shake Shack Inc. 38,084 2,264
  Six Flags Entertainment  Corp. 88,392 2,235
  Cheesecake Factory Inc. 53,157 1,894
  Bloomin’ Brands Inc. 102,537 1,845
  Jack in the Box Inc. 26,341 1,814
  Red Rock Resorts Inc. 87,276 1,799
* SeaWorld Entertainment Inc. 63,519 1,728
  Dine Brands Global Inc. 20,642 1,690
  Brinker International Inc. 47,964 1,648
  Papa John’s International  Inc. 27,408 1,579
* Denny’s Corp. 79,411 1,383
  Dave & Buster’s  Entertainment Inc. 40,300 1,330
* Scientific Games Corp. 66,376 1,211
* Everi Holdings Inc. 114,574 1,192
  BJ’s Restaurants Inc. 29,347 967
  Twin River Worldwide  Holdings Inc. 36,554 950
*  Monarch Casino & Resort  Inc. 19,931 942
  Ruth’s Hospitality Group Inc. 47,162 902
* Chuy’s Holdings Inc. 33,105 710
* Habit Restaurants Inc. 50,817 709
*   Red Robin Gourmet Burgers Inc.   25,041   689
*   Lindblad Expeditions Holdings Inc.   54,217   645
* El Pollo Loco Holdings Inc. 49,223 635
* Playa Hotels & Resorts NV 113,270 600
* Fiesta Restaurant Group Inc. 61,239 592
* Golden Entertainment Inc 34,117 555
* Del Taco Restaurants Inc. 85,287 546
* PlayAGS Inc. 53,420 518
*   Carrols Restaurant Group Inc.   117,428   484
  BBX Capital Corp. 122,351 426
* Biglari Holdings Inc. Class B 3,801 401
* Target Hospitality Corp. 61,846 289
* Biglari Holdings Inc. Class A 251 151
      594,563
Household Durables (5.0%)    
  DR Horton Inc. 363,054 19,340
  Lennar Corp. Class A 291,972 17,618
* NVR Inc. 3,677 13,484
  Garmin Ltd. 139,753 12,353
  PulteGroup Inc. 270,888 10,890
  Whirlpool Corp. 67,069 8,575
* Mohawk Industries Inc. 65,030 7,878
  Newell Brands Inc. 429,569 6,628
  Leggett & Platt Inc. 142,953 5,669
  Toll Brothers Inc. 144,522 5,352

 

15 

 

 

Consumer Discretionary Index Fund

 

 

      Market
      Value•
    Shares ($000)
* Helen of Troy Ltd. 27,700 4,559
* TopBuild Corp. 38,011 3,839
*  Tempur Sealy International Inc. 51,220 3,829
* Taylor Morrison Home Corp. 140,153 3,156
  KB Home 91,153 2,971
* Meritage Homes Corp. 42,639 2,706
* TRI Pointe Group Inc. 165,906 2,543
  MDC Holdings Inc. 60,040 2,362
* Cavco Industries Inc. 10,635 2,145
*  Installed Building Products Inc. 28,243 1,865
* LGI Homes Inc. 24,379 1,837
*,^ iRobot Corp. 36,616 1,757
  La-Z-Boy Inc. 59,579 1,707
* Skyline Champion Corp. 65,761 1,676
* M/I Homes Inc. 38,183 1,422
* Century Communities Inc. 37,827 1,261
* Universal Electronics Inc. 23,323 985
*,^ GoPro Inc. 228,068 866
* Beazer Homes USA Inc. 57,604 706
  Ethan Allen Interiors Inc. 52,966 699
* Green Brick Partners Inc. 58,799 643
* Sonos Inc. 52,535 606
  Hooker Furniture Corp. 29,535 556
* Legacy Housing Corp. 25,102 361
  Tupperware Brands Corp. 121,319 346
* Lovesac Co. 30,320 263
      153,453
Internet & Direct Marketing Retail (28.4%)  
* Amazon.com Inc. 367,882 692,998
* Booking Holdings Inc. 43,992 74,595
  eBay Inc. 843,409 29,216
* MercadoLibre Inc. 46,118 28,410
  Expedia Group Inc. 145,206 14,320
* Etsy Inc. 128,183 7,410
* Grubhub Inc. 100,831 4,851
*,^ Wayfair Inc. 68,672 4,341
*  Qurate Retail Group Inc. QVC Group Class A 436,559 2,977
* Stamps.com Inc. 20,926 2,953
* Chewy Inc. 68,550 2,029
*,^ Stitch Fix Inc. Class A 68,123 1,637
* Shutterstock Inc. 29,658 1,143
* Quotient Technology Inc. 120,272 1,076
  PetMed Express Inc. 35,175 929
* 1-800-Flowers.com Inc. 48,303 871
* Groupon Inc. 596,741 800
* RealReal Inc. 48,836 683
*,^ Revolve Group Inc. 34,699 566
*,^ Overstock.com Inc. 75,167 486
* Lands’ End Inc. 45,610 481
*,^ Duluth Holdings Inc. 56,635 388
      873,160
Leisure Products (1.2%)    
  Hasbro Inc. 136,577 10,551
  Polaris Inc. 63,459 5,237
  Brunswick Corp. 90,841 4,833
* Mattel Inc. 383,253 4,519
* YETI Holdings Inc. 76,078 2,301
  Callaway Golf Co. 111,448 1,892
*  Peloton Interactive Inc. Class A 59,685 1,593
* Malibu Boats Inc. 29,048 1,276
  Sturm Ruger & Co. Inc. 25,661 1,233
  Acushnet Holdings Corp. 47,699 1,214
*  American Outdoor Brands  Corp. 95,447 951

  Johnson Outdoors Inc. 12,543 783
* Vista Outdoor Inc. 102,346 752
*  MasterCraft Boat Holdings  Inc. 34,341 555
      37,690
Multiline Retail (4.4%)    
  Target Corp. 521,026 53,666
  Dollar General Corp. 264,322 39,728
* Dollar Tree Inc. 245,402 20,376
  Kohl’s Corp. 171,447 6,712
  Macy’s Inc. 339,598 4,493
  Nordstrom Inc. 120,669 4,187
*  Ollie’s Bargain Outlet  Holdings Inc. 65,703 3,342
^ Dillard’s Inc. Class A 16,991 956
  Big Lots Inc. 55,289 874
*,^ JC Penney Co. Inc. 892,506 616
      134,950
Other (0.0%)1    
*,§ Media General Inc. CVR 69,182 3
     
Specialty Retail (22.7%)    
  Home Depot Inc. 1,116,581 243,236
  Lowe’s Cos. Inc. 807,813 86,089
  TJX Cos. Inc. 1,237,383 73,996
  Ross Stores Inc. 373,978 40,681
* O’Reilly Automotive Inc. 79,742 29,403
* AutoZone Inc. 25,093 25,909
  Best Buy Co. Inc. 246,541 18,651
  Tiffany & Co. 112,965 15,091
* Ulta Beauty Inc. 58,324 14,995
* CarMax Inc. 171,626 14,985
* Burlington Stores Inc. 69,081 14,939
  Tractor Supply Co. 124,747 11,041
  Advance Auto Parts Inc. 73,584 9,785
* Five Below Inc. 60,143 5,831
  L Brands Inc. 255,943 5,544
  Williams-Sonoma Inc. 84,618 5,279
*,^ Carvana Co. 52,960 4,391
  Foot Locker Inc. 119,042 4,315
*  Floor & Decor Holdings Inc. Class A 79,706 4,069
  Gap Inc. 250,989 3,597
* Rh 18,707 3,393
* Murphy USA Inc. 33,652 3,281
* National Vision Holdings Inc.   91,945 3,202
  Lithia Motors Inc. Class A 26,173 3,119
  Aaron’s Inc. 75,634 2,975
  Dick’s Sporting Goods Inc. 74,254 2,704
* AutoNation Inc. 62,978 2,691
  American Eagle Outfitters  Inc. 191,387 2,465
  Monro Inc. 40,428 2,269
*  Asbury Automotive Group  Inc. 23,878 2,117
  Penske Automotive Group  Inc. 45,158 2,078
* Urban Outfitters Inc. 79,730 1,874
  Group 1 Automotive Inc. 21,911 1,868
* Sally Beauty Holdings Inc. 148,343 1,845
  Bed Bath & Beyond Inc. 164,043 1,773
  Office Depot Inc. 721,750 1,696
  Signet Jewelers Ltd. 68,494 1,597
* Sleep Number Corp. 36,259 1,597
* Boot Barn Holdings Inc. 43,216 1,325
  Rent-A-Center Inc. 61,474 1,309
  Children’s Place Inc. 21,542 1,241

  Designer Brands Inc. Class A 90,847 1,227
  Abercrombie & Fitch Co. 88,492 1,162
  Guess? Inc. 65,520 1,061
  Buckle Inc. 46,198 1,046
  Sonic Automotive Inc. 36,746 1,029
* America’s Car-Mart Inc. 9,636 990
  Winmark Corp. 4,866 973
* Genesco Inc. 26,273 904
  Chico’s FAS Inc. 220,714 885
* Zumiez Inc. 33,338 884
  Camping World Holdings Inc. 60,216 824
  Caleres Inc. 70,090 808
* Lumber Liquidators Holdings  Inc. 80,451 788
* Michaels Cos. Inc. 176,939 759
  Cato Corp. Class A 46,856 758
* MarineMax Inc. 41,694 706
  Shoe Carnival Inc. 23,213 694
^ GameStop Corp. Class A 191,157 688
* Hibbett Sports Inc. 34,956 682
  Haverty Furniture Cos. Inc. 37,228 626
* Express Inc. 157,371 582
* At Home Group Inc. 109,965 550
* Conn’s Inc. 61,914 505
^ Tailored Brands Inc. 150,933 494
*,^ Party City Holdco Inc. 202,957 404
      698,275
Textiles, Apparel & Luxury Goods (7.5%)  
  NIKE Inc. 1,273,345 113,812
  VF Corp. 350,690 25,250
* Lululemon Athletica Inc. 114,306 24,851
  Tapestry Inc. 299,380 7,020
  PVH Corp. 80,322 5,953
  Ralph Lauren Corp. 54,341 5,733
* Deckers Outdoor Corp. 30,510 5,303
  Hanesbrands Inc. 396,126 5,245
* Skechers U.S.A. Inc. 147,021 4,863
  Carter’s Inc. 48,534 4,439
* Capri Holdings Ltd. 168,751 4,357
* Under Armour Inc. Class A 213,947 3,036
  Steven Madden Ltd. 92,014 3,009
  Columbia Sportswear Co. 35,360 2,875
* Under Armour Inc. Class C 228,052 2,846
  Wolverine World Wide Inc. 95,223 2,503
  Kontoor Brands Inc. 59,725 2,015
* Crocs Inc. 73,626 1,927
  Oxford Industries Inc. 23,344 1,410
* G-III Apparel Group Ltd. 56,942 1,273
  Levi Strauss & Co. Class A 68,090 1,157
* Unifi Inc. 30,833 659
  Movado Group Inc. 40,892 601
* Vera Bradley Inc. 65,616 542
* Fossil Group Inc. 111,668 513
  Culp Inc. 45,039 411
      231,603
Total Common Stocks (Cost $2,805,606)   3,049,541

 

16 

 

 

Consumer Discretionary Index Fund

 

 

    Market
    Value•
  Shares ($000)
Temporary Cash Investment (1.0%)  
2,3 Vanguard Market Liquidity Fund, 1.706%
(Cost $28,743)		 287,411 28,750
Total Investments (100.3%) (Cost $2,834,349)   3,078,291
Other Assets and Liabilities—Net (-0.3%)2,4   (7,893)
Net Assets (100%)   3,070,398

Cost rounded to $000.

•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 $10,563,000.

§Security value determined using significant unobservable inputs.

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

2Collateral of $11,481,000 was received for securities on loan.

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

4Cash of $5,400,000 has been segregated as collateral for open over-the-counter swap contracts.

CVR—Contingent Value Rights.

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Over-the-Counter Total Return Swaps

 
               Floating         
               Interest Rate   Value and   Value and 
           Notional   Received   Unrealized   Unrealized 
   Termination       Amount   (Paid)1  Appreciation   (Depreciation)
Reference Entity   Date    Counterparty   ($000)   (%)  ($000)  ($000)
Tesla Inc.   2/2/21    GSI    25,752    (1.647)   —    (5,722)
1Payment received/paid monthly.

GSI—Goldman Sachs International.

 

 

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

 

17 

 

 

Consumer Discretionary Index Fund

 

 

Statement of Assets and Liabilities

As of February 29, 2020

 

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $2,805,606) 3,049,541
Affiliated Issuers (Cost $28,743) 28,750
Total Investments in Securities 3,078,291
Investment in Vanguard 150
Cash 4
Cash Collateral Pledged—Over-the-Counter Swap Contracts 5,400
Receivables for Investment Securities Sold 55,722
Receivables for Accrued Income 4,230
Receivables for Capital Shares Issued 1,506
Total Assets 3,145,303
Liabilities  
Payables for Investment Securities Purchased 55,880
Collateral for Securities on Loan 11,481
Payables for Capital Shares Redeemed 1,303
Payables to Vanguard 519
Unrealized Depreciation—Over-the-Counter Swap Contracts 5,722
Total Liabilities 74,905
Net Assets 3,070,398

 

   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 2,707,997
Total Distributable Earnings (Loss) 362,401
Net Assets 3,070,398
   
ETF Shares—Net Assets  
Applicable to 15,659,218 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 2,770,528
Net Asset Value Per Share—ETF Shares $176.93
   
Admiral Shares—Net Assets  
Applicable to 3,274,424 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 299,870
Net Asset Value Per Share—Admiral Shares $91.58

 

 

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

 

18 

 

 

Consumer Discretionary Index Fund

 

 

Statement of Operations

 

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   21,728 
Interest1   90 
Securities Lending—Net   388 
Total Income   22,206 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   255 
Management and Administrative—ETF Shares   1,169 
Management and Administrative—Admiral Shares   123 
Marketing and Distribution—ETF Shares   87 
Marketing and Distribution—Admiral Shares   12 
Custodian Fees   4 
Shareholders’ Reports—ETF Shares   52 
Shareholders’ Reports—Admiral Shares   2 
Trustees’ Fees and Expenses   1 
Total Expenses   1,705 
Expenses Paid Indirectly   (4)
Net Expenses   1,701 
Net Investment Income   20,505 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   184,707 
Swap Contracts   19,187 
Realized Net Gain (Loss)   203,894 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   (225,404)
Swap Contracts   (6,017)
Change in Unrealized Appreciation (Depreciation)   (231,421)
Net Increase (Decrease) in Net Assets Resulting from Operations   (7,022)
1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $ 90,000, $5,000, and $5,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $211,100,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   20,505    38,231 
Realized Net Gain (Loss)   203,894    198,044 
Change in Unrealized Appreciation (Depreciation)   (231,421)   (297,760)
Net Increase (Decrease) in Net Assets Resulting from Operations   (7,022)   (61,485)
Distributions1          
ETF Shares   (22,316)   (34,304)
Admiral Shares   (2,329)   (3,668)
Total Distributions   (24,645)   (37,972)
Capital Share Transactions          
ETF Shares   (248,918)   (55,912)
Admiral Shares   (18,480)   (1,729)
Net Increase (Decrease) from Capital Share Transactions   (267,398)   (57,641)
Total Increase (Decrease)   (299,065)   (157,098)
Net Assets          
Beginning of Period   3,369,463    3,526,561 
End of Period   3,070,398    3,369,463 
1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

19 

 

 

Consumer Discretionary Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

  Six Months              
      Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period     2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $178.51 $180.85 $141.74 $126.45 $120.80 $111.79  
Investment Operations                    
Net Investment Income     1.1211 2.0521 2.0661 2.0681 1.875 1.542  
Net Realized and Unrealized Gain (Loss) on Investments     (1.363) (2.391) 39.031 15.248 6.259 8.900  
Total from Investment Operations     (.242) (.339) 41.097 17.316 8.134 10.442  
Distributions                    
Dividends from Net Investment Income   (1.338) (2.001) (1.987) (2.026) (2.484) (1.432)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions     (1.338) (2.001) (1.987) (2.026) (2.484) (1.432)  
Net Asset Value, End of Period     $176.93 $178.51 $180.85 $141.74 $126.45 $120.80  
Total Return     -0.16% -0.14% 29.22% 13.81% 6.84% 9.41%  
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions)     $2,770 $3,049 $3,199 $2,198 $1,926 $1,842  
Ratio of Total Expenses to Average Net Assets     0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets     1.21% 1.20% 1.28% 1.53% 1.54% 1.31%  
Portfolio Turnover Rate2     4% 9% 28% 6% 7% 6%  

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

1Calculated based on average shares outstanding.
2Excludes 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.

 

20 

 

 

Consumer Discretionary Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

  Six Months              
    Ended         Year Ended August 31,  
For a Share Outstanding February 29,          
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $92.40 $93.61 $73.36 $65.45 $62.53 $57.87  
Investment Operations                  
Net Investment Income   .5781 1.0581 1.0731 1.0711 .971 .805  
Net Realized and Unrealized Gain (Loss) on Investments   (.705) (1.232) 20.205 7.890 3.239 4.595  
Total from Investment Operations   (.127) (.174) 21.278 8.961 4.210 5.400  
Distributions                  
Dividends from Net Investment Income (.693) (1.036) (1.028) (1.051) (1.290) (.740)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (.693) (1.036) (1.028) (1.051) (1.290) (.740)  
Net Asset Value, End of Period   $91.58 $92.40 $93.61 $73.36 $65.45 $62.53  
Total Return2   -0.16% -0.14% 29.24% 13.81% 6.83% 9.43%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $300 $321 $328 $204 $169 $139  
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10% 0.10% 0.10% 0.09%  
Ratio of Net Investment Income to Average Net Assets   1.21% 1.20% 1.28% 1.53% 1.54% 1.32%  
Portfolio Turnover Rate3   4% 9% 28% 6% 7% 6%  

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

1Calculated based on average shares outstanding.
2Total 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.
3Excludes 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.

 

21 

 

 

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. 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 Schedule of Investments. 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.

 

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 Schedule of Investments. 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 29, 2020, 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.

 

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, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

22 

 

 

Consumer Discretionary Index Fund

 

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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.

 

23 

 

 

Consumer Discretionary Index Fund

 

 

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 29, 2020, the fund had contributed to Vanguard capital in the amount of $150,000, representing less than 0.01% of the fund’s net assets and 0.06% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $4,000 (an annual rate of less than 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.

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   3,049,538    —    3    3,049,541 
Temporary Cash Investments   28,750    —    —    28,750 
Total   3,078,288    —    3    3,078,291 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    5,722    —    5,722 

 

E.  As of February 29, 2020, 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   2,834,349 
Gross Unrealized Appreciation   576,970 
Gross Unrealized Depreciation   (338,750)
Net Unrealized Appreciation (Depreciation)   238,220 

 

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, 2019, the fund had available capital losses totaling $81,895,000 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, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

24 

 

 

Consumer Discretionary Index Fund

 

 

F.  During the six months ended February 29, 2020, the fund purchased $310,862,000 of investment securities and sold $581,053,000 of investment securities, other than temporary cash investments. Purchases and sales include $169,208,000 and $446,510,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   197,571    1,056    625,380    3,592 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (446,489)   (2,475)   (681,292)   (4,200)
Net Increase (Decrease)—ETF Shares   (248,918)   (1,419)   (55,912)   (608)
Admiral Shares                    
Issued   39,780    408    108,968    1,234 
Issued in Lieu of Cash Distributions   2,045    22    3,235    36 
Redeemed   (60,305)   (627)   (113,932)   (1,303)
Net Increase (Decrease)—Admiral Shares   (18,480)   (197)   (1,729)   (33)

 

H.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

25 

 

 

Consumer Staples Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Agricultural Products   2.3%
Brewers   0.8 
Distillers & Vintners   2.7 
Drug Retail   2.1 
Food Distributors   2.9 
Food Retail   2.1 
Household Products   23.2 
Hypermarkets & Super Centers   12.6 
Packaged Foods & Meats   16.9 
Personal Products   3.4 
Soft Drinks   22.2 
Tobacco   8.8 

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

26 

 

 

Consumer Staples Index Fund

 

 

Financial Statements (unaudited)

 

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value•
    Shares ($000)
Common Stocks (99.7%)    
Beverages (25.6%)    
  Coca-Cola Co. 11,760,430 629,065
  PepsiCo Inc. 4,084,185 539,235
  Constellation Brands Inc. Class A 520,081 89,652
* Monster Beverage Corp. 1,263,879 78,879
  Brown-Forman Corp. 973,181 59,763
  Molson Coors Beverage Co. Class B 613,669 30,444
* Boston Beer Co. Inc. Class A 39,127 14,508
  Coca-Cola Consolidated Inc. 28,449 5,587
*,^ National Beverage Corp. 84,440 3,571
  MGP Ingredients Inc. 80,518 2,316
*,^ New Age Beverages Corp. 700,074 1,414
* Primo Water Corp. 43,452 608
      1,455,042
Food & Staples Retailing (19.7%)  
  Walmart Inc. 4,149,917 446,863
  Costco Wholesale Corp. 883,028 248,254
  Walgreens Boots Alliance Inc. 2,526,221 115,600
  Sysco Corp. 1,611,810 107,427
  Kroger Co. 2,786,832 78,394
* US Foods Holding Corp. 719,984 24,220
  Casey’s General Stores Inc. 136,398 22,236
* Performance Food Group Co. 381,019 16,155
* BJ’s Wholesale Club Holdings Inc. 478,408 9,214
* Sprouts Farmers Market Inc. 532,391 8,508
* Chefs’ Warehouse Inc. 211,336 6,471
  PriceSmart Inc. 116,169 6,469
^ Rite Aid Corp. 446,426 6,080
  Ingles Markets Inc. 124,054 4,437
  Weis Markets Inc. 114,663 4,271
  SpartanNash Co. 278,487 3,462
  Andersons Inc. 179,356 3,295
* United Natural Foods Inc. 376,301 2,435
  Village Super Market Inc. 101,328 2,082
  Grocery Outlet Holding Corp. 33,107 1,048
      1,116,921
Food Products (19.2%)    
  Mondelez International Inc. 4,513,575 238,317
  General Mills Inc. 1,839,019 90,112
  Archer-Daniels-Midland Co. 1,805,157 67,964
  Hershey Co. 464,140 66,831
  Tyson Foods Inc. 934,214 63,368
  McCormick & Co. Inc. 384,470 56,206
  Kraft Heinz Co. 2,091,314 51,802
  Kellogg Co. 819,084 49,530
  Conagra Brands Inc. 1,608,548 42,932
  Lamb Weston Holdings Inc. 478,774 41,601
  Hormel Foods Corp. 946,655 39,381
  JM Smucker Co. 361,686 37,250
  Bunge Ltd. 472,413 22,180
* Post Holdings Inc. 216,781 21,951
  Ingredion Inc. 234,997 19,575
  Campbell Soup Co. 419,366 18,922
* Darling Ingredients Inc. 734,603 18,879
* Freshpet Inc. 282,830 18,797
  Flowers Foods Inc. 685,747 14,764
  Sanderson Farms Inc. 94,773 11,710
  Lancaster Colony Corp. 78,555 11,347
  J&J Snack Foods Corp. 66,015 10,616
* Hain Celestial Group Inc. 387,911 9,205
* Simply Good Foods Co. 401,092 8,848
* TreeHouse Foods Inc. 212,091 8,083
* Hostess Brands Inc. 606,984 7,715
* Pilgrim’s Pride Corp. 316,525 6,698
  Calavo Growers Inc. 90,774 6,577
  Cal-Maine Foods Inc. 152,643 5,326
  Fresh Del Monte Produce Inc. 182,753 5,011
  Tootsie Roll Industries Inc. 153,061 4,910
^ B&G Foods Inc. 314,751 4,658
  John B Sanfilippo & Son Inc. 58,359 4,096
* Landec Corp. 313,085 3,212
* Farmer Brothers Co. 131,706 1,627
* Beyond Meat Inc. 5,379 482
      1,090,483
Household Products (23.1%)    
  Procter & Gamble Co. 7,351,370 832,395
  Colgate-Palmolive Co. 2,532,274 171,106
  Kimberly-Clark Corp. 1,083,535 142,149
  Clorox Co. 402,063 64,097
  Church & Dwight Co. Inc. 824,185 57,297
  WD-40 Co. 68,699 11,850
^ Energizer Holdings Inc. 257,866 11,086
  Spectrum Brands Holdings Inc 201,554 10,862
  Central Garden & Pet Co. Class A 277,021 7,011
* Central Garden & Pet Co. 126,165 3,379
* Reynolds Consumer Products Inc. 13,999 404
      1,311,636
Personal Products (3.4%)    
  Estee Lauder Cos. Inc. Class A 689,275 126,551
* Herbalife Nutrition Ltd. 432,345 13,991
  Coty Inc. 1,096,481 10,120
  Medifast Inc. 109,304 9,084
  Inter Parfums Inc. 144,740 8,693
* Edgewell Personal Care Co. 241,461 7,331
  Nu Skin Enterprises Inc. 234,799 5,757
* USANA Health Sciences Inc. 74,791 4,944
* elf Beauty Inc. 262,441 4,189
      190,660
Tobacco (8.7%)    
  Philip Morris International Inc. 3,253,474 266,362
  Altria Group Inc. 5,326,582 215,034
  Vector Group Ltd. 642,764 7,469
  Universal Corp. 124,802 6,159
  Turning Point Brands Inc. 18,966 496
      495,520
Total Common Stocks (Cost $5,429,838)   5,660,262
Temporary Cash Investment (0.7%)  
Money Market Fund (0.7%)    
1,2 Vanguard Market Liquidity Fund, 1.706%
(Cost $38,895)		 388,898 38,901
Total Investments (100.4%) (Cost $5,468,733)   5,699,163
Other Assets and Liabilities—Net (-0.4%)2,3   (22,538)
Net Assets (100%)   5,676,625

Cost rounded to $000.

•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 $21,166,000.
1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2Collateral of $22,103,000 was received for securities on loan.

3Cash of $1,370,000 has been segregated as collateral for open over-the-counter swap contracts.

 

27 

 

 

Consumer Staples Index Fund

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Over-the-Counter Total Return Swaps

 
               Floating         
               Interest Rate   Value and   Value and 
           Notional   Received   Unrealized   Unrealized 
   Termination       Amount   (Paid)1  Appreciation   (Depreciation)
Reference Entity   Date    Counterparty   ($000)   (%)  ($000)  ($000)
Campbell Soup Co.   2/2/21    GSI    8,435    (1.647)   —    (542)
Coca-Cola Co.   2/2/21    GSI    11,906    (1.647)   —    (1,212)
                        —    (1,754)

 

1Payment received/paid monthly.

GSI—Goldman Sachs International.

 

 

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

 

28 

 

 

Consumer Staples Index Fund

 

 

Statement of Assets and Liabilities

As of February 29, 2020

 

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost 5,429,838) 5,660,262
Affiliated Issuers (Cost 38,895) 38,901
Total Investments in Securities 5,699,163
Investment in Vanguard 277
Cash 9
Cash Collateral Pledged—Over-the-Counter Swap Contracts 1,370
Receivables for Investment Securities Sold 20,430
Receivables for Accrued Income 5,157
Receivables for Capital Shares Issued 1,489
Total Assets 5,727,895
Liabilities  
Payables for Investment Securities Purchased 20,592
Collateral for Securities on Loan 22,103
Payables for Capital Shares Redeemed 5,852
Payables to Vanguard 969
Unrealized Depreciation—Over-the-Counter Swap Contracts 1,754
Total Liabilities 51,270
Net Assets 5,676,625
   
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 5,404,995
Total Distributable Earnings (Loss) 271,630
Net Assets 5,676,625
   
ETF Shares—Net Assets  
Applicable to 33,736,155 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 4,969,930
Net Asset Value Per Share—ETF Shares $147.32
   
Admiral Shares—Net Assets  
Applicable to 9,728,846 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 706,695
Net Asset Value Per Share—Admiral Shares $72.64

 

 

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

 

29 

 

 

Consumer Staples Index Fund

 

 

Statement of Operations

 

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   76,725 
Interest1   129 
Securities Lending—Net   501 
Total Income   77,355 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   468 
Management and Administrative—ETF Shares   1,956 
Management and Administrative—Admiral Shares   287 
Marketing and Distribution—ETF Shares   166 
Marketing and Distribution—Admiral Shares   28 
Shareholders’ Reports—ETF Shares   194 
Shareholders’ Reports—Admiral Shares   5 
Trustees’ Fees and Expenses   2 
Total Expenses   3,106 
Expenses Paid Indirectly   (1)
Net Expenses   3,105 
Net Investment Income   74,250 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   145,165 
Swap Contracts   2,289 
Realized Net Gain (Loss)   147,454 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   (435,511)
Swap Contracts   (2,473)
Change in Unrealized Appreciation (Depreciation)   (437,984)
Net Increase (Decrease) in Net Assets Resulting from Operations   (216,280)
1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $ 129,000, ( $1,000), and $ 6,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $141,514,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   74,250    141,158 
Realized Net Gain (Loss)   147,454    115,413 
Change in Unrealized Appreciation (Depreciation)   (437,984)   408,242 
Net Increase (Decrease) in Net Assets Resulting from Operations   (216,280)   664,813 
Distributions1          
ETF Shares   (74,668)   (116,549)
Admiral Shares   (10,190)   (15,822)
Total Distributions   (84,858)   (132,371)
Capital Share Transactions          
ETF Shares   (60,787)   844,523 
Admiral Shares   33,235    58,390 
Net Increase (Decrease) from Capital Share Transactions   (27,552)   902,913 
Total Increase (Decrease)   (328,690)   1,435,355 
Net Assets          
Beginning of Period   6,005,315    4,569,960 
End of Period   5,676,625    6,005,315 

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

30 

 

 

Consumer Staples Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

 

  Six Months              
      Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period     2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $154.72 $140.13 $140.15 $139.97 $123.72 $117.12  
Investment Operations                    
Net Investment Income     1.8881 3.8961 3.6031 3.6511 3.189 2.903  
Net Realized and Unrealized Gain (Loss) on Investments     (7.135) 14.346 (.033) .212 17.752 6.114  
Total from Investment Operations     (5.247) 18.242 3.570 3.863 20.941 9.017  
Distributions                    
Dividends from Net Investment Income   (2.153) (3.652) (3.590) (3.683) (4.691) (2.417)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions     (2.153) (3.652) (3.590) (3.683) (4.691) (2.417)  
Net Asset Value, End of Period     $147.32 $154.72 $140.13 $140.15 $139.97 $123.72  
                   
Total Return     -3.48% 13.24% 2.60% 2.83% 17.36% 7.67%  
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions)     $4,970 $5,296 $3,983 $3,780 $3,518 $2,393  
Ratio of Total Expenses to Average Net Assets     0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets     2.40% 2.71% 2.60% 2.63% 2.50% 2.53%  
Portfolio Turnover Rate2     1% 6% 8% 5% 6% 6%  

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

1Calculated based on average shares outstanding.

2Excludes 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.

 

31 

 

 

Consumer Staples Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $76.29 $69.09 $69.10 $69.02 $61.01 $57.54  
Investment Operations                  
Net Investment Income   .9291 1.9231 1.7761 1.7971 1.575 1.431  
Net Realized and Unrealized Gain (Loss) on Investments   (3.517) 7.076 (.018) .101 8.752 3.025  
Total from Investment Operations   (2.588) 8.999 1.758 1.898 10.327 4.456  
Distributions                  
Dividends from Net Investment Income (1.062) (1.799) (1.768) (1.818) (2.317) (1.186)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (1.062) (1.799) (1.768) (1.818) (2.317) (1.186)  
Net Asset Value, End of Period   $72.64 $76.29 $69.09 $69.10 $69.02 $61.01  
                 
Total Return2   -3.47% 13.24% 2.59%  2.81%  17.37% 7.73%  
                 
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $707 $710 $587 $742 $728 $319  
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10%  0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets   2.39% 2.71% 2.60% 2.63% 2.50% 2.53%  
Portfolio Turnover Rate3   1% 6% 8% 5% 6% 6%  

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

1Calculated based on average shares outstanding.

2Total 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.

3Excludes 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.

 

32 

 

 

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.

 

2. 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 Schedule of Investments. 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.

 

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 Schedule of Investments. 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 29, 2020, 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.

 

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, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

33 

 

 

Consumer Staples Index Fund

 

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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.

 

34 

 

 

Consumer Staples Index Fund

 

 

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 29, 2020, the fund had contributed to Vanguard capital in the amount of $277,000, representing less than 0.01% of the fund’s net assets and 0.11% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $1,000 (an annual rate of less than 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.

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   5,660,262    —    —    5,660,262 
Temporary Cash Investments   38,901    —    —    38,901 
Total   5,699,163    —    —    5,699,163 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    1,754    —    1,754 

 

E.  As of February 29, 2020, 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   5,468,733 
Gross Unrealized Appreciation   761,215 
Gross Unrealized Depreciation   (532,539)
Net Unrealized Appreciation (Depreciation)   228,676 

 

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, 2019, the fund had available capital losses totaling $121,403,000 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, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

35 

 

 

Consumer Staples Index Fund

 

 

F.   During the six months ended February 29, 2020, the fund purchased $520,785,000 of investment securities and sold $553,546,000 of investment securities, other than temporary cash investments. Purchases and sales include $329,518,000 and $485,783,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   425,448    2,682    1,595,617    11,157 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (486,235)   (3,175)   (751,094)   (5,350)
Net Increase (Decrease)—ETF Shares   (60,787)   (493)   844,523    5,807 
Admiral Shares                    
Issued   120,237    1,546    217,155    3,077 
Issued in Lieu of Cash Distributions   8,474    109    13,107    184 
Redeemed   (95,476)   (1,227)   (171,872)   (2,460)
Net Increase (Decrease)—Admiral Shares   33,235    428    58,390    801 

 

H.   Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

36 

 

 

Energy Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Coal & Consumable Fuels   0.2%
Integrated Oil & Gas   43.0 
Oil & Gas Drilling   1.0 
Oil & Gas Equipment & Services   9.7 
Oil & Gas Exploration & Production   22.9 
Oil & Gas Refining & Marketing   11.4 
Oil & Gas Storage & Transportation   11.8 

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

37 

 

 

Energy Index Fund

 

 

Financial Statements (unaudited)

  

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

        Market
        Value•
    Shares   ($000)
Common Stocks (98.9%)      
Energy Equipment & Services (10.5%)    
  Oil & Gas Drilling (0.9%)      
  Helmerich & Payne Inc. 333,774   12,313
* Transocean Ltd. 1,633,035   5,471
  Patterson-UTI Energy Inc. 658,615   3,774
*,^ Valaris plc Class A 677,496   2,500
  Nabors Industries Ltd. 1,224,479   2,155
*,^ Diamond Offshore Drilling Inc. 266,017   811
* Noble Corp. plc 1,076,906   755
   
  Oil & Gas Equipment & Services (9.6%)
  Schlumberger Ltd. 4,132,943   111,961
  Halliburton Co. 2,622,721   44,481
  Baker Hughes Co. 1,896,449   30,514
  National Oilwell Varco Inc. 1,167,086   21,836
  TechnipFMC plc 1,287,051   19,100
* Apergy Corp. 243,749   4,534
  Cactus Inc. 152,075   4,153
* Dril-Quip Inc. 114,884   4,092
  Core Laboratories NV 140,733   3,777
* Oceaneering International Inc. 323,017   3,405
* Helix Energy Solutions Group Inc. 468,946   3,147
  Archrock Inc. 428,684   3,022
* NexTier Oilfield Solutions Inc. 603,542   2,812
* ProPetro Holding Corp. 283,463   2,483
* SEACOR Holdings Inc. 59,957   2,236
  DMC Global Inc. 52,344   1,888
* Tidewater Inc. 129,171   1,794
* Oil States International Inc. 196,680   1,556
* Select Energy Services Inc. 218,333   1,419
* Frank’s International NV 353,110   1,384
  Liberty Oilfield Services Inc. 196,370   1,314
* Matrix Service Co. 98,966   1,196
* Newpark Resources Inc. 317,024   1,113
  US Silica Holdings Inc. 236,198   1,084
  RPC Inc. 251,489   865
* TETRA Technologies Inc. 566,553   714
* Exterran Corp. 129,467   660
* SEACOR Marine Holdings Inc. 79,706   634
* Covia Holdings Corp. 291,624   449
* Nine Energy Service Inc. 95,699   389
* Forum Energy Technologies Inc. 453,024   353
* KLX Energy Services Holdings Inc. 88,813   215
* FTS International Inc. 202,795   188
  Solaris Oilfield Infrastructure Inc. 8,695   92
        306,639

Oil, Gas & Consumable Fuels (88.4%)    
  Coal & Consumable Fuels (0.2%)    
  Arch Coal Inc. 55,538   2,796
  Peabody Energy Corp. 240,525   1,405
* CONSOL Energy Inc. 101,823   579
* Contura Energy Inc. 66,434   378
         
  Integrated Oil & Gas (42.6%)    
  Exxon Mobil Corp. 12,277,530   631,556
  Chevron Corp. 5,660,537   528,355
  Occidental Petroleum Corp. 2,412,867   78,997
* Unit Corp. 272,624   96
         
  Oil & Gas Exploration & Production (22.7%)
  ConocoPhillips 2,922,776   141,521
  EOG Resources Inc. 1,731,503   109,535
  Pioneer Natural Resources Co. 507,880   62,358
  Hess Corp. 818,376   45,976
  Concho Resources Inc. 601,868   40,939
  Diamondback Energy Inc. 469,113   29,085
  Apache Corp. 1,140,065   28,410
  Noble Energy Inc. 1,440,292   22,800
  Marathon Oil Corp. 2,546,350   21,084
  Devon Energy Corp. 1,234,789   20,053
  Cabot Oil & Gas Corp. 1,314,994   18,318
^ Texas Pacific Land Trust 18,984   13,209
  Parsley Energy Inc. 941,490   12,616
* WPX Energy Inc. 1,291,285   12,048
  Cimarex Energy Co. 311,040   10,280
  Murphy Oil Corp. 508,694   9,589
* PDC Energy Inc. 337,837   6,429
  Continental Resources Inc. 291,531   5,525
  EQT Corp. 787,582   4,623
* Matador Resources Co. 352,996   3,403
* CNX Resources Corp. 629,620   3,343
* Callon Petroleum Co. 1,329,010   3,017
  Kosmos Energy Ltd. 888,627   2,710
* Magnolia Oil & Gas Corp. Class A 358,849   2,695
* Southwestern Energy Co. 1,807,660   2,567
  SM Energy Co. 355,315   2,334
^ Range Resources Corp. 740,939   2,052
  QEP Resources Inc. 795,109   1,789
* Oasis Petroleum Inc. 976,429   1,596
  Berry Corp. 238,029   1,516
* Centennial Resource Development Inc. 639,650   1,516
* Antero Resources Corp. 870,211   1,392
* Denbury Resources Inc. 1,730,628   1,302
* Northern Oil and Gas Inc. 834,419   1,210
* Talos Energy Inc. 83,096   1,180
*,^ California Resources Corp. 176,073   1,118
*,^ Chesapeake Energy Corp. 3,918,418   1,078
* Gran Tierra Energy Inc. 1,381,077   1,059
* Bonanza Creek Energy Inc. 61,896   1,008
* W&T Offshore Inc. 371,003   965
* Penn Virginia Corp. 43,115   686
  Falcon Minerals Corp. 171,260   684
* Laredo Petroleum Inc. 580,657   627
*,^ Tellurian Inc. 346,484   624
*,^ Montage Resources Corp. 170,990   597
*,^ Whiting Petroleum Corp. 309,958   573
* Ring Energy Inc. 381,801   538
* Gulfport Energy Corp. 560,887   460
* HighPoint Resources Corp. 646,028   440
* SandRidge Energy Inc. 160,208   330
*,^ Extraction Oil & Gas Inc. 392,505   270
  Brigham Minerals Inc. Class A 7,778   124
  Viper Energy Partners LP 3,936   70
* Sanchez Energy Corp. 111   —
         
  Oil & Gas Refining & Marketing (11.2%)
  Phillips 66 1,348,409   100,942
  Marathon Petroleum Corp. 1,972,442   93,533
  Valero Energy Corp. 1,249,320   82,767
  HollyFrontier Corp. 498,855   16,801
  PBF Energy Inc. 354,660   7,941
  World Fuel Services Corp. 209,151   5,915
  Delek US Holdings Inc. 239,813   5,127
* Renewable Energy Group Inc. 142,484   3,769
  CVR Energy Inc. 97,935   2,783
  Green Plains Inc. 164,430   1,971
* Par Pacific Holdings Inc. 111,499   1,850
* REX American Resources Corp. 21,778   1,525
* Clean Energy Fuels Corp. 594,116   1,343
*,^ New Fortress Energy LLC 6,043   85
         
  Oil & Gas Storage & Transportation (11.7%)
  Kinder Morgan Inc. 5,379,776   103,130
  ONEOK Inc. 1,233,212   82,280
  Williams Cos. Inc. 3,620,903   68,978
* Cheniere Energy Inc. 695,125   35,653
  Targa Resources Corp. 702,086   22,748
  Plains GP Holdings LP 531,628   7,321
  Tallgrass Energy LP 256,296   5,656
  Equitrans Midstream Corp. 672,945   4,751
  EnLink Midstream LLC 839,640   3,199
  Antero Midstream Corp. 724,652   3,159
* International Seaways Inc. 82,485   1,641
* Altus Midstream Co. Class A 280,550   410
  Rattler Midstream LP 6,541   82
* Diamond S Shipping Inc. 7,665   79
        2,568,872
Total Common Stocks (Cost $5,066,117)     2,875,511

 

38 

 

Energy Index Fund

 

      Market
      Value•
    Shares ($000)
Temporary Cash Investment (0.8%)    
Money Market Fund (0.8%)    
1,2 Vanguard Market Liquidity Fund, 1.706%    
  (Cost $21,870) 218,701 21,877
Total Investments (99.7%) (Cost $5,087,987)   2,897,388
Other Assets and Liabilities—Net (0.3%)2,3   8,739
Net Assets (100%)   2,906,127

Cost rounded to $000.

•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 $12,422,000.

1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2Collateral of $15,628,000 was received for securities on loan.

3Cash of $3,780,000 has been segregated as collateral for open over-the-counter swap contracts.

CVR—Contingent Value Rights.

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Over-the-Counter Total Return Swaps

 

               Floating         
               Interest Rate   Value and   Value and 
           Notional   Received   Unrealized   Unrealized 
   Termination       Amount   (Paid)1  Appreciation   (Depreciation)
Reference Entity   Date    Counterparty   ($000)   (%)  ($000)  ($000)
Kinder Morgan Inc.   9/2/20    BOANA    14,609    (1.662)   —    (1,031)
Occidental Petroleum Corp.   2/2/21    GSI    12,468    (1.647)   —    (2,651)
Tallgrass Energy LP Class A   2/2/21    GSI    5,464    (1.647)   —    (58)
                        —    (3,740)
1Payment received/paid monthly.

BOANA—Bank of America, N.A.

GSI—Goldman Sachs International.

 

 

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

 

39 

 

Energy Index Fund

 

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $5,066,117) 2,875,511
Affiliated Issuers (Cost $21,870) 21,877
Total Investments in Securities 2,897,388
Investment in Vanguard 150
Cash 77
Cash Collateral Pledged—Over-the-Counter Swap Contracts 3,780
Receivables for Investment Securities Sold 3,311
Receivables for Accrued Income 26,132
Receivables for Capital Shares Issued 5,324
Total Assets 2,936,162
Liabilities  
Payables for Investment Securities Purchased 8,461
Collateral for Securities on Loan 15,628
Payables for Capital Shares Redeemed 969
Payables to Vanguard 1,237
Unrealized Depreciation—Over-the-Counter Swap Contracts 3,740
Total Liabilities 30,035
Net Assets 2,906,127
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 5,849,211
Total Distributable Earnings (Loss) (2,943,084)
Net Assets 2,906,127
   
ETF Shares—Net Assets  
Applicable to 41,589,492 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 2,544,485
Net Asset Value Per Share—ETF Shares $61.18
   
Admiral Shares—Net Assets  
Applicable to 11,832,489 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 361,642
Net Asset Value Per Share—Admiral Shares $30.56

 

 

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

 

40 

 

 

Energy Index Fund

 

 

Statement of Operations

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   71,887 
Interest1   238 
Securities Lending—Net   779 
Total Income   72,904 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   267 
Management and Administrative—ETF Shares   1,131 
Management and Administrative—Admiral Shares   180 
Marketing and Distribution—ETF Shares   100 
Marketing and Distribution—Admiral Shares   18 
Custodian Fees   1 
Shareholders’ Reports—ETF Shares   72 
Shareholders’ Reports—Admiral Shares   3 
Trustees’ Fees and Expenses   1 
Total Expenses   1,773 
Expenses Paid Indirectly   (2)
Net Expenses   1,771 
Net Investment Income   71,133 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   (50,972)
Swap Contracts   1,776 
Realized Net Gain (Loss)   (49,196)
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   (665,389)
Swap Contracts   (4,530)
Change in Unrealized Appreciation (Depreciation)   (669,919)
Net Increase (Decrease) in Net Assets Resulting from Operations   (647,982)
1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $ 239,000, $4,000, and $3,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $3,762,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   71,133    131,015 
Realized Net Gain (Loss)   (49,196)   (19,257)
Change in Unrealized Appreciation (Depreciation)   (669,919)   (1,258,888)
Net Increase (Decrease) in Net Assets Resulting from Operations   (647,982)   (1,147,130)
Distributions1          
ETF Shares   (56,495)   (112,343)
Admiral Shares   (8,786)   (16,737)
Total Distributions   (65,281)   (129,080)
Capital Share Transactions          
ETF Shares   140,370    (148,483)
Admiral Shares   (18,339)   (7,983)
Net Increase (Decrease) from Capital Share Transactions   122,031    (156,466)
Total Increase (Decrease)   (591,232)   (1,432,676)
Net Assets          
Beginning of Period   3,497,359    4,930,035 
End of Period   2,906,127    3,497,359 

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

41 

 

 

Energy Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $75.75 $103.13 $85.71 $95.06 $93.86 $142.26  
Investment Operations                  
Net Investment Income   1.5531 2.7691 2.5191 2.8191,2 2.470 2.9531  
Net Realized and Unrealized Gain (Loss) on Investments   (14.694) (27.449) 17.837 (9.801) 2.587 (49.144)  
Total from Investment Operations   (13.141) (24.680) 20.356 (6.982) 5.057 (46.191)  
Distributions                  
Dividends from Net Investment Income (1.429) (2.700) (2.936) (2.368) (3.857) (2.209)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (1.429) (2.700) (2.936) (2.368) (3.857) (2.209)  
Net Asset Value, End of Period   $61.18 $75.75 $103.13 $85.71 $95.06 $93.86  
                 
Total Return   -17.77% -24.34% 24.06% -7.55% 5.82% -32.70%  
                 
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $2,544 $3,029 $4,288 $3,656 $3,944 $3,736  
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets   4.03% 3.15% 2.56% 2.93%2 2.86% 2.65%  
Portfolio Turnover Rate3   3% 7% 5% 11% 15% 4%  

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

1Calculated based on average shares outstanding.

2Net 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.

3Excludes 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.

 

42 

 

 

Energy Index Fund

 

Financial Highlights

 

Admiral Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $37.84 $51.52 $42.82 $47.49 $46.89 $71.06  
Investment Operations                  
Net Investment Income   .7491 1.3881 1.2491 1.3751,2 1.234 1.4951  
Net Realized and Unrealized Gain (Loss) on Investments   (7.315) (13.720) 8.916 (4.863) 1.293 (24.561)  
Total from Investment Operations   (6.566) (12.332) 10.165 (3.488) 2.527 (23.066)  
Distributions                  
Dividends from Net Investment Income (.714) (1.348) (1.465) (1.182) (1.927) (1.104)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (.714) (1.348) (1.465) (1.182) (1.927) (1.104)  
Net Asset Value, End of Period   $30.56 $37.84 $51.52 $42.82 $47.49 $46.89  
                 
Total Return3   -17.77% -24.33% 24.06% -7.56% 5.83% -32.66%  
                 
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $362 $468 $642 $523 $894 $733  
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets   3.89% 3.15% 2.56% 2.93%2 2.86% 2.65%  
Portfolio Turnover Rate4   3% 7% 5% 11% 15% 4%  

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

1Calculated based on average shares outstanding.

2Net 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.

3Total 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.

4Excludes 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.

 

43 

 

 

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. 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 Schedule of Investments. 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.

 

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 Schedule of Investments. 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 29, 2020, 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.

 

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, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

44 

 

 

Energy Index Fund

 

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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.

 

45 

 

 

Energy Index Fund

 

 

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 29, 2020, the fund had contributed to Vanguard capital in the amount of $150,000, representing less than 0.01% of the fund’s net assets and 0.06% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $2,000 (an annual rate of less than 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.

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   2,875,511    —    —    2,875,511 
Temporary Cash Investments   21,877    —    —    21,877 
Total   2,897,388    —    —    2,897,388 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    3,740    —    3,740 

 

E.  As of February 29, 2020, 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   5,087,987 
Gross Unrealized Appreciation   14,105 
Gross Unrealized Depreciation   (2,208,444)
Net Unrealized Appreciation (Depreciation)   (2,194,339)

 

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, 2019, the fund had available capital losses totaling $729,136,000 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, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

46 

 

 

Energy Index Fund

 

 

F.  During the six months ended February 29, 2020, the fund purchased $652,502,000 of investment securities and sold $540,422,000 of investment securities, other than temporary cash investments. Purchases and sales include $472,830,000 and $424,382,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   564,925    7,503    743,090    8,685 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (424,555)   (5,900)   (891,573)   (10,275)
Net Increase (Decrease)—ETF Shares   140,370    1,603    (148,483)   (1,590)
Admiral Shares                    
Issued   122,739    3,258    174,793    4,125 
Issued in Lieu of Cash Distributions   7,944    201    15,012    333 
Redeemed   (149,022)   (3,999)   (197,788)   (4,550)
Net Increase (Decrease)—Admiral Shares   (18,339)   (540)   (7,983)   (92)

 

H.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

47 

 

 

Financials Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Asset Management & Custody Banks   7.6%
Consumer Finance   5.3 
Diversified Banks   26.9 
Financial Exchanges & Data   8.4 
Insurance Brokers   4.4 
Investment Banking & Brokerage   6.2 
Life & Health Insurance   4.2 
Mortgage REITs   2.0 
Multi-line Insurance   2.0 
Multi-Sector Holdings   7.7 
Other Diversified Financial Services   0.5 
Property & Casualty Insurance   8.6 
Regional Banks   14.0 
Reinsurance   1.0 
Thrifts & Mortgage Finance   1.2 

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

48 

 

 

Financials Index Fund

 

 

 

Financial Statements (unaudited)

 

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

        Market
        Value•
    Shares   ($000)
Common Stocks (99.8%)      
Banks (40.8%)      
  JPMorgan Chase & Co. 6,145,252   713,525
  Bank of America Corp.    16,735,120   476,951
  Wells Fargo & Co. 7,866,894   321,363
  Citigroup Inc. 4,275,527   271,325
  US Bancorp 2,907,818   135,039
  Truist Financial Corp. 2,629,344   121,318
  PNC Financial Services Group Inc. 858,576   108,524
  M&T Bank Corp. 245,427   34,453
  Fifth Third Bancorp 1,390,178   33,920
  First Republic Bank 329,810   33,169
  KeyCorp 1,929,396   31,546
  Citizens Financial Group Inc. 851,475   26,983
  Regions Financial Corp. 1,888,925   25,538
  Huntington Bancshares Inc. 2,023,746   24,831
* SVB Financial Group 101,097   21,044
  Comerica Inc. 282,150   14,852
  Zions Bancorp NA 333,715   13,332
  Signature Bank 106,117   13,275
  People’s United Financial Inc. 870,329   12,176
  Commerce Bancshares Inc.   198,580   12,121
  Prosperity Bancshares Inc. 184,971   11,949
  East West Bancorp Inc. 285,479   11,059
  TCF Financial Corp. 300,548   10,952
  Cullen/Frost Bankers Inc. 116,399   9,125
  Popular Inc. 189,681   9,101
  Western Alliance Bancorp 190,984   8,793
  Synovus Financial Corp. 286,720   8,321
  First Horizon National Corp. 609,727   8,128
  Pinnacle Financial Partners Inc. 142,586   7,506
  CIT Group Inc. 185,784   7,377
  PacWest Bancorp 231,587   7,327
  Valley National Bancorp 751,936   6,993
  First Financial Bankshares Inc. 239,568   6,885
  Webster Financial Corp. 180,430   6,851
  Glacier Bancorp Inc. 180,911   6,746
  Umpqua Holdings Corp. 432,985   6,664
  Sterling Bancorp 394,879   6,547
  FNB Corp. 636,838   6,426
  Bank OZK 252,035   6,399
  Community Bank System Inc. 101,437   6,168
  IBERIABANK Corp. 102,375   6,162
  First Hawaiian Inc. 256,081   6,133
  Wintrust Financial Corp. 111,950   5,979
  Bank of Hawaii Corp. 79,030   5,881
  United Bankshares Inc. 199,918   5,774
  Hancock Whitney Corp. 170,686   5,718
  First Citizens BancShares Inc. 12,373   5,609
  BankUnited Inc. 185,558   5,511
  UMB Financial Corp. 91,441   5,317
  Associated Banc-Corp 311,177   5,268
  Home BancShares Inc. 309,129   5,181
  BancorpSouth Bank 202,399   4,953
  Investors Bancorp Inc. 455,498   4,801
  Columbia Banking System Inc. 141,508   4,698
  Old National Bancorp 297,895   4,695
 * Texas Capital Bancshares Inc. 99,053   4,663
  Fulton Financial Corp. 319,316   4,614
  Cathay General Bancorp 148,426   4,569
  BOK Financial Corp. 62,986   4,560
  Independent Bank Corp. 67,436   4,554
  South State Corp. 66,745   4,547
  CenterState Bank Corp. 220,473   4,460
  Ameris Bancorp 129,688   4,433
  Atlantic Union Bankshares Corp. 143,080   4,255
  Simmons First National Corp. 191,295   4,090
  CVB Financial Corp. 219,059   4,061
  First Financial Bancorp 194,934   4,016
  First Midwest Bancorp Inc. 215,368   3,909
  WesBanco Inc. 127,453   3,901
  United Community Banks Inc. 154,895   3,837
  First Merchants Corp. 109,629   3,835
  International Bancshares Corp. 108,957   3,715
  Cadence BanCorp Class A 253,320   3,577
  First BanCorp 430,317   3,417
  Towne Bank 143,397   3,307
  Trustmark Corp. 121,027   3,256
  Independent Bank Group Inc. 67,164   3,109
  ServisFirst Bancshares Inc. 89,372   3,088
  Westamerica Bancorporation 53,038   3,067
  Hope Bancorp Inc. 249,650   3,048
  Banner Corp. 66,408   3,031
  Hilltop Holdings Inc. 143,974   2,999
  Great Western Bancorp Inc. 109,600   2,945
  NBT Bancorp Inc. 86,066   2,900
  Heartland Financial USA Inc. 65,085   2,789
  First Interstate BancSystem Inc. 80,638   2,747
  Pacific Premier Bancorp Inc. 104,447   2,698
  Renasant Corp. 90,243   2,557
* Seacoast Banking Corp. of Florida 101,904   2,537
  Park National Corp. 28,725   2,508
  S&T Bancorp Inc. 74,654   2,454
  Eagle Bancorp Inc. 63,074   2,360
  First Commonwealth Financial Corp. 195,174   2,303
  City Holding Co. 31,640   2,212
  Sandy Spring Bancorp Inc. 70,544   2,170
  Brookline Bancorp Inc. 154,531   2,143
  First Busey Corp. 95,938   2,117
  Tompkins Financial Corp. 26,616   2,115
  Lakeland Financial Corp. 51,332   2,098
  Berkshire Hills Bancorp Inc. 83,934   2,049
  Southside Bancshares Inc. 63,341   2,041
  Veritex Holdings Inc. 81,617   1,965
  Enterprise Financial Services Corp. 50,117   1,918
  First Bancorp 59,307   1,904
  BancFirst Corp. 35,458   1,819
  TriCo Bancshares 53,353   1,804
  National Bank Holdings Corp. 58,822   1,799
  OFG Bancorp 100,454   1,682
  Heritage Financial Corp. 71,961   1,669
* Triumph Bancorp Inc. 46,922   1,589
  Boston Private Financial Holdings Inc. 161,076   1,571
  German American Bancorp Inc. 50,919   1,520
  Preferred Bank 29,367   1,502
  1st Source Corp. 35,024   1,473
  Carolina Financial Corp. 45,313   1,468
  Stock Yards Bancorp Inc. 41,724   1,458
  Lakeland Bancorp Inc. 96,684   1,393
  ConnectOne Bancorp Inc. 65,454   1,375
  Banc of California Inc. 87,407   1,340
  Univest Financial Corp. 57,100   1,336
  Central Pacific Financial Corp. 54,836   1,312
  Washington Trust Bancorp Inc. 30,401   1,305
  Opus Bank 55,062   1,303
  Bryn Mawr Bank Corp. 38,674   1,286
* Bancorp Inc. 103,191   1,256
  Camden National Corp. 30,070   1,233
  Community Trust Bancorp Inc. 30,760   1,190
  Horizon Bancorp Inc. 77,918   1,170
  QCR Holdings Inc. 30,554   1,163
* Customers Bancorp Inc. 56,998   1,156
* Nicolet Bankshares Inc. 17,300   1,150
  Great Southern Bancorp Inc. 22,262   1,142
  FB Financial Corp. 34,244   1,115
  Heritage Commerce Corp. 108,012   1,108
  Peoples Bancorp Inc. 37,721   1,077
  Midland States Bancorp Inc. 44,399   1,058
  First Foundation Inc. 73,044   1,057
  First Bancshares Inc. 35,218   1,051
  Origin Bancorp Inc. 34,056   1,030
  First of Long Island Corp. 48,965   1,014
  Dime Community Bancshares Inc. 59,526   999
  CBTX Inc. 37,490   935
  Bank of Marin Bancorp 24,512   935
  Hanmi Financial Corp. 59,537   929

 

49 

 

 

Financials Index Fund

 

 

        Market
        Value•
    Shares   ($000)
  Flushing Financial Corp. 51,121   928
* TriState Capital Holdings Inc. 46,187   918
  Franklin Financial Network Inc. 27,039   906
  Peapack Gladstone Financial Corp. 32,583   894
  Bridge Bancorp Inc. 31,236   860
  Arrow Financial Corp. 26,503   839
  First Community Bankshares Inc. 32,056   839
  First Financial Corp. 20,934   836
* Amerant Bancorp Inc. 44,414   820
* Atlantic Capital Bancshares Inc. 45,111   818
  Mercantile Bank Corp. 28,433   816
  Financial Institutions Inc. 30,272   815
  Live Oak Bancshares Inc. 52,698   810
  MidWestOne Financial Group Inc. 27,985   804
  Independent Bank Corp. 40,213   787
  HomeTrust Bancshares Inc. 33,064   786
  Farmers National Banc Corp. 52,088   783
  People’s Utah Bancorp 31,969   766
* Equity Bancshares Inc. 28,709   752
  Allegiance Bancshares Inc. 22,144   735
  Bank First Corp. 12,192   722
  First Mid Bancshares Inc. 25,347   714
  Republic Bancorp Inc. 19,386   693
  CNB Financial Corp. 27,530   690
  Bar Harbor Bankshares 31,231   638
  Capital City Bank Group Inc. 23,840   635
  Sierra Bancorp 26,217   624
  Byline Bancorp Inc. 34,537   604
  West Bancorporation Inc. 28,287   578
  Old Second Bancorp Inc. 54,249   577
  RBB Bancorp 32,782   553
  Southern National Bancorp of Virginia Inc. 35,694   506
  Macatawa Bank Corp. 51,849   500
  HarborOne Bancorp Inc. 49,774   497
  Amalgamated Bank 27,448   439
  Century Bancorp Inc. 5,629   407
* Republic First Bancorp Inc. 90,925   276
        2,919,667
Capital Markets (22.1%)      
  CME Group Inc. 702,612   139,693
  S&P Global Inc. 479,119   127,403
  Goldman Sachs Group Inc. 624,500   125,381
  Morgan Stanley 2,378,402   107,099
  BlackRock Inc. 226,949   105,080
  Intercontinental Exchange Inc. 1,091,454   97,380
  Charles Schwab Corp. 2,261,238   92,145
  Moody’s Corp. 333,206   79,979
  Blackstone Group LP 1,292,507   69,589
  Bank of New York Mellon Corp. 1,626,097   64,881
  MSCI Inc. 166,072   49,064
  State Street Corp. 712,342   48,518
  T. Rowe Price Group Inc. 358,083   42,257
  Ameriprise Financial Inc. 248,079   35,054
  Northern Trust Corp. 394,263   34,601
  KKR & Co. Inc. Class A 971,515   27,785
  Cboe Global Markets Inc. 217,292   24,771
  MarketAxess Holdings Inc. 74,349   24,114
  Nasdaq Inc. 224,879   23,061
  TD Ameritrade Holding Corp. 529,279   22,351
  Raymond James Financial Inc. 244,746   20,468
  E*TRADE Financial Corp. 442,118   20,240
  FactSet Research Systems Inc. 74,401   19,790
  SEI Investments Co. 250,458   13,703
  Apollo Global Management LLC 327,039   13,624
  Franklin Resources Inc. 584,591   12,721
  LPL Financial Holdings Inc. 157,932   12,552
  Invesco Ltd. 755,577   10,880
  Eaton Vance Corp. 221,815   9,152
  Legg Mason Inc. 170,202   8,479
  Interactive Brokers Group Inc. 142,931   7,304
  Stifel Financial Corp. 133,859   7,287
  Affiliated Managers Group Inc. 96,522   7,260
  Janus Henderson Group plc 312,213   6,619
  Tradeweb Markets Inc. Class A 124,912   6,023
  Ares Management Corp. Class A 169,080   5,848
  Morningstar Inc. 37,745   5,545
  Federated Hermes Inc. 188,375   5,435
  Evercore Inc. 76,657   5,107
  Houlihan Lokey Inc. 82,009   4,200
  Moelis & Co. 96,938   3,098
  Artisan Partners Asset Management Inc. 104,934   2,999
  Cohen & Steers Inc. 45,821   2,871
  Hamilton Lane Inc. 41,027   2,549
  BGC Partners Inc. 540,576   2,519
  Virtu Financial Inc. 106,257   1,999
  Waddell & Reed Financial Inc. 139,394   1,918
  Piper Sandler Cos. 27,034   1,895
  PJT Partners Inc. 41,286   1,856
* Blucora Inc. 94,397   1,643
  Virtus Investment Partners Inc. 13,486   1,489
* INTL. FCStone Inc. 31,363   1,429
* Focus Financial Partners Inc. 49,664   1,350
  Brightsphere Investment Group Inc. 142,203   1,330
  WisdomTree Investments Inc. 238,656   969
  Sculptor Capital Management Inc. Class A 35,830   813
  Diamond Hill Investment Group Inc. 6,385   809
  Cowen Inc. 51,128   765
  B. Riley Financial Inc. 27,252   645
  Victory Capital Holdings Inc. Class A 29,229   578
* Donnelley Financial Solutions Inc. 62,516   544
  Oppenheimer Holdings Inc. 18,151   431
  Greenhill & Co. Inc. 27,461   401
  Westwood Holdings Group Inc. 14,764   375
  Associated Capital Group Inc.   6,880   283
  Pzena Investment Management Inc. 34,411   225
  GAMCO Investors Inc. Class A 9,938   155
        1,578,381
Consumer Finance (5.3%)      
  American Express Co. 1,362,893   149,823
  Capital One Financial Corp. 912,853   80,568
  Discover Financial Services 614,248   40,282
  Synchrony Financial 1,139,064   33,147
  Ally Financial Inc. 744,490   18,664
  SLM Corp. 826,024   8,566
* Credit Acceptance Corp. 20,217   8,152
  FirstCash Inc. 83,965   6,459
  OneMain Holdings Inc 160,100   5,884
^ Santander Consumer USA Holdings Inc. 199,769   4,874
  Navient Corp. 389,823   4,378
* LendingTree Inc. 15,355   4,235
* PRA Group Inc. 89,755   3,484
* Green Dot Corp. 96,294   3,289
  Nelnet Inc. 38,407   2,040
* Encore Capital Group Inc. 50,625   1,881
  LendingClub Corp. 124,538   1,371
* Enova International Inc. 65,022   1,250
* World Acceptance Corp. 11,625   908
* EZCORP Inc. 101,297   486
  Curo Group Holdings Corp. 27,111   250
        379,991
Diversified Financial Services (8.1%)    
* Berkshire Hathaway Inc. 2,576,417   531,618
* Equitable Holdings Inc. 820,922   17,568
  Voya Financial Inc. 264,057   13,900
  Jefferies Financial Group Inc. 499,897   9,853
* Cannae Holdings Inc. 120,147   4,480
  FGL Holdings 326,533   3,735
* On Deck Capital Inc. 102,463   358
        581,512
Equity Real Estate Investment Trusts (REITs) (0.0%)    
*,§ Winthrop Realty Trust 23,515   —
         
Insurance (20.2%)      
  Chubb Ltd. 888,364   128,839
  Marsh & McLennan Cos. Inc. 989,287   103,440
  Aon plc 458,889   95,449
  Progressive Corp. 1,146,146   83,852
  American International Group Inc. 1,705,660   71,911
  Allstate Corp. 634,897   66,823
  MetLife Inc. 1,531,876   65,442
  Aflac Inc. 1,438,810   61,653
  Travelers Cos. Inc. 506,003   60,624
  Prudential Financial Inc. 788,242   59,473
  Willis Towers Watson plc 252,009   47,693
  Arthur J Gallagher & Co. 365,780   35,660
  Hartford Financial Services Group Inc. 706,613   35,295
* Arch Capital Group Ltd. 794,870   32,137
* Markel Corp. 27,111   32,034
  Cincinnati Financial Corp. 304,401   28,382
  Principal Financial Group Inc. 544,384   24,165
  Loews Corp. 523,987   23,910

 

50 

 

 

Financials Index Fund

 

 

        Market
        Value•
    Shares   ($000)
  Fidelity National Financial Inc. 539,311   20,904
  Brown & Brown Inc. 469,579   20,197
  Everest Re Group Ltd. 79,996   19,829
  WR Berkley Corp. 288,077   19,341
* Alleghany Corp. 28,290   19,018
  Globe Life Inc. 201,725   18,692
  Lincoln National Corp. 388,760   17,646
  Reinsurance Group of America Inc. 122,796   14,985
  RenaissanceRe Holdings Ltd. 86,545   14,747
  Assurant Inc. 118,086   14,240
  American Financial Group Inc. 150,368   13,897
  First American Financial Corp. 220,291   12,579
*  Athene Holding Ltd. Class A 281,860   11,627
  Old Republic International Corp. 565,565   11,153
  Unum Group 403,175   9,398
  Axis Capital Holdings Ltd. 164,588   9,237
  Hanover Insurance Group Inc. 77,309   9,164
  Primerica Inc. 80,912   9,009
  Kemper Corp. 111,142   7,651
  Assured Guaranty Ltd. 187,076   7,635
* Brighthouse Financial Inc. 211,545   7,582
  Erie Indemnity Co. 49,866   7,127
  Selective Insurance Group Inc. 116,459   6,496
  White Mountains Insurance Group Ltd. 6,312   6,250
  RLI Corp. 74,748   6,008
  Kinsale Capital Group Inc. 41,336   5,021
* eHealth Inc. 40,799   4,788
  CNO Financial Group Inc. 295,067   4,727
  American Equity Investment Life Holding Co. 178,636   4,516
* Enstar Group Ltd. 23,001   4,103
* Genworth Financial Inc. 988,726   3,856
  Argo Group International Holdings Ltd. 67,415   3,793
  Horace Mann Educators Corp. 81,034   3,155
  ProAssurance Corp. 106,021   2,878
  National General Holdings Corp. 132,556   2,581
  AMERISAFE Inc. 37,628   2,452
  James River Group Holdings Ltd. 59,849   2,418
  Employers Holdings Inc. 61,792   2,381
  Mercury General Corp. 53,931   2,336
  Safety Insurance Group Inc. 28,897   2,275
*,^ Trupanion Inc. 57,488   1,767
* Ambac Financial Group Inc. 87,680   1,685
* Palomar Holdings Inc. 32,679   1,660
  Stewart Information Services Corp. 45,776   1,656
  American National Insurance Co. 16,155   1,589
  United Fire Group Inc. 41,169   1,578
  Goosehead Insurance Inc. 24,781   1,344
* Third Point Reinsurance Ltd. 145,480   1,298
  Universal Insurance Holdings Inc. 61,786   1,278
* MBIA Inc. 145,343   1,134
  National Western Life Group Inc. 4,656   1,112
  FBL Financial Group Inc. Class A 21,378   1,021
* Watford Holdings Ltd. 38,959   889
  State Auto Financial Corp. 33,706   842
  Heritage Insurance Holdings Inc. 52,075   581
* Citizens Inc. Class A 97,519   569
  Global Indemnity Ltd. 17,850   567
* Health Insurance Innovations Inc. 19,240   566
  HCI Group Inc. 13,129   558
* Greenlight Capital Re Ltd. 55,516   469
  United Insurance Holdings Corp. 41,564   391
  Donegal Group Inc. 24,803   354
  Protective Insurance Corp. 18,744   267
  Crawford & Co. Class A 32,262   240
  Crawford & Co. Class B 19,130   131
        1,446,020
Mortgage Real Estate Investment Trusts (REITs) (2.0%)  
  Annaly Capital Management Inc. 2,802,817   24,833
  AGNC Investment Corp. 1,060,494   18,071
  New Residential Investment Corp. 814,381   12,672
  Starwood Property Trust Inc. 552,433   12,253
 ^ Blackstone Mortgage Trust Inc. 249,980   9,014
  Two Harbors Investment Corp. 535,170   7,251
  Chimera Investment Corp. 367,208   7,216
  MFA Financial Inc. 885,689   6,403
  Invesco Mortgage Capital Inc. 318,643   5,124
  Apollo Commercial Real Estate Finance Inc. 286,042   4,634
  New York Mortgage Trust Inc. 730,278   4,162
  Redwood Trust Inc. 221,257   3,779
  PennyMac Mortgage Investment Trust 178,768   3,700
  Ladder Capital Corp. 178,681   2,725
  Colony Credit Real Estate Inc. 166,877   2,124
  ARMOUR Residential REIT Inc. 114,748   2,075
  Arbor Realty Trust Inc. 163,365   1,983
  Granite Point Mortgage Trust Inc. 107,589   1,767
  TPG RE Finance Trust Inc. 83,985   1,614
  Ellington Financial Inc. 79,407   1,313
  Capstead Mortgage Corp. 182,105   1,293
  Ready Capital Corp. 76,381   1,107
  Western Asset Mortgage Capital Corp. 102,188   1,024
  KKR Real Estate Finance Trust Inc. 50,808   998
  AG Mortgage Investment Trust Inc. 62,917   942
  Ares Commercial Real Estate Corp. 60,295   920
  Dynex Capital Inc. 47,173   807
  Exantas Capital Corp. 61,579   706
  Orchid Island Capital Inc. 120,541   691
  Anworth Mortgage Asset Corp. 189,865   621
        141,822
Other (0.0%)1      
*,§ NewStar Financial Inc. CVR 42,593   10
*,§ American International Group Inc. Warrants Exp. 01/19/2021 7,950   —
        10
Thrifts & Mortgage Finance (1.3%)    
  New York Community Bancorp Inc. 915,963   9,902
  Radian Group Inc. 394,785   8,385
  MGIC Investment Corp. 686,375   8,257
  Essent Group Ltd. 183,164   7,993
  Washington Federal Inc. 154,641   4,638
  PennyMac Financial Services Inc. 123,076   4,340
  Walker & Dunlop Inc. 56,873   3,688
  WSFS Financial Corp. 97,375   3,355
  Capitol Federal Financial Inc. 265,827   3,244
* NMI Holdings Inc. 133,318   3,112
  Northwest Bancshares Inc. 198,821   2,762
* Axos Financial Inc. 109,138   2,719
  Provident Financial Services Inc. 122,102   2,440
  OceanFirst Financial Corp. 114,545   2,341
  Flagstar Bancorp Inc. 73,041   2,329
  Meta Financial Group Inc. 65,620   2,156
* Mr Cooper Group Inc. 140,875   1,807
  Kearny Financial Corp. 160,182   1,748
* Columbia Financial Inc. 111,364   1,728
  Meridian Bancorp Inc. 98,106   1,620
  TrustCo Bank Corp. NY 196,627   1,349
  Federal Agricultural Mortgage Corp. 17,662   1,326
  Northfield Bancorp Inc. 87,142   1,231
  HomeStreet Inc. 44,517   1,206
  First Defiance Financial Corp. 37,514   897
  Waterstone Financial Inc. 48,676   809
  PCSB Financial Corp. 30,511   560
* Bridgewater Bancshares Inc. 41,190   515
  Home Bancorp Inc. 15,094   499
  Hingham Institution for Savings 2,634   482
  Luther Burbank Corp. 38,046   397
  Merchants Bancorp 16,612   299
* Ocwen Financial Corp. 220,250   275
  Sterling Bancorp Inc. 30,407   213
        88,622
Total Common Stocks (Cost $7,139,947)     7,136,025

 

51 

 

 

Financials Index Fund

 

 

        Market
        Value•
    Shares   ($000)
Temporary Cash Investments (0.2%)    
2,3 Vanguard Market Liquidity Fund, 1.706%      
  (Cost $17,532) 175,288   17,534
Total Investments (100.0%) (Cost $7,157,479)     7,153,559
Other Assets and Liabilities—Net (0.0%)2,4     60
Net Assets (100%)     7,153,619

Cost rounded to $000. 

•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 $12,092,000.

§Security value determined using significant unobservable inputs.

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

2Collateral of $12,896,000 was received for securities on loan.

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

4Cash of $1,390,000 has been segregated as collateral for open over-the-counter swap contracts.

CVR—Contingent Value Rights.

REIT—Real Estate Investment Trust.

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Over-the-Counter Total Return Swaps

 

               Floating         
               Interest Rate   Value and   Value and 
           Notional   Received   Unrealized   Unrealized 
   Termination       Amount   (Paid)1  Appreciation   (Depreciation)
Reference Entity   Date    Counterparty   ($000)   (%)  ($000)  ($000)
T. Rowe Price Group Inc.   9/2/20    BOANA    13,353    (1.562)   —    (1,566)

1Payment received/paid monthly.

BOANA—Bank of America, N.A.

 

 

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

 

52 

 

 

Financials Index Fund

 

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $7,139,947) 7,136,025
Affiliated Issuers (Cost $17,532) 17,534
Total Investments in Securities 7,153,559
Investment in Vanguard 366
Cash 21
Cash Collateral Pledged—Over-the-Counter Swap Contracts 1,390
Receivables for Investment Securities Sold 44,711
Receivables for Accrued Income 13,454
Receivables for Capital Shares Issued 2,573
Total Assets 7,216,074
Liabilities  
Payables for Investment Securities Purchased 44,676
Collateral for Securities on Loan 12,896
Payables for Capital Shares Redeemed 2,244
Payables to Vanguard 1,073
Unrealized Depreciation—Over-the-Counter Swap Contracts 1,566
Total Liabilities 62,455
Net Assets 7,153,619
   
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 6,907,291
Total Distributable Earnings (Loss) 246,328
Net Assets 7,153,619
   
ETF Shares—Net Assets  
Applicable to 101,120,779 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 6,687,843
Net Asset Value Per Share—ETF Shares $66.14
   
Admiral Shares—Net Assets  
Applicable to 14,052,383 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 465,776
Net Asset Value Per Share—Admiral Shares $33.15

 

 

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

  

53 

 

 

Financials Index Fund

 

 

Statement of Operations

 

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   99,454 
Interest1   48 
Securities Lending—Net   109 
Total Income   99,611 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   614 
Management and Administrative—ETF Shares   2,871 
Management and Administrative—Admiral Shares   200 
Marketing and Distribution—ETF Shares   242 
Marketing and Distribution—Admiral Shares   20 
Shareholders’ Reports—ETF Shares   115 
Custodian Fees   5 
Shareholders’ Reports—Admiral Shares   3 
Trustees’ Fees and Expenses   2 
Total Expenses   4,072 
Expenses Paid Indirectly   (5)
Net Expenses   4,067 
Net Investment Income   95,544 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   262,145 
Futures Contracts   (136)
Swap Contracts   2,355 
Realized Net Gain (Loss)   264,364 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   (392,170)
Swap Contracts   (1,566)
Change in Unrealized Appreciation (Depreciation)   (393,736)
Net Increase (Decrease) in Net Assets Resulting from Operations   (33,828)

1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $ 48,000, ($ 1,000), and $2,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $285,646,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   95,544    182,504 
Realized Net Gain (Loss)   264,364    453,254 
Change in Unrealized Appreciation (Depreciation)   (393,736)   (1,094,417)
Net Increase (Decrease) in Net Assets Resulting from Operations   (33,828)   (458,659)
Distributions1          
ETF Shares   (95,835)   (165,401)
Admiral Shares   (6,609)   (13,448)
Total Distributions   (102,444)   (178,849)
Capital Share Transactions          
ETF Shares   (405,380)   (697,070)
Admiral Shares   (16,970)   (155,784)
Net Increase (Decrease) from Capital Share Transactions   (422,350)   (852,854)
Total Increase (Decrease)   (558,622)   (1,490,362)
Net Assets          
Beginning of Period   7,712,241    9,202,603 
End of Period   7,153,619    7,712,241 

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

54 

 

 

Financials Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $67.31 $71.60 $62.26 $50.81 $47.70 $47.32  
Investment Operations                  
Net Investment Income   .8601 1.5391 1.2981 1.0351 1.108 .917  
Net Realized and Unrealized Gain (Loss) on Investments   (1.107) (4.338) 9.307 11.387 3.070 .349  
Total from Investment Operations   (.247) (2.799) 10.605 12.422 4.178 1.266  
Distributions                  
Dividends from Net Investment Income (.923) (1.491) (1.265) (.972) (1.068) (.886)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (.923) (1.491) (1.265) (.972) (1.068) (.886)  
Net Asset Value, End of Period   $66.14 $67.31 $71.60 $62.26 $50.81 $47.70  
Total Return   -0.49% -3.85% 17.15% 24.65% 8.93% 2.63%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $6,688 $7,222 $8,512 $6,127 $3,735 $3,081  
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets   2.33% 2.30% 1.87% 1.75% 2.39% 1.99%  
Portfolio Turnover Rate2   2% 5% 3% 5% 21% 4%  

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

1Calculated based on average shares outstanding.
2Excludes 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.

 

55 

 

 

Financials Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

  Six Months              
  Ended         Year Ended August 31,  
For a Share Outstanding February 29,          
Throughout Each Period 2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period    $33.73 $35.88 $31.20 $25.47 $23.91 $23.72  

Investment Operations

Net Investment Income .4311 .7711 .6511 .5141 .556 .460  
Net Realized and Unrealized Gain (Loss)on Investments (.549) (2.174) 4.663 5.704 1.539 .174  
Total from Investment Operations (.118) (1.403) 5.314 6.218 2.095 .634  
Distributions              
Dividends from Net Investment Income (.462) (.747) (.634) (.488) (.535) (.444)  
Distributions from Realized Capital Gains — — — — — —  
Total Distributions (.462) (.747) (.634) (.488) (.535) (.444)  
Net Asset Value, End of Period $33.15 $33.73 $35.88 $31.20 $25.47 $23.91  
               
Total Return2 -0.47% -3.87% 17.16% 24.62% 8.96% 2.64%  
               
Ratios/Supplemental Data              
Net Assets, End of Period (Millions) $466 $490 $690 $518 $244 $204  
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets 2.33% 2.30% 1.87% 1.75% 2.39% 1.99%  
Portfolio Turnover Rate3 2% 5% 3% 5% 21% 4%  

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

1Calculated based on average shares outstanding.

2Total 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.

3Excludes 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.

 

56 

 

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.

 

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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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 29, 2020.

 

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 Schedule of Investments. 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.

 

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

 

57 

 

Financials Index Fund

 

 

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 Schedule of Investments. 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 29, 2020, 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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

58 

 

Financials Index Fund

 

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 29, 2020, the fund had contributed to Vanguard capital in the amount of $366,000, representing 0.01% of the fund’s net assets and 0.15% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $5,000 (an annual rate of less than 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.

