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: | 811-07443 | |
Name of Registrant: | Vanguard Whitehall Funds | |
Address of Registrant: | P.O. Box 2600 | |
Valley Forge, PA 19482 | ||
Name and address of agent for service: | Heidi Stam, Esquire | |
P.O. Box 876 | ||
Valley Forge, PA 19482 | ||
Registrant’s telephone number, including area code: (610) 669-1000 | ||
Date of fiscal year end: October 31 | ||
Date of reporting period: November 1, 2015 – April 30, 2016 | ||
Item 1: Reports to Shareholders |
Semiannual Report | April 30, 2016
Vanguard Selected Value Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisors’ Report. | 8 |
Fund Profile. | 12 |
Performance Summary. | 13 |
Financial Statements. | 14 |
About Your Fund’s Expenses. | 25 |
Trustees Approve Advisory Arrangements. | 27 |
Glossary. | 29 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended April 30, 2016 | |
Total | |
Returns | |
Vanguard Selected Value Fund | 1.19% |
Russell Midcap Value Index | 3.16 |
Mid-Cap Value Funds Average | 0.91 |
Mid-Cap Value Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Your Fund’s Performance at a Glance | ||||
October 31, 2015, Through April 30, 2016 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Selected Value Fund | $28.15 | $26.97 | $0.443 | $1.024 |
1
Chairman’s Letter
Dear Shareholder,
For the six months ended April 30, 2016, Vanguard Selected Value Fund returned a little more than 1%. This result was about 2 percentage points behind the fund’s benchmark, the Russell Midcap Value Index, but a bit ahead of the average return of its mid-cap value fund peers.
Selected Value’s holdings in the materials sector offered a huge advantage compared with the benchmark, but even stellar results there couldn’t offset notable weakness in other areas, including consumer discretionary, industrials, and financials.
On a separate note, I’d like to express my appreciation to Barrow, Hanley, Mewhinney & Strauss, which has managed the Selected Value Fund since its inception and celebrated the fund’s 20th anniversary in February. Jim Barrow, the firm’s founding partner, is one of Vanguard’s longest-tenured portfolio managers and an exceptional investor and true partner in every sense of the word.
U.S. stocks traveled a rocky road, finishing the period about even
The broad U.S. stock market delivered flat returns for a half year marked by inconsistency, sharp declines, and even sharper rallies.
After struggling during the first four months of the period, U.S. stocks rebounded in the final two. Most of the surge came in March,
2
as investors cheered the Federal Reserve’s indication that it would scale back its original plan for interest rate hikes in 2016. Continued aggressive stimulus by central bankers in Europe and Asia and a recovery in oil prices also helped.
International stocks traced an even rockier path than their U.S. counterparts en route to modestly negative returns. Developed markets, especially Europe, notched weak results, while emerging markets managed a slight advance.
Bonds have proved attractive with some help from the Fed
The broad U.S. bond market returned 2.82% for the half year. After retreating in November and December, the bond market recorded positive results for each of the next four months. It also received a boost from the Fed’s cautious approach to raising short-term interest rates.
The yield of the 10-year U.S. Treasury note closed at 1.83% at the end of April, down from 2.17% six months earlier. (Bond prices and yields move in opposite directions.)
Even though the Fed raised short-term interest rates a quarter percentage point in December, the target rate of 0.25%–0.5% is still very low historically, and it restrained returns for money market funds and savings accounts.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 8.72%. In a reversal from the trend of recent years, foreign currencies
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 0.22% | 0.34% | 10.81% |
Russell 2000 Index (Small-caps) | -1.90 | -5.94 | 6.98 |
Russell 3000 Index (Broad U.S. market) | 0.06 | -0.18 | 10.50 |
FTSE All-World ex US Index (International) | -1.52 | -10.65 | 0.25 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 2.82% | 2.72% | 3.60% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.55 | 5.29 | 5.37 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.08 | 0.10 | 0.05 |
CPI | |||
Consumer Price Index | 0.60% | 1.13% | 1.25% |
3
strengthened against the dollar, helping international bonds. Even without this currency benefit, however, international bond returns were solid.
The fund’s materials stocks surged, but couldn’t offset losses elsewhere
Selected Value’s three advisors––Barrow, Hanley, Mewhinney & Strauss; Pzena Investment Management; and Donald Smith & Co.––do extensive research as they construct their respective portions of the fund. Their methods vary, but all three advisors search and screen for attractive stocks that haven’t been adequately appreciated by the market.
Because your fund’s holdings tend to differ greatly from what is in the benchmark, its results often diverge from those of the benchmark. At times, the advisors’ conviction and patience means that periods of underperformance are necessary for the fund to achieve strong long-term results.
Consumer discretionary stocks hurt results the most, as the fund’s relatively large exposure to the slumping sector, as well as its specific holdings, weighed on returns. Much of the difficulty came from cruise lines, but auto component firms and apparel retailers and manufacturers also struggled.
The financials sector—the fund’s largest—was another source of trouble, with asset managers detracting the most. The fund’s industrial, energy, consumer staples, and information technology holdings also lagged their counterparts in the benchmark.
Expense Ratios | ||
Your Fund Compared With Its Peer Group | ||
Peer Group | ||
Fund | Average | |
Selected Value Fund | 0.39% | 1.25% |
The fund expense ratio shown is from the prospectus dated February 25, 2016, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2016, the fund’s annualized expense ratio was 0.39%. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2015.
Peer group: Mid-Cap Value Funds.