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   7,136,015    —    10    7,136,025 
Temporary Cash Investments   17,534    —    —    17,534 
Total   7,153,549    —    10    7,153,559 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    1,566    —    1,566 

 

59 

 

Financials Index Fund

 

 

E. As of February 29, 2020, 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   7,157,479 
Gross Unrealized Appreciation   678,422 
Gross Unrealized Depreciation   (683,908)
Net Unrealized Appreciation (Depreciation)   (5,486)

 

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, 2019, the fund had available capital losses totaling $44,257,000 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, 2020; 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 29, 2020, the fund purchased $838,801,000 of investment securities and sold $1,271,526,000 of investment securities, other than temporary cash investments. Purchases and sales include $584,913,000 and $1,110,853,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   712,555    9,692    1,423,985    21,039 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (1,117,935)   (15,875)   (2,121,055)   (32,625)
Net Increase (Decrease)—ETF Shares   (405,380)   (6,183)   (697,070)   (11,586)
Admiral Shares                    
Issued   65,975    1,777    147,528    4,455 
Issued in Lieu of Cash Distributions   5,591    153    11,597    349 
Redeemed   (88,536)   (2,405)   (314,909)   (9,513)
Net Increase (Decrease)—Admiral Shares   (16,970)   (475)   (155,784)   (4,709)

 

At February 29, 2020, one shareholder was the record or beneficial owner of 29% of the fund’s net assets. If this shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

 

H.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

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Health Care Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Biotechnology   18.5%
Health Care Distributors   1.6 
Health Care Equipment   23.0 
Health Care Facilities   1.7 
Health Care Services   5.4 
Health Care Supplies   2.0 
Health Care Technology   1.6 
Life Sciences Tools & Services   7.3 
Managed Health Care   9.7 
Other   0.0 
Pharmaceuticals   29.2 

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

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Financial Statements (unaudited)

 

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value•
    Shares ($000)
Common Stocks (99.9%)    
Biotechnology (18.5%)    
  AbbVie Inc. 3,810,238 326,575
  Amgen Inc. 1,530,994 305,785
  Gilead Sciences Inc. 3,259,742 226,096
* Vertex Pharmaceuticals Inc. 662,316 148,379
* Biogen Inc. 464,834 143,350
* Regeneron Pharmaceuticals Inc. 208,548 92,714
* Alexion Pharmaceuticals Inc. 570,518 53,646
* BioMarin Pharmaceutical Inc. 463,115 41,852
* Incyte Corp. 472,130 35,603
* Seattle Genetics Inc. 309,430 35,232
* Alnylam Pharmaceuticals Inc. 287,503 33,828
* Exact Sciences Corp. 378,439 30,635
* Sarepta Therapeutics Inc. 192,246 22,006
* Neurocrine Biosciences Inc. 225,627 21,367
* Ionis Pharmaceuticals Inc. 344,134 17,475
* Exelixis Inc. 782,412 14,545
* ACADIA Pharmaceuticals Inc. 298,180 12,744
* United Therapeutics Corp. 113,178 11,653
* Bluebird Bio Inc. 142,702 10,322
* Acceleron Pharma Inc. 116,385 10,001
* Global Blood Therapeutics Inc. 155,092 9,920
* Iovance Biotherapeutics Inc. 276,703 9,106
* FibroGen Inc. 202,584 8,468
* Momenta Pharmaceuticals Inc. 292,818 8,284
* Ultragenyx Pharmaceutical Inc. 141,573 7,939
* Arrowhead Pharmaceuticals Inc. 222,155 7,855
* PTC Therapeutics Inc. 143,209 7,854
* Agios Pharmaceuticals Inc. 155,575 7,387
* Halozyme Therapeutics Inc. 339,184 6,638
* Emergent BioSolutions Inc. 113,105 6,637
* Blueprint Medicines Corp. 120,291 6,511
* Immunomedics Inc. 397,736 6,364
* Sage Therapeutics Inc. 133,661 6,282
* Amicus Therapeutics Inc. 657,465 6,275
* Alkermes plc 298,732 6,226
* Intercept Pharmaceuticals Inc. 67,688 6,223
* Mirati Therapeutics Inc. 66,101 5,915
* Arena Pharmaceuticals Inc. 128,891 5,749
* Insmed Inc. 218,961 5,452
* Natera Inc. 140,194 5,314
* Apellis Pharmaceuticals Inc. 151,410 5,242
* Biohaven Pharmaceutical Holding Co. Ltd. 113,969 5,033
*,^ Invitae Corp. 240,245 4,896
* Ironwood Pharmaceuticals Inc. 403,893 4,863
* uniQure NV 90,039 4,633
* Fate Therapeutics Inc. 156,146 4,559
* ChemoCentryx Inc. 98,184 4,394
* Xencor Inc. 131,257 4,265
* Kodiak Sciences Inc. 66,555 4,258
* Ligand Pharmaceuticals Inc. 45,274 4,238
* Forty Seven Inc. 72,562 4,209
* CRISPR Therapeutics AG 77,628 4,149
* Heron Therapeutics Inc. 221,390 4,129
* Epizyme Inc. 186,932 4,006
*,^ Allakos Inc. 62,295 3,883
* Principia Biopharma Inc. 59,225 3,824
* Ra Pharmaceuticals Inc. 79,038 3,696
* Deciphera Pharmaceuticals Inc. 65,878 3,507
* REGENXBIO Inc. 85,625 3,425
* Myriad Genetics Inc. 190,672 3,360
*,^ Esperion Therapeutics Inc. 63,244 3,193
* Denali Therapeutics Inc. 161,039 3,184
* Veracyte Inc. 119,497 2,950
* TG Therapeutics Inc. 231,373 2,904
* Editas Medicine Inc. 119,302 2,646
* Coherus Biosciences Inc. 136,639 2,644
* Dicerna Pharmaceuticals Inc. 131,203 2,590
* Sangamo Therapeutics Inc. 299,373 2,554
* Radius Health Inc. 113,288 2,386
* Karuna Therapeutics Inc. 27,031 2,359
*,^ Aimmune Therapeutics Inc. 98,208 2,338
* CareDx Inc. 98,488 2,296
  Turning Point Therapeutics Inc. 45,751 2,268
* Twist Bioscience Corp. 73,106 2,238
* Karyopharm Therapeutics Inc. 127,928 2,090
* ImmunoGen Inc. 438,212 1,950
* Enanta Pharmaceuticals Inc. 38,218 1,945
* Portola Pharmaceuticals Inc. 191,002 1,931
* Madrigal Pharmaceuticals Inc. 21,921 1,889
* Cytokinetics Inc. 129,572 1,806
* Akebia Therapeutics Inc. 199,518 1,770
* Vericel Corp 110,216 1,702
*,^ Allogene Therapeutics Inc. 62,982 1,701
*,^ ZIOPHARM Oncology Inc. 538,024 1,662
* Rocket Pharmaceuticals Inc. 84,539 1,648
* Kadmon Holdings Inc. 350,853 1,628
* Anika Therapeutics Inc. 37,312 1,558
* Retrophin Inc. 99,871 1,547
* Krystal Biotech Inc. 28,787 1,539
* Atara Biotherapeutics Inc. 125,886 1,530
* Rhythm Pharmaceuticals Inc. 79,421 1,515
* Y-mAbs Therapeutics Inc. 50,605 1,489
* Athenex Inc. 119,697 1,463
* Vanda Pharmaceuticals Inc. 122,001 1,346
* Avrobio Inc. 69,600 1,343
*,^ Clovis Oncology Inc. 177,034 1,333
* Flexion Therapeutics Inc. 83,812 1,323
  NextCure Inc. 31,454 1,314
* Assembly Biosciences Inc. 72,471 1,313
* Eagle Pharmaceuticals Inc. 28,073 1,289
* G1 Therapeutics Inc. 68,667 1,232
* BioCryst Pharmaceuticals Inc. 398,343 1,195
*,^ Intellia Therapeutics Inc. 88,485 1,181
* Prothena Corp. plc 103,633 1,105
* Myovant Sciences Ltd. 104,122 1,072
* Kura Oncology Inc. 87,931 1,061
* Progenics Pharmaceuticals Inc. 223,288 1,054
* MacroGenics Inc. 119,999 1,052
*,^ Inovio Pharmaceuticals Inc. 245,218 1,050
* PDL BioPharma Inc. 294,393 1,001
*,^ Viking Therapeutics Inc. 168,128 995
* Eidos Therapeutics Inc. 19,568 990
* Rigel Pharmaceuticals Inc. 425,690 902
* Arcus Biosciences Inc. 59,201 901
* Puma Biotechnology Inc. 81,188 873
*,^ Dynavax Technologies Corp. 216,673 855
* Homology Medicines Inc. 51,207 819
* Akcea Therapeutics Inc. 47,380 805
* CytomX Therapeutics Inc. 117,470 786
* Voyager Therapeutics Inc. 71,137 775
* Agenus Inc. 293,385 742
*,^ Corbus Pharmaceuticals Holdings Inc. 150,688 714
* Stemline Therapeutics Inc. 118,603 714
* OPKO Health Inc. 474,331 711
* Scholar Rock Holding Corp. 49,792 703
*,^ Rubius Therapeutics Inc. 82,482 690
* Gossamer Bio Inc. 51,191 672
*,^ Geron Corp. 533,836 614
*,^ Sorrento Therapeutics Inc. 282,297 613
* Minerva Neurosciences Inc. 82,866 603
* MeiraGTx Holdings plc 37,075 601
* Kiniksa Pharmaceuticals Ltd. 32,238 595
* Crinetics Pharmaceuticals Inc. 24,712 509
  Stoke Therapeutics Inc. 20,500 507
* Syros Pharmaceuticals Inc. 85,511 500
* Spectrum Pharmaceuticals Inc. 159,474 456
* AnaptysBio Inc. 30,188 451
* MediciNova Inc. 106,748 448
* KalVista Pharmaceuticals Inc. 33,042 444
* Gritstone Oncology Inc. 50,924 428
* Translate Bio Inc. 52,832 400
* Replimune Group Inc. 28,864 400
* Concert Pharmaceuticals Inc. 46,217 391
* Lexicon Pharmaceuticals Inc. 123,369 342

 

62 

 

 

Health Care Index Fund

 

 

      Market
      Value•
    Shares ($000)
* Prevail Therapeutics Inc. 26,655 341
* GlycoMimetics Inc. 89,944 326
* TCR2 Therapeutics Inc. 27,399 325
* Akero Therapeutics Inc. 14,644 319
* Five Prime Therapeutics Inc. 80,003 306
  Morphic Holding Inc. 14,525 229
* Precision BioSciences Inc. 26,013 208
* Calyxt Inc. 30,023 189
* Solid Biosciences Inc. 54,248 179
* Cyclerion Therapeutics Inc. 39,485 169
*,^ Marker Therapeutics Inc. 65,402 162
* AMAG Pharmaceuticals Inc. 20,302 157
* Precigen Inc. 38,394 146
* PhaseBio Pharmaceuticals Inc. 32,952 139
* Acorda Therapeutics Inc. 58,243 84
* Advaxis Inc. Warrants Exp. 09/11/2024 7,710 —
      1,933,181
Health Care Equipment & Supplies (25.0%)
  Abbott Laboratories 4,556,992 351,025
  Medtronic plc 3,454,168 347,731
  Danaher Corp. 1,612,477 233,132
  Becton Dickinson and Co. 696,829 165,720
  Stryker Corp. 868,159 165,462
* Intuitive Surgical Inc. 297,738 158,980
* Boston Scientific Corp. 3,590,675 134,255
* Edwards Lifesciences Corp. 537,314 110,063
  Baxter International Inc. 1,249,725 104,315
  Zimmer Biomet Holdings Inc. 529,792 72,131
* DexCom Inc. 235,815 65,085
  ResMed Inc. 370,689 58,925
* IDEXX Laboratories Inc. 221,145 56,284
* Align Technology Inc. 192,999 42,141
  Cooper Cos. Inc. 127,636 41,427
  Teleflex Inc. 119,356 39,987
  STERIS plc 218,592 34,673
* Hologic Inc. 691,323 32,575
* Insulet Corp. 159,451 30,291
* Varian Medical Systems Inc. 234,170 28,796
  West Pharmaceutical Services Inc. 190,777 28,723
  Dentsply Sirona Inc. 573,358 28,232
* Masimo Corp. 131,300 21,445
* ABIOMED Inc. 116,418 17,493
  Hill-Rom Holdings Inc. 172,045 16,525
* Novocure Ltd. 204,165 14,853
* Haemonetics Corp. 130,809 14,171
* Penumbra Inc. 81,012 13,437
* Nevro Corp. 79,959 10,407
* Tandem Diabetes Care Inc. 137,146 10,239
* ICU Medical Inc. 50,640 9,916
* Envista Holdings Corp. 387,012 9,822
* Integra LifeSciences Holdings Corp. 188,199 9,805
* Wright Medical Group NV 311,057 9,410
* Globus Medical Inc. 198,455 8,976
* NuVasive Inc. 134,563 8,856
* LivaNova plc 124,803 8,701
* Neogen Corp. 135,310 8,220
* Integer Holdings Corp. 84,445 7,614
* Quidel Corp. 96,674 7,467
  CONMED Corp. 73,165 6,924
  Cantel Medical Corp. 98,867 6,239
* iRhythm Technologies Inc. 68,214 5,933
* Merit Medical Systems Inc. 142,372 5,127
* Glaukos Corp. 100,538 4,422
* Avanos Medical Inc. 123,629 4,007
* AtriCure Inc. 102,222 3,927
* Cardiovascular Systems Inc. 91,051 3,425
* STAAR Surgical Co. 86,358 2,710
* CryoLife Inc. 96,716 2,479
  Mesa Laboratories Inc. 10,191 2,439
  Atrion Corp. 3,844 2,369
* Natus Medical Inc. 88,101 2,368
* Varex Imaging Corp. 98,985 2,298
* Tactile Systems Technology Inc. 44,082 2,222
* Inogen Inc. 48,225 2,208
* Cerus Corp. 409,360 2,104
* Silk Road Medical Inc. 48,265 1,923
* Heska Corp. 19,230 1,836
* Orthofix Medical Inc. 49,140 1,737
* Lantheus Holdings Inc. 101,285 1,575
*,^ CryoPort Inc. 93,857 1,567
*,^ Axonics Modulation Technologies Inc. 42,338 1,501
* OrthoPediatrics Corp. 27,601 1,281
  LeMaitre Vascular Inc. 43,370 1,236
* Antares Pharma Inc. 392,959 1,218
* Surmodics Inc. 34,757 1,213
* Axogen Inc. 91,724 1,136
* AngioDynamics Inc. 97,029 1,115
* OraSure Technologies Inc. 159,363 961
* Establishment Labs Holdings Inc. 47,295 957
* Meridian Bioscience Inc. 110,243 881
* ViewRay Inc. 289,766 832
* Shockwave Medical Inc. 20,076 806
* Accuray Inc. 229,789 681
  Invacare Corp. 86,851 658
* SI-BONE Inc. 25,822 499
* GenMark Diagnostics Inc. 131,636 459
* TransMedics Group Inc. 21,236 333
* Neuronetics Inc. 21,832 63
      2,622,979
Health Care Providers & Services (18.3%)
  UnitedHealth Group Inc. 2,441,442 622,470
  CVS Health Corp. 3,352,370 198,393
  Cigna Corp. 962,015 175,991
  Anthem Inc. 653,360 167,972
  Humana Inc. 341,193 109,073
  HCA Healthcare Inc. 698,987 88,778
* Centene Corp. 1,504,064 79,745
  McKesson Corp. 464,407 64,952
* Laboratory Corp. of America Holdings 250,351 43,984
  Cardinal Health Inc. 753,959 39,296
  Quest Diagnostics Inc. 347,301 36,835
  AmerisourceBergen Corp. Class A 398,166 33,573
  Universal Health Services Inc. 207,095 25,626
* Henry Schein Inc. 378,972 23,095
  Encompass Health Corp. 254,195 19,024
* Molina Healthcare Inc. 153,320 18,789
* DaVita Inc. 233,562 18,129
  Chemed Corp. 41,289 17,243
* Amedisys Inc. 83,169 14,472
* HealthEquity Inc. 182,124 12,929
* LHC Group Inc. 77,210 9,378
* AMN Healthcare Services Inc. 120,277 8,852
* Guardant Health Inc. 96,890 8,426
* Select Medical Holdings Corp. 294,427 7,049
* Acadia Healthcare Co. Inc. 228,444 6,762
* Tenet Healthcare Corp. 226,980 5,965
  Ensign Group Inc. 130,710 5,817
  Patterson Cos. Inc. 221,794 5,277
* Premier Inc. 171,472 5,046
* BioTelemetry Inc. 87,739 3,748
* MEDNAX Inc. 217,471 3,717
* Magellan Health Inc. 59,970 3,599
  US Physical Therapy Inc. 32,838 3,422
* Covetrus Inc. 260,288 2,892
* R1 RCM Inc. 233,019 2,862
* Brookdale Senior Living Inc. 430,963 2,831
* Addus HomeCare Corp. 36,120 2,755
* RadNet Inc. 109,973 2,247
  National HealthCare Corp. 29,424 2,184
* Hanger Inc. 86,539 1,996
* Pennant Group Inc. 68,298 1,856
* Providence Service Corp. 29,943 1,850
* CorVel Corp. 25,813 1,780
  National Research Corp. 32,102 1,765
* PetIQ Inc. 51,401 1,599
* Tivity Health Inc. 122,719 1,555
  Option Care Health Inc. 90,236 1,331
* Community Health Systems Inc. 227,991 1,124
* Apollo Medical Holdings Inc. 62,451 1,091
* Triple-S Management Corp. 62,838 942
* Cross Country Healthcare Inc. 95,193 902
* Surgery Partners Inc. 51,175 840
* Avalon GloboCare Corp. 64,502 92
      1,921,921
Health Care Technology (1.6%)    
  Cerner Corp. 809,748 56,091
* Veeva Systems Inc. 338,715 48,087
*,^ Teladoc Health Inc. 177,325 22,159
* Omnicell Inc. 108,183 8,814
* HMS Holdings Corp. 227,268 5,220
* Inovalon Holdings Inc. 175,521 3,419
* Allscripts Healthcare Solutions Inc. 419,163 3,161
*,^ Tabula Rasa HealthCare Inc. 48,440 2,721
* Inspire Medical Systems Inc. 31,183 2,678
* Vocera Communications Inc. 81,033 1,976
* Evolent Health Inc. 194,833 1,800
*,^ Change Healthcare Inc. 127,553 1,733
* NextGen Healthcare Inc. 125,113 1,636
* HealthStream Inc. 66,213 1,610
  Simulations Plus Inc. 31,588 1,029
  Computer Programs & Systems Inc. 35,763 958
* Castlight Health Inc. 231,194 210
      163,302
Life Sciences Tools & Services (7.3%)    
  Thermo Fisher Scientific Inc. 1,033,194 300,453
* Illumina Inc. 378,655 100,597
  Agilent Technologies Inc. 796,697 61,401
* IQVIA Holdings Inc. 425,156 59,305
* Mettler-Toledo International Inc. 62,765 44,042
* Waters Corp. 166,034 32,358

 

63 

 

 

Health Care Index Fund

 

 

      Market
      Value•
    Shares ($000)
  PerkinElmer Inc. 286,146 24,735
* Bio-Rad Laboratories Inc. 57,631 20,287
* Charles River Laboratories International Inc. 125,910 19,588
  Bio-Techne Corp. 98,263 18,561
* PRA Health Sciences Inc. 163,125 15,366
  Bruker Corp. 278,111 12,115
  Avantor Inc. 735,377 11,582
* Repligen Corp. 120,828 10,343
* Syneos Health Inc. 160,691 10,180
* NeoGenomics Inc. 255,787 7,246
* Medpace Holdings Inc. 74,322 6,685
  PPD Inc. 174,819 4,874
  Luminex Corp. 104,536 2,588
* Codexis Inc. 143,355 1,670
* Pacific Biosciences of California Inc. 335,478 1,141
*,^ Accelerate Diagnostics Inc. 77,618 994
* Quanterix Corp. 36,322 829
* Personalis Inc. 24,301 212
      767,152
Other (0.0%)1    
*,§ Alder BioPharmaceuticals CVR Exp. 12/31/2024 157,578 139
*,§,^ Corium CVR 65,324 12
*,§ Clinical Data CVR 8,685 —
      151
Pharmaceuticals (29.2%)    
  Johnson & Johnson 6,782,350 912,090
  Merck & Co. Inc. 6,560,799 502,295
  Pfizer Inc. 14,030,596 468,903
  Bristol-Myers Squibb Co. 6,040,274 356,739
  Eli Lilly & Co. 2,226,739 280,859
  Zoetis Inc. 1,227,106 163,487
  Allergan plc 845,829 161,274
* Elanco Animal Health Inc. 1,020,236 27,954
* Mylan NV 1,330,854 22,877
* Catalent Inc. 377,222 19,438
  Perrigo Co. plc 333,406 16,900
* Jazz Pharmaceuticals plc 145,804 16,706
* Horizon Therapeutics plc 482,957 16,527
* Reata Pharmaceuticals Inc. 56,127 10,931
* Nektar Therapeutics Class A 453,631 9,440
* MyoKardia Inc. 113,324 7,184
* Prestige Consumer Healthcare Inc. 129,502 4,838
* Axsome Therapeutics Inc. 61,949 4,832
* Pacira BioSciences Inc. 97,328 4,222
* Corcept Therapeutics Inc. 265,205 3,347
* Intra-Cellular Therapies Inc. 150,467 3,175
* Endo International plc 526,372 2,906
* Revance Therapeutics Inc. 119,788 2,770
* Zogenix Inc. 108,606 2,724
* Theravance Biopharma Inc. 109,784 2,673
* Innoviva Inc. 182,830 2,463
* Supernus Pharmaceuticals Inc. 135,318 2,434
* Arvinas Inc. 50,705 2,390
*,^ Aerie Pharmaceuticals Inc. 113,541 1,987
* Intersect ENT Inc. 81,289 1,940
* Collegium Pharmaceutical Inc. 69,632 1,654
* Tricida Inc. 51,802 1,646
*,^ Cara Therapeutics Inc. 108,418 1,630
*,^ Omeros Corp. 123,680 1,473
* Amphastar Pharmaceuticals Inc. 90,798 1,397
  Phibro Animal Health Corp. 52,294 1,320
* ANI Pharmaceuticals Inc. 23,345 1,121
* Odonate Therapeutics Inc. 37,221 1,101
*,^ TherapeuticsMD Inc. 624,542 1,055
*,^ Tilray Inc. 64,939 937
*,^ Mallinckrodt plc 216,949 929
* SIGA Technologies Inc. 135,993 679
* Amneal Pharmaceuticals Inc. 164,856 635
*,^ Evolus Inc. 60,418 519
* WaVe Life Sciences Ltd. 49,187 415
* Verrica Pharmaceuticals Inc. 29,217 347
* Optinose Inc. 55,728 337
* Xeris Pharmaceuticals Inc. 80,973 288
* Akorn Inc. 244,108 283
*,^ Kala Pharmaceuticals Inc. 44,690 239
* Cymabay Therapeutics Inc. 97,124 161
* Eloxx Pharmaceuticals Inc. 26,213 82
      3,054,553
Total Common Stocks (Cost $8,925,534)   10,463,239
Temporary Cash Investment (0.5%)  
2,3

Vanguard Market Liquidity Fund, 1.706%

(Cost $54,098)

 540,943 54,111
Total Investments (100.4%) (Cost $8,979,632)   10,517,350
Other Assets and Liabilities—Net (-0.4%)3,4   (41,029)
Net Assets (100%)   10,476,321

Cost rounded to $000.

•See Note A in Notes to the Financial Statements.
*Non-income-producing security.

^Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $51,002,000.

§Security value determined using significant unobservable inputs.

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

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

3Collateral of $55,663,000 was received for securities on loan, of which $54,088,000 is held in Vanguard Market Liquidity Fund and $1,575,000 is held in cash.

4Cash of $470,000 has been segregated as collateral for open over-the-counter swap contracts.

CVR—Contingent Value Rights.

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Over-the-Counter Total Return Swaps

               Floating         
               Interest Rate   Value and   Value and 
           Notional   Received   Unrealized   Unrealized 
   Termination       Amount   (Paid)1  Appreciation   (Depreciation)
Reference Entity   Date    Counterparty   ($000)   (%)  ($000)  ($000)
Pfizer Inc.   2/2/21    GSI    8,354    (1.647)   —    (670)

1Payment received/paid monthly.

GSI—Goldman Sachs International.

 

 

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

 

64 

 

Health Care Index Fund

 

 

Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $8,925,534) 10,463,239
Affiliated Issuers (Cost $54,098) 54,111
Total Investments in Securities 10,517,350
Investment in Vanguard 494
Cash Collateral Pledged—Over-the-Counter Swap Contracts 470
Receivables for Investment Securities Sold 50,339
Receivables for Accrued Income 18,441
Receivables for Capital Shares Issued 3,137
Total Assets 10,590,231
Liabilities  
Due to Custodian 11,609
Payables for Investment Securities Purchased 38,495
Collateral for Securities on Loan 55,663
Payables for Capital Shares Redeemed 5,878
Payables to Vanguard 1,595
Unrealized Depreciation—Over-the-Counter Swap Contracts 670
Total Liabilities 113,910
Net Assets 10,476,321
   
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 8,760,983
Total Distributable Earnings (Loss) 1,715,338
Net Assets 10,476,321
   
ETF Shares—Net Assets  
Applicable to 51,949,423 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 9,105,975
Net Asset Value Per Share—ETF Shares $175.29
   
Admiral Shares—Net Assets  
Applicable to 15,628,586 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 1,370,346
Net Asset Value Per Share—Admiral Shares $87.68

 

 

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

  

65 

 

 

Health Care Index Fund

 

 

Statement of Operations

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   82,361 
Interest1   42 
Securities Lending—Net   1,518 
Total Income   83,921 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   816 
Management and Administrative—ETF Shares   3,628 
Management and Administrative—Admiral Shares   543 
Marketing and Distribution—ETF Shares   256 
Marketing and Distribution—Admiral Shares   53 
Custodian Fees   2 
Shareholders’ Reports—ETF Shares   125 
Shareholders’ Reports—Admiral Shares   4 
Trustees’ Fees and Expenses   3 
Total Expenses   5,430 
Expenses Paid Indirectly   (2)
Net Expenses   5,428 
Net Investment Income   78,493 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   292,472 
Swap Contracts   594 
Realized Net Gain (Loss)   293,066 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   8,656 
Swap Contracts   (994)
Change in Unrealized Appreciation (Depreciation)   7,662 
Net Increase (Decrease) in Net Assets Resulting from Operations   379,221 

1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $ 42,000, ($ 4,000), and $9,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $340,963,000 of net gain (loss resulting in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   78,493    216,225 
Realized Net Gain (Loss)   293,066    426,803 
Change in Unrealized Appreciation (Depreciation)   7,662    (874,477)
Net Increase (Decrease) in Net Assets Resulting from Operations   379,221    (231,449)
Distributions1          
ETF Shares   (70,348)   (183,804)
Admiral Shares   (10,403)   (26,640)
Total Distributions   (80,751)   (210,444)
Capital Share Transactions          
ETF Shares   (51,015)   692,430 
Admiral Shares   14,608    121,577 
Net Increase (Decrease) from Capital Share Transactions   (36,407)   814,007 
Total Increase (Decrease)   262,063    372,114 
Net Assets          
Beginning of Period   10,214,258    9,842,144 
End of Period   10,476,321    10,214,258 

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

66 

 

Health Care Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

  Six Months              
      Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period     2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $169.74 $177.07 $151.13 $133.25 $132.34 $117.17  
Investment Operations                    
Net Investment Income     1.3151 3.6001,2 2.1941 1.9941 1.795 1.350  
Net Realized and Unrealized Gain (Loss) on Investments     5.585 (7.457) 25.846 17.846 1.559 15.105  
Total from Investment Operations     6.900 (3.857) 28.040 19.840 3.354 16.455  
Distributions                    
Dividends from Net Investment Income   (1.350) (3.473) (2.100) (1.960) (2.444) (1.285)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions     (1.350) (3.473) (2.100) (1.960) (2.444) (1.285)  
Net Asset Value, End of Period     $175.29 $169.74 $177.07 $151.13 $133.25 $132.34  
Total Return     4.05% -2.22% 18.75% 15.06% 2.61% 14.08%  
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions)     $9,106 $8,899 $8,594 $7,002 $5,708 $5,826  
Ratio of Total Expenses to Average Net Assets     0.10% 0.10% 0.10% 0.10% 0.10% 0.09%  
Ratio of Net Investment Income to Average Net Assets     1.45% 2.12%2 1.38% 1.46% 1.40% 1.25%  
Portfolio Turnover Rate3     3% 5% 6% 4% 7% 4%  

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

1Calculated based on average shares outstanding.

2Net investment income per share and the ratio of net investment income to average net assets include $1.132 and 0.67%, respectively, resulting from a cash payment received in connection with the merger of Cigna Corp. and Express Scripts Holding Co. in December 2018.

3Excludes 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.

 

67 

 

Health Care Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $84.91 $88.57 $75.60 $66.65 $66.20 $58.61  
Investment Operations                  
Net Investment Income   .6571 1.8041,2 1.1011 .9961 .898 .676  
Net Realized and Unrealized Gain (Loss) on Investments   2.788 (3.727) 12.920 8.934 .774 7.557  
Total from Investment Operations   3.445 (1.923) 14.021 9.930 1.672 8.233  
Distributions                  
Dividends from Net Investment Income (.675) (1.737) (1.051) (.980) (1.222) (.643)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (.675) (1.737) (1.051) (.980) (1.222) (.643)  
Net Asset Value, End of Period   $87.68 $84.91 $88.57 $75.60 $66.65 $66.20  
Total Return3   4.05% -2.21% 18.74% 15.07% 2.61% 14.11%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $1,370 $1,316 $1,248 $924 $800 $824  
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets   1.45% 2.12%2 1.38% 1.46% 1.40% 1.24%  
Portfolio Turnover Rate4   3% 5% 6% 4% 7% 4%  

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

1Calculated based on average shares outstanding.

2Net investment income per share and the ratio of net investment income to average net assets include $.566 and 0.67%, respectively, resulting from a cash payment received in connection with the merger of Cigna Corp. and Express Scripts Holding Co. in December 2018.

3Total 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.

4Excludes 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.

  

68 

 

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.

 

2. 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 Schedule of Investments. 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.

 

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 Schedule of Investments. 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 29, 2020, 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.

 

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, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

69 

 

Health Care Index Fund

 

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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.

 

70 

 

Health Care Index Fund

 

 

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 29, 2020, the fund had contributed to Vanguard capital in the amount of $494,000, representing less than 0.01% of the fund’s net assets and 0.20% of Vanguard’s capital received pursuant to the FSA. 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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   10,463,088    —    151    10,463,239 
Temporary Cash Investments   54,111    —    —    54,111 
Total   10,517,199    —    151    10,517,350 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    670    —    670 

 

D.  As of February 29, 2020, 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   8,979,668 
Gross Unrealized Appreciation   2,236,405 
Gross Unrealized Depreciation   (699,393)
Net Unrealized Appreciation (Depreciation)   1,537,012 

 

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, 2019, the fund had available capital losses totaling $140,248,000 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, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

71 

 

Health Care Index Fund

 

 

E.  During the six months ended February 29, 2020, the fund purchased $1,115,326,000 of investment securities and sold $1,161,704,000 of investment securities, other than temporary cash investments. Purchases and sales include $708,088,000 and $831,609,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   788,451    4,250    1,841,149    10,713 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (839,466)   (4,725)   (1,148,719)   (6,825)
Net Increase (Decrease)—ETF Shares   (51,015)   (475)   692,430    3,888 
Admiral Shares                    
Issued   184,244    1,998    463,889    5,465 
Issued in Lieu of Cash Distributions   9,182    103    23,415    269 
Redeemed   (178,818)   (1,968)   (365,727)   (4,327)
Net Increase (Decrease)—Admiral Shares   14,608    133    121,577    1,407 

 

G.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

72 

 

Industrials Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Aerospace & Defense 23.4%
Agricultural & Farm Machinery 2.1
Air Freight & Logistics 4.7
Airlines 3.1
Airport Services 0.1
Building Products 4.1
Commercial Printing 0.2
Construction & Engineering 1.7
Construction Machinery & Heavy Trucks 5.6
Diversified Support Services 2.1
Electrical Components & Equipment 5.7
Environmental & Facilities Services 4.4
Heavy Electrical Equipment 0.1
Human Resource & Employment Services 0.8
Industrial Conglomerates 12.2
Industrial Machinery 11.5
Marine 0.2
Office Services & Supplies 0.5
Railroads 7.9
Research & Consulting Services 4.6
Security & Alarm Services 0.2
Trading Companies & Distributors 3.2
Trucking 1.6

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

73 

 

 

Industrials Index Fund

 

 

 

Financial Statements (unaudited)

 

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value•
    Shares ($000)
Common Stocks (99.9%)    
Aerospace & Defense (23.5%)    
  Boeing Co. 601,896 165,588
  United Technologies Corp. 923,072 120,544
  Lockheed Martin Corp. 285,726 105,681
  Northrop Grumman Corp. 180,249 59,273
  Raytheon Co. 313,517 59,117
  L3Harris Technologies Inc. 248,876 49,210
  General Dynamics Corp. 276,922 44,222
  TransDigm Group Inc. 54,225 30,247
* Teledyne Technologies Inc. 41,008 13,833
  Arconic Inc. 438,961 12,883
  Textron Inc. 256,714 10,423
  Huntington Ingalls Industries Inc. 46,113 9,478
  HEICO Corp. Class A 85,910 7,588
  Spirit AeroSystems Holdings Inc. 116,488 6,155
  Hexcel Corp. 94,910 6,134
  BWX Technologies Inc. 107,139 5,875
  Curtiss-Wright Corp. 45,701 5,481
  HEICO Corp. 48,380 5,218
* Axon Enterprise Inc. 66,748 5,164
* Mercury Systems Inc. 62,492 4,591
* Aerojet Rocketdyne Holdings Inc. 79,669 3,926
  Moog Inc. 36,274 2,797
  Cubic Corp. 33,574 1,828
* Kratos Defense & Security Solutions Inc. 102,256 1,663
  AAR Corp. 37,301 1,289
* AeroVironment Inc. 24,121 1,240
* Parsons Corp. 27,655 1,081
  Triumph Group Inc. 55,770 1,060
  Maxar Technologies Inc. 67,885 1,033
* Ducommun Inc. 12,603 563
* Astronics Corp. 25,955 526
  National Presto Industries Inc. 5,541 435
  Park Aerospace Corp. 21,642 301
      744,447
Air Freight & Logistics (4.7%)    
  United Parcel Service Inc. 788,983 71,395
  FedEx Corp. 279,183 39,412
  Expeditors International of Washington Inc. 191,944 13,517
  CH Robinson Worldwide Inc. 152,171 10,485
* XPO Logistics Inc. 103,844 7,681
  Forward Air Corp. 31,640 1,867
* Hub Group Inc. 37,671 1,741
* Air Transport Services Group Inc. 67,472 1,208
* Atlas Air Worldwide Holdings Inc. 29,479 788
* Echo Global Logistics Inc. 30,664 566
* Radiant Logistics Inc. 40,454 178
      148,838
Airlines (3.1%)    
  Delta Air Lines Inc. 655,460 30,236
  Southwest Airlines Co. 533,214 24,629
* United Airlines Holdings Inc. 256,635 15,806
  American Airlines Group Inc. 443,139 8,442
  Alaska Air Group Inc. 138,545 6,991
* JetBlue Airways Corp. 324,265 5,117
  SkyWest Inc. 56,726 2,575
* Spirit Airlines Inc. 77,080 2,193
  Allegiant Travel Co. 14,708 1,994
  Hawaiian Holdings Inc. 52,589 1,098
      99,081
Building Products (4.1%)    
  Johnson Controls    
  International plc 868,470 31,760
  Masco Corp. 320,058 13,225
  Allegion plc 104,535 12,021
  Fortune Brands Home & Security Inc. 156,494 9,664
  Lennox International Inc. 39,089 8,917
  Owens Corning 122,393 6,914
* Trex Co. Inc. 65,683 6,283
  AO Smith Corp. 154,084 6,094
  Armstrong World Industries Inc. 51,793 5,187
  Simpson Manufacturing Co. Inc. 44,837 3,561
  Universal Forest Products Inc. 69,060 3,236
* Builders FirstSource Inc. 130,737 2,969
  AAON Inc. 47,027 2,587
  Advanced Drainage Systems Inc. 57,680 2,415
* Masonite International Corp. 27,947 2,054
* Gibraltar Industries Inc. 36,389 1,844
* Resideo Technologies Inc. 138,726 1,491
* American Woodmark Corp. 17,007 1,425
* JELD-WEN Holding Inc. 73,741 1,386
  Patrick Industries Inc. 25,445 1,344
  CSW Industrials Inc. 16,864 1,110
* PGT Innovations Inc. 65,206 989
  Apogee Enterprises Inc. 28,633 864
  Griffon Corp. 42,577 741
  Quanex Building Products Corp. 37,730 634
* Cornerstone Building Brands Inc. 78,379 576
  Insteel Industries Inc. 20,862 415
* Armstrong Flooring Inc. 24,201 64
      129,770
Commercial Services & Supplies (7.4%)  
  Waste Management Inc. 477,714 52,936
  Waste Connections Inc. 296,718 28,630
  Cintas Corp. 99,034 26,416
  Republic Services Inc. 251,717 22,720
* Copart Inc. 235,571 19,901
* IAA Inc. 150,224 6,418
  Rollins Inc. 165,816 6,208
* Stericycle Inc. 102,533 5,889
  MSA Safety Inc. 41,506 5,050
  Tetra Tech Inc. 61,528 4,976
  Brink’s Co. 56,217 4,401
* Clean Harbors Inc. 59,800 4,157
  UniFirst Corp. 17,158 3,188
* Advanced Disposal Services Inc. 85,476 2,826
  KAR Auction Services Inc. 144,668 2,785
  Brady Corp. Class A 56,092 2,655
* Cimpress plc 21,860 2,545
  ABM Industries Inc. 74,828 2,463
* Casella Waste Systems Inc. 50,076 2,426
  Healthcare Services Group Inc. 83,712 2,305
  Herman Miller Inc. 66,478 2,276
  Mobile Mini Inc. 49,728 1,939
  McGrath RentCorp 27,406 1,903
  Covanta Holding Corp. 132,234 1,767
  Steelcase Inc. 99,251 1,610
  HNI Corp. 48,307 1,586
  Deluxe Corp. 47,029 1,566
  US Ecology Inc. 30,202 1,270
  Viad Corp. 22,758 1,143
^ ADT Inc. 168,651 1,078
* Harsco Corp. 87,641 1,051
  Matthews International Corp. 35,102 1,038
  Knoll Inc. 55,472 979
  Interface Inc. 66,502 970
* SP Plus Corp. 26,154 955
  ACCO Brands Corp. 108,759 871
  Kimball International Inc. 41,043 664
  Pitney Bowes Inc. 190,113 650
  Ennis Inc. 29,295 589
* BrightView Holdings Inc. 36,066 505
* Heritage-Crystal Clean Inc. 16,712 440
* Team Inc. 32,082 408
  VSE Corp. 9,850 290
  Quad/Graphics Inc. 36,520 175
* Civeo Corp. 149,211 175
  RR Donnelley & Sons Co. 76,415 145
      234,938
Construction & Engineering (1.7%)  
  Jacobs Engineering Group Inc. 149,760 13,829
* Aecom 176,806 7,946
  Quanta Services Inc. 160,177 6,107
  EMCOR Group Inc. 63,032 4,848
* MasTec Inc. 68,903 3,382
  Valmont Industries Inc. 24,212 2,814
  Arcosa Inc. 48,792 2,096
  Comfort Systems USA Inc. 41,255 1,742
  Fluor Corp. 150,173 1,400
* WillScot Corp. 61,074 1,071
  Granite Construction Inc. 52,444 1,066

 

74 

 

Industrials Index Fund

 

 

      Market
      Value•
    Shares ($000)
* Dycom Industries Inc. 35,635 1,053
  Primoris Services Corp. 48,369 918
  Argan Inc. 15,993 667
* Tutor Perini Corp. 45,582 661
* Aegion Corp. 34,071 614
* NV5 Global Inc. 11,434 612
* Ameresco Inc. 23,124 521
* MYR Group Inc. 18,768 479
* Construction Partners Inc. Class A 19,800 337
* IES Holdings Inc. 9,953 232
      52,395
Electrical Equipment (5.7%)    
  Emerson Electric Co. 686,191 43,992
  Eaton Corp. plc 465,617 42,241
  Rockwell Automation Inc. 130,168 23,886
  AMETEK Inc. 257,293 22,127
  Hubbell Inc. 61,215 8,156
* Sensata Technologies Holding plc 178,681 7,290
* Generac Holdings Inc. 70,411 7,252
  Acuity Brands Inc. 44,462 4,573
  nVent Electric plc 170,797 4,101
  Regal Beloit Corp. 46,078 3,578
  EnerSys 47,438 2,921
* Atkore International Group Inc. 52,934 1,954
* Sunrun Inc. 86,404 1,671
*,^ Plug Power Inc. 336,748 1,461
  Encore Wire Corp. 23,386 1,145
  AZZ Inc. 29,607 1,092
* Vicor Corp. 21,020 909
* TPI Composites Inc. 31,529 749
*,^ Bloom Energy Corp. Class A 76,959 698
  GrafTech International Ltd. 80,149 654
* Thermon Group Holdings Inc. 36,479 641
* Vivint Solar Inc. 47,176 530
  Powell Industries Inc. 10,219 342
  Allied Motion Technologies Inc. 8,549 329
      182,292
Industrial Conglomerates (12.2%)  
  Honeywell International Inc. 804,463 130,460
  General Electric Co. 9,832,542 106,978
  3M Co. 647,457 96,626
  Roper Technologies Inc. 117,116 41,190
  Carlisle Cos. Inc. 63,796 9,269
  Raven Industries Inc. 40,107 1,151
      385,674
Machinery (19.1%)    
  Caterpillar Inc. 622,297 77,314
  Illinois Tool Works Inc. 361,936 60,726
  Deere & Co. 336,806 52,703
  Ingersoll-Rand plc 268,478 34,644
  Parker-Hannifin Corp. 144,575 26,713
  PACCAR Inc. 389,742 26,074
  Cummins Inc. 163,968 24,807
  Stanley Black & Decker Inc. 171,057 24,581
  Fortive Corp. 340,098 23,521
  Dover Corp. 163,446 16,792
  Xylem Inc. 202,614 15,670
  Westinghouse Air Brake Technologies Corp. 204,908 14,077
  IDEX Corp. 85,589 12,667
  Graco Inc. 187,678 9,256
  Snap-on Inc. 61,741 8,937
  Toro Co. 119,983 8,570
  Nordson Corp. 58,234 8,461
* WABCO Holdings Inc. 57,880 7,820
  Pentair plc 179,685 7,078
* Middleby Corp. 63,225 7,069
  Woodward Inc. 62,772 6,478
  Donaldson Co. Inc. 141,933 6,398
  Flowserve Corp. 147,405 5,924
  ITT Inc. 98,479 5,924
  Oshkosh Corp. 76,527 5,521
  Lincoln Electric Holdings Inc. 65,331 5,350
* Gardner Denver Holdings Inc. 158,472 5,196
  Allison Transmission Holdings Inc. 127,432 5,174
* RBC Bearings Inc. 28,193 4,826
  AGCO Corp. 72,228 4,365
  Rexnord Corp. 138,340 4,034
  Crane Co. 53,834 3,658
  John Bean Technologies Corp. 35,625 3,451
  Timken Co. 76,240 3,419
* Colfax Corp. 99,406 3,327
  Watts Water Technologies Inc. 31,051 2,916
  Barnes Group Inc. 54,057 2,903
  ESCO Technologies Inc. 29,251 2,660
  Kennametal Inc. 93,336 2,595
* Proto Labs Inc. 28,735 2,518
  Trinity Industries Inc. 117,153 2,384
  Franklin Electric Co. Inc. 44,558 2,303
  Albany International Corp. 34,549 2,214
  Altra Industrial Motion Corp. 72,727 2,191
* Chart Industries Inc. 38,269 2,178
* SPX Corp. 49,689 2,083
* Welbilt Inc. 151,214 1,999
  Federal Signal Corp. 67,972 1,971
  Hillenbrand Inc. 83,710 1,959
  Mueller Water Products Inc. 177,471 1,943
* Evoqua Water Technologies Corp. 90,107 1,890
* Navistar International Corp. 50,427 1,831
* Meritor Inc. 78,883 1,790
  Terex Corp. 80,636 1,775
* SPX FLOW Inc. 47,933 1,763
  Mueller Industries Inc. 60,790 1,701
* Enerpac Tool Group Corp. Class A 68,120 1,456
  Tennant Co. 19,601 1,402
* TriMas Corp. 50,844 1,289
  Helios Technologies Inc. 32,238 1,281
  Alamo Group Inc. 11,292 1,251
  EnPro Industries Inc. 22,395 1,208
  Lindsay Corp. 12,193 1,208
  Kadant Inc. 12,767 1,160
  Douglas Dynamics Inc. 25,915 1,128
  Astec Industries Inc. 24,303 913
  Greenbrier Cos. Inc. 36,775 891
  Standex International Corp. 13,970 886
  Columbus McKinnon Corp. 25,019 778
*,^ Gates Industrial Corp. plc 65,345 684
* CIRCOR International Inc. 18,714 673
  Wabash National Corp. 61,258 673
  Gorman-Rupp Co. 20,453 654
* Manitowoc Co. Inc. 38,844 484
* Energy Recovery Inc. 38,066 375
  NN Inc. 46,439 360
  Hyster-Yale Materials Handling Inc. 7,376 355
* Blue Bird Corp. 15,789 282
  Omega Flex Inc. 3,262 255
  REV Group Inc. 30,413 238
* Lydall Inc. 18,975 226
  Park-Ohio Holdings Corp. 9,100 223
  Briggs & Stratton Corp. 46,216 147
  Titan International Inc. 56,345 125
      606,697
Marine (0.2%)    
* Kirby Corp. 64,076 4,085
  Matson Inc. 48,491 1,610
  Genco Shipping & Trading Ltd. 18,010 138
*,^ Eagle Bulk Shipping Inc. 38,516 128
      5,961
Professional Services (5.4%)    
  IHS Markit Ltd. 429,093 30,569
* CoStar Group Inc. 41,261 27,545
  Verisk Analytics Inc. 175,189 27,174
  Equifax Inc. 136,250 19,353
  TransUnion 211,884 18,841
  Nielsen Holdings plc 400,425 7,292
  Robert Half International Inc. 130,527 6,580
  ManpowerGroup Inc. 66,299 5,035
* FTI Consulting Inc. 42,334 4,766
  Exponent Inc. 58,350 4,297
* ASGN Inc. 59,398 3,012
  Insperity Inc. 42,689 2,872
* TriNet Group Inc. 51,162 2,704
  Korn Ferry 62,960 2,202
  ICF International Inc. 21,184 1,610
* CBIZ Inc. 58,713 1,529
* Huron Consulting Group Inc. 25,629 1,521
  Kforce Inc. 22,957 699
* TrueBlue Inc. 43,351 645
  Kelly Services Inc. 36,254 602
* Upwork Inc. 61,817 536
  Barrett Business Services Inc. 8,443 506
  Heidrick & Struggles International Inc. 22,214 495
* Forrester Research Inc. 12,573 453
  Resources Connection Inc. 34,337 430
  CRA International Inc. 8,775 408
* Willdan Group Inc. 12,316 379
* Mistras Group Inc. 20,269 159
      172,214
Road & Rail (9.5%)    
  Union Pacific Corp. 781,444 124,883
  CSX Corp. 831,562 58,584
  Norfolk Southern Corp. 273,563 49,884
  Kansas City Southern 111,691 16,830
  Old Dominion Freight Line Inc. 71,854 13,925
  JB Hunt Transport Services Inc. 95,969 9,255
  Knight-Swift Transportation Holdings Inc. 144,129 4,604
  Landstar System Inc. 44,411 4,484

 

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        Market
        Value•
    Shares   ($000)
  Amerco 9,902   3,194
* Saia Inc. 29,107   2,541
* Lyft Inc. Class A 64,547   2,461
  Ryder System Inc. 60,110   2,287
* Avis Budget Group Inc. 70,504   2,283
  Werner Enterprises Inc. 50,907   1,710
* Hertz Global Holdings Inc. 96,706   1,237
  Schneider National Inc. 58,082   1,040
  Heartland Express Inc. 50,553   905
  Marten Transport Ltd. 45,607   891
  ArcBest Corp. 28,743   569
* Covenant Transportation Group Inc. 13,992   169
* Daseke Inc. 50,083   165
  Universal Logistics Holdings Inc. 9,344   144
* US Xpress Enterprises Inc. 23,227   100
        302,145
Trading Companies & Distributors (3.2%)    
  Fastenal Co. 645,315   22,083
  WW Grainger Inc. 51,617   14,326
* United Rentals Inc. 84,781   11,232
* HD Supply Holdings Inc. 186,357   7,085
  Watsco Inc. 36,734   5,766
  Air Lease Corp. 120,594   4,626
* SiteOne Landscape Supply Inc. 44,237   4,391
  MSC Industrial Direct Co. Inc. Class A 50,682   3,133
  GATX Corp. 37,419   2,677
* Univar Solutions Inc. 151,855   2,580
  Applied Industrial Technologies Inc. 43,592   2,571

* Beacon Roofing Supply Inc. 77,096   2,290
  Aircastle Ltd. 63,227   2,014
  Triton International Ltd. 56,928   1,957
* BMC Stock Holdings Inc. 75,121   1,843
* WESCO International Inc. 44,477   1,804
  Kaman Corp. 28,233   1,566
  Rush Enterprises Inc. Class A 31,676   1,328
* NOW Inc. 121,898   1,076
* GMS Inc. 47,085   1,076
* Herc Holdings Inc. 24,131   885
  H&E Equipment Services Inc. 36,628   870
* MRC Global Inc. 93,302   812
* DXP Enterprises Inc. 19,140   543
* CAI International Inc. 18,376   455
* Foundation Building Materials Inc. 23,803   371
  Systemax Inc. 14,533   303
* Titan Machinery Inc. 21,020   212
  Rush Enterprises Inc. Class B 4,126   173
* Veritiv Corp. 13,830   167
* General Finance Corp. 17,626   137
* EVI Industries Inc. 4,488   99
        100,451
Transportation Infrastructure (0.1%)    
  Macquarie Infrastructure Corp. 82,445   3,236
Total Common Stocks (Cost $3,128,859)     3,168,139
Temporary Cash Investment (0.1%)    
1,2   Vanguard Market Liquidity Fund, 1.706%      
  (Cost $3,665) 36,650   3,666
Total Investments (100.0%) (Cost $3,132,524)     3,171,805
Other Assets and Liabilities—Net (0.0%)2,3     285
Net Assets (100%)     3,172,090

Cost rounded to $000.

•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 $3,266,000.

1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2Collateral of $3,663,000 was received for securities on loan.

3Cash of $460,000 has been segregated as collateral for open over-the-counter swap contracts.

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Over-the-Counter Total Return Swaps

 

               Floating         
               Interest Rate   Value and   Value and 
           Notional   Received   Unrealized   Unrealized 
   Termination       Amount   (Paid)1  Appreciation   (Depreciation)
Reference Entity   Date    Counterparty   ($000)   (%)  ($000)  ($000)
Norfolk Southern   2/2/21    GSI    4,160    (1.647)   —    (496)
1Payment received/paid monthly.

GSI—Goldman Sachs International.

 

 

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

 

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Statement of Assets and Liabilities

As of February 29, 2020

  

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $3,128,859) 3,168,139
Affiliated Issuers (Cost $3,665) 3,666
Total Investments in Securities 3,171,805
Investment in Vanguard 164
Cash Collateral Pledged—Over-the-Counter Swap Contracts 460
Receivables for Investment Securities Sold 11,906
Receivables for Accrued Income 9,444
Receivables for Capital Shares Issued 302
Total Assets 3,194,081
Liabilities  
Due to Custodian 2,309
Payables for Investment Securities Purchased 14,345
Collateral for Securities on Loan 3,663
Payables for Capital Shares Redeemed 599
Payables to Vanguard 579
Unrealized Depreciation—Over-the-Counter Swap Contracts 496
Total Liabilities 21,991
Net Assets 3,172,090
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 2,990,496
Total Distributable Earnings (Loss) 181,594
Net Assets 3,172,090
   
ETF Shares—Net Assets  
Applicable to 21,438,022 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 2,975,630
Net Asset Value Per Share—ETF Shares $138.80
   
Admiral Shares—Net Assets  
Applicable to 2,755,090 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 196,460
Net Asset Value Per Share—Admiral Shares $71.31

 

 

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

 

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Statement of Operations

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   34,333 
Interest1   22 
Securities Lending—Net   103 
Total Income   34,458 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   285 
Management and Administrative—ETF Shares   1,301 
Management and Administrative—Admiral Shares   82 
Marketing and Distribution—ETF Shares   104 
Marketing and Distribution—Admiral Shares   8 
Custodian Fees   9 
Shareholders’ Reports—ETF Shares   104 
Shareholders’ Reports—Admiral Shares   2 
Trustees’ Fees and Expenses   1 
Total Expenses   1,896 
Net Investment Income   32,562 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   171,230 
Swap Contracts   765 
Realized Net Gain (Loss)   171,995 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   (248,241)
Swap Contracts   (597)
Change in Unrealized Appreciation (Depreciation)   (248,838)
Net Increase (Decrease) in Net Assets Resulting from Operations   (44,281)
1Interest 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.

2Includes $174,334,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   32,562    69,081 
Realized Net Gain (Loss)   171,995    268,524 
Change in Unrealized Appreciation (Depreciation)   (248,838)   (460,158)
Net Increase (Decrease) in Net Assets Resulting from Operations   (44,281)   (122,553)
Distributions1          
ETF Shares   (33,435)   (62,999)
Admiral Shares   (2,000)   (3,522)
Total Distributions   (35,435)   (66,521)
Capital Share Transactions          
ETF Shares   (407,491)   (317,178)
Admiral Shares   (110)   (4,653)
Net Increase (Decrease) from Capital Share Transactions   (407,601)   (321,831)
Total Increase (Decrease)   (487,317)   (510,905)
Net Assets          
Beginning of Period   3,659,407    4,170,312 
End of Period   3,172,090    3,659,407 
1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

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Financial Highlights

  

ETF Shares

 

  Six Months              
      Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period     2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $142.53 $146.12 $128.70 $111.57 $99.23 $103.95  
Investment Operations                    
Net Investment Income     1.2981 2.5971 2.2631 2.3831 2.083 1.914  
Net Realized and Unrealized Gain (Loss) on Investments     (3.627) (3.754) 17.412 16.998 13.204 (4.961)  
Total from Investment Operations     (2.329) (1.157) 19.675 19.381 15.287 (3.047)  
Distributions                    
Dividends from Net Investment Income   (1.401) (2.433) (2.255) (2.251) (2.947) (1.673)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions     (1.401) (2.433) (2.255) (2.251) (2.947) (1.673)  
Net Asset Value, End of Period   $138.80 $142.53 $146.12 $128.70 $111.57 $99.23  
                 
Total Return     -1.70% -0.73% 15.41% 17.55% 15.78% -3.03%  
                   
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions)     $2,976 $3,457 $3,957 $3,202 $2,338 $1,898  
Ratio of Total Expenses to Average Net Assets     0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets     1.63% 1.87% 1.62% 1.95% 2.08% 1.83%  
Portfolio Turnover Rate2     1% 4% 4% 5% 8% 4%  

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

1Calculated based on average shares outstanding.

2Excludes 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.

 

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Financial Highlights

  

Admiral Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $73.22 $75.07 $66.12 $57.32 $50.98 $53.40  
Investment Operations                  
Net Investment Income   .6721 1.3401 1.1541 1.2371 1.069 .982  
Net Realized and Unrealized Gain (Loss) on Investments   (1.862) (1.941) 8.955 8.721 6.783 (2.541)  
Total from Investment Operations   (1.190) (.601) 10.109 9.958 7.852 (1.559)  
Distributions                  
Dividends from Net Investment Income (.720) (1.249) (1.159) (1.158) (1.512) (.861)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (.720) (1.249) (1.159) (1.158) (1.512) (.861)  
Net Asset Value, End of Period   $71.31 $73.22 $75.07 $66.12 $57.32 $50.98  
                 
Total Return2   -1.70% -0.75% 15.41% 17.55% 15.77% -2.98%  
                 
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $196 $202 $213 $176 $77 $66  
Ratio of Total Expenses to Average Net Assets   0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets   1.64% 1.87% 1.62% 1.95% 2.08% 1.83%  
Portfolio Turnover Rate3   1% 4% 4% 5% 8% 4%  

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

1Calculated based on average shares outstanding.

2Total 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.

3Excludes 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.

 

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Notes to Financial Statements

  

Vanguard Industrials 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. 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 Schedule of Investments. 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.

 

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 Schedule of Investments. 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 29, 2020, 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.

 

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, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

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4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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.

 

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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 29, 2020, the fund had contributed to Vanguard capital in the amount of $164,000, representing less than 0.01% of the fund’s net assets and 0.07% of Vanguard’s capital received pursuant to the FSA. 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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   3,168,139    —    —    3,168,139 
Temporary Cash Investments   3,666    —    —    3,666 
Total   3,171,805    —    —    3,171,805 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    496    —    496 

 

D.  As of February 29, 2020, 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   3,132,929 
Gross Unrealized Appreciation   496,948 
Gross Unrealized Depreciation   (458,568)
Net Unrealized Appreciation (Depreciation)   38,380 

 

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, 2019, the fund had available capital losses totaling $42,411,000 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, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

83 

 

 

Industrials Index Fund

 

 

E.  During the six months ended February 29, 2020, the fund purchased $158,202,000 of investment securities and sold $568,655,000 of investment securities, other than temporary cash investments. Purchases and sales include $95,137,000 and $536,968,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   129,824    856    613,810    4,352 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (537,315)   (3,675)   (930,988)   (7,175)
Net Increase (Decrease)—ETF Shares   (407,491)   (2,819)   (317,178)   (2,823)
Admiral Shares                    
Issued   48,952    624    68,108    955 
Issued in Lieu of Cash Distributions   1,715    22    2,995    42 
Redeemed   (50,777)   (650)   (75,756)   (1,078)
Net Increase (Decrease)—Admiral Shares   (110)   (4)   (4,653)   (81)

 

At February 29, 2020, one shareholder was the record or beneficial owner of 45% of the fund’s net assets. If this shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

 

G.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

84 

 

 

Information Technology Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Application Software 12.1%
Communications Equipment 3.8
Data Processing & Outsourced Services 16.3
Electronic Components 1.0
Electronic Equipment & Instruments 1.1
Electronic Manufacturing Services 0.8
Internet Services & Infrastructure 1.2
IT Consulting & Other Services 5.0
Semiconductor Equipment 2.5
Semiconductors 15.0
Systems Software 21.1
Technology Distributors 0.6
Technology Hardware, Storage & Peripherals 19.5

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

85 

 

 

Information Technology Index Fund

 

 

Financial Statements (unaudited)

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

        Market
        Value•
    Shares   ($000)
Common Stocks (99.6%)      
Communications Equipment (3.7%)    
  Cisco Systems Inc. 17,263,515   689,332
  Motorola Solutions Inc. 697,138   115,502
* Arista Networks Inc. 217,568   42,017
* F5 Networks Inc. 248,148   29,765
  Juniper Networks Inc. 1,366,703   29,001
* Lumentum Holdings Inc. 313,955   24,432
* Ciena Corp. 634,183   24,384
* Viavi Solutions Inc. 945,778   12,475
* ViaSat Inc. 160,894   9,251
* Acacia Communications Inc. 133,240   9,128
* CommScope Holding Co. Inc. 785,745   8,651
* NetScout Systems Inc. 306,432   7,875
* EchoStar Corp. 208,258   7,272
  InterDigital Inc. 126,012   6,665
  Ubiquiti Inc. 34,257   4,647
* Infinera Corp. 652,124   4,435
  Comtech Telecommunications Corp. 96,656   2,708
* Extreme Networks Inc. 486,249   2,446
* NETGEAR Inc. 125,317   2,365
* Harmonic Inc. 360,911   2,216
  Plantronics Inc. 135,306   1,858
* Calix Inc. 199,672   1,797
  ADTRAN Inc. 191,153   1,538
* CalAmp Corp. 133,358   1,283
* Ribbon Communications Inc. 218,841   707
^,* Applied Optoelectronics Inc. 76,658   685
* Casa Systems Inc. 116,341   382
        1,042,817
Electronic Equipment, Instruments & Components (3.5%)    
  TE Connectivity Ltd. 1,361,878   112,859
  Amphenol Corp. Class A 1,207,378   110,692
  Corning Inc. 3,138,383   74,882
*  Keysight Technologies Inc. 763,869   72,384
  CDW Corp. 583,914   66,695
* Zebra Technologies Corp. 219,394   46,286
* Trimble Inc. 1,014,381   40,048
  Cognex Corp. 698,149   31,096
  FLIR Systems Inc. 547,948   23,271
* Flex Ltd. 2,079,923   23,108
* Arrow Electronics Inc. 333,580   22,370
  SYNNEX Corp. 176,905   22,118
* Tech Data Corp. 144,517   20,578
  National Instruments Corp. 510,317   20,556
* IPG Photonics Corp. 150,417   19,199
  Jabil Inc. 553,253   17,732
  Dolby Laboratories Inc. 259,858   17,073
  Littelfuse Inc. 98,694   15,759
  Avnet Inc. 414,127   12,705
* Coherent Inc. 98,556   12,685
* Novanta Inc. 141,922   12,661
* Anixter International Inc. 129,467   12,624
* Itron Inc. 142,908   10,838
* II-VI Inc. 351,947   10,449
  Vishay Intertechnology Inc. 534,042   9,987
* Rogers Corp. 75,068   8,708
* Fabrinet 148,995   8,213
* Insight Enterprises Inc. 143,971   7,931
* Plexus Corp. 117,549   7,799
* Sanmina Corp. 284,714   7,485
  Belden Inc. 182,941   7,305
  Badger Meter Inc. 117,299   7,063
* Knowles Corp. 378,754   6,295
* OSI Systems Inc. 72,985   5,931
* Fitbit Inc. 914,701   5,845
  KEMET Corp. 221,615   5,780
* TTM Technologies Inc. 402,459   5,228
  Methode Electronics Inc. 148,582   4,555
  AVX Corp. 203,584   4,426
* ePlus Inc. 54,171   4,104
* FARO Technologies Inc. 69,395   3,972
  Benchmark Electronics Inc. 143,110   3,890
  CTS Corp. 124,263   3,240
  MTS Systems Corp. 77,339   3,104
* ScanSource Inc. 101,264   2,879
  PC Connection Inc. 47,840   1,946
* nLight Inc. 113,064   1,867
* Kimball Electronics Inc. 103,339   1,400
* Vishay Precision Group Inc. 42,619   1,171
* Arlo Technologies Inc. 301,330   988
  Daktronics Inc. 153,945   757
        960,537
IT Services (22.4%)      
  Visa Inc. 6,469,535   1,175,903
  Mastercard Inc. 3,653,232   1,060,351
* PayPal Holdings Inc. 4,538,707   490,135
  International Business Machines Corp. 3,600,126   468,556
  Accenture plc Class A 2,583,139   466,489
  Fidelity National Information Services Inc. 2,497,774   348,989
  Automatic Data Processing Inc. 1,759,725   272,300
* Fiserv Inc. 2,349,455   256,936
  Global Payments Inc. 1,218,867   224,235
  Cognizant Technology Solutions Corp. 2,227,119   135,698
* Square Inc. 1,405,599   117,129
  Paychex Inc. 1,311,858   101,643
* FleetCor Technologies Inc. 353,126   93,857
* VeriSign Inc. 430,815   81,747
* Akamai Technologies Inc. 658,753   56,989
  Leidos Holdings Inc. 548,125   56,265
* Okta Inc. 434,568   55,651
* Twilio Inc. 478,976   53,952
* EPAM Systems Inc. 223,771   49,946
  Broadridge Financial Solutions Inc. 467,537   48,792
* GoDaddy Inc. 695,724   48,687
  Jack Henry & Associates Inc. 313,269   47,535
* Gartner Inc. 365,132   47,244
  Booz Allen Hamilton Holding Corp. 571,861   40,774
* Black Knight Inc. 608,106   40,567
  Western Union Co. 1,706,882   38,217
* WEX Inc. 176,285   33,008
^,* MongoDB Inc. 192,309   29,327
* Euronet Worldwide Inc. 220,124   27,304
  DXC Technology Co. 1,044,467   25,182
* CACI International Inc. Class A 101,911   24,970
  Science Applications International Corp. 210,330   16,854
  MAXIMUS Inc. 261,331   16,469
  Sabre Corp. 1,124,135   15,305
  Alliance Data Systems Corp. 176,560   15,163
  KBR Inc. 568,994   14,771
  Perspecta Inc. 590,035   14,733
  CoreLogic Inc. 323,583   14,681
* ExlService Holdings Inc. 138,123   10,311
* LiveRamp Holdings Inc. 260,084   9,217
  ManTech International Corp. 108,497   8,126
  EVERTEC Inc. 247,542   7,347
* Verra Mobility Corp. Class A 415,835   6,298
  CSG Systems International Inc. 132,972   5,884
* Cardtronics plc 156,224   5,666
* Perficient Inc. 132,481   5,428
* Virtusa Corp. 115,707   5,104
* Sykes Enterprises Inc. 158,815   5,031
  NIC Inc. 269,754   4,934
* Evo Payments Inc. 165,989   4,196
* Unisys Corp. 251,019   3,898
  Switch Inc. 234,464   3,362
  TTEC Holdings Inc. 65,520   2,452
* Conduent Inc. 727,304   2,378
* Limelight Networks Inc. 468,436   2,363
  Cass Information Systems Inc. 50,234   2,359
* Tucows Inc. 38,871   1,986
^,* GTT Communications Inc. 125,664   1,903
^,* GreenSky Inc. Class A 214,179   1,709
  Hackett Group Inc. 102,781   1,583
* Endurance International Group Holdings Inc. 264,525   987
^,* Paysign Inc. 115,927   931
* International Money Express Inc. 90,729   855
* Exela Technologies Inc. 237,336   61
        6,230,723

 

86 

 

 

Information Technology Index Fund

 

 

        Market
        Value•
    Shares   ($000)
Semiconductors & Semiconductor    
Equipment (17.5%)      
  Intel Corp. 17,704,385   982,947
  NVIDIA Corp. 2,355,154   636,056
  Broadcom Inc. 1,614,588   440,169
  Texas Instruments Inc. 3,799,528   433,678
  QUALCOMM Inc. 4,645,676   363,756
* Micron Technology Inc. 4,497,431   236,385
  Applied Materials Inc. 3,755,588   218,275
*  Advanced Micro Devices Inc. 4,241,786   192,916
  Lam Research Corp. 588,271   172,616
  Analog Devices Inc. 1,498,177   163,376
  KLA Corp. 643,355   98,890
  Microchip Technology Inc. 973,158   88,275
  Xilinx Inc. 1,022,765   85,391
  Skyworks Solutions Inc. 694,904   69,616
  Maxim Integrated Products Inc. 1,104,283   61,420
  Marvell Technology Group Ltd. 2,574,748   54,842
* Qorvo Inc. 473,561   47,631
  Teradyne Inc. 683,393   40,156
  Cypress Semiconductor Corp. 1,508,700   34,836
* ON Semiconductor Corp. 1,667,601   31,117
  Entegris Inc. 548,456   29,244
  Universal Display Corp. 172,858   27,448
  Monolithic Power Systems Inc. 168,058   26,661
* Mellanox Technologies Ltd.   192,321   22,967
  MKS Instruments Inc. 222,731   22,315
* SolarEdge Technologies Inc. 178,372   22,247
* Cree Inc. 438,037   19,593
* Enphase Energy Inc. 349,820   17,131
  Cabot Microelectronics Corp. 118,715   16,535
* Cirrus Logic Inc. 234,866   16,121
* Silicon Laboratories Inc. 174,205   15,449
* First Solar Inc. 319,338   14,616
* Inphi Corp. 168,357   12,570
* Semtech Corp. 268,359   10,598
  Power Integrations Inc. 120,018   10,448
  Brooks Automation Inc. 291,965   10,076
*  Advanced Energy Industries Inc. 154,637   9,197
*  Lattice Semiconductor Corp. 510,546   9,164
* Synaptics Inc. 135,691   8,962
* Diodes Inc. 175,206   7,711
* Ambarella Inc. 117,980   7,014
* FormFactor Inc. 303,594   6,791
* Rambus Inc. 449,733   6,287
* Onto Innovation Inc. 201,212   6,151
  Kulicke & Soffa Industries Inc. 256,369   5,853
*  MACOM Technology Solutions Holdings Inc. 186,185   4,705
* Amkor Technology Inc. 433,237   4,521
* MaxLinear Inc. 273,438   4,227
  Cohu Inc. 166,477   3,408
  Xperi Corp. 197,291   3,391
* Photronics Inc. 269,256   3,352
* Ultra Clean Holdings Inc. 159,096   3,327
* Axcelis Technologies Inc. 131,004   3,143
* SunPower Corp. 364,215   3,121
* Veeco Instruments Inc. 197,388   2,643
* Ichor Holdings Ltd. 91,007   2,632
* CEVA Inc. 87,921   2,498
* Impinj Inc. 66,848   2,056
* PDF Solutions Inc. 110,385   1,616
* SMART Global Holdings Inc.   55,443   1,488
  NVE Corp. 19,368   1,225
* NeoPhotonics Corp. 144,323   954
*  Alpha & Omega Semiconductor Ltd. 77,198   837
        4,862,641
Software (33.1%)      
  Microsoft Corp. 29,468,030   4,774,115
* Adobe Inc. 1,969,505   679,716
* salesforce.com Inc. 3,385,915   576,960
  Oracle Corp. 9,353,128   462,606
  Intuit Inc. 1,058,044   281,281
* ServiceNow Inc. 763,465   248,958
* Autodesk Inc. 890,527   169,984
* Workday Inc. 665,997   115,384
* Splunk Inc. 622,554   91,721
* Synopsys Inc. 612,033   84,418
* ANSYS Inc. 342,945   83,058
* Cadence Design Systems Inc. 1,143,279   75,616
* Palo Alto Networks Inc. 399,350   73,728
* RingCentral Inc. 305,751   72,081
* Fortinet Inc. 591,170   60,335
* Paycom Software Inc. 202,005   57,097
  Citrix Systems Inc. 529,736   54,769
  SS&C Technologies Holdings Inc. 925,722   51,378
* Tyler Technologies Inc. 158,212   49,576
  NortonLifeLock Inc. 2,532,408   48,192
* Fair Isaac Corp. 117,805   44,298
* Trade Desk Inc. 152,173   43,712
* VMware Inc. 334,969   40,370
* Coupa Software Inc. 254,597   38,126
* DocuSign Inc. Class A 428,306   36,967
* Guidewire Software Inc. 336,008   36,830
* Zendesk Inc. 455,434   36,120
* PTC Inc. 447,322   33,795
* HubSpot Inc. 165,209   29,647
* Aspen Technology Inc. 277,156   29,520
* Alteryx Inc. 208,788   29,151
* Ceridian HCM Holding Inc. 358,521   25,358
*  Nuance Communications Inc. 1,154,619   24,963
* Proofpoint Inc. 230,225   24,553
  CDK Global Inc. 493,236   22,699
* RealPage Inc. 329,034   21,091
* Dropbox Inc. Class A 974,998   19,071
* Paylocity Holding Corp. 141,287   18,299
* Anaplan Inc. 403,689   18,142
* Five9 Inc. 248,243   18,129
*  Zoom Video Communications Inc. Class A 172,644   18,128
* Manhattan Associates Inc. 259,853   17,504
* Smartsheet Inc. Class A 368,339   17,054
  LogMeIn Inc. 199,795   17,029
* Nutanix Inc. 691,238   16,479
  j2 Global Inc. 187,563   16,380
* Envestnet Inc. 212,791   16,061
* Verint Systems Inc. 270,892   14,867
  Pegasystems Inc. 162,091   14,669
* Everbridge Inc. 131,781   13,924
^,* Zscaler Inc. 259,261   13,479
  Blackbaud Inc. 197,576   13,396
* Q2 Holdings Inc. 176,077   13,271
* ACI Worldwide Inc. 471,390   13,138
* FireEye Inc. 889,154   11,768
* New Relic Inc. 204,698   11,516
* Qualys Inc. 134,725   10,802
* Varonis Systems Inc. 122,763   9,848
* Box Inc. 582,216   9,752
* Blackline Inc. 155,687   9,741
* Teradata Corp. 461,113   9,195
*  Cornerstone OnDemand Inc. 208,061   8,537
* Elastic NV 111,884   8,264
*  SailPoint Technologies Holding Inc. 324,420   8,214
* Cloudera Inc. 904,058   8,046
* Rapid7 Inc. 172,335   7,979
* Mimecast Ltd. 200,021   7,919
*  Bottomline Technologies DE Inc. 177,459   7,858
* 8x8 Inc. 413,533   7,650
* CommVault Systems Inc. 178,282   7,434
* SPS Commerce Inc. 141,158   7,425
* Appfolio Inc. 59,698   7,341
* Alarm.com Holdings Inc. 147,276   7,106
* PROS Holdings Inc. 151,885   6,955
  Progress Software Corp. 180,840   6,743
* LivePerson Inc. 252,004   6,668
* Instructure Inc. 127,812   6,232
* 2U Inc. 254,659   5,987
* Avaya Holdings Corp. 448,292   5,810
* Workiva Inc. 129,051   5,516
* Pluralsight Inc. Class A 307,671   5,486
* Altair Engineering Inc. 145,189   5,053
*  ForeScout Technologies Inc. 148,341   4,827
^,* Appian Corp. Class A 104,987   4,635
* MicroStrategy Inc. 33,284   4,499
* Zuora Inc. Class A 328,748   4,353
  TiVo Corp. 505,838   3,829
* Yext Inc. 249,215   3,778
* Upland Software Inc. 86,314   3,358
* Tenable Holdings Inc. 118,079   2,895
* Model N Inc. 99,605   2,889
  Ebix Inc. 98,964   2,617
  QAD Inc. 47,219   2,316
* OneSpan Inc. 130,268   2,151
  American Software Inc. 119,415   1,964
* SVMK Inc. 107,587   1,961
* Digital Turbine Inc. 302,329   1,853
* A10 Networks Inc. 216,172   1,450
* Benefitfocus Inc. 105,096   1,312
* PagerDuty Inc. 61,193   1,261
* ShotSpotter Inc. 32,667   1,163
* MobileIron Inc. 262,375   1,063
* Domo Inc. 44,537   939
^,* Intelligent Systems Corp. 21,547   790
        9,193,941
Technology Hardware, Storage & Peripherals (19.4%)    
  Apple Inc. 18,083,576   4,943,326
  HP Inc. 6,014,530   125,042
  Hewlett Packard Enterprise Co. 5,278,198   67,508
  Western Digital Corp. 1,207,548   67,092
  Seagate Technology plc 963,593   46,204
  NetApp Inc. 930,414   43,469

 

87 

 

 

Information Technology Index Fund

 

 

        Market
        Value•
    Shares   ($000)
* Dell Technologies Inc. 663,133   26,830
  Xerox Holdings Corp. 793,161   25,540
* Pure Storage Inc. 941,828   14,372
* NCR Corp. 521,330   13,138
* 3D Systems Corp. 478,693   4,385
* Diebold Nixdorf Inc. 293,894   2,063
        5,378,969
Total Common Stocks (Cost $20,263,470)     27,669,628
Temporary Cash Investments (0.2%)    
Money Market Fund (0.2%)      
1,2 Vanguard Market Liquidity Fund, 1.706% 554,381   55,455

 

    Face   Market
    Amount   Value•
    ($000 ) ($000)

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

3 United States Treasury Bill, 1.546%, 3/26/20 1,000   999
3 United States Treasury Bill, 1.543%, 4/16/20 26   26
        1,025
Total Temporary Cash Investments (Cost $56,459)     56,480
Total Investments (99.8%) (Cost $20,319,929)     27,726,108
Other Assets and Liabilities—Net (0.2%)2,4     65,767
Net Assets (100%)     27,791,875

Cost rounded to $000. 

•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 $15,966,000.

1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2Collateral of $16,424,000 was received for securities on loan, of which $16,349,000 is held in Vanguard Market Liquidity Fund and $75,000 is held in cash.

3Securities with a value of $228,000 have been segregated as initial margin for open futures contracts.

4Cash of $9,440,000 has been segregated as collateral for open over-the-counter swap 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 2020 136 20,067 (168)
E-mini NASDAQ 100 Index   March 2020 29 4,903 (448)
            (616)

             
Over-the-Counter Total Return Swaps            
        Floating      
        Interest Rate Value and   Value and
      Notional Received Unrealized   Unrealized
  Termination   Amount (Paid)1 Appreciation (Depreciation)
Reference Entity Date Counterparty ($000) (%) ($000) ($000)
Visa Inc. 9/2/20 BOANA 99,485 (1.562) — (8,559)

1 Payment received/paid monthly.

BOANA—Bank of America, N.A.

 

88 

 

 

Information Technology Index Fund

 

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts)  Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $20,264,495) 27,670,653
Affiliated Issuers (Cost $55,434) 55,455
Total Investments in Securities 27,726,108
Investment in Vanguard 1,323
Cash Collateral Pledged—Over-the-Counter Swap Contracts 9,440
Receivables for Investment Securities Sold 160,016
Receivables for Accrued Income 36,292
Receivables for Capital Shares Issued 14,794
Variation Margin Receivable—Futures Contracts 41
Total Assets 27,948,014
Liabilities  
Due to Custodian 79
Payables for Investment Securities Purchased 99,740
Collateral for Securities on Loan 16,424
Payables for Capital Shares Redeemed 28,309
Payables to Vanguard 2,860
Variation Margin Payable—Futures Contracts 168
Unrealized Depreciation—Over-the-Counter Swap Contracts 8,559
Total Liabilities 156,139
Net Assets 27,791,875
   
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 19,935,137
Total Distributable Earnings (Loss) 7,856,738
Net Assets 27,791,875
   
ETF Shares—Net Assets  
Applicable to 104,941,384 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 24,716,456
Net Asset Value Per Share—ETF Shares $235.53
   
Admiral Shares—Net Assets  
Applicable to 25,500,591 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 3,075,419
Net Asset Value Per Share—Admiral Shares $120.60

 

 

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

 

89 

 

 

Information Technology Index Fund

 

 

Statement of Operations

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   196,188 
Interest1   1,024 
Securities Lending—Net   253 
Total Income   197,465 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   1,446 
Management and Administrative—ETF Shares   9,742 
Management and Administrative—Admiral Shares   1,171 
Marketing and Distribution—ETF Shares   637 
Marketing and Distribution—Admiral Shares   109 
Custodian Fees   20 
Shareholders’ Reports—ETF Shares   386 
Shareholders’ Reports—Admiral Shares   7 
Trustees’ Fees and Expenses   7 
Total Expenses   13,525 
Expenses Paid Indirectly   (19)
Net Expenses   13,506 
Net Investment Income   183,959 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   481,167 
Futures Contracts   4,070 
Swap Contracts   8,547 
Realized Net Gain (Loss)   493,784 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   1,837,190 
Futures Contracts   (1,139)
Swap Contracts   (8,559)
Change in Unrealized Appreciation (Depreciation)   1,827,492 
Net Increase (Decrease) in Net Assets Resulting from Operations   2,505,235 

1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $ 1,016,000, $12,000, and $10,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $512,266,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   183,959    288,885 
Realized Net Gain (Loss)   493,784    2,703,211 
Change in Unrealized Appreciation (Depreciation)   1,827,492    (1,981,325)
Net Increase (Decrease) in Net Assets Resulting from Operations   2,505,235    1,010,771 
Distributions1          
ETF Shares   (149,698)   (260,834)
Admiral Shares   (17,592)   (26,967)
Total Distributions   (167,290)   (287,801)
Capital Share Transactions          
ETF Shares   1,876,153    (2,459,914)
Admiral Shares   369,020    317,194 
Net Increase (Decrease) from Capital Share Transactions   2,245,173    (2,142,720)
Total Increase (Decrease)   4,583,118    (1,419,750)
Net Assets          
Beginning of Period   23,208,757    24,628,507 
End of Period   27,791,875    23,208,757 

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

90 

 

 

Information Technology Index Fund

 

 

Financial Highlights

 

 ETF Shares

 

  Six Months              
      Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period     2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $213.66 $202.82 $151.19 $117.82 $102.35 $101.41  
Investment Operations                    
Net Investment Income     1.6091 2.5721 1.9211 1.6461 1.566 1.277  
Net Realized and Unrealized Gain (Loss) on Investments     21.747 10.792 51.430 33.329 16.049 .834  
Total from Investment Operations     23.356 13.364 53.351 34.975 17.615 2.111  
Distributions                    
Dividends from Net Investment Income   (1.486) (2.524) (1.721) (1.605) (2.145) (1.171)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions     (1.486) (2.524) (1.721) (1.605) (2.145) (1.171)  
Net Asset Value, End of Period   $235.53 $213.66 $202.82 $151.19 $117.82 $102.35  
                 
Total Return     10.96% 6.70% 35.52% 29.93% 17.48% 2.05%  
                   
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions)     $24,716 $20,738 $22,595 $14,638 $9,429 $7,259  
Ratio of Total Expenses to Average Net Assets     0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets     1.25% 1.32% 1.10% 1.24% 1.50% 1.35%  
Portfolio Turnover Rate2     1% 5% 7% 6% 5% 3%  

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

1Calculated based on average shares outstanding.

2Excludes 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.

 

91 

 

 

Information Technology Index Fund

 

 

Financial Highlights

  

Admiral Shares

 

  Six Months              
      Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period     2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $109.40 $103.86 $77.42 $60.33 $52.41 $51.93  
Investment Operations                    
Net Investment Income     .8301 1.3261 1.0011 .8501 .802 .655  
Net Realized and Unrealized Gain (Loss) on Investments     11.131 5.509 26.324 17.062 8.216 .426  
Total from Investment Operations     11.961 6.835 27.325 17.912 9.018 1.081  
Distributions                    
Dividends from Net Investment Income   (.761) (1.295) (.885) (.822) (1.098) (.601)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions     (.761) (1.295) (.885) (.822) (1.098) (.601)  
Net Asset Value, End of Period     $120.60 $109.40 $103.86 $77.42 $60.33 $52.41  
                   
Total Return2     10.97% 6.70% 35.54% 29.94% 17.49% 2.09%  
                   
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions)     $3,075 $2,470 $2,033 $933 $456 $342  
Ratio of Total Expenses to Average Net Assets     0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets     1.26% 1.32% 1.10% 1.24% 1.50% 1.35%  
Portfolio Turnover Rate3     1% 5% 7% 6% 5% 3%  

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

1Calculated based on average shares outstanding.
2Total 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.
3Excludes 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.

 

92 

 

 

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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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 Schedule of Investments. 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.

 

93 

 

 

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 Schedule of Investments. 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 29, 2020, 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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

94 

 

 

Information Technology Index Fund

 

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $1,323,000, representing less than 0.01% of the fund’s net assets and 0.53% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $19,000 (an annual rate of less than 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.

 

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 Schedule of Investments.

 

95 

 

 

Information Technology Index Fund

 

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   27,669,628    —    —    27,669,628 
Temporary Cash Investments   55,455    1,025    —    56,480 
Total   27,725,083    1,025    —    27,726,108 
Derivative Financial Instruments                    
Assets                    
Futures Contracts1   41    —    —    41 
Liabilities                    
Futures Contracts1   168    —    —    168 
Swap Contracts   —    8,559    —    8,559 
Total   168    8,559    —    8,727 

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

 

E.  As of February 29, 2020, 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   20,319,929 
Gross Unrealized Appreciation   8,182,139 
Gross Unrealized Depreciation   (785,135)
Net Unrealized Appreciation (Depreciation)   7,397,004 

 

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, 2019, the fund had available capital losses totaling $132,283,000 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, 2020; 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 29, 2020, the fund purchased $3,513,108,000 of investment securities and sold $1,244,388,000 of investment securities, other than temporary cash investments. Purchases and sales include $2,629,963,000 and $899,338,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)  (000)  ($000)  (000)
ETF Shares                    
Issued   2,780,914    11,703    2,875,252    14,358 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (904,761)   (3,825)   (5,335,166)   (28,700)
Net Increase (Decrease)—ETF Shares   1,876,153    7,878    (2,459,914)   (14,342)
Admiral Shares                    
Issued   853,506    6,859    952,910    9,462 
Issued in Lieu of Cash Distributions   16,032    139    24,513    243 
Redeemed   (500,518)   (4,079)   (660,229)   (6,699)
Net Increase (Decrease)—Admiral Shares   369,020    2,919    317,194    3,006 

 

96 

 

 

Information Technology Index Fund

 

 

H.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

97 

 

 

Materials Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Aluminum   0.6%
Commodity Chemicals   8.1 
Construction Materials   4.7 
Copper   1.8 
Diversified Chemicals   1.9 
Diversified Metals & Mining   0.3 
Fertilizers & Agricultural Chemicals   6.6 
Forest Products   0.6 
Gold   5.7 
Industrial Gases   19.4 
Metal & Glass Containers   6.2 
Paper Packaging   8.9 
Paper Products   0.7 
Silver   0.2 
Specialty Chemicals   29.4 
Steel   4.9 

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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 

 

 

Materials Index Fund

 

 

Financial Statements (unaudited)

  

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value•
    Shares ($000)
Common Stocks (99.8%)    
Chemicals (65.3%)    
  Linde plc 1,406,272 268,612
  Air Products & Chemicals Inc. 577,074 126,731
  Ecolab Inc. 679,157 122,554
  Sherwin-Williams Co. 217,496 112,391
  DuPont de Nemours Inc. 1,939,488 83,204
  Dow Inc. 1,941,348 78,450
  PPG Industries Inc. 619,108 64,666
  Corteva Inc. 1,959,412 53,296
  LyondellBasell Industries NV 698,390 49,907
  FMC Corp. 339,341 31,593
  Celanese Corp. 316,489 29,668
  International Flavors & Fragrances Inc. 240,487 28,806
  Albemarle Corp. 277,573 22,719
  Eastman Chemical Co. 356,177 21,908
  RPM International Inc. 339,413 21,760
  CF Industries Holdings Inc. 569,133 20,978
  Mosaic Co. 942,247 16,046
* Axalta Coating Systems Ltd. 553,269 13,787
  Scotts Miracle-Gro Co. 109,664 11,623
  Ashland Global Holdings Inc. 157,446 11,264
  Huntsman Corp. 531,062 10,058
  Valvoline Inc. 492,579 9,605
  NewMarket Corp. 23,433 9,106
  WR Grace & Co. 157,402 8,903
  Balchem Corp. 84,286 7,962
  Olin Corp. 418,290 6,772
  Chemours Co. 427,494 6,353
* Element Solutions Inc. 591,928 6,150
  PolyOne Corp. 235,970 5,843
  Westlake Chemical Corp. 100,693 5,626
  Cabot Corp. 149,360 5,583
  Innospec Inc. 64,063 5,544
  Quaker Chemical Corp. 34,800 5,483
  Sensient Technologies Corp. 110,652 5,442
  HB Fuller Co. 133,305 5,230
* Ingevity Corp. 109,339 4,925
  Stepan Co. 53,089 4,663
  Minerals Technologies Inc. 91,267 4,095
* Livent Corp. 381,520 3,407
* GCP Applied Technologies Inc. 171,729 3,344
* Ferro Corp. 203,395 2,363
  Trinseo SA 102,212 2,236
  Tronox Holdings plc Class A 240,555 1,766
  Chase Corp. 19,805 1,758
* OMNOVA Solutions Inc. 118,286 1,196
* Koppers Holdings Inc. 54,668 1,195
  Tredegar Corp. 69,518 1,186
  American Vanguard Corp. 70,995 1,083
* AdvanSix Inc. 73,496 1,068
  Hawkins Inc. 24,847 888
* Kraton Corp. 83,199 842
  FutureFuel Corp. 68,484 696
  Kronos Worldwide Inc. 60,664 606
* Intrepid Potash Inc. 258,179 457
  Rayonier Advanced Materials Inc. 161,761 396
* Venator Materials plc 143,390 383
*,§ A Schulman Inc. CVR 108,962 47
      1,332,223
Construction Materials (4.7%)  
  Vulcan Materials Co. 346,447 41,664
  Martin Marietta Materials Inc. 163,575 37,218
  Eagle Materials Inc. 109,037 8,606
* Summit Materials Inc. 293,613 5,737
* US Concrete Inc. 41,234 1,107
* Forterra Inc. 50,542 684
      95,016
Containers & Packaging (15.0%)  
  Ball Corp. 813,495 57,319
  Amcor plc 4,241,489 39,531
  International Paper Co. 975,406 36,051
  Avery Dennison Corp. 218,602 25,028
* Crown Holdings Inc. 354,664 25,004
  Packaging Corp. of America 247,728 22,449
  Westrock Co. 675,134 22,448
  AptarGroup Inc. 167,314 16,910
* Berry Global Group Inc. 345,970 13,133
  Sonoco Products Co. 262,126 12,637
  Sealed Air Corp. 404,691 12,266
  Graphic Packaging Holding Co. 759,841 10,273
  Silgan Holdings Inc. 203,098 5,815
  O-I Glass Inc. 407,074 4,396
  Greif Inc. Class A 68,871 2,434
  Myers Industries Inc. 83,852 1,138
      306,832
Metals & Mining (13.5%)    
  Newmont Corp. 2,146,311 95,790
  Freeport-McMoRan Inc. 3,797,918 37,827
  Nucor Corp. 793,775 32,823
  Reliance Steel & Aluminum Co. 174,472 17,847
  Royal Gold Inc. 171,709 16,565
  Steel Dynamics Inc. 564,471 15,032
* Alcoa Corp. 485,232 6,730
  Commercial Metals Co. 310,299 5,666
* Allegheny Technologies Inc. 329,629 5,633
  Compass Minerals International Inc. 88,569 4,831
  Carpenter Technology Corp. 124,741 4,584
^ Cleveland-Cliffs Inc. 706,635 4,106
  Kaiser Aluminum Corp. 41,479 3,922
^ United States Steel Corp. 445,981 3,577
  Hecla Mining Co. 1,296,698 3,423
  Worthington Industries Inc. 102,483 3,259
* Coeur Mining Inc. 632,635 2,632
  Materion Corp. 53,495 2,425
  Warrior Met Coal Inc. 121,103 2,146
* AK Steel Holding Corp. 828,629 1,914
  Schnitzer Steel Industries Inc. 69,822 1,151
  SunCoke Energy Inc. 225,937 1,042
  Haynes International Inc. 33,165 839
* Century Aluminum Co. 138,333 802
*,^ McEwen Mining Inc. 838,475 755
* TimkenSteel Corp. 98,976 502
* Ryerson Holding Corp. 45,393 378
      276,201
Paper & Forest Products (1.3%)  
  Louisiana-Pacific Corp. 307,379 8,745
  Domtar Corp. 150,040 4,317
  Boise Cascade Co. 102,308 3,630
  Schweitzer-Mauduit International Inc. 81,045 2,733
  Neenah Inc. 43,993 2,541
  PH Glatfelter Co. 115,501 1,647
* Verso Corp. 91,169 1,487
* Clearwater Paper Corp. 42,879 1,169
  Mercer International Inc. 112,455 996
      27,265
Total Common Stocks (Cost $2,464,152)   2,037,537
Temporary Cash Investment (0.4%)  
1,2

Vanguard Market Liquidity Fund, 1.706%

(Cost $9,171)

 91,700 9,173
Total Investments (100.2%) (Cost $2,473,323)   2,046,710
Other Assets and Liabilities—Net (-0.2%)2   (4,667)
Net Assets (100%)   2,042,043

Cost rounded to $000.

•See Note A in Notes to Financial Statements.
*Non-income-producing security.

§Security value determined using significant unobservable inputs.

^Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $4,317,000.
1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2Collateral of $4,502,000 was received for securities on loan.
 CVR—Contingent Value Rights.

 

99 

 

 

Materials Index Fund

 

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Over-the-Counter Total Return Swaps

 
               Floating         
               Interest Rate   Value and   Value and 
           Notional   Received   Unrealized   Unrealized 
   Termination       Amount   (Paid)1  Appreciation   (Depreciation)
Reference Entity  Date   Counterparty   ($000)  (%)  ($000)  ($000)
International Flavors & Fragrances Inc.   2/2/21    GSI    3,371    (1.647)   —    (378)
1Payment received/paid monthly.

GSI—Goldman Sachs International..

 

 

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

 

100 

 

 

Materials Index Fund

 

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts)  Amount 
Assets    
Investments in Securities, at Value    
Unaffiliated Issuers (Cost $2,464,152)  2,037,537 
Affiliated Issuers (Cost $9,171)  9,173 
Total Investments in Securities  2,046,710 
Investment in Vanguard  106 
Receivables for Investment Securities Sold  4,669 
Receivables for Accrued Income  5,335 
Receivables for Capital Shares Issued  2,163 
Total Assets  2,058,983 
Liabilities    
Payables for Investment Securities Purchased  9,930 
Collateral for Securities on Loan  4,502 
Payables for Capital Shares Redeemed  1,620 
Payables to Vanguard  510 
Unrealized Depreciation—Over-the-Counter Swap Contracts  378 
Total Liabilities  16,940 
Net Assets  2,042,043 
     
     
At February 29, 2020, net assets consisted of:    
     
Paid-in Capital  2,514,898 
Total Distributable Earnings (Loss)  (472,855)
Net Assets  2,042,043 
     
ETF Shares—Net Assets    
Applicable to 13,626,411 outstanding $.001 par value shares of beneficial interest (unlimited authorization)  1,555,649 
Net Asset Value Per Share—ETF Shares  $114.16 
     
Admiral Shares—Net Assets    
Applicable to 8,361,772 outstanding $.001 par value shares of beneficial interest (unlimited authorization)  486,394 
Net Asset Value Per Share—Admiral Shares  $58.17 

 

 

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

101 

 

  

Materials Index Fund

 

 

Statement of Operations

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   24,113 
Interest1   22 
Securities Lending—Net   80 
Total Income   24,215 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   184 
Management and Administrative—ETF Shares   665 
Management and Administrative—Admiral Shares   195 
Marketing and Distribution—ETF Shares   63 
Marketing and Distribution—Admiral Shares   19 
Custodian Fees   10 
Auditing Fees   — 
Shareholders’ Reports—ETF Shares   85 
Shareholders’ Reports—Admiral Shares   2 
Trustees’ Fees and Expenses   1 
Total Expenses   1,224 
Net Investment Income   22,991 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   22,904 
Futures Contracts   — 
Swap Contracts   614 
Realized Net Gain (Loss)   23,518 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   (186,650)
Swap Contracts   (355)
Change in Unrealized Appreciation (Depreciation)   (187,005)
Net Increase (Decrease) in Net Assets Resulting from Operations   (140,496)
1Interest 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. Purchase and sales are for temporary cash investment purposes.
2Includes $33,573,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   22,991    52,576 
Realized Net Gain (Loss)   23,518    118,154 
Change in Unrealized Appreciation (Depreciation)   (187,005)   (439,986)
Net Increase (Decrease) in Net Assets Resulting from Operations   (140,496)   (269,256)
Distributions1          
ETF Shares   (19,951)   (44,813)
Admiral Shares   (5,263)   (9,048)
Total Distributions   (25,214)   (53,861)
Capital Share Transactions          
ETF Shares   (239,096)   (545,088)
Admiral Shares   43,366    70,433 
Net Increase (Decrease) from Capital Share Transactions   (195,730)   (474,655)
Total Increase (Decrease)   (361,440)   (797,772)
Net Assets          
Beginning of Period   2,403,483    3,201,255 
End of Period   2,042,043    2,403,483 

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

102 

 

 

Materials Index Fund

 

 

Financial Highlights

 

ETF Shares

 

 

  Six Months              
    Ended         Year Ended August 31,  
For a Share Outstanding February 29,          
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $122.80   $134.33 $124.29 $108.16 $96.39 $113.50  
Investment Operations                  
Net Investment Income   1.2031   2.5011 2.2851 2.1751 1.980 2.126  
Net Realized and Unrealized Gain (Loss) on Investments   (8.518)   (11.541) 9.961 16.072 12.770 (17.344)  
Total from Investment Operations   (7.315)   (9.040) 12.246 18.247 14.750 (15.218)  
Distributions                  
Dividends from Net Investment Income (1.325)   (2.490) (2.206) (2.117) (2.980) (1.892)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (1.325)   (2.490) (2.206) (2.117) (2.980) (1.892)  
Net Asset Value, End of Period   $114.16   $122.80 $134.33 $124.29 $108.16 $96.39  
                   
Total Return   -6.08%   -6.73% 9.91% 17.06% 15.83% -13.56%  
                   
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $1,556   $1,921 $2,749 $1,913 $1,448 $1,022  
Ratio of Total Expenses to Average Net Assets   0.10%   0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets   1.89%   2.04% 1.71% 1.87% 2.06% 1.86%  
Portfolio Turnover Rate2   1%   4% 5% 5% 6% 4%  

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

1Calculated based on average shares outstanding.
2Excludes 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 

 

 

Materials Index Fund

 

 

Financial Highlights

 

 Admiral Shares

  

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $62.57   $68.45 $63.33 $55.11 $49.12 $57.84  
Investment Operations                  
Net Investment Income   .6191   1.2821 1.1591 1.1041 1.008 1.088  
Net Realized and Unrealized Gain (Loss) on Investments   (4.343)   (5.892) 5.084 8.195 6.505 (8.846)  
Total from Investment Operations   (3.724)   (4.610) 6.243 9.299 7.513 (7.758)  
Distributions                  
Dividends from Net Investment Income (.676)   (1.270) (1.123) (1.079) (1.523) (.962)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (.676)   (1.270) (1.123) (1.079) (1.523) (.962)  
Net Asset Value, End of Period   $58.17   $62.57 $68.45 $63.33 $55.11 $49.12  
                   
Total Return2   -6.07%   -6.74% 9.91% 17.06% 15.80% -13.54%  
                   
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $486   $482 $452 $372 $235 $193  
Ratio of Total Expenses to Average Net Assets   0.10%   0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets   1.88%   2.04% 1.71% 1.87% 2.06% 1.86%  
Portfolio Turnover Rate3   1%   4% 5% 5% 6% 4%  

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

1Calculated based on average shares outstanding.
2Total 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.
3Excludes 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.

 

104 

 

 

Materials Index Fund

 

 

Notes to Financial Statements

  

Vanguard Materials 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. 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 Assets and Liabilities. 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.

 

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 Assets and Liabilities. 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 29, 2020, 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.

 

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

 

105 

 

 

Materials Index Fund

 

 

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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date.

 

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.

  

106 

 

 

Materials Index Fund

 

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 29, 2020, the fund had contributed to Vanguard capital in the amount of $106,000, representing less than 0.01% of the fund’s net assets and 0.04% of Vanguard’s capital received pursuant to the FSA. 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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   2,037,490    —    47    2,037,537 
Temporary Cash Investments   9,173    —    —    9,173 
Total   2,046,663    —    47    2,046,710 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    378    —    378 

 

D.  As of February 29, 2020, 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   2,473,323 
Gross Unrealized Appreciation   167,430 
Gross Unrealized Depreciation   (594,421)
Net Unrealized Appreciation (Depreciation)   (426,991)

 

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, 2019, the fund had available capital losses totaling $75,687,000 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, 2020; 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 29, 2020, the fund purchased $169,841,000 of investment securities and sold $367,284,000 of investment securities, other than temporary cash investments. Purchases and sales include $77,371,000 and $336,006,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

  

107 

 

 

Materials Index Fund

 

 

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

 

   Six Months Ended   Year Ended 
   February 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   97,246    756    662,298    5,428 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (336,342)   (2,775)   (1,207,386)   (10,250)
Net Increase (Decrease)—ETF Shares   (239,096)   (2,019)   (545,088)   (4,822)
Admiral Shares                    
Issued   94,203    1,436    165,502    2,647 
Issued in Lieu of Cash Distributions   4,852    74    8,315    131 
Redeemed   (55,689)   (855)   (103,384)   (1,673)
Net Increase (Decrease)—Admiral Shares   43,366    655    70,433    1,105 

 

G.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

108 

 

 

Utilities Index Fund

 

 

Sector Diversification

As of February 29, 2020

  

Electric Utilities   58.3%
Gas Utilities   4.5 
Independent Power Producers & Energy Traders   3.0 
Multi-Utilities   29.0 
Renewable Electricity   1.0 
Water Utilities   4.2 

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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 fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

  

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Financial Statements (unaudited)

 

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

         Market 
         Value• 
      Shares   ($000)
Common Stocks (99.6%)          
Electric Utilities (58.2%)          
  NextEra Energy Inc.   2,784,678    703,855 
  Duke Energy Corp.   4,173,003    382,664 
  Southern Co.   5,721,795    345,368 
  American Electric Power Co. Inc.   2,812,455    251,040 
  Exelon Corp.   5,535,001    238,614 
  Xcel Energy Inc.   2,987,514    186,182 
  Eversource Energy   1,843,506    159,390 
  Edison International   2,041,861    137,193 
  FirstEnergy Corp.   3,076,522    136,998 
  Entergy Corp.   1,133,718    132,543 
  PPL Corp.   4,116,934    123,549 
  Evergy Inc.   1,296,288    84,712 
  Alliant Energy Corp.   1,298,185    67,661 
  Pinnacle West Capital Corp.   640,055    57,278 
  OGE Energy Corp.   1,139,783    43,426 
  IDACORP Inc.   287,180    27,753 
  Portland General Electric Co.   509,270    27,709 
  Hawaiian Electric Industries Inc.   621,032    26,605 
  PNM Resources Inc.   452,971    21,326 
  ALLETE Inc.   293,806    20,270 
  Avangrid Inc.   351,458    17,464 
  El Paso Electric Co.   231,662    15,723 
  MGE Energy Inc.   197,156    14,065 
  Otter Tail Corp.   204,410    9,936 
  Spark Energy Inc.   66,336    568 
           3,231,892 
Gas Utilities (4.5%)          
  Atmos Energy Corp.   679,851    70,195 
  UGI Corp.   1,190,250    42,896 
  ONE Gas Inc.   300,633    24,694 
  Spire Inc.   290,678    21,815 
  Southwest Gas Holdings Inc.   311,502    20,148 
  New Jersey Resources Corp.   512,820    18,108 
  National Fuel Gas Co.   443,473    16,235 
  South Jersey Industries Inc.   525,424    14,213 
  Northwest Natural Holding Co.   173,094    11,384 
  Chesapeake Utilities Corp.   93,156    7,965 
  Star Group LP   265,884    2,388 
           250,041 

Independent Power and Renewable Electricity Producers (3.9%)          
  AES Corp.   3,780,493    63,248 
  NRG Energy Inc.   1,432,454    47,572 
  Vistra Energy Corp.   2,080,995    40,018 
^ NextEra Energy Partners LP   346,754    19,997 
  Ormat Technologies Inc.   217,511    15,156 
  Pattern Energy Group Inc. Class A   502,771    13,600 
  Clearway Energy Inc.   358,564    7,544 
  TerraForm Power Inc.   388,289    7,296 
  Clearway Energy Inc. Class A   256,984    5,214 
           219,645 
Multi-Utilities (28.9%)          
  Dominion Energy Inc.   4,686,672    366,404 
  Sempra Energy   1,606,387    224,541 
  WEC Energy Group Inc.   1,796,065    165,831 
  Consolidated Edison Inc.   1,892,907    149,199 
  Public Service Enterprise Group Inc.   2,879,549    147,750 
  DTE Energy Co.   1,095,477    122,332 
  Ameren Corp.   1,400,925    110,673 
  CMS Energy Corp.   1,616,348    97,660 
  CenterPoint Energy Inc.   2,859,662    65,829 
  NiSource Inc.   2,126,982    57,471 
  MDU Resources Group Inc.   1,142,170    31,672 
  Black Hills Corp.   350,257    25,288 
  NorthWestern Corp.   286,899    20,180 
  Avista Corp.   379,505    17,894 
  Unitil Corp.   84,696    4,772 
           1,607,496 
Water Utilities (4.1%)          
  American Water Works Co. Inc.   1,029,524    127,311 
  Essential Utilities Inc.   1,229,146    52,866 
  American States Water Co.   209,536    16,048 
  California Water Service Group   273,823    13,132 
  SJW Group   137,575    8,417 
  Middlesex Water Co.   99,312    5,906 
  York Water Co.   73,817    3,122 
* AquaVenture Holdings Ltd.   107,666    2,911 
           229,713 
Total Common Stocks (Cost $5,002,872)        5,538,787 

Temporary Cash Investment (0.1%)          
1,2 Vanguard Market Liquidity Fund, 1.706%          
  (Cost $3,009)   30,081    3,009 
Total Investments (99.7%) (Cost $5,005,881)        5,541,796 
Other Assets and Liabilities—Net (0.3%)2,3        15,676 
Net Assets (100%)        5,557,472 

Cost rounded to $000.

•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 $2,872,000.

*Non-income-producing security.

1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2Collateral of $2,988,000 was received for securities on loan.

3Cash of $2,260,000 has been segregated as collateral for open over-the-counter swap contracts.

  

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Derivative Financial Instruments Outstanding as of Period End
                         
Over-the-Counter Total Return Swaps
                   Floating           
                   Interest Rate    Value and    Value and 
              Notional    Received    Unrealized    Unrealized 
    Termination         Amount    (Paid)1   Appreciation    (Depreciation)
Reference Entity   Date    Counterparty   ($000)   (%)  ($000)  ($000)
Southern Co.   9/2/20    BOANA    17,600    (1.662%)   —    (2,375)
Alliant Energy Corp.   2/2/21    GSI    5,776    (1.647%)   —    (774)
                        —    (3,149)
1Payment received/paid monthly.

BOANA—Bank of America, N.A.

GSI—Goldman Sachs International.

 

 

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

  

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Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $5,002,872) 5,538,787
Affiliated Issuers (Cost $3,009) 3,009
Total Investments in Securities 5,541,796
Cash Collateral Pledged—Over-the-Counter Swap Contracts 2,260
Investment in Vanguard 274
Receivables for Investment Securities Sold 25,780
Receivables for Accrued Income 29,482
Receivables for Capital Shares Issued 10,698
Total Assets 5,610,290
Liabilities  
Due to Custodian 1,668
Payables for Investment Securities Purchased 32,824
Collateral for Securities on Loan 2,988
Payables for Capital Shares Redeemed 11,295
Payables to Vanguard 894
Unrealized Depreciation—Over-the-Counter Swap Contracts 3,149
Total Liabilities 52,818
Net Assets 5,557,472
   
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 4,994,672
Total Distributable Earnings (Loss) 562,800
Net Assets 5,557,472
   
ETF Shares—Net Assets  
Applicable to 30,614,744 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 4,174,380
Net Asset Value Per Share—ETF Shares $136.35
   
Admiral Shares—Net Assets  
Applicable to 20,218,028 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 1,383,092
Net Asset Value Per Share—Admiral Shares $68.41

 

 

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

  

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Statement of Operations

 

   Six Months Ended 
   February 29, 2020 
   ($000)
Investment Income     
Income     
Dividends   92,251 
Interest1   151 
Securities Lending—Net   2 
Total Income   92,404 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   436 
Management and Administrative—ETF Shares   1,623 
Management and Administrative—Admiral Shares   525 
Marketing and Distribution—ETF Shares   147 
Marketing and Distribution—Admiral Shares   53 
Custodian Fees   28 
Shareholders’ Reports—ETF Shares   78 
Shareholders’ Reports—Admiral Shares   6 
Trustees’ Fees and Expenses   2 
Total Expenses   2,898 
Net Investment Income   89,506 
Realized Net Gain (Loss)     
Investment Securities Sold1,2   133,806 
Futures Contracts   50 
Swap Contracts   3,453 
Realized Net Gain (Loss)   137,309 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1   (273,635)
Swap Contracts   (3,230)
Change in Unrealized Appreciation (Depreciation)   (276,865)
Net Increase (Decrease) in Net Assets Resulting from Operations   (50,050)

1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $ 151,000, $4,000, and $1,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $140,297,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets

 

   Six Months Ended   Year Ended 
   February 29,   August 31, 
   2020   2019 
   ($000)  ($000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   89,506    142,287 
Realized Net Gain (Loss)   137,309    122,862 
Change in Unrealized Appreciation (Depreciation)   (276,865)   585,241 
Net Increase (Decrease) in Net Assets Resulting from Operations   (50,050)   850,390 
Distributions1          
ETF Shares   (65,116)   (103,410)
Admiral Shares   (20,123)   (31,297)
Total Distributions   (85,239)   (134,707)
Capital Share Transactions          
ETF Shares   169,000    749,411 
Admiral Shares   150,403    230,614 
Net Increase (Decrease) from Capital Share Transactions   319,403    980,025 
Total Increase (Decrease)   184,114    1,695,708 
Net Assets          
Beginning of Period   5,373,358    3,677,650 
End of Period   5,557,472    5,373,358 
1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

  

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Financial Highlights

  

ETF Shares

 

  Six Months              
  Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period 2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $139.09 $119.32 $120.75 $107.35 $91.41 $94.61  
Investment Operations                
Net Investment Income 2.2071 4.0871 3.7571 3.6971 3.355 3.337  
Net Realized and Unrealized Gain (Loss) on Investments (2.836) 19.562  (1.434) 13.374 15.889 (3.261)  
Total from Investment Operations (.629) 23.649  2.323 17.071 19.244 .076  
Distributions                
Dividends from Net Investment Income (2.111) (3.879) (3.753) (3.671) (3.304) (3.276)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions (2.111) (3.879) (3.753) (3.671) (3.304) (3.276)  
Net Asset Value, End of Period $136.35 $139.09 $119.32 $120.75 $107.35 $91.41  
               
Total Return -0.51% 20.17% 2.05% 16.27% 21.40% -0.02%  
               
Ratios/Supplemental Data                
Net Assets, End of Period (Millions) $4,174 $4,107 $2,809 $2,689 $2,249 $1,581  
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets 3.09% 3.22% 3.25% 3.33% 3.38% 3.39%  
Portfolio Turnover Rate2 1% 4% 4% 4% 3% 7%  

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

1Calculated based on average shares outstanding.
2Excludes 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.

  

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Financial Highlights

  

Admiral Shares

 

  Six Months              
  Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period 2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $69.78 $59.86 $60.58 $53.86 $45.86 $47.47  
Investment Operations                
Net Investment Income 1.1091 2.0381 1.8831 1.8631 1.683 1.676  
Net Realized and Unrealized Gain (Loss) on Investments (1.420) 9.828 (.719) 6.698 7.974 (1.641)  
Total from Investment Operations (.311) 11.866 1.164 8.561 9.657 .035  
Distributions                
Dividends from Net Investment Income (1.059) (1.946) (1.884) (1.841) (1.657) (1.645)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions (1.059) (1.946) (1.884) (1.841) (1.657) (1.645)  
Net Asset Value, End of Period $68.41 $69.78 $59.86 $60.58 $53.86 $45.86  
               
Total Return2 -0.49% 20.19% 2.04% 16.24% 21.42% -0.01%  
               
Ratios/Supplemental Data                
Net Assets, End of Period (Millions) $1,383 $1,266 $868 $845 $704 $447  
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%  
Ratio of Net Investment Income to Average Net Assets 3.10% 3.22% 3.25% 3.33% 3.38% 3.39%  
Portfolio Turnover Rate3 1% 4% 4% 4% 3% 7%  

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

1Calculated based on average shares outstanding.
2Total 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.
3Excludes 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.

 

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Notes to Financial Statements

  

Vanguard Utilities 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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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 29, 2020.

 

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 Schedule of Investments. 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.

 

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

 

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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 Schedule of Investments. 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 29, 2020, 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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

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For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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. 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $274,000, representing less than 0.01% of the fund’s net assets and 0.11% of Vanguard’s capital received pursuant to the FSA. 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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($000)  ($000)  ($000)  ($000)
Investments                    
Assets                    
Common Stocks   5,538,787    —    —    5,538,787 
Temporary Cash Investments   3,009    —    —    3,009 
Total   5,541,796    —    —    5,541,796 
Derivative Financial Instruments                    
Liabilities                    
Swap Contracts   —    3,149    —    3,149 

 

118 

 

 

Utilities Index Fund

 

 

D.  As of February 29, 2020, 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   5,005,881 
Gross Unrealized Appreciation   722,159 
Gross Unrealized Depreciation   (189,393)
Net Unrealized Appreciation (Depreciation)   532,766 

 

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, 2019, the fund had available capital losses totaling $140,707,000 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, 2020; 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 29, 2020, the fund purchased $887,623,000 of investment securities and sold $576,315,000 of investment securities, other than temporary cash investments. Purchases and sales include $595,703,000 and $502,883,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   672,471    4,687    1,761,117    13,983 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (503,471)   (3,600)   (1,011,706)   (8,000)
Net Increase (Decrease)—ETF Shares   169,000    1,087    749,411    5,983 
Admiral Shares                    
Issued   307,162    4,248    452,254    7,138 
Issued in Lieu of Cash Distributions   16,337    230    25,301    397 
Redeemed   (173,096)   (2,407)   (246,941)   (3,895)
Net Increase (Decrease)—Admiral Shares   150,403    2,071    230,614    3,640 

 

G.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

 

119 

 

 

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 (GRAPHIC)

 

 

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.

 

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, www.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 www.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.

 

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.

  

 

 

 

 

 

  © 2020 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 042020

 

 

 

 

 

 

(GRAPHIC) 

 

 
 
Semiannual Report | February 29, 2020
 
 
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 29, 2020

 

  Beginning Ending Expenses
  Account Value Account Value Paid During
Extended Duration Treasury Index Fund 8/31/2019 2/29/2020 Period
Based on Actual Fund Return      
ETF Shares $1,000.00 $1,083.58 $0.36
Institutional Shares 1,000.00 1,083.76 0.31
Institutional Plus Shares 1,000.00 1,083.80 0.21
Based on Hypothetical 5% Yearly Return      
ETF Shares $1,000.00 $1,024.52 $0.35
Institutional Shares 1,000.00 1,024.56 0.30
Institutional Plus Shares 1,000.00 1,024.66 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 (182/366).

 

2 

 

 

Extended Duration Treasury Index Fund

 

 

Fund Allocation 

As of February 29, 2020

 

Treasury/Agency 100.0%

The table reflects the fund’s investments, except for short-term investments. The agency and mortgage backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith of the U.S. government.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

3 

 

 

Extended Duration Treasury Index Fund

 

 

Financial Statements (unaudited)

 

  

Schedule of Investments 

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.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% 2/15/40 30,987 22,245
United States Treasury Strip Coupon 0.000% 5/15/40 72,410 51,677
United States Treasury Strip Coupon 0.000% 8/15/40 78,860 55,916
United States Treasury Strip Coupon 0.000% 11/15/40 75,228 53,036
United States Treasury Strip Coupon 0.000% 2/15/41 72,357 50,678
United States Treasury Strip Coupon 0.000% 5/15/41 75,950 52,916
United States Treasury Strip Coupon 0.000% 8/15/41 80,475 55,635
United States Treasury Strip Coupon 0.000% 11/15/41 65,802 45,295
United States Treasury Strip Coupon 0.000% 2/15/42 67,582 46,257
United States Treasury Strip Coupon 0.000% 5/15/42 64,669 43,980
United States Treasury Strip Coupon 0.000% 8/15/42 66,051 44,559
United States Treasury Strip Coupon 0.000% 11/15/42 64,225 43,046
United States Treasury Strip Coupon 0.000% 2/15/43 68,742 45,810
United States Treasury Strip Coupon 0.000% 5/15/43 73,361 48,630
United States Treasury Strip Coupon 0.000% 8/15/43 59,897 39,467
United States Treasury Strip Coupon 0.000% 11/15/43 58,110 38,080
United States Treasury Strip Coupon 0.000% 2/15/44 59,588 38,783
United States Treasury Strip Coupon 0.000% 5/15/44 67,801 43,811
United States Treasury Strip Coupon 0.000% 8/15/44 59,154 37,988
United States Treasury Strip Coupon 0.000% 11/15/44 48,122 30,719
United States Treasury Strip Coupon 0.000% 2/15/45 63,977 40,645
United States Treasury Strip Coupon 0.000% 5/15/45 68,248 43,119
United States Treasury Strip Coupon 0.000% 8/15/45 66,185 41,624
United States Treasury Strip Coupon 0.000% 11/15/45 67,024 41,979
United States Treasury Strip Coupon 0.000% 2/15/46 71,736 44,729
United States Treasury Strip Coupon 0.000% 5/15/46 74,102 46,053
United States Treasury Strip Coupon 0.000% 8/15/46 51,367 31,808
United States Treasury Strip Coupon 0.000% 11/15/46 65,128 40,150
United States Treasury Strip Coupon 0.000% 2/15/47 73,438 45,089
United States Treasury Strip Coupon 0.000% 5/15/47 82,633 50,542
United States Treasury Strip Coupon 0.000% 8/15/47 75,818 46,226
United States Treasury Strip Coupon 0.000% 11/15/47 68,588 41,651
United States Treasury Strip Coupon 0.000% 2/15/48 80,385 48,689
United States Treasury Strip Coupon 0.000% 5/15/48 70,253 42,431
United States Treasury Strip Coupon 0.000% 8/15/48 58,483 35,200
United States Treasury Strip Coupon 0.000% 11/15/48 36,422 21,876

 

4 

 

 

Extended Duration Treasury Index Fund        
         
         
      Face Market
    Maturity Amount Value·
  Coupon Date ($000) ($000)
United States Treasury Strip Coupon 0.000% 2/15/49 31,427 18,778
United States Treasury Strip Coupon 0.000% 5/15/49 41,815 24,923
United States Treasury Strip Coupon 0.000% 8/15/49 27,090 16,108
United States Treasury Strip Coupon 0.000% 11/15/49 1,451 860
United States Treasury Strip Coupon 0.000% 2/15/50 50 30
United States Treasury Strip Principal 0.000% 5/15/40 72,452 53,241
United States Treasury Strip Principal 0.000% 8/15/40 67,917 49,457
United States Treasury Strip Principal 0.000% 11/15/40 57,880 41,886
United States Treasury Strip Principal 0.000% 2/15/41 58,816 42,370
United States Treasury Strip Principal 0.000% 5/15/41 57,837 41,304
United States Treasury Strip Principal 0.000% 8/15/41 31,956 22,624
United States Treasury Strip Principal 0.000% 11/15/41 26,994 18,989
United States Treasury Strip Principal 0.000% 2/15/42 43,219 30,243
United States Treasury Strip Principal 0.000% 5/15/42 44,550 30,920
United States Treasury Strip Principal 0.000% 8/15/42 59,069 40,665
United States Treasury Strip Principal 0.000% 11/15/42 58,552 40,048
United States Treasury Strip Principal 0.000% 2/15/43 72,672 49,354
United States Treasury Strip Principal 0.000% 5/15/43 48,352 32,653
United States Treasury Strip Principal 0.000% 8/15/43 68,282 45,888
United States Treasury Strip Principal 0.000% 11/15/43 62,228 41,586
United States Treasury Strip Principal 0.000% 2/15/44 51,422 34,123
United States Treasury Strip Principal 0.000% 5/15/44 65,287 43,054
United States Treasury Strip Principal 0.000% 8/15/44 63,315 41,471
United States Treasury Strip Principal 0.000% 11/15/44 54,268 35,363
United States Treasury Strip Principal 0.000% 2/15/45 55,173 35,785
United States Treasury Strip Principal 0.000% 5/15/45 59,147 38,178
United States Treasury Strip Principal 0.000% 8/15/45 59,970 38,526
United States Treasury Strip Principal 0.000% 11/15/45 60,963 39,016
United States Treasury Strip Principal 0.000% 2/15/46 57,228 36,451
United States Treasury Strip Principal 0.000% 5/15/46 67,762 43,018
United States Treasury Strip Principal 0.000% 8/15/46 73,987 46,855
United States Treasury Strip Principal 0.000% 11/15/46 81,146 51,205
United States Treasury Strip Principal 0.000% 2/15/47 102,655 64,601
United States Treasury Strip Principal 0.000% 5/15/47 78,162 48,851
United States Treasury Strip Principal 0.000% 8/15/47 94,340 58,705
United States Treasury Strip Principal 0.000% 11/15/47 73,994 45,853
United States Treasury Strip Principal 0.000% 2/15/48 102,580 63,335
United States Treasury Strip Principal 0.000% 5/15/48 93,553 57,593
United States Treasury Strip Principal 0.000% 8/15/48 19,847 12,178
United States Treasury Strip Principal 0.000% 11/15/48 41,706 25,538
United States Treasury Strip Principal 0.000% 2/15/49 77,003 46,966
United States Treasury Strip Principal 0.000% 5/15/49 86,835 52,766
United States Treasury Strip Principal 0.000% 8/15/49 111,815 67,735
United States Treasury Strip Principal 0.000% 11/15/49 115,983 70,006
United States Treasury Strip Principal 0.000% 2/15/50 100,050 60,085
Total U.S. Government and Agency Obligations (Cost $2,617,021)     3,349,523

 

5 

 

 

Extended Duration Treasury Index Fund        
         
         
      Market  
      Value·  
  Coupon Shares ($000)  
Temporary Cash Investment (0.0%)        
Money Market Fund (0.0%)        
1    Vanguard Market Liquidity Fund (Cost $322) 1.706% 3,220 322  
Total Investments (100.0%) (Cost $2,617,343)     3,349,845  
Other Assets and Liabilities—Net (0.0%)     (282 )
Net Assets (100%)     3,349,563  

Cost rounded to $000. 

·See Note A in Notes to Financial Statements.
1Affiliated 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 Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $2,617,021) 3,349,523
Affiliated Issuers (Cost $322) 322
Total Investments in Securities 3,349,845
Investment in Vanguard 127
Receivables for Investment Securities Sold 86,393
Receivables for Accrued Income 1
Receivables for Capital Shares Issued 35,233
Total Assets 3,471,599
Liabilities  
Payables for Investment Securities Purchased 119,223
Payables for Capital Shares Redeemed 2,490
Payables to Vanguard 323
Total Liabilities 122,036
Net Assets 3,349,563
   
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 2,525,913
Total Distributable Earnings (Loss) 823,650
Net Assets 3,349,563
   
ETF Shares—Net Assets  
Applicable to 10,000,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 1,552,155
Net Asset Value Per Share—ETF Shares $155.22
   
Institutional Shares—Net Assets  
Applicable to 20,860,095 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 978,245
Net Asset Value Per Share—Institutional Shares $46.90
   
Institutional Plus Shares—Net Assets  
Applicable to 6,958,185 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 819,163
Net Asset Value Per Share—Institutional Plus Shares $117.73

  

 

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

 

7 

 

 

Extended Duration Treasury Index Fund

 

 

Statement of Operations

 

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Interest1 33,588
Total Income 33,588
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 45
Management and Administrative—ETF Shares 338
Management and Administrative—Institutional Shares 219
Management and Administrative—Institutional Plus Shares 128
Marketing and Distribution—ETF Shares 39
Marketing and Distribution—Institutional Shares 13
Marketing and Distribution—Institutional Plus Shares 6
Custodian Fees 4
Shareholders’ Reports—ETF Shares 25
Shareholders’ Reports—Institutional Shares —
Shareholders’ Reports—Institutional Plus Shares —
Trustees’ Fees and Expenses 1
Total Expenses 818
Expenses Paid Indirectly (3)
Net Expenses 815
Net Investment Income 32,773
Realized Net Gain (Loss)  
Investment Securities Sold1,2 86,744
Futures —
Realized Net Gain (Loss) 86,744
Change in Unrealized Appreciation (Depreciation) of Investment Securities1 123,380
Net Increase (Decrease) in Net Assets Resulting from Operations 242,897

1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from affiliated companies of the fund were $10,000, $1,000, and $1,000, respectively.
2Includes $50,610,000 of net gain (loss) resulting from in-kind redemptions.

 

 

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

 

8 

 

Extended Duration Treasury Index Fund

 

 

Statement of Changes in Net Assets

 

  Six Months Ended   Year Ended
  February 29,   August 31,
  2020   2019
  ($000)   ($000)
Increase (Decrease) in Net Assets      
Operations      
Net Investment Income 32,773   63,738
Realized Net Gain (Loss) 86,744   44,663
Change in Unrealized Appreciation (Depreciation) 123,380   616,956
Net Increase (Decrease) in Net Assets Resulting from Operations 242,897   725,357
Distributions1      
ETF Shares (25,015)   (23,240)
Institutional Shares (17,395)   (22,154)
Institutional Plus Shares (15,724)   (16,154)
Total Distributions (58,134)   (61,548)
Capital Share Transactions      
ETF Shares 138,816   389,756
Institutional Shares 58,991   (129,112)
Institutional Plus Shares (7,774)   72,452
Net Increase (Decrease) from Capital Share Transactions 190,033   333,096
Total Increase (Decrease) 374,796   996,905
Net Assets      
Beginning of Period 2,974,767   1,977,862
End of Period 3,349,563   2,974,767
1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

  

9 

 

 

Extended Duration Treasury Index Fund

 

 

Financial Highlights

 

ETF Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $146.43 $113.39 $120.92 $139.77 $116.00 $113.24  
Investment Operations                  
Net Investment Income   1.6221 3.3471 3.3531 3.3831 3.420 3.524  
Net Realized and Unrealized Gain (Loss) on Investments2   10.111 32.972 (7.272) (16.377) 25.019 3.113  
Total from Investment Operations   11.733 36.319 (3.919) (12.994) 28.439 6.637  
Distributions                  
Dividends from Net Investment Income (1.693) (3.279) (3.314) (3.402) (3.414) (3.506)  
Distributions from Realized Capital Gains (1.250)   — (.297) (2.454) (1.255) (.371)  
Total Distributions   (2.943) (3.279) (3.611) (5.856) (4.669) (3.877)  
Net Asset Value, End of Period   $155.22 $146.43 $113.39 $120.92 $139.77 $116.00  
Total Return   8.36% 32.92% -3.24% -8.86% 25.30% 5.90%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $1,552 $1,333 $658 $623 $615 $365  
Ratio of Total Expenses to Average Net Assets   0.07% 0.07% 0.07% 0.07% 0.07% 0.10%  
Ratio of Net Investment Income to Average Net Assets   2.37% 2.87% 2.93% 2.90% 2.77% 2.93%  
Portfolio Turnover Rate3   9% 20% 18% 18% 20% 16%  

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

1Calculated based on average shares outstanding.

2Includes increases from purchase and redemption fees of $0.03, $0.04, $0.07, $0.16, $0.06, and $0.05.

3Excludes 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 Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $44.24 $34.25 $36.52 $42.20 $35.02 $34.18  
Investment Operations                  
Net Investment Income   .4921 1.0151 1.0161 1.0241 1.036 1.069  
Net Realized and Unrealized Gain (Loss) on Investments2   3.060 9.967 (2.191) (4.934) 7.558 .947  
Total from Investment Operations   3.552 10.982 (1.175) (3.910) 8.594 2.016  
Distributions                  
Dividends from Net Investment Income (.514) (.992) (1.005) (1.030) (1.035) (1.064)  
Distributions from Realized Capital Gains (.378)   — (.090) (.740) (.379) (.112)  
Total Distributions   (.892) (.992) (1.095) (1.770) (1.414) (1.176)  
Net Asset Value, End of Period   $46.90 $44.24 $34.25 $36.52 $42.20 $35.02  
Total Return3   8.38% 32.94% -3.23% -8.86% 25.33% 5.89%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $978 $862 $787 $682 $660 $484  
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   2.38% 2.88% 2.94% 2.91% 2.78% 2.95%  
Portfolio Turnover Rate4   9% 20% 18% 18% 20% 16%  

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

1Calculated based on average shares outstanding.

2Includes increases from purchase and redemption fees of $0.01, $0.01, $0.02, $0.05, $0.02, and $0.01.

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

4Excludes 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

 

 

Financial Highlights

 

Institutional Plus Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $111.06 $85.99 $91.68 $105.93 $87.92 $85.80  
Investment Operations                  
Net Investment Income   1.2451 2.5641 2.5681 2.5881 2.620 2.701  
Net Realized and Unrealized Gain (Loss) on Investments2   7.673 25.015 (5.492) (12.375) 18.958 2.389  
Total from Investment Operations   8.918 27.579 (2.924) (9.787) 21.578 5.090  
Distributions                  
Dividends from Net Investment Income (1.300) (2.509) (2.541) (2.603) (2.616) (2.688)  
Distributions from Realized Capital Gains (.948)   — (.225) (1.860) (.952) (.282)  
Total Distributions   (2.248) (2.509) (2.766) (4.463) (3.568) (2.970)  
Net Asset Value, End of Period   $117.73 $111.06 $85.99 $91.68 $105.93 $87.92  
Total Return3   8.38% 32.95% -3.20% -8.84% 25.34% 5.93%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $819 $780 $533 $367 $258 $250  
Ratio of Total Expenses to Average Net Assets   0.04% 0.04% 0.04% 0.04% 0.04% 0.06%  
Ratio of Net Investment Income to Average Net Assets   2.40% 2.90% 2.96% 2.93% 2.80% 2.97%  
Portfolio Turnover Rate4   9% 20% 18% 18% 20% 16%  

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

1Calculated based on average shares outstanding.

2Includes increases from purchase and redemption fees of $0.03, $0.03, $0.06, $0.12, $0.05, and $0.04.

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

4Excludes 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 

 

 

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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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 29, 2020.

 

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, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

13 

 

 

Extended Duration Treasury Index Fund

 

 

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

 

5. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

6. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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

 

14 

 

 

Extended Duration Treasury Index Fund

 

 

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 29, 2020, the fund had contributed to Vanguard capital in the amount of $127,000, representing less than 0.01% of the fund’s net assets and 0.05% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $3,000 (an annual rate of less than 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.

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments as of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
U.S. Government and Agency Obligations — 3,349,523 — 3,349,523
Temporary Cash Investments 322 — — 322
Total 322 3,349,523 — 3,349,845

 

E.  As of February 29, 2020, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

 

  Amount
  ($000)
Tax Cost 2,617,343
Gross Unrealized Appreciation 733,203
Gross Unrealized Depreciation (701)
Net Unrealized Appreciation (Depreciation) 732,502

 

15 

 

 

Extended Duration Treasury Index Fund

 

 

F.   During the six months ended February 29, 2020, the fund purchased $661,398,000 of investment securities and sold $529,769,000 of investment securities, other than temporary cash investments. Purchases and sales include $394,931,000 and $256,583,000, 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 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued1   396,419    2,800    607,253    5,250 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (257,603)   (1,900)   (217,497)   (1,950)
Net Increase (Decrease)—ETF Shares   138,816    900    389,756    3,300 
Institutional Shares                    
Issued1   100,099    2,324    63,167    1,842 
Issued in Lieu of Cash Distributions   17,233    429    22,033    644 
Redeemed   (58,341)   (1,383)   (214,312)   (5,975)
Net Increase (Decrease)—Institutional Shares   58,991    1,370    (129,112)   (3,489)
Institutional Plus Shares                    
Issued1   181    —    64,883    720 
Issued in Lieu of Cash Distributions   15,724    156    16,154    187 
Redeemed   (23,679)   (221)   (8,585)   (83)
Net Increase (Decrease)—Institutional Plus Shares   (7,774)   (65)   72,452    824 

1 Includes purchase fees for fiscal 2020 and 2019 of $686,000 and $716,000, respectively (fund totals).

 

H.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

16 

 

 

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(GRAPHIC) 

 

 

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.

 

 

 

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, www.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 www.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.

 

 

 

 

 

 

 

  © 2020 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 042020

 

 

 

 

 

 
 
 
Semiannual Report | February 29, 2020
 
 
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 29, 2020

 

  Beginning Ending Expenses
  Account Value Account Value Paid During
  8/31/2019 2/29/2020 Period
Based on Actual Fund Return      
Mega Cap Index Fund      
ETF Shares $1,000.00 $1,028.06 $0.35
Institutional Shares 1,000.00 1,028.11 0.30
Mega Cap Growth Index Fund      
ETF Shares $1,000.00 $1,072.63 $0.36
Institutional Shares 1,000.00 1,072.65 0.31
Mega Cap Value Index Fund      
ETF Shares $1,000.00 $985.23 $0.35
Institutional Shares 1,000.00 985.18 0.30
Based on Hypothetical 5% Yearly Return      
Mega Cap Index Fund      
ETF Shares $1,000.00 $1,024.52 $0.35
Institutional Shares 1,000.00 1,024.57 0.30
Mega Cap Growth Index Fund      
ETF Shares $1,000.00 $1,024.52 $0.35
Institutional Shares 1,000.00 1,024.57 0.30
Mega Cap Value Index Fund      
ETF Shares $1,000.00 $1,024.52 $0.35
Institutional Shares 1,000.00 1,024.57 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 (182/366).

  

2

 

 

Mega Cap Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Basic Materials   1.4%
Consumer Goods   7.9 
Consumer Services   14.3 
Financials   17.2 
Health Care   13.4 
Industrials   11.1 
Oil & Gas   3.4 
Technology   26.2 
Telecommunications   2.4 
Utilities   2.7 

 

The table reflects the fund’s investments, except for short -term investments and derivatives. 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.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

 

 

 

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.

  

3

 

 

Mega Cap Index Fund

 

 

Financial Statements (unaudited)

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

         Market 
         Value· 
      Shares   ($000)
Common Stocks (99.4%)          
Basic Materials (1.4%)          
  Linde plc   58,727    11,217 
  Air Products & Chemicals Inc.   24,156    5,305 
  Ecolab Inc.   28,245    5,097 
  DuPont de Nemours Inc.   80,856    3,469 
  Dow Inc.   81,135    3,279 
  PPG Industries Inc.   25,619    2,676 
  LyondellBasell Industries NV   27,843    1,989 
           33,032 
Consumer Goods (7.9%)          
  Procter & Gamble Co.   272,370    30,840 
  Coca-Cola Co.   421,195    22,530 
  PepsiCo Inc.   152,544    20,140 
  Philip Morris International Inc.   169,962    13,915 
  NIKE Inc.   136,149    12,169 
* Tesla Inc.   15,781    10,542 
  Mondelez International Inc.   157,718    8,328 
  Altria Group Inc.   203,722    8,224 
  Colgate-Palmolive Co.   93,159    6,295 
  Kimberly-Clark Corp.   37,647    4,939 
  Activision Blizzard Inc.   83,937    4,879 
  Estee Lauder Cos. Inc. Class A   24,329    4,467 
  General Motors Co.   139,898    4,267 
  General Mills Inc.   66,425    3,255 
* Electronic Arts Inc.   31,856    3,229 
  Ford Motor Co.   425,887    2,964 
  Constellation Brands Inc. Class A   16,430    2,832 
  VF Corp.   37,033    2,666 
* Monster Beverage Corp.   41,064    2,563 
  Hershey Co.   16,397    2,361 
  Archer-Daniels-Midland Co.   61,293    2,308 
  Brown-Forman Corp.   32,340    1,986 
  Kraft Heinz Co.   72,991    1,808 
  Kellogg Co.   28,069    1,697 

  Aptiv plc   14,220    1,111 
  Corteva Inc.   40,790    1,109 
  Tyson Foods Inc.   16,298    1,105 
* Keurig Dr Pepper Inc.   30,231    843 
           183,372 
Consumer Services (14.2%)          
* Amazon.com Inc.   46,076    86,796 
  Home Depot Inc.   119,209    25,968 
  Walt Disney Co.   196,924    23,168 
  Comcast Corp.   495,925    20,050 
* Netflix Inc.   47,869    17,665 
  Walmart Inc.   155,475    16,742 
  McDonald’s Corp.   82,293    15,979 
  Costco Wholesale Corp.   48,002    13,495 
  Starbucks Corp.   122,539    9,611 
  Lowe’s Cos. Inc.   84,271    8,981 
  CVS Health Corp.   142,128    8,411 
* Charter Communications Inc.   16,395    8,085 
* Booking Holdings Inc.   4,541    7,700 
  TJX Cos. Inc.   119,294    7,134 
  Target Corp.   55,394    5,706 
  Ross Stores Inc.   39,389    4,285 
  Dollar General Corp.   28,275    4,250 
  Walgreens Boots Alliance Inc.   82,809    3,789 
* Uber Technologies Inc.   111,849    3,788 
  Marriott International Inc.   28,557    3,541 
  Sysco Corp.   52,698    3,512 
* O’Reilly Automotive Inc.   8,214    3,029 
  Hilton Worldwide Holdings Inc.   30,784    2,992 
  Yum! Brands Inc.   33,079    2,952 
  Delta Air Lines Inc.   63,363    2,923 
  eBay Inc.   84,286    2,920 
  McKesson Corp.   19,682    2,753 
  Las Vegas Sands Corp.   42,305    2,467 
  Kroger Co.   87,529    2,462 
  Southwest Airlines Co.   51,888    2,397 
  Carnival Corp.   43,529    1,456 
* AutoZone Inc.   1,296    1,338 

 

4

 

 

Mega Cap Index Fund

 

 

           Market 
           Value· 
      Shares   ($000)
  Fox Corp. Class A   39,639    1,218 
^ Sirius XM Holdings Inc.   123,983    786 
* United Airlines Holdings Inc.   11,537    711 
  ViacomCBS Inc. Class B   28,758    708 
  Fox Corp. Class B   16,977    517 
  ViacomCBS Inc. Class A   900    27 
           330,312 
Financials (17.1%)          
* Berkshire Hathaway Inc. Class B   205,685    42,441 
  JPMorgan Chase & Co.   325,603    37,806 
  Visa Inc.   187,207    34,027 
  Mastercard Inc.   98,127    28,481 
  Bank of America Corp.   884,685    25,214 
  Wells Fargo & Co.   415,916    16,990 
  Citigroup Inc.   238,474    15,134 
  American Tower Corp.   48,323    10,960 
  CME Group Inc.   39,201    7,794 
  Goldman Sachs Group Inc.   36,741    7,377 
  American Express Co.   67,067    7,373 
  S&P Global Inc.   26,898    7,152 
  US Bancorp   153,575    7,132 
  Prologis Inc.   80,621    6,795 
  Truist Financial Corp.   146,532    6,761 
  Crown Castle International Corp.   45,598    6,534 
  Chubb Ltd.   42,392    6,148 
  Morgan Stanley   132,398    5,962 
  Marsh & McLennan Cos. Inc.   55,351    5,788 
  BlackRock Inc.   11,834    5,479 
  PNC Financial Services Group Inc.   43,048    5,441 
  Intercontinental Exchange Inc.   60,962    5,439 
  Aon plc   25,486    5,301 
  Equinix Inc.   9,224    5,284 
  Charles Schwab Corp.   126,017    5,135 
  Progressive Corp.   63,633    4,655 
  Capital One Financial Corp.   50,797    4,483 
  Moody’s Corp.   17,599    4,224 
  American International Group Inc.   95,131    4,011 
  Simon Property Group Inc.   32,114    3,953 
  Blackstone Group LP   72,199    3,887 
  Allstate Corp.   35,216    3,706 
  Bank of New York Mellon Corp.   90,557    3,613 
  Public Storage   16,212    3,390 
  Prudential Financial Inc.   44,239    3,338 
  Welltower Inc.   44,446    3,325 
  Aflac Inc.   75,955    3,255 
  MetLife Inc.   75,080    3,207 

  Travelers Cos. Inc.   26,724    3,202 
  Equity Residential   40,550    3,045 
  T. Rowe Price Group Inc.   24,082    2,842 
  State Street Corp.   37,683    2,567 
  Discover Financial Services   34,173    2,241 
  Boston Properties Inc.   17,037    2,197 
  Ventas Inc.   40,823    2,195 
  Northern Trust Corp.   22,324    1,959 
  Synchrony Financial   66,948    1,948 
  Fifth Third Bancorp   77,179    1,883 
  AvalonBay Communities Inc.   7,727    1,550 
* Berkshire Hathaway Inc. Class A   5    1,545 
  TD Ameritrade Holding Corp.   29,735    1,256 
  Weyerhaeuser Co.   41,520    1,079 
  Ameriprise Financial Inc.   6,887    973 
  Interactive Brokers Group Inc.   3,921    200 
           397,677 
Health Care (13.3%)          
  Johnson & Johnson   287,517    38,665 
  UnitedHealth Group Inc.   103,535    26,397 
  Merck & Co. Inc.   278,137    21,294 
  Pfizer Inc.   604,589    20,205 
  Bristol-Myers Squibb Co.   255,716    15,103 
  Abbott Laboratories   193,097    14,874 
  Medtronic plc   146,463    14,744 
  AbbVie Inc.   161,451    13,838 
  Amgen Inc.   64,868    12,956 
  Thermo Fisher Scientific Inc.   43,810    12,740 
  Eli Lilly & Co.   94,487    11,918 
  Gilead Sciences Inc.   138,426    9,601 
  Cigna Corp.   40,794    7,463 
  Anthem Inc.   27,765    7,138 
  Becton Dickinson and Co.   29,527    7,022 
  Zoetis Inc.   52,211    6,956 
* Intuitive Surgical Inc.   12,609    6,733 
  Stryker Corp.   34,704    6,614 
  Allergan plc   34,022    6,487 
* Vertex Pharmaceuticals Inc.   28,087    6,292 
* Biogen Inc.   19,693    6,073 
* Boston Scientific Corp.   152,175    5,690 
  Baxter International Inc.   55,967    4,672 
* Edwards Lifesciences Corp.   22,755    4,661 
  Humana Inc.   14,442    4,617 
* Illumina Inc.   16,083    4,273 
* Regeneron Pharmaceuticals Inc.   8,941    3,975 
  HCA Healthcare Inc.   29,507    3,748 

 

5

 

 

Mega Cap Index Fund

 

 

         Market 
         Value· 
      Shares   ($000)
  Zimmer Biomet Holdings Inc.   22,642    3,083 
* Alexion Pharmaceuticals Inc.   23,391    2,200 
           310,032 
Industrials (11.0%)          
  Boeing Co.   58,473    16,087 
* PayPal Holdings Inc.   128,326    13,858 
  Honeywell International Inc.   78,072    12,661 
  Accenture plc Class A   69,434    12,539 
  United Technologies Corp.   94,283    12,312 
  Union Pacific Corp.   75,843    12,121 
  General Electric Co.   954,234    10,382 
  Danaher Corp.   68,358    9,883 
  Lockheed Martin Corp.   26,225    9,700 
  Fidelity National Information Services Inc.   67,178    9,386 
  3M Co.   62,733    9,362 
  Caterpillar Inc.   60,297    7,491 
  United Parcel Service Inc.   76,574    6,929 
* Fiserv Inc.   63,008    6,891 
  Automatic Data Processing Inc.   42,499    6,576 
  Global Payments Inc.   32,855    6,044 
  Raytheon Co.   30,426    5,737 
  CSX Corp.   81,195    5,720 
  Northrop Grumman Corp.   16,595    5,457 
  Deere & Co.   34,380    5,380 
  Illinois Tool Works Inc.   31,831    5,341 
  Norfolk Southern Corp.   28,499    5,197 
  Waste Management Inc.   46,445    5,147 
  Sherwin-Williams Co.   9,057    4,680 
  General Dynamics Corp.   26,902    4,296 
  Emerson Electric Co.   66,360    4,254 
  Eaton Corp. plc   45,001    4,083 
  Roper Technologies Inc.   11,291    3,971 
  FedEx Corp.   25,568    3,610 
  Ingersoll-Rand plc   26,026    3,358 
  Johnson Controls International plc   84,161    3,078 
  TE Connectivity Ltd.   36,820    3,051 
  Paychex Inc.   34,938    2,707 
  Agilent Technologies Inc.   33,935    2,615 
  Parker-Hannifin Corp.   14,050    2,596 
  PACCAR Inc.   38,045    2,545 
  Cummins Inc.   16,737    2,532 
  Stanley Black & Decker Inc.   16,640    2,391 
  Fortive Corp.   30,948    2,140 
  Republic Services Inc.   22,851    2,063 
* Square Inc.   18,750    1,563 
  Rockwell Automation Inc.   6,496    1,192 
           256,926 

Oil & Gas (3.4%)          
  Exxon Mobil Corp.   462,148    23,773 
  Chevron Corp.   206,551    19,279 
  ConocoPhillips   119,775    5,800 
  Schlumberger Ltd.   151,304    4,099 
  Kinder Morgan Inc.   211,109    4,047 
  EOG Resources Inc.   63,629    4,025 
  Phillips 66   48,481    3,629 
  Marathon Petroleum Corp.   70,872    3,361 
  Occidental Petroleum Corp.   98,146    3,213 
  Valero Energy Corp.   44,846    2,971 
  Williams Cos. Inc.   132,637    2,527 
  Pioneer Natural Resources Co.   18,074    2,219 
  Baker Hughes Co.   35,235    567 
           79,510 
Technology (26.0%)          
  Microsoft Corp.   833,694    135,067 
  Apple Inc.   437,001    119,459 
* Facebook Inc.   262,970    50,614 
* Alphabet Inc. Class A   32,619    43,685 
* Alphabet Inc. Class C   32,042    42,915 
  Intel Corp.   475,201    26,383 
  Cisco Systems Inc.   463,466    18,506 
* Adobe Inc.   53,014    18,296 
  NVIDIA Corp.   63,559    17,165 
* salesforce.com Inc.   90,990    15,505 
  International Business Machines Corp.   96,776    12,595 
  Texas Instruments Inc.   101,979    11,640 
  Oracle Corp.   233,155    11,532 
  Broadcom Inc.   41,355    11,274 
  QUALCOMM Inc.   124,745    9,768 
  Intuit Inc.   27,043    7,189 
* ServiceNow Inc.   20,600    6,717 
* Micron Technology Inc.   120,902    6,355 
  Applied Materials Inc.   100,906    5,865 
  L3Harris Technologies Inc.   24,134    4,772 
  Lam Research Corp.   15,877    4,659 
* Autodesk Inc.   23,923    4,566 
  Analog Devices Inc.   40,382    4,404 
  Cognizant Technology Solutions Corp.   59,814    3,644 
  HP Inc.   161,946    3,367 
* Workday Inc.   17,910    3,103 
* Advanced Micro Devices Inc.   60,823    2,766 
  Corning Inc.   83,675    1,997 
* VMware Inc.   8,299    1,000 
* Dell Technologies Inc.   22,721    919 
  Hewlett Packard Enterprise Co.   69,611    890 
           606,617 

 

6

 

 

Mega Cap Index Fund

 

 

         Market 
         Value· 
      Shares   ($000)
Telecommunications (2.4%)          
  AT&T Inc.   797,983    28,105 
  Verizon Communications Inc.   451,593    24,458 
* T-Mobile US Inc.   32,826    2,960 
* Sprint Corp.   72,141    663 
           56,186 
Utilities (2.7%)          
  NextEra Energy Inc.   53,297    13,471 
  Duke Energy Corp.   79,714    7,310 
  Dominion Energy Inc.   89,790    7,020 
  Southern Co.   114,202    6,893 
  American Electric Power Co. Inc.   54,238    4,841 
  Exelon Corp.   105,915    4,566 
  Sempra Energy   30,145    4,214 
  Xcel Energy Inc.   57,824    3,604 
  Consolidated Edison Inc.   36,562    2,882 
  Public Service Enterprise Group Inc.   55,298    2,837 
  Edison International   39,160    2,631 
  PPL Corp.   78,817    2,365 
           62,634 
Total Common Stocks (Cost $1,622,922)        2,316,298 

 

Temporary Cash Investments (0.4%)             
Money Market Fund (0.4%)             
1,2 Vanguard Market Liquidity Fund, 1.706%   86,951     8,698  
               
      Face         
      Amount         
     ($000)        
              
U.S. Government and Agency Obligations (0.0%)             
3 United States Treasury Bill, 1.527%, 4/30/20   50     50  
3 United States Treasury Bill, 1.551%, 5/14/20   600     598  
            648  
                
Total Temporary Cash Investments (Cost $9,344)         9,346  
Total Investments (99.8%) (Cost $1,632,266)         2,325,644  
Other Assets and Liabilities—Net (0.2%)2         4,119  
Net Assets (100%)         2,329,763  

Cost rounded to $000.

·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 $380,000.

1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2Collateral of $420,000 was received for securities on loan.

3Securities with a value of $601,000 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 2020 89 13,132 (1,243)

 

 

 

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

 

7

 

 

Mega Cap Index Fund

 

 

Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $1,623,570) 2,316,946
Affiliated Issuers (Cost $8,696) 8,698
Total Investments in Securities 2,325,644
Investment in Vanguard 109
Cash 2
Receivables for Accrued Income 4,793
Total Assets 2,330,548
Liabilities  
Payables for Investment Securities Purchased 13
Collateral for Securities on Loan 420
Payables to Vanguard 326
Variation Margin Payable—Futures Contracts 26
Total Liabilities 785
Net Assets 2,329,763
   
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 1,635,348
Total Distributable Earnings (Loss) 694,415
Net Assets 2,329,763
   
ETF Shares–Net Assets  
Applicable to 21,100,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 2,177,731
Net Asset Value Per Share–ETF Shares $103.21
   
Institutional Shares–Net Assets  
Applicable to 747,096 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 152,032
Net Asset Value Per Share–Institutional Shares $203.50

 

 

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

  

8

 

 

Mega Cap Index Fund

 

 

Statement of Operations

 

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Dividends 22,459
Interest1 87
Securities Lending—Net 13
Total Income 22,559
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 176
Management and Administrative—ETF Shares 506
Management and Administrative—Institutional Shares 33
Marketing and Distribution—ETF Shares 55
Marketing and Distribution—Institutional Shares 3
Custodian Fees 10
Shareholders’ Reports—ETF Shares 31
Shareholders’ Reports—Institutional Shares —
Trustees’ Fees and Expenses 1
Total Expenses 815
Expenses Paid Indirectly (6)
Net Expenses 809
Net Investment Income 21,750
Realized Net Gain (Loss)  
Investment Securities Sold1,2 11,854
Futures Contracts 1,215
Realized Net Gain (Loss) 13,069
Change in Unrealized Appreciation (Depreciation)  
Investment Securities1 13,917
Futures Contracts (1,250)
Change in Unrealized Appreciation (Depreciation) 12,667
Net Increase (Decrease) in Net Assets Resulting from Operations 47,486
1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $81,000, $1,000, and $2,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $10,555,000 of net gain (loss) resulting from in-kind redemptions.

 

 

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 29, August 31,
  2020 2019
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 21,750 37,926
Realized Net Gain (Loss) 13,069 17,415
Change in Unrealized Appreciation (Depreciation) 12,667 21,521
Net Increase (Decrease) in Net Assets Resulting from Operations 47,486 76,862
Distributions1    
ETF Shares (20,359) (34,093)
Institutional Shares (1,503) (2,519)
Total Distributions (21,862) (36,612)
Capital Share Transactions    
ETF Shares 211,420 364,632
Institutional Shares (679) 25,154
Net Increase (Decrease) from Capital Share Transactions 210,741 389,786
Total Increase (Decrease) 236,365 430,036
Net Assets    
Beginning of Period 2,093,398 1,663,362
End of Period 2,329,763 2,093,398

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

 

10

 

Mega Cap Index Fund

 

 

Financial Highlights

 

ETF Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $101.36 $100.26 $85.02 $74.19 $67.35 $68.69  
Investment Operations                  
Net Investment Income   1.0101 2.0451 1.7901 1.6761 1.582 1.399  
Net Realized and Unrealized Gain (Loss) on Investments   1.861 1.052 15.214 10.788 6.793 (1.377)  
Total from Investment Operations   2.871 3.097 17.004 12.464 8.375 .022  
Distributions                  
Dividends from Net Investment Income (1.021) (1.997) (1.764) (1.634) (1.535) (1.362)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (1.021) (1.997) (1.764) (1.634) (1.535) (1.362)  
Net Asset Value, End of Period   $103.21 $101.36 $100.26 $85.02 $74.19 $67.35  
Total Return   2.81% 3.26% 20.25% 17.01% 12.61% -0.05%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $2,178 $1,944 $1,542 $1,233 $1,057 $970  
Ratio of Total Expenses to Average Net Assets   0.07% 0.07% 0.07% 0.07% 0.07% 0.09%  
Ratio of Net Investment Income to Average Net Assets   1.86% 2.10% 1.93% 2.12% 2.23% 2.02%  
Portfolio Turnover Rate2   2% 4% 4% 6% 7% 8%  

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

1Calculated based on average shares outstanding.

2Excludes 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

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $199.84 $197.68 $167.62 $146.25 $132.77 $135.41  
Investment Operations                  
Net Investment Income   1.9981 4.0531 3.5131 3.3621 3.117 2.798  
Net Realized and Unrealized Gain (Loss) on Investments   3.685 2.062 30.038 21.220 13.419 (2.717)  
Total from Investment Operations   5.683 6.115 33.551 24.582 16.536 .081  
Distributions                  
Dividends from Net Investment Income (2.023) (3.955) (3.491) (3.212) (3.056) (2.721)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (2.023) (3.955) (3.491) (3.212) (3.056) (2.721)  
Net Asset Value, End of Period   $203.50 $199.84 $197.68 $167.62 $146.25 $132.77  
Total Return   2.81% 3.25% 20.26% 17.02% 12.63% -0.01%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $152 $150 $122 $132 $133 $298  
Ratio of Total Expenses to Average Net Assets   0.06% 0.06% 0.06% 0.06% 0.06% 0.06%  
Ratio of Net Investment Income to Average Net Assets   1.87% 2.11% 1.94% 2.13% 2.24% 2.05%  
Portfolio Turnover Rate2   2% 4% 4% 6% 7% 8%  

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

1Calculated based on average shares outstanding.

2Excludes 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 clearing-house 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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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.

 

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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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and

 

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borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $109,000, representing less than 0.01% of the fund’s net assets and 0.04% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $6,000 (an annual rate of less than 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.

 

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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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
Common Stocks 2,316,298 — — 2,316,298
Temporary Cash Investments 8,698 648 — 9,346
Total 2,324,996 648 — 2,325,644
Derivative Financial Instruments        
Liabilities        
Futures Contracts1 26 — — 26
1Represents variation margin on the last day of the reporting period.

 

E.  As of February 29, 2020, 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 1,632,266
Gross Unrealized Appreciation 790,496
Gross Unrealized Depreciation (98,361)
Net Unrealized Appreciation (Depreciation) 692,135

 

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, 2019, the fund had available capital losses totaling $18,267,000 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, 2020; 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 29, 2020, the fund purchased $260,285,000 of investment securities and sold $53,816,000 of investment securities, other than temporary cash investments. Purchases and sales include $213,399,000 and $17,581,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

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Mega Cap Index 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 29, 2020, such purchases and sales were $15,748,000 and $11,721,000, respectively; these amounts are included in the purchases and sales of investment securities noted above.

 

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

 

  Six Months Ended     Year Ended
  February 29, 2020   August 31, 2019
  Amount Shares   Amount   Shares  
  ($000) (000)   ($000)   (000)  
ETF Shares          
Issued 229,354 2,100   389,257   4,050  
Issued in Lieu of Cash Distributions — —   —   —  
Redeemed (17,934) (175 ) (24,625 ) (250 )
Net Increase (Decrease)—ETF Shares 211,420 1,925   364,632   3,800  
Institutional Shares          
Issued 11,234 53   38,620   203  
Issued in Lieu of Cash Distributions 664 3   753   4  
Redeemed (12,577) (59 ) (14,219 ) (73 )
Net Increase (Decrease)—Institutional Shares (679) (3 ) 25,154   134  

 

H.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

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Mega Cap Growth Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Basic Materials 1.4%
Consumer Goods 4.2
Consumer Services 20.8
Financials 12.1
Health Care 6.4
Industrials 11.0
Oil & Gas 0.6
Technology 43.2
Telecommunications 0.3

 

The table reflects the fund’s investments, except for short -term investments and derivatives. 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.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

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Mega Cap Growth Index Fund

 

 

Financial Statements (unaudited)

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value·
    Shares ($000)
Common Stocks (99.8%)    
Basic Materials (1.4%)    
  Linde plc 256,969 49,084
  Ecolab Inc. 124,058 22,386
      71,470
Consumer Goods (4.2%)    
  NIKE Inc. 595,997 53,270
* Tesla Inc. 69,012 46,099
  Colgate-Palmolive Co. 409,927 27,699
  Activision Blizzard Inc. 367,541 21,365
  Estee Lauder Cos. Inc. Class A 106,440 19,542
* Electronic Arts Inc. 139,714 14,163
* Monster Beverage Corp. 179,970 11,232
  Hershey Co. 71,066 10,233
  Brown-Forman Corp. 140,179 8,608
  Constellation Brands Inc. Class A 36,169 6,235
* Keurig Dr Pepper Inc. 134,308 3,745
      222,191
Consumer Services (20.7%)    
* Amazon.com Inc. 201,566 379,700
  Home Depot Inc. 521,765 113,661
  Comcast Corp. 2,171,348 87,788
* Netflix Inc. 209,570 77,338
  McDonald’s Corp. 360,142 69,929
  Costco Wholesale Corp. 210,349 59,137
  Starbucks Corp. 536,683 42,092
  Lowe’s Cos. Inc. 369,117 39,337
* Charter Communications Inc. 71,909 35,463
* Booking Holdings Inc. 20,001 33,915
  TJX Cos. Inc. 520,260 31,111
  Ross Stores Inc. 172,925 18,811
  Dollar General Corp. 122,875 18,468
* Uber Technologies Inc. 489,410 16,576
  Marriott International Inc. 125,013 15,502
* O’Reilly Automotive Inc. 36,147 13,328
  Hilton Worldwide Holdings Inc. 134,899 13,112
  Yum! Brands Inc. 144,523 12,899
* AutoZone Inc. 5,747 5,934
  Sirius XM Holdings Inc. 531,166 3,368
      1,087,469
Financials (12.1%)    
  Visa Inc. 819,199 148,898
  Mastercard Inc. 429,404 124,634
  American Tower Corp. 211,904 48,060
  S&P Global Inc. 116,862 31,075
  Prologis Inc. 352,735 29,728
  Crown Castle International Corp. 198,794 28,485
  Marsh & McLennan Cos. Inc. 241,276 25,228
  Intercontinental Exchange Inc. 266,410 23,769
  Equinix Inc. 40,808 23,375
  Aon plc 111,974 23,291
  Charles Schwab Corp. 552,064 22,497
  Moody’s Corp. 76,787 18,431
  Simon Property Group Inc. 139,477 17,167
  Blackstone Group LP 315,441 16,983
  Public Storage 70,997 14,847
  T. Rowe Price Group Inc. 106,072 12,518
  Boston Properties Inc. 73,994 9,541
  Welltower Inc. 97,212 7,273
  AvalonBay Communities Inc. 33,251 6,670
  TD Ameritrade Holding Corp. 64,963 2,743
  Interactive Brokers Group Inc. 17,458 892
      636,105
Health Care (6.4%)    
  Thermo Fisher Scientific Inc. 191,798 55,775
  Bristol-Myers Squibb Co. 559,888 33,067
  Becton Dickinson and Co. 129,345 30,761
  Zoetis Inc. 227,790 30,348
* Intuitive Surgical Inc. 55,240 29,496
  Stryker Corp. 152,171 29,002
* Vertex Pharmaceuticals Inc. 123,033 27,563

 

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Mega Cap Growth Index Fund

 

 

      Market
      Value·
    Shares ($000)
* Boston Scientific Corp. 666,769 24,931
* Edwards Lifesciences Corp. 99,801 20,443
* Illumina Inc. 70,357 18,692
* Regeneron Pharmaceuticals Inc. 38,770 17,236
  Baxter International Inc. 122,110 10,193
* Alexion Pharmaceuticals Inc. 100,462 9,446
      336,953
Industrials (11.0%)    
  Boeing Co. 255,768 70,364
* PayPal Holdings Inc. 561,645 60,652
  Accenture plc Class A 303,737 54,852
  Union Pacific Corp. 331,994 53,056
  Lockheed Martin Corp. 114,653 42,407
  Fidelity National Information Services Inc. 293,953 41,071
  United Parcel Service Inc. 335,204 30,333
* Fiserv Inc. 276,444 30,232
  Automatic Data Processing Inc. 186,231 28,817
  Global Payments Inc. 143,771 26,449
  Illinois Tool Works Inc. 138,208 23,188
  Danaher Corp. 149,760 21,652
  Sherwin-Williams Co. 39,798 20,566
  Roper Technologies Inc. 49,793 17,512
  Raytheon Co. 66,560 12,551
  Paychex Inc. 154,235 11,950
  Agilent Technologies Inc. 147,770 11,389
  Fortive Corp. 136,760 9,458
* Square Inc. 83,003 6,917
  Rockwell Automation Inc. 27,640 5,072
      578,488
Oil & Gas (0.6%)    
  EOG Resources Inc. 278,081 17,591
  Pioneer Natural Resources Co. 79,130 9,716
  Baker Hughes Co. 155,287 2,498
      29,805
Technology (43.1%)    
  Microsoft Corp. 3,649,132 591,196
  Apple Inc. 1,912,816 522,887
* Facebook Inc. 1,151,123 221,557
* Alphabet Inc. Class A 143,136 191,695
* Alphabet Inc. Class C 139,886 187,354
* Adobe Inc. 231,592 79,927
  NVIDIA Corp. 278,102 75,107
* salesforce.com Inc. 398,487 67,902
  Texas Instruments Inc. 447,106 51,033
  Broadcom Inc. 180,231 49,135
  Intuit Inc. 118,338 31,460
* ServiceNow Inc. 90,192 29,411
* Micron Technology Inc. 529,592 27,835
  Applied Materials Inc. 441,788 25,677
  L3Harris Technologies Inc. 105,774 20,915
  Lam Research Corp. 69,462 20,382
* Autodesk Inc. 105,058 20,053
  Analog Devices Inc. 176,208 19,215
* Workday Inc. 78,435 13,589
* Advanced Micro Devices Inc. 266,281 12,110
* VMware Inc. 36,814 4,437
      2,262,877
Telecommunications (0.3%)    
* T-Mobile US Inc. 143,347 12,924
Total Common Stocks (Cost $3,647,453)   5,238,282
Temporary Cash Investments (0.1%)  
Money Market Fund (0.1%)    
1 Vanguard Market Liquidity Fund , 1.706% 73,633 7,365
       
    Face  
    Amount  
    ($000)  
U.S. Government and Agency Obligations (0.0%)
2 United States Treasury Bill, 1.543%, 4/16/20 475 474
Total Temporary Cash Investments (Cost $7,838)   7,839
Total Investments (99.9%) (Cost $3,655,291)   5,246,121
Other Assets and Liabilities—Net (0.1%)2   5,061
Net Assets (100%)   5,251,182

Cost rounded to $000.

·See Note A in Notes to Financial Statements.

*Non-income-producing security.

1Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2Securities with a value of $474,000 and cash of $68,000 have been segregated as initial margin for open futures contracts.

 

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Mega Cap Growth 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 2020 42 7,101 (385)
E-mini S&P 500 Index March 2020 33 4,869 (478)
        (863)

 

 

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

 

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Mega Cap Growth Index Fund

 

 

Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $3,647,927) 5,238,756
Affiliated Issuers (Cost $7,364) 7,365
Total Investments in Securities 5,246,121
Investment in Vanguard 244
Cash Collateral Pledged—Futures Contracts 68
Receivables for Accrued Income 5,302
Variation Margin Receivable—Futures Contracts 60
Total Assets 5,251,795
Liabilities  
Payables for Investment Securities Purchased 10
Payables for Capital Shares Redeemed 25
Payables to Vanguard 568
Variation Margin Payable—Futures Contracts 10
Total Liabilities 613
Net Assets 5,251,182
   
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 3,642,943
Total Distributable Earnings (Loss) 1,608,239
Net Assets 5,251,182
   
ETF Shares—Net Assets  
Applicable to 36,914,005 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 5,207,549
Net Asset Value Per Share—ETF Shares $141.07
   
Institutional Shares—Net Assets  
Applicable to 155,716 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 43,633
Net Asset Value Per Share—Institutional Shares $280.21

 

 

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

 

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Mega Cap Growth Index Fund

 

 

Statement of Operations

 

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Dividends 26,351
Interest1 101
Securities Lending—Net 48
Total Income 26,500
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 378
Management and Administrative—ETF Shares 1,140
Management and Administrative—Institutional Shares 9
Marketing and Distribution—ETF Shares 121
Marketing and Distribution—Institutional Shares 1
Custodian Fees 9
Shareholders’ Reports—ETF Shares 99
Shareholders’ Reports—Institutional Shares —
Trustees’ Fees and Expenses 1
Total Expenses 1,758
Net Investment Income 24,742
Realized Net Gain (Loss)  
Investment Securities Sold1,2 154,929
Futures Contracts 1,625
Realized Net Gain (Loss) 156,554
Change in Unrealized Appreciation (Depreciation)  
Investment Securities1 120,840
Futures Contracts (846)
Change in Unrealized Appreciation (Depreciation) 119,994
Net Increase (Decrease) in Net Assets Resulting from Operations 301,290
1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $100,000, $1,000, and $1,000, respectively. Purchases and sales are for temporary cash investment purposes.
2Includes $178,023,000 of net gain (loss) resulting from in-kind redemptions.

 

 

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

 

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Mega Cap Growth Index Fund

 

 

Statement of Changes in Net Assets

 

  Six Months Ended Year Ended
  February 29, August 31,
 

2020

 2019
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 24,742 53,105
Realized Net Gain (Loss) 156,554 150,409
Change in Unrealized Appreciation (Depreciation) 119,994 (20,819)
Net Increase (Decrease) in Net Assets Resulting from Operations 301,290 182,695
Distributions1    
ETF Shares (25,323) (33,904)
Institutional Shares (239) (331)
Total Distributions (25,562) (34,235)
Capital Share Transactions    
ETF Shares 546,447 89,447
Institutional Shares (2,596) (1,367)
Net Increase (Decrease) from Capital Share Transactions 543,851 88,080
Total Increase (Decrease) 819,579 236,540
Net Assets    
Beginning of Period 4,431,603 4,195,063
End of Period 5,251,182 4,431,603
1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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

  

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Mega Cap Growth Index Fund

 

 

Financial Highlights

 

ETF Shares

 

  Six Months            
    Ended     Year Ended August 31,  
For a Share Outstanding February 29,      
Throughout Each Period   2020 2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $132.22 $127.79 $104.09 $87.15 $80.22 $79.16  
Investment Operations                
Net Investment Income   .7001 1.5881 1.4851 1.3511 1.269 1.148  
Net Realized and Unrealized Gain (Loss) on Investments   8.883 3.860 23.677 16.920 6.897 1.013  
Total from Investment Operations   9.583 5.448 25.162 18.271 8.166 2.161  
Distributions                
Dividends from Net Investment Income (.733) (1.018) (1.462) (1.331) (1.236) (1.101)  
Distributions from Realized Capital Gains — — — — — —  
Total Distributions   (.733) (1.018) (1.462) (1.331) (1.236) (1.101)  
Net Asset Value, End of Period   $141.07 $132.22 $127.79 $104.09 $87.15 $80.22  
Total Return   7.26% 4.32% 24.38% 21.17% 10.28% 2.70%  
Ratios/Supplemental Data                
Net Assets, End of Period (Millions)   $5,208 $4,388 $4,152 $3,135 $2,247 $1,928  
Ratio of Total Expenses to Average Net Assets   0.07% 0.07% 0.07% 0.07% 0.07% 0.09%  
Ratio of Net Investment Income to Average Net Assets   0.99% 1.30% 1.29% 1.43% 1.55% 1.43%  
Portfolio Turnover Rate2   4% 14% 9% 8% 12% 9%  

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

1Calculated based on average shares outstanding.
2Excludes 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.

 

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Mega Cap Growth Index Fund

 

 

Financial Highlights

 

Institutional Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $262.63 $253.80 $206.74 $173.07 $159.31 $157.21  
Investment Operations                  
Net Investment Income   1.3901 3.1841 2.9631 2.6991 2.528 2.293  
Net Realized and Unrealized Gain (Loss) on Investments   17.658 7.684 47.023 33.622 13.693 2.011  
Total from Investment Operations   19.048 10.868 49.986 36.321 16.221 4.304  
Distributions                  
Dividends from Net Investment Income (1.468) (2.038) (2.926) (2.651) (2.461) (2.204)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (1.468) (2.038) (2.926) (2.651) (2.461) (2.204)  
Net Asset Value, End of Period   $280.21 $262.63 $253.80 $206.74 $173.07 $159.31  
Total Return   7.26% 4.34% 24.39% 21.20% 10.28% 2.71%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $44 $43 $43 $35 $30 $35  
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   1.00% 1.31% 1.30% 1.44% 1.56% 1.44%  
Portfolio Turnover Rate2   4% 14% 9% 8% 12% 9%  

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

1Calculated based on average shares outstanding.
2Excludes 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.

  

26 

 

 

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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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.

 

27 

 

 

Mega Cap Growth 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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans

 

28 

 

 

Mega Cap Growth Index Fund

 

 

may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $244,000, representing less than 0.01% of the fund’s net assets and 0.10% of Vanguard’s capital received pursuant to the FSA. 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 Schedule of Investments.

 

29 

 

Mega Cap Growth Index Fund

 

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
Common Stocks 5,238,282 — — 5,238,282
Temporary Cash Investments 7,365 474 — 7,839
Total 5,245,647 474 — 5,246,121
Derivative Financial Instruments        
Assets        
Futures Contracts1 60 — — 60
Liabilities        
Futures Contracts1 10 — — 10
1Represents variation margin on the last day of the reporting period.

 

D.  As of February 29, 2020, 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 3,655,291
Gross Unrealized Appreciation 1,683,294
Gross Unrealized Depreciation (93,327)
Net Unrealized Appreciation (Depreciation) 1,589,967

 

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, 2019, the fund had available capital losses totaling $146,929,000 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, 2020; 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 29, 2020, the fund purchased $1,081,959,000 of investment securities and sold $540,028,000 of investment securities, other than temporary cash investments. Purchases and sales include $870,656,000 and $351,312,000, 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 29, 2020, such purchases and sales were $76,343,000 and $129,188,000, 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       Year Ended 
   February 29, 2020   August 31, 2019 
   Amount   Shares   Amount   Shares 
   ($000)   (000)  ($000)   (000)
ETF Shares                    
Issued   905,216    6,300    602,968    4,900 
Issued in Lieu of Cash Distributions   —    —    —    — 
Redeemed   (358,769)   (2,575)   (513,521)   (4,200)
Net Increase (Decrease)—ETF Shares   546,447    3,725    89,447    700 
Institutional Shares                    
Issued   470    1    21,064    89 
Issued in Lieu of Cash Distributions   239    1    290    1 
Redeemed   (3,305)   (11)   (22,721)   (97)
Net Increase (Decrease)—Institutional Shares   (2,596)   (9)   (1,367)   (7)

 

G.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

31 

 

 

Mega Cap Value Index Fund

 

 

Sector Diversification

As of February 29, 2020

 

Basic Materials 1.5%
Consumer Goods 11.8
Consumer Services 7.3
Financials 22.5
Health Care 20.8
Industrials 11.2
Oil & Gas 6.5
Technology 8.1
Telecommunications 4.7
Utilities 5.6

 

The table reflects the fund’s investments, except for short -term investments and derivatives. 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.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

 

 

 

 

 

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.

 

32 

 

 

Mega Cap Value Index Fund

 

 

Financial Statements (unaudited)

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

       Market 
       Value· 
    Shares   ($000)
Common Stocks (99.8%)          
Basic Materials (1.5%)          
  Air Products & Chemicals Inc.   55,809    12,256 
  DuPont de Nemours Inc.   187,734    8,054 
  Dow Inc.   188,283    7,609 
  PPG Industries Inc.   59,781    6,244 
  LyondellBasell Industries NV   63,548    4,541 
         38,704 
Consumer Goods (11.8%)          
  Procter & Gamble Co.   631,729    71,531 
  Coca-Cola Co.   976,676    52,242 
  PepsiCo Inc.   353,227    46,636 
  Philip Morris International Inc.   394,076    32,263 
  Mondelez International Inc.   364,674    19,255 
  Altria Group Inc.   473,236    19,104 
  Kimberly-Clark Corp.   86,826    11,391 
  General Motors Co.   325,799    9,937 
  General Mills Inc.   153,266    7,510 
  Ford Motor Co.   987,464    6,873 
  VF Corp.   85,793    6,177 
  Archer-Daniels-Midland Co.   140,744    5,299 
  Kraft Heinz Co.   169,556    4,200 
  Kellogg Co.   64,790    3,918 
  Constellation Brands Inc. Class A   19,043    3,283 
  Corteva Inc.   94,734    2,577 
  Tyson Foods Inc.   37,573    2,548 
  Aptiv plc   32,417    2,532 
         307,276 
Consumer Services (7.3%)          
  Walt Disney Co.   456,585    53,717 
  Walmart Inc.   360,278    38,795 
  CVS Health Corp.   329,533    19,502 
  Target Corp.   128,331    13,218 
  Walgreens Boots Alliance Inc.   192,247    8,797 
  Sysco Corp.   122,830    8,187 
  Delta Air Lines Inc.   147,503    6,804 
  eBay Inc.   196,083    6,792 
  McKesson Corp.   45,750    6,399 
  Kroger Co.   202,483    5,696 
  Las Vegas Sands Corp.   97,277    5,672 
  Southwest Airlines Co.   120,175    5,551 
  Carnival Corp.   100,118    3,350 
  Fox Corp. Class A   89,929    2,764 
* United Airlines Holdings Inc.   27,195    1,675 
  ViacomCBS Inc. Class B   68,059    1,675 
  Fox Corp. Class B   40,442    1,232 
  ViacomCBS Inc. Class A   710    21 
           189,847 
Financials (22.5%)          
* Berkshire Hathaway Inc. Class B   492,458    101,614 
  JPMorgan Chase & Co.   754,729    87,632 
  Bank of America Corp.   2,050,524    58,440 
  Wells Fargo & Co.   964,180    39,387 
  Citigroup Inc.   553,001    35,093 
  CME Group Inc.   90,736    18,040 
  Goldman Sachs Group Inc.   85,228    17,111 
  American Express Co.   155,487    17,093 
  US Bancorp   356,074    16,536 
  Truist Financial Corp.   339,721    15,675 
  Chubb Ltd.   97,557    14,149 
  Morgan Stanley   307,435    13,844 
  BlackRock Inc.   27,384    12,679 
  PNC Financial Services Group Inc.   99,832    12,619 
  Progressive Corp.   148,247    10,846 
  Capital One Financial Corp.   118,009    10,415 
  American International Group Inc.   220,039    9,277 
  Allstate Corp.   82,024    8,633 
  Bank of New York Mellon Corp.   210,316    8,392 
  Prudential Financial Inc.   101,856    7,685 

 

33 

 

 

Mega Cap Value Index Fund        
         
         
         
           Market 
           Value· 
      Shares   ($000)
  Aflac Inc.   176,774    7,575 
  MetLife Inc.   174,823    7,468 
  Travelers Cos. Inc.   62,093    7,439 
  Equity Residential   94,155    7,071 
  State Street Corp.   87,322    5,947 
  Discover Financial Services   79,555    5,217 
  Ventas Inc.   94,563    5,085 
  Synchrony Financial   155,087    4,513 
  Northern Trust Corp.   51,112    4,486 
  Fifth Third Bancorp   180,213    4,397 
  Welltower Inc.   51,388    3,845 
  Weyerhaeuser Co.   94,105    2,445 
  Ameriprise Financial Inc.   16,011    2,262 
  TD Ameritrade HoldingCorp.   34,155    1,442 
* Berkshire Hathaway Inc Class A   1    309 
           584,661 
Health Care (20.8%)          
  Johnson & Johnson   666,620    89,647 
  UnitedHealth Group Inc.   239,966    61,182 
  Merck & Co. Inc.   644,922    49,375 
  Pfizer Inc.   1,401,776    46,847 
  Abbott Laboratories   447,964    34,507 
  Medtronic plc   339,503    34,178 
  AbbVie Inc.   374,560    32,103 
  Amgen Inc.   150,458    30,051 
  Eli Lilly & Co.   218,906    27,611 
  Gilead Sciences Inc.   320,490    22,229 
  Bristol-Myers Squibb Co.   296,473    17,510 
  Cigna Corp.   94,571    17,301 
  Anthem Inc.   64,239    16,515 
  Allergan plc   79,039    15,070 
* Biogen Inc.   45,702    14,094 
  Humana Inc.   33,546    10,724 
  HCA Healthcare Inc.   68,741    8,731 
  Zimmer Biomet Holdings Inc.   52,192    7,106 
  Baxter International Inc.   64,558    5,389 
           540,170 
Industrials (11.1%)          
  Honeywell International Inc.   181,030    29,358 
  United Technologies Corp.   218,632    28,551 
  General Electric Co.   2,212,099    24,068 
  3M Co.   145,699    21,744 
  Caterpillar Inc.   139,989    17,392 
  CSX Corp.   188,200    13,259 
  Northrop Grumman Corp.   38,393    12,625 
  Deere & Co.   79,731    12,476 
  Norfolk Southern Corp.   66,010    12,037 
  Waste Management Inc.   107,413    11,902 
  Danaher Corp.   79,273    11,461 
  General Dynamics Corp.   62,337    9,955 
  Emerson Electric Co.   154,287    9,891 
  Eaton Corp. plc   104,699    9,498 
  FedEx Corp.   59,530    8,404 
  Ingersoll-Rand plc   60,689    7,831 
  Johnson Controls International plc   195,599    7,153 
  TE Connectivity Ltd.   84,765    7,025 
  Raytheon Co.   35,308    6,658 
  Parker-Hannifin Corp.   32,569    6,018 
  Cummins Inc.   38,854    5,878 
  PACCAR Inc.   87,492    5,853 
  Stanley Black & Decker Inc.   38,418    5,521 
  Republic Services Inc.   52,484    4,737 
           289,295 
Oil & Gas (6.5%)          
  Exxon Mobil Corp.   1,071,615    55,124 
  Chevron Corp.   478,883    44,699 
  ConocoPhillips   277,891    13,456 
  Schlumberger Ltd.   350,578    9,497 
  Kinder Morgan Inc.   487,451    9,344 
  Phillips 66   112,599    8,429 
  Marathon Petroleum Corp.   164,568    7,804 
  Occidental Petroleum Corp.   226,511    7,416 
  Valero Energy Corp.   104,146    6,900 
  Williams Cos. Inc.   307,108    5,850 
           168,519 
Technology (8.0%)          
  Intel Corp.   1,101,840    61,174 
  Cisco Systems Inc.   1,074,534    42,906 
  International Business Machines Corp.   224,305    29,193 
  Oracle Corp.   540,414    26,729 
  QUALCOMM Inc.   289,259    22,649 
  Cognizant Technology Solutions Corp.   138,739    8,453 
  HP Inc.   375,703    7,811 
  Corning Inc.   194,374    4,638 
* Dell Technologies Inc.   52,653    2,130 
  Hewlett Packard Enterprise Co.   163,468    2,091 
           207,774 
Telecommunications (4.7%)          
  AT&T Inc.   1,850,267    65,166 
  Verizon Communications Inc.    1,047,562    56,736 
* Sprint Corp.   156,249    1,436 
           123,338 

 

34 

 

Mega Cap Value Index Fund        
         
         
       Market 
       Value· 
    Shares   ($000)
Utilities (5.6%)          
NextEra Energy Inc.   123,817    31,296 
Duke Energy Corp.   184,691    16,936 
Dominion Energy Inc.   208,530    16,303 
Southern Co.   265,599    16,032 
American Electric Power Co. Inc.   125,055    11,162 
Exelon Corp.   245,657    10,590 
Sempra Energy   69,547    9,721 
Xcel Energy Inc.   135,918    8,471 
Consolidated Edison Inc.   84,038    6,624 
Public Service Enterprise Group Inc.   127,896    6,562 
Edison International   91,022    6,116 
PPL Corp.   182,919    5,489 
         145,302 
Total Common Stocks (Cost $2,316,301)        2,594,886 

 

    Shares ($000)
Temporary Cash Investments (0.0%)  
Money Market Fund (0.0%)    
1 Vanguard Market Liquidity Fund, 1.706% 38 4
       
    Face  
    Amount  
    ($000)  
U.S. Government and Agency Obligations (0.0%)
2 United States Treasury Bill, 1.551%, 5/14/20 450 449
 
Total Temporary Cash Investments (Cost $452)   453
Total Investments (99.8%) (Cost $2,316,753)   2,595,339
Other Assets and Liabilities—Net (0.2%)   4,079
Net Assets (100%)   2,599,418

Cost rounded to $000.

·See Note A in Notes to Financial Statements.

*Non-income-producing security.

1Affiliated fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown for Vanguard Market Liquidity Fund is the 7-day yield.

2Securities with a value of $201,000 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 2020 30 4,427 (476)

 

 

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

 

35 

 

Mega Cap Value Index Fund

 

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $2,316,749) 2,595,335
Affiliated Issuers (Cost $4) 4
Total Investments in Securities 2,595,339
Investment in Vanguard 125
Receivables for Accrued Income 8,349
Receivables for Capital Shares Issued 89
Total Assets 2,603,902
Liabilities  
Due to Custodian 3,745
Payables for Investment Securities Purchased 2
Payables for Capital Shares Redeemed 381
Payables to Vanguard 347
Variation Margin Payable—Futures Contracts 9
Total Liabilities 4,484
Net Assets 2,599,418
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 2,318,355
Total Distributable Earnings (Loss) 281,063
Net Assets 2,599,418
   
ETF Shares—Net Assets  
Applicable to 32,284,807 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 2,475,856
Net Asset Value Per Share—ETF Shares $76.69
   
Institutional Shares—Net Assets  
Applicable to 812,550 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 123,562
Net Asset Value Per Share—Institutional Shares $152.07

 

 

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 29, 2020
  ($000)
Investment Income  
Income  
Dividends 39,200
Interest1 33
Securities Lending—Net 4
Total Income 39,237
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 211
Management and Administrative—ETF Shares 607
Management and Administrative—Institutional Shares 28
Marketing and Distribution—ETF Shares 73
Marketing and Distribution—Institutional Shares 2
Custodian Fees 18
Shareholders’ Reports—ETF Shares 31
Shareholders’ Reports—Institutional Shares 1
Trustees’ Fees and Expenses 1
Total Expenses 972
Net Investment Income 38,265
Realized Net Gain (Loss)  
Investment Securities Sold1,2 21,042
Futures Contracts 941
Realized Net Gain (Loss) 21,983
Change in Unrealized Appreciation (Depreciation)  
Investment Securities1 (103,993)
Futures Contracts (557)
Change in Unrealized Appreciation (Depreciation) (104,550)
Net Increase (Decrease) in Net Assets Resulting from Operations (44,302)
1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $30,000, $1,000, and $1,000, respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $31,412,000 of net gain (loss) resulting from in-kind redemptions.

 

 

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 29, August 31,
 

2020

 2019
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 38,265 69,674
Realized Net Gain (Loss) 21,983 194,851
Change in Unrealized Appreciation (Depreciation) (104,550) (221,389)
Net Increase (Decrease) in Net Assets Resulting from Operations (44,302) 43,136
Distributions1    
ETF Shares (37,144) (64,527)
Institutional Shares (1,998) (3,466)
Total Distributions (39,142) (67,993)
Capital Share Transactions    
ETF Shares 108,477 351,597
Institutional Shares (7,950) 5,455
Net Increase (Decrease) from Capital Share Transactions 100,527 357,052
Total Increase (Decrease) 17,083 332,195
Net Assets    
Beginning of Period 2,582,335 2,250,140
End of Period 2,599,418 2,582,335

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

 

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     Year Ended August 31,  
For a Share Outstanding February 29,      
Throughout Each Period   2020 2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $78.94 $79.89 $70.19 $63.52 $56.89 $59.60  
Investment Operations                
Net Investment Income   1.1501 2.2611 1.8931 1.8431 1.638 1.484  
Net Realized and Unrealized Gain (Loss) on Investments   (2.226) (1.027) 9.668 6.557 6.583 (2.733)  
Total from Investment Operations   (1.076) 1.234 11.561 8.400 8.221 (1.249)  
Distributions                
Dividends from Net Investment Income (1.174) (2.184) (1.861) (1.730) (1.591) (1.461)  
Distributions from Realized Capital Gains — — — — — —  
Total Distributions   (1.174) (2.184) (1.861) (1.730) (1.591) (1.461)  
Net Asset Value, End of Period   $76.69 $78.94 $79.89 $70.19 $63.52 $56.89  
Total Return   -1.48% 1.69% 16.71% 13.40% 14.71% -2.22%  
Ratios/Supplemental Data                
Net Assets, End of Period (Millions)   $2,476 $2,448 $2,120 $1,717 $1,322 $957  
Ratio of Total Expenses to Average Net Assets   0.07% 0.07% 0.07% 0.07% 0.07% 0.09%  
Ratio of Net Investment Income to Average Net Assets   2.73% 2.90% 2.50% 2.73% 2.84% 2.51%  
Portfolio Turnover Rate2   4% 10% 8% 8% 8% 5%  

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

1Calculated based on average shares outstanding.

2Excludes 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       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $156.53 $158.41 $139.18 $125.94 $112.80 $118.18  
Investment Operations                  
Net Investment Income   2.2841 4.4671 3.7431 3.5961 3.259 2.976  
Net Realized and Unrealized Gain (Loss) on Investments   (4.409) (2.002) 19.188 13.077 13.063 (5.427)  
Total from Investment Operations   (2.125) 2.465 22.931 16.673 16.322 (2.451)  
Distributions                  
Dividends from Net Investment Income (2.335) (4.345) (3.701) (3.433) (3.182) (2.929)  
Distributions from Realized Capital Gains —   — — — — —  
Total Distributions   (2.335) (4.345) (3.701) (3.433) (3.182) (2.929)  
Net Asset Value, End of Period   $152.07 $156.53 $158.41 $139.18 $125.94 $112.80  
Total Return   -1.48% 1.68% 16.71% 13.41% 14.72% -2.19%  
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $124 $134 $131 $125 $207 $213  
Ratio of Total Expenses to Average Net Assets   0.06% 0.06% 0.06% 0.06% 0.06% 0.06%  
Ratio of Net Investment Income to Average Net Assets   2.73% 2.91% 2.51% 2.74% 2.85% 2.54%  
Portfolio Turnover Rate2   4% 10% 8% 8% 8% 5%  

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

1Calculated based on average shares outstanding.

2Excludes 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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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, 2016–2019), and for the period ended February 29, 2020, 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 at the fiscal year-end 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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans

 

42 

 

 

Mega Cap Value Index Fund

 

 

may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $125,000, representing less than 0.01% of the fund’s net assets and 0.05% of Vanguard’s capital received pursuant to the FSA. 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 Schedule of Investments.

  

43

 

 

Mega Cap Value Index Fund

 

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
Common Stocks 2,594,886 — — 2,594,886
Temporary Cash Investments 4 449 — 453
Total 2,594,890 449 — 2,595,339
Derivative Financial Instruments        
Liabilities        
Futures Contracts1 9 — — 9

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

  

D.  As of February 29, 2020, 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 2,316,753 
Gross Unrealized Appreciation 452,352 
Gross Unrealized Depreciation (174,242)
Net Unrealized Appreciation (Depreciation) 278,110 

 

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, 2019, the fund had available capital losses totaling $31,808,000 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, 2020; 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 29, 2020, the fund purchased $301,964,000 of investment securities and sold $200,552,000 of investment securities, other than temporary cash investments. Purchases and sales include $145,864,000 and $78,532,000, 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 29, 2020, such purchases and sales were $68,082,000 and $30,772,000, respectively; these amounts are included in the purchases and sales of investment securities noted above.

 

44

 

 

Mega Cap Value Index Fund

 

 

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

 

  Six Months Ended     Year Ended 
  February 29, 2020   August 31, 2019 
  Amount Shares   Amount  Shares 
  ($000) (000)   ($000)  (000) 
ETF Shares          
Issued 189,935  2,250    828,137  10,705 
Issued in Lieu of Cash Distributions —  —    —  — 
Redeemed (81,458) (975)   (476,540) (6,225)
Net Increase (Decrease)—ETF Shares 108,477  1,275    351,597  4,480 
Institutional Shares          
Issued 2,667  16    24,632  157 
Issued in Lieu of Cash Distributions 1,255  8    1,944  13 
Redeemed (11,872) (70)   (21,121) (136)
Net Increase (Decrease)—Institutional Shares (7,950) (46)   5,455  34 

 

At February 29, 2020, one shareholder was the record or beneficial owner of 27% of the fund’s net assets. If this shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

 

G.  Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

45

 

 

 

 

 

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.

 

 

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, www.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 www.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.

 

 

 

 

 

 

 

 

© 2020 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 042020

 

 

 

 

 

 

   
   
   
  Semiannual Report | February 29, 2020
   
   
  Vanguard Global Wellington™ 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 33

 

 

 

 

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 29, 2020

 

  Beginning Ending Expenses
  Account Value Account Value Paid During
Global Wellington Fund 8/31/2019 2/29/2020 Period
Based on Actual Fund Return      
Investor Shares $1,000.00 $1,007.81 $2.30
Admiral™ Shares 1,000.00 1,008.57 1.80
Based on Hypothetical 5% Yearly Return      
Investor Shares $1,000.00 $1,022.58 $2.31
Admiral Shares 1,000.00 1,023.07 1.81

 

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 0.36% 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 (182/366).

 

2

 

 

Global Wellington Fund

 

Country Allocation 

As of February 29, 2020 

 

United States 54.1%
United Kingdom 8.2
Japan 8.1
France 6.0
Switzerland 5.4
Canada 3.4
Spain 3.2
Germany 2.6
China 1.3
Taiwan 1.2
Netherlands 1.1
South Korea 1.0
Sweden 0.7
Australia 0.5
Cayman Islands 0.5
Other 2.7

 

The table reflects the fund’s investments, except for short-term investments and derivatives.

 

3

 

 

Global Wellington Fund

 

Financial Statements (unaudited)

 

Schedule of Investments 

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

       Market 
       Value• 
    Shares   ($000)
Common Stocks (64.2%)          
Canada (2.2%)          
Suncor Energy Inc.   534,420    14,728 
Dollarama Inc.   257,179    7,560 
Canadian National Railway Co.   40,240    3,417 
         25,705 
China (0.6%)          
Shandong Weigao Group Medical Polymer Co. Ltd.   5,185,490    6,766 
           
France (4.4%)          
Vinci SA   136,569    13,800 
Engie SA   557,313    9,307 
Total SA   195,528    8,451 
Arkema SA   75,402    7,133 
BNP Paribas SA   137,178    6,659 
Schneider Electric SE   30,104    3,058 
Legrand SA   38,850    2,982 
         51,390 
Germany (0.6%)          
Bayerische Motoren Werke AG   111,844    7,380 
           
Italy (0.1%)          
Assicurazioni Generali SPA   71,819    1,297 
           
Japan (6.9%)          
Tokio Marine Holdings Inc.   285,397    15,251 
Marui Group Co. Ltd.   593,265    11,578 
Nippon Telegraph & Telephone Corp.   352,044    8,213 
Mitsubishi UFJ Financial Group Inc.   1,633,722    7,982 
Astellas Pharma Inc.   488,700    7,660 
Honda Motor Co. Ltd.   284,300    7,294 
Seven & i Holdings Co. Ltd.   187,483    6,379 
Sumitomo Mitsui Financial Group Inc.   197,801    6,276 
Isuzu Motors Ltd.   619,914    5,800 
Daiwa House Industry Co. Ltd.   135,102    3,728 
Takeda Pharmaceutical Co. Ltd.   14,315    494 
         80,655 
Netherlands (0.9%)          
ING Groep NV   728,323    6,974 
Koninklijke Philips NV   86,094    3,687 
         10,661 

 

4

 

 

Global Wellington Fund        
         Market 
         Value• 
      Shares   ($000)
South Korea (1.0%)          
  Samsung Electronics Co. Ltd.   255,258    11,490 
           
Spain (1.9%)          
* Iberdrola SA   1,345,400    15,403 
  CaixaBank SA   2,657,128    6,829 
           22,232 
Sweden (0.6%)          
  Lundin Petroleum AB   262,410    7,491 
             
Switzerland (5.0%)          
  Nestle SA   191,680    19,725 
  Novartis AG   222,039    18,679 
  Zurich Insurance Group AG   31,149    12,062 
* Alcon Inc.   80,887    4,946 
  Julius Baer Group Ltd.   64,387    2,709 
           58,121 
Taiwan (1.2%)          
  Taiwan Semiconductor Manufacturing Co. Ltd.   1,306,175    13,466 
             
United Kingdom (5.2%)          
  Diageo plc   342,387    12,216 
  AstraZeneca plc ADR   259,960    11,386 
  BAE Systems plc   1,288,187    10,190 
  Derwent London plc   194,627    9,845 
  Prudential plc   579,853    9,640 
  Rotork plc   1,849,241    6,762 
           60,039 
United States (33.6%)          
  Microsoft Corp.   109,694    17,772 
  Johnson & Johnson   123,444    16,601 
  Deere & Co.   101,493    15,882 
  Chubb Ltd.   108,001    15,663 
  Medtronic plc   152,102    15,312 
  Bank of America Corp.   531,573    15,150 
  McDonald’s Corp.   77,909    15,128 
  Cisco Systems Inc.   367,634    14,680 
  Merck & Co. Inc.   173,450    13,279 
  Lockheed Martin Corp.   35,822    13,249 
  Mondelez International Inc.   245,168    12,945 
* Alphabet Inc. Class A   9,191    12,309 
  General Dynamics Corp.   76,396    12,200 
  Linde plc   59,605    11,487 
  PepsiCo Inc.   85,800    11,328 
  Comcast Corp.   261,601    10,577 
  UnitedHealth Group Inc.   39,867    10,165 
  TJX Cos. Inc.   159,467    9,536 
  Union Pacific Corp.   58,736    9,387 
  Sempra Energy   66,243    9,259 
  General Motors Co.   288,171    8,789 
  United Parcel Service Inc.   93,437    8,455 
  American Tower Corp.   36,146    8,198 
  Honeywell International Inc.   48,865    7,924 

 

 

5

 

 

Global Wellington Fund        
       Market 
       Value• 
    Shares   ($000)
Gilead Sciences Inc.   111,618    7,742 
Verizon Communications Inc.   137,329    7,438 
Texas Instruments Inc.   64,594    7,373 
Autoliv Inc.   105,788    7,059 
JPMorgan Chase & Co.   50,396    5,851 
Accenture plc Class A   31,733    5,731 
Schlumberger Ltd.   209,929    5,687 
EOG Resources Inc.   88,413    5,593 
PNC Financial Services Group Inc.   41,368    5,229 
Caterpillar Inc.   41,673    5,177 
United Technologies Corp.   39,241    5,124 
KLA Corp.   31,829    4,892 
Colgate-Palmolive Co.   71,324    4,819 
Broadcom Inc.   16,246    4,429 
Intel Corp.   70,957    3,940 
American Express Co.   32,713    3,596 
Abbott Laboratories   43,262    3,332 
Marsh & McLennan Cos. Inc.   22,723    2,376 
Chevron Corp.   5,771    539 
         391,202 
Total Common Stocks (Cost $725,109)        747,895 

 

             Face     
         Maturity   Amount     
      Coupon    Date   ($000)     
U.S. Government and Agency Obligations (4.2%)                    
United States (4.2%)                    
1,2 Fannie Mae Pool   3.070%   2/1/25    150    161 
1,2 Fannie Mae Pool   2.780%   6/1/26    330    354 
1,2 Fannie Mae Pool   3.000%   8/1/34–3/1/50    5,633    5,827 
1,2 Fannie Mae Pool   4.000%   12/1/48–12/1/49    1,155    1,218 
1,2 Fannie Mae Pool   2.500%   12/1/49    922    941 
1,2 Fannie Mae REMICS   2.000%   9/25/40    131    132 
1,2 Fannie Mae REMICS   3.500%   6/25/44–6/25/59    2,683    2,937 
1,2 Fannie Mae REMICS   2.500%   5/25/45–3/25/53    994    1,017 
1,2 Fannie Mae REMICS   3.000%   2/25/49    221    227 
1,2 Freddie Mac Gold Pool   3.000%   11/1/47–12/1/47    2,054    2,146 
1,2 Freddie Mac Gold Pool   3.500%   11/1/47–12/1/47    5,585    5,871 
1,2 Freddie Mac Gold Pool   4.000%   10/1/48–12/1/48    428    454 
1,2 Freddie Mac REMICS   4.000%   12/15/39–8/15/40    1,195    1,296 
1,2 Freddie Mac REMICS   3.500%   9/15/40–11/15/40    397    408 
1,2 Freddie Mac REMICS   1.750%   9/15/42    1,131    1,131 
1 Ginnie Mae REMICS   2.750%   9/20/44    228    236 
1,2 UMBS Pool   2.500%   4/1/48–12/1/49    9,108    9,305 
1,2 UMBS Pool   3.000%   12/1/49    2,956    3,049 
1,2 UMBS Pool   4.000%   12/1/49    354    373 
1,2,3 UMBS Pool   2.500%   3/1/35–3/1/50    1,200    1,232 
  United States Treasury Note/Bond   1.750%   7/31/24    1,445    1,497 
  United States Treasury Note/Bond   1.500%   10/31/24    3,980    4,084 
  United States Treasury Note/Bond   1.750%   12/31/24    615    639 
  United States Treasury Note/Bond   1.750%   11/15/29    1,835    1,938 
4 United States Treasury Note/Bond   2.750%   11/15/47    550    682 

 

6

 

 

Global Wellington Fund                
             Face   Market 
         Maturity   Amount   Value• 
      Coupon    Date   ($000)  ($000)
  United States Treasury Note/Bond   2.250%   8/15/49    975    1,108 
  United States Treasury Strip Principal   0.000%   5/15/47    660    413 
  United States Treasury Strip Principal   0.000%   8/15/47    755    470 
Total U.S. Government and Agency Obligations (Cost $47,195)            49,146 
Asset-Backed/Commercial Mortgage-Backed Securities (1.5%)              
Australia (0.1%)                    
5 National Australia Bank Ltd.   2.400%   12/7/21    575    587 
                     
Bermuda (0.0%)                    
1,5 START Ireland   4.089%   3/15/44    234    239 
                     
Canada (0.2%)                    
1,5 Chesapeake Funding II LLC 2018-2A   3.230%   8/15/30    583    592 
5,6 Ford Auto Securitization Trust   2.354%   6/15/23    2,005    1,494 
1,5,7 Master Credit Card Trust II Series 2018-1A,                    
  1M USD LIBOR + 0.490%   2.129%   7/21/24    765    767 
                     2,853 
Cayman Islands (0.5%)                    
1,5,7 Atlas Senior Loan Fund V Ltd., 3M USD                    
  LIBOR + 1.260%   3.103%   7/16/29    750    749 
1,5,7 KKR CLO 16 Ltd., 3M USD LIBOR + 1.250%   3.069%   1/20/29    360    360 
1,5,7 KKR CLO 17 Ltd., 3M USD LIBOR + 1.340%   3.171%   4/15/29    730    732 
1,5,7 Madison Park Funding XVIII Ltd., 3M USD                    
  LIBOR + 1.190%   3.009%   10/21/30    730    729 
1,5,7 Madison Park Funding XXX Ltd., 3M USD                    
  LIBOR + 0.750%   2.581%   4/15/29    1,400    1,392 
1,5,7 Magnetite VII Ltd., 3M USD LIBOR + 0.800%   2.631%   1/15/28    1,375    1,372 
1,5,7 Race Point IX CLO Ltd., 3M USD                    
  LIBOR + 1.210%   3.041%   10/15/30    730    728 
                     6,062 
Spain (0.1%)                    
8 Bankia SA   4.125%   3/24/36    850    1,501 
                     
United States (0.6%)                    
1,5 Aaset 2019-1 Trust   3.844%   5/15/39    225    231 
1,5 Angel Oak Mortgage Trust I LLC 2018-3   3.649%   9/25/48    388    395 
1,5 ARI Fleet Lease Trust 2018-A   2.550%   10/15/26    94    94 
1,5 Castlelake Aircraft Securitization Trust 2019-1   3.967%   4/15/39    241    246 
1,5 Chesapeake Funding II LLC 2017-2A   1.990%   5/15/29    203    203 
1,5 COLT 2018-1 Mortgage Loan Trust   2.930%   2/25/48    71    71 
1,5 COLT 2018-3 Mortgage Loan Trust   3.692%   10/26/48    112    112 
1,5 DB Master Finance LLC   3.787%   5/20/49    144    149 
1,5 DB Master Finance LLC   4.021%   5/20/49    124    132 
1,5 Deephaven Residential Mortgage Trust 2018-1   2.976%   12/25/57    140    140 
1,5 Enterprise Fleet Financing LLC Series 2018-1   2.870%   10/20/23    365    368 
1,5 First Investors Auto Owner Trust   2.410%   12/15/22    76    77 
1,5 First Investors Auto Owner Trust 2016-1   3.410%   4/18/22    226    227 
1 Ford Credit Floorplan Master Owner Trust A   2.440%   9/15/26    255    263 
1,2 Freddie Mac Multifamily Structured Pass                    
  Through Certificates   2.282%   7/25/26    285    297 
1,5 GreatAmerica Leasing Receivables Funding                    
  LLC Series 2018-1   2.600%   6/15/21    174    175 

 

7

 

 

Global Wellington Fund                
             Face   Market 
         Maturity   Amount   Value• 
      Coupon    Date   ($000)  ($000)
1,5 GreatAmerica Leasing Receivables Funding                    
  LLC Series 2018-1   2.830%   6/17/24    167    170 
1,5 Horizon Aircraft Finance Ltd.   3.721%   7/15/39    239    244 
1,5 MMAF Equipment Finance LLC 2017-B   2.210%   10/17/22    117    118 
1,2 Seasoned Credit Risk Transfer Trust Series                    
  2018-4   3.500%   3/25/58    107    112 
1,2 Seasoned Credit Risk Transfer Trust Series                    
  2019-1   3.500%   7/25/58    110    117 
1,2 Seasoned Credit Risk Transfer Trust Series                    
  2019-3   3.500%   10/25/58    293    311 
1,5 SoFi Consumer Loan Program 2019-3 Trust   2.900%   5/25/28    990    1,001 
1,5 Towd Point Mortgage Trust 2018-1   3.000%   1/25/58    234    239 
1,5 Vantage Data Centers LLC 2018-1A   4.072%   2/16/43    294    307 
1,5 Vantage Data Centers LLC 2019-1A   3.188%   7/15/44    194    199 
1,5 Verus Securitization Trust 2019-2   3.211%   5/25/59    289    294 
1,5 Westlake Automobile Receivables Trust   2.980%   1/18/22    184    184 
                     6,476 
Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $17,461)            17,718 
Corporate Bonds (23.9%)                    
Australia (0.3%)                    
1,5 Macquarie Group Ltd.   4.150%   3/27/24    1,025    1,095 
1,5 National Australia Bank Ltd.   3.933%   8/2/34    1,050    1,135 
5 WEA Finance LLC   4.625%   9/20/48    220    277 
5 WEA Finance LLC   4.125%   9/20/28    895    1,018 
                     3,525 
Belgium (0.3%)                    
  Anheuser-Busch Cos. LLC / Anheuser-Busch                    
  InBev Worldwide Inc.   4.900%   2/1/46    925    1,138 
9 Anheuser-Busch InBev SA   1.750%   3/7/25    375    492 
  Anheuser-Busch InBev Worldwide Inc.   4.375%   4/15/38    670    774 
  Anheuser-Busch InBev Worldwide Inc.   4.600%   4/15/48    765    914 
                     3,318 
Canada (0.5%)                    
  Bank of Nova Scotia   2.700%   8/3/26    1,205    1,264 
6 Bell Canada Inc.   3.350%   3/22/23    975    755 
7 Canadian Imperial Bank of Commerce, 3M                    
  USD LIBOR + 0.720%   2.614%   6/16/22    570    576 
  Emera US Finance LP   2.700%   6/15/21    400    407 
  Fortis Inc.   3.055%   10/4/26    775    811 
  Nutrien Ltd.   4.125%   3/15/35    650    721 
6 Royal Bank of Canada   2.949%   5/1/23    1,875    1,449 
  TransCanada PipeLines Ltd.   4.875%   1/15/26    400    453 
                     6,436 
Chile (0.2%)                    
5 Banco Santander Chile   2.700%   1/10/25    1,825    1,849 
                       
China (0.3%)                    
  Alibaba Group Holding Ltd.   3.125%   11/28/21    825    847 
  Alibaba Group Holding Ltd.   3.400%   12/6/27    660    710 
5 Tencent Holdings Ltd.   3.595%   1/19/28    1,035    1,117 
5 Tencent Holdings Ltd.   3.975%   4/11/29    445    498 
                     3,172 

 

8

 

 

Global Wellington Fund                
             Face   Market 
         Maturity   Amount   Value• 
      Coupon    Date   ($000)  ($000)
Denmark (0.2%)                    
1,8 Danske Bank A/S   0.500%   8/27/25    1,675    1,833 
                     
France (1.5%)                    
1,8 AXA SA   5.125%   7/4/43    600    760 
8 Banque Federative du Credit Mutuel SA   1.250%   1/14/25    1,200    1,395 
8 BNP Paribas SA   1.500%   11/17/25    1,625    1,898 
1,5 BNP Paribas SA   2.819%   11/19/25    470    485 
5 BPCE SA   5.700%   10/22/23    400    448 
8 BPCE SA   1.125%   1/18/23    700    793 
5 BPCE SA   3.250%   1/11/28    525    560 
8 BPCE SA   2.875%   4/22/26    1,600    2,002 
8 Credit Mutuel Arkea SA   1.625%   4/15/26    2,200    2,568 
5 Danone SA   2.947%   11/2/26    555    589 
8 Orange SA   1.000%   5/12/25    1,300    1,499 
8 Orange SA   2.000%   1/15/29    500    628 
8 Orange SA   0.500%   9/4/32    1,000    1,077 
8 RCI Banque SA   1.375%   3/8/24    800    895 
8 RCI Banque SA   0.750%   9/26/22    500    554 
8 Societe Generale SA   1.000%   4/1/22    600    675 
8 Veolia Environnement SA   1.590%   1/10/28    400    488 
                     17,314 
Germany (2.0%)                    
5 Bayer US Finance II LLC   4.250%   12/15/25    1,400    1,566 
8 Daimler AG   0.875%   1/12/21    2,575    2,868 
8 Deutsche Bank AG   2.625%   2/12/26    4,200    4,971 
9 Deutsche Telekom AG   3.125%   2/6/34    775    1,103 
8 Deutsche Telekom International Finance BV   4.250%   3/16/20    1,200    1,327 
9 E.ON International Finance BV   5.875%   10/30/37    250    481 
8 E.ON SE   1.625%   5/22/29    1,265    1,538 
8 E.ON SE   0.375%   8/23/21    1,800    1,999 
9 innogy Finance BV   4.750%   1/31/34    600    1,007 
5 Siemens Financieringsmaatschappij NV   2.900%   5/27/22    650    671 
8 Volkswagen Leasing GmbH   2.625%   1/15/24    425    507 
8 Volkswagen Leasing GmbH   1.375%   1/20/25    2,325    2,643 
8 Wintershall Dea Finance BV   0.840%   9/25/25    2,000    2,226 
                     22,907 
Italy (0.3%)                    
5 Intesa Sanpaolo SPA   4.000%   9/23/29    1,250    1,324 
1,8 UniCredit SPA   4.875%   2/20/29    1,700    2,047 
                     3,371 
Japan (0.2%)                    
10 Toyota Finance Australia Ltd.   2.500%   12/7/20    1,625    1,070 
8 Toyota Motor Credit Corp.   1.800%   7/23/20    1,250    1,391 
                     2,461 
Mexico (0.1%)                    
  America Movil SAB de CV   6.375%   3/1/35    350    502 
  America Movil SAB de CV   3.625%   4/22/29    275    305 
5 Infraestructura Energetica Nova SAB de CV   4.875%   1/14/48    980    994 
                     1,801 

 

9

 

 

Global Wellington Fund             
             Face   Market 
         Maturity   Amount   Value• 
      Coupon    Date   ($000)  ($000)
Netherlands (0.2%)                    
8 ABN AMRO Bank NV   2.500%   11/29/23    1,330    1,605 
9 Cooperatieve Rabobank UA   4.625%   5/23/29    200    309 
  Shell International Finance BV   4.000%   5/10/46    475    562 
                     2,476 
Norway (0.1%)                    
5 Aker BP ASA   3.750%   1/15/30    950    957 
                     
South Korea (0.0%)                    
5 SK Telecom Co. Ltd.   3.750%   4/16/23    200    211 
                     
Spain (1.0%)                    
8 Banco de Sabadell SA   1.625%   3/7/24    2,300    2,642 
8 Banco de Sabadell SA   1.750%   5/10/24    1,800    2,020 
8 CaixaBank SA   1.750%   10/24/23    2,200    2,527 
8 Iberdrola International BV   2.875%   11/11/20    1,800    2,029 
  Telefonica Emisiones SAU   4.665%   3/6/38    1,405    1,635 
8 Telefonica Emisiones SAU   2.242%   5/27/22    700    814 
                     11,667 
Switzerland (0.3%)                    
1,8 Credit Suisse Group AG   1.250%   7/17/25    675    768 
1,5 Credit Suisse Group AG   2.593%   9/11/25    500    509 
5 Roche Holdings Inc.   2.625%   5/15/26    1,100    1,167 
1,5 UBS Group AG   3.126%   8/13/30    1,230    1,301 
                     3,745 
United Kingdom (2.2%)                    
  AstraZeneca plc   4.000%   1/17/29    755    866 
1 Barclays plc   3.932%   5/7/25    860    914 
  BAT Capital Corp.   3.222%   8/15/24    575    603 
  BAT Capital Corp.   3.557%   8/15/27    925    975 
  BP Capital Markets plc   3.814%   2/10/24    475    514 
6 BP Capital Markets plc   3.470%   5/15/25    1,350    1,072 
9 British Telecommunications plc   3.125%   11/21/31    1,950    2,691 
5 CK Hutchison International 17 II Ltd.   2.750%   3/29/23    1,275    1,317 
9 CPUK Finance Ltd.   3.588%   8/28/25    1,400    1,949 
8 FCE Bank plc   0.869%   9/13/21    1,800    1,997 
1,9 HSBC Holdings plc   2.256%   11/13/26    2,050    2,679 
1 HSBC Holdings plc   4.041%   3/13/28    1,160    1,259 
7 HSBC Holdings plc, 3M USD LIBOR + 1.000%   2.692%   5/18/24    245    248 
8 Imperial Brands Finance plc   2.250%   2/26/21    1,825    2,049 
5 Sky plc   3.125%   11/26/22    725    758 
1,5 Standard Chartered plc   2.744%   9/10/22    1,095    1,108 
  Trinity Acquisition plc   4.400%   3/15/26    1,274    1,435 
  Vodafone Group plc   5.250%   5/30/48    400    505 
  Vodafone Group plc   4.375%   5/30/28    2,250    2,586 
                     25,525 
United States (14.2%)                    
  Abbott Laboratories   3.400%   11/30/23    500    536 
5 AbbVie Inc.   4.050%   11/21/39    275    303 
  AbbVie Inc.   4.450%   5/14/46    475    545 
  Alabama Power Co.   4.300%   7/15/48    255    315 
  Allergan Funding SCS   3.800%   3/15/25    1,060    1,153 
  Allergan Funding SCS   4.750%   3/15/45    225    271 

 

10

 

 

Global Wellington Fund        
         
        Face Market
      Maturity Amount Value•
    Coupon Date ($000) ($000)
8 Altria Group Inc. 2.200% 6/15/27 435 520
  Altria Group Inc. 3.875% 9/16/46 400 390
  Altria Group Inc. 5.800% 2/14/39 560 688
  Amazon.com Inc. 4.800% 12/5/34 300 397
  American Electric Power Co. Inc. 3.200% 11/13/27 950 1,012
8 American Express Credit Corp. 0.625% 11/22/21 1,900 2,125
8 American International Group Inc. 1.500% 6/8/23 975 1,120
  American International Group Inc. 4.250% 3/15/29 800 915
  American International Group Inc. 4.500% 7/16/44 73 89
  American International Group Inc. 4.750% 4/1/48 45 57
  American Tower Corp. 5.000% 2/15/24 380 426
  American Tower Corp. 4.400% 2/15/26 300 338
  Amgen Inc. 3.625% 5/22/24 275 295
  Amgen Inc. 4.663% 6/15/51 350 437
  Anthem Inc. 4.375% 12/1/47 500 571
  Anthem Inc. 3.500% 8/15/24 275 295
  Anthem Inc. 4.101% 3/1/28 610 682
  Apple Inc. 2.750% 1/13/25 780 823
  AT&T Inc. 4.125% 2/17/26 800 889
8 AT&T Inc. 1.875% 12/4/20 2,450 2,733
  AT&T Inc. 4.900% 8/15/37 450 538
  AT&T Inc. 3.600% 7/15/25 850 919
8 AT&T Inc. 3.150% 9/4/36 350 468
8 AT&T Inc. 2.450% 3/15/35 730 904
  AutoZone Inc. 3.125% 4/21/26 1,525 1,616
  Bank of America Corp. 3.300% 1/11/23 570 598
1 Bank of America Corp. 3.593% 7/21/28 1,885 2,052
1 Bank of America Corp. 4.271% 7/23/29 1,640 1,884
7 Bank of New York Mellon Corp., 3M USD LIBOR + 1.050% 2.819% 10/30/23 415 423
5 Bayer US Finance LLC 3.375% 10/8/24 770 822
  BB&T Corp. 2.200% 3/16/23 875 891
  Berkshire Hathaway Energy Co. 5.150% 11/15/43 10 13
  Boeing Co. 3.250% 3/1/28 727 786
  Boeing Co. 3.450% 11/1/28 230 250
  Boeing Co. 3.200% 3/1/29 400 428
  Boeing Co. 2.950% 2/1/30 173 181
  Boeing Co. 3.375% 6/15/46 300 307
5 Boston Gas Co. 3.001% 8/1/29 130 140
  Boston Scientific Corp. 4.000% 3/1/29 60 69
  Boston Scientific Corp. 4.550% 3/1/39 600 743
  Brandywine Operating Partnership LP 3.950% 11/15/27 890 971
  Broadcom Corp. / Broadcom Cayman Finance Ltd. 3.625% 1/15/24 1,190 1,246
  Broadcom Corp. / Broadcom Cayman Finance Ltd. 3.875% 1/15/27 915 960
5 Broadcom Inc. 4.250% 4/15/26 65 70
5 Brooklyn Union Gas Co. 4.273% 3/15/48 965 1,182
8 Capital One Financial Corp. 1.650% 6/12/29 1,900 2,218
5 Cargill Inc. 4.760% 11/23/45 340 462
5 Carrier Global Corp. 2.722% 2/15/30 173 175
  Charter Communications Operating LLC / Charter Communications Operating Capital 6.384% 10/23/35 355 468
8 Chubb INA Holdings Inc. 1.400% 6/15/31 525 616

 

11

 

 

Global Wellington Fund        
         
        Face Market
      Maturity Amount Value•
    Coupon Date ($000) ($000)
8 Chubb INA Holdings Inc. 0.875% 6/15/27 1,455 1,655
  Cigna Corp. 4.375% 10/15/28 420 477
  Cimarex Energy Co. 4.375% 6/1/24 1,040 1,097
  Citigroup Inc. 4.600% 3/9/26 535 605
  Citigroup Inc. 2.700% 3/30/21 345 348
1 Citigroup Inc. 3.520% 10/27/28 1,000 1,081
9 Citigroup Inc. 1.750% 10/23/26 1,000 1,290
  Cleco Corporate Holdings LLC 3.743% 5/1/26 1,185 1,265
5 Cleco Corporate Holdings LLC 3.375% 9/15/29 325 339
  Cleco Corporate Holdings LLC 4.973% 5/1/46 660 797
  Comcast Corp. 6.500% 11/15/35 885 1,334
  Comcast Corp. 3.999% 11/1/49 120 141
  Comcast Corp. 4.049% 11/1/52 20 24
  Comcast Corp. 4.000% 3/1/48 40 47
  Comcast Corp. 4.600% 10/15/38 255 321
  Comcast Corp. 3.950% 10/15/25 250 280
9 Comcast Corp. 1.500% 2/20/29 630 806
  Comcast Corp. 4.700% 10/15/48 170 223
  CommonSpirit Health 4.200% 8/1/23 770 832
  CommonSpirit Health 3.347% 10/1/29 355 376
  CommonSpirit Health 4.187% 10/1/49 435 478
  Commonwealth Edison Co. 3.650% 6/15/46 35 40
  Commonwealth Edison Co. 4.000% 3/1/48 245 295
  Conagra Brands Inc. 4.600% 11/1/25 200 224
  Conagra Brands Inc. 5.300% 11/1/38 600 731
  Consolidated Edison Co. of New York Inc. 6.300% 8/15/37 75 109
  Consolidated Edison Co. of New York Inc. 4.625% 12/1/54 290 384
  Cottage Health Obligated Group 3.304% 11/1/49 290 314
5 Cox Communications Inc. 4.600% 8/15/47 800 936
5 Cox Communications Inc. 4.800% 2/1/35 100 120
  CSX Corp. 4.300% 3/1/48 495 595
  CVS Health Corp. 2.875% 6/1/26 1,455 1,511
  CVS Health Corp. 4.100% 3/25/25 1,185 1,295
  CVS Health Corp. 5.050% 3/25/48 125 153
  Dignity Health 4.500% 11/1/42 166 195
  Dignity Health 3.812% 11/1/24 594 643
  Discover Bank 4.200% 8/8/23 575 617
  Dominion Energy Gas Holdings LLC 4.600% 12/15/44 660 780
  Dominion Energy Inc. 2.715% 8/15/21 140 142
  Dominion Energy South Carolina Inc. 4.600% 6/15/43 230 298
  Dominion Energy South Carolina Inc. 5.300% 5/15/33 113 152
  Dominion Energy South Carolina Inc. 5.450% 2/1/41 300 414
  Dominion Energy South Carolina Inc. 6.625% 2/1/32 156 227
  Duke Energy Progress LLC 4.100% 3/15/43 707 833
  Energy Transfer Operating LP 4.900% 3/15/35 1,075 1,161
  Energy Transfer Operating LP 5.000% 5/15/50 80 81
  Enterprise Products Operating LLC 3.900% 2/15/24 535 578
  Enterprise Products Operating LLC 3.950% 1/31/60 90 88
  Enterprise Products Operating LLC 3.700% 1/31/51 130 129
  EQM Midstream Partners LP 4.750% 7/15/23 504 464
5 ERAC USA Finance LLC 4.500% 2/15/45 765 916
  Evergy Inc. 2.900% 9/15/29 580 597
  Exxon Mobil Corp. 2.275% 8/16/26 1,075 1,114
  FedEx Corp. 4.950% 10/17/48 213 243

 

12

 

 

Global Wellington Fund        
         
        Face Market
      Maturity Amount Value•
    Coupon Date ($000) ($000)
  FedEx Corp. 4.050% 2/15/48 33 33
  FedEx Corp. 4.550% 4/1/46 117 128
  FedEx Corp. 4.750% 11/15/45 227 252
  FedEx Corp. 4.100% 2/1/45 85 87
8 Fidelity National Information Services Inc. 2.000% 5/21/30 835 1,021
8 Fidelity National Information Services Inc. 1.500% 5/21/27 1,820 2,132
  FirstEnergy Corp. 3.900% 7/15/27 1,025 1,133
  Fiserv Inc. 3.200% 7/1/26 355 378
  Florida Power & Light Co. 3.700% 12/1/47 275 325
9 Ford Motor Credit Co. LLC 4.535% 3/6/25 2,575 3,497
  Ford Motor Credit Co. LLC 3.815% 11/2/27 975 928
5 Fox Corp. 4.030% 1/25/24 160 173
  General Motors Co. 4.200% 10/1/27 475 501
  General Motors Co. 5.000% 10/1/28 1,490 1,630
  General Motors Financial Co. Inc. 3.450% 4/10/22 1,310 1,343
  Georgia Power Co. 4.300% 3/15/42 860 1,005
  Georgia Power Co. 3.700% 1/30/50 255 283
  Goldman Sachs Group Inc. 2.625% 4/25/21 575 581
1 Goldman Sachs Group Inc. 3.272% 9/29/25 1,375 1,450
1 Goldman Sachs Group Inc. 3.814% 4/23/29 335 368
1 Goldman Sachs Group Inc. 4.223% 5/1/29 1,000 1,134
  HCA Inc. 5.250% 6/15/49 575 670
  Healthpeak Properties Inc. 4.000% 6/1/25 850 932
  Healthpeak Properties Inc. 3.000% 1/15/30 420 441
  Healthpeak Properties Inc. 3.500% 7/15/29 335 360
  Hess Corp. 7.300% 8/15/31 555 739
  Humana Inc. 2.900% 12/15/22 590 612
  International Business Machines Corp. 3.300% 5/15/26 550 598
  International Paper Co. 4.350% 8/15/48 605 669
  John Deere Capital Corp. 3.450% 3/13/25 985 1,073
1 JPMorgan Chase & Co. 3.782% 2/1/28 1,890 2,091
1 JPMorgan Chase & Co. 3.964% 11/15/48 975 1,168
8 JPMorgan Chase & Co. 3.875% 9/23/20 1,300 1,468
  Kaiser Foundation Hospitals 4.875% 4/1/42 45 61
5 KeySpan Gas East Corp. 2.742% 8/15/26 400 415
5 L3Harris Technologies Inc. 4.400% 6/15/28 675 782
  Lockheed Martin Corp. 4.700% 5/15/46 253 337
  Lockheed Martin Corp. 4.090% 9/15/52 97 124
  Lowe’s Cos. Inc. 4.550% 4/5/49 525 641
  Marsh & McLennan Cos. Inc. 4.375% 3/15/29 1,010 1,174
  McDonald’s Corp. 4.450% 9/1/48 475 586
8 Medtronic Global Holdings SCA 1.125% 3/7/27 1,595 1,864
8 Medtronic Global Holdings SCA 1.625% 3/7/31 1,135 1,395
  Memorial Sloan-Kettering Cancer Center 4.125% 7/1/52 150 192
  Merck & Co. Inc. 4.000% 3/7/49 360 450
  Merck & Co. Inc. 3.400% 3/7/29 545 609
  Mercy Health 3.555% 8/1/27 410 446
  Mercy Health 4.302% 7/1/28 370 432
5 Metropolitan Life Global Funding I 3.000% 9/19/27 775 834
  Microsoft Corp. 3.700% 8/8/46 1,125 1,365
  MidAmerican Energy Co. 4.250% 5/1/46 10 12
  Molson Coors Beverage Co. 3.000% 7/15/26 700 727
6 Molson Coors International LP 2.840% 7/15/23 1,875 1,423
  Morgan Stanley 2.750% 5/19/22 1,375 1,412

 

13

 

 

Global Wellington Fund        
         
        Face Market
      Maturity Amount Value•
    Coupon Date ($000) ($000)
  Morgan Stanley 3.125% 7/27/26 1,850 1,964
1 Morgan Stanley 3.772% 1/24/29 1,045 1,158
  MPLX LP 4.125% 3/1/27 875 938
  MPLX LP 4.000% 3/15/28 220 233
5 MPLX LP 3.500% 12/1/22 1,405 1,461
  National Retail Properties Inc. 3.900% 6/15/24 805 873
  National Rural Utilities Cooperative Finance Corp. 2.950% 2/7/24 400 425
  NextEra Energy Capital Holdings Inc. 3.250% 4/1/26 100 107
  NextEra Energy Capital Holdings Inc. 3.500% 4/1/29 155 170
  NextEra Energy Capital Holdings Inc. 2.750% 11/1/29 130 136
  Noble Energy Inc. 3.850% 1/15/28 625 646
5 Northwestern Mutual Life Insurance Co. 3.850% 9/30/47 230 270
5 Northwestern Mutual Life Insurance Co. 3.625% 9/30/59 36 40
  Occidental Petroleum Corp. 7.500% 5/1/31 145 189
  Oglethorpe Power Corp. 5.250% 9/1/50 350 436
  Oglethorpe Power Corp. 5.050% 10/1/48 161 203
1,5 Oglethorpe Power Corp. 6.191% 1/1/31 210 254
  Oracle Corp. 3.400% 7/8/24 575 618
  Oracle Corp. 4.000% 11/15/47 220 266
5 Otis Worldwide Corp. 3.362% 2/15/50 335 347
5 Otis Worldwide Corp. 3.112% 2/15/40 280 286
5 Penske Truck Leasing Co. LP / PTL Finance Corp. 4.250% 1/17/23 1,405 1,508
5 Penske Truck Leasing Co. LP / PTL Finance Corp. 3.375% 2/1/22 145 149
5 Penske Truck Leasing Co. LP / PTL Finance Corp. 3.950% 3/10/25 1,120 1,224
5 Penske Truck Leasing Co. LP / PTL Finance Corp. 2.700% 11/1/24 170 176
  Philip Morris International Inc. 2.500% 11/2/22 575 591
8 Philip Morris International Inc. 2.875% 3/3/26 725 915
  Phillips 66 Partners LP 3.750% 3/1/28 500 538
  PNC Bank NA 3.250% 1/22/28 910 1,008
  PPL Capital Funding Inc. 3.100% 5/15/26 1,500 1,591
1 Providence St. Joseph Health Obligated Group 3.930% 10/1/48 225 275
  Santander Holdings USA Inc. 3.700% 3/28/22 2,400 2,485
5 SBA Tower Trust 3.448% 3/15/23 675 712
5 SBA Tower Trust 2.877% 7/9/21 805 813
  Sempra Energy 3.250% 6/15/27 1,050 1,119
  Sierra Pacific Power Co. 2.600% 5/1/26 149 155
  Simon Property Group LP 2.450% 9/13/29 375 382
  Southern California Edison Co. 4.125% 3/1/48 550 628
  Southern California Edison Co. 3.700% 8/1/25 30 33
  Southern Co. 4.400% 7/1/46 5 6
1,5 Sprint Spectrum Co LLC / Sprint Spectrum Co II LLC / Sprint Spectrum Co III LLC 4.738% 3/20/25 805 863
  SSM Health Care Corp. 3.823% 6/1/27 320 355
  Starbucks Corp. 4.500% 11/15/48 730 874
  Sunoco Logistics Partners Operations LP 5.350% 5/15/45 400 445
  Synchrony Bank 3.000% 6/15/22 450 462
5 Teachers Insurance & Annuity Assn. of America 4.900% 9/15/44 860 1,135
5 Tennessee Gas Pipeline Co. LLC 2.900% 3/1/30 1,485 1,492

 

14

 

 

Global Wellington Fund          
           
        Face   Market
      Maturity Amount   Value•
    Coupon Date ($000)   ($000)
  Toledo Hospital 5.750% 11/15/38 210   264
  Toledo Hospital 5.325% 11/15/28 555   647
  Truist Bank 3.300% 5/15/26 450   483
  Truist Financial Corp. 3.200% 9/3/21 510   523
  Truist Financial Corp. 3.700% 6/5/25 970   1,066
  Tyson Foods Inc. 5.100% 9/28/48 400   522
  Union Pacific Corp. 3.700% 3/1/29 210   237
  Union Pacific Corp. 4.300% 3/1/49 130   157
  Union Pacific Corp. 3.750% 2/5/70 675   708
1 United Airlines 2018-1 Class B Pass Through Trust 4.600% 3/1/26 64   68
8 United Technologies Corp. 1.150% 5/18/24 380   436
  United Technologies Corp. 3.950% 8/16/25 285   319
  United Technologies Corp. 4.450% 11/16/38 725   897
  UnitedHealth Group Inc. 4.625% 7/15/35 75   94
  UnitedHealth Group Inc. 4.200% 1/15/47 65   78
  UnitedHealth Group Inc. 3.850% 6/15/28 820   927
  Verizon Communications Inc. 3.500% 11/1/24 275   297
  Verizon Communications Inc. 4.522% 9/15/48 695   896
  Verizon Communications Inc. 4.672% 3/15/55 118   158
9 Verizon Communications Inc. 3.375% 10/27/36 400   597
  Verizon Communications Inc. 5.012% 8/21/54 475   665
  ViacomCBS Inc. 4.250% 9/1/23 800   863
  Walt Disney Co. 6.200% 12/15/34 640   943
  Wells Fargo & Co. 4.300% 7/22/27 275   309
  Wells Fargo & Co. 4.750% 12/7/46 800   1,009
8 Wells Fargo & Co. 2.250% 9/3/20 2,500   2,794
6 Wells Fargo & Co. 2.975% 5/19/26 625   483
  Wells Fargo & Co. 4.100% 6/3/26 920   1,011
1 Wells Fargo & Co. 2.879% 10/30/30 435   453
  Welltower Inc. 4.000% 6/1/25 275   302
  Westar Energy Inc. 3.250% 9/1/49 525   568
  Western Midstream Operating LP 4.050% 2/1/30 1,270   1,248
            165,980
Total Corporate Bonds (Cost $267,367)         278,548
Sovereign Bonds (4.1%)          
Australia (0.2%)          
10 Commonwealth of Australia 2.250% 11/21/22 1,260   860
10 Commonwealth of Australia 2.750% 11/21/27 135   101
10 Commonwealth of Australia 2.250% 5/21/28 1,195   873
            1,834
Canada (0.4%)          
6 City of Montreal 3.150% 12/1/36 750   616
6 City of Montreal 3.500% 12/1/38 410   357
6 City of Toronto 3.200% 8/1/48 1,000   878
6 Province of Ontario 2.900% 6/2/28 1,910   1,537
11 Province of Ontario 0.250% 6/28/29 985   1,094
            4,482
Chile (0.1%)          
  Corp. Nacional del Cobre de Chile 3.625% 8/1/27 650   702

 

15

 

 

Global Wellington Fund          
           
        Face   Market
      Maturity Amount   Value•
    Coupon Date ($000)   ($000)
China (0.4%)          
5 Sinopec Group Overseas Development 2017 Ltd. 3.000% 4/12/22 1,025   1,052
5 Sinopec Group Overseas Development 2018 Ltd. 2.950% 11/12/29 1,170   1,226
5 State Grid Overseas Investment 2016 Ltd. 2.750% 5/4/22 2,135   2,183
            4,461
Colombia (0.1%)          
  Republic of Colombia 4.000% 2/26/24 1,350   1,432
           
Japan (0.8%)          
12 Japan 0.100% 12/20/28 828,000   7,899
12 Japan 0.100% 3/20/29 158,800   1,515
12 Japan 0.100% 6/20/29 40,250   384
            9,798
Panama (0.2%)          
1,5 Empresa de Transmision Electrica SA 5.125% 5/2/49 470   558
1 Republic of Panama 3.160% 1/23/30 1,650   1,741
            2,299
Qatar (0.2%)          
5 State of Qatar 2.375% 6/2/21 1,400   1,406
5 State of Qatar 3.875% 4/23/23 550   583
5 State of Qatar 4.000% 3/14/29 515   584
5 State of Qatar 5.103% 4/23/48 255   340
            2,913
Saudi Arabia (0.4%)          
5 Kingdom of Saudi Arabia 2.875% 3/4/23 2,740   2,808
5 Saudi Arabian Oil Co. 2.875% 4/16/24 500   514
5 Saudi Arabian Oil Co. 3.500% 4/16/29 910   965
            4,287
Singapore (0.1%)          
5 Temasek Financial I Ltd. 3.625% 8/1/28 510   589
           
Spain (0.1%)          
5,8 Kingdom of Spain 0.600% 10/31/29 1,050   1,198
           
Supranational (0.2%)          
8 European Financial Stability Facility 1.375% 5/31/47 1,025   1,491
8 European Investment Bank 0.050% 10/13/34 1,050   1,182
            2,673
Switzerland (0.1%)          
5 Syngenta Finance NV 5.182% 4/24/28 550   620
           
United Arab Emirates (0.1%)          
  Emirate of Abu Dhabi 3.125% 10/11/27 1,235   1,325
           
United Kingdom (0.7%)          
9 United Kingdom 1.500% 1/22/21 1,015   1,313
9 United Kingdom 0.500% 7/22/22 430   554
9 United Kingdom 0.750% 7/22/23 1,210   1,575
9 United Kingdom 0.625% 6/7/25 700   912
9 United Kingdom 1.250% 7/22/27 155   212

 

16

 

 

Global Wellington Fund          
           
        Face   Market
      Maturity Amount   Value•
    Coupon Date ($000)   ($000)
9 United Kingdom 0.875% 10/22/29 1,100   1,474
9 United Kingdom 3.500% 1/22/45 1,215   2,446
            8,486
Total Sovereign Bonds (Cost $45,497)         47,099
Taxable Municipal Bonds (0.9%)          
  Bay Area Toll Authority California Toll Bridge Revenue (San Francisco Bay Area) 2.574% 4/1/31 230   243
  Bay Area Toll Authority California Toll Bridge Revenue (San Francisco Bay Area) 6.907% 10/1/50 75   140
  California GO 7.550% 4/1/39 180   309
  California GO 7.350% 11/1/39 140   228
  California GO 7.625% 3/1/40 20   34
  Chicago IL Transit Authority Sales Tax Receipts Revenue 6.899% 12/1/40 55   81
  Chicago IL Transit Authority Transfer Tax Receipts Revenue 6.899% 12/1/40 805   1,179
  Chicago IL Transit Authority 6.300% 12/1/21 40   42
  County of Broward FL Airport System Revenue 3.477% 10/1/43 100   108
  Foothill-Eastern Transportation Corridor Agency California Toll Road Revenue Taxable Refunding Bonds 2019A 4.094% 1/15/49 55   59
13 Foothill-Eastern Transportation Corridor Agency California 3.924% 1/15/53 405   435
  Georgia Municipal Electric Power Authority Revenue 6.637% 4/1/57 757   1,140
  Georgia Municipal Electric Power Authority Revenue 6.655% 4/1/57 94   145
  Grand Parkway Transportation Corp. Texas 3.236% 10/1/52 290   295
  Illinois GO 5.100% 6/1/33 660   772
13 Kansas Development Finance Authority 5.371% 5/1/26 695   781
  Massachusetts School Building Authority Dedicated Sales Tax Revenue 3.395% 10/15/40 175   187
  New York Metropolitan Transportation Authority Revenue (Transit Revenue) 6.668% 11/15/39 170   263
  New York State Dormitory Authority Revenue 3.142% 7/1/43 120   133
  New York State Dormitory Authority Revenue (Personal Income Tax) 3.110% 2/15/39 285   322
  North Texas Tollway Authority System Revenue 6.718% 1/1/49 125   224
14 Philadelphia PA Authority for Industrial Development 6.550% 10/15/28 635   849
  Port Authority of New York & New Jersey Revenue 4.458% 10/1/62 305   417
  Sales Tax Securitization Corp. Illinois Revenue 4.787% 1/1/48 650   873
  South Carolina Public Service Authority Revenue 2.388% 12/1/23 690   710
  State of Connecticut 5.770% 3/15/25 275   335
Total Taxable Municipal Bonds (Cost $9,094)         10,304

 

17

 

 

Global Wellington Fund      
       
      Market
      Value•
  Coupon Shares ($000)
Temporary Cash Investment (2.4%)      
Money Market Fund (2.4%)      
15    Vanguard Market Liquidity Fund (Cost $28,160) 1.706% 281,567 28,165
Total Investments (101.2%) (Cost $1,139,883)     1,178,875
Other Assets and Liabilities—Net (-1.2%)     (13,735)
Net Assets (100%)     1,165,140

Cost rounded to $000.

•See Note A in Notes to Financial Statements.

*Non-income-producing security.

1The 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.

2The 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.

3Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of February 29, 2020.

4Securities with a value of $434,000 have been segregated as initial margin for open futures contracts.

5Security 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 29, 2020, the aggregate value of these securities was $69,096,000, representing 5.9% of net assets.

6Face amount denominated in Canadian dollars.

7Adjustable-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.

8Face amount denominated in euro.

9Face amount denominated in British pounds.

10Face amount denominated in Australian dollars.

11Face amount denominated in Swiss francs.

12Face amount denominated in Japanese yen.

13Scheduled principal and interest payments are guaranteed by AGM (Assured Guaranty Municipal Corporation).

14Scheduled principal and interest payments are guaranteed by National Public Finance Guarantee Corp.

15Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

ADR—American Depositary Receipt.

GO—General Obligation Bond. 

LIBOR—London Interbank Offered Rate.

REMICS—Real Estate Mortgage Investment Conduits.

UMBS—Uniform Mortgage-Backed Securities.

  

18

 

 

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                  
Euro-Schatz     March 2020   51   6,324   20
Euro-Bund     March 2020   25   4,898   75
Euro-Buxl     March 2020   17   4,125   281
Euro-OAT     March 2020   14   2,607   74
Euro-BTP     March 2020   13   2,092   33
Euro-Bobl     March 2020   7   1,048   13
                  496
                   
Short Futures Contracts                  
10-Year U.S. Treasury Note     June 2020   (81)   (10,915)   (134)
Long Gilt     June 2020   (14)   (2,430)   (22)
                  (156)
                  340

 

Forward Currency Contracts                    
  Contract             Unrealized   Unrealized
Settlement   Contract Amount (000)   Appreciation   (Depreciation)
Counterparty Date   Receive   Deliver ($000)   ($000)
J.P. Morgan Securities LLC 3/31/20 USD 85,398 EUR 78,525   —   (1,461)
Goldman Sachs International 3/31/20 USD 26,111 GBP 20,138 267   —
J.P. Morgan Securities LLC 3/31/20 USD 10,085 CAD 13,391 108   —
J.P. Morgan Securities LLC 3/31/20 USD 9,651 JPY 1,065,696   —   (247)
J.P. Morgan Securities LLC 3/31/20 USD 2,815 AUD 4,262 36   —
J.P. Morgan Securities LLC 3/31/20 USD 1,468 CHF 1,434   —   (21)
                411   (1,729)

 

AUD—Australian dollar.

CAD—Canadian dollar.

CHF—Swiss franc.

EUR—euro.

GBP—British pound.

JPY—Japanese yen.

USD—U.S. dollar.

 

At February 29, 2020, the counterparties had deposited in segregated accounts securities with a value of $762,000 in connection with open forward currency contracts.

 

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

 

19

 

 

Global Wellington Fund

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $1,111,723) 1,150,710
Affiliated Issuers (Cost $28,160) 28,165
Total Investments in Securities 1,178,875
Investment in Vanguard 53
Cash 40
Foreign Currency, at Value (Cost $1,505) 1,530
Receivables for Investment Securities Sold 21,586
Receivables for Accrued Income 5,234
Receivables for Capital Shares Issued 2,585
Variation Margin Receivable—Futures Contracts 8
Unrealized Appreciation—Forward Currency Contracts 411
Total Assets 1,210,322
Liabilities  
Payables for Investment Securities Purchased 37,255
Payables for Capital Shares Redeemed 5,528
Payables to Investment Advisor 463
Payables to Vanguard 117
Variation Margin Payable—Futures Contracts 90
Unrealized Depreciation—Forward Currency Contracts 1,729
Total Liabilities 45,182
Net Assets 1,165,140
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 1,119,938
Total Distributable Earnings (Loss) 45,202
Net Assets 1,165,140
   
Investor Shares—Net Assets  
Applicable to 8,881,334 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 189,539
Net Asset Value Per Share—Investor Shares $21.34
   
Admiral Shares—Net Assets  
Applicable to 36,561,332 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 975,601
Net Asset Value Per Share—Admiral Shares $26.68

 

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

  

20

 

 

Global Wellington Fund

 

Statement of Operations

 

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Dividends1 7,407
Interest2 4,881
Securities Lending—Net 5
Total Income 12,293
Expenses  
Investment Advisory Fees—Note B  
Basic Fee 852
Performance Adjustment 32
The Vanguard Group—Note C  
Management and Administrative—Investor Shares 259
Management and Administrative—Admiral Shares 883
Marketing and Distribution—Investor Shares 16
Marketing and Distribution—Admiral Shares 36
Custodian Fees 26
Shareholders’ Reports—Investor Shares 5
Shareholders’ Reports—Admiral Shares 8
Trustees’ Fees and Expenses 1
Total Expenses 2,118
Expenses Paid Indirectly (8)
Net Expenses 2,110
Net Investment Income 10,183
Realized Net Gain (Loss)  
Investment Securities Sold2 10,671
Futures Contracts (64)
Forward Currency Contracts 2,868
Foreign Currencies 25
Realized Net Gain (Loss) 13,500
Change in Unrealized Appreciation (Depreciation)  
Investment Securities2 (18,653)
Futures Contracts (228)
Forward Currency Contracts (1,924)
Foreign Currencies 53
Change in Unrealized Appreciation (Depreciation) (20,752)
Net Increase (Decrease) in Net Assets Resulting from Operations 2,931
1Dividends are net of foreign withholding taxes of $330,000.

2Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $300,000, ($1,000), and $5,000, respectively. Purchases and sales are for temporary cash investment purposes.

 

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

 

21

 

 

Global Wellington Fund

 

Statement of Changes in Net Assets

 

   Six Months Ended  Year Ended
   February 29,  August 31,
   2020  2019
   ($000)  ($000)
Increase (Decrease) in Net Assets      
Operations      
Net Investment Income  10,183  20,611
Realized Net Gain (Loss)  13,500  (5,890)
Change in Unrealized Appreciation (Depreciation)  (20,752)  49,342
Net Increase (Decrease) in Net Assets Resulting from Operations  2,931  64,063
Distributions1      
Investor Shares  (2,061)  (3,787)
Admiral Shares  (10,568)  (17,340)
Total Distributions  (12,629)  (21,127)
Capital Share Transactions      
Investor Shares  14,346  (2,831)
Admiral Shares  157,705  75,712
Net Increase (Decrease) from Capital Share Transactions  172,051  72,881
Total Increase (Decrease)  162,353  115,817
Net Assets      
Beginning of Period  1,002,787  886,970
End of Period  1,165,140  1,002,787

1 Certain prior period numbers have been reclassified to conform with current period presentation.

 

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

 

22

 

 

Global Wellington Fund

 

Financial Highlights

 

Investor Shares

 

  Six Months Year Oct. 18,
  Ended Ended 20171 to
  Feb. 29, Aug. 31, Aug. 31,
For a Share Outstanding Throughout Each Period 2020 2019 2018
Net Asset Value, Beginning of Period $21.41 $20.51 $20.00
Investment Operations      
Net Investment Income2 .190 .443 .392
Net Realized and Unrealized Gain (Loss) on Investments (.015) .920 .379
Total from Investment Operations .175 1.363 .771
Distributions      
Dividends from Net Investment Income (.210) (.426) (.261)
Distributions from Realized Capital Gains (.035) (.037) —
Total Distributions (.245) (.463) (.261)
Net Asset Value, End of Period $21.34 $21.41 $20.51
Total Return3 0.78% 6.80% 3.88%
Ratios/Supplemental Data      
Net Assets, End of Period (Millions) $190 $176 $172
Ratio of Total Expenses to Average Net Assets 0.46%4 0.46%4 0.46%5,6
Ratio of Net Investment Income to Average Net Assets 1.72% 2.19% 2.32%6
Portfolio Turnover Rate 27%7 54% 44%

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

1Subscription 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.

2Calculated based on average shares outstanding.

3Total 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.

4Includes performance-based investment advisory fee increases (decreases) of 0.01% for 2020 and 0.01% for 2019.

5The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.45%.

6Annualized.

7Includes 5% attributable to mortgage-dollar-roll activity.

 

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

 

23

 

 

Global Wellington Fund

 

Financial Highlights

 

Admiral Shares

 

  Six Months Year Oct. 18,
  Ended Ended 20171 to
  Feb. 29, Aug. 31, Aug. 31,
For a Share Outstanding Throughout Each Period 2020 2019 2018
Net Asset Value, Beginning of Period $26.76 $25.65 $25.00
Investment Operations      
Net Investment Income2 .251 .583 .511
Net Realized and Unrealized Gain (Loss) on Investments (.011) 1.132 .480
Total from Investment Operations .240 1.715 .991
Distributions      
Dividends from Net Investment Income (.276) (.559) (.341)
Distributions from Realized Capital Gains (.044) (.046) —
Total Distributions (.320) (.605) (.341)
Net Asset Value, End of Period $26.68 $26.76 $25.65
Total Return3 0.86% 6.85% 3.99%
Ratios/Supplemental Data      
Net Assets, End of Period (Millions) $976 $826 $715
Ratio of Total Expenses to Average Net Assets 0.36%4 0.36%4 0.36%5,6
Ratio of Net Investment Income to Average Net Assets 1.82% 2.29% 2.42%6
Portfolio Turnover Rate 27%7 54% 44%

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

1Subscription 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.

2Calculated based on average shares outstanding.

3Total 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.

4Includes performance-based investment advisory fee increases (decreases) of 0.01% for 2020 and 0.01% for 2019.

5The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.35%.

6Annualized.

7Includes 5% attributable to mortgage-dollar-roll activity.

 

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

 

24

 

 

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 securities 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).

 

25

 

 

Global Wellington Fund

 

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 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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, the fund’s average investments in long and short futures contracts represented 2% and 1% 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 Schedule of Investments. 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 Schedule of Investments. Fluctuations in the value

 

26

 

 

Global Wellington Fund

 

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 forward currency contract gains (losses).

 

During the six months ended February 29, 2020, the fund’s average investment in forward currency contracts represented 11% 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. Mortgage Dollar Rolls: The fund enters into mortgage-dollar-roll transactions, in which the fund sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar securities in the future at a predetermined price. The proceeds of the securities sold in mortgage-dollar-roll transactions are typically invested in high-quality short-term fixed income securities. The fund forgoes principal and interest paid on the securities sold, and is compensated by interest earned on the proceeds of the sale and by a lower price on the securities to be repurchased. The fund has also entered into mortgage-dollar-roll transactions in which the fund buys mortgage-backed securities from a dealer pursuant to a TBA transaction and simultaneously agrees to sell similar securities in the future at a predetermined price. The securities bought in mortgage-dollar-roll transactions are used to cover an open TBA sell position. The fund continues to earn interest on mortgage-backed security pools already held and receives a lower price on the securities to be sold in the future. The fund accounts for mortgage-dollar-roll transactions as purchases and sales; as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to be received or paid in connection with open mortgage dollar rolls are included in Receivables for Investment Securities Sold or Payables for Investment Securities Purchased in the Statement of Assets and Liabilities.

 

7. 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, 2018–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

27

 

 

Global Wellington Fund

 

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

 

9. 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 counter-party’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.

 

10. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

28

 

 

Global Wellington Fund

 

11. 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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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 of the FTSE Developed Index and the Bloomberg Barclays Fixed Income Composite Index, since December 1, 2017. For the six months ended February 29, 2020, the investment advisory fee represented an effective annual basic rate of 0.15% of the fund’s average net assets before an increase of $32,000 (0.01%) 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.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 29, 2020, the fund had contributed to Vanguard capital in the amount of $53,000, representing less than 0.01% of the fund’s net assets and 0.02% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $8,000 (an annual rate of less than 0.01% 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 Schedule of Investments.

 

29

 

 

Global Wellington Fund

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
Common Stocks 416,806 331,089 — 747,895
U.S. Government and Agency Obligations — 49,146 — 49,146
Asset-Backed/Commercial Mortgage-Backed        
Securities — 17,718 — 17,718
Corporate Bonds — 278,548 — 278,548
Sovereign Bonds — 47,099 — 47,099
Taxable Municipal Bonds — 10,304 — 10,304
Temporary Cash Investments 28,165 — — 28,165
Total 444,971 733,904 — 1,178,875
Derivative Financial Instruments        
Assets        
Futures Contracts1 8 — — 8
Forward Currency Contracts — 411 — 411
Total 8 411 — 419
Liabilities        
Futures Contracts1 90 — — 90
Forward Currency Contracts — 1,729 — 1,729
Total 90 1,729 — 1,819

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

 

F. At February 29, 2020, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:

 

  Interest Rate Currency  
  Contracts Contracts Total
Statement of Assets and Liabilities Caption ($000) ($000) ($000)
Variation Margin Receivable—Futures Contracts 8 — 8
Unrealized Appreciation—Forward Currency Contracts — 411 411
Total Assets 8 411 419
       
Variation Margin Payable—Futures Contracts 90 — 90
Unrealized Depreciation—Forward Currency Contracts — 1,729 1,729
Total Liabilities 90 1,729 1,819

 

30

 

 

Global Wellington Fund

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 29, 2020, were:

 

Interest Rate Credit  
  Contracts Contracts Total
Realized Net Gain (Loss) on Derivatives ($000) ($000) ($000)
Futures Contracts (64) — (64)
Forward Currency Contracts — 2,868 2,868
Realized Net Gain (Loss) on Derivatives (64) 2,868 2,804
Change in Unrealized Appreciation (Depreciation) on Derivatives      
Futures Contracts (228) — (228)
Forward Currency Contracts — (1,924) (1,924)
Change in Unrealized Appreciation (Depreciation) on Derivatives (228) (1,924) (2,152)

 

G. As of February 29, 2020, 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 $1,139,997
Gross Unrealized Appreciation $95,302
Gross Unrealized Depreciation (57,402)
Net Unrealized Appreciation (Depreciation) $37,900

 

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, 2019, the fund had available capital losses totaling $6,241,000 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, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

H. During the six months ended February 29, 2020, the fund purchased $336,162,000 of investment securities and sold $173,562,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $124,998,000 and $119,270,000, respectively.

 

31

 

 

Global Wellington Fund

 

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

 

  Six Months Ended     Year Ended
  February 29, 2020   August 31, 2019
  Amount Shares   Amount Shares
  ($000) (000)   ($000) (000)
Investor Shares          
Issued 43,230 1,943   57,984 2,861
Issued in Lieu of Cash Distributions 1,832 83   3,350 166
Redeemed (30,716) (1,383)   (64,165) (3,183)
Net Increase (Decrease)—Investor Shares 14,346 643   (2,831) (156)
Admiral Shares          
Issued 268,198 9,666   372,819 14,761
Issued in Lieu of Cash Distributions 9,201 333   14,816 586
Redeemed (119,694) (4,315)   (311,923) (12,339)
Net Increase (Decrease)—Admiral Shares 157,705 5,684   75,712 3,008

 

J. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

32

 

 

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 renewing the fund’s 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 reviewed the quality of the fund’s investment management services 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 subportfolio 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 performance of Wellington Management since the fund’s inception, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that the advisory arrangement should continue.

 

33

 

 

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 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 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.

 

34

 

 

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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.

 

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, www.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 www.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.

 

 

© 2020 The Vanguard Group, Inc.

All rights reserved.

Vanguard Marketing Corporation, Distributor.

 

Q15672 042020

 

 

 

 

   
   
   
   
Semiannual Report | February 29, 2020  
   
   
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

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 29, 2020

 

 

Beginning

Ending

Expenses

 

Account Value

Account Value

Paid During

Global Wellesley Income Fund

8/31/2019

2/29/2020

Period

Based on Actual Fund Return

 

 

 

Investor Shares

$1,000.00

$1,012.45

$2.05

Admiral™ Shares

1,000.00

1,013.14

1.55

Based on Hypothetical 5% Yearly Return

 

 

 

Investor Shares

$1,000.00

$1,022.82

$2.06

Admiral Shares

1,000.00

1,023.32

1.56

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 0.41% for Investor Shares and 0.31% 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 (182/366).

 

 2

 

 

Global Wellesley Income Fund

 

Country Allocation 

As of February 29, 2020

 

United States

50.1%

United Kingdom

7.5

France

6.7

Canada

5.8

Germany

5.2

Japan

4.4

Spain

2.9

Switzerland

2.8

Netherlands

2.3

China

1.7

Cayman Islands

1.5

Taiwan

1.1

Australia

1.0

Sweden

0.7

Portugal

0.7

Hong Kong

0.6

Greece

0.6

Italy

0.6

Belgium

0.5

Saudi Arabia

0.5

Supranational

0.5

Other

2.3

 

The table reflects the fund’s investments, except for short-term investments and derivatives.

 

 3

 

 

Global Wellesley Income Fund

 

Financial Statements (unaudited)

 

Schedule of Investments 

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

U.S. Government and Agency Obligations (7.3%)

 

 

 

United States (7.3%)

 

 

 

 

1,2

Fannie Mae Pool

3.070%

2/1/25

125

135

1,2

Fannie Mae Pool

2.780%

6/1/26

275

295

1,2

Fannie Mae Pool

3.000%

12/1/47–3/1/50

1,943

2,018

1,2

Fannie Mae Pool

4.000%

12/1/49

185

196

1,2

Fannie Mae REMICS

2.000%

9/25/40

160

161

1,2

Fannie Mae REMICS

3.500%

6/25/44–6/25/59

2,034

2,215

1,2

Fannie Mae REMICS

2.500%

5/25/45–3/25/53

1,006

1,030

1,2

Fannie Mae REMICS

3.000%

2/25/49

162

167

1,2

Freddie Mac Gold Pool

3.000%

11/1/47–12/1/47

2,469

2,580

1,2

Freddie Mac Gold Pool

3.500%

11/1/47–12/1/47

4,298

4,517

1,2

Freddie Mac Gold Pool

4.000%

10/1/48–12/1/48

384

407

1,2

Freddie Mac REMICS

4.000%

12/15/39–8/15/40

1,440

1,561

1,2

Freddie Mac REMICS

3.500%

9/15/40–11/15/40

476

490

1,2

Freddie Mac REMICS

1.750%

9/15/42

1,331

1,332

1

Ginnie Mae REMICS

2.750%

9/20/44

271

280

¤,1,2

UMBS Pool

2.500%

11/1/49–3/1/50

3,271

3,338

1,2

UMBS Pool

3.000%

12/1/49–1/1/50

7,115

7,338

1,2

UMBS Pool

4.000%

12/1/49

1,259

1,329

 

United States Treasury Note/Bond

1.125%

2/28/25

2,600

2,626

 

United States Treasury Note/Bond

1.750%

11/15/29

1,265

1,336

3

United States Treasury Note/Bond

2.875%

5/15/49

370

474

 

United States Treasury Note/Bond

2.250%

8/15/49

1,355

1,540

 

United States Treasury Strip Principal

0.000%

8/15/47

1,260

784

Total U.S. Government and Agency Obligations (Cost $34,747)

 

36,149

Asset-Backed/Commercial Mortgage-Backed Securities (3.3%)

 

 

Bermuda (0.0%)

 

 

 

 

1,4

START Ireland

4.089%

3/15/44

234

239
           

Canada (0.4%)

 

 

 

 

1,4

Chesapeake Funding II LLC 2018-2A

3.230%

8/15/30

580

589

4,5

Ford Auto Securitization Trust

2.354%

6/15/23

1,820

1,355

 

 

 

 

 

1,944

Cayman Islands (1.4%)

 

 

 

 

1,4,6

Atlas Senior Loan Fund V Ltd., 3M USD LIBOR + 1.260%

3.103%

7/16/29

900

899

1,4,6

KKR Clo 16 Ltd., 3M USD LIBOR + 1.250%

3.069%

1/20/29

435

435

1,4,6

KKR Clo 17 Ltd., 3M USD LIBOR + 1.340%

3.171%

4/15/29

875

877

1,4,6

Madison Park Funding XVIII Ltd., 3M USD LIBOR + 1.190%

3.009%

10/21/30

875

873

 

 4

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

1,4,6

Madison Park Funding XXX Ltd., 3M USD LIBOR + 0.750%

2.581%

4/15/29

1,570

1,561

1,4,6

Magnetite VII Ltd., 3M USD LIBOR + 0.800%

2.631%

1/15/28

1,510

1,507

1,4,6

Race Point IX CLO Ltd., 3M USD LIBOR + 1.210%

3.041%

10/15/30

870

868

 

 

 

 

 

7,020

Spain (0.2%)

 

 

 

 

7

Bankia SA

4.125%

3/24/36

550

972
           

United States (1.3%)

 

 

 

 

1,4

Angel Oak Mortgage Trust I LLC 2018-3

3.649%

9/25/48

406

414

1,4

ARI Fleet Lease Trust 2018-A

2.550%

10/15/26

102

102

1,4

Castlelake Aircraft Securitization Trust 2019-1

3.967%

4/15/39

223

228

1,4

Chesapeake Funding II LLC 2017-2A

1.990%

5/15/29

226

226

1,4

COLT 2018-1 Mortgage Loan Trust

2.930%

2/25/48

80

80

1,4

COLT 2018-3 Mortgage Loan Trust

3.692%

10/26/48

116

117

1,4

DB Master Finance LLC

3.787%

5/20/49

129

134

1,4

DB Master Finance LLC

4.021%

5/20/49

114

122

1,4

Deephaven Residential Mortgage Trust 2018-1

2.976%

12/25/57

153

153

1,4

Enterprise Fleet Financing LLC Series 2018-1

2.870%

10/20/23

399

402

1,4

First Investors Auto Owner Trust

2.410%

12/15/22

89

89

1,4

First Investors Auto Owner Trust 2016-1

3.410%

4/18/22

206

207

1

Ford Credit Floorplan Master Owner Trust A

2.440%

9/15/26

210

217

1,2

Freddie Mac Multifamily Structured Pass Through Certificates

2.282%

7/25/26

235

245

1,4

GreatAmerica Leasing Receivables Funding LLC Series 2018-1

2.600%

6/15/21

174

175

1,4

GreatAmerica Leasing Receivables Funding LLC Series 2018-1

2.830%

6/17/24

183

186

1,4

MMAF Equipment Finance LLC 2017-B

2.210%

10/17/22

141

142

1,2

Seasoned Credit Risk Transfer Trust Series 2018-4

3.500%

3/25/58

235

247

1,2

Seasoned Credit Risk Transfer Trust Series 2019-1

3.500%

7/25/58

242

258

1,2

Seasoned Credit Risk Transfer Trust Series 2019-3

3.500%

10/25/58

372

395

1,4

SoFi Consumer Loan Program 2019-3 Trust

2.900%

5/25/28

903

912

1,4

Towd Point Mortgage Trust 2018-1

3.000%

1/25/58

254

260

1,4

Vantage Data Centers LLC 2018-1A

4.072%

2/16/43

323

337

1,4

Vantage Data Centers LLC 2019-1A

3.188%

7/15/44

139

143

1,4

Verus Securitization Trust 2019-2

3.211%

5/25/59

262

267

1,4

Westlake Automobile Receivables Trust

2.980%

1/18/22

182

183

 

 

 

 

 

6,241

Total Asset-Backed/Commercial Mortgage-Backed Securities (Cost $16,184)

 

16,416

Corporate Bonds (42.0%)

 

 

 

 

Australia (0.6%)

 

 

 

 

1,4

Macquarie Group Ltd.

4.150%

3/27/24

1,125

1,202

1,4

National Australia Bank Ltd.

3.933%

8/2/34

850

918

4

WEA Finance LLC

4.125%

9/20/28

610

694

4

WEA Finance LLC

4.625%

9/20/48

225

283

 

 

 

 

 

3,097

 

 5

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

Belgium (0.5%)

 

 

 

 

 

Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide Inc.

4.900%

2/1/46

700

862

8

Anheuser-Busch InBev SA/NV

1.750%

3/7/25

325

426

 

Anheuser-Busch InBev Worldwide Inc.

4.600%

4/15/48

540

645

 

Anheuser-Busch InBev Worldwide Inc.

4.375%

4/15/38

480

554

 

 

 

 

 

2,487

Canada (1.1%)

 

 

 

 

 

Bank of Nova Scotia

2.700%

8/3/26

990

1,038

5

Bell Canada Inc.

3.350%

3/22/23

950

736

 

Fortis Inc.

3.055%

10/4/26

625

654

 

Nutrien Ltd.

4.125%

3/15/35

750

833

5

Royal Bank of Canada

2.949%

5/1/23

1,825

1,410

 

TransCanada PipeLines Ltd.

4.875%

1/15/26

475

538

 

 

 

 

 

5,209

Chile (0.2%)

 

 

 

 

4

Banco Santander Chile

2.700%

1/10/25

1,050

1,064
           

China (0.4%)

 

 

 

 

 

Alibaba Group Holding Ltd.

3.400%

12/6/27

690

743

4

Tencent Holdings Ltd.

3.975%

4/11/29

405

453

4

Tencent Holdings Ltd.

3.595%

1/19/28

690

744

 

 

 

 

 

1,940

Denmark (0.2%)

 

 

 

 

1,7

Danske Bank A/S

0.500%

8/27/25

925

1,012
           

France (2.9%)

 

 

 

 

1,7

AXA SA

5.125%

7/4/43

750

950

7

Banque Federative du Credit Mutuel SA

1.250%

1/14/25

1,100

1,278

7

BNP Paribas SA

1.500%

11/17/25

800

935

1,4

BNP Paribas SA

2.819%

11/19/25

360

372

4

BPCE SA

3.250%

1/11/28

500

533

7

BPCE SA

1.125%

1/18/23

900

1,019

4

BPCE SA

5.700%

10/22/23

400

448

7

BPCE SA

2.875%

4/22/26

1,300

1,626

7

Credit Mutuel Arkea SA

1.625%

4/15/26

1,700

1,985

4

Danone SA

2.947%

11/2/26

285

303

7

Orange SA

1.000%

5/12/25

1,200

1,384

7

Orange SA

2.000%

1/15/29

300

377

7

Orange SA

0.500%

9/4/32

700

754

7

RCI Banque SA

0.750%

9/26/22

625

692

7

RCI Banque SA

1.375%

3/8/24

575

643

7

Societe Generale SA

1.000%

4/1/22

600

675

7

Veolia Environnement SA

1.590%

1/10/28

400

488

 

 

 

 

 

14,462

Germany (3.5%)

 

 

 

 

4

Bayer US Finance II LLC

4.250%

12/15/25

860

962

7

Daimler AG

0.875%

1/12/21

3,100

3,452

7

Deutsche Bank AG

2.625%

2/12/26

3,100

3,669

8

Deutsche Telekom AG

3.125%

2/6/34

675

961

8

E.ON International Finance BV

5.875%

10/30/37

200

385

7

E.ON SE

1.625%

5/22/29

550

669

7

E.ON SE

0.375%

8/23/21

1,775

1,971

 

 6

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

8

innogy Finance BV

4.750%

1/31/34

500

839

7

Volkswagen Leasing GmbH

2.625%

1/15/24

525

626

7

Volkswagen Leasing GmbH

1.375%

1/20/25

1,825

2,075

7

Wintershall Dea Finance BV

0.840%

9/25/25

1,500

1,669

 

 

 

 

 

17,278

Italy (0.5%)

 

 

 

 

4

Intesa Sanpaolo SPA

4.000%

9/23/29

925

980

1,7

UniCredit SPA

4.875%

2/20/29

1,400

1,686

 

 

 

 

 

2,666

Japan (0.3%)

 

 

 

 

9

Toyota Finance Australia Ltd.

2.500%

12/7/20

2,075

1,366
           

Mexico (0.3%)

 

 

 

 

 

America Movil SAB de CV

3.625%

4/22/29

250

277

4

Infraestructura Energetica Nova SAB de CV

4.875%

1/14/48

1,090

1,105

 

 

 

 

 

1,382

Netherlands (0.4%)

 

 

 

 

7

ABN AMRO Bank NV

2.500%

11/29/23

1,025

1,237

8

Cooperatieve Rabobank UA

4.625%

5/23/29

200

309

 

Shell International Finance BV

4.000%

5/10/46

425

503

 

 

 

 

 

2,049

Norway (0.1%)

 

 

 

 

4

Aker BP ASA

3.750%

1/15/30

700

705

 

 

 

 

 

 

South Korea (0.0%)

 

 

 

 

4

SK Telecom Co. Ltd.

3.750%

4/16/23

200

211

 

 

 

 

 

 

Spain (1.9%)

 

 

 

 

7

Banco de Sabadell SA

1.750%

5/10/24

1,700

1,908

7

Banco de Sabadell SA

1.625%

3/7/24

1,200

1,379

7

CaixaBank SA

1.750%

10/24/23

1,700

1,953

7

Iberdrola International BV

2.875%

11/11/20

1,800

2,029

7

Telefonica Emisiones SAU

2.242%

5/27/22

800

930

 

Telefonica Emisiones SAU

4.665%

3/6/38

1,070

1,245

 

 

 

 

 

9,444

Switzerland (0.6%)

 

 

 

 

1,7

Credit Suisse Group AG

1.250%

7/17/25

600

683

1,4

Credit Suisse Group AG

2.593%

9/11/25

410

417

4

Roche Holdings Inc.

2.625%

5/15/26

850

902

1,4

UBS Group AG

3.126%

8/13/30

885

936

 

 

 

 

 

2,938

United Kingdom (4.1%)

 

 

 

 

 

AstraZeneca plc

4.000%

1/17/29

720

826

1

Barclays plc

3.932%

5/7/25

785

835

 

BAT Capital Corp.

3.222%

8/15/24

675

708

 

BAT Capital Corp.

3.557%

8/15/27

825

869

5

BP Capital Markets plc

3.470%

5/15/25

1,325

1,053

8

British Telecommunications plc

3.125%

11/21/31

1,475

2,036

4

CK Hutchison International 17 II Ltd.

2.750%

3/29/23

975

1,007

8

CPUK Finance Ltd.

3.588%

8/28/25

1,200

1,671

7

FCE Bank plc

0.869%

9/13/21

500

555

1,8

HSBC Holdings plc

2.256%

11/13/26

1,500

1,960

 

 7

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

6

HSBC Holdings plc, 3M USD LIBOR + 1.000%

2.692%

5/18/24

255

258

7

Imperial Brands Finance plc

2.250%

2/26/21

2,525

2,834

4

Sky plc

3.125%

11/26/22

825

862

1,4

Standard Chartered plc

2.744%

9/10/22

905

915

 

Trinity Acquisition plc

4.400%

3/15/26

888

1,000

 

Vodafone Group plc

4.375%

5/30/28

2,600

2,988

 

 

 

 

 

20,377

United States (24.2%)

 

 

 

 

 

AbbVie Inc.

4.450%

5/14/46

370

424

4

AbbVie Inc.

4.050%

11/21/39

210

231

 

Alabama Power Co.

4.300%

7/15/48

275

339

 

Allergan Funding SCS

4.750%

3/15/45

275

331

 

Allergan Funding SCS

3.800%

3/15/25

550

599

7

Altria Group Inc.

2.200%

6/15/27

385

460

 

Amazon.com Inc.

4.800%

12/5/34

150

199

7

American International Group Inc.

1.500%

6/8/23

875

1,005

 

American International Group Inc.

4.250%

3/15/29

650

744

 

American Tower Corp.

4.400%

2/15/26

325

366

 

American Tower Corp.

5.000%

2/15/24

200

224

 

Amgen Inc.

4.663%

6/15/51

350

437

 

Anthem Inc.

4.101%

3/1/28

665

743

 

Anthem Inc.

3.500%

8/15/24

325

349

 

Anthem Inc.

4.375%

12/1/47

290

331

 

Apple Inc.

2.750%

1/13/25

645

680

 

AT&T Inc.

4.125%

2/17/26

700

778

7

AT&T Inc.

2.450%

3/15/35

380

470

7

AT&T Inc.

1.875%

12/4/20

2,425

2,705

 

AT&T Inc.

3.600%

7/15/25

950

1,027

 

AT&T Inc.

4.900%

8/15/37

200

239

7

AT&T Inc.

3.150%

9/4/36

250

334

 

AutoZone Inc.

3.125%

4/21/26

425

451

1

Bank of America Corp.

3.593%

7/21/28

1,550

1,687

 

Bank of America Corp.

3.300%

1/11/23

700

735

1

Bank of America Corp.

4.271%

7/23/29

1,460

1,677

4

Bayer US Finance LLC

3.375%

10/8/24

765

817

 

Boeing Co.

3.250%

3/1/28

617

667

 

Boeing Co.

3.450%

11/1/28

175

190

 

Boeing Co.

3.200%

3/1/29

300

321

 

Boeing Co.

2.950%

2/1/30

128

134

 

Boeing Co.

3.375%

6/15/46

175

179

4

Boston Gas Co.

3.001%

8/1/29

105

113

 

Boston Scientific Corp.

4.000%

3/1/29

55

63

 

Boston Scientific Corp.

4.550%

3/1/39

550

681

 

Brandywine Operating Partnership LP

3.950%

11/15/27

800

873

 

Broadcom Corp. / Broadcom Cayman Finance Ltd.

3.625%

1/15/24

850

890

 

Broadcom Corp. / Broadcom Cayman Finance Ltd.

3.875%

1/15/27

665

698

4

Broadcom Inc.

4.250%

4/15/26

60

65

4

Brooklyn Union Gas Co.

4.273%

3/15/48

760

931

7

Capital One Financial Corp.

1.650%

6/12/29

1,425

1,664

4

Cargill Inc.

4.760%

11/23/45

275

373

4

Carrier Global Corp.

2.722%

2/15/30

130

132

 

 8

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

 

Charter Communications Operating LLC / Charter Communications Operating Capital

6.384%

10/23/35

305

402

7

Chubb INA Holdings Inc.

1.400%

6/15/31

1,125

1,319

7

Chubb INA Holdings Inc.

0.875%

6/15/27

1,010

1,149

 

Cigna Corp.

4.375%

10/15/28

435

494

 

Cimarex Energy Co.

4.375%

6/1/24

859

906

1

Citigroup Inc.

3.520%

10/27/28

1,930

2,087

8

Citigroup Inc.

1.750%

10/23/26

375

484

4

Cleco Corporate Holdings LLC

3.375%

9/15/29

270

282

 

Cleco Corporate Holdings LLC

4.973%

5/1/46

395

477

 

Cleco Corporate Holdings LLC

3.743%

5/1/26

1,140

1,217

 

Comcast Corp.

4.600%

10/15/38

265

333

 

Comcast Corp.

3.950%

10/15/25

255

286

 

Comcast Corp.

4.000%

3/1/48

20

24

 

Comcast Corp.

4.049%

11/1/52

10

12

 

Comcast Corp.

3.999%

11/1/49

60

71

 

Comcast Corp.

6.500%

11/15/35

775

1,169

8

Comcast Corp.

1.500%

2/20/29

465

595

 

CommonSpirit Health

3.347%

10/1/29

145

154

 

CommonSpirit Health

4.187%

10/1/49

175

192

 

CommonSpirit Health

4.200%

8/1/23

895

968

 

Conagra Brands Inc.

4.600%

11/1/25

200

224

 

Conagra Brands Inc.

5.300%

11/1/38

345

420

 

Conagra Brands Inc.

5.400%

11/1/48

20

25

 

Cottage Health Obligated Group

3.304%

11/1/49

215

232

4

Cox Communications Inc.

4.600%

8/15/47

650

760

 

CSX Corp.

4.300%

3/1/48

405

487

 

CVS Health Corp.

4.100%

3/25/25

1,370

1,497

 

CVS Health Corp.

2.875%

6/1/26

1,000

1,038

 

Dignity Health

4.500%

11/1/42

202

237

 

Dignity Health

3.812%

11/1/24

659

713

 

Discover Bank

4.200%

8/8/23

700

751

 

Dominion Energy Gas Holdings LLC

4.600%

12/15/44

625

739

 

Dominion Energy Inc.

2.715%

8/15/21

125

127

 

Dominion Energy South Carolina Inc.

4.600%

6/15/43

280

363

 

Dominion Energy South Carolina Inc.

6.625%

2/1/32

156

227

 

Dominion Energy South Carolina Inc.

5.450%

2/1/41

250

345

 

Dominion Energy South Carolina Inc.

5.300%

5/15/33

129

173

 

Duke Energy Progress LLC

4.200%

8/15/45

350

430

 

Duke Energy Progress LLC

4.100%

3/15/43

725

854

 

Energy Transfer Operating LP

4.900%

3/15/35

975

1,053

 

Energy Transfer Operating LP

5.000%

5/15/50

60

60

 

Enterprise Products Operating LLC

3.700%

1/31/51

100

99

 

Enterprise Products Operating LLC

3.950%

1/31/60

65

64

 

EQM Midstream Partners LP

4.750%

7/15/23

554

510

4

ERAC USA Finance LLC

4.500%

2/15/45

575

689

 

Evergy Inc.

2.900%

9/15/29

480

494

 

Exxon Mobil Corp.

2.275%

8/16/26

865

897

 

FedEx Corp.

4.100%

2/1/45

65

67

 

FedEx Corp.

4.750%

11/15/45

187

208

 

FedEx Corp.

4.550%

4/1/46

95

104

 

FedEx Corp.

4.050%

2/15/48

28

28

 

FedEx Corp.

4.950%

10/17/48

175

200

7

Fidelity National Information Services Inc.

2.000%

5/21/30

645

788

 

 9

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

7

Fidelity National Information Services Inc.

1.500%

5/21/27

1,405

1,646

 

FirstEnergy Corp.

3.900%

7/15/27

825

912

 

Fiserv Inc.

3.200%

7/1/26

320

340

 

Ford Motor Credit Co. LLC

3.815%

11/2/27

650

618

8

Ford Motor Credit Co. LLC

4.535%

3/6/25

2,125

2,886

4

Fox Corp.

4.030%

1/25/24

145

157

 

General Motors Co.

5.000%

10/1/28

1,095

1,198

 

General Motors Co.

4.200%

10/1/27

550

580

 

General Motors Financial Co. Inc.

3.450%

4/10/22

1,535

1,574

 

Georgia Power Co.

4.300%

3/15/42

940

1,099

 

Georgia Power Co.

3.700%

1/30/50

35

39

1

Goldman Sachs Group Inc.

4.223%

5/1/29

635

720

1

Goldman Sachs Group Inc.

3.272%

9/29/25

1,425

1,503

1

Goldman Sachs Group Inc.

3.814%

4/23/29

235

258

 

HCA Inc.

5.250%

6/15/49

300

350

 

Healthpeak Properties Inc.

4.000%

6/1/25

475

521

 

Healthpeak Properties Inc.

3.000%

1/15/30

315

330

 

Hess Corp.

7.300%

8/15/31

515

686

 

International Business Machines Corp.

3.300%

5/15/26

500

543

 

International Paper Co.

4.350%

8/15/48

475

525

 

John Deere Capital Corp.

3.450%

3/13/25

830

904

7

JPMorgan Chase & Co.

3.875%

9/23/20

1,400

1,581

1

JPMorgan Chase & Co.

3.964%

11/15/48

850

1,018

1

JPMorgan Chase & Co.

3.782%

2/1/28

1,200

1,328

 

Kaiser Foundation Hospitals

4.875%

4/1/42

55

75

4

KeySpan Gas East Corp.

2.742%

8/15/26

500

518

 

Lockheed Martin Corp.

4.090%

9/15/52

118

150

 

Lowe’s Cos. Inc.

4.550%

4/5/49

440

537

 

Marsh & McLennan Cos. Inc.

4.375%

3/15/29

705

819

 

McDonald’s Corp.

4.450%

9/1/48

250

308

7

Medtronic Global Holdings SCA

1.125%

3/7/27

1,275

1,490

7

Medtronic Global Holdings SCA

1.625%

3/7/31

760

934

 

Merck & Co. Inc.

4.000%

3/7/49

330

412

 

Merck & Co. Inc.

3.400%

3/7/29

500

559

 

Mercy Health

3.555%

8/1/27

535

582

4

Metropolitan Life Global Funding I

3.000%

9/19/27

700

753

 

Microsoft Corp.

3.700%

8/8/46

650

789

 

Molson Coors Beverage Co.

3.000%

7/15/26

425

441

5

Molson Coors International LP

2.840%

7/15/23

1,825

1,385

1

Morgan Stanley

3.772%

1/24/29

550

610

 

Morgan Stanley

3.125%

7/27/26

2,100

2,229

4

MPLX LP

3.500%

12/1/22

1,325

1,378

 

MPLX LP

4.125%

3/1/27

805

863

 

MPLX LP

4.000%

3/15/28

200

211

 

National Retail Properties Inc.

3.900%

6/15/24

400

434

 

NextEra Energy Capital Holdings Inc.

3.250%

4/1/26

90

96

 

NextEra Energy Capital Holdings Inc.

3.500%

4/1/29

140

153

 

NextEra Energy Capital Holdings Inc.

2.750%

11/1/29

255

267

4

Northwestern Mutual Life Insurance Co.

3.850%

9/30/47

280

328

4

Northwestern Mutual Life Insurance Co.

3.625%

9/30/59

12

13

 

Occidental Petroleum Corp.

7.500%

5/1/31

135

176

 

Oglethorpe Power Corp.

4.550%

6/1/44

20

22

 

Oglethorpe Power Corp.

4.250%

4/1/46

81

85

 

Oglethorpe Power Corp.

5.250%

9/1/50

250

311

 

 10

 

 

Global Wellesley Income Fund

 

         
        Face Market
      Maturity Amount Value●
    Coupon Date ($000) ($000)
1,4 Oglethorpe Power Corp. 6.191% 1/1/31 285 345
  Oracle Corp. 4.000% 11/15/47 265 321
4 Otis Worldwide Corp. 3.112% 2/15/40 205 210
4 Otis Worldwide Corp. 3.362% 2/15/50 250 259
4 Penske Truck Leasing Co. LP / PTL Finance Corp.  4.250%  1/17/23  1,125  1,207
4 Penske Truck Leasing Co. LP / PTL Finance Corp.  3.950%  3/10/25  740  809
4 Penske Truck Leasing Co. LP / PTL Finance Corp.  2.700%  11/1/24  180  187
7 Philip Morris International Inc. 2.875% 3/3/26 500 631
  Phillips 66 Partners LP 3.750% 3/1/28 400 430
  PNC Bank NA 3.250% 1/22/28 600 665
  PPL Capital Funding Inc. 3.100% 5/15/26 1,125 1,193
1 Providence St. Joseph Health Obligated Group 3.930% 10/1/48 245 300
  Santander Holdings USA Inc. 3.700% 3/28/22 1,700 1,760
4 SBA Tower Trust 3.448% 3/15/23 755 796
4 SBA Tower Trust 2.877% 7/9/21 885 894
  Sempra Energy 3.250% 6/15/27 1,000 1,066
  Sierra Pacific Power Co. 2.600% 5/1/26 180 188
  Simon Property Group LP 2.450% 9/13/29 310 316
  Southern California Edison Co. 3.700% 8/1/25 30 33
  Southern California Edison Co. 4.125% 3/1/48 475 542
1,4 Sprint Spectrum Co LLC / Sprint Spectrum Co II LLC / Sprint Spectrum Co III LLC  4.738%  3/20/25  1,100  1,179
  SSM Health Care Corp. 3.823% 6/1/27 380 422
  Starbucks Corp. 4.500% 11/15/48 335 401
  Sunoco Logistics Partners Operations LP 5.350% 5/15/45 175 195
  Synchrony Bank 3.000% 6/15/22 550 565
4 Teachers Insurance & Annuity Assn. of America  4.900%  9/15/44  635  838
4 Tennessee Gas Pipeline Co. LLC 2.900% 3/1/30 1,095 1,100
  Toledo Hospital 5.325% 11/15/28 410 478
  Toledo Hospital 5.750% 11/15/38 155 195
  Truist Bank 3.300% 5/15/26 975 1,048
  Tyson Foods Inc. 5.100% 9/28/48 200 261
  Union Pacific Corp. 3.700% 3/1/29 190 214
  Union Pacific Corp. 4.300% 3/1/49 120 145
  Union Pacific Corp. 3.750% 2/5/70 265 278
1 United Airlines 2018-1 Class B Pass Through Trust  4.600%  3/1/26  69  73
  United Technologies Corp. 3.950% 8/16/25 310 347
7 United Technologies Corp. 1.150% 5/18/24 395 454
  United Technologies Corp. 4.450% 11/16/38 550 680
  UnitedHealth Group Inc. 4.625% 7/15/35 90 113
  UnitedHealth Group Inc. 3.850% 6/15/28 415 469
  Verizon Communications Inc. 4.522% 9/15/48 675 870
  Verizon Communications Inc. 5.012% 8/21/54 250 350
  Verizon Communications Inc. 4.672% 3/15/55 144 193
8 Verizon Communications Inc. 3.375% 10/27/36 300 448
  Walt Disney Co. 6.200% 12/15/34 650 958
  Wells Fargo & Co. 4.750% 12/7/46 700 883
  Wells Fargo & Co. 4.300% 7/22/27 325 365
5 Wells Fargo & Co. 2.975% 5/19/26 600 464

   

 11

 

  

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

 

Welltower Inc.

4.000%

6/1/25

325

357

 

Western Midstream Operating LP

4.050%

2/1/30

935

919

 

 

 

 

 

119,538

Total Corporate Bonds (Cost $198,500)

 

 

 

207,225

Sovereign Bonds (6.7%)

 

 

 

 

Australia (0.3%)

 

 

 

 

9

Commonwealth of Australia

2.250%

11/21/22

1,185

809

9

Commonwealth of Australia

2.750%

11/21/27

160

120

9

Commonwealth of Australia

2.250%

5/21/28

870

635

 

 

 

 

 

1,564

Canada (0.7%)

 

 

 

 

5

City of Montreal

3.500%

12/1/38

910

792

5

City of Toronto

3.200%

8/1/48

1,000

878

5

Province of Ontario

2.900%

6/2/28

815

656

10

Province of Ontario

0.250%

6/28/29

1,075

1,193

 

 

 

 

 

3,519

Chile (0.2%)

 

 

 

 

 

Corp. Nacional del Cobre de Chile

3.625%

8/1/27

800

864
           

China (0.4%)

 

 

 

 
4

Sinopec Group Overseas Development 2018 Ltd.

2.950%

11/12/29

845

886

4

State Grid Overseas Investment 2016 Ltd.

2.750%

5/4/22

1,110

1,135

 

 

 

 

 

2,021

Colombia (0.2%)

 

 

 

 

 

Republic of Colombia

4.000%

2/26/24

1,045

1,108
           

Japan (1.5%)

 

 

 

 

11

Japan

0.100%

12/20/28

699,850

6,677

11

Japan

0.100%

3/20/29

42,600

406

11

Japan

0.100%

6/20/29

12,000

115

 

 

 

 

 

7,198

Panama (0.3%)

 

 

 

 

1,4

Empresa de Transmision Electrica SA

5.125%

5/2/49

415

493

1

Republic of Panama

3.160%

1/23/30

825

870

 

 

 

 

 

1,363

Qatar (0.4%)

 

 

 

 

4

State of Qatar

3.875%

4/23/23

785

832

4

State of Qatar

4.000%

3/14/29

595

675

4

State of Qatar

5.103%

4/23/48

285

380

 

 

 

 

 

1,887

Saudi Arabia (0.5%)

 

 

 

 

4

Kingdom of Saudi Arabia

2.875%

3/4/23

1,555

1,594

4

Saudi Arabian Oil Co.

3.500%

4/16/29

785

832

 

 

 

 

 

2,426

Singapore (0.1%)

 

 

 

 

4

Temasek Financial I Ltd.

3.625%

8/1/28

530

612

 

 12

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)

Spain (0.2%)

 

 

 

 

4,7

Kingdom of Spain

0.600%

10/31/29

775

885
           

Supranational (0.4%)

 

 

 

 

7

European Financial Stability Facility

1.375%

5/31/47

900

1,309

7

European Investment Bank

0.050%

10/13/34

775

872

 

 

 

 

 

2,181

Switzerland (0.1%)

 

 

 

 

4

Syngenta Finance NV

5.182%

4/24/28

400

451
           

United Arab Emirates (0.3%)

 

 

 

 

 

Emirate of Abu Dhabi

3.125%

10/11/27

1,435

1,539
           

United Kingdom (1.1%)

 

 

 

 

8

United Kingdom

1.500%

1/22/21

955

1,235

8

United Kingdom

0.500%

7/22/22

775

998

8

United Kingdom

1.250%

7/22/27

445

611

8

United Kingdom

3.500%

1/22/45

1,200

2,416

 

 

 

 

 

5,260

Total Sovereign Bonds (Cost $31,438)

 

 

 

32,878

Taxable Municipal Bonds (1.7%)

 

 

 

 

 

Bay Area Toll Authority California Toll Bridge Revenue (San Francisco Bay Area)

2.574%

4/1/31

190

201

 

California GO

7.550%

4/1/39

260

446

 

California GO

7.625%

3/1/40

25

43

 

Chicago IL Transit Authority Sales Tax Receipts Revenue

6.899%

12/1/40

40

58

 

Chicago IL Transit Authority Transfer Tax Receipts Revenue

6.899%

12/1/40

645

944

 

Chicago IL Transit Authority

6.300%

12/1/21

45

47

 

County of Broward FL Airport System Revenue

3.477%

10/1/43

80

86

 

Foothill-Eastern CA Transportation Corridor Agency

4.094%

1/15/49

45

49
12

Foothill-Eastern CA Transportation Corridor Agency

3.924%

1/15/53

315

339

 

Georgia Municipal Electric Power Authority Revenue

6.637%

4/1/57

665

1,002

 

Georgia Municipal Electric Power Authority Revenue

6.655%

4/1/57

100

154

 

Grand Parkway Transportation Corp

3.236%

10/1/52

210

214

 

Illinois GO

5.100%

6/1/33

515

603

12

Kansas Development Finance Authority

5.371%

5/1/26

860

967

 

Massachusetts School Building Authority Dedicated Sales Tax Revenue

3.395%

10/15/40

135

144

 

New York Metropolitan Transportation Authority Revenue (Transit Revenue)

6.668%

11/15/39

155

239

 

New York State Dormitory Authority Revenue (Personal Income Tax)

3.110%

2/15/39

210

237

 

North Texas Tollway Authority System Revenue

6.718%

1/1/49

75

135

 

 13

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

 

 

Face

Market

 

 

 

Maturity

Amount

Value●

 

 

Coupon

Date

($000)

($000)
13

Philadelphia PA Authority for Industrial Development

6.550%

10/15/28

525

702

 

Sales Tax Securitization Corp. Illinois Revenue

4.787%

1/1/48

545

732

 

South Carolina Public Service Authority Revenue

2.388%

12/1/23

770

793

 

State of Connecticut

5.770%

3/15/25

250

304

Total Taxable Municipal Bonds (Cost $7,447)

 

 

 

8,439
         

 

 

 

 

Shares

 

Common Stocks (35.0%)

 

 

 

 

Canada (3.4%)

 

 

 

 

 

TC Energy Corp.

 

 

94,990

4,951

 

Bank of Nova Scotia

 

 

94,349

4,936

^

Enbridge Inc.

 

 

98,023

3,648

 

Royal Bank of Canada

 

 

45,874

3,412

 

 

 

 

 

16,947

China (0.8%)

 

 

 

 

 

ENN Energy Holdings Ltd.

 

 

184,100

2,077

 

Guangdong Investment Ltd.

 

 

1,074,000

2,039

 

 

 

 

 

4,116

France (3.5%)

 

 

 

 

 

Axa SA

 

 

206,414

4,798

 

Vinci SA

 

 

44,445

4,491

 

Total SA

 

 

98,927

4,276

 

Nexity SA

 

 

85,524

3,957

 

 

 

 

 

17,522

Germany (1.4%)

 

 

 

 

 

E.On Se

 

 

354,414

4,117

 

Volkswagen AG Preference Shares

 

 

18,153

3,014

 

 

 

 

 

7,131

Greece (0.5%)

 

 

 

 

 

Hellenic Telecommunications Organization SA

 

 

188,306

2,679
           

Hong Kong (0.6%)

 

 

 

 

 

AIA Group Ltd.

 

 

275,600

2,762
           

Japan (2.5%)

 

 

 

 

 

Mitsubishi UFJ Financial Group Inc.

 

 

853,400

4,170

 

Tokio Marine Holdings Inc.

 

 

58,800

3,142

 

KDDI Corp.

 

 

102,700

2,901

 

Isuzu Motors Ltd.

 

 

223,900

2,095

 

 

 

 

 

12,308

Netherlands (1.8%)

 

 

 

 

4

ABN AMRO Bank NV

 

 

256,119

3,513

 

Koninklijke KPN NV

 

 

1,256,847

3,048

 

Koninklijke Philips NV

 

 

50,341

2,156

 

 

 

 

 

8,717

Portugal (0.6%)

 

 

 

 

 

Galp Energia SGPS SA

 

 

224,000

3,090

 

 14

 

 

Global Wellesley Income Fund

 

 

 
 

 

 

Market
 

 

 

Value●
 

 

Shares

($000)

Spain (0.5%)

 

 
*

    Iberdrola SA

198,683

2,275
       

Sweden (0.7%)

 

 
 

Millicom International Cellular SA

75,701

3,497
       

Switzerland (2.0%)

 

 
 

UBS Group AG

359,308

3,957
 

Novartis AG

45,525

3,830
 

Nestle SA

20,518

2,111
 

 

 

9,898

Taiwan (1.0%)

 

 
 

Taiwan Semiconductor Manufacturing Co. Ltd.

502,000

5,175
       

United Kingdom (2.0%)

 

 
 

AstraZeneca plc

39,578

3,474
 

Standard Chartered plc

449,292

3,251
 

National Grid plc

243,209

3,066
 

 

 

9,791

United States (13.5%)

 

 
 

Philip Morris International Inc.

65,463

5,359
 

Bank of America Corp.

161,473

4,602
 

Progressive Corp.

60,114

4,398
 

Verizon Communications Inc.

80,366

4,353
 

Cisco Systems Inc.

101,137

4,038
 

Comcast Corp.

98,948

4,001
 

Pfizer Inc.

116,184

3,883
 

Edison International

46,914

3,152
 

Microsoft Corp.

19,080

3,091
 

Home Depot Inc.

14,067

3,064
 

Baxter International Inc.

35,213

2,939
 

Anthem Inc.

10,738

2,761
 

FMC Corp.

29,482

2,745
 

Kellogg Co.

44,657

2,700
 

Emerson Electric Co.

39,237

2,516
 

Merck & Co. Inc.

32,644

2,499
 

Boeing Co.

8,834

2,430
 

Lockheed Martin Corp.

6,491

2,401
 

Expedia Group Inc.

21,671

2,137
 

TJX Cos. Inc.

34,915

2,088
 

Accenture plc Class A

9,723

1,756
 

 

 

66,913

Total Common Stocks (Cost $174,651)

 

172,821

 

 15

 

 

Global Wellesley Income Fund

 

 

 

 

 

 

Market

 

 

 

Value●

 

Coupon

Shares

($000)

Temporary Cash Investment (6.0%)

 

 

 

Money Market Fund (6.0%)

 

 

 

14,15  Vanguard Market Liquidity Fund (Cost $29,554)

1.706%

295,509

29,560

Total Investments (101.9%) (Cost $492,521)

 

 

503,488

Other Assets and Liabilities—Net (-1.9%)

 

 

(9,601)

Net Assets (100%)

 

 

493,887

Cost rounded to $000. 

●

See Note A in Notes to Financial Statements.

¤Includes securities purchased on a when-issued or delayed-delivery basis for which the fund has not taken delivery as of February 29, 2020.

^

Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $3,253,000.

*

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

Securities with a value of $429,000 have been segregated as initial margin for open futures contracts.

4

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 29, 2020, the aggregate value of these securities was $57,750,000, representing 11.7% of net assets.

5

Face amount denominated in Canadian dollars.

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 Australian dollars.

10

Face amount denominated in Swiss francs.

11

Face amount denominated in Japanese yen.

12

Scheduled principal and interest payments are guaranteed by AGM (Assured Guaranty Municipal Corporation).

13

Scheduled principal and interest payments are guaranteed by National Public Finance Guarantee Corp.

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

Collateral of $3,496,000 was received for securities on loan.

   GO—General Obligation Bond. 

   LIBOR—London Interbank Offered Rate. 

   REIT—Real Estate Investment Trust. 

   REMICS—Real Estate Mortgage Investment Conduits. 

   TBA—To Be Announced. 

   UMBS—Uniform Mortgage-Backed Securities.

 

 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

 

 

 

 

Euro-Bund

March 2020

24

4,702

72

Euro-Buxl

March 2020

12

2,912

216

Euro-Schatz

March 2020

22

2,728

9

Euro-OAT

March 2020

10

1,862

53

Euro-BTP

March 2020

10

1,609

25

Ultra Long U.S. Treasury Bond

June 2020

1

208

9

 

 

 

 

384

 

 

 

 

 

Short Futures Contracts

 

 

 

 

10-Year U.S. Treasury Note

June 2020

(46)

(6,198)

(97)

Long Gilt

June 2020

(12)

(2,083)

(19)

10-Year Canadian Government Bond

June 2020

(8)

(851)

(12)

Euro-Bobl

March 2020

(5)

(749)

(5)

 

 

 

 

(133)

 

 

 

 

251

 

Forward Currency Contracts

 

 

 

 

 

 

 

 

Contract

 

 

 

 

Unrealized

Unrealized

Settlement

 

Contract Amount (000) 

 Appreciation

(Depreciation)

Counterparty

Date

 

Receive

 

Deliver

($000)

($000)

J.P. Morgan Securities LLC

3/31/20

USD

64,251

EUR

59,080

—

(1,099)

Goldman Sachs International

3/31/20

USD

18,566

GBP

14,319

190

—

J.P. Morgan Securities LLC

3/31/20

USD

8,844

CAD

11,743

95

—

J.P. Morgan Securities LLC

3/31/20

USD

6,924

JPY

764,587

—

(177)

J.P. Morgan Securities LLC

3/31/20

USD

2,845

AUD

4,307

37

—

J.P. Morgan Securities LLC

3/31/20

USD

1,077

CHF

1,052

—

(16)

 

 

 

 

 

 

322

(1,292)

 

AUD—Australian dollar. 

CAD—Canadian dollar. 

CHF—Swiss franc. 

EUR—euro. 

GBP—British pound. 

JPY—Japanese yen. 

USD—U.S. dollar.

 

At February 29, 2020, the counterparties had deposited in segregated accounts securities with a value of $658,000 in connection with open forward currency contracts.

 

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

 

 17

 

 

Global Wellesley Income Fund

 

Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts)

Amount

Assets

 

Investments in Securities, at Value

 

Unaffiliated Issuers (Cost $462,967)

473,928

Affiliated Issuers (Cost $29,554)

29,560

Total Investments in Securities

503,488

Investment in Vanguard

22

Cash

29

Foreign Currency, at Value (Cost $629)

635

Receivables for Investment Securities Sold

10,768

Receivables for Accrued Income

2,920

Receivables for Capital Shares Issued

909

Variation Margin Receivable—Futures Contracts

4

Unrealized Appreciation—Forward Currency Contracts

322

Total Assets

519,097

Liabilities

 

Payables for Investment Securities Purchased

18,504

Collateral for Securities on Loan

3,496

Payables for Capital Shares Redeemed

1,649

Payables to Investment Advisor

142

Payables to Vanguard

48

Variation Margin Payable—Futures Contracts

79

Unrealized Depreciation—Forward Currency Contracts

1,292

Total Liabilities

25,210

Net Assets

493,887
   

At February 29, 2020, net assets consisted of:

 

 

 

Paid-in Capital

494,281

Total Distributable Earnings (Loss)

(394)

Net Assets

493,887

 

 

Investor Shares—Net Assets

 

Applicable to 4,386,976 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

88,523

Net Asset Value Per Share—Investor Shares

$20.18

 

 

Admiral Shares—Net Assets

 

Applicable to 16,067,526 outstanding $.001 par value shares of beneficial interest (unlimited authorization)

405,364

Net Asset Value Per Share—Admiral Shares

$25.23

 

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

 

 18

 

 

Global Wellesley Income Fund

 

Statement of Operations

 

 

Six Months Ended

 

February 29, 2020

 

($000)

Investment Income

 

Income

 

Dividends1

1,985

Interest2

3,770

Securities Lending—Net

10

Total Income

5,765

Expenses

 

Investment Advisory Fees—Note B

 

Basic Fee

291

Performance Adjustment

(21)

The Vanguard Group—Note C

 

Management and Administrative—Investor Shares

119

Management and Administrative—Admiral Shares

371

Marketing and Distribution—Investor Shares

7

Marketing and Distribution—Admiral Shares

15

Custodian Fees

16

Shareholders’ Reports—Investor Shares

2

Shareholders’ Reports—Admiral Shares

4

Total Expenses

804

Expenses Paid Indirectly

(8)

Net Expenses

796

Net Investment Income

4,969

Realized Net Gain (Loss)

 

Investment Securities Sold2

1,686

Futures Contracts

(99)

Forward Currency Contracts

2,242

Foreign Currencies

(11)

Realized Net Gain (Loss)

3,818

Change in Unrealized Appreciation (Depreciation)

 

Investment Securities2

(1,434)

Futures Contracts

(153)

Forward Currency Contracts

(1,657)

Foreign Currencies

25

Change in Unrealized Appreciation (Depreciation)

(3,219)

Net Increase (Decrease) in Net Assets Resulting from Operations

5,568

1Dividends are net of foreign withholding taxes of $205,000.

2Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $154,000, ($1,000), and $5,000, 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

 

 

Six Months Ended

  

Year Ended

 

February 29,

  

August 31,

 

2020

  

2019

 

($000)

  

($000)

Increase (Decrease) in Net Assets

 

  

 

Operations

 

  

 

Net Investment Income

4,969

  

12,355

Realized Net Gain (Loss)

3,818

  

(14,891)

Change in Unrealized Appreciation (Depreciation)

(3,219)

  

25,885

Net Increase (Decrease) in Net Assets Resulting from Operations

5,568

  

23,349

Distributions1

 

  

 

Investor Shares

(976)

  

(3,267)

Admiral Shares

(4,619)

  

(14,576)

Total Distributions

(5,595)

  

(17,843)

Capital Share Transactions

 

  

 

Investor Shares

3,485

  

(8,902)

Admiral Shares

26,015

  

(33,414)

Net Increase (Decrease) from Capital Share Transactions

29,500

  

(42,316)

Total Increase (Decrease)

29,473

  

(36,810)

Net Assets

 

  

 

Beginning of Period

464,414

  

501,224

End of Period

493,887

  

464,414

1Certain prior period numbers have been reclassified to conform with current period presentation.

 

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

 

 20

 

 

Global Wellesley Income Fund

 

Financial Highlights

 

Investor Shares

 

 

 
       

 

Six Months

Year

Oct. 18,

 

Ended

Ended

20171 to

 

February 29,

Aug. 31,

Aug. 31,

For a Share Outstanding Throughout Each Period

2020

2019

2018

Net Asset Value, Beginning of Period

$20.16

$19.87

$20.00

Investment Operations

 

 

 

Net Investment Income2

.201

.513

.443

Net Realized and Unrealized Gain (Loss) on Investments

.051

.529

(.269)

Total from Investment Operations

.252

1.042

.174

Distributions

 

 

 

Dividends from Net Investment Income

(.232)

(.473)

(.304)

Distributions from Realized Capital Gains

—

(.279)

—

Total Distributions

(.232)

(.752)

(.304)

Net Asset Value, End of Period

$20.18

$20.16

$19.87
       

Total Return3

1.24%

5.50%

0.88%
       

Ratios/Supplemental Data

 

 

 

Net Assets, End of Period (Millions)

$89

$85

$93

Ratio of Total Expenses to Average Net Assets

0.41%4

0.42%4

0.43%5,6

Ratio of Net Investment Income to Average Net Assets

1.99%

2.63%

2.68%6

Portfolio Turnover Rate

33%7

90%

39%

The expense ratio and net investment income ratio 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 (0.01%) and (0.01%).

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.

7

Includes 7% attributable to mortgage-dollar-roll activity.

 

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

 

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Global Wellesley Income Fund

 

Financial Highlights

 

Admiral Shares

 

 

 
       

 

Six Months

Year

Oct. 18,

 

Ended

Ended

20171 to

 

February 29,

Aug. 31,

Aug. 31,

For a Share Outstanding Throughout Each Period

2020

2019

2018

Net Asset Value, Beginning of Period

$25.20

$24.84

$25.00

Investment Operations

 

 

 

Net Investment Income2

.265

.666

.577

Net Realized and Unrealized Gain (Loss) on Investments

.067

.658

(.341)

Total from Investment Operations

.332

1.324

.236

Distributions

 

 

 

Dividends from Net Investment Income

(.302)

(.616)

(.396)

Distributions from Realized Capital Gains

—

(.348)

—

Total Distributions

.(302)

(.964)

(.396)

Net Asset Value, End of Period

$25.23

$25.20

$24.84
       

Total Return3

1.31%

5.60%

0.96%
       

Ratios/Supplemental Data

 

 

 

Net Assets, End of Period (Millions)

$405

$379

$408

Ratio of Total Expenses to Average Net Assets

0.31%

0.32%4

0.33%5,6

Ratio of Net Investment Income to Average Net Assets

2.09%

2.73%

2.78%6

Portfolio Turnover Rate

33%7

90%

39%

The expense ratio and net investment income ratio 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 (0.01%) and (0.01%).

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.

7

Includes 7% attributable to mortgage-dollar-roll activity.

 

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

 

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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 securities 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).

 

 23

 

 

Global Wellesley Income Fund

 

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 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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, the fund’s average investments in long and short futures contracts represented 3% and 2% 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 Schedule of Investments. 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.

 

 24

 

 

Global Wellesley Income Fund

 

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 Schedule of Investments. 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 forward currency contract gains (losses).

 

During the six months ended February 29, 2020, the fund’s average investment in forward currency contracts represented 22% 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. Mortgage Dollar Rolls: The fund enters into mortgage-dollar-roll transactions, in which the fund sells mortgage-backed securities to a dealer and simultaneously agrees to purchase similar securities in the future at a predetermined price. The proceeds of the securities sold in mortgage-dollar-roll transactions are typically invested in high-quality short-term fixed income securities. The fund forgoes principal and interest paid on the securities sold, and is compensated by interest earned on the proceeds of the sale and by a lower price on the securities to be repurchased. The fund has also entered into mortgage-dollar-roll transactions in which the fund buys mortgage-backed securities from a dealer pursuant to a TBA transaction and simultaneously agrees to sell similar securities in the future at a predetermined price. The securities bought in mortgage-dollar- roll transactions are used to cover an open TBA sell position. The fund continues to earn interest on mortgage-backed security pools already held and receives a lower price on the securities to be sold in the future. The fund accounts for mortgage-dollar-roll transactions as purchases and sales; as such, these transactions may increase the fund’s portfolio turnover rate. Amounts to be received or paid in connection with open mortgage dollar rolls are included in Receivables for Investment Securities Sold or Payables for Investment Securities Purchased in the Statement of Assets and Liabilities.

 

 25

 

 

Global Wellesley Income Fund

 

7. 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, 2018–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

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

 

9. 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.

 

10. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans

 

 26

 

 

Global Wellesley Income Fund

 

may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

11. 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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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 High Dividend Yield Index (net of tax) and the Bloomberg Barclays Fixed Income Composite index, since December 1, 2017. For the six months ended February 29, 2020, the investment advisory fee represented an effective annual basic rate of 0.12% of the fund’s average net assets before a decrease of $21,000 (0.01%) 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.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 29, 2020, the fund had contributed to Vanguard capital in the amount of $22,000, representing less than 0.01% of the fund’s net assets and 0.01% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $8,000 (an annual rate of less than 0.01% of average net assets).

 

 27

 

 

Global Wellesley Income Fund

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

 

Level 1

Level 2

Level 3

Total

 

($000)

($000)

($000)

($000)

Investments

 

 

 

 

Assets

 

 

 

 

U.S. Government and Agency Obligations

—

36,149

—

36,149

Asset-Backed/Commercial Mortgage-Backed Securities

—

16,416

—

16,416

Corporate Bonds

—

207,225

—

207,225

Sovereign Bonds

—

32,878

—

32,878

Taxable Municipal Bonds

—

8,439

—

8,439

Common Stocks

83,860

88,961

—

172,821

Temporary Cash Investments

29,560

—

—

29,560

Total

113,420

390,068

—

503,488

Derivative Financial Instruments

 

 

 

 

Assets

 

 

 

 

Futures Contracts1

4

—

—

4

Forward Currency Contracts

—

322

—

322

Total

4

322

—

326

Liabilities

 

 

 

 

Futures Contracts1

79

—

—

79

Forward Currency Contracts

—

1,292

—

1,292

Total

79

1,292

—

1,371

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

 

 28

 

 

Global Wellesley Income Fund

 

F. At February 29, 2020, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:

 

 

 

Foreign

 

Interest Rate

Exchange

 

 

Contracts

Contracts

Total

Statement of Assets and Liabilities Caption

($000)

($000)

($000)

Variation Margin Receivable—Futures Contracts

4

—

4

Unrealized Appreciation—Forward Currency Contracts

—

322

322

Total Assets

4

322

326

 

 

 

 

Variation Margin Payable—Futures Contracts

79

—

79

Unrealized Depreciation—Forward Currency Contracts

—

1,292

1,292

Total Liabilities

79

1,292

1,371

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 29, 2020, were:

 

 

 

Foreign

 

Interest Rate

Exchange

 

 

Contracts

Contracts

Total

Realized Net Gain (Loss) on Derivatives

($000)

($000)

($000)

Futures Contracts

(99)

—

(99)

Forward Currency Contracts

—

2,242

2,242

Realized Net Gain (Loss) on Derivatives

(99)

2,242

2,143
       

Change in Unrealized Appreciation (Depreciation) on Derivatives

 

 

 

Futures Contracts

(153)

—

(153)

Forward Currency Contracts

—

(1,657)

(1,657)

Change in Unrealized Appreciation (Depreciation) on Derivatives

(153)

(1,657)

(1,810)

 

G. As of February 29, 2020, 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

492,723

Gross Unrealized Appreciation

24,371

Gross Unrealized Depreciation

(14,325)

Net Unrealized Appreciation (Depreciation)

10,046

 

 29

 

 

Global Wellesley Income Fund

 

H.  During the six months ended February 29, 2020, the fund purchased $91,146,000 of investment securities and sold $76,890,000 of investment securities, other than U.S. government securities and temporary cash investments. Purchases and sales of U.S. government securities were $85,185,000 and $78,022,000, respectively.

 

I.

Capital share transactions for each class of shares were:

 

 

Six Months Ended

 

 

Year Ended

 

February 29, 2020

 

August 31, 2019

 

Amount

Shares

 

Amount

Shares

 

($000)

(000)

 

($000)

(000)

Investor Shares

 

 

 

 

 

Issued

19,506

952

 

29,050

1,497

Issued in Lieu of Cash Distributions

836

41

 

2,809

147

Redeemed

(16,857)

(824)

 

(40,761)

(2,103)

Net Increase (Decrease)—Investor Shares

3,485

169

 

(8,902)

(459)

Admiral Shares

 

 

 

 

 

Issued

83,644

3,267

 

143,988

5,941

Issued in Lieu of Cash Distributions

3,927

155

 

12,597

527

Redeemed

(61,556)

(2,407)

 

(189,999)

(7,853)

Net Increase (Decrease)—Admiral Shares

26,015

1,015

 

(33,414)

(1,385)

 

J. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

 30

 

 

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 renewing the fund’s 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 reviewed the quality of the fund’s investment management services 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 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 performance of Wellington Management since the fund’s inception, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that that advisory arrangement should continue.

 

 31

 

 

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 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 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.

 

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calling Vanguard at 800-662-2739. The guidelines are
also available from the SEC’s website, www.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 www.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.

 

 

 

© 2020 The Vanguard Group, Inc.

All rights reserved.

Vanguard Marketing Corporation, Distributor.

 

Q14962 042020

 

 

 

 

 

image

 

   
   
   
   

Semiannual Report | February 29, 2020

  
   
   
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

 

 

 

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 29, 2020

 

 

 

Beginning

 

 

Ending

 

 

Expenses

 

 

 

Account Value

 

 

Account Value

 

 

Paid During

 

ESG U.S. Stock ETF

 

8/31/2019

 

 

2/29/2020

 

 

Period

 

Based on Actual Fund Return

 

$

1,000.00

 

 

$

1,029.72

 

 

$

0.61

 

Based on Hypothetical 5% Yearly Return

 

 

1,000.00

 

 

 

1,024.27

 

 

 

0.60

 

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratio for that period is 0.12%. 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 that period, then divided by the number of days in the most recent 12-month period (182/366).

 

2

 

ESG U.S. Stock ETF

 

Sector Diversification

As of February 29, 2020

 

Basic Materials

2.2

%

Consumer Goods

8.1

 

Consumer Services

14.3

 

Financials

19.2

 

Health Care

13.7

 

Industrials

9.8

 

Oil & Gas

1.2

 

Technology

28.0

 

Telecommunications

2.3

 

Utilities

1.2

 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, at-tempting to remain fully invested and tracking their target index as closely as possible.

  

  

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.

 

 

 

3

 

ESG U.S. Stock ETF

 

Financial Statements (unaudited)

 

Schedule of Investments 

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Shares   Market 
Value• 
($000)		 
Common Stocks (99.8%)        
Basic Materials (2.2%)          
   Linde plc   22,295    4,259 
   Air Products & Chemicals Inc.   9,112    2,001 
   Ecolab Inc.   10,438    1,884 
   Newmont Corp.   33,974    1,516 
   DuPont de Nemours Inc.   30,596    1,313 
   Dow Inc.   30,953    1,251 
   LyondellBasell Industries NV   10,919    780 
   International Paper Co.   16,237    600 
   Nucor Corp.   13,029    539 
   International Flavors & Fragrances Inc.   4,346    521 
   FMC Corp.   5,312    495 
   Celanese Corp.   5,079    476 
   Avery Dennison Corp.   3,374    386 
   Albemarle Corp.   4,370    358 
   Eastman Chemical Co.   5,477    337 
   CF Industries Holdings Inc.   8,927    329 
   RPM International Inc.   5,095    327 
   Reliance Steel & Aluminum Co.   2,742    280 
   Royal Gold Inc.   2,734    264 
   Mosaic Co.   14,718    251 
   Steel Dynamics Inc.   8,969    239 
*  Axalta Coating Systems Ltd.   8,118    202 
   Ashland Global Holdings Inc.   2,726    195 
   Huntsman Corp.   9,624    182 
   Scotts Miracle-Gro Co.   1,623    172 
   Balchem Corp.   1,546    146 
   WR Grace & Co.   2,359    133 
   Cabot Corp.   3,335    125 
*  Alcoa Corp.   8,516    118 
*  Univar Solutions Inc.   6,899    117 
   HB Fuller Co.   2,855    112 
*  Element Solutions Inc.   10,535    109 
   Sensient Technologies Corp.   2,184    107 
   Commercial Metals Co.   5,739    105 
   NewMarket Corp.   260    101 
   PolyOne Corp.   3,888    96 

   Stepan Co.   1,026    90 
*  Ingevity Corp.   1,789    81 
   Innospec Inc.   931    81 
   Quaker Chemical Corp.   473    74 
   Westlake Chemical Corp.   1,288    72 
   Compass Minerals International Inc.   1,234    67 
   Domtar Corp.   2,148    62 
*  Constellium SE Class A   4,747    59 
   Minerals Technologies Inc.   1,255    56 
   Cleveland-Cliffs Inc.   9,540    55 
*  GCP Applied Technologies Inc.   2,836    55 
   Hecla Mining Co.   20,741    55 
   United States Steel Corp.   5,693    46 
   Kaiser Aluminum Corp.   468    44 
*  Coeur Mining Inc.   8,742    36 
   Schweitzer-Mauduit International Inc.   1,003    34 
   Neenah Inc.   527    30 
*  Ferro Corp.   2,485    29 
   Trinseo SA   1,118    24 
   Orion Engineered Carbons SA   1,661    24 
   Tronox Holdings plc Class A   2,971    22 
   Schnitzer Steel Industries Inc. 1,158        19 
*  AdvanSix Inc.   1,096    16 
*  Century Aluminum Co.   2,267    13 
   Tredegar Corp.   757    13 
*  Kraton Corp.   1,008    10 
   US Silica Holdings Inc.   1,664    8 
   Nexa Resources SA   997    7 
            21,608 
Consumer Goods (8.1%)          
   Procter & Gamble Co.   102,868    11,648 
   Coca-Cola Co.   159,411    8,527 
   PepsiCo Inc.   58,227    7,688 
   NIKE Inc.   48,948    4,375 
*  Tesla Inc.   6,010    4,015 
   Mondelez International Inc.   59,069    3,119 
   Colgate-Palmolive Co.   34,900    2,358 
   Kimberly-Clark Corp.   14,178    1,860 

 

4

 

 

ESG U.S. Stock ETF

 

            
      Shares   Market
Value•
($000)		 
   Activision Blizzard Inc.   31,393    1,825 
   Estee Lauder Cos. Inc. Class A   9,020    1,656 
*  Electronic Arts Inc.   12,032    1,220 
   General Mills Inc.   24,718    1,211 
   Ford Motor Co.   161,378    1,123 
*  Lululemon Athletica Inc.   4,821    1,048 
*  Monster Beverage Corp.   15,817    987 
   VF Corp.   12,485    899 
   Hershey Co.   6,032    869 
   Corteva Inc.   31,115    846 
   Aptiv plc   10,684    835 
   Clorox Co.   5,143    820 
   Tyson Foods Inc.   11,888    806 
   DR Horton Inc.   14,310    762 
   McCormick & Co. Inc.   5,120    748 
   Lennar Corp. Class A   11,924    719 
   Church & Dwight Co. Inc.   10,282    715 
   Kraft Heinz Co.   25,868    641 
   Kellogg Co.   10,295    623 
   Garmin Ltd.   6,129    542 
   Conagra Brands Inc.   19,994    534 
   Lamb Weston Holdings Inc.   6,006    522 
   Genuine Parts Co.   5,864    512 
*  Take-Two Interactive Software Inc.   4,727    508 
   Hormel Foods Corp.   11,653    485 
   JM Smucker Co.   4,471    460 
   PulteGroup Inc.   10,859    437 
   Hasbro Inc.   5,269    407 
   Coca-Cola European Partners plc   7,655    390 
*  LKQ Corp.   12,643    374 
   Fortune Brands Home & Security Inc.   6,018    372 
   Whirlpool Corp.   2,665    341 
   Pool Corp.   1,539    325 
   Campbell Soup Co.   7,014    316 
*  Mohawk Industries Inc.   2,543    308 
*  US Foods Holding Corp.   9,025    304 
   Gentex Corp.   11,012    294 
   Lear Corp.   2,601    289 
*  WABCO Holdings Inc.   2,059    278 
*  Post Holdings Inc.   2,740    277 
   BorgWarner Inc.   8,762    277 
   Tapestry Inc.   11,703    274 
*  Middleby Corp.   2,441    273 
   Bunge Ltd.   5,561    261 
   Autoliv Inc.   3,785    253 
*  Keurig Dr Pepper Inc.   8,890    248 
   Newell Brands Inc.   15,866    245 
   Ingredion Inc.   2,855    238 
   Ralph Lauren Corp.   2,211    233 
*  Zynga Inc.   34,318    230 

   Toll Brothers Inc.   6,118    227 
   PVH Corp.   3,018    224 
*  Deckers Outdoor Corp.   1,262    219 
   Leggett & Platt Inc.   5,432    215 
   Harley-Davidson Inc.   6,874    209 
   Brunswick Corp.   3,708    197 
   Hanesbrands Inc.   14,749    195 
   Thor Industries Inc.   2,533    191 
*  Darling Ingredients Inc.   7,296    187 
*  Helen of Troy Ltd.   1,113    183 
   Flowers Foods Inc.   8,407    181 
*  Beyond Meat Inc.   2,010    180 
   Carter’s Inc.   1,941    178 
*  Skechers U.S.A. Inc.   5,266    174 
*  Mattel Inc.   14,598    172 
*  Wayfair Inc.   2,657    168 
*  Capri Holdings Ltd.   6,095    157 
   Valvoline Inc.   7,738    151 
*  Herbalife Nutrition Ltd.   4,540    147 
*  Nomad Foods Ltd.   7,827    144 
*  Tempur Sealy International Inc.   1,926    144 
   KB Home   4,041    132 
   Steven Madden Ltd.   3,957    129 
   Energizer Holdings Inc.   2,871    123 
*  Under Armour Inc. Class C   9,860    123 
   WD-40 Co.   704    121 
   Coty Inc.   12,819    118 
   Lancaster Colony Corp.   802    116 
*  Taylor Morrison Home Corp.   5,050    114 
*  Under Armour Inc. Class A   7,816    111 
   Columbia Sportswear Co.   1,364    111 
   Wolverine World Wide Inc.   4,011    105 
*  TreeHouse Foods Inc.   2,742    104 
   J&J Snack Foods Corp.   640    103 
   Goodyear Tire & Rubber Co.   10,182    99 
   Dana Inc.   6,737    97 
*  Fox Factory Holding Corp.   1,505    95 
   Sanderson Farms Inc.   766    95 
   Spectrum Brands Holdings Inc   1,703    92 
   LCI Industries   948    92 
*  Adient plc   3,421    82 
*  Meritage Homes Corp.   1,237    78 
*  Crocs Inc.   2,895    76 
*  Hain Celestial Group Inc.   3,083    73 
   Herman Miller Inc.   2,010    69 
*  YETI Holdings Inc.   2,218    67 
*  Visteon Corp.   1,017    66 
*  Edgewell Personal Care Co.   2,150    65 
*  TRI Pointe Group Inc.   4,252    65 
*  Welbilt Inc.   4,849    64 
*  Meritor Inc.   2,823    64 
   MDC Holdings Inc.   1,599    63 

 

5

 

 

ESG U.S. Stock ETF

 

       Shares    Market
Value•
($000)		 
   Winnebago Industries Inc.   1,160    60 
*  Cavco Industries Inc.   290    58 
*  Dorman Products Inc.   961    58 
*  Fitbit Inc.   8,980    57 
*  Hostess Brands Inc.   4,447    57 
*  LGI Homes Inc.   720    54 
   Kontoor Brands Inc.   1,484    50 
   Cooper Tire & Rubber Co.   1,959    50 
*  American Woodmark Corp.   593    50 
   Callaway Golf Co.   2,730    46 
   Nu Skin Enterprises Inc.   1,866    46 
*  Veoneer Inc.   3,618    45 
   Steelcase Inc.   2,730    44 
   Cal-Maine Foods Inc.   1,252    44 
   Calavo Growers Inc.   601    44 
*  iRobot Corp.   876    42 
*  Sleep Number Corp.   946    42 
*  Gentherm Inc.   993    40 
   HNI Corp.   1,215    40 
   La-Z-Boy Inc.   1,354    39 
*  Delphi Technologies plc   2,717    38 
*  Pilgrim’s Pride Corp.   1,784    38 
   Oxford Industries Inc.   620    37 
   Inter Parfums Inc.   598    36 
*  Central Garden & Pet Co.   1,372    35 
   Coca-Cola Consolidated Inc.   166    33 
*  G-III Apparel Group Ltd.   1,440    32 
   B&G Foods Inc.   2,070    31 
   Medifast Inc.   359    30 
   Interface Inc.   2,023    30 
*  USANA Health Sciences Inc.   445    29 
   Fresh Del Monte Produce Inc.   1,061    29 
*  Adecoagro SA   4,108    27 
   Acushnet Holdings Corp.   968    25 
   Knoll Inc.   1,305    23 
   ACCO Brands Corp.   2,776    22 
   Tootsie Roll Industries Inc.   689    22 
*  American Axle & Manufacturing Holdings Inc.   3,249    21 
*  National Beverage Corp.   444    19 
   Tenneco Inc.   1,810    17 
   Andersons Inc.   772    14 
*  GoPro Inc.   3,713    14 
   Ethan Allen Interiors Inc.   703    9 
*  Cooper-Standard Holdings Inc.   477    8 
*  Modine Manufacturing Co.   1,018    8 
   Tupperware Brands Corp.   1,732    5 
            81,103 
Consumer Services (14.3%)          
*  Amazon.com Inc.   17,195    32,391 
   Home Depot Inc.    45,831    9,984 
   Walt Disney Co.    72,474    8,527 
   Comcast Corp.    186,733    7,550 
*  Netflix Inc.    17,496    6,457 

   McDonald’s Corp.   31,350    6,087 
   Costco Wholesale Corp.   18,270    5,136 
   Starbucks Corp.   49,019    3,845 
   Lowe’s Cos. Inc.   32,076    3,418 
   CVS Health Corp.   53,859    3,187 
*  Charter Communications Inc.   6,349    3,131 
   TJX Cos. Inc.   50,409    3,014 
*  Booking Holdings Inc.   1,727    2,928 
   Target Corp.   20,695    2,132 
   Dollar General Corp.   10,703    1,609 
   Ross Stores Inc.   14,766    1,606 
   Walgreens Boots Alliance Inc.   31,196    1,428 
*  Uber Technologies Inc.   39,042    1,322 
   Sysco Corp.   19,825    1,321 
*  MercadoLibre Inc.   1,941    1,196 
   eBay Inc.   32,583    1,129 
*  O’Reilly Automotive Inc.   3,058    1,128 
   Yum! Brands Inc.   12,599    1,124 
   McKesson Corp.   7,505    1,050 
*  AutoZone Inc.   978    1,010 
   Kroger Co.   33,043    929 
*  Dollar Tree Inc.   9,842    817 
*  Chipotle Mexican Grill Inc.   1,052    814 
   Best Buy Co. Inc.   9,412    712 
*  Spotify Technology SA   4,881    669 
   Tiffany & Co.   4,999    668 
   Yum China Holdings Inc.   15,226    667 
   Omnicom Group Inc.   8,970    621 
*  CarMax Inc.   6,915    604 
*  Ulta Beauty Inc.   2,327    598 
*  Burlington Stores Inc.   2,761    597 
   Domino’s Pizza Inc.   1,683    571 
   Expedia Group Inc.   5,695    562 
   ViacomCBS Inc. Class B   22,422    552 
   AmerisourceBergen Corp. Class A   6,341    535 
   Darden Restaurants Inc.   5,217    509 
*  Trade Desk Inc.   1,600    460 
   Tractor Supply Co.   4,900    434 
   Fox Corp. Class B   13,447    409 
   FactSet Research Systems Inc.   1,532    407 
*   Bright Horizons Family Solutions Inc.   2,463    387 
*  DISH Network Corp.   11,541    387 
   Advance Auto Parts Inc.   2,842    378 
   Liberty Media Corp-Liberty SiriusXM Class A   8,356    373 
   Sirius XM Holdings Inc.   57,757    366 
   Aramark   10,160    353 
   Service Corp. International   7,252    347 
   Vail Resorts Inc.   1,595    339 

 

6

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   Interpublic Group of Cos. Inc.   15,762    337 
*  Altice USA Inc.   13,003    336 
*  Live Nation Entertainment Inc.   5,382    327 
   Delta Air Lines Inc.   6,806    314 
*  Discovery Communications Inc.   12,499    314 
*  Liberty Global plc   16,695    310 
   Cable One Inc.   195    307 
*  Etsy Inc.   4,859    281 
   Fox Corp. Class A   8,856    272 
   Nielsen Holdings plc   14,593    266 
   Southwest Airlines Co.   5,701    263 
*  Liberty Media Corp-Liberty Formula One Class C   6,675    261 
   Kohl’s Corp.   6,581    258 
*  IAA Inc.   5,693    243 
*  Planet Fitness Inc.   3,537    239 
   Casey’s General Stores Inc.   1,460    238 
   New York Times Co.   6,180    231 
   Rollins Inc.   6,024    226 
   Dunkin’ Brands Group Inc.   3,379    225 
   Nexstar Media Group Inc.   1,951    224 
*  Five Below Inc.   2,231    216 
   L Brands Inc.   9,646    209 
*  Madison Square Garden Co.   769    206 
   Williams-Sonoma Inc.   3,250    203 
*  ServiceMaster Global Holdings Inc.   5,616    201 
*  Discovery Inc.   7,734    199 
*  Performance Food Group Co.   4,467    189 
*  Chegg Inc.   4,826    189 
*  Grubhub Inc.   3,893    187 
   Macy’s Inc.   13,823    183 
   H&R Block Inc.   8,539    176 
   Dolby Laboratories Inc.   2,674    176 
*  United Airlines Holdings Inc.   2,834    175 
   Nordstrom Inc.   4,983    173 
   Texas Roadhouse Inc.   3,035    171 
*  Liberty Global plc Class A   8,616    168 
*  Grand Canyon Education Inc.   2,070    167 
   Foot Locker Inc.   4,577    166 
   Sabre Corp.   11,378    155 
*  frontdoor Inc.   3,626    154 
   Strategic Education Inc.   1,034    152 
*  Floor & Decor Holdings Inc. Class A   2,941    150 
   Wendy’s Co.   7,820    148 
   Cracker Barrel Old Country Store Inc.   1,030    148 
   Gap Inc.   10,223    146 
   TEGNA Inc.   9,373    134 

*  Liberty Media Corp-Liberty Formula One Class A   3,551    133 
   Cinemark Holdings Inc.   4,952    129 
   Lithia Motors Inc. Class A   1,063    127 
*  Murphy USA Inc.   1,289    126 
*  National Vision Holdings Inc.   3,541    123 
*  Rh   661    120 
   KAR Auction Services Inc.   6,151    118 
*  Ollie’s Bargain Outlet Holdings Inc.   2,324    118 
   Morningstar Inc.   798    117 
   TripAdvisor Inc.   4,951    116 
*  LiveRamp Holdings Inc.   3,141    111 
   Aaron’s Inc.   2,810    110 
   Extended Stay America Inc.   9,833    108 
*  Sprouts Farmers Market Inc.   6,738    108 
*  Liberty Latin America Ltd.   6,917    105 
   American Airlines Group Inc.   5,296    101 
*  Cargurus Inc.   3,892    99 
*  Hilton Grand Vacations Inc.   3,720    99 
*  BJ’s Wholesale Club Holdings Inc.   5,099    98 
   Wingstop Inc.   1,162    98 
   Dick’s Sporting Goods Inc.   2,693    98 
   Hillenbrand Inc.   4,185    98 
*  AutoNation Inc.   2,189    94 
*  Stamps.com Inc.   658    93 
   Monro Inc.   1,645    92 
   World Wrestling Entertainment Inc.   1,925    90 
*  Laureate Education Inc.   4,601    86 
   Six Flags Entertainment Corp.   3,303    83 
*  Yelp Inc.   2,637    82 
*  Liberty Media Corp-Liberty SiriusXM Class C   1,822    81 
*  Avis Budget Group Inc.   2,274    74 
   American Eagle Outfitters Inc.   5,663    73 
*  Simply Good Foods Co.   3,302    73 
*  Shake Shack Inc.   1,181    70 
   Jack in the Box Inc.   1,011    70 
*  Asbury Automotive Group Inc.    745    66 
   Bloomin’ Brands Inc.   3,638    65 
*  Adtalem Global Education Inc.   2,078    64 
   Graham Holdings Co.   127    64 
*  Urban Outfitters Inc.   2,689    63 
   Dine Brands Global Inc.   744    61 
   Group 1 Automotive Inc.   689    59 
   Grocery Outlet Holding Corp.   1,772    56 
   Viad Corp.   1,107    56 
*  Sally Beauty Holdings Inc.   4,324    54 
*  WW International Inc.   1,787    54 

 

7

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   Bed Bath & Beyond Inc.   4,923    53 
*  Hertz Global Holdings Inc.   4,071    52 
*  Liberty Media Corp-Liberty Braves   1,919    50 
   Alaska Air Group Inc.   963    49 
*  2U Inc.   2,065    49 
   Cheesecake Factory Inc.   1,354    48 
*  AMC Networks Inc.   1,555    48 
   Penske Automotive Group Inc.   1,038    48 
   John Wiley & Sons Inc.   1,245    46 
*  SeaWorld Entertainment Inc.   1,663    45 
   Office Depot Inc.   18,387    43 
   Signet Jewelers Ltd.   1,833    43 
   Papa John’s International Inc.   739    43 
   PriceSmart Inc.   718    40 
   Brinker International Inc.   1,160    40 
   Rent-A-Center Inc.   1,811    39 
*  MakeMyTrip Ltd.   1,662    38 
*  Lions Gate Entertainment Corp. Class B   5,082    38 
   Dave & Buster’s Entertainment Inc.   1,073    35 
*   Lions Gate Entertainment Corp. Class A   4,354    35 
*  JetBlue Airways Corp.   2,137    34 
   Core-Mark Holding Co. Inc.   1,412    32 
   Buckle Inc.   1,345    30 
   SkyWest Inc.   663    30 
*   Liberty Latin America Ltd. Class A   1,904    29 
   Meredith Corp.   1,089    29 
   Designer Brands Inc. Class A   2,069    28 
   Matthews International Corp.   922    27 
*  IMAX Corp.   1,737    27 
   Abercrombie & Fitch Co.   2,009    26 
   Scholastic Corp.   796    26 
*  MSG Networks Inc.   2,018    25 
   Children’s Place Inc.   427    25 
   Guess? Inc.   1,480    24 
*  Genesco Inc.   692    24 
*  Herc Holdings Inc.   602    22 
   Big Lots Inc.   1,313    21 
   Dillard’s Inc. Class A   367    21 
*  Groupon Inc.   15,212    20 
*  Cars.com Inc.   2,220    20 
   Houghton Mifflin Harcourt Co.   3,482    19 
   Weis Markets Inc.   497    18 
   BJ’s Restaurants Inc.   548    18 
*  Regis Corp.   1,391    18 
   Allegiant Travel Co.   125    17 
   Copa Holdings SA   198    16 
   EW Scripps Co.   1,379    16 

^  GameStop Corp. Class A   4,519    16 
   Caleres Inc.   1,372    16 
*  Gannett Co. Inc.   3,639    15 
*  Upwork Inc.   1,638    14 
*  Spirit Airlines Inc.   481    14 
*  TrueCar Inc.   4,962    13 
*  Liberty TripAdvisor Holdings Inc.   2,986    13 
*  Michaels Cos. Inc.   2,985    13 
   Hawaiian Holdings Inc.   375    8 
            142,617 
Financials (19.1%)          
   JPMorgan Chase & Co.   129,289    15,012 
   Visa Inc.   71,262    12,953 
   Mastercard Inc.   36,880    10,704 
   Bank of America Corp.   336,192    9,581 
   Citigroup Inc.   89,905    5,705 
   American Tower Corp.   18,270    4,144 
   American Express Co.   27,756    3,051 
   CME Group Inc.   14,732    2,929 
   Chubb Ltd.   18,733    2,717 
   S&P Global Inc.   10,207    2,714 
   US Bancorp   58,359    2,710 
   Goldman Sachs Group Inc.   13,163    2,643 
   Prologis Inc.   30,333    2,556 
   Truist Financial Corp.   54,698    2,524 
   Crown Castle International Corp.   17,229    2,469 
   BlackRock Inc.   4,897    2,267 
   PNC Financial Services Group Inc.   17,790    2,249 
   Marsh & McLennan Cos. Inc.   21,093    2,205 
   Morgan Stanley   48,069    2,165 
   Equinix Inc.   3,594    2,059 
   Intercontinental Exchange Inc.   22,831    2,037 
   Aon plc   9,757    2,029 
   Charles Schwab Corp.   47,667    1,942 
   Progressive Corp.   24,230    1,773 
   Capital One Financial Corp.   19,228    1,697 
   Moody’s Corp.   6,801    1,632 
   American International Group Inc.   36,136    1,524 
   Allstate Corp.   13,477    1,418 
   MetLife Inc.   31,931    1,364 
   Bank of New York Mellon Corp.   33,910    1,353 
   Aflac Inc.   30,168    1,293 
   Public Storage   6,161    1,288 
   Travelers Cos. Inc.   10,719    1,284 
   Welltower Inc.   17,069    1,277 
   Prudential Financial Inc.   16,739    1,263 
   SBA Communications Corp.   4,739    1,256 

 

8

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   IHS Markit Ltd.   16,205    1,154 
   AvalonBay Communities Inc.   5,750    1,153 
   Equity Residential   15,067    1,132 
   T. Rowe Price Group Inc.   9,354    1,104 
   Digital Realty Trust Inc.   8,572    1,030 
   State Street Corp.   15,109    1,029 
   MSCI Inc.   3,442    1,017 
   Realty Income Corp.   13,779    997 
   Discover Financial Services   13,030    855 
   Boston Properties Inc.   6,594    850 
   Ventas Inc.   15,479    832 
   Synchrony Financial   27,311    795 
*  CBRE Group Inc.   13,753    772 
   M&T Bank Corp.   5,372    754 
   Ameriprise Financial Inc.   5,329    753 
   Alexandria Real Estate Equities Inc.   4,934    749 
   Arthur J Gallagher & Co.   7,620    743 
   Hartford Financial Services Group Inc.   14,744    736 
   Fifth Third Bancorp   29,806    727 
*  Markel Corp.   600    709 
   Northern Trust Corp.   8,064    708 
   First Republic Bank   6,757    680 
   KeyCorp   41,492    678 
*  Arch Capital Group Ltd.   16,145    653 
   Healthpeak Properties Inc.   20,548    650 
   Invitation Homes Inc.   21,857    627 
   Sun Communities Inc.   4,049    619 
   Mid-America Apartment Communities Inc.   4,724    611 
   Cincinnati Financial Corp.   6,455    602 
   WP Carey Inc.   7,588    587 
   Citizens Financial Group Inc.   18,328    581 
   Regions Financial Corp.   40,806    552 
   UDR Inc.   12,263    552 
   Annaly Capital Management Inc.   61,728    547 
   Huntington Bancshares Inc.   42,582    522 
   Cboe Global Markets Inc.   4,554    519 
   Principal Financial Group Inc.   11,660    518 
   MarketAxess Holdings Inc.   1,527    495 
   Credicorp Ltd.   2,728    495 
   Nasdaq Inc.   4,772    489 
   Equity LifeStyle Properties Inc.   7,038    481 
   TD Ameritrade Holding Corp.   11,036    466 
   Duke Realty Corp.   13,826    449 
*  SVB Financial Group   2,121    442 
   E*TRADE Financial Corp.   9,532    436 
   Medical Properties Trust Inc.   19,986    422 

   Raymond James Financial Inc.   5,023    420 
   Fidelity National Financial Inc.   10,795    418 
*  Alleghany Corp.   618    415 
   Host Hotels & Resorts Inc.   28,450    412 
   Ally Financial Inc.   16,061    403 
   Globe Life Inc.   4,345    403 
   Brown & Brown Inc.   9,248    398 
   Everest Re Group Ltd.   1,602    397 
   Lincoln National Corp.   8,654    393 
   WR Berkley Corp.   5,828    391 
   VEREIT Inc   44,589    386 
   Western Union Co.   17,209    385 
   Camden Property Trust   3,522    373 
   Vornado Realty Trust   6,876    368 
   Regency Centers Corp.   6,309    362 
*  Equitable Holdings Inc.   16,909    362 
   Iron Mountain Inc.   11,564    352 
   AGNC Investment Corp.   20,278    346 
   National Retail Properties Inc.   6,727    342 
   Omega Healthcare Investors Inc.   8,610    341 
   Federal Realty Investment Trust   2,836    330 
   Jones Lang LaSalle Inc.   2,154    318 
   Comerica Inc.   5,873    309 
   Reinsurance Group of America Inc.   2,495    304 
   Assurant Inc.   2,481    299 
   Lamar Advertising Co.   3,548    297 
   RenaissanceRe Holdings Ltd.   1,721    293 
   Kilroy Realty Corp.   3,992    290 
   SEI Investments Co.   5,151    282 
   Signature Bank   2,221    278 
   Zions Bancorp NA   6,948    278 
   Voya Financial Inc.   5,234    276 
   CyrusOne Inc.   4,543    275 
   Kimco Realty Corp.   15,772    274 
   Healthcare Trust of America Inc.   8,558    267 
   STORE Capital Corp.   8,104    266 
   American Financial Group Inc.   2,868    265 
   Franklin Resources Inc.   12,103    263 
   LPL Financial Holdings Inc.   3,307    263 
   SL Green Realty Corp.   3,331    261 
   American Homes 4 Rent   10,089    261 
   Douglas Emmett Inc.   6,663    254 
   First American Financial Corp.   4,400    251 
   Commerce Bancshares Inc.   4,108    251 
*  Athene Holding Ltd. Class A   6,063    250 

 

9

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   East West Bancorp Inc.   6,206    240 
   Americold Realty Trust   7,801    239 
   Prosperity Bancshares Inc.   3,661    237 
   People’s United Financial Inc.   16,780    235 
   CubeSmart   7,742    234 
   Invesco Ltd.   15,958    230 
   Old Republic International Corp.   11,631    229 
   Starwood Property Trust Inc.   10,239    227 
   Cousins Properties Inc.   6,154    220 
   Unum Group   9,270    216 
   Brixmor Property Group Inc.   11,814    215 
   Life Storage Inc.   1,986    214 
   TCF Financial Corp.   5,724    209 
   Primerica Inc.   1,863    207 
   New York Community Bancorp Inc.   19,147    207 
   SLM Corp.   19,689    204 
   Rexford Industrial Realty Inc.   4,297    201 
   Legg Mason Inc.   3,981    198 
   Highwoods Properties Inc.   4,392    197 
   First Industrial Realty Trust Inc.   5,110    197 
   EastGroup Properties Inc.   1,550    195 
   Radian Group Inc.   9,167    195 
   Hudson Pacific Properties Inc.   5,923    191 
   EPR Properties   3,222    191 
   Cullen/Frost Bankers Inc.   2,408    189 
   Axis Capital Holdings Ltd.   3,361    189 
   Popular Inc.   3,929    189 
   Eaton Vance Corp.   4,558    188 
   Western Alliance Bancorp   4,068    187 
   Healthcare Realty Trust Inc.   5,424    186 
   Hanover Insurance Group Inc.   1,561    185 
   Synovus Financial Corp.   6,371    185 
   Essent Group Ltd.   4,194    183 
   Kemper Corp.   2,652    183 
   MGIC Investment Corp.   15,160    182 
   JBG SMITH Properties   4,908    180 
   Park Hotels & Resorts Inc.   9,643    176 
   CoreSite Realty Corp.   1,688    175 
*  Brighthouse Financial Inc.   4,805    172 
*  Howard Hughes Corp.   1,591    172 
   Affiliated Managers Group Inc.   2,260    170 
   Piedmont Office Realty Trust Inc.   7,816    169 
   Spirit Realty Capital Inc.   3,691    168 
   First Horizon National Corp.   12,504    167 
   Invesco Mortgage Capital Inc.   10,214    164 

  Interactive Brokers Group Inc.   3,198    163 
  Fulton Financial Corp.   11,235    162 
  Equity Commonwealth   5,151    162 
  Apollo Commercial Real Estate Finance Inc.   9,955    161 
  Assured Guaranty Ltd.   3,924    160 
  First Financial Bankshares Inc.   5,558    160 
  Agree Realty Corp.   2,218    159 
  CIT Group Inc.   3,992    159 
  Stifel Financial Corp.   2,911    158 
  Outfront Media Inc.   6,016    158 
  Physicians Realty Trust   8,336    157 
  Cathay General Bancorp   5,090    157 
  Janus Henderson Group plc   7,336    156 
  Webster Financial Corp.   4,093    155 
  STAG Industrial Inc.   5,504    154 
  Lazard Ltd.   4,295    154 
  Valley National Bancorp   16,375    152 
  Old National Bancorp   9,616    152 
  Rayonier Inc.   5,705    151 
  Home BancShares Inc.   9,027    151 
  Kennedy-Wilson Holdings Inc.   7,419    150 
  BankUnited Inc.   4,986    148 
  CNO Financial Group Inc.   9,113    146 
  QTS Realty Trust Inc.   2,598    146 
  Umpqua Holdings Corp.   9,448    145 
  South State Corp.   2,127    145 
  Terreno Realty Corp.   2,627    144 
  CVB Financial Corp.   7,763    144 
  Ryman Hospitality Properties Inc.   2,063    143 
  RLI Corp.   1,779    143 
  First Hawaiian Inc.   5,958    143 
  IBERIABANK Corp.   2,366    142 
  National Health Investors Inc.   1,741    142 
  Blackstone Mortgage Trust Inc.   3,940    142 
  Columbia Banking System Inc.   4,273    142 
  Hancock Whitney Corp.   4,232    142 
  Glacier Bancorp Inc.   3,797    142 
  UMB Financial Corp.   2,412    140 
  BancorpSouth Bank   5,720    140 
  Chimera Investment Corp.   7,122    140 
  FirstCash Inc.   1,812    139 
  Weingarten Realty Investors   5,149    139 
  CenterState Bank Corp.   6,853    139 
  Paramount Group Inc.   11,398    138 
  FNB Corp.   13,574    137 
  Columbia Property Trust Inc.   7,240    137 
  PS Business Parks Inc.   916    136 
  Wintrust Financial Corp.   2,545    136 

 

10

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   Selective Insurance Group Inc.   2,429    136 
   International Bancshares Corp.   3,944    135 
   Community Bank System Inc.   2,203    134 
   Sunstone Hotel Investors Inc.   12,218    134 
   Bank OZK   5,269    134 
   Corporate Office Properties Trust   5,274    134 
   Brandywine Realty Trust   9,839    134 
   RLJ Lodging Trust   10,054    133 
   Washington Federal Inc.   4,385    132 
*  Texas Capital Bancshares Inc.   2,774    131 
   Bank of Hawaii Corp.   1,715    128 
   Atlantic Union Bankshares Corp.   4,288    128 
   Simmons First National Corp.   5,901    126 
   First Citizens BancShares Inc.   278    126 
   United Bankshares Inc.   4,314    125 
   First Financial Bancorp   6,034    124 
   Macerich Co.   6,053    124 
   Federated Hermes Inc.   4,283    124 
   Taubman Centers Inc.   2,352    122 
   Navient Corp.   10,645    120 
   Evercore Inc.   1,794    120 
   American Equity Investment Life Holding Co.   4,716    119 
   Ameris Bancorp   3,461    118 
   Retail Properties of America Inc.   11,297    118 
   MFA Financial Inc.   16,236    117 
   White Mountains Insurance Group Ltd.   118    117 
   Pebblebrook Hotel Trust   5,641    114 
   OneMain Holdings Inc   3,092    114 
   PotlatchDeltic Corp.   3,078    113 
   BOK Financial Corp.   1,557    113 
   Associated Banc-Corp   6,655    113 
   Independent Bank Corp.   1,654    112 
   First Merchants Corp.   3,156    110 
   Washington REIT   4,068    109 
   First Midwest Bancorp Inc.   5,944    108 
   Acadia Realty Trust   4,668    107 
*  eHealth Inc.   892    105 
   Investors Bancorp Inc.   9,809    103 
*  Cannae Holdings Inc.   2,729    102 
   WesBanco Inc.   3,304    101 
   Kinsale Capital Group Inc.   831    101 
*  Redfin Corp.   3,554    96 
   Colony Capital Inc.   24,268    96 
^  Santander Consumer USA Holdings Inc.   3,755    92 

   Xenia Hotels & Resorts Inc.   5,831    87 
   Lexington Realty Trust Class B   8,385    87 
   Hannon Armstrong Sustainable Infrastructure Capital Inc.   2,487    84 
*  LendingTree Inc.   303    84 
   PennyMac Mortgage Investment Trust   4,034    84 
*  Genworth Financial Inc.   20,753    81 
   Clearway Energy Inc.   3,583    75 
   Four Corners Property Trust Inc.   2,616    75 
   National Storage Affiliates Trust   2,224    75 
   Westamerica Bancorporation   1,290    75 
   DiamondRock Hospitality Co.   8,086    74 
   Uniti Group Inc.   7,500    73 
   Argo Group International Holdings Ltd.   1,283    72 
   NBT Bancorp Inc.   2,122    72 
   CareTrust REIT Inc.   3,329    69 
*  Green Dot Corp.   1,996    68 
   FGL Holdings   5,843    67 
   Cadence BanCorp Class A   4,712    67 
   American Assets Trust Inc.   1,588    66 
   Walker & Dunlop Inc.   1,006    65 
*  Cushman & Wakefield plc   3,501    64 
*  Enstar Group Ltd.   340    61 
   SITE Centers Corp.   5,256    61 
   Horace Mann Educators Corp.   1,537    60 
   Moelis & Co.   1,863    60 
   Ladder Capital Corp.   3,896    59 
   LTC Properties Inc.   1,311    59 
   ServisFirst Bancshares Inc.   1,695    59 
   Urban Edge Properties   3,581    58 
*  NMI Holdings Inc.   2,467    58 
   WSFS Financial Corp.   1,609    55 
*  PRA Group Inc.   1,417    55 
   United Community Banks Inc.   2,176    54 
   BGC Partners Inc.   11,374    53 
   Cohen & Steers Inc.   832    52 
   Redwood Trust Inc.   3,008    51 
*  Axos Financial Inc.   2,058    51 
   Retail Opportunity Investments Corp.   3,413    51 
   Mack-Cali Realty Corp.   2,696    51 
   Artisan Partners Asset Management Inc.   1,768    51 
   ARMOUR Residential REIT Inc.   2,717    49 
   Virtu Financial Inc.   2,595    49 

 

11

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   Office Properties Income Trust   1,669    49 
   Independent Bank Group Inc.   1,043    48 
   Hope Bancorp Inc.   3,925    48 
   ProAssurance Corp.   1,765    48 
   Global Net Lease Inc.   2,589    48 
   Bank of NT Butterfield & Son Ltd.   1,722    48 
   Trustmark Corp.   1,764    47 
   First BanCorp   5,891    47 
   Capitol Federal Financial Inc.   3,803    46 
   Kite Realty Group Trust   2,848    46 
*  Encore Capital Group Inc.   1,227    46 
   National General Holdings Corp.   2,304    45 
   Heartland Financial USA Inc.   1,042    45 
   Universal Health Realty Income Trust   395    43 
   Pacific Premier Bancorp Inc.   1,634    42 
   Alexander & Baldwin Inc.   2,231    42 
^  Tanger Factory Outlet Centers Inc.   3,474    42 
   Colony Credit Real Estate Inc.   3,242    41 
   Towne Bank   1,787    41 
   Banner Corp.   902    41 
   Great Western Bancorp Inc.   1,502    40 
   Hilltop Holdings Inc.   1,934    40 
   Mercury General Corp.   906    39 
   Renasant Corp.   1,380    39 
   S&T Bancorp Inc.   1,185    39 
   Employers Holdings Inc.   1,002    39 
   Realogy Holdings Corp.   3,994    37 
   Brookfield Property REIT Inc. Class A   2,263    37 
   Investors Real Estate Trust   518    37 
   Northwest Bancshares Inc.   2,619    36 
   Eagle Bancorp Inc.   963    36 
   TFS Financial Corp.   1,741    36 
   iStar Inc.   2,314    35 
   CNA Financial Corp.   838    35 
   Flagstar Bancorp Inc.   1,078    34 
   Getty Realty Corp.   1,203    34 
*  MBIA Inc.   4,343    34 
   Clearway Energy Inc. Class A   1,653    34 
   Waddell & Reed Financial Inc.   2,389    33 
   Provident Financial Services Inc.   1,617    32 
   First Commonwealth Financial Corp.   2,659    31 
   RPT Realty   2,417    31 
   United Fire Group Inc.   812    31 
   Sandy Spring Bancorp Inc.   1,004    31 
   Safety Insurance Group Inc.   391    31 

   Capstead Mortgage Corp.   4,248    30 
   Berkshire Hills Bancorp Inc.   1,187    29 
   Brookline Bancorp Inc.   2,026    28 
   State Auto Financial Corp.   1,048    26 
   Alexander’s Inc.   83    26 
   LendingClub Corp.   2,315    25 
   Summit Hotel Properties Inc.   2,723    25 
   City Holding Co.   360    25 
*  Columbia Financial Inc.   1,609    25 
   Nelnet Inc.   469    25 
   Kearny Financial Corp.   2,268    25 
   Franklin Street Properties Corp.   3,453    25 
   Piper Sandler Cos.   335    23 
   BancFirst Corp.   457    23 
   Front Yard Residential Corp.   1,844    23 
*  Marcus & Millichap Inc.   717    23 
   RMR Group Inc.   594    22 
   Virtus Investment Partners Inc.   199    22 
*  Third Point Reinsurance Ltd.   2,408    21 
   Stock Yards Bancorp Inc.   551    19 
   Washington Prime Group Inc.   6,905    19 
   Boston Private Financial Holdings Inc.   1,886    18 
   Washington Trust Bancorp Inc.   389    17 
*  St. Joe Co.   838    16 
   Saul Centers Inc.   376    16 
   Brightsphere Investment Group Inc.   1,639    15 
   TrustCo Bank Corp. NY   2,115    15 
   FBL Financial Group Inc. Class A   285    14 
   Urstadt Biddle Properties Inc.   637    13 
   WisdomTree Investments Inc.   3,233    13 
   Flushing Financial Corp.   660    12 
   Hersha Hospitality Trust Class A   958    11 
   1st Source Corp.   255    11 
   Republic Bancorp Inc.   252    9 
   Dime Community Bancshares Inc.   507    9 
   Community Trust Bancorp Inc.   215    8 
   CorePoint Lodging Inc.   898    7 
            191,099 
Health Care (13.7%)          
   UnitedHealth Group Inc.   39,296    10,019 
   Merck & Co. Inc.   106,013    8,116 
   Pfizer Inc.   231,435    7,735 
   Bristol-Myers Squibb Co.   97,168    5,739 
   Medtronic plc   55,775    5,615 
   Abbott Laboratories   71,513    5,509 
   AbbVie Inc.   61,391    5,262 

 

12

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   Amgen Inc.   24,897    4,973 
   Thermo Fisher Scientific Inc.   16,570    4,819 
   Eli Lilly & Co.   35,389    4,464 
   Gilead Sciences Inc.   52,966    3,674 
   Cigna Corp.   15,142    2,770 
   Stryker Corp.   14,219    2,710 
   Anthem Inc.   10,536    2,709 
   Becton Dickinson and Co.   11,125    2,646 
   Zoetis Inc.   19,844    2,644 
   Allergan plc   13,602    2,593 
*  Intuitive Surgical Inc.   4,744    2,533 
*  Vertex Pharmaceuticals Inc.   10,625    2,380 
*  Biogen Inc.   7,482    2,307 
*  Boston Scientific Corp.   57,675    2,156 
*  Edwards Lifesciences Corp.   8,607    1,763 
   Humana Inc.   5,478    1,751 
   Baxter International Inc.   19,932    1,664 
*  Illumina Inc.   6,083    1,616 
*   Regeneron Pharmaceuticals Inc.   3,431    1,525 
   HCA Healthcare Inc.   11,051    1,404 
*  Centene Corp.   23,961    1,270 
   Zimmer Biomet Holdings Inc.   8,560    1,165 
*  DexCom Inc.   3,767    1,040 
*  IQVIA Holdings Inc.   7,306    1,019 
   ResMed Inc.   5,887    936 
*  IDEXX Laboratories Inc.   3,535    900 
*  Alexion Pharmaceuticals Inc.   8,740    822 
*  Laboratory Corp. of America Holdings   4,120    724 
*  Align Technology Inc.   3,210    701 
*  BioMarin Pharmaceutical Inc.   7,625    689 
   Cooper Cos. Inc.   2,035    660 
   Teleflex Inc.   1,966    659 
   Cardinal Health Inc.   12,159    634 
   Quest Diagnostics Inc.   5,564    590 
*  Incyte Corp.   7,466    563 
*  Seattle Genetics Inc.   4,816    548 
   STERIS plc   3,403    540 
*  Alnylam Pharmaceuticals Inc.   4,390    517 
*  Hologic Inc.   10,956    516 
*  Insulet Corp.   2,438    463 
*  Exact Sciences Corp.   5,688    460 
*  Varian Medical Systems Inc.   3,691    454 
*  Elanco Animal Health Inc.   16,424    450 
   West Pharmaceutical Services Inc.   2,984    449 
   Dentsply Sirona Inc.   9,123    449 
   Universal Health Services Inc.   3,213    398 
   PerkinElmer Inc.   4,503    389 
*  Teladoc Health Inc.   2,977    372 

*  Henry Schein Inc.   6,078    370 
*  Neurocrine Biosciences Inc.   3,813    361 
*  Mylan NV   20,987    361 
*  ICON plc   2,208    345 
*  Sarepta Therapeutics Inc.   2,898    332 
*  Catalent Inc.   6,383    329 
*  Masimo Corp.   2,010    328 
*  Molina Healthcare Inc.   2,669    327 
   Encompass Health Corp.   4,222    316 
*  DaVita Inc.   4,068    316 
*   Charles River Laboratories International Inc.   2,006    312 
*  Bio-Rad Laboratories Inc.   864    304 
   Bio-Techne Corp.   1,528    289 
*  ABIOMED Inc.   1,902    286 
*  Jazz Pharmaceuticals plc   2,468    283 
*  Ionis Pharmaceuticals Inc.   5,477    278 
   Chemed Corp.   658    275 
*  Horizon Therapeutics plc   7,885    270 
   Perrigo Co. plc   5,311    269 
   Hill-Rom Holdings Inc.   2,742    263 
*  Novocure Ltd.   3,581    260 
*  PRA Health Sciences Inc.   2,631    248 
*  Amedisys Inc.   1,407    245 
*  Exelixis Inc.   13,083    243 
*  Haemonetics Corp.   2,127    230 
*  Penumbra Inc.   1,333    221 
*  United Therapeutics Corp.   2,117    218 
   Avantor Inc.   13,424    211 
*  ACADIA Pharmaceuticals Inc.   4,713    201 
*  HealthEquity Inc.   2,819    200 
*  Repligen Corp.   2,322    199 
   Bruker Corp.   4,188    182 
*  Tandem Diabetes Care Inc.   2,358    176 
*  Reata Pharmaceuticals Inc.   889    173 
*  Iovance Biotherapeutics Inc.   5,171    170 
*  LHC Group Inc.   1,384    168 
*  Nevro Corp.   1,288    168 
*  Global Blood Therapeutics Inc.   2,592    166 
*  PTC Therapeutics Inc.   3,023    166 
*  Wright Medical Group NV   5,391    163 
*  Syneos Health Inc.   2,567    163 
*   Integra LifeSciences Holdings Corp.   3,086    161 
*  Acceleron Pharma Inc.   1,871    161 
*  ICU Medical Inc.   815    160 
*  Bluebird Bio Inc.   2,182    158 
*  Omnicell Inc.   1,881    153 
*  LivaNova plc   2,124    148 
*  Globus Medical Inc.   3,245    147 
*  Neogen Corp.   2,368    144 
*  FibroGen Inc.   3,410    143 

 

13

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
*  Alkermes plc   6,782    141 
*  Agios Pharmaceuticals Inc.   2,937    139 
*  NuVasive Inc.   2,109    139 
*  MyoKardia Inc.   2,168    137 
*  Arrowhead Pharmaceuticals Inc.   3,844    136 
*  Immunomedics Inc.   7,991    128 
*  Quidel Corp.   1,640    127 
*  Acadia Healthcare Co. Inc.   4,237    125 
*  Guardant Health Inc.   1,439    125 
   CONMED Corp.   1,314    124 
*  Halozyme Therapeutics Inc.   6,121    120 
*  Blueprint Medicines Corp.   2,198    119 
*  Mirati Therapeutics Inc.   1,327    119 
*  Ultragenyx Pharmaceutical Inc.   2,089    117 
*  Tenet Healthcare Corp.   4,444    117 
*  Emergent BioSolutions Inc.   1,983    116 
*  Momenta Pharmaceuticals Inc.   3,975    112 
*  Intercept Pharmaceuticals Inc.   1,213    111 
   Cantel Medical Corp.   1,735    109 
*  NeoGenomics Inc.   3,846    109 
*  Natera Inc.   2,709    103 
*  Amicus Therapeutics Inc.   10,580    101 
*  Sage Therapeutics Inc.   2,139    101 
*  Select Medical Holdings Corp.   4,157    99 
*  Medpace Holdings Inc.   1,079    97 
*  HMS Holdings Corp.   4,044    93 
*  iRhythm Technologies Inc.   1,037    90 
*  Insmed Inc.   3,557    89 
   Ensign Group Inc.   1,949    87 
*  Arena Pharmaceuticals Inc.   1,905    85 
   Healthcare Services Group Inc.   2,946    81 
*  MEDNAX Inc.   4,682    80 
*  Merit Medical Systems Inc.   2,203    79 
   Patterson Cos. Inc.   3,289    78 
*  Biohaven Pharmaceutical Holding Co. Ltd.   1,721    76 
*  Prestige Consumer Healthcare Inc.   2,021    75 
*  uniQure NV   1,437    74 
*  Ironwood Pharmaceuticals Inc.   5,933    71 
*  Pacira BioSciences Inc.   1,613    70 
*  Glaukos Corp.   1,545    68 
*  Invitae Corp.   3,206    65 
*  Ligand Pharmaceuticals Inc.   649    61 
*  Avanos Medical Inc.   1,841    60 
*  Xencor Inc.   1,645    53 
*  Heron Therapeutics Inc.   2,821    53 

*  Esperion Therapeutics Inc.   967    49 
*  BioTelemetry Inc.   1,135    48 
*  Editas Medicine Inc.   2,129    47 
*  Brookdale Senior Living Inc.   7,011    46 
*  Endo International plc   8,145    45 
*  Magellan Health Inc.   749    45 
*  Myriad Genetics Inc.   2,528    45 
*  Theravance Biopharma Inc.   1,819    44 
*  Allogene Therapeutics Inc.   1,634    44 
*  REGENXBIO Inc.   1,101    44 
*  Corcept Therapeutics Inc.   3,336    42 
*  Aimmune Therapeutics Inc.   1,734    41 
*  Radius Health Inc.   1,857    39 
*  Zogenix Inc.   1,462    37 
*  Supernus Pharmaceuticals Inc.   1,962    35 
   Luminex Corp.   1,385    34 
*  Tricida Inc.   1,053    33 
*  Intra-Cellular Therapies Inc.   1,532    32 
*  Denali Therapeutics Inc.   1,624    32 
*  Varex Imaging Corp.   1,345    31 
*  Atara Biotherapeutics Inc.   2,560    31 
*  Aerie Pharmaceuticals Inc.   1,731    30 
*  Natus Medical Inc.   1,111    30 
*  Innoviva Inc.   2,031    27 
*  Inogen Inc.   591    27 
*  Portola Pharmaceuticals Inc.   2,544    26 
*  Taro Pharmaceutical Industries Ltd.   362    24 
*  Eagle Pharmaceuticals Inc.   518    24 
*  Pennant Group Inc.   833    23 
*  CorVel Corp.   313    22 
*  Orthofix Medical Inc.   588    21 
*  Enanta Pharmaceuticals Inc.   408    21 
*  Tivity Health Inc.   1,466    19 
*  OPKO Health Inc.   11,176    17 
*  Madrigal Pharmaceuticals Inc.   179    15 
*  Amneal Pharmaceuticals Inc.   3,851    15 
*  Axogen Inc.   1,111    14 
*  Clovis Oncology Inc.   1,665    13 
*  Mallinckrodt plc   2,751    12 
*,^  TherapeuticsMD Inc.   6,948    12 
*  Spectrum Pharmaceuticals Inc.   2,665    8 
*  Precigen Inc.   1,728    7 
*  AnaptysBio Inc.   373    6 
*  Lexicon Pharmaceuticals Inc.   1,530    4 
*,§  Alder BioPharmaceuticals CVR Exp. 12/31/2024   767    1 
            136,954 
Industrials (9.8%)          
*  PayPal Holdings Inc.   48,820    5,272 
   Accenture plc Class A   26,535    4,792 
   Union Pacific Corp.   28,811    4,604 

 

14

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   Danaher Corp.   25,498    3,687 
   Fidelity National Information Services Inc.   25,321    3,538 
   Automatic Data Processing Inc.   18,082    2,798 
   Caterpillar Inc.   22,159    2,753 
   United Parcel Service Inc.   29,004    2,625 
*  Fiserv Inc.   23,414    2,561 
   Global Payments Inc.   12,310    2,265 
   Illinois Tool Works Inc.   13,222    2,218 
   CSX Corp.   31,167    2,196 
   Deere & Co.   13,037    2,040 
   Waste Management Inc.   17,592    1,949 
   Sherwin-Williams Co.   3,427    1,771 
   FedEx Corp.   9,939    1,403 
   Ingersoll-Rand plc   9,934    1,282 
   Johnson Controls International plc   32,699    1,196 
*  Square Inc.   14,147    1,179 
   Paychex Inc.   13,282    1,029 
   Willis Towers Watson plc   5,421    1,026 
   Verisk Analytics Inc.   6,596    1,023 
*  CoStar Group Inc.   1,479    987 
   Agilent Technologies Inc.   12,712    980 
   PACCAR Inc.   14,174    948 
*  FleetCor Technologies Inc.   3,542    941 
   Cintas Corp.   3,513    937 
   Stanley Black & Decker Inc.   6,318    908 
   Rockwell Automation Inc.   4,869    893 
   Fortive Corp.   12,300    851 
   Republic Services Inc.   9,216    832 
   Fastenal Co.   23,392    801 
*  Keysight Technologies Inc.   7,778    737 
*  Mettler-Toledo International Inc.   991    695 
   TransUnion   7,796    693 
   Vulcan Materials Co.   5,386    648 
   Dover Corp.   6,189    636 
   Kansas City Southern   4,166    628 
   Martin Marietta Materials Inc.   2,632    599 
   Xylem Inc.   7,590    587 
*  Waters Corp.   2,768    539 
   WW Grainger Inc.   1,918    532 
   Old Dominion Freight Line Inc.   2,729    529 
   Westinghouse Air Brake Technologies Corp.   7,547    519 
   Masco Corp.   12,182    503 
   Expeditors International of Washington Inc.   7,029    495 
   Broadridge Financial Solutions Inc.   4,715    492 
   Jack Henry & Associates Inc.   3,121    474 

*  Fair Isaac Corp.   1,251    470 
   Arconic Inc.   15,935    468 
*  Zebra Technologies Corp.   2,196    463 
   IDEX Corp.   3,069    454 
   Allegion plc   3,859    444 
*  Trimble Inc.   10,571    417 
   Booz Allen Hamilton Holding Corp.   5,561    397 
   CH Robinson Worldwide Inc.   5,514    380 
*  Crown Holdings Inc.   5,336    376 
*  WEX Inc.   1,877    351 
   Westrock Co.   10,415    346 
   Graco Inc.   6,976    344 
   Nordson Corp.   2,360    343 
   JB Hunt Transport Services Inc.   3,536    341 
   Packaging Corp. of America   3,736    339 
   Snap-on Inc.   2,286    331 
   Lennox International Inc.   1,438    328 
   Toro Co.   4,454    318 
   Cognex Corp.   6,825    304 
   Genpact Ltd.   7,741    298 
*  XPO Logistics Inc.   3,831    283 
   Universal Display Corp.   1,682    267 
*  Sensata Technologies Holding plc   6,530    266 
   AptarGroup Inc.   2,597    263 
*  HD Supply Holdings Inc.   6,837    260 
*  Generac Holdings Inc.   2,519    259 
   Owens Corning   4,570    258 
*  Euronet Worldwide Inc.   2,066    256 
*  Pagseguro Digital Ltd.   8,101    254 
   Donaldson Co. Inc.   5,468    247 
*  Arrow Electronics Inc.   3,655    245 
*  Trex Co. Inc.   2,551    244 
   Xerox Holdings Corp.   7,439    240 
*  Flex Ltd.   21,449    238 
   Robert Half International Inc.   4,721    238 
   National Instruments Corp.   5,790    233 
   AO Smith Corp.   5,810    230 
   Armstrong World Industries Inc.   2,259    226 
   Quanta Services Inc.   5,877    224 
*  Stericycle Inc.   3,876    223 
   MDU Resources Group Inc.   7,445    206 
*  Berry Global Group Inc.   5,418    206 
   Sonoco Products Co.   4,248    205 
   Sealed Air Corp.   6,628    201 
   MSA Safety Inc.   1,616    197 
*  Axon Enterprise Inc.   2,526    195 
   Watsco Inc.   1,228    193 
   Allison Transmission Holdings Inc.   4,748    193 
*  Paylocity Holding Corp.   1,431    185 

 

15

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   ManpowerGroup Inc.   2,413    183 
   Landstar System Inc.   1,801    182 
*  Gardner Denver Holdings Inc.   5,464    179 
*  SiteOne Landscape Supply Inc.   1,805    179 
   MAXIMUS Inc.   2,814    177 
   Brink’s Co.   2,250    176 
*  FTI Consulting Inc.   1,548    174 
   Littelfuse Inc.   1,086    173 
   CoreLogic Inc.   3,789    172 
*  Mercury Systems Inc.   2,297    169 
   Acuity Brands Inc.   1,625    167 
   Air Lease Corp.   4,317    166 
   AGCO Corp.   2,730    165 
   Simpson Manufacturing Co. Inc.   2,070    164 
   Rexnord Corp.   5,621    164 
   Graphic Packaging Holding Co.   12,080    163 
*  Clean Harbors Inc.   2,340    163 
   Louisiana-Pacific Corp.   5,717    163 
   Regal Beloit Corp.   2,041    158 
*  TopBuild Corp.   1,555    157 
   Eagle Materials Inc.   1,969    155 
*  Integer Holdings Corp.   1,709    154 
*  Kirby Corp.   2,409    154 
   Alliance Data Systems Corp.   1,779    153 
   nVent Electric plc   6,298    151 
*  AMN Healthcare Services Inc.   2,005    148 
   Avnet Inc.   4,682    144 
*  Novanta Inc.   1,560    139 
   Valmont Industries Inc.   1,196    139 
   Watts Water Technologies Inc.   1,473    138 
*  Anixter International Inc.   1,351    132 
   Universal Forest Products Inc.   2,809    132 
*  ExlService Holdings Inc.   1,760    131 
   GATX Corp.   1,797    129 
   John Bean Technologies Corp.   1,315    127 
   UniFirst Corp.   673    125 
   Franklin Electric Co. Inc.   2,408    125 
*  MasTec Inc.   2,535    124 
*  Builders FirstSource Inc.   5,381    122 
*  Proto Labs Inc.   1,376    121 
   Insperity Inc.   1,771    119 
   MSC Industrial Direct Co. Inc. Class A   1,927    119 
*  ASGN Inc.   2,340    119 
   Macquarie Infrastructure Corp.   3,005    118 
   Vishay Intertechnology Inc.   6,280    117 
   Brady Corp. Class A   2,456    116 

*  Itron Inc.   1,518    115 
   Korn Ferry   3,114    109 
   Applied Industrial Technologies Inc.   1,841    109 
   Trinity Industries Inc.   5,109    104 
*  WESCO International Inc.   2,490    101 
   Ryder System Inc.   2,620    100 
*  Cimpress plc   824    96 
*  Summit Materials Inc.   4,705    92 
*   Advanced Disposal Services Inc.   2,687    89 
*  Casella Waste Systems Inc.   1,779    86 
*  Saia Inc.   986    86 
   ESCO Technologies Inc.   939    85 
*  Rogers Corp.   733    85 
   AAON Inc.   1,533    84 
*  TriNet Group Inc.   1,586    84 
*  Beacon Roofing Supply Inc.   2,654    79 
   Forward Air Corp.   1,330    79 
*  Fabrinet   1,386    76 
   Albany International Corp.   1,186    76 
*  Ambarella Inc.   1,246    74 
*  SPX Corp.   1,631    68 
   O-I Glass Inc.   6,289    68 
   Federal Signal Corp.   2,336    68 
   Badger Meter Inc.   1,120    67 
   EVERTEC Inc.   2,238    66 
   Advanced Drainage Systems Inc.   1,530    64 
*  Masonite International Corp.   869    64 
*  Plexus Corp.   946    63 
   Aircastle Ltd.   1,967    63 
   Otter Tail Corp.   1,278    62 
   Mobile Mini Inc.   1,576    61 
*  Sanmina Corp.   2,180    57 
*  Hub Group Inc.   1,190    55 
*  BMC Stock Holdings Inc.   2,230    55 
   McGrath RentCorp   786    55 
*  Kratos Defense & Security Solutions Inc.   3,343    54 
   Covanta Holding Corp.   3,952    53 
   Boise Cascade Co.   1,483    53 
   Deluxe Corp.   1,559    52 
   Belden Inc.   1,279    51 
   Mueller Industries Inc.   1,821    51 
   Triton International Ltd.   1,475    51 
*  Installed Building Products Inc.   746    49 
*  Cardtronics plc   1,351    49 
*  Gibraltar Industries Inc.   966    49 
   Werner Enterprises Inc.   1,403    47 
*  OSI Systems Inc.   571    46 
   Comfort Systems USA Inc.   1,085    46 
*  Pluralsight Inc. Class A   2,545    45 
*  Huron Consulting Group Inc.   764    45 
   Tennant Co.   628    45 

 

16

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   Patrick Industries Inc.   834    44 
*  Knowles Corp.   2,621    44 
*  CBIZ Inc.   1,660    43 
   AAR Corp.   1,232    43 
*  JELD-WEN Holding Inc.   2,250    42 
   Terex Corp.   1,864    41 
*  Atlas Corp.   3,785    40 
*  MACOM Technology Solutions Holdings Inc.   1,564    40 
   SFL Corp. Ltd.   3,234    39 
*  TTM Technologies Inc.   2,938    38 
*  Sykes Enterprises Inc.   1,200    38 
   Greif Inc. Class A   1,048    37 
   Encore Wire Corp.   748    37 
   Lindsay Corp.   369    37 
   Helios Technologies Inc.   910    36 
   AVX Corp.   1,572    34 
   Raven Industries Inc.   1,179    34 
*  TriMas Corp.   1,328    34 
   Benchmark Electronics Inc.   1,194    32 
   Rush Enterprises Inc.   741    31 
   US Ecology Inc.   710    30 
   Schneider National Inc.   1,601    29 
*  Dycom Industries Inc.   964    29 
   Scorpio Tankers Inc.   1,438    28 
   Granite Construction Inc.   1,384    28 
*  FARO Technologies Inc.   491    28 
*  Harsco Corp.   2,319    28 
   Heartland Express Inc.   1,426    26 
   Quanex Building Products Corp.   1,508    25 
*  SEACOR Holdings Inc.   665    25 
   Primoris Services Corp.   1,296    25 
*  Evolent Health Inc.   2,607    24 
   Griffon Corp.   1,291    22 
*  Manitowoc Co. Inc.   1,741    22 
   H&E Equipment Services Inc.   900    21 
   Astec Industries Inc.   565    21 
   Greenbrier Cos. Inc.   869    21 
*  Tutor Perini Corp.   1,416    21 
   Myers Industries Inc.   1,511    21 
   Apogee Enterprises Inc.   669    20 
   CTS Corp.   770    20 
   ADT Inc.   3,119    20 
   Kelly Services Inc.   1,114    19 
   TTEC Holdings Inc.   458    17 
*  Conduent Inc.   5,177    17 
   Hyster-Yale Materials Handling Inc.   335    16 
*  TrueBlue Inc.   1,032    15 
   GasLog Ltd.   1,570    9 
   Matson Inc.   260    9 
   Caesarstone Ltd.   398    4 
            97,618 

Oil & Gas (1.2%)          
   Schlumberger Ltd.   57,357    1,554 
   Phillips 66   18,678    1,398 
   Marathon Petroleum Corp.   26,867    1,274 
   ONEOK Inc.   17,155    1,145 
   Valero Energy Corp.   17,083    1,132 
   Williams Cos. Inc.   50,324    959 
   Halliburton Co.   36,300    616 
*  Cheniere Energy Inc.   9,769    501 
   Baker Hughes Co.   27,844    448 
   Targa Resources Corp.   9,612    311 
   National Oilwell Varco Inc.   16,074    301 
   HollyFrontier Corp.   6,388    215 
*  SolarEdge Technologies Inc.   1,654    206 
*  Enphase Energy Inc.   3,944    193 
   Helmerich & Payne Inc.   4,871    180 
*  First Solar Inc.   3,454    158 
   PBF Energy Inc.   5,264    118 
*  Transocean Ltd.   27,418    92 
*  Cosan Ltd.   4,442    81 
   Arcosa Inc.   1,880    81 
*  Apergy Corp.   3,994    74 
*  Chart Industries Inc.   1,275    73 
   Equitrans Midstream Corp.   8,432    60 
   Delek US Holdings Inc.   2,488    53 
   Golar LNG Ltd.   3,851    49 
   Core Laboratories NV   1,668    45 
*  Dril-Quip Inc.   1,234    44 
   Patterson-UTI Energy Inc.   6,649    38 
   Archrock Inc.   5,138    36 
   Antero Midstream Corp.   8,140    35 
*  NOW Inc.   3,363    30 
*  Valaris plc Class A   6,443    24 
   CVR Energy Inc.   817    23 
*  MRC Global Inc.   2,621    23 
   Nabors Industries Ltd.   11,299    20 
*  ProPetro Holding Corp.   2,187    19 
*  SunPower Corp.   2,024    17 
*  Newpark Resources Inc.   4,118    14 
*  Frank’s International NV   3,600    14 
*  Oil States International Inc.   1,455    11 
   RPC Inc.   3,251    11 
*  Diamond Offshore Drilling Inc.   1,569    5 
            11,681 
Technology (27.9%)          
   Microsoft Corp.   314,568    50,963 
   Apple Inc.   184,897    50,543 
*  Facebook Inc.   99,354    19,123 
*  Alphabet Inc. Class C   13,041    17,466 
*  Alphabet Inc. Class A   11,874    15,902 
   Intel Corp.   181,119    10,056 
   Cisco Systems Inc.   177,954    7,106 
*  Adobe Inc.   20,197    6,970 

 

17

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
   NVIDIA Corp.   24,247    6,548 
*  salesforce.com Inc.   34,935    5,953 
   International Business Machines Corp.   36,900    4,803 
   Texas Instruments Inc.   39,015    4,453 
   Broadcom Inc.   16,057    4,377 
   Oracle Corp.   85,375    4,223 
   QUALCOMM Inc.   47,461    3,716 
   Intuit Inc.   10,324    2,745 
*  ServiceNow Inc.   7,720    2,517 
*  Micron Technology Inc.   45,899    2,412 
   Applied Materials Inc.   38,246    2,223 
*  Advanced Micro Devices Inc.   42,740    1,944 
   Lam Research Corp.   5,979    1,754 
*  Autodesk Inc.   9,069    1,731 
   Analog Devices Inc.   15,305    1,669 
   Cognizant Technology Solutions Corp.   22,829    1,391 
   NXP Semiconductors NV   11,759    1,337 
   HP Inc.   61,591    1,280 
   Motorola Solutions Inc.   7,230    1,198 
*  Workday Inc.   6,790    1,176 
*  Twitter Inc.   32,356    1,074 
   KLA Corp.   6,570    1,010 
*  Splunk Inc.   6,370    939 
   Cerner Corp.   12,883    892 
   Xilinx Inc.   10,477    875 
   Microchip Technology Inc.   9,529    864 
*  Synopsys Inc.   6,201    855 
*  VeriSign Inc.   4,326    821 
*  Veeva Systems Inc.   5,685    807 
   Corning Inc.   32,094    766 
*  Cadence Design Systems Inc.   11,469    759 
*  RingCentral Inc.   3,185    751 
   Skyworks Solutions Inc.   7,216    723 
*  Atlassian Corp. plc Class A   4,976    721 
*  Palo Alto Networks Inc.   3,878    716 
   Hewlett Packard Enterprise Co.   55,059    704 
   CDW Corp.   5,953    680 
   Western Digital Corp.   12,227    679 
   Maxim Integrated Products Inc.   11,391    634 
*  Fortinet Inc.   5,864    598 
   Marvell Technology Group Ltd.   27,686    590 
*  Akamai Technologies Inc.   6,778    586 
*  Paycom Software Inc.   2,063    583 
*  Twilio Inc.   5,012    565 
*  DocuSign Inc. Class A   6,393    552 
*  Okta Inc.   4,301    551 
   Seagate Technology plc   11,001    528 

   Citrix Systems Inc.   5,037    521 
*  GoDaddy Inc.   7,172    502 
*  Check Point Software Technologies Ltd.   4,752    493 
*  Arista Networks Inc.   2,528    488 
*  Yandex NV   11,932    485 
*  Tyler Technologies Inc.   1,531    480 
*  Qorvo Inc.   4,765    479 
*  EPAM Systems Inc.   2,144    479 
*  Gartner Inc.   3,588    464 
   NetApp Inc.   9,914    463 
   NortonLifeLock Inc.   23,874    454 
   Teradyne Inc.   7,010    412 
*  Black Knight Inc.   5,895    393 
*  Coupa Software Inc.   2,595    389 
*  VMware Inc.   3,181    383 
*  Guidewire Software Inc.   3,415    374 
   Cypress Semiconductor Corp.   15,230    352 
*  Zendesk Inc.   4,363    346 
   Amdocs Ltd.   5,400    344 
*  PTC Inc.   4,239    320 
*  ON Semiconductor Corp.   16,995    317 
*  F5 Networks Inc.   2,599    312 
   Juniper Networks Inc.   14,341    304 
*  Aspen Technology Inc.   2,838    302 
   Entegris Inc.   5,642    301 
   Monolithic Power Systems Inc.   1,825    290 
*  HubSpot Inc.   1,610    289 
*  Ceridian HCM Holding Inc.   3,848    272 
*  MongoDB Inc.   1,779    271 
*  Alteryx Inc.   1,930    269 
   DXC Technology Co.   10,714    258 
*  Lumentum Holdings Inc.   3,308    257 
*  InterXion Holding NV   3,004    255 
*  Dell Technologies Inc.   6,255    253 
*  Ciena Corp.   6,506    250 
   CDK Global Inc.   5,234    241 
*  Proofpoint Inc.   2,247    240 
*  Mellanox Technologies Ltd.   1,937    231 
   SYNNEX Corp.   1,821    228 
   MKS Instruments Inc.   2,252    226 
*  Tech Data Corp.   1,551    221 
*  RealPage Inc.   3,361    215 
*  Cree Inc.   4,497    201 
*  Five9 Inc.   2,641    193 
*  Wix.com Ltd.   1,360    182 
*  Manhattan Associates Inc.   2,704    182 
   j2 Global Inc.   2,073    181 
*  Smartsheet Inc. Class A   3,858    179 
*  Dropbox Inc. Class A   9,096    178 
*  Nutanix Inc.   7,460    178 
   Cabot Microelectronics Corp.   1,269    177 

 

18

 

 

ESG U.S. Stock ETF

 

      Shares   Market
Value•
($000)		 
*  Avalara Inc.   2,077    176 
   LogMeIn Inc.   2,061    176 
*  Cirrus Logic Inc.   2,524    173 
*  Silicon Laboratories Inc.   1,866    165 
*  Verint Systems Inc.   2,998    165 
*  Envestnet Inc.   2,150    162 
*  Everbridge Inc.   1,511    160 
   Cogent Communications Holdings Inc.   2,181    159 
*  Pure Storage Inc.   10,351    158 
*  CyberArk Software Ltd.   1,495    157 
   Pegasystems Inc.   1,727    156 
*  Anaplan Inc.   3,414    153 
*  Globant SA   1,348    152 
   Blackbaud Inc.   2,222    151 
*  Q2 Holdings Inc.   1,909    144 
*  Elastic NV   1,938    143 
*  Inphi Corp.   1,915    143 
   Perspecta Inc.   5,667    142 
*  ACI Worldwide Inc.   5,040    140 
*  ViaSat Inc.   2,419    139 
*  NCR Corp.   5,344    135 
*  Viavi Solutions Inc.   10,128    134 
   Pinterest Inc. Class A   6,808    133 
*  Zscaler Inc.   2,525    131 
*  Qualys Inc.   1,631    131 
*  Box Inc.   7,375    124 
   Power Integrations Inc.   1,402    122 
*  Semtech Corp.   3,061    121 
*  FireEye Inc.   8,844    117 
*  Cornerstone OnDemand Inc.   2,775    114 
   Brooks Automation Inc.   3,191    110 
*  Rapid7 Inc.   2,369    110 
*  Advanced Energy Industries Inc.   1,768    105 
*  Acacia Communications Inc.   1,533    105 
*  Teradata Corp.   5,139    102 
*  Blackline Inc.   1,616    101 
*  CommScope Holding Co. Inc.   9,089    100 
*  Cloudera Inc.   10,617    95 
*  Varonis Systems Inc.   1,160    93 
*  Lattice Semiconductor Corp.   5,183    93 
*  Synaptics Inc.   1,297    86 
*  SailPoint Technologies Holding Inc.   3,197    81 
*  Bottomline Technologies DE Inc.   1,669    74 
*  SPS Commerce Inc.   1,391    73 
*  Premier Inc.   2,435    72 
*  Insight Enterprises Inc.   1,300    72 
*  Diodes Inc.   1,605    71 
*  Alarm.com Holdings Inc.   1,370    66 
*  NetScout Systems Inc.   2,425    62 
   InterDigital Inc.   1,170    62 

   Progress Software Corp.   1,613    60 
*  Avaya Holdings Corp.   4,604    60 
*  Workiva Inc.   1,396    60 
*  LivePerson Inc.   2,201    58 
*  SVMK Inc.   3,151    57 
*  PROS Holdings Inc.   1,249    57 
*  EchoStar Corp.   1,611    56 
*  CommVault Systems Inc.   1,265    53 
*  Rambus Inc.   3,747    52 
*  Virtusa Corp.   1,097    48 
*  Yext Inc.   3,097    47 
   Kulicke & Soffa Industries Inc.   2,053    47 
*  Perficient Inc.   1,112    46 
   CSG Systems International Inc.   1,029    46 
*  Tenable Holdings Inc.   1,708    42 
   NIC Inc.   2,265    41 
*  Mimecast Ltd.   977    39 
*  Covetrus Inc.   3,359    37 
   TiVo Corp.   4,911    37 
*  Allscripts Healthcare Solutions Inc.   4,743    36 
*  3D Systems Corp.   3,749    34 
*  MicroStrategy Inc.   248    34 
*  Amkor Technology Inc.   3,118    33 
*  SolarWinds Corp.   1,697    31 
*  MaxLinear Inc.   1,849    29 
*  Shutterstock Inc.   707    27 
*  Blucora Inc.   1,552    27 
   Xperi Corp.   1,366    24 
*  Stratasys Ltd.   1,455    23 
*  ScanSource Inc.   752    21 
*  Loral Space & Communications Inc.   674    21 
   Ebix Inc.   765    20 
   Pitney Bowes Inc.   5,514    19 
*  NextGen Healthcare Inc.   1,356    18 
*  NETGEAR Inc.   909    17 
*  Forrester Research Inc.   405    15 
   Plantronics Inc.   1,011    14 
   ADTRAN Inc.   1,484    12 
*  Endurance International Group Holdings Inc.   2,223    8 
            278,991 
Telecommunications (2.3%)          
   AT&T Inc.   303,400    10,686 
   Verizon Communications Inc.   172,018    9,316 
*  T-Mobile US Inc.   12,906    1,164 
   CenturyLink Inc.   45,669    551 
*  Zayo Group Holdings Inc.   8,739    306 
*  Sprint Corp.   25,967    239 

 

19

 

 

ESG U.S. Stock ETF    

 

           Market 
           Value• 
         Shares   ($ 000)
     Telephone & Data Systems Inc.   5,401    109 
     Shenandoah Telecommunications Co.   2,253    100 
 *   Iridium Communications Inc.   3,628    98 
 *   Vonage Holdings Corp.   9,320    84 
 *   8x8 Inc.   3,527    65 
     ATN International Inc.   373    20 
 *,^   GTT Communications Inc.   1,153    17 
 *   Intelsat SA   2,121    8 
 *   United States Cellular Corp.   245    8 
              22,771 

Utilities (1.2%)        
        Sempra Energy   11,645    1,628 
        Consolidated Edison Inc.   13,624    1,074 
        Edison International   14,502    974 
        American Water Works Co. Inc.   7,566    936 
        PPL Corp.   29,524    886 
        CMS Energy Corp.   12,583    760 
        Atmos Energy Corp.   4,842    500 
        CenterPoint Energy Inc.   20,582    474 
        Alliant Energy Corp.   9,003    469 
        AES Corp.   26,718    447 
        NiSource Inc.   14,473    391 
        Essential Utilities Inc.   8,524    367 
        UGI Corp.   8,500    306 
        OGE Energy Corp.   7,435    283 
        IDACORP Inc.   2,090    202 
        Hawaiian Electric Industries Inc.   4,495    193 
        Portland General Electric Co.   3,485    190 
        ONE Gas Inc.   2,298    189 
        Spire Inc.   2,274    171 
        NorthWestern Corp.   2,395    168 
        Avangrid Inc.   3,166    157 
        Southwest Gas Holdings Inc.   2,367    153 
        Avista Corp.   3,206    151 
        California Water Service Group   2,937    141 
        New Jersey Resources Corp.   3,978    140 
        South Jersey Industries Inc.   4,995    135 
        American States Water Co.   1,734    133 
        MGE Energy Inc.   1,826    130 

     Ormat Technologies Inc.   1,832    128 
     El Paso Electric Co.   1,583    107 
     Pattern Energy Group Inc. Class A   3,289    89 
 *   Sunrun Inc.   4,112    80 
     Northwest Natural Holding Co.   1,085    71 
     Atlantica Yield plc   2,174    63 
 *   Evoqua Water Technologies Corp.   2,954    62 
     SJW Group   954    58 
     TerraForm Power Inc.   3,018    57 

         12,463 
Total Common Stocks          
(Cost $982,760)        996,905 
Temporary Cash Investment (0.1%)          
Money Market Fund (0.1%)          
1,2  Vanguard Market          
Liquidity Fund, 1.706%          
(Cost $1,162)   11,617    1,162 
Total Investments (99.9%)          
(Cost $983,922)        998,067 
Other Assets and Liabilities—Net (0.1%)2,3        784 
Net Assets (100%)        998,851 

 

Cost rounded to $000.

• 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 $142,000.

§ Security value determined using significant unobservable inputs.

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.

2 Collateral of $156,000 was received for securities on loan.

3 Cash of $91,000 has been segregated as initial margin for open futures contracts.

  CVR—Contingent Value Rights.  

  REIT—Real Estate Investment Trust.

 

20

 

 

ESG U.S. 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                    
E-mini S&P 500 Index   March 2020    13    1,918    (225)

 

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

 

21

 

 

ESG U.S. Stock ETF

 

Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts)  Amount 
Assets    
Investments in Securities, at Value    
Unaffiliated Issuers (Cost $982,760)   996,905 
Affiliated Issuers (Cost $1,162)   1,162 
Total Investment in Securities   998,067 
Investment in Vanguard   43 
Cash Collateral Pledged—Futures Contracts   91 
Receivables for Accrued Income   1,208 
Receivables for Capital Shares Issued   3,927 
Total Assets   1,003,336 
Liabilities     
Due to Custodian   2 
Payables for Investment Securities Purchased   4,266 
Collateral for Securities on Loan   156 
Payables to Vanguard   57 
Variation Margin Payable—Futures Contracts   4 
Total Liabilities   4,485 
Net Assets   998,851 
      
At February 29, 2020, net assets consisted of:     
      
Paid-in Capital   982,078 
Total Distributable Earnings (Loss)   16,773 
Net Assets   998,851 
      
Net Assets     
Applicable to 19,075,000 outstanding $.001 par value shares of     
beneficial interest (unlimited authorization)   998,851 
Net Asset Value Per Shares  $52.36 

  

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

 

22

 

 

ESG U.S. Stock ETF

 

Statement of Operations

 

   Six Months Ended 
   February 29, 2020 
   ($ 000)
Investment Income     
Income     
Dividends   6,950 
Interest1   9 
Securities Lending—Net   15 
Total Income   6,974 
Expenses     
The Vanguard Group—Note B     
Investment Advisory Services   59 
Management and Administrative   393 
Marketing and Distribution   27 
Custodian Fees   13 
Shareholders’ Reports   4 
Trustees’ Fees and Expenses   — 
Total Expenses   496 
Expenses Paid Indirectly   (12)
Net Expenses   484 
Net Investment Income   6,490 
Realized Net Gain (Loss)     
Investment Securities Sold1   2,208 
Futures Contracts   197 
Realized Net Gain (Loss)   2,405 
Change in Unrealized Appreciation (Depreciation)     
Investment Securities1,2   (15,930)
Futures Contracts   (235)
Change in Unrealized Appreciation (Depreciation)   (16,165)
Net Increase (Decrease) in Net Assets Resulting from Operations   (7,270)

1Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $9,000, $1,000, and $1,000 respectively. Purchases and sales are for temporary cash investment purposes.

2Includes $2,262,000 of net gain (loss) resulting from in-kind redemptions.

  

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

 

23

 

 

ESG U.S. Stock ETF

 

Statement of Changes in Net Assets

  

       September 18, 
   Six Months Ended   20181 to 
   February 29,   August 31, 
   2020   2019 
   ($ 000)  ($ 000)
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   6,490    4,244 
Realized Net Gain (Loss)   2,405    (2,051)
Change in Unrealized Appreciation (Depreciation)   (16,165)   30,085 
Net Increase (Decrease) in Net Assets Resulting from Operations   (7,270)   32,278 
Distributions2          
Total Distributions   (5,787)   (2,448)
Capital Share Transactions          
Issued   429,174    564,704 
Issued in Lieu of Cash Distributions   —    — 
Redeemed   (11,800)   — 
Net Increase (Decrease) from Capital Share Transactions   417,374    564,704 
Total Increase (Decrease)   404,317    594,534 
Net Assets          
Beginning of Period   594,534    — 
End of Period   998,851    594,534 
1Inception.

2Certain prior period numbers have been reclassified to conform with current period presentation.

  

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

 

24

 

 

ESG U.S. Stock ETF

 

Financial Highlights

 

   Six Months   Sept. 18, 
   Ended   20181 to 
   Feb. 29,   Aug. 31, 
For a Share Outstanding Throughout Each Period  2020   2019 
Net Asset Value, Beginning of Period  $51.25   $50.00 
Investment Operations          
Net Investment Income2   .444    .792 
Net Realized and Unrealized Gain (Loss) on Investments   1.092    .868 
Total from Investment Operations   1.536    1.660 
Distributions          
Dividends from Net Investment Income   (.426)   (.410)
Distributions from Realized Capital Gains   —    — 
Total Distributions   (.426)   (.410)
Net Asset Value, End of Period  $52.36   $51.25 
           
Total Return   2.97%   3.40%
           
Ratios/Supplemental Data          
Net Assets, End of Period (Millions)  $999   $595 
Ratio of Total Expenses to Average Net Assets   0.12%   0.12%3
Ratio of Net Investment Income to Average Net Assets   1.58%   1.67%3
Portfolio Turnover Rate   2%   6%

The expense ratio and net investment income ratio for the period have been annualized.

1 Inception.

2 Calculated based on average shares outstanding.

3 Annualized.

 

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

  

25

 

 

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. 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 Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. 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 29, 2020, 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 its open federal income tax year ended August 31, 2019, and for the period ended February 29, 2020, 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 at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

 

26

 

 

ESG U.S. Stock ETF

 

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 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.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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.

 

27

 

 

ESG U.S. Stock ETF

 

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, 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $43,000, representing less than 0.01% of the fund’s net assets and 0.02% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $12,000 (an annual rate of less than 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.

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives of February 29, 2020, based on the inputs used to value them:

 

   Level 1   Level 2   Level 3   Total 
   ($ 000)  ($ 000)  ($ 000)  ($ 000)
Investments                    
Assets                    
Common Stocks   996,904    —    1    996,905 
Temporary Cash Investments   1,162    —    —    1,162 
Total   998,066    —    1    998,067 
Derivative Financial Instruments                    
Liabilities                    
Futures Contracts1   4    —    —    4 

 

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

 

28

 

 

ESG U.S. Stock ETF

 

E. As of February 29, 2020, 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   983,929 
Gross Unrealized Appreciation   76,048 
Gross Unrealized Depreciation   (62,135)
Net Unrealized Appreciation (Depreciation)   13,913 

 

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, 2019, the fund had available capital losses totaling $2,040,000 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, 2020; 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 29, 2020, the fund purchased $445,808,000 of investment securities and sold $28,181,000 of investment securities, other than temporary cash investments. Purchases and sales include $318,350,000 and $10,765,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

G.Capital shares issued and redeemed were:

 

   Six Months Ended   September 18, 20181 to 
   February 29, 2020   August 31, 2019 
    Shares    Shares 
    (000)   (000)
Issued   7,700    11,600 
Issued in Lieu of Cash Distributions   —    — 
Redeemed   (225)   — 
Net Increase (Decrease) in Shares Outstanding   7,475    11,600 
1 Inception.          

 

At February 29, 2020, one shareholder was the record or beneficial owner of 27% of the fund’s net assets. If this shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

 

H. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

29

 

 

   
   

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. 

 

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, www.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 www.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.

  
   
 

© 2020 The Vanguard Group, Inc.

All rights reserved.

Vanguard Marketing Corporation, Distributor

.

Q43932 042020

 

 

 

 

 

 

 

 

 

Semiannual Report | February 29, 2020

 

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

 

 

 

 

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 29, 2020

 

   Beginning   Ending   Expenses 
   Account Value   Account Value   Paid During 
ESG International Stock ETF  8/31/2019   2/29/2020   Period 
Based on Actual Fund Return  $1,000.00   $1,024.56   $0.81 
Based on Hypothetical 5% Yearly Return   1,000.00    1,024.07    0.81 

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratio for that period is 0.16%. 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 that period, then divided by the number of days in the most recent 12-month period (182/366).

 

2

 

 

ESG International Stock ETF

 

Sector Diversification 

As of February 29, 2020

 

Basic Materials   5.2%
Consumer Goods   13.7 
Consumer Services   10.3 
Financials   29.1 
Health Care   10.7 
Industrials   12.0 
Oil & Gas   1.7 
Technology   11.2 
Telecommunications   4.1 
Utilities   2.0 

The table reflects the fund’s investments, except for short-term investments and derivatives. 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.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, at-tempting to remain fully invested and tracking their target index as closely as possible.

 

 

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.

 

3

 

 

ESG International Stock ETF

 

Financial Statements (unaudited)

 

Schedule of Investments

As of February 29, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

         Market 
         Value• 
    Shares   ($000)
Common Stocks (99.2%)          
Australia (4.8%)          
  CSL Ltd.   18,125    3,702 
  Commonwealth Bank of Australia   68,453    3,675 
  Westpac Banking Corp.   136,496    2,090 
  Australia & New Zealand Banking Group Ltd.   110,571    1,783 
  National Australia Bank Ltd.   106,721    1,756 
  Macquarie Group Ltd.   11,894    1,058 
  Transurban Group   101,708    992 
  Goodman Group   79,164    777 
  Amcor plc   63,235    601 
  Newcrest Mining Ltd.   35,412    581 
  QBE Insurance Group Ltd.   64,713    575 
  Brambles Ltd.   70,950    558 
  ASX Ltd.   10,775    526 
  Scentre Group   217,968    494 
  Fortescue Metals Group Ltd.   72,987    488 
  Sonic Healthcare Ltd.   23,806    452 
  Dexus   56,221    448 
  James Hardie Industries plc   23,484    439 
  Insurance Australia Group Ltd.   103,968    438 
  Cochlear Ltd.   3,083    422 
  APA Group   59,545    420 
  Telstra Corp. Ltd.   184,446    416 
  Suncorp Group Ltd.   55,674    416 
  GPT Group   106,698    403 
  Ramsay Health Care Ltd.   8,267    370 
  Orica Ltd.   28,085    367 
  Lendlease Group   30,755    358 
  Northern Star Resources Ltd.   37,508    328 
  Sydney Airport   61,272    313 
  Medibank Pvt Ltd.   160,484    300 
  SEEK Ltd.   21,595    296 
  Caltex Australia Ltd.   13,148    283 
  Computershare Ltd.   27,881    283 

  Vicinity Centres   192,507    273 
  Bendigo & Adelaide Bank Ltd.   43,244    261 
  Alumina Ltd.   191,647    245 
  Incitec Pivot Ltd.   134,083    241 
  BlueScope Steel Ltd.   30,125    236 
  Mirvac Group   112,990    225 
  Boral Ltd.   70,960    212 
* Afterpay Ltd.   9,076    202 
  Challenger Ltd.   33,100    199 
  Bank of Queensland Ltd.   40,461    199 
  Orora Ltd.   110,155    198 
* AMP Ltd.   177,707    196 
  Downer EDI Ltd.   49,937    189 
  Stockland   58,475    181 
  Magellan Financial Group Ltd.   4,279    158 
  Atlas Arteria Ltd.   24,033    127 
* Xero Ltd.   2,495    122 
  Aurizon Holdings Ltd.   31,417    100 
  Charter Hall Group   12,119    99 
* Saracen Mineral Holdings Ltd.   35,010    85 
  JB Hi-Fi Ltd.   2,954    71 
  Evolution Mining Ltd.   25,648    67 
  Iluka Resources Ltd.   10,611    58 
  Ansell Ltd.   2,932    57 
  ALS Ltd.   9,769    54 
  REA Group Ltd.   810    53 
  Cleanaway Waste Management Ltd.   33,140    50 
  Shopping Centres Australasia Property Group   24,723    49 
  Domino’s Pizza Enterprises Ltd.   1,210    44 
  Appen Ltd.   3,142    43 
  Qube Holdings Ltd.   22,597    43 
  carsales.com Ltd.   3,967    42 
  Cromwell Property Group   55,723    42 
  Qantas Airways Ltd.   10,685    39 
  Steadfast Group Ltd.   15,232    38 

 

4

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
  AusNet Services   34,110    38 
  IOOF Holdings Ltd.   10,049    38 
  Reliance Worldwide Corp. Ltd.   16,544    37 
  nib holdings Ltd.   11,992    37 
  Regis Resources Ltd.   13,682    36 
  Altium Ltd.   1,715    35 
* Nufarm Ltd.   10,332    35 
  IGO Ltd.   9,793    34 
1 Viva Energy Group Ltd.   29,194    34 
  OZ Minerals Ltd.   5,624    33 
* NEXTDC Ltd.   6,393    33 
  IDP Education Ltd.   2,294    32 
  St. Barbara Ltd.   20,175    31 
  Pendal Group Ltd.   5,946    29 
  TPG Telecom Ltd.   5,848    29 
  CSR Ltd.   10,256    28 
  Breville Group Ltd.   2,187    28 
* PolyNovo Ltd.   18,383    28 
  Link Administration Holdings Ltd.   8,893    28 
  Harvey Norman Holdings Ltd.   11,121    27 
  Premier Investments Ltd.   2,430    27 
  IRESS Ltd.   3,425    27 
  CIMIC Group Ltd.   1,699    27 
  Metcash Ltd.   16,281    26 
  Mineral Resources Ltd.   2,416    26 
  Bapcor Ltd.   6,578    25 
  Bingo Industries Ltd.   13,363    25 
* Vocus Group Ltd.   10,984    25 
  Nine Entertainment Co. Holdings Ltd.   22,766    24 
  Ingenia Communities Group   7,126    23 
  Perpetual Ltd.   906    23 
  Monadelphous Group Ltd.   2,354    22 
  Flight Centre Travel Group Ltd.   1,027    22 
  WiseTech Global Ltd.   2,129    21 
  Credit Corp. Group Ltd.   981    21 
* GrainCorp Ltd. Class A   4,098    21 
  Sims Ltd.   3,306    21 
  Corporate Travel Management Ltd.   2,207    20 
* Perseus Mining Ltd.   29,913    20 
  IPH Ltd.   3,562    20 
  National Storage REIT   13,356    20 
  Super Retail Group Ltd.   3,607    19 
* Gold Road Resources Ltd.   19,926    19 
  Rural Funds Group   14,574    18 
* Silver Lake Resources Ltd.   17,669    18 
* Resolute Mining Ltd.   27,652    18 
  Abacus Property Group   7,284    18 
  Technology One Ltd.   3,371    18 

  GUD Holdings Ltd.   2,503    18 
§ Bega Cheese Ltd.   6,696    17 
  Aventus Group   9,152    17 
  Adelaide Brighton Ltd.   8,530    17 
* Lynas Corp. Ltd.   13,034    16 
  IMF Bentham Ltd.   4,918    14 
  Healius Ltd.   6,810    14 
  NRW Holdings Ltd.   8,414    13 
* Nanosonics Ltd.   2,892    13 
  Genworth Mortgage Insurance Australia Ltd.   6,053    13 
* Perenti Global Ltd.   14,365    13 
  Platinum Asset Management Ltd.   4,754    13 
  Pro Medicus Ltd.   946    13 
  Webjet Ltd.   1,973    12 
  oOh!media Ltd.   6,623    12 
  Ramelius Resources Ltd.   16,230    12 
  Southern Cross Media Group Ltd.   26,454    12 
  Freedom Foods Group Ltd.   4,398    12 
  Costa Group Holdings Ltd.   5,932    12 
  EML Payments Ltd.   4,702    11 
  Select Harvests Ltd.   2,684    11 
  Vita Group Ltd.   11,206    11 
  InvoCare Ltd.   1,072    10 
* nearmap Ltd.   8,760    10 
  Domain Holdings Australia Ltd.   4,494    9 
  Clinuvel Pharmaceuticals Ltd.   794    9 
  BWX Ltd.   3,321    9 
* Mesoblast Ltd.   5,919    9 
* Westgold Resources Ltd.   6,224    8 
  SeaLink Travel Group Ltd.   2,879    8 
  Infigen Energy   17,920    8 
  Elders Ltd.   1,368    7 
  Mount Gibson Iron Ltd.   15,479    7 
  Collins Foods Ltd.   1,100    6 
  G8 Education Ltd.   5,178    6 
*,§ Dacian Gold Ltd.   6,021    5 
  Accent Group Ltd.   4,783    5 
  Western Areas Ltd.   3,185    5 
  Blackmores Ltd.   119    5 
  GWA Group Ltd.   2,234    5 
* Emeco Holdings Ltd.   3,820    5 
  Service Stream Ltd.   3,335    5 
  Lovisa Holdings Ltd.   728    5 
* Orocobre Ltd.   2,419    4 
  Netwealth Group Ltd.   852    4 
  Sigma Healthcare Ltd.   11,549    4 
  McMillan Shakespeare Ltd.   588    4 
  Aurelia Metals Ltd.   15,765    4 
  FlexiGroup Ltd.   3,882    4 

 

5

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
* Eclipx Group Ltd.   3,881    4 
* Liquefied Natural Gas Ltd.   46,898    3 
* Myer Holdings Ltd.   14,953    3 
* Pilbara Minerals Ltd.   19,643    3 
* Pact Group Holdings Ltd.   2,475    3 
* Mayne Pharma Group Ltd.   14,606    3 
  Sandfire Resources Ltd.   1,019    3 
* Syrah Resources Ltd.   6,123    2 
§  SpeedCast International Ltd.   2,489    1 
§ Decmil Group Ltd.   3,820    1 
* Castile Resources Pty Ltd.   1,410    — 
           32,662 
Austria (0.2%)          
  Erste Group Bank AG   15,670    536 
  Raiffeisen Bank International AG   11,337    234 
  Wienerberger AG   2,733    70 
1 BAWAG Group AG   1,599    69 
  Andritz AG   1,571    56 
  CA Immobilien Anlagen AG   1,176    48 
  Verbund AG   986    47 
  Immofinanz AG   1,648    43 
  UNIQA Insurance Group AG   4,150    37 
  Oesterreichische Post AG   888    28 
  Telekom Austria AG   3,162    24 
  Lenzing AG   258    17 
  Do & Co AG   177    15 
* Zumtobel Group AG   1,379    11 
  Schoeller-Bleckmann Oilfield Equipment AG   215    9 
           1,244 
Belgium (0.6%)          
  KBC Group NV   12,469    831 
  Ucb SA   6,126    567 
  Ageas   10,158    473 
  Solvay SA Class A   4,139    378 
* Argenx SE   2,499    350 
  Ackermans & van Haaren NV   2,284    328 
  Proximus SADP   11,620    289 
  KBC Ancora   5,716    246 
  Groupe Bruxelles Lambert SA   1,327    121 
  Aedifica SA   618    80 
  Cofinimmo SA   409    65 
  Elia Group SA/NV   601    60 
  Gimv NV   870    50 
  Barco NV   159    34 
  Ontex Group NV   2,258    34 
  Telenet Group Holding NV   757    29 
  Colruyt SA   593    28 
  D’ieteren SA/NV   450    26 

  Euronav NV   2,786    25 
  Melexis NV   300    21 
* AGFA-Gevaert NV   3,906    17 
  bpost SA   1,995    16 
  Kinepolis Group NV   303    16 
  Econocom Group SA/NV   3,447    10 
* Tessenderlo Chemie NV (Voting Shares)   292    9 
* Montea C.V.A   69    7 
  Bekaert SA   209    5 
* Mithra Pharmaceuticals SA   173    4 
* Ion Beam A pplications   151    1 
           4,120 
Brazil (1.8%)          
  Itau Unibanco Holding SA Preference Shares   173,785    1,244 
  Banco Bradesco SA Preference Shares   143,743    981 
  B3 SA - Brasil Bolsa Balcao   72,815    782 
  Lojas Renner SA   33,020    394 
  Itausa - Investimentos Itau SA Preference Shares   144,900    389 
  Banco do Brasil SA   30,077    315 
  Magazine Luiza SA   27,385    309 
  Banco Bradesco SA   42,920    262 
  Localiza Rent a Car SA   22,279    247 
  Suzano SA   28,003    239 
* Natura & Co. Holding SA   22,895    233 
  Notre Dame Intermedica Participacoes SA   15,930    225 
  Weg SA   23,300    225 
  Raia Drogasil SA   8,272    222 
  IRB Brasil Resseguros S/A   29,567    220 
  BR Malls Participacoes SA   57,100    209 
  Lojas Americanas SA   38,727    195 
* Rumo SA   37,900    179 
  Cia de Saneamento Basico do Estado de Sao Paulo   12,375    163 
  BB Seguridade Participacoes SA   22,200    158 
  Telefonica Brasil SA Preference Shares   13,200    158 
  Equatorial Energia SA   26,700    147 
  Ccr SA   38,693    141 
  Cogna Educacao   60,530    137 
  Banco BTG Pactual SA   8,995    136 
  Petrobras Distribuidora SA   22,814    133 
  Lojas Americanas SA Preference Shares   21,988    131 
* Brf SA   21,192    128 
  Gerdau SA Preference Shares   33,300    126 
  Hypera SA   16,400    126 
  Ultrapar Participacoes SA   29,400    125 

 

6

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
  Banco Santander Brasil SA   13,040    116 
  Cosan SA   6,800    111 
  Cia Energetica de Minas Gerais   32,844    109 
* B2W Cia Digital   7,223    100 
* YDUQS Part   8,200    95 
  Klabin SA   21,400    92 
  Cia Energetica de Minas Gerais Preference Shares   29,400    92 
  Sul America SA   7,500    91 
  Cia Brasileira de Distribuicao Grupo Pao de Acucar Preference Shares   5,600    90 
  TIM Participacoes SA   24,200    87 
  Azul SA Prior Preference Shares   8,685    86 
  Totvs SA   5,247    83 
  Qualicorp Consultoria e Corretora de Seguros SA   9,300    71 
  Energisa SA   5,200    63 
  Bradespar SA Preference Shares   8,100    60 
  Transmissora Alianca de Energia Eletrica SA   8,900    60 
  Cielo SA   38,800    59 
  Cia Energetica de Sao Paulo Preference Shares   8,000    58 
  AES Tiete Energia SA   16,947    58 
* Via Varejo SA   18,575    57 
  Cyrela Brazil Realty SA Empreendimentos e Participacoes   8,400    56 
  Cia Siderurgica Nacional SA   20,921    52 
  Anima Holding SA   6,000    48 
  Cia de Locacao das Americas   10,003    47 
* Marfrig Global Foods SA   17,405    47 
  MRV Engenharia e Participacoes SA   10,600    46 
* Grupo SBF SA   4,700    46 
  Alupar Investimento SA   7,100    45 
  Engie Brasil Energia SA   4,200    45 
  Light SA   9,200    45 
  Metalurgica Gerdau SA Preference Shares Class A   24,900    44 
  Cia Paranaense de Energia   2,500    44 
  Sao Martinho SA   7,200    43 
  Duratex SA   10,400    40 
  Wiz Solucoes e Corretagem de Seguros SA   12,700    40 
  Movida Participacoes SA   9,900    40 

  Construtora Tenda SA   5,000    39 
  Multiplan Empreendimentos Imobiliarios SA   5,600    38 
  Alpargatas SA Preference Shares   5,400    38 
  Linx SA   5,300    37 
* Omega Geracao SA   4,200    36 
* Minerva SA   13,907    36 
  Atacadao SA   7,800    36 
  Fleury SA   5,400    36 
  Cia de Saneamento do Parana Preference Shares   8,100    36 
  Porto Seguro SA   2,600    35 
  Randon Participacoes SA Preference Shares   13,200    34 
  Direcional Engenharia SA   10,100    34 
* BR Properties SA   10,881    34 
  Ez Tec Empreendimentos e Participacoes SA   3,200    33 
* Even Construtora e Incorporadora SA   10,200    33 
* Aliansce Sonae Shopping Centers sa   3,192    33 
  Cia Paranaense de Energia Preference Shares   1,900    30 
  Camil Alimentos SA   16,000    30 
  Neoenergia SA   5,600    30 
  EDP - Energias do Brasil SA   6,300    29 
  Iochpe Maxion SA   6,600    29 
  Marcopolo SA Preference Shares   26,100    29 
  M Dias Branco SA   3,100    28 
  Iguatemi Empresa de Shopping Centers SA   2,500    28 
  Odontoprev SA   7,400    27 
  Instituto Hermes P ardini SA   4,200    27 
  LOG Commercial Properties e Participacoes SA   4,367    27 
  Banco do Estado do Rio Grande do Sul SA Preference Shares   6,400    26 
  BK Brasil Operacao e Assessoria a Restaurantes SA   7,700    25 
1 Ser Educacional SA   4,000    23 
  SLC Agricola SA   5,100    23 
  Braskem SA Preference Shares   3,700    22 
* Cosan Logistica SA   5,400    22 
  Mahle-Metal Leve SA   3,600    22 
  Cia de Transmissao de Energia Eletrica Paulista Preference Shares   4,200    21 

 

7

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
* Gol Linhas Aereas Inteligentes SA Preference Shares   3,600    21 
  Cia de Saneamento de Minas Gerais-COPASA   1,500    20 
  Cia de Saneamento do Parana   900    20 
* EcoRodovias Infraestrutura e Logistica SA   5,700    20 
  Usinas Siderurgicas de Minas Gerais SA Preference Shares   10,700    20 
  Santos Brasil Participacoes SA   14,700    20 
  Tupy SA   3,800    19 
  Guararapes Confeccoes SA   2,900    18 
1 Banco Inter SA Preference Shares   4,800    16 
  Arezzo Industria e Comercio SA   1,200    16 
  Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao SA   4,800    16 
  Smiles Fidelidade SA   2,000    15 
  Unipar Carbocloro SA Preference Shares   2,383    14 
  Alliar Medicos A Frente SA   3,300    14 
  Grendene SA   6,400    14 
  Cia Hering   2,700    14 
  Banco Inter SA   1,000    10 
           12,398 
Canada (7.3%)          
  Royal Bank of Canada   54,007    4,016 
  Toronto-Dominion Bank   68,882    3,543 
  Enbridge Inc.   78,090    2,907 
  Bank of Nova Scotia   45,607    2,386 
  Canadian National Railway Co.   27,387    2,322 
  TC Energy C orp.   38,219    1,992 
* Shopify Inc.   3,950    1,834 
  Bank of Montreal   23,263    1,581 
  Canadian Pacific Railway Ltd.   5,848    1,449 
  Canadian Imperial Bank of Commerce   16,767    1,276 
  Manulife Financial Corp.   75,339    1,266 
  Waste Connections Inc.   10,370    998 
^ Sun Life Financial Inc.   22,794    985 
  Alimentation Couche-Tard Inc.   31,699    963 
  Nutrien Ltd.   23,051    932 
^ Pembina Pipeline Corp.   25,863    932 
  Franco-Nevada Corp.   7,573    813 

* CGI Inc.   10,705    752 
  Fortis Inc.   17,540    710 
  National Bank of Canada   13,479    701 
  Intact F inancial Corp.   6,230    675 
  Thomson Reuters Corp.   8,398    624 
  Wheaton Precious Metals Corp.   21,119    601 
  Rogers Communications Inc. Class B   13,068    599 
  Magna International Inc.   13,056    594 
  Open Text Corp.   13,360    559 
  Restaurant Brands International Inc. (XTSE)   8,887    524 
  Agnico Eagle Mines Ltd.   10,782    512 
  Algonquin Power & Utilities Corp.   32,767    498 
  Fairfax Financial Holdings Ltd.   1,135    489 
  Loblaw Cos. Ltd.   8,800    436 
  Canadian Apartment Properties REIT   10,363    433 
  Shaw Communications Inc. Class B   24,259    420 
1 Hydro One Ltd.   19,809    398 
  RioCan REIT   21,167    395 
  BCE Inc.   8,676    381 
  CAE Inc.   13,895    372 
  H&R REIT   24,999    361 
  Dollarama Inc.   12,234    360 
  Granite REIT   6,756    344 
  Kirkland Lake Gold Ltd.   10,658    344 
  George Weston Ltd.   4,502    339 
  Saputo Inc.   10,738    299 
* Kinross Gold Corp.   58,997    297 
^ Choice Properties REIT   29,294    295 
  Ritchie Bros Auctioneers Inc.   6,775    269 
  Canadian Tire Corp. Ltd. Class A   2,636    259 
  CCL Industries Inc. Class B   7,738    255 
  Atco Ltd.   6,818    254 
  CI Financial Corp.   15,308    254 
  Emera Inc.   5,803    245 
  Gildan Activewear Inc.   9,637    233 
  Canadian Utilities Ltd. Class A   7,862    233 
  Toromont Industries Ltd.   4,679    231 
  Lundin Mining Corp.   44,950    229 
  Empire Co. Ltd.   10,218    228 
  Chartwell Retirement Residences   23,048    224 
  Metro Inc.   5,642    220 
  First Quantum Minerals Ltd.   29,097    215 
             

 

8

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
  iA Financial Corp. Inc.   3,851    183 
^ Finning International Inc.   11,264    167 
* BlackBerry Ltd.   30,455    157 
  TELUS Corp.   3,965    143 
  Great-West Lifeco Inc.   5,469    129 
  Yamana Gold Inc.   31,887    124 
  TMX Group Ltd.   1,410    117 
  B2Gold Corp.   29,010    116 
* Canada Goose Holdings Inc.   3,521    97 
  Parkland Fuel C orp.   3,072    97 
* NovaGold Resources Inc.   10,574    84 
* Bombardier Inc. Class B   102,549    73 
* Air Canada Class B   2,789    71 
  FirstService Corp.   689    68 
  Alamos G old I nc. Class A   11,053    64 
* Boyd Group Services Inc.   400    63 
* Descartes Systems Group Inc.   1,500    62 
  SmartCentres REIT   2,900    62 
  Keyera Corp.   2,589    62 
  Element Fleet Management Corp.   6,600    62 
  Northview Apartment REIT   2,200    59 
  AltaGas Ltd.   3,875    58 
  Innergex Renewable Energy Inc.   3,700    54 
  West Fraser Timber Co. Ltd. 1,438        54 
  Methanex Corp.   1,800    52 
  First Capital REIT   3,300    49 
  Quebecor Inc.   2,100    49 
  Colliers International Group Inc.   600    49 
* SSR Mining Inc.   2,845    44 
* Ivanhoe Mines Ltd.   18,703    44 
* Kinaxis Inc.   500    42 
  Cominar REIT   4,000    41 
* IAMGOLD Corp.   14,370    41 
  Canadian Western Bank   1,800    40 
  IGM Financial Inc.   1,500    40 
* Alacer Gold Corp.   8,555    39 
* Pretium Resources Inc.   5,159    37 
  Premium Brands Holdings Corp.   500    35 
* First Majestic Silver Corp.   4,633    35 
  BRP Inc.   836    34 
  Boardwalk REIT   1,000    34 
* Torex Gold Resources Inc.   2,499    33 
  Gibson Energy Inc.   1,700    32 
* Eldorado Gold Corp.   3,644    32 
  Genworth MI Canada Inc.   800    31 
  Maple Leaf Foods Inc.   1,800    30 
* Endeavour Mining Corp.   1,569    28 
  Cineplex Inc.   1,100    27 
  OceanaGold Corp.   18,452    27 

  Superior Plus Corp.   3,300    25 
  Cogeco Communications Inc.   300    24 
  Laurentian Bank of Canada   800    23 
  Linamar Corp.   805    22 
  Norbord Inc.   800    21 
  Home Capital Group Inc. Class B   1,000    21 
  Osisko Gold Royalties Ltd.   2,500    21 
  Restaurant Brands International Inc. (XNYS)   322    19 
  NFI Group Inc.   800    18 
  Transcontinental Inc. Class A   1,400    17 
  ECN Capital Corp.   3,629    15 
  Corus Entertainment Inc. Class B   4,379    14 
* Celestica Inc.   2,100    13 
  Hudbay Minerals Inc.   5,200    13 
* SEMAFO Inc.   5,600    11 
* Canfor Corp.   1,300    11 
  Winpak Ltd.   300    10 
  Cascades Inc.   1,000    8 
  Pason Systems Inc.   700    6 
  Hudson’s Bay Co.   774    6 
  Martinrea International Inc.   700    6 
  Enerflex Ltd.   1,000    5 
  ShawCor Ltd.   800    5 
* Precision Drilling Corp.   3,500    4 
  Secure Energy Services Inc.   1,400    4 
  Mullen Group Ltd.   700    4 
           50,373 
Chile (0.2%)          
  Enel Americas SA   1,323,448    224 
  Banco de Chile   1,393,423    123 
  Empresas COPEC SA   15,413    120 
  Banco Santander Chile   2,574,608    115 
  Sociedad Quimica y Minera de Chile SA Preference Shares Class B   3,068    81 
  Empresas CMPC SA   38,923    79 
  SACI Falabella   21,855    73 
  Enel Chile SA   788,658    71 
  Latam Airlines Group SA   9,192    62 
  Banco de Credito e Inversiones SA   1,458    54 
  Cencosud SA   37,907    45 

 

9

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
* Cencosud Shopping SA   22,751    43 
  Parque Arauco SA   19,322    40 
* Cia Sud Americana de Vapores SA   1,292,701    38 
  Colbun SA   257,569    33 
* Empresa Nacional de Telecomunicaciones SA   5,827    31 
  Aguas Andinas SA   88,671    30 
  Itau CorpBanca   7,595,147    28 
  Engie Energia Chile SA   21,235    28 
  Cap SA   4,116    24 
  Sonda SA   29,101    21 
  Inversiones Aguas Metropolitanas SA   20,849    18 
  Empresas Tricot SA   30,859    17 
  Salfacorp SA   33,800    16 
  Besalco SA   34,618    14 
  Ripley Corp. SA   34,664    14 
  Embotelladora Andina SA Preference Shares   4,544    11 
  Smu SA   63,232    10 
  Inversiones La Construccion SA   1,128    8 
  Forus SA   6,471    8 
           1,479 
China (9.2%)          
* Alibaba Group Holding Ltd. ADR   67,472    14,034 
  Tencent Holdings Ltd.   222,300    11,272 
  China Construction Bank Corp.   3,724,000    3,062 
  Ping An Insurance Group Co. of China Ltd.   217,000    2,472 
  Industrial & Commercial Bank of China Ltd.   2,891,000    1,992 
  China Mobile Ltd .   212,500    1,691 
* Baidu Inc.   11,520    1,382 
* JD.com Inc. ADR   32,608    1,256 
  Bank of China Ltd.   2,714,000    1,085 
* TAL Education Group   15,019    817 
* New Oriental Education & Technology Group Inc.   5,953    761 
  China Overseas Land & Investment Ltd.   204,000    699 
  Wuxi Biologics Cayman Inc.   44,638    665 
  China Merchants Bank Co. Ltd.   133,500    642 
  Sunac China Holdings Ltd.   114,300    640 
  China Life Insurance Co. Ltd.   261,000    631 

  China Resources Land Ltd.   112,000    532 
  Shenzhou International Group Holdings Ltd.   41,300    523 
  China Conch Venture Holdings Ltd.   105,500    516 
  Sunny Optical Technology G roup Co. Ltd.   30,900    502 
  Sino Biopharmaceutical Ltd.   336,000    498 
  Longfor Group Holdings Ltd.   102,500    485 
  ENN Energy Holdings Ltd.   42,000    474 
  Country Garden Holdings Co. Ltd.   330,000    448 
  Geely Automobile Holdings Ltd.   239,000    437 
  PICC Property & Casualty Co. Ltd.   410,000    434 
  CSPC Pharmaceutical Group Ltd.   180,000    420 
  China National Building Material Co. Ltd.   344,000    409 
  ZTO Express Cayman Inc.   17,176    403 
  Hengan International Group Co. Ltd.   52,000    392 
  Shimao Property Holdings Ltd.   90,000    330 
  ANTA Sports Products Ltd.   40,000    326 
  Agricultural Bank of China Ltd.   780,000    317 
  Sinopharm Group Co. Ltd.   97,300    306 
  China Unicom Hong Kong Ltd.   362,000    291 
* Vipshop Holdings Ltd.   22,356    287 
* 58.com Inc.   5,145    284 
  China Telecom Corp. Ltd.   744,000    281 
  China Evergrande Group   122,000    279 
* Alibaba Health Information Technology Ltd.   142,000    277 
* BeiGene Ltd.   1,713    271 
  Anhui Conch Cement Co. Ltd.   32,000    240 
  Far East Horizon Ltd.   269,000    239 
  Kingdee International Software Group Co. Ltd.   181,000    238 
* Autohome Inc.   3,053    237 
  China Taiping Insurance Holdings Co. Ltd.   110,200    230 
  Li Ning Co. Ltd.   85,000    229 
  China Cinda Asset Management Co. Ltd.   1,079,000    229 

 

10

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
  China Pacific Insurance Group Co. Ltd.   64,600    217 
1 China Resources Pharmaceutical Group Ltd.   209,500    185 
* JOYY Inc. ADR   3,325    179 
  Momo Inc.   5,905    166 
  Zhuzhou CRRC Times Electric Co. Ltd.   45,100    160 
* iQIYI Inc.   7,051    158 
*,1 Innovent Biologics Inc.   34,000    156 
*,1 3SBio Inc.   147,000    156 
1 People’s Insurance Co. Group of China Ltd.   413,000    149 
  China Vanke Co. Ltd.   35,400    139 
*,^ NIO Inc. ADR   29,775    123 
  Guangdong Investment Ltd.   64,000    122 
  China Jinmao Holdings Group Ltd.   158,000    118 
  Yihai International Holding Ltd.   16,000    108 
  Weichai Power Co. Ltd.   53,000    106 
  BYD Co. Ltd.   17,000    106 
* GDS Holdings Ltd. ADR   1,766    102 
  China Resources Gas Group Ltd.   20,000    101 
  Guangzhou Automobile Group Co. Ltd.   84,000    95 
* Kingsoft Corp. Ltd.   28,000    93 
  Haier Electronics Group Co. Ltd.   31,000    90 
  Shandong Weigao Group Medical Polymer Co. Ltd.   60,000    78 
  Zhongsheng Group Holdings Ltd.   19,500    75 
  Haitong Securities Co. Ltd.   62,800    69 
* GSX Techedu Inc. A DR   1,663    67 
  Brilliance China Automotive Holdings Ltd.   76,000    66 
*,1 Hansoh Pharmaceutical Group Co. Ltd.   18,000    64 
* Shang Gong Group Co. Ltd. Class B   141,622    62 
* China Aoyuan Group Ltd.   42,000    62 
  China Lesso Group Holdings Ltd.   40,000    61 
  Dongfeng Motor Group Co. Ltd.   74,000    59 
* Zai Lab Ltd. ADR   1,076    59 
* ZTE Corp.   13,800    59 
  Great Wall Motor Co. Ltd.   78,500    58 

* China Biologic Products Holdings Inc.   500    58 
  China Overseas Property Holdings Ltd.   70,000    58 
  BYD Electronic International Co. Ltd.   28,500    55 
  Seazen Group Ltd.   51,360    54 
  China CITIC Bank Corp. Ltd.   103,000    54 
  KWG Group Holdings Ltd.   35,000    53 
  TravelSky Technology Ltd.   26,000    51 
  Yangzijiang Shipbuilding Holdings Ltd.   70,500    49 
  China Resources Cement Holdings Ltd.   38,000    49 
* GOME Retail Holdings Ltd.   463,000    48 
  Chinasoft International Ltd.   76,000    48 
  Times China Holdings Ltd.   25,000    48 
  CITIC Securities Co. Ltd.   21,500    47 
  China Longyuan Power Group Corp. Ltd.   90,000    47 
  China Communications Services Corp. Ltd.   60,000    47 
  Yuexiu REIT   73,000    47 
* Genscript Biotech Corp.   22,000    47 
* 21Vianet Group Inc. ADR   3,019    45 
* Kama Co. Ltd. Class B   104,900    45 
  Bank of Communications Co. Ltd.   67,000    44 
* Daqo New Energy Corp. ADR   662    43 
1,* Tongcheng-Elong Holdings Ltd.   28,000    43 
  Beijing Enterprises Water Group Ltd.   92,000    43 
  China Medical System Holdings Ltd.   34,000    43 
1 A-Living Services Co. Ltd.   9,250    42 
1 China Galaxy Securities Co. Ltd.   75,000    42 
  Anhui Expressway Co. Ltd.   74,000    42 
  Shenzhen International Holdings Ltd.   21,500    42 
1 WuXi AppTec Co. Ltd.   2,700    41 
  Haitian International Holdings Ltd.   20,000    40 
* Canadian Solar Inc.   1,951    40 
  Nine Dragons Paper Holdings Ltd.   33,000    40 
  China Agri-Industries Holdings Ltd.   72,000    40 
  China Yongda Automobiles Services Holdings Ltd.   38,500    38 
  Sinotruk Hong Kong Ltd.   19,500    38 

 

11

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
  Tiangong International Co. Ltd.   106,000    38 
  Yuexiu Transport Infrastructure Ltd.   48,000    37 
  Agile Group Holdings Ltd.   26,000    37 
* BEST Inc.   6,851    37 
  Huangshan Tourism Development Co. Ltd. Class B   45,900    37 
*,1 ZhongAn Online P&C Insurance Co. Ltd.   8,500    36 
* Baozun Inc.   1,143    36 
  Beijing Capital International Airport Co. Ltd.   46,000    36 
  Zhaojin Mining Industry Co. Ltd.   30,500    36 
  Zoomlion Heavy Industry Science and Technology Co. Ltd.   42,600    36 
  China Overseas Grand Oceans Group Ltd.   51,000    36 
  Digital China Holdings Ltd.   69,000    35 
  Logan Property Holdings Co. Ltd.   20,000    35 
  Hangzhou Steam Turbine Co. Ltd.   32,100    35 
  Sany Heavy Equipment International Holdings Co. Ltd.   57,000    34 
  Lonking Holdings Ltd.   121,000    34 
* Alibaba Group Holding Ltd.   1,300    34 
1 Fu Shou Yuan International Group Ltd.   38,000    33 
  Ausnutria Dairy Corp. Ltd.   20,000    33 
  Shenzhen Expressway Co. Ltd.   26,000    32 
  China Minsheng Banking Corp. Ltd.   46,000    31 
  China Yuhua Education Corp. Ltd.   40,000    31 
  China SCE Group Holdings Ltd.   56,000    31 
  Greentown China Holdings Ltd.   23,000    31 
  China Everbright Ltd.   18,000    31 
  Zhejiang Expressway Co. Ltd.   40,000    30 
  China Suntien Green Energy Corp. Ltd.   122,000    30 
  Concord New Energy Group Ltd.   680,000    30 
* Luckin Coffee Inc. ADR   754    30 

  China Molybdenum Co. Ltd.   78,000    30 
  Kingboard Holdings Ltd.   11,000    29 
  NetDragon Websoft Holdings Ltd.   10,500    29 
* COSCO Shipping International Singapore Co. Ltd.   150,600    29 
  Sino-Ocean Group Holding Ltd.   78,000    29 
* Oshidori International Holdings Ltd.   291,000    29 
  Tianjin Port Development Holdings Ltd.   316,000    28 
  Shanghai Diesel Engine Co. Ltd. Class B   70,300    28 
  China State Construction International Holdings Ltd.   34,000    28 
  Greenland Hong Kong Holdings Ltd.   70,000    28 
* JinkoSolar Holding Co. Ltd. ADR   1,209    28 
1 YiChang HEC ChangJiang Pharmaceutical Co. Ltd.   4,400    27 
1 Huatai Securities Co. Ltd.   15,400    27 
  Greatview Aseptic Packaging Co. Ltd.   69,000    27 
  Lee & Man Paper Manufacturing Ltd.   34,000    27 
  Shougang Concord International Enterprises Co. Ltd.   618,000    27 
  Xingda International Holdings Ltd.   90,000    27 
  China Oriental Group Co. Ltd.   78,000    27 
  COSCO SHIPPING Ports Ltd.   40,000    27 
1 Hua Hong Semiconductor Ltd.   12,000    27 
  Powerlong Real Estate Holdings Ltd.   42,000    27 
  China Hongqiao Group Ltd.   48,500    27 
* Sohu.com Ltd.   2,756    26 
*,1 China East Education Holdings Ltd.   12,500    26 
* Hi Sun Technology China Ltd.   183,000    26 
  China Traditional Chinese Medicine Holdings Co. Ltd.   48,000    26 

 

12

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
  Bosideng International Holdings Ltd.   86,000    25 
  Yuzhou Properties Co. Ltd.   50,000    25 
*,1 China Literature Ltd.   5,400    25 
1 Haidilao International Holding Ltd.   6,000    25 
  Comba Telecom Systems Holdings Ltd.   60,000    25 
  Yuexiu Property Co. Ltd.   118,000    24 
  China Everbright International Ltd.   36,000    24 
  Shandong Airlines Co. Ltd. Class B   23,200    24 
1 China Huarong Asset Management Co. Ltd.   175,000    24 
  Xiamen International Port Co. Ltd.   209,089    24 
  Kingboard Laminates Holdings Ltd.   23,500    24 
  Vinda International Holdings Ltd.   9,000    23 
  Sichuan Expressway Co. Ltd.   84,000    23 
1 Zhou Hei Ya International Holdings Co. Ltd.   42,000    22 
  Shenzhen Investment Ltd.   66,000    22 
  Fantasia Holdings Group Co. Ltd.   114,000    22 
1 Luye Pharma Group Ltd.   34,500    21 
* Lifetech Scientific Corp.   108,000    21 
  China Reinsurance Group Corp.   150,000    21 
* Q Technology Group Co. Ltd.   14,000    20 
1 CSC Financial Co. Ltd.   22,500    20 
  China Tian Lun Gas Holdings Ltd.   24,500    20 
  China Resources Medical Holdings Co. Ltd.   38,500    20 
* CAR Inc.   32,000    20 
*,1 China Metal Resources Utilization Ltd.   52,000    20 
  Air China Ltd.   24,000    20 
  Qingling Motors Co. Ltd.   88,000    19 
* COSCO SHIPPING Holdings Co. Ltd.   56,500    19 
  CPMC Holdings Ltd.   49,000    19 
1 Genertec Universal Medical Group Co. Ltd.   27,000    19 
  China Merchants Land Ltd.   124,000    19 
  Jiangsu Expressway Co. Ltd.   16,000    19 

  Fufeng Group Ltd.   46,000    18 
  Jiangxi Copper Co. Ltd.   15,000    18 
  Chongqing Rural Commercial Bank Co. Ltd.   39,000    18 
  Sinosoft Technology Group Ltd.   83,000    18 
  Tong Ren Tang Technologies Co. Ltd.   19,000    18 
  INESA Intelligent Tech Inc.   27,800    18 
  Zhenro Properties Group Ltd.   26,000    17 
  O-Net Technologies G roup Ltd.   31,000    17 
  Shanghai Highly Group Co. Ltd.   24,400    17 
*,1 China Logistics Property Holdings Co. Ltd.   43,000    17 
  Tianneng Power International Ltd.   22,000    16 
  Fanhua Inc. ADR   804    16 
  China Maple Leaf Educational Systems Ltd.   46,000    16 
  Chaowei Power Holdings Ltd.   51,000    16 
* Shanghai Greencourt Investment Group Co. Ltd. Class B   43,300    16 
  Dongyue Group Ltd.   30,000    16 
  Ronshine China Holdings Ltd.   14,000    16 
  Shanghai Jin Jiang Capital Co. Ltd.   88,000    15 
1 Sinopec Engineering Group Co. Ltd.   31,000    15 
*,1 Haichang Ocean Park Holdings Ltd.   156,000    15 
  Xinhua Winshare Publishing and Media Co. Ltd.   22,000    15 
*,1 Shandong Gold Mining Co. Ltd.   6,250     15 
  SOHO China Ltd.   41,000    15 
1 Yadea Group Holdings Ltd.   54,000    15 
  PAX Global Technology Ltd.   29,000    15 
  So-Young International Inc. ADR   1,203    14 
  Skyfame Realty Holdings Ltd.   110,000    14 
1 BAIC Motor Corp. Ltd.   29,000    14 
  Skyworth Group Ltd.   56,000    14 
* Bitauto Holdings Ltd. ADR   959    14 

 

13

 

 

ESG International Stock ETF

 

         Market 
         Value• 
     Shares   ($000) 
  AviChina Industry & Technology Co. Ltd.   32,000    14 
  Consun Pharmaceutical Group Ltd.   28,000    14 
*,1 Cogobuy Group   99,000    14 
* Beijing Gas Blue Sky Holdings Ltd.   560,000    14 
* Zhuguang Holdings Group Co. Ltd.   94,000    13 
  Huaneng Power International Inc.   32,000    13 
  China Water Affairs Group Ltd.   16,000    13 
  China High Speed Transmission Equipment Group Co. Ltd.   20,000    13 
  TCL Electronics Holdings Ltd.   22,000    12 
* Ruhnn Holding Ltd. ADR   1,795    12 
* Shanghai Fudan Microelectronics Group Co. Ltd.   16,000    12 
* Bilibili Inc. ADR   482    12 
  Beijing North Star Co. Ltd.   44,000    12 
  Phoenix Media Investment Holdings Ltd.   194,000    12 
  West China Cement Ltd.   72,000    12 
1 Qingdao Port International Co. Ltd.   18,000    12 
  Sinotrans Ltd.   41,000    12 
  China ZhengTong Auto Services Holdings Ltd.   41,000    12 
  Sinofert Holdings Ltd.   114,000    12 
  Xtep International Holdings Ltd.   28,000    11 
* Noah Holdings Ltd.   402    11 
  Health & Happiness H&H International Holdings Ltd.   2,500    11 
* DouYu International Holdings Ltd. ADR   1,387    11 
* China Modern Dairy Holdings Ltd.   88,000    11 
*,1 Yixin Group Ltd.   49,000    11 
  China Zhongwang Holdings Ltd.   31,200    11 
  Colour Life Services Group Co. Ltd.   19,000    10 
* Sogou Inc. ADR   2,400    10 
*,1 Tian Ge Interactive Holdings Ltd.     45,000     10 
  Xinjiang Goldwind Science & Technology Co. Ltd.   9,800    10 
  Dawnrays Pharmaceutical Holdings Ltd.   58,000    10 

* First Tractor Co. Ltd.   48,000    10 
  Central China Securities Co. Ltd.   48,000    10 
  Sihuan Pharmaceutical Holdings Group Ltd.   80,000    10 
* Shanghai Phoenix          
  Enterprise Group Co. Ltd.   23,400    10 
  Weiqiao Textile Co.   36,000    9 
1 China Everbright Greentech Ltd.   19,000    9 
  Shanghai Industrial Urban Development Group Ltd.   80,000    9 
1 China Merchants Securities Co. Ltd.   7,400    9 
  China Fangda Group Co. Ltd.   25,100    9 
  China Shineway Pharmaceutical Group Ltd.   10,000    9 
  Jiayuan International Group Ltd.   22,000    9 
1 Beijing Urban Construction Design & Development Group Co. Ltd.   30,000    9 
  China Power International Development Ltd.   46,000    9 
  Tianjin Development Holdings Ltd.   34,000    9 
  China Lilang Ltd.   13,000    8 
  Guorui Properties Ltd.   47,000    8 
1 China Railway Signal & Communication Corp. Ltd.   16,000    8 
* Grand Baoxin Auto Group Ltd.   50,000    8 
  Shanghai Fudan-Zhangjiang Bio-Pharmaceutical Co. Ltd.   14,000    8 
  Wasion Holdings Ltd.   20,000    8 
* China Eastern Airlines Corp. Ltd.   18,000    8 
*,1 Jinxin Fertility Group Ltd.   6,000    8 
* HengTen Networks Group Ltd.   600,000    8 
  China Grand Pharmaceutical and Healthcare Holdings Ltd.   12,000    8 
  Greentown Service Group Co. Ltd.   6,000    8 
* GCL-Poly Energy Holdings Ltd.   153,000    7 
  Ajisen China Holdings Ltd.   24,000    6 
  Zhongyu Gas Holdings Ltd.   7,000    6 

 

14

 

 

ESG International Stock ETF

 

      Shares 

Market

Value•

($000)

   China Education Group Holdings Ltd.  4,000  6
*  Kasen International Holdings Ltd.  30,000  6
*  Leyou Technologies Holdings Ltd.  15,000  5
   Maoye International Holdings Ltd.  79,000  5
   Tongda Group Holdings Ltd.  50,000  5
1  Redco Properties Group Ltd.  10,000  5
1  Shanghai Haohai Biological Technology Co. Ltd.  800  4
*  Times Neighborhood Holdings Ltd.  5,000  4
   Shanghai Zhenhua Heavy      
   Industries Co. Ltd. Class B  12,800  4
   Texhong Textile Group Ltd.  3,500  4
*  Wise Talent Information Technology Co. Ltd.  1,400  3
   China BlueChemical Ltd.  18,000  3
   China Dongxiang Group Co. Ltd.  34,000  3
   Launch Tech Co. Ltd.  13,800  3
   JNBY Design Ltd.  2,500  3
*  Qudian Inc. ADR  900  2
*  Beijing Enterprises Clean Energy Group Ltd.  280,000  2
*  China First Capital Group Ltd.  60,000  2
*,§  Legend Holdings Corp. Rights  207  —
         63,310
Colombia (0.1%)
   Bancolombia SA Preference Shares  26,690  319
   Interconexion Electrica SA ESP  12,561  66
   Banco Davivienda SA Preference Shares  5,148  62
   Grupo de Inversiones Suramericana SA  5,831  51
   Bancolombia SA Grupo Aval Acciones y  3,288  36
   Valores Preference Shares  73,540  30
   Corp Financiera Colombiana SA  2,832  26
         590
Czech Republic (0.0%)
   Komercni banka AS  8,704  270
1  Moneta Money Bank AS  8,738  29
         299

Denmark (1.4%)
  Novo Nordisk A/S Class B  65,233   3,822
   Coloplast A/S Class B  6,710   901
   Dsv Panalpina A/S  8,367   849
   Vestas Wind Systems A/S  8,685   838
*  Genmab A/S  3,023   684
   Novozymes A/S  9,843   505
   GN Store Nord A/S  8,208   458
   Chr Hansen Holding A/S  4,651   335
   Ambu A/S Class B  8,420   192
   Pandora A/S  4,160   187
   Iss A/S  10,276   183
   SimCorp A/S  611   59
*  Demant A/S  1,573   48
   Tryg A/S  1,641   46
   Jyske Bank A/S  1,228   42
   Ringkjoebing Landbobank A/S  620   41
   Topdanmark A/S  762   33
   H Lundbeck A/S  906   32
*  ALK-Abello A/S  123   31
   Schouw & Co. A/S  372   28
   Matas A/S  2,846   24
   ROCKWOOL International A/S Class B  101   23
   Sydbank A/S  1,250   23
*,1  Netcompany Group A/S  287   14
   Spar Nord Bank A/S  1,580   13
*  Nkt A/S  498   12
*  Bavarian Nordic A/S  232   8
   D/S Norden A/S  511   6
*,^  Bang & Olufsen A/S  729   4
          9,441
Egypt (0.1%)
   Commercial International       
   Bank Egypt SAE  62,057   328
   Oriental Weavers  30,685   20
   Six of October Development & Investment  25,899   20
   Egyptian Financial Group-       
   Hermes Holding Co.  18,351   17
   Orascom Construction plc  2,961   17
*   Palm Hills Developments SAE  156,950   14
*  Medinet Nasr Housing  33,720   9
   Heliopolis Housing  15,858   6
          431
Finland (0.8%)
   Nordea Bank Abp  117,643   927
   Nokia Oyj  225,309   861
^  Kone Oyj Class B  15,002   850
   Sampo Oyj Class A  16,686   682
   Elisa Oyj  8,608   496
           

 

 

15

 

 

ESG International Stock ETF

 

 

      Shares   Market
Value•
($000)		 
   Kesko Oyj   5,262    358 
   Stora Enso Oyj   29,546    350 
   Wartsila OYJ Abp   23,911    250 
   Nokian R enkaat Oyj   8,911    233 
   Orion Oyj Class B   2,403    96 
   Huhtamaki Oyj   2,258    93 
   Valmet Oyj   2,585    62 
   TietoEVRY Oyj   1,319    37 
   Kemira Oyj   2,307    29 
   Cargotec Oyj Class B   831    24 
   Metsa Board Oyj   3,789    22 
*  Outotec Oyj   3,687    19 
   Sanoma Oyj   1,656    19 
   Ahlstrom-Munksjo Oyj   869    12 
   YIT Oyj   1,180    8 
   Uponor Oyj   441    6 
   Finnair Oyj   339    2 
            5,436 
France (5.2%)          
   Sanofi   41,294    3,851 
   L’Oreal SA   9,018    2,424 
   Air Liquide SA   17,365    2,365 
   BNP Paribas SA   40,978    1,989 
   Kering SA   2,875    1,621 
   Axa SA   69,164    1,608 
   Danone SA   22,403    1,581 
   EssilorLuxottica SA   11,242    1,541 
   Orange SA   68,975    928 
   Legrand SA   12,006    922 
   Vivendi SA   34,495    881 
   STMicroelectronics NV   30,113    831 
   Societe Generale SA   28,454    806 
   Cie Generale des Etablissements Michelin SCA   7,413    794 
   Hermes International   1,027    724 
   Veolia Environnement SA   23,281    671 
   Teleperformance   2,662    649 
   Edenred   11,844    620 
   Credit Agricole SA   48,432    582 
   Ingenico Group SA   3,417    487 
   Gecina SA   2,724    485 
   Carrefour SA   27,512    475 
   Peugeot SA   22,741    441 
   Getlink SE   26,162    424 
   Arkema SA   4,235    401 
   Worldline SA   4,814    371 
   Orpea   2,818    366 
   Suez   22,348    355 
   Publicis Groupe SA   9,079    353 
1  Euronext NV   3,892    325 
   Covivio   3,029    322 
   Rubis SCA   5,902    320 
   Klepierre SA   10,370    311 

   Scor Se   8,337    302 
   Sodexo SA   3,065    296 
   Valeo SA   10,584    269 
   Eurofins Scientific SE   527    266 
   Rexel SA   21,201    262 
   Alstom SA   5,279    261 
   Wendel SA   2,036    252 
   Eurazeo SE   3,700    249 
   Aeroports de Paris   1,469    218 
   Seb SA   1,602    213 
*  Ubisoft Entertainment SA   2,816    211 
   Lagardere SCA   12,058    210 
   Renault SA   6,915    206 
   SES SA Class A   16,913    194 
   Sodexo SA - French Loyalty Line   1,731    167 
   Ipsen SA   1,538    101 
   Natixis SA   21,568    88 
   Faurecia SE   1,886    86 
   BioMerieux   685    64 
   Sartorius Stedim Biotech   306    59 
1  Amundi SA   799    57 
   Elis SA   3,285    57 
   Casino Guichard Perrachon SA   1,455    57 
   Icade   548    55 
   Iliad SA   380    53 
*  Cgg SA   19,045    53 
*  Soitec   575    48 
   Nexity SA   875    41 
   Eutelsat Communications SA   2,991    40 
   Sopra Steria Group   234    38 
   Korian SA   804    37 
   JCDecaux SA   1,477    34 
   CNP Assurances   2,067    33 
   Imerys SA   768    30 
   Gaztransport Et Technigaz SA   320    29 
   Societe BIC SA   461    28 
*  Virbac SA   117    27 
*  Air France-KLM   3,286    25 
1  Elior Group SA   1,988    25 
1  Ald SA   1,798    24 
   Cie Plastic Omnium SA   1,050    24 
   Metropole Television SA   1,352    20 
   Mercialys SA   1,640    19 
   Vicat SA   393    15 
*  Fnac Darty SA   311    14 
   Ipsos   389    12 
   Tarkett SA   706    11 
1  Maisons du Monde SA   858    11 
   Albioma SA   268    9 
   Television Francaise 1   1,071    8 

 

16

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
   Rallye SA   850    8 
*  DBV Technologies SA   384    8 
   Trigano SA   99    8 
   Coface SA   676    7 
   Quadient   340    7 
   Lisi   162    5 
   Akka Technologies   83    5 
   Rothschild & Co.   174    4 
   Beneteau SA   430    4 
   Altarea SCA   21    4 
   Interparfums SA   113    4 
   Eramet   97    3 
1  Europcar Mobility Group   786    3 
*,1 Smcp SA   262    2 
*  Technicolor SA   4,381    1 
            35,805 
Germany (5.6%)          
   SAP SE   37,889    4,730 
   Allianz SE   15,721    3,425 
   Bayer AG   36,380    2,646 
   adidas AG   7,698    2,167 
   Daimler AG   32,295    1,359 
   Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen   5,203    1,348 
   Deutsche Post AG   42,344    1,274 
   Deutsche Boerse AG   7,368    1,159 
   Vonovia SE   21,331    1,154 
   Infineon Technologies AG   49,988    1,067 
   Fresenius SE & Co. KGaA   16,990    806 
   Henkel AG & C o. KGaA   9,077    776 
   Deutsche Bank AG   86,762    762 
   Merck KGaA   6,256    761 
   Fresenius Medical Care AG & Co. KGaA   9,289    716 
   MTU Aero Engines AG   2,593    642 
   Symrise AG Class A   6,482    635 
^  Wirecard AG   4,608    594 
   Bayerische Motoren Werke AG Preference Shares   10,889    565 
   Continental AG   4,720    540 
   Deutsche Wohnen SE   12,690    518 
   Beiersdorf AG   4,831    510 
   HeidelbergCement AG   8,043    482 
1  Scout24 AG   7,114    468 
   Hannover Rueck SE   2,572    466 
   LEG Immobilien AG   3,828    460 
   Sartorius AG Preference Shares   1,910    446 
   Brenntag AG   9,610    436 
*,1 Delivery Hero SE   5,354    410 
   Aroundtown SA   44,067    383 
   Puma SE   4,610    357 

*  Qiagen NV   9,425    348 
*,1 Zalando SE   7,387    330 
   Lanxess AG   6,024    321 
1  Covestro AG   8,200    318 
   Commerzbank AG   52,170    301 
   GEA Group AG   9,578    256 
   KION Group AG   4,429    239 
   Bayerische Motoren Werke AG   3,576    236 
   Fuchs Petrolub Se   6,204    220 
*  OSRAM Licht AG   4,074    210 
*  MorphoSys AG   1,923    207 
   Deutsche Lufthansa AG   13,400    177 
   Hugo Boss AG   3,922    175 
   ProSiebenSat.1 M edia SE   14,184    173 
   Henkel AG & C o. KGaA Preference Shares   1,397    130 
*  HelloFresh SE   5,055    123 
   K&S AG   14,280    118 
   Carl Zeiss Meditec AG   999    106 
   United Internet AG   3,494    106 
1  Siemens Healthineers AG   2,468    101 
*  Evotec SE   3,865    94 
   Bechtle AG   521    69 
   CTS Eventim AG & Co. KGaA   1,234    66 
   Nemetschek SE   1,012    64 
   Evonik Industries AG   2,533    63 
1  Hapag-Lloyd AG   790    63 
   alstria office REIT-AG   3,042    58 
*  Dialog Semiconductor plc   1,656    57 
   Siltronic AG   562    53 
   Aareal Bank AG   1,828    51 
   TAG Immobilien AG   1,874    46 
   Freenet AG   2,264    45 
   Aurubis AG   898    43 
   Grand City Properties SA   1,805    43 
1  Deutsche Pfandbriefbank AG   2,681    38 
   Gerresheimer AG   499    36 
*  Varta AG   469    36 
   Grenke AG   379    35 
   Rational AG   51    35 
   Software AG   1,055    35 
   Fraport AG Frankfurt Airport Services Worldwide   542    35 
   Stroeer SE & Co. KGaA   451    34 
   Stabilus SA   623    34 
*  Hypoport AG   99    34 
   RTL Group SA   776    33 
   Cancom Se   620    31 
   Metro AG   2,587    30 
   1&1 Drillisch AG   1,384    30 

 

17

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
   Norma Group SE   908    30 
   Telefonica Deutschland Holding AG   11,048    29 
   Talanx AG   604    27 
   S&T AG   1,207    27 
   RIB Software SE   812    26 
   DIC Asset AG   1,490    26 
   Pfeiffer Vacuum Technology AG   172    26 
   Suedzucker AG   1,658    26 
   CompuGroup Medical SE   411    26 
   Duerr AG   811    26 
   CropEnergies AG   2,396    25 
   Patrizia AG   1,016    24 
   Fuchs Petrolub SE Preference Shares   620    24 
   TLG Immobilien AG   776    22 
   Jenoptik AG   927    22 
   Schaeffler AG Preference Shares   2,248    20 
   Krones AG   316    20 
*  New Work SE   68    18 
   Jungheinrich AG Preference Shares   905    18 
   Wacker Chemie AG   251    18 
1  Befesa SA   525    17 
*  Aixtron SE   1,618    17 
*  Nordex SE   1,327    16 
1  ADO Properties SA   530    16 
*  Encavis AG   1,251    15 
*  Ceconomy AG   2,885    14 
   Deutz AG   2,915    14 
*  Zooplus AG   116    12 
   Isra Vision AG   172    10 
   Koenig & Bauer AG   378    9 
*,1 Rocket Internet SE   409    9 
   KWS Saat SE & Co. KGaA   157    9 
   Wacker N euson S E   574    8 
   Hornbach H olding AG &Co. KGaA   99    6 
   Corestate Capital Holding SA   123    6 
   Draegerwerk AG & Co.KGaA   110    5 
   Washtec AG   87    5 
   Kloeckner & Co. SE   727    4 
   Takkt AG   303    4 
*  Heidelberger Druckmaschinen AG   2,926    3 
            38,227 
Greece (0.1%)          
*  Alpha Bank AE   116,431    170 
*  Eurobank Ergasias SA   192,919    123 
   Fourlis Holdings SA   11,757    65 

   Hellenic Telecommunications Organization SA   3,868    55 
*  National Bank of Greece SA   17,538    40 
   Jumbo SA   2,220    35 
   Holding Co. ADMIE IPTO SA   11,577    28 
*  Piraeus Bank SA   10,710    24 
   Sarantis SA   1,078    8 
*   GEK Terna Holding Real Estate Construction SA   1,145    8 
*  LAMDA Development SA   930    7 
*  Ellaktor SA   4,982    7 
   Aegean Airlines SA   945    7 
            577 

 Hong Kong (2.6%)

          
   AIA Group Ltd.   481,000    4,821 
   Hong Kong Exchanges &Clearing Ltd.   52,800    1,766 
   CK Asset Holdings Ltd.   126,000    804 
   Sun Hung Kai Properties Ltd.   54,500    788 
   Hang Seng Bank Ltd.   36,100    761 
   Link REIT   75,000    700 
   BOC Hong Kong Holdings Ltd.   158,500    555 
   Techtronic Industries Co. Ltd.   56,500    469 
   China Mengniu Dairy Co. Ltd.   127,000    464 
   New World Development Co. Ltd.   337,000    441 
1  WH Group Ltd.   397,500    417 
   Hang Lung Properties Ltd.   170,000    377 
   Sino Land Co. Ltd.   228,000    315 
   PCCW Ltd.   509,000    308 
   Lenovo Group Ltd.   466,000    293 
   Hysan Development Co. Ltd.   75,000    274 
   AAC Technologies Holdings Inc.   39,500    264 
   ASM Pacific Technology Ltd.   20,900    253 
   Wharf Holdings Ltd.   109,000    233 
   Power Assets Holdings Ltd.   32,500    233 
   Swire Properties Ltd.   68,800    207 
*  Semiconductor Manufacturing International Corp.   102,000    202 
   Bank of East Asia Ltd.   90,400    193 
   Wheelock & Co. Ltd.   24,000    184 
   MTR Corp. Ltd.   28,500    163 

 

18

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
1  Samsonite International SA   87,300    154 
   NWS Holdings Ltd.   113,000    140 
   Wharf Real Estate Investment Co. Ltd.   29,000    134 
   CK Infrastructure Holdings Ltd.   18,500    127 
   Hongkong Land Holdings Ltd.   22,000    109 
   Tingyi Cayman Islands Holding Corp.   54,000    99 
   Swire Pacific Ltd. Class A   9,500    87 
   Henderson Land Development Co. Ltd.   18,400    86 
   Vitasoy International Holdings Ltd.   22,000    80 
   Sun Art Retail Group Ltd.   57,000    74 
   Minth Group Ltd.   20,000    71 
   Xinyi Solar Holdings Ltd.   78,000    63 
   Hang Lung Group Ltd.   19,000    48 
   Prada SpA   12,200    40 
   Fortune REIT   36,000    39 
1  BOC Aviation Ltd.   3,900    34 
   Yue Yuen Industrial Holdings Ltd.   13,500    33 
   Cafe de Coral Holdings Ltd.   14,000    31 
   Kerry Properties Ltd.   10,500    30 
   VTech Holdings Ltd.   3,300    29 
   BOE Varitronix Ltd.   89,000    29 
   SITC International Holdings Co. Ltd.   24,000    28 
   HKBN Ltd.   13,000    23 
*  Hong Kong Television Network Ltd.   40,000    23 
   China Harmony New Energy Auto Holding Ltd.   44,000    22 
   Cathay Pacific Airways Ltd.   16,000    21 
   Johnson Electric Holdings Ltd.   8,500    20 
   Uni-President China Holdings Ltd.   19,000    20 
   Man Wah Holdings Ltd.   26,400    20 
   Value Partners Group Ltd.   32,000    18 
   Kerry Logistics Network Ltd.   11,500    17 
   L’Occitane International SA   9,250    16 
1  CGN New Energy Holdings Co. Ltd.   102,000    16 
   Pou Sheng International Holdings Ltd.   61,000    16 
*  China Silver Group Ltd.    154,000    15 
   Haitong International Securities Group Ltd.   50,000    15 

*  FIH Mobile Ltd.   91,000    14 
   Inspur International Ltd.   34,000    14 
   K Wah International Holdings Ltd.   26,000    13 
*,1 Razer Inc.   75,000    12 
   China Travel International Investment Hong Kong Ltd.   70,000    11 
   Canvest Environmental Protection Group Co. Ltd.   22,000    11 
   Chow Tai Fook Jewellery Group Ltd.   11,800    10 
*  COFCO Meat Holdings Ltd.   39,000    10 
   Li & Fung Ltd.   116,000    10 
   Henderson Investment Ltd.   120,000    10 
   Ju Teng International Holdings Ltd.   42,000    9 
*  MMG Ltd.   44,000    9 
   Pacific Basin Shipping Ltd.   61,000    9 
   Dairy Farm International Holdings Ltd.   1,900    9 
*  Esprit Holdings Ltd.   52,700    9 
   New World Department Store China Ltd.   52,000    8 
   Lee’s Pharmaceutical Holdings Ltd.   16,500    8 
*  Parkson Retail Group Ltd.   118,500    8 
   EVA Precision Industrial Holdings Ltd.   112,000    8 
   Gemdale Properties & Investment Corp. Ltd.   44,000    8 
1  IMAX China Holding Inc.   4,100    8 
*  Lifestyle China Group Ltd.   29,500    8 
   Towngas China Co. Ltd.   13,000    8 
   Nexteer Automotive Group Ltd.   10,000    7 
   Asia Cement China Holdings Corp.   5,500    7 
   IGG Inc.   10,000    7 
   Luk Fook Holdings International Ltd.   3,000    7 
*  HC Group Inc.   25,000    7 
*  Beijing Enterprises Medical   330,000    6 
*  GCL New Energy Holdings Ltd.   284,000    5 
   CITIC Telecom International Holdings Ltd.   12,000    4 
   Guotai Junan International Holdings Ltd.   25,000    4 

 

19

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
*  Honghua Group Ltd.   77,000    4 
   Anton Oilfield Services Group   40,000    4 
*  Truly International Holdings Ltd.   28,000    4 
*  NewOcean Energy Holdings Ltd.   22,000    3 
1  Xiabuxiabu Catering Management China Holdings Co. Ltd.   3,000    3 
   Lifestyle International Holdings Ltd.   3,000    3 
   SA Sa International Holdings Ltd.   14,000    3 
*  China LNG Group Ltd.   42,000    2 
*  NOVA Group Holdings Ltd.   10,000    2 
*,§  Camsing International Holding Ltd.   6,000    1 
            17,619 
Hungary (0.1%)          
   OTP Bank Nyrt   11,836    519 
   Richter Gedeon Nyrt   10,051    205 
            724 
India (2.3%)          
   Housing Development Finance Corp. Ltd.   63,822    1,937 
   Infosys Ltd.   138,339    1,404 
   Hindustan Unilever Ltd.   24,537    741 
   Axis Bank Ltd.   71,160    693 
*  Bharti Airtel Ltd.   63,807    465 
   Bajaj Finance Ltd.   7,292    456 
   HCL Technologies Ltd.   52,731    392 
   Maruti Suzuki India Ltd.   4,202    367 
   Asian Paints Ltd.   13,401    335 
*  State Bank of India   74,592    318 
   UltraTech Cement Ltd.   4,654    274 
   Bajaj Finserv Ltd.   1,996    253 
   Titan Co. Ltd.   13,609    238 
   Sun Pharmaceutical Industries Ltd.   39,131    203 
   UPL Ltd.   24,192    175 
   Hero MotoCorp Ltd.   5,721    164 
   Wipro Ltd.   52,570    162 
   Nestle India Ltd.   731    160 
   Godrej Consumer Products Ltd.   20,025    156 
1  SBI Life Insurance Co. Ltd.   12,575    156 
1  HDFC Life Insurance Co. Ltd.   18,571    141 
*,1 Avenue Supermarts Ltd. Zee Entertainment Enterprises Ltd.   34,078    114 
   Dabur India Ltd.   16,469    114 
   Bajaj Auto Ltd.   2,742    110 

1  ICICI Lombard General Insurance Co. Ltd.   6,338    109 
   Shriram Transport Finance Co. Ltd.   6,382    107 
   Eicher Motors Ltd.   426    99 
   Bharti Infratel Ltd.   33,048    99 
1  AU Small Finance Bank Ltd.   5,814    94 
   Dr Reddy’s Laboratories Ltd.   2,064    84 
   Info Edge India Ltd.   2,280    82 
   Grasim Industries Ltd.   8,539    82 
   Piramal Enterprises Ltd.   4,355    80 
1  Bandhan Bank Ltd.   13,545    72 
   Jubilant Foodworks Ltd.   2,929    72 
   Apollo Hospitals Enterprise Ltd.   2,885    70 
   Federal Bank Ltd.   57,597    69 
   Petronet LNG Ltd.   19,352    66 
   Welspun Corp. Ltd.   23,678    62 
   Britannia Industries Ltd.   1,483    61 
1  HDFC Asset Management Co. Ltd.   1,356    60 
   Marico Ltd.   14,286    59 
*  Aavas Financiers Ltd.   2,260    59 
1  ICICI Prudential Life Insurance Co. Ltd.   8,799    58 
1  InterGlobe Aviation Ltd.   3,063    56 
   Karnataka Bank Ltd.   55,236    54 
   Muthoot Finance Ltd.   4,331    53 
   Mahindra & Mahindra Financial Services Ltd.   10,678    51 
   City Union Bank Ltd.   17,071    51 
1  RBL Bank Ltd.   12,366    50 
   DLF Ltd.   17,854    50 
   Indiabulls Housing Finance Ltd.   12,306    49 
   Container Corp. Of India Ltd.   6,776    48 
   V-Mart Retail Ltd.   1,545    48 
   Pidilite Industries Ltd.   2,261    48 
   Shree Cement Ltd.   150    47 
*  IDFC Bank   90,552    47 
*  Max Financial Services Ltd.   5,762    46 
*  Ambuja Cements Ltd.   16,099    46 
   Aurobindo Pharma Ltd.   6,332    44 
   PI Industries Ltd.   2,085    44 
   Lupin Ltd.   4,857    43 
   Cipla Ltd.   7,642    43 
   LIC Housing Finance Ltd.   9,551    43 
   NMDC Ltd.   33,248    43 
   Gujarat Gas Ltd.   10,971    42 
   Motherson Sumi Systems Ltd.   28,995    42 

 

20

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
   Page Industries Ltd.   136    42 
   Tata Consumer Products Ltd.   8,617    42 
   Rajesh Exports Ltd.   4,537    41 
   Berger Paints India Ltd.   5,160    41 
   Phoenix Mills Ltd.   3,378    40 
   Havells India Ltd.   4,708    40 
   Crompton Greaves Consumer Electricals Ltd.   9,995    39 
*  Bajaj Consumer Care Ltd.   14,146    38 
*  Adani Transmission Ltd.   10,674    37 
   South Indian Bank Ltd.   286,528    37 
   Cholamandalam Investment and Finance Co. Ltd.   8,637    37 
   Manappuram Finance Ltd.   15,361    35 
   Yes Bank Ltd.   72,063    35 
   Whirlpool of India Ltd.   1,147    35 
   Biocon Ltd.   8,655    35 
   NIIT Technologies Ltd.   1,476    35 
   DCB Bank Ltd.   14,646    33 
   Ashok Leyland Ltd.   33,673    33 
   Indraprastha Gas Ltd.   5,306    33 
   Raymond Ltd.   4,638    33 
   Castrol India Ltd.   15,821    32 
*  Fortis Healthcare Ltd.   15,031    32 
   India Cements Ltd.   23,758    32 
   Repco Home Finance Ltd.   7,818    31 
   Ipca Laboratories Ltd.   1,630    31 
   Gateway Distriparks Ltd.   19,121    31 
   Colgate-Palmolive India Ltd.   1,700    30 
   Bosch Ltd.   180    30 
   Indian Hotels Co. Ltd.   16,117    30 
   Ceat Ltd.   2,090    30 
   Bajaj Holdings & Investment Ltd.   630    30 
1  Dr Lal PathLabs Ltd.   1,291    29 
   AIA Engineering Ltd.   1,163    29 
*  Future Retail Ltd.   6,757    29 
   REC Ltd.   17,266    28 
*  Bank of Baroda   26,360    28 
   Divi’s Laboratories Ltd.   963    28 
   Karur Vysya Bank Ltd.   47,313    28 
*  Godrej Properties Ltd.   1,973    28 
   Varun Beverages Ltd.   2,413    27 
   Mphasis Ltd.   2,242    27 
   Great Eastern Shipping Co. Ltd.   7,994    27 
   Torrent Power Ltd.   6,333    27 
*  Aditya Birla Capital Ltd.   24,373    26 
   Gillette India Ltd.   322    26 
*  Polycab India Ltd.   1,680    25 

   Power Grid Corp. of India Ltd.   9,800    25 
*  Aditya Birla Fashion and Retail Ltd.   7,007    25 
1  Godrej Agrovet Ltd.   3,739    24 
   Coromandel International Ltd.   2,824    24 
1  Laurus Labs Ltd.   4,179    24 
   PVR Ltd.   887    24 
*  Just Dial Ltd.   3,620    24 
   PTC India Ltd.   33,779    23 
   Astral Poly Technik Ltd.   1,461    23 
   Redington India Ltd.   15,136    23 
   Persistent Systems Ltd.   2,379    23 
*,1 Quess Corp. Ltd.   3,171    23 
   Power Finance Corp. Ltd.   14,555    22 
   Jindal Saw Ltd.   20,589    22 
   Kajaria Ceramics Ltd.   2,891    21 
   Mangalore Refinery & Petrochemicals Ltd.   39,722    21 
   NHPC Ltd.   73,521    21 
   Jubilant Life Sciences Ltd.   2,971    21 
   Escorts Ltd.   1,902    21 
   Minda Industries Ltd.   3,994    21 
   SRF Ltd.   382    21 
   JM Financial Ltd.   13,905    21 
   Tata Communications Ltd.   4,060    21 
   Symphony Ltd.   1,144    20 
   Multi Commodity Exchange of India Ltd.   1,119    20 
   Finolex Cables Ltd.   4,410    20 
*  Punjab National Bank   31,189    20 
   Alkem Laboratories Ltd.   536    20 
*  Equitas Holdings Ltd.   12,964    20 
   Prestige Estates Projects Ltd.   4,801    19 
   Motilal Oswal Financial Services Ltd.   1,862    19 
   Balrampur Chini Mills Ltd.   9,537    19 
   Vakrangee Ltd.   33,613    18 
   Oberoi Realty Ltd.   2,530    18 
   Hexaware Technologies Ltd.   3,550    18 
   V-Guard Industries Ltd.   6,229    18 
*  TeamLease Services Ltd.   544    18 
   GlaxoSmithKline Consumer Healthcare Ltd.   134    18 
   Sundaram Finance Ltd.   797    17 
   KRBL Ltd.   4,936    17 
   IDFC Ltd.   37,895    17 
   Indiabulls Ventures Ltd.   7,104    17 
*  Vodafone Idea Ltd.   312,723    17 
   EIH Ltd.   8,912    16 
   Edelweiss Financial Services Ltd.   12,887    16 

 

21

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
   Kansai Nerolac Paints Ltd.   2,283    16 
   Kaveri Seed Co. Ltd.   2,626    16 
*  Mahindra CIE Automotive Ltd.   8,314    15 
   Gujarat Pipavav Port Ltd.   15,221    15 
*  Canara Bank   7,457    15 
   Avanti Feeds Ltd.   2,284    15 
   Thermax Ltd.   1,148    15 
   Torrent Pharmaceuticals Ltd.   493    15 
*  Indian Overseas Bank   121,202    15 
   Rain Industries Ltd.   10,064    15 
   National A luminium Co. Ltd.   30,294    14 
   Sundram Fasteners Ltd.   2,451    14 
   eClerx Services Ltd.   1,853    14 
   Care Ratings Ltd.   2,063    14 
   Voltas Ltd.   1,414    13 
1  Dilip Buildcon Ltd.   3,182    13 
   Century Textiles & Industries Ltd.   1,877    13 
   TVS Motor Co. Ltd.   2,114    13 
   Aarti Industries Ltd.   939    13 
   Amara Raja Batteries Ltd.   1,430    13 
   Glenmark Pharmaceuticals Ltd.   3,207    12 
1  PNB Housing Finance Ltd.   2,417    12 
*  IFCI Ltd.   159,540    12 
*  Vinati Organics Ltd.   892    12 
*  Union Bank of India   21,340    11 
   Bayer CropScience Ltd.   183    11 
   Mahanagar Gas Ltd.   789    11 
   Cholamandalam Financial Holdings Ltd.   1,545    11 
   Natco Pharma Ltd.   1,306    11 
   Sobha Ltd.   2,611    11 
*   Oracle Financial Services Software Ltd.   281    10 
   Cadila Healthcare Ltd.   2,846    10 
*  Hindustan Zinc Ltd.   4,257    10 
*   Oriental Bank of Commerce   21,062    10 
*  TV18 Broadcast Ltd.   31,831    10 
   Supreme Industries Ltd.   527    10 
   DCM Shriram Ltd.   2,097    10 
   Balkrishna Industries Ltd.   623    10 
*   Jammu & Kashmir Bank Ltd.   33,848    9 
   Gujarat State Petronet Ltd.   3,007    9 
   Pfizer Ltd.   160    9 
*  Bank of India   12,538    9 
*  Future Consumer Ltd.   52,332    9 
*   Sun Pharma Advanced Research Co. Ltd.   4,241    9 

   Ramco Cements Ltd.   759    8 
   NCC Ltd.   16,130    8 
   Bata India Ltd.   334    8 
*  Andhra Bank   40,902    8 
*  VA Tech Wabag Ltd.   2,896    8 
   Apollo Tyres Ltd.   3,748    7 
*  Indian Bank   7,109    7 
   NBCC India Ltd.   19,798    7 
   Chambal Fertilizers and Chemicals Ltd.   3,702    7 
   Emami Ltd.   2,023    7 
   Ajanta Pharma Ltd.   367    7 
   WABCO India Ltd.   74    7 
   Dalmia Bharat Ltd.   621    7 
   Birlasoft Ltd.   5,410    7 
   Alembic Pharmaceuticals Ltd.   764    7 
   Bombay Burmah Trading Co.   449    7 
   Thomas Cook India Ltd.   10,185    7 
*  Central Bank of India   29,612    6 
*  Reliance Capital Ltd.   69,928    6 
   Exide Industries Ltd.   2,696    6 
*  Allahabad Bank   38,741    6 
*   IRB Infrastructure Developers Ltd.   5,170    6 
*   Dewan Housing Finance Corp. Ltd.   31,200    6 
   Sterlite Technologies Ltd.   4,642    6 
   Godrej Industries Ltd.   1,095    6 
   Graphite India Ltd.   1,899    6 
*  Suzlon Energy Ltd.   157,392    6 
   HEG Ltd.   462    6 
   Strides Pharma Science Ltd.   811    5 
*  Corp Bank   21,881    5 
   Arvind Ltd.   9,750    5 
1  Syngene International Ltd.   1,188    5 
*  Jain Irrigation Systems Ltd.   61,581    5 
1  Endurance Technologies Ltd.   331    5 
*  Indiabulls Real Estate Ltd.   4,206    4 
   Welspun India Ltd.   7,618    4 
*  PC Jeweller Ltd.   19,763    4 
   TTK Prestige Ltd.   49    4 
   GE T&D India Ltd.   1,935    3 
*  Gujarat Fluorochemicals Ltd.   424    3 
*  Housing Development & Infrastructure Ltd.   82,456    3 
*  Dish TV India Ltd.   22,499    3 
*,§  Hemisphere Properties India Ltd.   1,129    3 
*  Wockhardt Ltd.   471    2 

 

22

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
*,§  ABB Power Products & Systems India Ltd.   125    1 
*  Aarti Surfactants Ltd.   26    — 
            15,479 
Indonesia (0.5%)
   Bank Central Asia Tbk PT   354,500    783 
   Bank Rakyat Indonesia Persero Tbk PT   2,484,300    742 
   Telekomunikasi Indonesia Persero Tbk PT   2,365,800    577 
   Bank Mandiri Persero Tbk PT   936,200    487 
   Bank Negara Indonesia Persero Tbk PT   602,400    302 
   Unilever Indonesia Tbk PT   300,000    144 
   Charoen Pokphand Indonesia Tbk PT   260,800    105 
*  Barito Pacific Tbk PT   685,300    48 
   Indofood CBP Sukses Makmur Tbk PT   55,300    40 
   Indofood Sukses Makmur Tbk PT   81,400    38 
   Kalbe Farma Tbk PT   344,000    30 
   Indah Kiat Pulp & Paper Corp. Tbk PT   51,500    21 
   Ciputra Development Tbk PT   294,200    20 
   Indocement Tunggal Prakarsa Tbk PT   16,500    18 
   Summarecon Agung Tbk PT   281,200    17 
   Tower Bersama Infrastructure Tbk PT   205,300    16 
   Ace Hardware Indonesia Tbk PT   148,900    16 
   Japfa Comfeed Indonesia Tbk PT   134,000    13 
   Pakuwon Jati Tbk PT   327,100    12 
   Jasa Marga Persero Tbk PT   36,800    12 
   Media Nusantara Citra Tbk PT   131,500    12 
   Bank Tabungan Negara Persero Tbk PT   94,700    11 
   Matahari Department Store Tbk PT   46,000    10 
   Surya Semesta Internusa Tbk PT   209,500    9 
*  XL Axiata Tbk PT   40,000    7 
   Wijaya Karya Persero Tbk PT   39,500    5 

*  Siloam International Hospitals Tbk PT   11,600    5 
*  Sentul City Tbk PT    1,413,700    5 
*  Agung Podomoro Land Tbk PT   456,400    4 
*  Bumi Serpong Damai Tbk PT   57,300    4 
   Mitra Adiperkasa Tbk PT   68,800    4 
*  Panin Financial Tbk PT   210,700    4 
*  Kresna Graha Investama Tbk PT   112,700    4 
   Surya Citra Media Tbk PT   39,400    3 
   PP Persero Tbk PT   36,200    3 
   Bekasi Fajar Industrial Estate Tbk PT   319,100    3 
   Ramayana Lestari Sentosa Tbk PT   41,400    3 
   Waskita Karya Persero Tbk PT   38,300    3 
*  Global Mediacom Tbk PT   94,100    2 
*,§  Trada Alam Minera Tbk PT   477,100    2 
            3,544 
Ireland (0.2%)          
   Kerry Group plc   6,258    795 
   Kingspan Group plc   8,498    535 
   Bank of Ireland Group plc   46,843    176 
   AIB Group plc   18,524    43 
   Glanbia plc   2,806    33 
   Cairn Homes plc   15,088    20 
   Dalata Hotel Group plc   4,099    19 
   Irish Continental Group plc   1,849    8 
            1,629 
Israel (0.4%)          
*  Nice Ltd.   3,566    583 
*  Teva Pharmaceutical Industries Ltd.   39,980    464 
   Bank Hapoalim BM   51,201    398 
   Bank Leumi Le-Israel BM   60,902    394 
   Israel Discount Bank Ltd.   77,460    323 
   Israel Chemicals Ltd.   36,015    131 
   Mizrahi Tefahot Bank Ltd .   2,719    70 
   Azrieli Group Ltd.   694    50 
   First International Bank Of Israel Ltd.   1,727    46 
*  Tower Semiconductor Ltd.   2,151    41 
   Strauss Group Ltd.   1,339    41 
   Paz Oil Co. Ltd.   330    36 
   Shikun & Binui Ltd.   6,529    35 
   Reit 1 Ltd.   4,750    28 
*  Bezeq The Israeli Telecommunication Corp. Ltd.   36,574    27 
*  Nova Measuring Instruments Ltd.   680    23 

 

23

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
   Sella Capital Real Estate Ltd.   5,366    17 
   Gazit-Globe Ltd.   1,409    16 
   Sapiens International Corp. NV   623    15 
   FIBI Holdings Ltd.   454    14 
   Electra Ltd.   24    12 
   Shapir Engineering and Industry Ltd.   1,653    11 
   Formula Systems 1985 Ltd.   150    10 
   Matrix IT Ltd.   529    10 
   Kenon Holdings Ltd.   574    10 
*  Allot Ltd.   857    9 
   AudioCodes Ltd.   430    9 
   Delek Automotive Systems Ltd.   1,676    9 
   Hilan Ltd.   212    8 
   Harel Insurance Investments & Financial Services Ltd.   1,042    6 
*  Clal Insurance Enterprises Holdings Ltd.   417    4 
            2,850 
Italy (1.5%)          
   Intesa Sanpaolo SPA (Registered)   562,812    1,368 
   UniCredit SPA   91,225    1,173 
   Ferrari NV   5,504    867 
   Assicurazioni Generali SPA   42,458    766 
   Snam SPA   119,062    590 
   Fiat Chrysler Automobiles NV   46,361    584 
   Terna Rete Elettrica Nazionale SPA   82,561    546 
   Mediobanca Banca di Credito Finanziario SPA   49,126    447 
   Telecom Italia SPA (Bearer)   694,454    389 
   Moncler SPA   9,768    384 
   FinecoBank Banca Fineco SPA   35,666    374 
   Tenaris SA   28,645    262 
*,1 Nexi SPA   10,426    169 
*  Saipem SPA   40,576    155 
   Unione di Banche Italiane SPA   31,046    128 
1  doValue SPA   10,050    126 
1  Poste Italiane SPA   9,360    100 
*  Banco BPM SPA   44,954    99 
   Amplifon SPA   2,999    86 
   Azimut Holding SPA   3,683    79 
   Recordati SPA   1,553    66 

   Banca Mediolanum SPA   6,842    56 
1  Infrastrutture Wireless Italiane SPA   5,194    53 
*  Telecom Italia SPA (Registered)   92,941    52 
   Cerved G roup SPA   5,400    51 
   Hera SPA   11,818    51 
1  Pirelli & C SPA   10,475    50 
   BPER Banca   12,279    49 
   Interpump Group SPA   1,596    48 
   Banca Popolare di Sondrio SCPA   19,984    48 
   ASTM SPA   1,840    46 
   Unipol Gruppo SPA   9,078    45 
   Iren SPA   14,352    44 
   Tamburi Investment Partners SPA   6,237    44 
   Reply SPA   552    42 
   Banca Generali SPA   1,278    40 
   DiaSorin SPA   325    37 
   Societa Cattolica di Assicurazioni SC   5,056    37 
   Buzzi Unicem SPA   1,643    36 
   A2A SPA   19,170    33 
   Immobiliare Grande Distribuzione SIIQ SPA   5,375    32 
1  Technogym SPA   2,955    31 
   Autogrill SPA   3,798    31 
1  Enav SPA   5,137    31 
   Freni Brembo SPA   2,943    30 
1  Anima Holding SPA   6,173    27 
   Italgas SPA   4,404    27 
   IMA Industria Macchine Automatiche SPA   430    27 
   Falck Renewables S PA   3,939    26 
   DeA Capital SPA   16,523    25 
   Salvatore Ferragamo SPA   1,402    22 
   Brunello Cucinelli SPA   652    22 
   Italmobiliare SPA   736    22 
   De’ Longhi SPA   1,201    21 
   Cairo Communication SPA   8,334    20 
   ERG SPA   857    20 
   UnipolSai Assicurazioni SPA   8,031    20 
1  RAI Way SPA   3,084    19 
   Saras SPA   15,485    18 
   Maire Tecnimont SPA   6,121    16 
   Danieli & C Officine Meccaniche SPA   1,043    16 
*  Arnoldo Mondadori Editore SPA   9,116    16 
   Piaggio & C SPA   6,297    15 
   Zignago Vetro SPA   1,065    15 
   Credito Emiliano SPA   2,712    14 
*  Salini Impregilo SPA   9,222    14 

 

24

 

 

ESG International Stock ETF

 

      Shares   Market
Value•
($000)		 
1  Carel Industries SPA   1,027    13 
   Biesse SPA   905    12 
1  Banca Farmafactoring SPA   1,799    11 
   Tod’s SPA   291    10 
*  Juventus Football Club SPA   8,956    10 
   Rizzoli Corriere Della Sera Mediagroup SPA   8,503    8 
   Datalogic SPA   523    8 
   MARR SPA   335    6 
   CIR SpA-Compagnie Industriali   11,016    6 
*  Banca Monte dei Paschi di Siena SPA   2,477    5 
*,1 OVS SPA   2,886    5 
   Buzzi Unicem SPA Saving Shares   265    4 
   Banca IFIS SPA   199    3 
            10,298 
Japan (17.7%)          
   Toyota Motor Corp.   96,700    6,350 
   SoftBank Group Corp.   65,000    3,020 
   Sony Corp.   48,100    2,965 
   Mitsubishi UFJ Financial Group Inc.   473,400    2,313 
   Takeda Pharmaceutical Co. Ltd.   63,557    2,195 
   Keyence Corp.   6,200    1,980 
   KDDI Corp.   69,200    1,955 
   Recruit Holdings Co. Ltd.   53,100    1,857 
   Honda Motor Co. Ltd.   69,600    1,786 
   Shin-Etsu Chemical Co. Ltd.   14,800    1,638 
   Daiichi Sankyo Co. Ltd.   26,200    1,595 
   Sumitomo Mitsui Financial Group Inc.   50,200    1,593 
   Kao Corp.   21,300    1,550 
   Tokio Marine Holdings Inc.   27,100    1,448 
   FANUC Corp.   8,700    1,429 
   Astellas Pharma Inc.   84,100    1,318 
   Murata Manufacturing Co. Ltd.   24,600    1,289 
   Hoya Corp.   14,400    1,277 
   Mizuho Financial Group Inc.   937,200    1,268 
   Nidec Corp.   10,700    1,260 
   Nintendo Co. Ltd.   3,700    1,240 
   Seven & i Holdings Co. Ltd.   35,100    1,194 
   NTT DOCOMO Inc.   44,000    1,191 
   Chugai Pharmaceutical Co. Ltd.   10,600    1,140 
   Nippon Telegraph & Telephone Corp.   48,000    1,120 

    East Japan Railway Co.   14,200    1,085 
    Oriental Land Co. Ltd.   9,300    1,059 
    Tokyo Electron Ltd.   4,900    1,024 
    Fujitsu Ltd.   9,800    1,022 
    Canon Inc.   38,700    974 
    Central Japan Railway Co.   5,900    970 
    Panasonic Corp.   99,700    946 
    Mitsui Fudosan Co. Ltd.   40,800    936 
    Mitsubishi Estate Co. Ltd.   52,200    891 
    Terumo Corp.   27,500    883 
    ORIX Corp.   54,400    882 
    Shiseido Co. Ltd.   14,700    877 
    Fast Retailing Co. Ltd.   1,700    839 
    Kyocera Corp.   13,300    832 
    Olympus Corp.   45,600    826 
    Eisai Co. Ltd.   11,200    822 
    Softbank Corp.   61,700    811 
    Secom Co. Ltd.   9,600    761 
    Daiwa House Industry Co. Ltd.   27,500    759 
    SMC Corp.   1,900    757 
    Kubota Corp.   51,200    718 
    Shionogi & Co. Ltd.   13,100    705 
    Dai-ichi Life Holdings Inc.   51,500    698 
    FUJIFILM Holdings Corp.   14,100    685 
    West Japan Railway Co.   9,600    678 
    Aeon Co. Ltd.   35,400    662 
    Sysmex Corp.   9,900    633 
    Nomura Holdings Inc.   142,900    631 
    Suzuki Motor Corp.   15,400    620 
    Bridgestone Corp.   18,200    603 
    Denso Corp.   15,500    596 
    M3 Inc.   22,400    578 
    Omron Corp.   10,400    557 
    Sekisui House Ltd.   26,600    522 
    Bandai Namco Holdings Inc.   10,300    516 
    Sompo Holdings I nc.   13,800    510 
    Pan Pacific International Holdings Corp.   30,800    509 
    MS&AD Insurance Group Holdings Inc.   15,700    506 
    Toyota Industries Corp.   9,400    490 
    Sumitomo Electric Industries Ltd.   41,500    490 
    Ono Pharmaceutical Co. Ltd.   23,800    482 
    Sumitomo Mitsui Trust Holdings Inc.   14,200    482 
    Yamaha Corp.   9,600    470 
    Nitto Denko Corp.   9,400    467 
    Unicharm Corp.   14,400    466 
    Advantest Corp.   9,900    455 

 

25

 

 

ESG International Stock ETF

 

       Shares   Market
Value•
($000)		 
    Sumitomo Realty & Development Co. Ltd.   14,400    449 
    Kintetsu Group Holdings Co. Ltd.   10,400    449 
    Nippon Paint Holdings C o. Ltd.   9,800    443 
    Asahi Kasei Corp.   53,400    437 
    Kyowa Kirin Co. Ltd.   18,300    436 
    Japan Exchange Group Inc.   25,600    428 
    NTT Data Corp.   35,800    427 
    Ajinomoto Co. Inc.   25,200    423 
    Resona Holdings I nc.   113,100    421 
    Mitsubishi Chemical Holdings Corp.   62,600    418 
    MINEBEA MITSUMI Inc.   23,700    415 
    Santen Pharmaceutical Co. Ltd.   25,300    406 
    Z Holdings Corp.   111,400    404 
    Yaskawa Electric Corp.   12,800    399 
    Yakult Honsha Co. Ltd.   8,500    388 
    Daiwa Securities Group Inc.   91,300    386 
    Toray Industries Inc.   66,300    381 
    Tokyu Corp.   24,800    380 
    Sekisui Chemical Co. Ltd.   25,300    378 
    TOTO Ltd.   9,700    364 
    Hamamatsu Photonics KK   9,300    363 
    Tobu Railway Co. Ltd.   12,100    361 
    Yamato Holdings Co. Ltd.   22,600    357 
    Dai Nippon Printing C o.Ltd.   14,500    349 
    Ricoh Co. Ltd.   37,200    347 
    Aisin Seiki Co. Ltd.   10,800    347 
    Sumitomo Chemical Co. Ltd.   92,600    337 
    Nisshin Seifun G roup Inc.   19,700    332 
    NEC Corp.   8,800    330 
    AGC Inc.   11,500    329 
    Keihan Holdings Co. Ltd.   8,100    328 
    Azbil Corp.   13,200    326 
    Kurita Water Industries Ltd.   12,600    325 
    T&D Holdings Inc.   33,400    324 
    Toyo Suisan Kaisha Ltd.   8,100    322 
    Sohgo Security Services Co. Ltd.   6,900    322 
    Hulic Co. Ltd.   28,900    322 
    NH Foods Ltd.   8,500    320 
    Shimadzu Corp.   13,200    319 
    Brother Industries Ltd.   18,000    319 
    Hisamitsu Pharmaceutical Co. Inc.   7,200    319 
    Nagoya Railroad Co. Ltd.   12,200    319 
    Sumitomo Metal Mining Co. Ltd.   12,800    315 
    TDK Corp.   3,300    315 

   Nexon Co. Ltd.   19,700    312 
   Dentsu Group Inc.   12,000    310 
   Concordia Financial Group Ltd.   91,000    307 
   Shimano Inc.   2,200    306 
   Yamada Denki Co. Ltd.   63,100    303 
   Yamaha Motor Co. Ltd.   19,100    301 
   Mitsubishi Materials Corp.   13,200    299 
   Japan Post Holdings Co. Ltd.   34,300    298 
   Oji Holdings Corp.   62,800    297 
   Seiko Epson Corp.   21,000    294 
   Nissan Motor Co. Ltd.   68,200    292 
   NSK Ltd.   38,400    291 
   Rohm Co. Ltd.   4,400    288 
   Keikyu Corp.   18,900    285 
   Konami Holdings Corp.   7,900    285 
   Mazda Motor Corp.   41,000    281 
   Teijin Ltd.   17,000    279 
   Toho Co. Ltd.   9,000    278 
   Haseko Corp.   21,500    277 
   LIXIL Group Corp.   18,600    277 
   Kaken Pharmaceutical Co. Ltd.   5,700    275 
   Chiba Bank Ltd.   56,700    275 
   SUMCO Corp.   18,100    274 
   Stanley Electric Co. Ltd.   11,200    270 
   FamilyMart Co. Ltd.   12,300    268 
   Aozora Bank Ltd.   10,700    266 
   Nitori Holdings Co. Ltd.   1,900    264 
   Mitsui Chemicals Inc.   12,200    263 
   Taiyo Yuden Co. Ltd.   9,300    262 
^  ANA Holdings Inc.   9,600    258 
   Shizuoka Bank Ltd.   41,400    257 
   Odakyu Electric Railway Co. Ltd.   13,300    256 
   Pigeon Corp.   7,500    253 
   Taiheiyo Cement Corp.   10,200    252 
   COMSYS Holdings Corp.   10,200    251 
   SBI Holdings Inc.   12,400    250 
   Coca-Cola Bottlers Japan Holdings Inc.   10,800    249 
   Bank of Kyoto Ltd.   7,500    249 
   Alps Alpine Co. Ltd.   16,300    248 
   Kuraray Co. Ltd.   23,800    247 
   Japan Airlines Co. Ltd.   10,000    246 
   Marui Group Co. Ltd.   12,500    244 
   Isuzu Motors Ltd.   25,600    240 
   Nikon Corp.   22,600    231 
   Showa Denko KK   10,600    228 
   Makita Corp.   6,700    227 
   Sinanen Holdings Co. Ltd.   12,100    225 
   Air Water Inc.   16,500    219 
   Lion Corp.   13,000    217 

 

26

 

 

ESG International Stock ETF          
           
            Market 
            Value• 
       Shares   ($ 000)
   Alfresa Holdings Corp.   11,900    207 
   NGK Spark Plug Co. Ltd.   12,200    198 
   MEIJI Holdings Co. Ltd.   3,000    178 
   Seibu Holdings Inc.   12,400    176 
   Konica Minolta Inc.   31,800    174 
^  Anritsu Corp.   10,300    170 
   Fukuoka Financial Group Inc.   11,200    168 
   Disco Corp.   800    162 
   Hankyu Hanshin Holdings Inc.   4,900    161 
   Nissan Chemical Corp.   3,800    160 
   Sumitomo Dainippon Pharma Co. Ltd.   10,800    154 
   Nomura Research Institute Ltd.   6,500    143 
   Daito Trust Construction Co. Ltd.   1,400    142 
   Sac’s Bar Holdings Inc.   20,600    139 
   Kobayashi Pharmaceutical Co. Ltd.   1,900    138 
   MISUMI Group Inc.   6,200    131 
   Daifuku Co. Ltd.   2,100    123 
   Hitachi Chemical Co. Ltd.   2,900    123 
   CyberAgent Inc.   3,100    117 
   Tokyo Rope Manufacturing Co. Ltd.   15,700    117 
   TIS Inc.   1,900    114 
*  Renesas Electronics Corp.   18,300    111 
   Lasertec Corp.   2,200    101 
   Otsuka Corp.   2,300    99 
   Nihon M&A Center Inc.   3,200    99 
   Cybozu Inc.   5,700    96 
   Hikari Tsushin Inc.   500    95 
   Nissin Foods Holdings Co. Ltd.   1,200    94 
   Keio Corp.   1,900    91 
   Ryohin Keikaku Co. Ltd.   6,300    85 
   Nippon Shinyaku Co. Ltd.   1,100    82 
   Hitachi High-Tech Corp.   1,100    82 
   Casio Computer Co. Ltd.   4,500    77 
   Hoshizaki Corp.   900    76 
   GMO Payment Gateway Inc.   1,200    74 
   Hirose Electric Co. Ltd.   700    74 
   Shinsei Bank Ltd.   5,495    72 
   Welcia Holdings Co. Ltd.   1,200    72 
   Kose Corp.   600    71 
*  PeptiDream Inc.   1,800    71 
   SG Holdings Co. Ltd.   3,300    65 
   Kansai Paint Co. Ltd.   3,000    65 
   Tokyu Fudosan Holdings Corp.   9,800    62 
   USS Co. Ltd.   3,900    62 

    Miura Co. Ltd.   1,900    62 
    Sugi Holdings Co. Ltd.   1,300    61 
    JSR Corp.   3,500    61 
    Goldwin Inc.   1,000    61 
    Capcom Co. Ltd.   2,200    60 
    Nabtesco Corp.   2,200    58 
    Kakaku.com Inc.   2,700    58 
    Nippon Express Co. Ltd.   1,200    58 
    Rohto Pharmaceutical Co. Ltd.   2,000    57 
    THK Co. Ltd.   2,500    57 
    Asics Corp.   5,200    56 
    MonotaRO Co. Ltd.   2,500    56 
    Sony Financial Holdings Inc.   2,700    54 
    Persol Holdings Co. Ltd.   3,900    52 
    Koei Tecmo Holdings Co. Ltd.   2,100    52 
    Kagome Co. Ltd.   2,400    52 
    Tokyo Tatemono Co. Ltd.   3,800    52 
    Koito Manufacturing Co. Ltd.   1,300    51 
    Keisei Electric Railway Co. Ltd.   1,600    51 
    Sumitomo Forestry Co. Ltd.   3,400    50 
    Acom Co. Ltd.   12,200    50 
    Nomura Real Estate Holdings Inc.   2,300    50 
    Taisho Pharmaceutical Holdings Co. Ltd.   800    49 
    Wacoal Holdings Corp.   2,100    49 
    Nishi-Nippon Railroad Co. Ltd.   2,200    48 
    Rinnai Corp.   700    48 
    Mitsubishi UFJ Lease & Finance Co. Ltd.   8,300    47 
    Maeda Road Construction Co. Ltd.   1,600    47 
    Oracle Corp. Japan   600    47 
    Benesse Holdings Inc.   1,800    46 
    Iwatani Corp.   1,400    46 
    Kewpie Corp.   2,500    46 
    Sawai Pharmaceutical Co. Ltd.   800    45 
    Nichirei Corp.   1,800    45 
    Japan Post Insurance Co. Ltd.   2,939    45 
    Unizo Holdings Co. Ltd.   800    44 
    Nagase & Co. Ltd.   3,700    44 
    ADEKA Corp.   3,400    44 
    Ito En Ltd.   1,000    44 
    Kyowa Exeo Corp.   2,000    44 
    AEON Financial Service Co. Ltd.   3,000    44 
    Suzuken Co. Ltd.   1,300    43 
    Lawson Inc.   800    43 

 

27

 

  

ESG International Stock ETF          
               
             Market 
             Value• 
        Shares   ($ 000)
    Matsumotokiyoshi HoldingsCo. Ltd.   1,300    43 
    GS Yuasa Corp.   2,400    42 
    Daicel Corp.   4,900    42 
    Itochu Techno-Solutions Corp.   1,500    42 
    Nankai Electric Railway Co. Ltd.   1,900    42 
    Sharp Corp.   3,600    42 
    SCSK Corp.   800    42 
    Isetan Mitsukoshi Holdings Ltd.   6,400    41 
    Ushio Inc.   3,300    41 
    Kokuyo Co. Ltd.   2,900    41 
    Hitachi Capital Corp.   1,600    41 
    Hino Motors Ltd.   5,000    41 
    Iyo Bank Ltd.   9,200    41 
    Daiichikosho Co. Ltd.   1,000    41 
    Yokohama Rubber Co. Ltd.   2,500    41 
    Nippo Corp.   1,800    41 
    Sumitomo Rubber Industries Ltd.   3,900    40 
    Sanwa Holdings Corp.   4,400    40 
    Toyobo Co. Ltd.   3,200    40 
    Glory Ltd.   1,500    40 
    MediPal Holdings Corp.   2,200    40 
    Toyo Seikan Group Holdings Ltd.   2,500    40 
    Chugoku Bank Ltd.   5,100    40 
    Ibiden Co. Ltd.   1,800    40 
    Hachijuni Bank Ltd.   11,800    40 
    Taiyo Nippon Sanso Corp.   2,200    39 
    Nihon Kohden Corp.   1,300    39 
    Sotetsu Holdings Inc.   1,700    38 
    Nippon Kayaku Co. Ltd.   3,500    38 
    Calbee Inc.   1,500    38 
    Hiroshima Bank Ltd.   8,900    38 
    NET One Systems Co. Ltd.   1,800    38 
    JTEKT Corp.   3,900    38 
    Seven Bank Ltd.   14,300    38 
    Nishimatsu Construction Co. Ltd.   1,800    38 
    Tokyo Century Corp.   900    37 
    Kurimoto Ltd.   2,200    37 
    Ezaki Glico Co. Ltd.   900    37 
    Tsumura & Co.   1,600    37 
    Toyo Ink SC Holdings Co. Ltd.   1,900    37 
    Nihon Unisys Ltd.   1,200    36 
    Zeon Corp.   3,800    36 
    J Front Retailing Co. Ltd.   3,400    36 
    Sushiro Global Holdings Ltd.   500    36 
    SCREEN Holdings Co. Ltd.   700    36 
    Dowa Holdings Co. Ltd.   1,100    36 

    Morinaga & Co. Ltd.   900    36 
    Yamazaki Baking Co. Ltd.   2,100    36 
    DIC Corp.   1,500    35 
    House Foods Group Inc.   1,200    35 
    Ain Holdings Inc.   600    35 
    Nitto Boseki Co. Ltd.   900    35 
    Toagosei Co. Ltd.   3,500    34 
    Lintec Corp.   1,600    34 
    TS Tech Co. Ltd.   1,300    34 
    DeNA Co. Ltd.   2,600    34 
    Shimamura Co. Ltd.   500    33 
    NOK Corp.   2,600    33 
    Citizen Watch Co. Ltd.   8,300    33 
    Amada Holdings Co. Ltd.   3,500    33 
    NHK Spring Co. Ltd.   4,300    33 
    Fancl Corp.   1,300    32 
    Daido Steel Co. Ltd.   900    32 
    Mitsubishi Logistics Corp.   1,400    32 
    Tokyo Seimitsu Co. Ltd.   1,000    32 
    Hazama Ando Corp.   4,300    31 
    Skylark Holdings Co. Ltd.   2,100    31 
    Aeon Mall Co. Ltd.   2,200    31 
    Paramount Bed Holdings Co. Ltd.   800    31 
    K’s Holdings Corp.   2,800    31 
    Sumitomo Osaka Cement Co. Ltd.   900    31 
    Toyo Tire Corp.   2,300    30 
    FP Corp.   500    30 
    TechnoPro Holdings Inc.   500    30 
    Nipro Corp.   2,800    30 
    Shimachu Co. Ltd.   1,200    30 
    Kaneka Corp.   1,100    29 
    Organo Corp.   500    29 
    Kyudenko Corp.   1,100    29 
    Tokuyama Corp.   1,300    29 
    Maruichi Steel Tube Ltd.   1,200    29 
    Hokkan Holdings Ltd.   2,000    29 
    Hakuhodo DY Holdings Inc.   2,500    29 
    Fujikura Kasei Co. Ltd.   6,600    28 
    Shinwa Co. Ltd.   1,600    28 
    Morinaga Milk Industry Co. Ltd.   800    28 
    Takashimaya Co. Ltd.   3,000    28 
    Yoshinoya Holdings Co. Ltd.   1,400    28 
    Shinko Electric Industries Co. Ltd.   2,500    28 
    Colowide Co. Ltd.   1,700    28 
    Fujitsu General Ltd.   1,400    28 
    Nippon Light Metal Holdings Co. Ltd.   15,900    28 
    Nippon Paper Industries Co. Ltd.   1,900    27 
    DMG Mori Co. Ltd.   2,200    27 

 

28

 

 

ESG International Stock ETF        
         
           Market 
           Value• 
        Shares   ($ 000)
    Miraca Holdings Inc.   1,100    27 
    Nisshinbo Holdings Inc.   3,200    27 
    NTN Corp.   11,400    27 
    Nippon Electric Glass Co. Ltd.   1,600    27 
    Toho Holdings Co. Ltd.   1,400    26 
    Furukawa Electric Co. Ltd.   1,200    26 
    Tokai Carbon Co. Ltd.   2,900    26 
    NEC Networks & System Integration Corp.   700    26 
    Yushiro Chemical Industry Co. Ltd.   2,300    26 
    Japan Post Bank Co. Ltd.   2,900    26 
    Nippon Shokubai Co. Ltd.   500    25 
    TOKAI Holdings Corp.   3,100    25 
    PC Depot Corp.   5,300    25 
    Toyota Boshoku Corp.   1,800    25 
    Tsubakimoto Chain Co.   900    24 
    CKD Corp.   1,600    24 
    Wellnet Corp.   4,600    24 
    Aiphone Co. Ltd.   1,700    24 
    Rengo Co. Ltd.   3,500    24 
    Achilles Corp.   1,500    24 
    Nihon Yamamura Glass Co. Ltd.   2,400    23 
    Pola Orbis Holdings Inc.   1,200    23 
    Sanrio Co. Ltd.   1,500    23 
    Digital Garage Inc.   700    22 
    Kiyo Bank Ltd.   1,700    22 
    Okura Industrial Co. Ltd.   1,600    22 
    Morita Holdings Corp.   1,400    22 
    Mitsubishi Paper Mills Ltd.   5,800    21 
    PALTAC Corp.   500    21 
    Tokai Tokyo Financial Holdings Inc.   8,000    21 
    Riken Technos Corp.   5,300    21 
    Fuji Oil Holdings Inc.   900    21 
    Totetsu Kogyo Co. Ltd.   800    21 
    Ulvac Inc.   700    20 
    North Pacific Bank Ltd.   10,800    20 
    Awa Bank Ltd.   1,000    20 
    Takamiya Co. Ltd.   4,200    20 
    Fujikura Ltd.   6,200    20 
    Mebuki Financial Group Inc.   10,100    19 
    Fuso Pharmaceutical Industries Ltd.   1,200    19 
    Takara Bio Inc.   1,100    19 
    Ariake Japan Co. Ltd.   300    19 
*   Leopalace21 Corp.   6,300    19 
    Topcon Corp.   1,900    19 
    Toho Co. Ltd.   1,300    19 
    Itoham Yonekyu Holdings Inc.   3,400    19 
    Zuiko Corp.   500    19 

   Daito Pharmaceutical Co. Ltd.   700    19 
   Nagaileben Co. Ltd.   900    18 
   Nichi-iko Pharmaceutical Co. Ltd.   1,700    18 
   Argo Graphics Inc.   600    18 
   Nissin Corp.   1,300    18 
   Hokkoku Bank Ltd.   700    18 
   San-In Godo Bank Ltd.   3,500    17 
   Noritake Co. Ltd.   500    17 
   Kyushu Financial Group Inc.   5,100    17 
   Nippon Suisan Kaisha Ltd.   3,600    17 
   Sankyu Inc.   400    17 
   Keihin Corp.   700    17 
   Shizuoka Gas Co. Ltd.   2,100    17 
   Joyful Honda Co. Ltd.   1,600    17 
   Tocalo Co. Ltd.   1,900    17 
   Fujita Kanko Inc.   900    17 
   Kato Sangyo Co. Ltd.   600    17 
   Marudai Food Co. Ltd.   1,000    16 
   Fuji Seal International Inc.   900    16 
   Sanyo Denki Co. Ltd.   400    16 
   Mitsubishi Steel Manufacturing Co. Ltd.   2,100    16 
   Mitsuuroko Group Holdings Co. Ltd.   1,700    16 
   Mizuno Corp.   800    16 
   Comture Corp.   800    16 
   Kintetsu World Express Inc.   1,000    16 
*  Kawasaki Kisen Kaisha Ltd.   1,400    16 
   Senko Group Holdings Co. Ltd.   2,100    15 
   Jafco Co. Ltd.   400    15 
   Unipres Corp.   1,400    15 
   Denka Co. Ltd.   600    15 
*  Right On Co. Ltd.   3,400    15 
   GMO internet Inc.   900    15 
   Aichi Bank Ltd.   500    15 
   Aica Kogyo Co. Ltd.   500    15 
   Zensho Holdings Co. Ltd.   800    15 
*  M&A Capital Partners Co. Ltd.   500    15 
   Kadokawa Corp.   1,100    14 
   Meiko Network Japan Co. Ltd.   1,900    14 
*  COOKPAD Inc.   5,500    14 
   cocokara fine Inc.   300    14 
   Nitta Corp.   600    13 
   Fukui Bank Ltd.   1,000    13 
   Kita-Nippon Bank Ltd.   800    13 
   Japan Lifeline Co. Ltd.   1,100    13 
   WATAMI Co. Ltd.   1,500    13 
   SBS Holdings Inc.   900    13 
   World Co. Ltd.   700    13 

 

29

 

 

ESG International Stock ETF          
              
            Market 
            Value• 
       Shares   ($ 000)
   Mitsui-Soko Holdings Co. Ltd.   900    13 
   Duskin Co. Ltd.   500    13 
   San-Ai Oil Co. Ltd.   1,500    13 
   Autobacs Seven Co. Ltd.   1,000    13 
   Shimizu Bank Ltd.   800    13 
   Japan Transcity Corp.   3,200    13 
   77 Bank Ltd.   1,000    13 
   Mitsubishi Logisnext Co. Ltd.   1,000    13 
   Tsukuba Bank Ltd.   7,900    12 
   Tomy Co. Ltd.   1,400    12 
   Tochigi Bank Ltd.   8,000    12 
   Maezawa Kasei Industries Co. Ltd.   1,300    12 
   Tsugami Corp.   1,500    12 
   BayCurrent Consulting Inc.   200    12 
   Daiseki Co. Ltd.   500    12 
   Systena Corp.   900    12 
*  RENOVA Inc.   1,300    12 
   Taikisha Ltd.   400    11 
   Godo Steel Ltd.   500    11 
   JP-Holdings Inc.   4,500    11 
   Fuyo General Lease Co. Ltd.   200    11 
   United Arrows Ltd.   500    11 
   Maruzen Showa Unyu Co. Ltd.   500    11 
   Create Restaurants Holdings Inc.   1,400    11 
   Izumi Co. Ltd.   400    11 
*  Japan Display Inc.   19,700    11 
   Toshiba Machine Co. Ltd.   400    11 
   KFC Holdings Japan Ltd.   500    11 
   Nippon Koei Co. Ltd.   400    11 
   Towa Bank Ltd.   1,700    11 
   San ju San Financial Group Inc.   800    11 
   Tokyo Ohka Kogyo Co. Ltd.   300    11 
   Yaoko Co. Ltd.   200    11 
   Gurunavi Inc.   1,600    11 
   Takasago Thermal Engineering Co. Ltd.   700    11 
   Toli Corp.   4,500    11 
   Sumitomo Warehouse Co. Ltd.   900    11 
   Teikoku Electric Manufacturing Co. Ltd.   900    11 
   Daihen Corp.   400    11 
   Jeol Ltd.   400    10 
   Maruha Nichiro Corp.   500    10 
   Shin Nippon Air Technologies Co. Ltd.   600    10 
   Hodogaya Chemical Co. Ltd.   300    10 
   Iriso Electronics Co. Ltd.   300    10 
   Kureha Corp.   200    10 

    Bank of Saga Ltd.   800    10 
    Maruwa Unyu Kikan Co. Ltd.   600    10 
    Milbon Co. Ltd.   200    10 
    Matsuya Co. Ltd.   1,600    9 
    Neturen Co. Ltd.   1,500    9 
    Shima Seiki Manufacturing Ltd.   600    9 
    Hirata Corp.   200    9 
    JCU Corp.   400    9 
    Anicom Holdings Inc.   300    9 
    Asahi Holdings Inc.   400    9 
    Uchida Yoko Co. Ltd.   200    9 
    JCR Pharmaceuticals Co. Ltd.   100    9 
    Sumitomo Bakelite Co. Ltd.   300    9 
    Micronics Japan Co. Ltd.   1,000    9 
*   euglena Co. Ltd.   1,200    9 
    Nissin Electric Co. Ltd.   900    9 
    Showa Corp.   400    9 
    Mandom Corp.   400    8 
    Noevir Holdings Co. Ltd.   200    8 
    Nichiha Corp.   400    8 
    Cosel Co. Ltd.   900    8 
    en-japan Inc.   300    8 
    Tonami Holdings Co. Ltd.   200    8 
    Descente Ltd.   600    8 
    Menicon Co. Ltd.   200    8 
    Hitachi Transport System Ltd.   300    8 
    Adastria Co. Ltd.   500    8 
    SWCC Showa Holdings Co. Ltd.   800    8 
    Shinmaywa Industries Ltd.   700    8 
    Mirait Holdings Corp.   600    8 
    KH Neochem Co. Ltd.   400    8 
    Oki Electric Industry Co. Ltd.   700    8 
    Central Glass Co. Ltd.   400    8 
    Idec Corp.   500    8 
    Mitsui High-Tec Inc.   600    8 
    Toshiba TEC Corp.   200    7 
    Dai-Dan Co. Ltd.   300    7 
    MTI Ltd.   1,400    7 
    DTS Corp.   400    7 
    Sanken Electric Co. Ltd.   300    7 
    Nojima Corp.   400    7 
    Japan Material Co. Ltd.   600    7 
    UACJ Corp.   400    7 
    Canon Marketing Japan Inc.   300    7 
    Modec Inc.   400    7 
    J Trust Co. Ltd.   2,100    7 
    Resorttrust Inc.   500    7 
    Gree Inc.   1,600    7 
    Fuji Soft Inc.   200    7 
    Transcosmos Inc.   300    7 
    Sumitomo Mitsui Construction Co. Ltd.   1,300    7 
    Takuma Co. Ltd.   600    7 

 

30

 

 

ESG International Stock ETF          
           
            Market 
            Value• 
       Shares   ($ 000)
   Eizo Corp.   200    6 
   Maruwa Co. Ltd.   100    6 
   Seiren Co. Ltd.   500    6 
   Trancom Co. Ltd.   100    6 
   Monogatari Corp.   100    6 
   NS United Kaiun Kaisha Ltd.   400    6 
   Gakken Holdings Co. Ltd.   100    6 
   Computer Engineering & Consulting Ltd.   400    6 
   Orient Corp.   5,000    6 
   Toridoll Holdings Corp.   300    6 
   Toyo Kanetsu KK   300    6 
   Megmilk Snow Brand Co. Ltd.   300    6 
   Kumiai Chemical Industry Co. Ltd.   900    6 
*  Vision Inc.   600    6 
   Noritsu Koki Co. Ltd.   500    6 
   Towa Pharmaceutical Co. Ltd.   300    6 
   Toa Corp.   400    6 
   ASKUL Corp.   200    6 
   Sinko Industries Ltd.   400    6 
   Yokogawa Bridge Holdings Corp.   300    5 
   Pacific Industrial Co. Ltd.   500    5 
   H2O Retailing Corp.   700    5 
   PAL GROUP Holdings Co. Ltd.   400    5 
   Ohsho Food Service Corp.   100    5 
   Eiken Chemical Co. Ltd.   300    5 
   Daio Paper Corp.   400    5 
   Nitto Kogyo Corp.   300    5 
*  KNT-CT Holdings Co. Ltd.   600    5 
   Earth Corp.   100    5 
   KAWADA TECHNOLOGIES Inc.   100    5 
   Nippon Soda Co. Ltd.   200    5 
   Sankyo Tateyama Inc.   500    5 
   Okamura Corp.   600    5 
   Chiyoda Integre Co. Ltd.   300    5 
   Keihanshin Building Co. Ltd.   400    5 
   Chuetsu Pulp & Paper Co. Ltd.   400    5 
   Shibuya Corp.   200    5 
   Raito Kogyo Co. Ltd.   400    5 
   Nextage Co. Ltd.   600    5 
   Sanoh Industrial Co. Ltd.   600    5 
   Sangetsu Corp.   300    5 
   Solasto Corp.   500    5 
   Hiday Hidaka Corp.   300    5 
   Shoei Co. Ltd.   100    4 
   Shiga Bank Ltd.   200    4 
   Kanamoto Co. Ltd.   200    4 

   Musashi Seimitsu Industry Co. Ltd.    400     4  
   Nichicon Corp.    600     4  
   Kanematsu Corp.    400     4  
*  Akebono Brake Industry Co. Ltd.    2,700     4  
   NichiiGakkan Co. Ltd.    400     4  
   Fixstars Corp.    400     4  
   Ichibanya Co. Ltd.    100     4  
   Kameda Seika Co. Ltd.    100     4  
   Kohnan Shoji Co. Ltd.    200     4  
   CAC Holdings Corp.    400     4  
   Seiko Holdings Corp.    200     4  
   Nissha Co. Ltd.    500     4  
   Shimojima Co. Ltd.    400     4  
   Yahagi Construction Co. Ltd.    500     4  
   Gunze Ltd.    100     4  
   Sumida Corp.    400     4  
*,§  Curves Holdings Co. Ltd.    500     4  
   LIFULL Co. Ltd.    900     3  
   Taki Chemical Co. Ltd.    100     3  
*  ARTERIA Networks Corp.    200     3  
   IDOM Inc.    700     3  
   Joshin Denki Co. Ltd.    200     3  
   Feed One Co. Ltd.    2,200     3  
   Macromill Inc.    400     3  
   Belluna Co. Ltd.    600     3  
   Tokyo Kiraboshi Financial Group Inc.    300     3  
   Okamoto Industries Inc.    100     3  
   Future Corp.    200     3  
*  Open Door Inc.    300     3  
   Press Kogyo Co. Ltd.    1,000     3  
   Toho Zinc Co. Ltd.    200     3  
   Riken Corp.    100     3  
   Nissan Shatai Co. Ltd.    300     3  
   Nippon Sheet Glass Co. Ltd.    600     3  
*  FDK Corp.    400     3  
   Futaba Industrial Co. Ltd.    500     3  
   Obara Group Inc.    100     3  
   Koshidaka Holdings Co. Ltd.    500     3  
   Yamashin-Filter Corp.    400     2  
   Ichikoh Industries Ltd.    400     2  
*  Sanden Holdings Corp.    500     2  
   Qol Holdings Co. Ltd.    200     2  
   Tamron Co. Ltd.    100     2  
   Saibu Gas Co. Ltd.    100     2  
   Kenko Mayonnaise Co. Ltd.    100     2  
   Nippon Thompson Co. Ltd.    500     2  
              121,625  
Kuwait (0.2%)            
   National Bank of Kuwait  SAKP    212,425     695  
   Kuwait Finance House KSCP    115,199     291  

 

31

 

 

ESG International Stock ETF          
              
            Market 
            Value• 
       Shares   ($ 000)
   Ahli United Bank BSC   153,979    161 
   Agility Public Warehousing Co. KSC   53,154    134 
   Mobile Telecommunications Co. KSC   53,014    96 
   National Industries Group Holding SAK   83,406    61 
*  Warba Bank KSCP   70,112    60 
   Gulf Bank KSCP   57,803    53 
   Kuwait International Bank KSCP   38,119    34 
*  Kuwait Projects Co. Holding KSCP   42,008    28 
*  Burgan Bank SAK   29,439    28 
   Alimtiaz Investment Group KSC   66,965    27 
   Mezzan Holding Co. KSCC   14,181    21 
   Integrated Holding Co. KCSC   8,798    15 
            1,704 
Malaysia (0.7%)          
   Public Bank Bhd. (Local)   103,900    423 
   Malayan Banking Bhd.   188,800    378 
   Tenaga Nasional Bhd.   124,448    359 
   CIMB Group Holdings Bhd.   230,700    265 
   Maxis Bhd.   147,300    192 
   Dialog Group Bhd.   227,800    183 
   DiGi.Com Bhd.   173,500    173 
   Axiata Group Bhd.   160,500    161 
   AMMB Holdings Bhd.   161,900    143 
   Sime Darby Plantation Bhd.   111,300    132 
   PPB Group Bhd.   27,800    121 
   IHH Healthcare Bhd.   84,300    116 
   Petronas Chemicals Group Bhd.   84,100    108 
   Petronas Gas Bhd.   20,400    81 
   IOI Corp. Bhd.   72,400    72 
   Hong Leong Bank Bhd.   19,700    72 
   Yinson Holdings Bhd.   40,300    68 
   Kuala Lumpur Kepong Bhd.   12,000    63 
   Gamuda Bhd.   78,300    62 
   RHB Bank Bhd.   46,000    61 
   Press Metal Aluminium Holdings Bhd.   53,800    60 
   Pavilion REIT   139,100    59 
   Serba Dinamik Holdings Bhd.   110,540    58 
   MISC Bhd.   32,000    58 
   IJM Corp. Bhd.   119,500    56 
   Top Glove Corp. Bhd.   40,100    54 
*  Frontken Corp. Bhd.   96,400    53 
   TIME dotCom Bhd.   22,400    50 

   Malakoff Corp. Bhd.   234,200    49 
   VS Industry Bhd.   138,400    43 
   Alliance Bank Malaysia Bhd.   76,900    42 
   Genting Plantations Bhd.   17,300    42 
   Malaysia Airports Holdings Bhd.   26,400    42 
   Sunway Construction Group Bhd.   88,900    40 
   Petronas Dagangan Bhd.   7,000    38 
   Inari Amertron Bhd.   109,500    37 
   QL Resources Bhd.   18,500    36 
   Hartalega Holdings Bhd.   23,500    35 
   Telekom Malaysia Bhd.   38,800    34 
   Bermaz Auto Bhd.   78,400    33 
   Nestle Malaysia Bhd.   900    31 
*  FGV Holdings Bhd.   111,200    30 
   YTL Corp. Bhd.   148,300    30 
   Muhibbah Engineering M Bhd.   70,000    27 
   Bursa Malaysia Bhd.   20,600    27 
*  Velesto Energy Bhd.   366,200    27 
   Malaysia Building Society Bhd.   145,400    27 
   Sime Darby Bhd.   54,400    26 
   My EG Services Bhd.   96,900    26 
   Hong Leong Financial Group Bhd.   7,000    25 
   AEON Credit Service M Bhd.   7,400    24 
   Padini Holdings Bhd.   32,200    23 
*  WCT Holdings Bhd.   146,700    23 
   Sime Darby Property Bhd.   120,400    22 
   AirAsia Group Bhd.   90,800    22 
   Malaysian Resources Corp. Bhd.   157,800    21 
   Supermax Corp. Bhd.   55,892    21 
   KPJ Healthcare Bhd.   91,000    21 
   Westports Holdings Bhd.   24,300    20 
   Sunway Bhd.   45,500    19 
*  UEM Sunrise Bhd.   131,300    19 
   IOI Properties Group Bhd.   76,300    18 
   Cahya Mata Sarawak Bhd.   36,800    17 
   SP Setia Bhd Group   54,100    16 
   HAP Seng Consolidated Bhd.   7,500    16 
   Scientex Bhd.   7,300    16 
   Pos Malaysia Bhd.   56,800    16 
*  AirAsia X Bhd.   604,900    15 
*  Bumi Armada Bhd.   183,300    14 
1  Astro Malaysia Holdings Bhd.   44,400    13 
   UMW Holdings Bhd.   16,500    13 
   Kossan Rubber Industries   10,500    12 

 

32

 

 

ESG International Stock ETF          
           
            Market 
            Value• 
       Shares   ($ 000)
*  Leong Hup International Bhd.   68,700    11 
*  Malayan Cement Bhd.   10,900    8 
*  Serba Dinamik Holdings Bhd. Warrants Exp. 05/12/2024   14,640    1 
            4,849 
Mexico (0.8%)          
   America Movil SAB de CV   1,261,041    994 
   Fomento Economico Mexicano SAB de CV   98,900    800 
   Grupo Financiero Banorte SAB de CV   125,500    680 
   Wal-Mart de Mexico SAB de CV   150,500    422 
   Cemex SAB de CV   873,500    281 
   Grupo Bimbo SAB de CV Class A   185,734    280 
   Grupo Televisa SAB   134,800    252 
1  Macquarie Mexico Real Estate Management SA de CV   170,163    226 
   Fibra Uno Administracion SA de CV   91,600    138 
   Grupo Aeroportuario del Pacifico SAB de CV Class B   9,100    99 
   Grupo Elektra SAB de CV   1,435    97 
   Grupo Aeroportuario del Sureste SAB de CV Class B   3,785    62 
   Grupo Aeroportuario del Centro Norte SAB de CV   9,400    62 
   Orbia Advance Corp. SAB de CV   29,000    57 
   Grupo Financiero Inbursa SAB de CV   52,700    56 
   Coca-Cola Femsa SAB de CV   10,100    56 
*  Controladora Vuela Cia de Aviacion SAB de CV   49,600    50 
   PLA Administradora Industrial S de RL de CV   29,300    44 
   Arca Continental SAB de CV   7,400    41 
   Kimberly-Clark de Mexico SAB de CV Class A   19,400    37 
   Infraestructura Energetica Nova SAB de CV   7,900    34 

   Gentera SAB de CV   34,000    33 
   Regional SAB de CV   5,700    32 
   Prologis Property Mexico SA de CV   12,900    27 
*  Alsea SAB de CV   13,400    27 
   Grupo Carso SAB de CV   7,300    20 
   Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand   14,300    18 
1  Concentradora Fibra Hotelera Mexicana SA de CV   48,900    18 
*  Genomma Lab Internacional SAB de CV   17,800    18 
   Credito Real SAB de CV SOFOM ER   16,700    18 
   Gruma SAB de CV Class B   1,840    18 
*  La Comer SAB de CV   13,200    16 
*  Telesites SAB de CV   20,600    15 
   Bolsa Mexicana de Valores SAB de CV   7,100    15 
   Grupo Cementos de Chihuahua SAB de CV   3,000    15 
   Industrias Penoles SAB de CV   1,555    14 
   Grupo Herdez SAB de CV   5,700    10 
   Grupo Comercial Chedraui SA de CV   7,600    10 
*  Grupo GICSA SAB de CV   28,100    9 
   Qualitas Controladora SAB de CV   2,100    9 
*  Axtel SAB de CV   40,400    9 
*  Hoteles City Express SAB de CV   14,100    9 
   Grupo Rotoplas SAB de CV   7,800    6 
   Corp Inmobiliaria Vesta SAB de CV   3,500    6 
   Grupo Lala SAB de CV   4,300    3 
            5,143 
Netherlands (2.7%)          
   ASML Holding NV   15,361    4,259 
   Unilever NV   55,114    2,910 
   Koninklijke Philips NV   36,956    1,583 
   ING Groep NV   154,357    1,478 
   Koninklijke Ahold Delhaize NV   44,740    1,045 
   Wolters Kluwer NV   11,658    853 
   Koninklijke DSM NV   7,467    842 
*,1  Adyen NV   870    766 
   Akzo Nobel NV   9,528    762 
   Koninklijke KPN NV   166,749    404 
   NN Group NV   11,179    382 
   Randstad NV   7,274    375 
*  Galapagos NV   1,658    349 

 

33

 

 

ESG International Stock ETF          
           
            Market 
            Value• 
       Shares   ($ 000)
   ASR Nederland NV   8,937    301 
   Aegon NV   85,548    291 
   Imcd NV   3,285    269 
1  ABN AMRO Bank NV   17,838    245 
   SBM Offshore NV   12,776    202 
   TKH Group NV   4,267    193 
   ASM International NV   1,322    152 
1  Signify NV   2,962    88 
*,1 Just Eat Takeaway (XAMS)   980    86 
*  Altice Europe NV Class B   15,925    83 
   Corbion NV   1,456    53 
   BE SemiconductorIndustries NV   1,317    51 
1  Intertrust NV   2,233    37 
   Koninklijke Vopak NV   712    34 
   Boskalis Westminster   1,540    34 
   Aperam SA   1,058    31 
   Sligro Food Group NV   1,092    27 
*  Oci NV   1,487    25 
*  Altice Europe NV   3,147    17 
   Koninklijke Volkerwessels NV   623    15 
   Wereldhave NV   895    14 
   Eurocommercial Properties NV   597    13 
1  Flow Traders   543    13 
   PostNL NV   8,456    13 
*  TomTom NV   1,235    13 
*,1 Basic-Fit NV   349    12 
   Accell Group NV   378    10 
   Nsi NV   202    10 
   Vastned Retail NV   142    4 
1  GrandVision NV   113    3 
            18,347 
New Zealand (0.4%)          
   Fisher & Paykel Healthcare Corp. Ltd.   34,150    553 
*  a2 Milk Co. Ltd.   37,361    385 
   Spark New Zealand Ltd.   125,414    357 
   Auckland International Airport Ltd.   62,670    310 
   Contact Energy Ltd.   65,599    276 
   Meridian Energy Ltd.   33,276    97 
   Ryman Healthcare Ltd.   9,448    91 
   Fletcher Building Ltd.   16,087    53 
   Infratil Ltd.   14,663    47 
   Mercury NZ Ltd.   11,981    36 
   Chorus Ltd.   8,196    34 
   Mainfreight Ltd.   1,339    32 
   Kiwi Property Group Ltd.   31,736    29 
   Summerset Group Holdings Ltd.   5,141    25 

   Precinct Properties New Zealand Ltd.   19,911    24 
   Z Energy Ltd.   9,115    23 
   Freightways Ltd.   4,706    21 
   EBOS Group Ltd.   1,392    20 
   Argosy Property Ltd.   16,147    14 
   Goodman Property Trust   8,559    12 
*  Pushpay Holdings Ltd.   4,800    12 
   Kathmandu Holdings Ltd.   5,898    11 
   Scales Corp. Ltd.   3,089    8 
   Air New Zealand Ltd.   4,685    7 
*  Synlait Milk Ltd.   1,759    7 
   Tourism Holdings Ltd.   1,445    2 
            2,486 
Norway (0.5%)          
   Dnb ASA   43,265    725 
   Telenor ASA   28,842    467 
   Mowi ASA   21,602    458 
   Yara International ASA   9,253    340 
   Storebrand ASA   40,836    262 
   Norsk Hydro ASA   88,009    256 
   TOMRA Systems ASA   3,281    105 
   Bakkafrost P/F   1,192    76 
1  Entra ASA   4,047    64 
   TGS NOPEC Geophysical Co. ASA   2,713    63 
   Salmar ASA   1,307    59 
   SpareBank 1 SMN   5,532    55 
   Schibsted ASA Class B   2,167    52 
1  Scatec Solar ASA   2,964    52 
*  Adevinta ASA   4,622    48 
*  Norwegian Finans Holding ASA   4,678    44 
   Subsea 7 SA   4,848    44 
   SpareBank 1 SR-Bank ASA   4,383    42 
   Veidekke ASA   3,082    38 
   Gjensidige Forsikring ASA   1,826    37 
   Leroy Seafood Group ASA   5,955    37 
   Schibsted ASA Class A   1,314    33 
1  BW LPG Ltd.   4,579    29 
1  Sbanken ASA   3,743    26 
   Frontline Ltd.   2,746    22 
   Atea ASA   1,925    22 
*  Pgs ASA   13,832    20 
*  Nordic Semiconductor ASA   3,513    19 
   Grieg Seafood ASA   1,064    14 
   Austevoll Seafood ASA   1,525    13 
*  BW Offshore Ltd.   2,699    11 
   Borregaard ASA   780    8 
1  Elkem ASA   4,052    8 
*,1,^  XXL ASA   5,525    6 
*  Borr Drilling Ltd.   2,637    6 
   Hoegh LNG Holdings Ltd.   1,642    4 

 

34

 

 

ESG International Stock ETF

 

        Market 
        Value• 
       Shares   ($ 000)
*  Seadrill Ltd.   3,125    3 
*  Akastor ASA   3,428    3 
*  Norwegian Air Shuttle ASA   874    2 
1,*  Aker Solutions ASA   1,196    2 
*  BW Energy Ltd.   550    1 
*,§  XXL ASA Rights Exp. 03/11/2020   167    — 
            3,576 
Pakistan (0.0%)          
*  SUI Southern Gas Co. Ltd.   677,752    70 
   Lucky Cement Ltd.   16,400    52 
   Pakistan State Oil Co. Ltd.   40,979    43 
   MCB Bank Ltd.   25,800    33 
   Habib Bank Ltd.   19,500    20 
   SUI Northern Gas Pipeline   41,500    18 
   Searle Co. Ltd.   10,300    12 
   Kot Addu Power Co. Ltd.   77,500    12 
   Millat Tractors Ltd.   2,300    10 
*  Hub Power Co. Ltd.   14,012    8 
   Engro Corp. Ltd.   2,420    5 
   Bank Alfalah Ltd.   15,000    4 
            287 
Peru (0.0%)          
   Cia de Minas Buenaventura SAA ADR   5,921    66 
              
Philippines (0.2%)          
   BDO Unibank Inc.   95,060    260 
   Ayala Land Inc.   313,900    242 
   Bank of the Philippine Islands   119,170    173 
   International Container Terminal Services Inc.   31,910    67 
   Ayala Corp.   4,030    53 
   Cebu Air Inc.   33,720    49 
   Wilcon Depot Inc.   130,900    47 
   Security Bank Corp.   13,830    42 
*  Metropolitan Bank & Trust Co.   35,357    39 
   PLDT Inc.   1,850    36 
   Jollibee Foods Corp.   10,290    34 
   Century Pacific Food Inc.   115,400    33 
   Manila Electric Co.   4,610    24 
   Globe Telecom Inc.   580    20 
   First Gen Corp.   51,000    18 
   GT Capital Holdings Inc.   1,080    15 
   San Miguel Food and Beverage Inc.   10,320    15 
   Aboitiz Power Corp.   18,100    10 
   Filinvest Land Inc.   339,000    8 
   Manila Water Co. Inc.   31,600    7 
   Robinsons Retail Holdings Inc.   5,100    7 
   Puregold Price Club Inc.   9,000    7 
   Nickel Asia Corp.   144,000    6 

*,1  CEMEX Holdings Philippines Inc.   186,933    5 
   Vista Land & Lifescapes Inc.   36,100    5 
            1,222 
Poland (0.2%)          
   Powszechna Kasa Oszczednosci Bank Polski SA   48,313    387 
   Bank Polska Kasa Opieki SA   11,411    258 
   Powszechny Zaklad Ubezpieczen SA   27,669    247 
   CD Projekt SA   1,470    105 
*  KGHM Polska Miedz SA   4,047    74 
*,1  Dino Polska SA   1,370    50 
   Santander Bank Polska SA   655    42 
*  Orange Polska SA   17,084    27 
   Lpp SA   13    23 
   Budimex SA   446    20 
   Kernel Holding SA   1,327    15 
*  mBank SA   187    14 
*  Bank Millennium SA   11,269    14 
   Kruk SA   302    11 
*  Alior Bank SA   1,967    10 
   Ccc SA   469    9 
   Asseco Poland SA   557    9 
   Cyfrowy Polsat SA   1,253    8 
*  AmRest Holdings SE   574    6 
*  Energa SA   2,079    4 
   PKP Cargo SA   735    2 
            1,335 
Portugal (0.0%)          
   Jeronimo Martins SGPS SA   3,893    69 
   Banco Comercial Portugues SA   233,478    42 
   CTT-Correios de Portugal SA   11,496    30 
   EDP Renovaveis SA   1,928    26 
   Nos Sgps SA   4,992    20 
   Sonae SGPS SA   24,793    19 
   REN - Redes Energeticas Nacionais SGPS SA   6,873    19 
   Mota-Engil SGPS SA   10,000    15 
   Navigator Co. SA   4,298    13 
   Altri SGPS SA   1,635    9 
            262 
Qatar (0.3%)          
   Qatar National Bank QPSC   160,963    822 
*  Masraf Al Rayan QSC   125,228    138 
   Industries Qatar QSC   49,484    122 
   Qatar Fuel QSC   18,465    97 

 

35

 

 

ESG International Stock ETF          
           
            Market 
            Value• 
       Shares   ($ 000)
   Commercial Bank PSQC   74,240    90 
*  Mesaieed Petrochemical Holding Co.   168,227    80 
   Qatar Gas Transport Co. Ltd.   120,916    71 
   Qatar International Islamic Bank QSC   30,001    69 
   Barwa Real Estate Co.   70,000    59 
   Ooredoo QPSC   27,917    48 
   Doha Bank QPSC   74,983    47 
   Vodafone Qatar QSC   109,533    31 
*  United Development Co. QSC   80,662    27 
   Medicare Group   9,591    17 
*  Ezdan Holding Group QSC   50,710    7 
            1,725 
Russia (0.4%)          
   Sberbank of Russia PJSC   358,760    1,270 
   Mobile TeleSystems PJSC   34,020    165 
   AK Transneft OAO Preference Shares   54    123 
   Inter RAO UES PJSC   1,083,000    85 
1  Detsky Mir PJSC   46,470    78 
   Polyus PJSC   617    78 
   Magnit PJSC   1,538    74 
   VTB Bank PJSC (MISX)   92,410,000    60 
   Moscow Exchange MICEX-RTS PJSC   34,870    52 
   Sistema PJSFC   198,900    49 
   Aeroflot PJSC   33,650    48 
   TGC-1 PJSC   209,400,000    45 
   Novolipetsk Steel PJSC   22,270    42 
   VTB Bank PJSC (XLON)   32,335    42 
   OGK-2 PJSC   3,581,000    36 
   Polyus PJSC GDR   557    35 
   M.Video PJSC   4,770    35 
   Lenenergo PJSC Preference Shares   14,320    30 
   TMK PJSC   37,380    29 
   Enel Russia PJSC   1,899,000    27 
   RusHydro PJSC   2,707,000    26 
   PhosAgro PJSC   732    26 
   Rosseti PJSC   835,000    18 
   Rostelecom PJSC   13,790    18 

   Federal Grid Co. Unified Energy System PJSC   3,960,000    12 
   Mosenergo PJSC   327,000    11 
   Unipro PJSC   202,000    9 
            2,523 
Saudi Arabia (0.3%)          
   Al Rajhi Bank   31,841    519 
   Saudi Basic Industries Corp.   21,633    450 
   National Commercial Bank   36,961    430 
   Saudi Arabian Mining Co.   8,364    83 
   Saudi Airlines Catering Co.   3,366    81 
   Saudi Ground Services Co.   9,489    80 
*  Savola Group   8,265    72 
   Almarai Co. JSC   5,676    69 
*  Etihad Etisalat Co.   10,003    60 
   Abdullah Al Othaim Markets Co.   2,306    50 
*  Fawaz Abdulaziz Al Hokair & Co.   6,736    50 
   Yanbu Cement Co.   4,686    46 
   Sahara International Petrochemical Co.   9,166    37 
*  Arabian Centres Co. Ltd.   4,093    30 
*  Mobile Telecommunications Co. Saudi Arabia   10,356    27 
   National Industrialization Co.   6,051    19 
            2,103 
Singapore (1.0%)          
   DBS Group Holdings Ltd.   78,200    1,367 
   Oversea-Chinese Banking Corp. Ltd.   135,900    1,046 
   United Overseas Bank Ltd.   53,900    962 
   Singapore Telecommunications Ltd.   285,700    619 
   Singapore Exchange Ltd.   58,900    364 
   Keppel Corp. Ltd.   78,000    360 
   CapitaLand Ltd.   131,700    337 
   City Developments Ltd.   45,000    322 
   UOL Group Ltd.   55,700    299 
   ComfortDelGro Corp. Ltd.   174,100    247 
   Singapore Press Holdings Ltd.   178,300    245 
   Wilmar International Ltd.   80,100    231 
   Venture Corp. Ltd.   5,700    69 

 

36

 

 

ESG International Stock ETF

 

          Market 
          Value• 
       Shares   ($ 000)
   Mapletree Industrial Trust   32,100    62 
   Mapletree Logistics Trust   44,800    60 
   NetLink NBN Trust   80,700    57 
   Keppel DC REIT   29,028    49 
   Manulife US REIT   44,394    43 
   Keppel REIT   46,800    41 
   Mapletree North Asia Commercial Trust   44,900    36 
   Ascendas India Trust   28,000    33 
   Sembcorp Industries Ltd.   24,200    32 
   Ascott Residence Trust   29,800    25 
   Golden Agri-Resources Ltd.   168,800    24 
   Sabana Shari’ah Compliant          
   Industrial REIT   61,100    20 
   Hutchison Port Holdings Trust   129,400    19 
   Olam International Ltd.   14,300    18 
*  Sembcorp Marine Ltd.   22,100    17 
   Esr-Reit   44,761    17 
   Raffles Medical Group Ltd.   23,700    17 
   Eagle Hospitality Trust   38,000    15 
   Frasers Commercial Trust   12,400    15 
   CapitaLand Retail China Trust   14,200    14 
   Far East Hospitality Trust   30,500    13 
   Cache Logistics Trust   19,000    9 
   Accordia Golf Trust   20,100    9 
   Frasers Logistics &Industrial Trust   9,800    9 
   Lippo Malls Indonesia Retail Trust   32,400    5 
   StarHub Ltd.   4,400    5 
*  Yoma Strategic Holdings Ltd.   20,000    5 
§  Best World International Ltd.   3,000    3 
   SATS Ltd.   800    2 
            7,142 
South Africa (1.3%)          
   Naspers Ltd.   16,958    2,652 
   Standard Bank Group Ltd.   54,313    522 
   FirstRand Ltd.   129,188    461 
   Bid Corp. Ltd.   17,791    322 
   Absa Group Ltd.   36,587    315 
   Sanlam Ltd.   73,172    307 
   Remgro Ltd.   29,333    305 
*  Impala Platinum Holdings Ltd.   32,154    261 
   Capitec Bank Holdings Ltd.   2,949    250 
   Bidvest Group Ltd.   20,907    244 
   RMB Holdings Ltd.   52,108    239 
   Nedbank Group Ltd.   20,242    231 
   Clicks Group Ltd.   15,279    231 
   Gold Fields Ltd.   37,849    230 

   PSG Group Ltd.   16,222    197 
   SPAR Group Ltd.   17,476    188 
   Old Mutual Ltd.   179,940    183 
   Shoprite Holdings Ltd.   24,328    177 
   Foschini Group Ltd.   21,253    171 
   AVI Ltd.   35,728    167 
   Vodacom Group Ltd.   21,861    156 
   Growthpoint Properties Ltd.   133,001    152 
   Redefine Properties Ltd.   436,652    152 
   Mr Price Group Ltd.   14,259    140 
   Tiger Brands Ltd.   11,998    118 
   Anglo American Platinum Ltd.   1,559    105 
   Discovery Ltd.   12,499    78 
*  Aspen Pharmacare Holdings Ltd.   12,011    77 
*  Northam Platinum Ltd.   8,434    61 
*  MultiChoice Group   6,483    38 
   NEPI Rockcastle plc   4,932    37 
   Netcare Ltd.   23,285    28 
   Pick n Pay Stores Ltd.   7,522    27 
*  Harmony Gold Mining Co. Ltd.   7,711    27 
   Pioneer Foods Group Ltd.   3,809    27 
   Rand Merchant Investment Holdings Ltd.   16,193    26 
   Fortress REIT Ltd.   23,070    24 
   Truworths International Ltd.   7,419    22 
   AECI Ltd.   3,214    22 
   Woolworths Holdings Ltd.   8,701    21 
   Barloworld Ltd.   3,920    20 
   Motus Holdings Ltd.   3,936    19 
   Investec Ltd.   3,376    18 
   Liberty Holdings Ltd.   2,847    17 
   JSE Ltd.   2,651    17 
   Hyprop Investments Ltd.   5,458    16 
*  Sappi Ltd.   7,124    13 
1  Dis-Chem Pharmacies Ltd.   8,756    13 
   Kumba Iron Ore Ltd.   660    12 
   Momentum Metropolitan Holdings   10,419    12 
   Coronation Fund Managers Ltd.   4,546    12 
   Santam Ltd.   637    10 
   KAP Industrial Holdings Ltd.   42,829    8 
   Massmart Holdings Ltd.   2,664    8 
   Telkom SA SOC Ltd.   4,621    8 
   SA Corporate Real Estate Ltd.   52,269    7 
   Resilient REIT Ltd.   1,780    7 
   Assore Ltd.   497    6 
   Astral Foods Ltd.   453    5 
*  Super Group Ltd.   3,557    5 

 

37

 

 

ESG International Stock ETF      

 

          Market 
          Value• 
       Shares   ($ 000)
   Imperial Logistics Ltd.   1,382    4 
*  Nampak Ltd.   14,448    3 
   Lewis Group Ltd.   1,258    2 
*  PPC Ltd.   14,109    1 
            9,234 
South Korea (3.2%)          
   Samsung Electronics Co. Ltd.   163,318    7,351 
   Samsung Electronics Co.          
   Ltd. Preference Shares   46,178    1,763 
   SK Hynix Inc.   18,805    1,390 
   NAVER Corp.   4,791    688 
   LG Chem Ltd.   1,623    492 
   Hyundai Motor Co.   4,945    472 
   Shinhan Financial Group Co. Ltd.   17,277    462 
   KB Financial Group Inc.   13,772    435 
   Samsung SDI Co. Ltd.   1,775    431 
   Hyundai Mobis Co. Ltd.   2,222    388 
   LG Household & Health Care Ltd.   353    356 
   Hana Financial Group Inc.   10,465    271 
   Samsung Electro-Mechanics Co. Ltd.   1,933    204 
   Kakao Corp.   1,343    193 
   Samsung Fire & Marine Insurance Co. Ltd.   1,167    190 
   LG Electronics Inc.   3,386    170 
   Woori Financial Group Inc.   20,256    161 
*,1  Samsung Biologics Co. Ltd.   411    158 
   Samsung Securities Co. Ltd.   5,613    154 
   Mirae Asset Daewoo Co. Ltd.   29,017    153 
   BNK Financial Group Inc.   27,574    140 
   Samsung SDS Co. Ltd.   1,002    139 
   SK Telecom Co. Ltd. (XKRX)   729    128 
   S-Oil Corp.   2,228    124 
   Industrial Bank of Korea   15,365    121 
   Amorepacific Corp.   839    111 
   Amorepacific Corp. Preference Shares   1,798    109 
   CJ CheilJedang Corp.   509    102 
   Samsung Life Insurance Co. Ltd.   2,043    98 
*  LG Display Co. Ltd.   8,432    96 
   Coway Co. Ltd.   1,634    93 
   Lotte Chemical Corp.   538    84 
   DB Insurance Co. Ltd.   2,259    81 
   SK Securities Co. Ltd.   168,085    75 
   Hankook Tire & Technology Co. Ltd.   3,490    73 
   Hyundai Motor Co. 2nd Preference Shares   1,130    70 

   Hyundai Motor Co. Preference Shares   1,144    63 
   Lotte Corp.   2,544    61 
   Green Cross Corp.   636    59 
   Fila Holdings Corp.   1,837    58 
   Hyundai Department Store Co. Ltd.   1,007    58 
   Hanjin Kal Corp.   996    56 
*  Samsung Engineering Co. Ltd.   4,681    55 
   Samchully Co. Ltd.   817    53 
   LG Innotek Co. Ltd.   473    51 
   Lotte Shopping Co. Ltd.   626    50 
   KISCO Corp.   14,830    47 
   Modetour Network Inc.   3,999    46 
   LEENO Industrial Inc.   690    46 
   SK Telecom Co. Ltd. (XNYS)   2,400    46 
   AMOREPACIFIC Group   846    43 
*  Samsung Heavy Industries Co. Ltd.   8,869    43 
   LG Uplus Corp.   3,887    42 
   Douzone Bizon Co. Ltd.   578    42 
   Hankook Shell Oil Co. Ltd.   192    41 
   DB HiTek Co. Ltd.   1,889    38 
   Hyundai Marine & Fire Insurance Co. Ltd.   2,048    38 
   LG Electronics Inc.Preference Shares   1,903    38 
   Eo Technics Co. Ltd.   486    36 
   Chong Kun Dang Pharmaceutical Corp.   485    35 
   JB Financial Group Co. Ltd.   8,231    34 
   WONIK IPS Co. Ltd.   1,267    34 
   Hyundai Glovis Co. Ltd.   321    33 
*  Korea Line Corp.   2,290    32 
   E1 Corp.   958    32 
   Posco ICT Co. Ltd.   8,529    32 
   Koh Young Technology Inc.   396    32 
*  CUROCOM Co. Ltd.   15,418    30 
*  HLB Life Science CO Ltd.   1,542    30 
   Samsung Card Co. Ltd.   1,055    29 
   DGB Financial Group Inc.   6,168    29 
   Cheil Worldwide Inc.   1,797    29 
*  Eusu Holdings Co. Ltd.   5,670    28 
   Interpark Holdings Corp.   19,256    28 
*  SFA Semicon Co. Ltd.   5,895    28 
*  GemVax & Kael Co. Ltd.   1,162    27 
   Korea Asset In Trust Co. Ltd.   13,066    27 
*  Hyundai Merchant Marine Co. Ltd.   9,710    26 
   Hyundai Steel Co.   1,316    26 
   Meritz Securities Co. Ltd.   8,815    25 

 

38

 

 

ESG International Stock ETF              

 

          Market 
          Value• 
       Shares   ($ 000)
   Dae Han Flour Mills Co. Ltd.   236    25 
   HS Industries Co. Ltd.   2,693    24 
   DB Financial Investment Co. Ltd.   8,159    24 
   NICE Information Service Co. Ltd.   1,830    24 
   Hana Tour Service Inc.   693    24 
   TK Corp.   3,160    23 
*  Innox Advanced Materials Co. Ltd.   658    23 
*  Seobu T&D   4,039    23 
   It’s Hanbul Co. Ltd.   1,850    23 
*  Wonik Holdings Co. Ltd.   6,264    23 
   NICE Holdings Co. Ltd.   1,308    22 
   Iljin Materials Co. Ltd.   565    22 
   CJ Freshway Corp.   1,235    22 
   NEPES Corp.   891    22 
*  Samsung Pharmaceutical Co. Ltd.   7,549    22 
*  Komipharm International Co. Ltd.   1,335    21 
   Dong-A Socio Holdings Co. Ltd.   303    21 
*  SBS Media Holdings Co. Ltd.   14,321    21 
   Hanwha Solutions Corp.   1,404    21 
   Sam Young Electronics Co. Ltd.   3,282    21 
   NS Shopping Co. Ltd.   3,459    21 
*  KONA I Co. Ltd.   1,364    21 
   Mirae Asset Life Insurance Co. Ltd.   6,228    21 
   Mando Corp.   827    21 
   Yuhan Corp.   116    21 
*  BH Co. Ltd.   1,372    20 
   iMarketKorea Inc.   2,649    20 
   Hansol Chemical Co. Ltd.   261    20 
*  Hansol Holdings Co. Ltd.   8,018    20 
*  Mezzion Pharma Co. Ltd.   166    20 
*  Humax Co. Ltd.   5,470    20 
*  Duk San Neolux Co. Ltd.   689    19 
   Advanced Process Systems Corp.   837    19 
*  Able C&C Co. Ltd.   2,269    19 
   Soulbrain Co. Ltd.   258    19 
   Samwha Capacitor Co. Ltd.   380    19 
*  Dongkuk Steel Mill Co. Ltd.   4,757    19 
*  G-treeBNT Co. Ltd.   926    18 
   Seoul Semiconductor Co. Ltd.   1,472    18 
*  Hanall Biopharma Co. Ltd.   930    18 
   Sung Kwang Bend Co. Ltd.   2,710    18 
   Ecopro Co. Ltd.   957    18 
   KISWIRE Ltd.   1,290    18 

   DoubleUGames Co. Ltd.   531    18 
   F&F Co. Ltd.   231    18 
   JYP Entertainment Corp.   1,012    18 
   Binggrae Co. Ltd.   388    17 
   Partron Co. Ltd.   2,262    17 
   Ssangyong Cement Industrial Co. Ltd.   4,172    17 
   Korean Air Lines Co. Ltd.   935    17 
*  DIO Corp.   608    17 
   Korea Real Estate Investment & Trust Co. Ltd.   10,579    17 
   Hanon Systems   1,909    17 
   Korea Electric Terminal Co. Ltd.   619    17 
   GOLFZON Co. Ltd.   418    17 
   POSCO Chemical Co. Ltd.   357    16 
   COSMAX NBT Inc.   3,541    16 
   Dongwon Industries Co. Ltd.   100    16 
   SK Gas Ltd.   252    16 
*  Asiana Airlines Inc.   4,657    16 
   Shinsegae International Inc.   106    16 
   DongKook Pharmaceutical Co. Ltd.   225    16 
   Cosmax BTI Inc   1,637    16 
   Com2uSCorp   191    16 
   Silicon Works Co. Ltd.   558    15 
   Jusung Engineering Co. Ltd.   3,039    15 
   Cosmax Inc.   247    15 
*  Aprogen pharmaceuticals Inc.   12,249    15 
   Samyang Holdings Corp.   378    15 
   YG Entertainment Inc.   616    15 
   Ahnlab Inc.   342    15 
   Young Poong Corp.   31    15 
*  SM Entertainment Co. Ltd.   641    15 
*  COSON Co. Ltd.   3,236    15 
   KCC Corp.   110    15 
   Toptec Co. Ltd.   1,853    15 
   Hyundai Elevator Co. Ltd.   329    15 
*  Oscotec Inc.   862    15 
*  Homecast Co. Ltd.   4,311    15 
   L&F Co. Ltd.   807    15 
   ST Pharm Co. Ltd.   603    15 
   Daea TI Co. Ltd.   4,255    14 
*  Coreana Cosmetics Co. Ltd.   4,004    14 
   Kolon Industries Inc.   506    14 
   SKCKOLONPI Inc.   497    14 
   Namyang Dairy Products Co. Ltd.   45    14 
   LG Household & Health Care Ltd. Preference Shares   23    14 
   Hansol Paper Co. Ltd.   1,268    14 

 

39

 

 

ESG International Stock ETF              

 

          Market 
          Value• 
       Shares   ($ 000)
   Kolmar Korea Holdings Co. Ltd.   763    14 
   Sungwoo Hitech Co. Ltd.   5,271    13 
   ICD Co. Ltd.   931    13 
   Maeil Dairies Co. Ltd.   192    13 
   INTOPS Co. Ltd.   1,295    13 
*  KH Vatec Co. Ltd.   759    13 
*  Telcon RF Pharmaceutical Inc.   3,343    13 
   KC Co. Ltd.   1,095    13 
   Hyosung Chemical Corp.   146    13 
   Samyang Corp.   405    13 
   Youlchon Chemical Co. Ltd.   1,220    12 
   TES Co. Ltd.   687    12 
*  Peptron Inc.   949    12 
*  Insun ENT Co. Ltd.   2,089    12 
   Huons Global Co. Ltd.   507    12 
*  CJ Logistics Corp.   108    12 
*  CMG Pharmaceutical Co. Ltd.   3,943    12 
   Kolmar Korea Co. Ltd.   347    12 
   Huons Co. Ltd.   315    12 
*  Leaders Cosmetics Co. Ltd.   3,390    11 
   Sangsangin Co. Ltd.   1,742    11 
   KC Tech Co. Ltd.   745    11 
   Hanil Cement Co. Ltd.   187    11 
   Hanjin Transportation Co. Ltd.   434    11 
   Hanwha General Insurance Co. Ltd.   6,091    11 
   Tongyang Inc.   9,624    11 
   BGF retail Co. Ltd.   88    11 
   Eugene Investment & Securities Co. Ltd.   6,615    11 
   Daishin Securities Co. Ltd.   1,382    11 
*  Enzychem Lifesciences Corp.   225    11 
*  Neowiz   774    11 
*  Interflex Co. Ltd.   1,048    11 
   Vieworks Co. Ltd.   424    11 
*  Genexine Co. Ltd.   211    11 
   Dongjin Semichem Co. Ltd.   839    11 
*  Naturecell Co. Ltd.   1,694    10 
   Meritz Fire & Marine Insurance Co. Ltd.   835    10 
   Korean Reinsurance Co.   1,499    10 
   i-SENS Inc.   589    10 
   Hyundai Construction Equipment Co. Ltd.   572    10 
   Kumho Petrochemical Co. Ltd.   196    10 
*  Inscobee Inc.   3,923    9 
*  Lumens Co. Ltd.   5,378    9 
   Daeduck Electronics Co.   1,156    9 
*  Hansol Technics Co. Ltd.   1,554    9 
   Cuckoo Homesys Co. Ltd.   288    9 

   Chongkundang Holdings Corp.   97    9 
   LOTTE Fine Chemical Co. Ltd.   311    9 
   OCI Co. Ltd.   207    8 
*  Hugel Inc.   27    8 
   SK Materials Co. Ltd.   68    8 
   LG Chem Ltd. Preference Shares   52    8 
*  Anterogen Co. Ltd.   291    8 
*  Feelux Co. Ltd.   1,807    8 
   Foosung Co. Ltd.   1,294    8 
*  Ananti Inc.   1,359    8 
   Seegene Inc.   251    8 
*  ABLBio Inc.   516    8 
   Youngone Corp.   290    8 
*  Lotte Tour Development Co. Ltd.   881    8 
*  Lutronic Corp.   1,359    8 
*  Hyosung Heavy Industries Corp.   457    7 
   Byucksan Corp.   5,036    7 
*  Jenax Inc.   1,050    6 
   Dae Hwa Pharmaceutical Co. Ltd.   783    6 
   Innocean Worldwide Inc.   112    6 
   Songwon Industrial Co. Ltd.   652    6 
   KTB Investment & Securities Co. Ltd.   3,521    6 
*  Eutilex Co. Ltd.   140    6 
*  GNCO Co. Ltd.   5,594    6 
*  Vidente Co. Ltd.   1,044    6 
   Lock&Lock Co. Ltd.   549    5 
   KIWOOM Securities Co. Ltd.   98    5 
*  Webzen Inc.   432    5 
   LS Industrial Systems Co. Ltd.   143    5 
   Taeyoung Engineering & Construction Co. Ltd.   477    5 
*  Hyosung Advanced          
   Materials Corp.   74    5 
*  Medipost Co. Ltd.   191    4 
   Green Cross Holdings Corp.   304    4 
   Sam Chun Dang Pharm Co. Ltd.   130    4 
*  Pharmicell Co. Ltd.   671    4 
*  Osstem Implant Co. Ltd.   154    4 
*  Binex Co. Ltd.   705    4 
   InBody Co. Ltd.   250    4 
   Dong-A ST Co. Ltd.   55    4 
   Taekwang Industrial Co. Ltd.   6    4 
   Woongjin Thinkbig Co. Ltd.   1,970    4 
   Halla Holdings Corp.   135    4 
*  Amicogen Inc.   213    4 
*  Yuyang DNU Co. Ltd.   2,639    4 

 

40

 

 

ESG International Stock ETF      

 

          Market 
          Value• 
       Shares   ($ 000)
*  LegoChem Biosciences Inc.   101    4 
*  Esmo Corp.   3,938    4 
*  Gamevil Inc.   207    4 
*  CrystalGenomics Inc.   405    4 
*  Cafe24 Corp.   127    4 
   Hyundai Greenfood Co. Ltd.   509    4 
   Daekyo Co. Ltd.   867    4 
   Hancom Inc.   421    4 
   Sebang Global Battery Co. Ltd.   134    3 
   SL Corp.   274    3 
*,§  Cellumed Co. Ltd.   685    3 
   Daesang Corp.   202    3 
   Bukwang Pharmaceutical Co. Ltd.   308    3 
   Dentium Co. Ltd.   91    3 
   GS Home Shopping Inc.   31    3 
   Hyundai Home Shopping Network Corp.   52    3 
*  NKMax Co. Ltd.   397    3 
   Wemade Co. Ltd.   118    3 
   Handsome Co. Ltd.   146    3 
   CJ CGV Co. Ltd.   146    3 
   Youngone Holdings Co. Ltd.   84    3 
   Daewoong Pharmaceutical Co. Ltd.   32    3 
   Hansae Co. Ltd.   229    3 
*  iNtRON Biotechnology Inc.   283    3 
   LF Corp.   230    2 
*  Stcube   278    2 
*  KCC Glass Corp.   103    2 
   AK Holdings Inc.   111    2 
*  Agabang&Company   560    2 
*  Ssangyong Motor Co.   912    1 
   Humedix Co. Ltd.   87    1 
*  Studio Dragon Corp.   21    1 
   Namhae Chemical Corp.   198    1 
   Hanil Holdings Co. Ltd.   38    1 
   Hyundai Livart Furniture Co. Ltd.   55    — 
            21,745 
Spain (1.6%)          
   Banco Santander SA (XMAD)   619,784    2,291 
   Industria de Diseno Textil SA   42,493    1,326 
   Banco Bilbao Vizcaya Argentaria SA   258,379    1,238 
   Amadeus IT Group SA   16,073    1,139 
   Telefonica SA   171,943    1,023 
1  Cellnex Telecom SA   13,016    635 
   CaixaBank SA   158,921    409 
1  Aena SME SA   2,423    390 
   Enagas SA   13,806    358 

   Grifols SA Preference Shares   13,719    298 
   Banco de Sabadell SA   312,292    274 
   Bankinter SA   45,479    269 
   Grifols SA   8,294    267 
   Merlin Properties Socimi SA   18,304    236 
   Bankia SA   94,925    151 
   Bolsas y Mercados Espanoles SHMSF SA   2,202    84 
   Viscofan SA   911    49 
   Inmobiliaria Colonial Socimi SA   3,756    48 
*  Masmovil Ibercom SA   2,383    47 
   Faes Farma SA   8,300    40 
   Banco Santander SA (XMEX)   9,806    35 
   Mapfre SA   13,921    31 
   Corp Financiera Alba SA   679    30 
   Acerinox SA   3,193    30 
   Prosegur Cia de Seguridad SA   6,488    24 
   Zardoya Otis SA   3,083    23 
   Neinor Homes SA   1,895    22 
   Cia de Distribucion Integral Logista Holdings SA   1,020    21 
1  Unicaja Banco SA   20,814    19 
*  Almirall SA   1,397    18 
1  Prosegur Cash SA   12,332    18 
*  Fluidra SA   1,229    17 
   Lar Espana Real Estate Socimi SA   2,012    14 
*  Pharma Mar SA   3,177    14 
*  Sacyr SA   3,614    10 
1  Metrovacesa SA   937    9 
1  Euskaltel SA   978    9 
*  Fomento de Construcciones y Contratas SA   641    8 
   Construcciones y Auxiliar de Ferrocarriles SA   129    6 
*  Promotora de Informaciones SA   3,532    5 
1  Gestamp Automocion SA   1,513    5 
   Ence Energia y Celulosa SA   1,476    5 
            10,945 
Sweden (2.3%)          
   Atlas Copco AB Class A   33,457    1,193 
   Telefonaktiebolaget LM Ericsson Class B   125,312    1,005 
   Volvo AB Class B   57,730    906 
   Assa Abloy AB   37,960    854 
   Essity AB Class B   23,849    719 

 

41

 

 

ESG International Stock ETF              

  

          Market 
          Value• 
       Shares   ($ 000)
   Hennes & Mauritz AB          
   Class B   39,499    717 
   Swedbank AB Class A   41,673    633 
   Skandinaviska Enskilda          
   Banken AB Class A   59,823    573 
   Svenska Handelsbanken          
   AB Class A   53,626    542 
   Investor AB Class A   10,024    501 
   Industrivarden AB Class A   21,216    494 
   Investor AB Class B   9,616    482 
   Skanska AB Class B   21,373    471 
   SKF AB   23,928    423 
   Tele2 AB   27,768    404 
   Telia Co. AB   99,406    394 
   Svenska Cellulosa AB SCA          
   Class B   40,216    386 
   Castellum AB   16,088    371 
*  Boliden AB   17,060    358 
*  Kinnevik AB   16,175    329 
   Trelleborg AB Class B   19,541    305 
   Securitas AB Class B   21,824    296 
   Electrolux AB Class B   14,172    288 
   Epiroc AB Class A   24,308    281 
*  Swedish Orphan Biovitrum          
   AB   12,904    222 
   Elekta AB Class B   19,761    210 
   Atlas Copco AB   5,039    156 
   Fabege AB   6,734    111 
   Getinge AB   6,338    106 
   Nibe Industrier AB   5,626    92 
   Epiroc AB Class B   6,302    71 
   AAK AB   3,992    69 
   Nordic Entertainment          
   Group AB Class B   2,117    64 
1  Dometic Group AB   7,267    62 
   Pandox AB Class B   2,924    55 
   Kungsleden AB   5,167    53 
   Holmen AB   1,851    52 
   Wihlborgs Fastigheter AB   2,704    52 
   ICA Gruppen AB   1,361    51 
   Loomis AB Class B   1,400    49 
   BillerudKorsnas AB   3,952    48 
   NCC AB Class B   2,731    48 
   Husqvarna AB   6,867    46 
   JM AB   1,606    44 
1  Thule Group AB   1,949    43 
   SSAB AB Class B   14,204    41 
   Axfood AB   2,093    39 
1  Bravida Holding AB   3,873    35 
   Wallenstam AB   2,737    34 
   Hexpol AB   4,265    32 
*  Avanza Bank Holding AB   3,189    32 
   Vitrolife AB   1,844    31 
   Intrum AB   1,213    30 

   Beijer Ref AB   1,086    30 
   Hufvudstaden AB Class A   1,589    29 
*  AddTech AB   945    27 
   Mycronic AB   1,887    27 
   Peab AB Class B   2,389    24 
   Investment AB Latour   1,517    24 
   Nobia AB   3,638    24 
*  Sectra AB Class B   631    23 
   Klovern AB   9,927    23 
*  Nyfosa AB   2,616    21 
*  Modern Times Group MTG AB Class B   2,266    20 
   Lindab International AB   1,607    19 
   Bure Equity AB   985    19 
1  Scandic Hotels Group AB   1,928    18 
   Bonava AB   2,184    17 
   Bilia AB   1,704    16 
   Nolato AB Class B   282    15 
   Svenska Handelsbanken AB   1,415    15 
   Cloetta AB   4,552    14 
*  Mekonomen AB   1,764    14 
*  Collector AB   4,677    13 
   Concentric AB   909    13 
   Ratos AB   4,064    13 
   Catena AB   372    12 
   Klovern AB Preference Shares   279    10 
   Clas Ohlson AB   967    10 
*  Adapteo Oyj   805    9 
   Arjo AB   1,525    8 
*  SAS AB   6,747    7 
   Munters Group AB   1,379    6 
1  Attendo AB   1,249    6 
1  Resurs Holding AB   1,152    6 
*  Samhallsbyggnadsbolaget i Norden AB   1,467    4 
*  Hansa Biopharma AB   352    3 
   SkiStar AB   284    3 
            15,445 
Switzerland (6.1%)          
   Nestle SA   111,703    11,495 
   Roche Holding AG   26,683    8,580 
   Zurich Insurance Group AG   5,337    2,067 
   Cie Financiere Richemont SA   19,865    1,362 
   UBS Group AG   117,560    1,295 
   Givaudan SA   376    1,171 
   Lonza Group AG   2,926    1,168 
*  Alcon Inc.   16,005    979 
   Swiss Re AG   10,109    962 
   Credit Suisse Group AG   83,670    940 
   Geberit AG   1,565    781 
   Swiss Life Holding AG   1,539    707 

 

42

 

 

ESG International Stock ETF    

 

          Market 
          Value• 
       Shares   ($ 000)
   Partners Group Holding AG   743    645 
   Sonova Holding AG   2,680    640 
   Swiss Prime Site AG   4,475    540 
   Straumann Holding AG   568    534 
   Swisscom AG   967    516 
   Schindler Holding AG   2,117    475 
   Adecco Group AG   8,654    463 
   Julius Baer Group Ltd.   10,316    434 
   Baloise Holding AG   2,665    431 
   Vifor Pharma AG   2,425    407 
   Temenos AG   2,762    395 
   Kuehne & Nagel International AG   2,630    385 
   Chocoladefabriken Lindt & Spruengli AG   47    368 
   Cembra Money Bank AG   2,988    336 
   Roche Holding AG (Bearer)   1,040    330 
   Logitech International SA   8,301    322 
1  Galenica AG   4,504    305 
   Clariant AG   14,277    303 
   Georg Fischer AG   346    297 
*  Helvetia Holding AG   2,188    292 
   Flughafen Zurich AG   1,677    254 
1  Sunrise Communications Group AG   3,016    245 
   Mobimo Holding AG   811    244 
   Dufry AG   2,629    193 
   Barry Callebaut AG   77    159 
*  ams AG   4,012    139 
   Allreal Holding AG   433    93 
   PSP Swiss Property AG   596    88 
   Chocoladefabriken Lindt & Spruengli AG (Registered)   1    87 
1  VAT Group AG   640    87 
   Belimo Holding AG   10    65 
   SIG Combibloc Group AG   4,370    65 
   Tecan Group AG   216    60 
   Schindler Holding AG (Registered)   272    59 
   Banque Cantonale Vaudoise   68    55 
*  Idorsia Ltd.   1,727    46 
   Vontobel Holding AG   682    45 
   Bucher Industries AG   144    45 
   Landis&Gyr Group AG   446    37 
   Forbo Holding AG   24    35 
   Siegfried Holding AG   79    34 
   Valiant Holding AG   342    34 
   dormakaba Holding AG   56    33 
   Emmi AG   38    33 
   SFS Group AG   377    31 
   Conzzeta AG   28    29 
*  Aryzta AG   31,013    27 
   Daetwyler Holding AG   164    26 
   Schweiter Technologies AG   21    25 

   Valora Holding AG   88    22 
   Inficon Holding AG   30    21 
   Bachem Holding AG   118    20 
   HBM Healthcare Investments AG   83    19 
   Intershop Holding AG   28    19 
   Burckhardt Compression Holding AG   79    19 
   Komax Holding AG   96    18 
   Ypsomed Holding AG   120    17 
   Kardex AG   107    17 
   Zehnder Group AG   334    16 
   VZ Holding AG   43    15 
   LEM Holding SA   11    14 
   Vetropack Holding AG   5    13 
   DKSH Holding AG   181    10 
   Berner Kantonalbank AG   42    10 
   Interroll Holding AG   5    9 
   Implenia AG   164    8 
   Comet Holding AG   53    7 
*  GAM Holding AG   1,791    6 
   u-blox Holding AG   59    5 
   St. Galler Kantonalbank AG   10    5 
*  COSMO Pharmaceuticals NV   59    4 
   Ascom Holding AG   373    3 
*  Meyer Burger Technology AG   7,432    2 
            42,597 
Taiwan (4.3%)          
   Taiwan Semiconductor          
   Manufacturing Co. Ltd.   913,174    9,415 
   Hon Hai Precision Industry Co. Ltd.   423,400    1,105 
   MediaTek Inc.   53,104    617 
   Formosa Plastics Corp.   161,000    481 
   Chunghwa Telecom Co. Ltd.   127,000    450 
   Nan Ya Plastics Corp.   192,000    429 
   Largan Precision Co. Ltd.   3,000    424 
   E.Sun Financial Holding Co. Ltd.   433,108    413 
   Uni-President Enterprises Corp.   164,000    393 
   Cathay Financial Holding Co. Ltd.   272,052    356 
   Mega Financial Holding Co. Ltd.   331,000    351 
   China Steel Corp.   458,000    347 
   Delta Electronics Inc.   76,000    345 
   ASE Technology Holding Co. Ltd.   139,000    322 
   First Financial Holding Co. Ltd.   393,200    306 

 

43

 

 

ESG International Stock ETF    

 

          Market 
          Value• 
       Shares   ($ 000)
   Taiwan Cement Corp.   217,497    300 
   Hua Nan Financial Holdings Co. Ltd.   409,366    290 
   Taiwan Cooperative Financial Holding Co. Ltd.   417,720    287 
   Quanta Computer Inc.   131,000    264 
   Formosa Chemicals & Fibre Corp.   92,000    247 
   Taiwan Mobile Co. Ltd.   65,000    224 
   Hotai Motor Co. Ltd.   11,000    223 
   Yuanta Financial Holding Co. Ltd.   354,000    221 
   Taishin Financial Holding Co. Ltd.   472,983    220 
   United Microelectronics Corp.   395,000    197 
   Pou Chen Corp.   171,000    190 
   Foxconn Technology Co. Ltd.   94,000    182 
   Yageo Corp.   14,000    181 
   WPG Holdings Ltd.   141,680    180 
   Lite-On Technology Corp.   125,000    178 
   President Chain Store Corp.    18,000    176 
   Catcher Technology Co. Ltd.   22,000    165 
   Powertech Technology Inc.   49,000    160 
   Ruentex Development Co. Ltd.   118,000    159 
   Shin Kong Financial Holding Co. Ltd.   514,206    153 
   Bank of Kaohsiung Co. Ltd.    470,291    152 
   Chang Hwa Commercial Bank Ltd.   197,560    151 
*  AGV Products Corp.   610,000    148 
   Asustek Computer Inc.   22,000    147 
   Far EasTone Telecommunications Co. Ltd.   65,000    141 
   Synnex Technology International Corp.   109,000    134 
   China Development Financial Holding Corp.   439,000    132 
   SinoPac Financial Holdings Co. Ltd.   296,000    125 
   Win Semiconductors Corp.   14,000    122 
   Novatek Microelectronics Corp.   18,000    113 
   Innolux Corp.   427,000    110 
   Walsin Technology Corp.   16,000    109 
   AU Optronics Corp.   351,000    109 
   Cheng Shin Rubber Industry Co. Ltd.   84,000    108 
*  China Life Insurance Co. Ltd.   132,278    104 

   Pegatron Corp.   48,000    98 
   Realtek Semiconductor Corp.   12,000    87 
   Accton Technology Corp.   16,000    84 
   Infortrend Technology Inc.   208,000    84 
   Compal Electronics Inc.   130,000    78 
   Airtac International Group   5,000    78 
   Zhen Ding Technology Holding Ltd.   20,000    75 
   Formosan Rubber Group Inc.   116,000    70 
   Unimicron Technology Corp.   52,000    67 
   Silergy Corp.   2,000    66 
   Globalwafers Co. Ltd.   5,000    65 
   Tripod Technology Corp.   17,000    61 
   Chroma ATE Inc.   13,000    60 
   Macronix International   57,000    60 
   Hiwin Technologies Corp.   6,120    59 
   Asia Cement Corp.   39,000    57 
   ITEQ Corp.   12,000    56 
   Phison Electronics Corp.   5,000    53 
   Compeq Manufacturing Co. Ltd.   42,000    53 
   Chicony Electronics Co. Ltd.   19,000    51 
   Genius Electronic Optical Co. Ltd.   3,158    50 
   Sheng Yu Steel Co. Ltd.   79,000    50 
   Senao International Co. Ltd.   47,000    48 
   Giant Manufacturing Co. Ltd.   9,000    48 
   Taiwan Fertilizer Co. Ltd.   30,000    47 
   Eclat Textile Co. Ltd.   4,000    47 
   Simplo Technology Co. Ltd.   5,000    46 
   Sonix Technology Co. Ltd.   41,000    46 
   Lingsen Precision Industries Ltd.   129,000    45 
   Far Eastern International Bank   117,000    45 
   Nanya Technology Corp.   18,000    45 
   Sampo Corp.   73,000    45 
   Tong Hsing Electronic Industries Ltd.   9,000    44 
   Sino-American Silicon Products Inc.   13,000    44 
   FSP Technology Inc.   65,000    44 
   Taiwan Business Bank   110,200    43 
   Parade Technologies Ltd.   2,000    43 
   Vanguard International Semiconductor Corp.   18,000    43 
*  Microbio Co. Ltd.   90,000    42 

 

44

 

 

ESG International Stock ETF    

 

          Market 
          Value• 
       Shares   ($ 000)
   Feng TAY Enterprise Co. Ltd.   7,500    41 
   Inventec Corp.   55,000    41 
   Wistron Corp.   46,000    40 
   Taiwan High Speed Rail Corp.   35,000    39 
   TA Chen Stainless Pipe   39,000    39 
   Hsin Kuang Steel Co. Ltd.   41,000    39 
   International Games System Co. Ltd.   2,000    39 
   Elite Semiconductor Memory Technology Inc.   35,000    39 
   King Yuan Electronics Co. Ltd.   37,000    39 
   Elite Material Co. Ltd.   10,000    39 
   China Metal Products   41,000    39 
   TXC Corp.   25,000    39 
   King’s Town Bank Co. Ltd.   32,000    39 
   Taiwan Union Technology Corp.   9,000    38 
   Formosa Taffeta Co. Ltd.   35,000    38 
   Taichung Commercial Bank Co. Ltd.   94,404    38 
   Radiant Opto-Electronics Corp.   12,000    38 
   YC INOX Co. Ltd.   45,000    38 
   Taiwan Cogeneration Corp.   34,000    38 
   Winbond Electronics Corp.   73,000    37 
*  Tatung Co. Ltd.   54,000    37 
   Tung Ho Steel Enterprise Corp.   50,000    37 
   Test Rite International Co. Ltd.   55,000    36 
   FLEXium Interconnect Inc.   10,000    36 
   Yieh Phui Enterprise Co. Ltd.   122,300    36 
   Syncmold Enterprise Corp.   13,000    36 
   Taiwan Surface Mounting  Technology Corp.   12,000    36 
   Wah Lee Industrial Corp.   20,000    36 
   Wowprime Corp.   16,000    36 
   FocalTech Systems Co. Ltd.   36,000    36 
   Micro-Star International  Co. Ltd.   12,000    35 
   Acer Inc.   64,000    34 
*  Silicon Integrated Systems Corp.   141,000    34 
   Taiyen Biotech Co. Ltd.   32,000    34 
   Standard Foods Corp.   15,000    33 
   Jentech Precision Industrial Co. Ltd.   5,000    33 
   Gloria Material Technology Corp.   59,000    33 

   Nan Kang Rubber Tire Co. Ltd.   23,000    32 
   D-Link Corp.   78,000    32 
   Great Wall Enterprise Co. Ltd.   24,250    32 
   Tyntek Corp.   76,000    32 
   Test Research Inc.   19,000    32 
   Supreme Electronics Co. Ltd.   31,000    31 
   Poya International Co. Ltd.   2,000    31 
*  Concord Securities Co. Ltd.   133,000    31 
   Chung-Hsin Electric & Machinery Manufacturing Corp.   36,000    31 
   ASPEED Technology Inc.   1,000    31 
   Firich Enterprises Co. Ltd.   30,000    30 
   United Integrated Services Co. Ltd.   5,000    30 
   Flytech Technology Co. Ltd.   12,000    29 
   Walsin Lihwa Corp.   64,000    29 
   China Electric Manufacturing Corp.   70,600    29 
   Hu Lane Associate Inc.   11,000    29 
   Far Eastern Department Stores Ltd.   36,000    29 
   Ichia Technologies Inc.   61,000    29 
   Visual Photonics Epitaxy Co. Ltd.   9,000    28 
   A-DATA Technology Co. Ltd.   13,000    28 
   Unitech Printed Circuit Board Corp.   32,000    28 
   Chilisin Electronics Corp.   8,000    27 
   Asia Optical Co. Inc.   10,000    27 
   Foxsemicon Integrated Technology Inc.   5,000    27 
   Kinik Co.   13,000    26 
   KEE TAI Properties Co. Ltd.   71,000    26 
*  HannsTouch Solution Inc.   73,000    26 
   Chunghwa Precision Test Tech Co. Ltd.   1,000    26 
*  Etron Technology Inc.   111,000    26 
   Sinbon Electronics Co. Ltd.   6,000    25 
   Cheng Uei Precision Industry Co. Ltd.   21,000    25 
   Eternal Materials Co. Ltd.   28,000    25 
   Chipbond Technology Corp.   13,000    25 
   ASMedia Technology Inc.   1,000    25 
   ITE Technology Inc.   17,000    25 
   Tong-Tai Machine & Tool          
   Co. Ltd.   47,000    24 

 

45

 

 

ESG International Stock ETF

 

          Market 
          Value• 
       Shares   ($ 000)
   Sunplus Technology Co Ltd.   

69,000

    

24

 
   Faraday Technology Corp. Ltd.   17,000    24 
   Formosa International Hotels Corp.   5,000    24 
*  PChome Online Inc.   7,000    24 
   YFY Inc.   53,000    24 
   Merida Industry Co. Ltd.   5,000    24 
   Sercomm Corp.   10,000    24 
   E Ink Holdings Inc.   24,000    24 
   Advanced International Multitech Co. Ltd.   20,000    24 
   Voltronic Power Technology Corp.   1,050    24 
   China Petrochemical Development Corp.   88,200    23 
   Cyberlink Corp.   6,000    23 
   momo.com Inc.   2,000    23 
   Epistar Corp.   25,000    23 
   International CSRC Investment Holdings Co.   25,990    23 
   TCI Co. Ltd.   3,297    23 
   King Slide Works Co. Ltd.   2,000    23 
   Taiwan Paiho Ltd.   10,000    23 
   Ruentex Industries Ltd.   10,200    22 
   Chaun-Choung Technology Corp.   3,000    22 
*  Yeong Guan Energy Technology Group Co. Ltd.   11,000    22 
   Ho Tung Chemical Corp.   85,000    22 
   Global Unichip Corp.   3,000    22 
   Grape King Bio Ltd.   3,000    21 
   Qisda Corp.   35,000    21 
*  Dynamic Electronics Co. Ltd.   44,000    21 
   Clevo Co.   21,000    21 
   Global Mixed Mode Technology Inc.   6,000    21 
   Dynapack International Technology Corp.   11,000    21 
   Sporton International Inc.   3,000    21 
   Egis Technology Inc.   3,000    21 
   eMemory Technology Inc.   2,000    20 
   Goldsun Building Materials Co. Ltd.   48,000    20 
   Topco Scientific Co. Ltd.   6,000    20 
   Pan-International Industrial Corp.   32,000    20 
   Charoen Pokphand Enterprise   10,000    20 
   Advanced Wireless Semiconductor Co.   7,000    20 
   Hong Pu Real Estate Development Co. Ltd.   26,000    20 

   Huaku Development Co. Ltd.   7,000    20 
*  PharmaEssentia Corp.   6,000    20 
   AcBel Polytech Inc.   26,000    20 
   Zinwell Corp.   35,000    20 
   Evergreen International Storage & Transport Corp.   42,000    19 
   Jess-Link Products Co. Ltd.   20,000    19 
   Advanced Ceramic X Corp.   2,000    19 
   Lotes Co. Ltd.   2,000    19 
   Lien Hwa Industrial Holdings Corp.   15,250    19 
   TA-I Technology Co. Ltd.   8,000    19 
   Career Technology MFG.Co. Ltd.   18,150    19 
   Nan Ya Printed Circuit Board Corp.   11,000    19 
   Sitronix Technology Corp.   4,000    19 
   Sincere Navigation Corp.   41,900    18 
   Taiflex Scientific Co. Ltd.   12,000    18 
   Adlink Technology Inc.   10,000    18 
   CyberTAN Technology Inc.   38,000    18 
   ChipMOS Technologies Inc.   19,000    18 
   Merry Electronics Co. Ltd.   4,000    18 
*  Phihong Technology Co. Ltd.   68,000    18 
*  Unizyx Holding Corp.   36,000    18 
   Nien Hsing Textile Co. Ltd.   27,000    18 
   Elite Advanced Laser Corp.   8,000    18 
   Weltrend Semiconductor   25,000    18 
   Pixart Imaging Inc.   3,000    18 
   Shin Zu Shing Co. Ltd.   4,000    18 
   Taiwan PCB Techvest Co. Ltd.   17,000    18 
*  Gigastorage Corp.   45,000    18 
*  Federal Corp.   47,000    18 
*  TPK Holding Co. Ltd.   12,000    17 
*  Unity Opto Technology Co. Ltd.   90,000    17 
   Center Laboratories Inc.   10,299    17 
   WUS Printed Circuit Co. Ltd.   16,600    17 
   Yulon Finance Corp.   5,000    17 
   SDI Corp.   9,000    17 
*  XinTec Inc.   6,000    17 
*  Via Technologies Inc.   18,000    17 
   Asia Polymer Corp.   36,000    16 
   Vivotek Inc.   6,000    16 
   Huang Hsiang Construction Corp.   15,000    16 
   U-Ming Marine Transport Corp.   17,000    16 
   HannStar Display Corp.   75,000    16 
   Posiflex Technology Inc.   5,000    16 

 

46

 

  

ESG International Stock ETF          
           
            Market 
            Value• 
       Shares   ($ 000)
   Ta Ya Electric Wire & Cable   48,000    16 
   USI Corp.   40,000    16 
   Alpha Networks Inc.   23,000    16 
   Soft-World International Corp.   6,000    16 
   Global Brands Manufacture Ltd.   34,000    16 
   Nien Made Enterprise Co. Ltd.   2,000    16 
   China Steel Chemical Corp.   4,000    15 
   Kinpo Electronics   35,000    15 
   WT Microelectronics Co. Ltd.   12,000    15 
*  Taiwan Land Developmen Corp.   63,000    15 
   Globe Union Industrial Corp.    28,000    15 
   China Airlines Ltd.   56,000    15 
   IEI Integration Corp.   10,000    15 
*  Gemtek Technology Corp.   20,000    15 
   Lite-On Semiconductor Corp.   11,000    15 
   Swancor Holding Co. Ltd.   6,000    15 
   Kuo Toong International Co. Ltd.   24,330    15 
   Eva Airways Corp.   36,932    15 
   Taiwan TEA Corp.   28,000    15 
*  Asia Pacific Telecom Co. Ltd.   56,779    14 
   Namchow Holdings Co. Ltd.   9,000    14 
   Li Peng Enterprise Co. Ltd.   67,000    14 
   Prince Housing & Development Corp.   40,000    14 
   China General Plastics Corp.   22,000    14 
   Aten International Co. Ltd.   5,000    14 
   Taiwan Glass Industry Corp.   42,000    14 
   Run Long Construction Co. Ltd.   7,000    14 
   Capital Securities Corp.   42,000    14 
   China Man-Made Fiber Corp.   56,000    13 
   Chung Hwa Pulp Corp.   44,000    13 
   Teco Electric and Machinery Co. Ltd.   15,000    13 
   Arcadyan Technology Corp.   5,123    13 
   Rich Development Co. Ltd.   43,000    13 
   Concraft Holding Co. Ltd.   3,000    13 
   St. Shine Optical Co. Ltd.   1,000    13 
   CHC Healthcare Group   11,000    13 
*  Gold Circuit Electronics Ltd.   27,000    13 
   Holy Stone Enterprise Co. Ltd.   4,000    13 

   Kindom Development Co. Ltd.   15,000    13 
*  Motech Industries Inc.   56,000    13 
*  Orient Semiconductor Electronics Ltd.   30,000    12 
   Darwin Precisions Corp.   29,000    12 
   Bizlink Holding Inc.   2,000    12 
   Lealea Enterprise Co. Ltd.   42,000    12 
   Coretronic Corp.   10,000    12 
   Radium Life Tech Co. Ltd.   36,200    12 
*  Shining Building Business Co. Ltd.   39,000    12 
*  Gigasolar Materials Corp.   3,000    12 
   Machvision Inc.   1,000    12 
   Taiwan Secom Co. Ltd.   4,000    12 
   Chin-Poon Industrial Co. Ltd.   12,000    12 
   Iron Force Industrial Co. Ltd.   4,000    12 
   Topkey Corp.   3,000    12 
   Johnson Health Tech Co. Ltd.   5,000    11 
   IBF Financial Holdings Co. Ltd.   30,300    11 
   Wei Chuan Foods Corp.   16,000    11 
*  OBI Pharma Inc.   3,000    11 
   Yulon Motor Co. Ltd.   16,000    11 
   Makalot Industrial Co. Ltd.   2,100    10 
   HTC Corp.   9,000    10 
   Brogent Technologies Inc.   2,100    10 
   Kinsus Interconnect Technology Corp.   6,000    10 
   Lextar Electronics Corp.   20,000    10 
   Li Cheng Enterprise Co. Ltd.   8,252    10 
   Pan Jit International Inc.   12,400    10 
   Cathay Real Estate Development Co. Ltd.   14,000    10 
   Everlight Electronics Co. Ltd.   9,000    9 
   BES Engineering Corp.   39,000    9 
   Sanyang Motor Co. Ltd.   13,000    9 
   Toung Loong Textile Manufacturing   7,000    9 
   OptoTech Corp.   12,000    9 
   Pharmally International Holding Co. Ltd.   1,282    9 
   LandMark Optoelectronics Corp.   1,000    9 
*  ALI Corp.   15,000    8 
   Elan Microelectronics Corp.   3,000    8 
   Mercuries & Associates Holding Ltd.   11,000    8 
*  CMC Magnetics Corp.   30,114    8 
   Yungtay Engineering Co. Ltd.   4,000    8 

 

47

 

 

ESG International Stock ETF          
           
            Market 
            Value• 
       Shares   ($ 000)
   Mitac Holdings Corp.   6,900    8 
   Sunny Friend Environmental Technology Co. Ltd.   1,000    8 
   Hota Industrial Manufacturing Co. Ltd.   2,000    7 
   Cheng Loong Corp.   9,000    7 
   Cub Elecparts Inc.   1,049    7 
   Hung Sheng Construction Ltd.   10,000    7 
   Gigabyte Technology Co. Ltd.   4,000    7 
*  Mercuries Life Insurance Co. Ltd.   17,000    7 
*  United Renewable Energy Co. Ltd.   28,287    6 
   Tong Yang Industry Co. Ltd.   5,000    6 
   Gourmet Master Co. Ltd.   2,000    6 
   Taiwan Styrene Monomer   10,000    6 
   Chlitina Holding Ltd.   1,000    6 
   Lung Yen Life Service Corp.   3,000    6 
   Quanta Storage Inc.   6,000    6 
   Ginko International Co. Ltd.   1,000    6 
   Taiwan Semiconductor Co. Ltd.   4,000    6 
   L&K Engineering Co. Ltd.   6,000    6 
   UPC Technology Corp.   17,000    6 
   Longchen Paper & Packaging Co. Ltd.   9,308    6 
   Wafer Works Corp.   5,000    6 
   Asia Vital Components Co. Ltd.   5,000    5 
   Wan Hai Lines Ltd.   9,000    5 
   TaiDoc Technology Corp.   1,000    5 
   Getac Technology Corp.   3,000    5 
   Shinkong Synthetic Fibers Corp.   12,000    5 
   Primax Electronics Ltd.   3,000    5 
   Ability Enterprise Co. Ltd.   10,000    5 
   Wistron NeWeb Corp.   2,000    5 
   Sigurd Microelectronics Corp.   4,000    4 
*  Grand Pacific Petrochemical   7,000    4 
*  Medigen Biotechnology Corp.   2,000    4 
   China Motor Corp.   3,200    4 
*  Roo Hsing Co. Ltd.   11,000    4 
   Oriental Union Chemical Corp.   5,000    3 
*  Ritek Corp.   18,000    3 
*  Lotus Pharmaceutical Co Ltd.   1,000    3 
   Everlight Chemical Industrial Corp.   4,000    2 
*  Tung Thih Electronic Co. Ltd.   1,000    2 

   Casetek Holdings Ltd.   1,000    1 
*  Elitegroup Computer Systems Co. Ltd.   3,000    1 
            29,267 
Thailand (0.8%)          
   CP ALL PCL (Foreign)   257,900    544 
   Airports of Thailand PCL (Foreign)   227,900    439 
   Siam Cement PCL (Foreign)   39,900    397 
   Siam Commercial Bank PCL (Foreign)   140,700    395 
   Kasikornbank PCL (Foreign)   92,800    355 
   Home Product Center PCL   591,900    242 
   Energy Absolute PCL   181,300    229 
   Advanced Info Service PCL (Foreign)   32,700    210 
   Bangkok Dusit Medica Services PCL   249,300    177 
   Gulf Energy Development PCL   27,000    144 
   Central Pattana PCL   73,600    126 
   Krung Thai Bank PCL (Foreign)   270,700    121 
   Kiatnakin Bank PCL   54,900    109 
   Carabao Group PCL   43,500    100 
   Sino-Thai Engineering & Construction PCL   195,400    94 
*  Intouch Holdings   53,100    92 
   PTT Global Chemical PCL   68,000    90 
   Kasikornbank PCL   19,700    75 
   BTS Group Holdings PCL   194,800    68 
   Charoen Pokphand Foods PCL (Foreign)   76,900    66 
   Tisco Financial Group PCL (Foreign)   18,000    57 
   Digital Telecommunications Infrastructure Fund   109,863    55 
   Intouch Holdings PCL (Foreign)   31,378    54 
   Electricity Generating PCL (Foreign)   5,900    52 
   Bangkok Bank PCL (Foreign)   12,200    51 
*  Advanced Info Service PCL (Local)   7,800    50 
   Bangkok Expressway & Metro PCL   159,600    47 
   Global Power Synergy PCL   22,192    45 
   Indorama Ventures PCL   52,100    44 

 

48

 

 

ESG International Stock ETF                
                 
                  Market  
                  Value•  
          Shares       ($000)  
    TMB Bank PCL   1,232,924       43  
    Thanachart Capital PCL     23,000       39  
    Krungthai Card PCL (Foreign)     28,600       36  
    Osotspa PCL     26,800       36  
    Srisawad Corp. PCL     14,300       31  
    Thai Union Frozen Products PCL (Foreign)     60,700       30  
    Muangthai Capital PCL     14,700       27  
    Bumrungrad Hospital PCL (Foreign)     6,400       27  
    WHA Premium GrowthFreehold & Leasehold Real Estate Investment Trust     50,400       26  
    WHA Corp. PCL     271,500       24  
    B Grimm Power PCL     16,700       24  
*   BEC World PCL (Foreign)     165,600       23  
    Supalai PCL     42,200       22  
    True Corp. PCL     197,700       21  
    IRPC PCL (Foreign)     295,700       21  
    Thaicom PCL     229,500       21  
    Thai Vegetable Oil PCL     23,000       20  
    Jasmine International PCL     114,300       18  
    Asian Property Development PCL (Foreign)     88,200       17  
*   Krungthai Card PCL     13,300       17  
    Total Access Communication PCL (Foreign)     13,200       16  
    Jasmine Broadband Internet Infrastructure Fund     54,472       15  
    PTG Energy PCL     29,400       13  
    Bangkok Airways PCL     88,100       13  
    Esso Thailand PCL     65,700       13  
*   Bangkok Land PCL     387,600       13  
*   AEON Thana Sinsap Thailand PCL     2,800       13  
    Central Plaza Hotel PCL     21,400       12  
    Gfpt Pcl     36,300       12  
    KCE Electronics PCL     16,900       12  
    Major Cineplex Group PCL 18,300       11  
    Vgi Pcl     51,200       11  
    Delta Electronics Thailand PCL     6,700       11  
    Intouch Holdings NVDR     5,900       10  
    Thoresen Thai Agencies PCL     113,700       10  
    BTS Rail Mass Transit Growth Infrastructure Fund     35,600       10  

    Chularat Hospital PCL     122,800       10  
    Hana Microelectronics PCL (Foreign)     8,700       9  
    Gunkul Engineering PCL     111,400       9  
    CK Power PCL     71,400       9  
    Tipco Asphalt PCL     13,700       8  
* Group Lease PCL     70,900       7  
    Plan B Media PCL     39,700       7  
    TOA Paint Thailand PCL     6,800       7  
    Star Petroleum Refining PCL     23,600       6  
    Siam Global House PCL     11,100       5  
    Super Energy Corp. PCL     387,600       5  
    Sri Trang Agro-Industry PCL     12,400       5  
    Thaifoods Group PCL     41,800       5  
    Beauty Community PCL     84,600       5  
*   Thai Airways International PCL (Foreign)     33,800       4  
    Univentures PCL     37,700       4  
* Precious Shipping PCL     24,700       4  
    Taokaenoi Food & Marketing PCL     15,700       4  
    Unique Engineering & Construction PCL     17,300       4  
    Bcpg Pcl     6,000       3  
* U City PCL     64,000       3  
    Workpoint Entertainment PCL     3,100       1  
*   BTS Group Holdings PCL Warrants Exp. 12/31/2021     15,059       —  
*   Minor International PCL Warrants Exp. 12/31/2021     3,645       —  
                  5,370  
Turkey (0.2%)                
* Tat Gida Sanayi AS     204,435       208  
*   Logo Yazilim Sanayi Ve Ticaret AS     9,946       121  
* Akbank T.A.S.     65,889       71  
*   Turkiye Garanti Bankasi AS     43,772       67  
    Tupras Turkiye Petrol Rafinerileri AS     3,123       51  
*   Yatas Yatak ve Yorgan Sanayi ve Ticaret AS     34,815       43  
* Gubre Fabrikalari TAS     12,258       33  
*   Aksa Enerji Uretim AS Class B     55,252       32  
    Eregli Demir ve Celik Fabrikalari TAS     23,491       31  
* Konya Cimento Sanayii AS     675       26  
*   Koza Anadolu Metal Madencilik Isletmeleri AS     14,046       26  

 

49

 

 

ESG International Stock ETF          
           
            Market 
            Value• 
       Shares   ($ 000)
*,1  Mavi Giyim Sanayi Ve Ticaret AS   2,923    25 
   Alarko Holding AS   27,754    25 
   Haci Omer Sabanci Holding AS (Bearer)   17,735    24 
   Coca-Cola Icecek AS   3,293    24 
*  Zorlu Enerji Elektrik Uretim AS   109,551    24 
*  Koza Altin Isletmeleri AS   1,798    21 
*  Turk Hava Yollari AO   10,282    19 
   EGE Endustri VE Ticaret AS   181    19 
*  Petkim Petrokimya Holding AS   32,626    19 
*  Sok Marketler Ticaret AS   13,618    19 
*  Yapi ve Kredi Bankasi AS   48,161    18 
   Aksigorta AS   17,334    18 
*  Pegasus Hava Tasimaciligi AS   1,931    17 
   Aygaz AS   8,618    16 
*  Is Gayrimenkul Yatirim Ortakligi AS   58,322    15 
   Aksa Akrilik Kimya Sanayii AS   11,264    14 
*  Turkiye Is Bankasi AS   15,178    14 
*  Turk Traktor ve Ziraat Makineleri AS   1,370    13 
*  Brisa Bridgestone Sabanci Sanayi ve Ticaret AS   7,642    11 
*  Bera Holding AS   17,692    10 
*,1  MLP Saglik Hizmetleri AS   3,921    9 
   AG Anadolu Grubu Holding AS   3,534    9 
*  Torunlar Gayrimenkul Yatirim Ortakligi AS   22,142    9 
   Ford Otomotiv Sanayi AS   719    9 
*  Sekerbank Turk AS   50,455    9 
   Dogan Sirketler Grubu Holding AS   31,140    9 
   Tekfen Holding AS   3,446    8 
*  Turkiye Vakiflar Bankas TAO   8,334    7 
   Tofas Turk Otomobil Fabrikasi AS   1,547    7 
   TAV Havalimanlari Holding AS   1,847    6 
*  Ulker Biskuvi Sanayi AS   1,628    5 
   Kardemir Karabuk Demir Celik Sanayi ve Ticaret AS Class A   11,830    5 
   Turkiye Sise ve Cam Fabrikalari AS   5,701    5 
*  Arcelik AS   1,329    4 
   Soda Sanayii AS   3,606    3 
            1,178 

United Arab Emirates (0.2%)          
    First Abu Dhabi Bank PJSC     142,146       546  
    Emirates Telecommunications Group Co. PJSC     57,904       248  
    Abu Dhabi Commercial Bank PJSC     99,212       190  
    Aldar Properties PJSC     124,597       71  
* Air Arabia PJSC     150,314       57  
    DP World plc     3,013       47  
    Abu Dhabi Islamic Bank PJSC     27,292       40  
*   Eshraq Investments PJSC     398,693       33  
* RAK Properties PJSC     147,004       17  
*   Dubai Financial Market PJSC     62,719       15  
*   DAMAC Properties Dubai Co. PJSC     79,395       14  
*   DXB Entertainments PJSC     265,832       12  
    Arabtec Holding PJSC     40,224       8  
                  1,298  
United Kingdom (8.8%)                
    AstraZeneca plc     50,501       4,432  
    GlaxoSmithKline plc     186,745       3,768  
    Unilever plc     40,795       2,193  
    Reckitt Benckiser Group plc     24,277       1,794  
    Vodafone Group plc     1,017,601       1,779  
    Lloyds Banking Group plc     2,696,512       1,750  
    RELX plc     72,303       1,749  
    Prudential plc     100,150       1,665  
    National Grid plc     124,226       1,566  
    Compass Group plc     63,562       1,400  
^ Barclays plc     663,547       1,272  
    Experian plc     36,518       1,215  
    Tesco plc     401,108       1,195  
    London Stock Exchange Group plc     12,077       1,186  
    CRH plc     29,999       1,018  
    Smith & Nephew plc     37,977       852  
    Ferguson plc     9,675       843  
    Legal & General Group plc     231,260       784  
    Standard Chartered plc     107,620       779  
    Aviva plc     144,958       664  
    Ashtead Group plc     21,138       663  
    SSE plc     32,365       636  
    BT Group plc     334,576       614  
    3i Group plc     42,216       556  
    Rentokil Initial plc     88,240       552  

 

50

 

 

ESG International Stock ETF

 

                  Market  
                  Value•  
          Shares       ($000)  
    Persimmon plc     14,500       536  
    Informa plc     60,166       533  
    WPP plc     54,429       523  
    Sage Group plc     58,421       518  
    Segro plc     48,380       513  
    Next plc     6,332       499  
    Halma plc     18,740       471  
    Spirax-Sarco Engineering plc     4,239       464  
    Barratt Developments plc     47,009       464  
    Smiths Group plc     22,698       452  
    Royal Bank of Scotland Group plc     185,779       430  
    Mondi plc     20,969       426  
    Rightmove plc     52,905       424  
    Taylor Wimpey plc     159,617       422  
    Associated British Foods plc     14,352       419  
    Smurfit Kappa Group plc     12,162       411  
    Standard Life Aberdeen plc     113,540       407  
    Bunzl plc     16,722       402  
    St. James’s Place plc     29,971       397  
    Intermediate Capital Group plc     19,067       394  
    Burberry G roup plc     17,622       380  
    Berkeley Group Holdings plc     6,132       378  
    Croda International plc     6,379       377  
    RSA Insurance Group plc     55,431       371  
    United U tilities Group plc     30,541       371  
    DCC plc     5,156       369  
    Admiral Group plc     13,122       360  
    Severn Trent plc     11,255       357  
  1 Auto Trader Group plc     52,452       353  
    Bellway plc     7,154       346  
    Direct Line Insurance Group plc     83,092       331  
    Wm Morrison Supermarkets p lc     147,667       331  
    Coca-Cola HBC AG     10,228       326  
    ITV plc     213,006       324  
    Howden J oinery Group plc     38,833       321  
    Johnson Matthey plc     9,744       319  
    Kingfisher plc     129,758       318  
    Phoenix Group Holdings plc     34,873       313  
    Derwent London plc     6,173       312  
    British Land Co. plc     47,253       306  
    Pennon Group plc     21,857       306  
    DS Smith plc     73,192       299  

*   Ocado Group plc     21,364       296  
    Tate & Lyle plc     31,328       286  
    Spectris plc     7,884       278  
    Pearson plc     37,726       274  
    HomeServe plc     17,793       271  
*,1   Just Eat Takeaway (XLON)     3,014       264  
    Hargreaves Lansdown plc     12,773       256  
    Investec plc     46,231       237  
    Britvic plc     21,162       234  
    J Sainsbury plc     90,760       230  
    SSP Group plc     34,741       230  
    Beazley plc     32,812       227  
    Hiscox Ltd.     13,792       220  
    Marks & Spencer Group plc     104,910       216  
*   M&G plc     74,232       194  
    Micro Focus International plc     15,671       149  
    Polymetal International plc     8,171       126  
    International Consolidated Airlines Group SA (London Shares)     19,686       121  
    Hammerson plc     41,357       112  
*,1   Network International Holdings plc     15,627       107  
    Antofagasta plc     9,232       91  
    UNITE Group plc     6,267       91  
1   Sophos G roup plc     11,846       88  
    JD Sports Fashion plc     9,086       87  
1   Quilter plc     43,860       83  
*   Virgin Money UK p lc     41,102       82  
    Greggs plc     2,888       78  
*,1   Trainline plc     12,073       74  
    easyJet plc     5,103       74  
    B&M European Value Retail SA     16,430       71  
    Games Workshop Group plc     850       70  
    Dechra Pharmaceuticals plc     1,986       68  
    Electrocomponents plc     8,550       67  
1   Avast plc     12,883       66  
    Vistry Group plc     3,793       63  
    Schroders plc     1,669       62  
1   ConvaTec Group plc     22,997       61  
    Grafton Group plc     5,218       58  
    OneSavings Bank plc     10,337       54  
    IWG plc     11,629       53  
§   NMC Health plc     4,208       51  
    Inchcape plc     6,654       50  
    Genus plc     1,184       48  
    Cineworld Group plc     23,636       48  

 

51

 

 

ESG International Stock ETF

 

      Market
      Value•
    Shares ($000)
1 Countryside Properties plc 7,827 48
  Grainger plc 12,196 47
  IG Group Holdings plc 5,319 46
  Great Portland Estates plc 4,278 46
  Centamin plc 27,118 45
  Royal Mail plc 21,313 45
  WH Smith plc 1,779 45
  Savills plc 3,179 45
  Man Group PLC 23,179 44
  Pets at Home Group plc 13,109 44
  Spirent Communications plc 15,704 42
  TP ICAP plc 8,767 41
  Moneysupermarket.com Group plc 10,205 41
  Hikma Pharmaceuticals plc 1,750 41
  Assura plc 41,973 40
  Hays plc 22,154 40
  Cranswick plc 917 39
  UDG Healthcare plc 4,303 39
  Dunelm G roup plc 2,729 39
* Signature Aviation plc 10,681 39
  Pagegroup plc 7,381 39
  Aggreko plc 4,403 38
  Redrow plc 3,915 38
  Safestore Holdings plc 3,724 37
  Victrex plc 1,337 36
  National E xpress Group plc 6,527 36
  Close Brothers Group plc 2,138 36
  Lancashire Holdings Ltd. 3,804 36
  Big Yellow Group plc 2,525 35
  Shaftesbury plc 3,356 35
  LondonMetric Property plc 12,832 34
  St. Modwen Properties plc 5,519 34
  Domino’s Pizza Group plc 8,858 34
  Bodycote plc 3,408 34
  Paragon Banking Group plc 5,679 33
1 Ascential plc 7,348 33
  Workspace Group plc 2,234 33
1 John Laing Group plc 7,379 32
* Firstgroup plc 21,078 32
* Just Group plc 33,962 32
  Polypipe Group plc 4,577 32
  Ashmore Group plc 5,163 31
  Jupiter Fund Management plc 7,940 31
  Dixons Carphone plc 19,305 31
  Capital & Counties Properties plc 11,716 30
  Essentra plc 6,453 30
1 Ibstock plc 8,512 30
  Redde Northgate plc 9,423 30
*,1 Wizz Air Holdings plc 671 30

  Brewin Dolphin Holdings plc 7,324 29
  Softcat plc 2,041 28
  Computacenter plc 1,309 28
  Plus500 Ltd. 2,245 28
  Crest Nicholson Holdings plc 4,638 27
  Synthomer plc 7,267 26
  Marshalls plc 2,809 26
  Mediclinic International plc 5,961 26
  Renishaw plc 553 25
  Vesuvius plc 4,493 25
  Rathbone Brothers plc 1,068 23
  Daily Mail & General Trust plc 2,396 23
  Greencore Group plc 8,217 22
  Coats Group plc 28,249 22
  Provident Financial plc 4,090 21
  Drax Group plc 6,144 21
  Rhi Magnesita NV 546 21
  Go-Ahead Group plc 813 21
  AG Barr plc 2,978 21
  TBC Bank Group plc 1,188 20
  IntegraFin Holdings plc 3,144 20
  Telecom Plus plc 1,118 19
  Fresnillo plc 2,428 19
  KAZ Minerals plc 3,492 19
  Sanne Group plc 2,498 18
  Restaurant Group plc 13,183 18
  Petrofac Ltd. 4,258 18
* Frasers Group plc 3,477 17
  Bank of Georgia Group plc 771 17
  Stagecoach Group plc 9,115 15
1 Hastings Group Holdings plc 7,203 15
1 Airtel Africa plc 15,891 13
  Elementis plc 9,763 13
  NewRiver REIT plc 5,722 11
  Hochschild Mining plc 5,483 11
  SIG plc 11,882 10
  Redefine International plc 5,397 8
  Ferrexpo plc 4,560 8
1 McCarthy & Stone plc 4,086 7
*,1 Aston Martin Lagonda Global Holdings plc 1,440 6
  Stobart Group Ltd. 6,172 6
  TalkTalk Telecom Group plc 4,266 6
  Keller Group plc 717 6
* Metro Bank plc 2,707 6
  Hyve Group plc 5,794 6
* Vectura Group plc 4,791 5
1 Equiniti Group plc 2,016 5
  Mitie Group plc 2,929 5

 

52

 

 

ESG International Stock ETF

 

      Market
      Value•
    Shares ($000)
* Galliford Try Holdings plc 2,290 5
1 Spire Healthcare Group plc 2,910 4
* Sirius Minerals plc 71,585 4
  International Personal Finance plc 2,012 4
  Dignity plc 520 4
  AA plc 6,577 4
  Halfords Group plc 1,656 3
  Superdry plc 736 3
  Card Factory plc 2,673 3
*,1 Funding Circle Holdings plc 2,197 2
* AO World plc 1,847 1
      60,139
Total Common Stocks    
(Cost $694,338)   680,148
Temporary Cash Investments (1.4%)  
Money Market Fund (1.4%)    
2,3 Vanguard Market    
  Liquidity Fund,    
  1.706% 93,353 9 ,338

 

    Face M arket
    Amount Value•
    ($000) ($000)
U.S. Government and Agency Obligations (0.0%)
4 United States Treasury Bill,1.527%–1.541%, 4/30/20 186 186
4 United States Treasury Bill,1.551%, 5/14/20 150 150
      336
Total Temporary Cash Investments  
(Cost $9,672)   9,674
Total Investments (100.6%)    
(Cost $704,010)   689,822
Other Assets and Liabilities—Net (-0.6%)3   (4,006)
Net Assets (100%)   685,816
Cost rounded to $000.    
     
• See Note A in Notes to the Financial Statements.  
     
*   Non-income-producing security.    
     
§ Security value determined using significant unobservable inputs.
     
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $4,748,000.
     
1 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 29, 2020, the aggregate value of these securities was $13,374,000, representing 2.0% 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 Collateral of $5,793,000 was received for securities on loan.
   
4 Securities with a value of $301,000 have been segregated as initial margin for open futures contracts.
       
  ADR—American Depositary Receipt.    
  GDR—Global Depositary Receipt.    
  NVDR—Non-Voting Depository Receipt.    
  REIT—Real Estate Investment Trust.    

 

53

 

 

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                
MSCI Emerging Market Index     March 2020   68   3,430 (129)
MSCI EAFE Index     March 2020   25   2,270 (223)
                (352)
                 
Forward Currency Contracts                
  Contract           Unrealized Unrealized
Settlement       Contract Amount (000) Appreciation (Depreciation)
Counterparty Date   Receive   Deliver ($000) ($000)
BNP Paribas 4/2/20 USD 722 JPY 77,957 — (2)

JPY—Japanese Yen. 

USD—U.S. dollar.

 

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

 

54

 

 

ESG International Stock ETF

 

Statement of Assets and Liabilities 

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $694,673) 680,484
Affiliated Issuers (Cost $9,337) 9,338
Total Investments in Securities 689,822
Investment in Vanguard 30
Cash 3
Foreign Currency, at Value (Cost $504) 497
Receivables for Investment Securities Sold 8
Receivables for Accrued Income 1,359
Total Assets 691,719
Liabilities  
Payables for Investment Securities Purchased 4
Collateral for Securities on Loan 5,793
Payables to Vanguard 48
Variation Margin Payable—Futures Contracts 29
Unrealized Depreciation—Forward Currency Contracts 2
Other Liabilities 27
Total Liabilities 5,903
Net Assets 685,816

 

At February 29, 2020, net assets consisted of:

  
   
Paid-in Capital 702,180
Total Distributable Earnings (Loss) (16,364)
Net Assets 685,816
   
Net Assets  
Applicable to 14,100,000 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 685,816
Net Asset Value Per Share $48.64

 

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

 

55

 

 

ESG International Stock ETF

 

Statement of Operations

 

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Dividends1 5,296
Interest2 19
Securities Lending—Net 30
Total Income 5,345
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 42
Management and Administrative 325
Marketing and Distribution 19
Custodian Fees 56
Shareholders’ Reports 4
Trustees’ Fees and Expenses —
Total Expenses 446
Expenses Paid Indirectly (23)
Net Expenses 423
Net Investment Income 4,922
Realized Net Gain (Loss)  
Investment Securities Sold2 (269)
Futures Contracts 128
Forward Currency Contracts 10
Foreign Currencies 18
Realized Net Gain (Loss) (113)
Change in Unrealized Appreciation (Depreciation)  
Investment Securities2,3 (10,928)
Futures Contracts (364)
Forward Currency Contracts (2)
Foreign Currencies (26)
Change in Unrealized Appreciation (Depreciation) (11,320)
Net Increase (Decrease) in Net Assets Resulting from Operations (6,511)
1Dividends are net of foreign withholding taxes of $454,000.

2Interest 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.

3The change in unrealized appreciation (depreciation) is net of deferred foreign capital gains taxes of $27,000.

 

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

 

56

 

 

ESG International Stock ETF

 

Statement of Changes in Net Assets

 

    September 18,
  Six Months Ended   20181, to
  February 29,   August 31,
  2020 2019
  ($000)   ($000)
Increase (Decrease) in Net Assets      
Operations      
Net Investment Income 4,922 5,847
Realized Net Gain (Loss) (113) (1,830)
Change in Unrealized Appreciation (Depreciation) (11,320) (3,271)
Net Increase (Decrease) in Net Assets Resulting from Operations (6,511) 746
Distributions2      
Total Distributions (6,879) (3,720)
Capital Share Transactions      
Issued 280,792 421,388
Issued in Lieu of Cash Distributions —   —
Redeemed —   —
Net Increase (Decrease) from Capital Share Transactions 280,792 421,388
Total Increase (Decrease) 267,402 418,414
Net Assets      
Beginning of Period 418,414   —
End of Period 685,816 418,414

1Inception.

2Certain prior period numbers have been reclassified to conform with current period presentation.

 

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

  

57

 

 

ESG International Stock ETF

 

Financial Highlights

 

     Six Months      Sept. 18,  
     Ended      20181 to  
     Feb. 29,      Aug. 31,  
For a Share Outstanding Throughout Each Period    2020      2019  
Net Asset Value, Beginning of Period  $48.09   $50.00 
Investment Operations          
Net Investment Income2   .450    1.529 
Net Realized and Unrealized Gain (Loss) on Investments   .764    (2.714)
Total from Investment Operations   1.214    (1.185)
Distributions          
Dividends from Net Investment Income   (.664)   (.725)
Distributions from Realized Capital Gains   —    — 
Total Distributions   (.664)   (.725)
Net Asset Value, End of Period  $48.64   $48.09 
           
Total Return   2.46%   -2.36%
           
Ratios/Supplemental Data          
Net Assets, End of Period (Millions)  $686   $418 
Ratio of Total Expenses to Average Net Assets   0.16%3   0.17%3,4
Ratio of Net Investment Income to Average Net Assets   1.68%   3.30%4
Portfolio Turnover Rate   6%   22%

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

1Inception.

2Calculated based on average shares outstanding.

3The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.15%.

4Annualized.

 

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

  

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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 Schedule of Investments.

 

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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 Schedule of Investments. 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 Schedule of Investments. 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 gains (losses) on futures or forward currency contracts.

 

During the six months ended February 29, 2020, 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 less than 1% 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 its open federal income tax year ended August 31, 2019, and for the period ended February 29, 2020, 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 at the fiscal year-end 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

 

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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 and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. 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. Foreign capital gains tax is accrued daily based upon net unrealized gains. 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.

 

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ESG International Stock ETF

 

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, 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 29, 2020, the fund had contributed to Vanguard capital in the amount of $30,000, representing less than 0.01% of the fund’s net assets and 0.01% of Vanguard’s capital received pursuant to the FSA. 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 29, 2020, custodian fee offset arrangements reduced the fund’s expenses by $23,000 (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.

 

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 Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
Common Stocks—North and South America 68,570 1,479 — 70,049
Common Stocks—Other 21,112 588,895 92 610,099
Temporary Cash Investments 9,338 336 — 9,674
Total 99,020 590,710 92 689,822
Derivative Financial Instruments        
Liabilities        
Futures Contracts1 29 — — 29
Forward Currency Contracts — 2 — 2
Total 29 2 — 31

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

 

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E. At February 29, 2020, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:

 

    Foreign  
  Equity Exchange  
  Contracts Contracts Total
Statement of Assets and Liabilities Caption ($000) ($000) ($000)
Variation Margin Payable—Futures Contracts 29 — 29
Unrealized Depreciation—Forward Currency Contracts — 2 2
Total Liabilities 29 2 31

 

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 29, 2020, were:

 

    Foreign  
  Equity Exchange  
  Contracts Contracts Total
Realized Net Gain (Loss) on Derivatives ($000) ($000) ($000)
Futures Contracts 128 — 128
Forward Currency Contracts — 10 10
Realized Net Gain (Loss) on Derivatives 128 10 138
       
Change in Unrealized Appreciation (Depreciation) on Derivatives      
Futures Contracts (364) — (364)
Forward Currency Contracts — (2) (2)
Change in Unrealized Appreciation (Depreciation) on Derivatives (364) (2) (366)

 

F. As of February 29, 2020, 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 704,850
Gross Unrealized Appreciation 39,711
Gross Unrealized Depreciation (55,093)
Net Unrealized Appreciation (Depreciation) (15,382)

 

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, 2019, the fund had available capital losses totaling $1,572,000 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, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

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G.  During the six months ended February 29, 2020, the fund purchased $309,099,000 of investment securities and sold $34,563,000 of investment securities, other than temporary cash investments. Purchases and sales include $226,145,000 and $0, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

H.Capital shares issued and redeemed were:

 

  Six Months Ended   September 18, 20181 to
  February 29, 2020   August 31, 2019
  Shares   Shares
  (000)   (000)
Issued 5,400   8,700
Issued in Lieu of Cash Distributions —   —
Redeemed —   —
Net Increase (Decrease) in Shares Outstanding 5,400   8,700
1 Inception.      

 

At February 29, 2020, one shareholder was the record or beneficial owner of 34% of the fund’s net assets. If this shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

 

I. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

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Connect with Vanguard® >. vanguard com

 

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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.

 

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, www.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 www.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.

 

© 2020 The Vanguard Group, Inc.
  All rights reserved.
  Vanguard Marketing Corporation, Distributor.
   
  Q43942 042020

 

 

 

 

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 17, 2020

 

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 17, 2020

 

VANGUARD WORLD FUND

 

BY:        /s/ JOHN BENDL*

___________________________

JOHN BENDL

CHIEF FINANCIAL OFFICER

 

Date: April 17, 2020

 

 

* By: /s/ Anne E. Robinson

Anne E. Robinson, pursuant to a Power of Attorney filed on January 18, 2018  (see file Number 33-32216) and a Power of Attorney filed on October 30, 2019  (see file Number 811-02554), Incorporated by Reference.