4
Do U.S.-based multinationals provide enough global diversification? |
Some investors believe that their portfolios get enough exposure to international stocks |
through their holdings in large-capitalization, multinational U.S. companies such as the ones |
represented in the Standard & Poor’s 500 Index. After all, those firms generated almost half |
of their total sales outside the United States in 2014.* |
However, international exposure based only on a broad index of U.S.-based companies would |
be patchy at best. The near-even split of domestic and foreign sales for S&P 500 companies |
is an average; when you look at individual sectors, a different picture emerges. Information |
technology firms earned the highest percentage of sales abroad (almost 60% in 2014). Utilities |
and telecommunication services, which tend to operate regionally or nationally, generated the |
least overseas revenue. |
As the chart below shows, such a portfolio would also differ significantly from a broadly |
diversified global portfolio in some sector weightings. It would, for example, have more |
exposure to IT and health care stocks and considerably less to materials and financials. |
The bottom line: Large-cap U.S. stocks can give you a degree of exposure to international |
economic and market forces, but not to the same extent as a combination of both U.S. and |
non-U.S. stocks. |
S&P 500 Index sector weightings vary from those of global stocks |
(Differences in percentage points) |
Notes: Data are 12-month-average sector weightings as of March 31, 2016. Global stocks are represented by the FTSE All-World Index. |
Sources: Vanguard calculations, based on data from S&P Dow Jones Indices LLC and FTSE International Limited. |
* All S&P 500 Index and sector revenue data are from S&P Dow Jones Indices LLC for 2014. |
There are additional risks when investing outside the United States, including the possibility that returns will be hurt |
by a decline in the value of foreign currencies or by unfavorable developments in a particular country or region. |
5
Selected Values’ utilities and health care stocks outperformed their benchmark counterparts. Because the fund held these sectors lightly, however, their returns didn’t have much of an effect on its overall returns.
Although your fund suffered its share of setbacks, there were some successes. As I mentioned earlier, its materials stocks soared. The sector returned about 65% for the fund—nearly four times as much as it returned for the benchmark. Most of the fund’s strength in the sector came from the precious metals and mining industry. Gold and other precious metals, which had declined in recent years—and are extremely volatile—rallied during the period as the weaker U.S. dollar boosted dollar-denominated commodities.
You can find more information on the fund’s positioning and performance in the Advisors’ Report that follows this letter.
Whether it’s index or active, low costs and talent matter
If you listen to some investing pundits, you might think index investing and actively managed investing are incompatible opposites. We at Vanguard don’t see it that way.
To us, it’s not index versus active. In fact, depending on your goals, it could well be index and active.
Vanguard is known as a pioneer in index investing. In 1976, we opened the first index mutual fund, giving shareholders an opportunity to track the performance of the S&P 500 Index. But our roots in active management—which aims to choose investments that will outperform the market—go back to the 1929 launch of what later became Vanguard Wellington™ Fund.
Our index and active funds share important traits. Both are low-cost, and as their assets grow, we can take advantage of the economies of scale by further reducing fund expense ratios. That allows you to keep more of your fund’s returns.
And low costs aren’t the whole story. Talent and experience are vital, regardless of what a fund’s management style might be.
When it comes to indexing, portfolio managers in our Equity Index Group and Fixed Income Group have honed their expertise over decades. That expertise helps our index funds meet their objectives of closely tracking their benchmarks.
Our active funds, too, benefit from world-class managers—both our own experts and premier money managers we hire from around the globe. There’s no guarantee that active management will lead to market-beating results, but the combination of talent and low costs can give investors a better chance of success.
6
If you’d like to know more, see Keys to Improving the Odds of Active Management Success and The Case for Index-Fund Investing, available at vanguard.com/research.
As always, thank you for investing with Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
May 16, 2016
7
Advisors’ Report
For the six months ended April 30, 2016, Vanguard Selected Value Fund returned 1.19%. Your fund is managed by three independent advisors. This provides exposure to distinct yet complementary investment approaches, enhancing the fund’s diversification. It is not uncommon for different advisors to have different views about individual securities or the broader investment environment.
The advisors, the percentage and amount of fund assets each manages, and a brief description of their investment strategies
are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal period and of how portfolio positioning reflects this assessment. These comments were prepared on May 20, 2016.
Please note that the Pzena Investment Management discussion refers to industry sectors as defined by Russell classifications rather than the Global Industry Classification Standard used elsewhere in this report. These comments were prepared on November 17, 2015.
Vanguard Selected Value Fund Investment Advisors | ||||
Fund Assets Managed | ||||
Investment Advisor | % | $ Million | Investment Strategy | |
Barrow, Hanley, Mewhinney & | 62 | 5,844 | Conducts fundamental research on individual stocks | |
Strauss, LLC | exhibiting traditional value characteristics: | |||
price/earnings and price/book ratios below the market | ||||
average and dividend yields above the market average. | ||||
Pzena Investment Management, | 19 | 1,761 | Uses a fundamental, bottom-up, deep-value-oriented | |
LLC | investment strategy. Seeks to buy good businesses at | |||
low prices, focusing exclusively on companies that are | ||||
underperforming their historically demonstrated | ||||
earnings power. | ||||
Donald Smith & Co., Inc. | 18 | 1,665 | Conducts fundamental research on the lowest | |
price-to-tangible book value companies. Research | ||||
focuses on underlying quality of book value and assets, | ||||
and on long-term earnings potential. | ||||
Cash Investments | 1 | 49 | These short-term reserves are invested by Vanguard in | |
equity index products to simulate investment in stocks. | ||||
Each advisor may also maintain a cash position. |
8
Barrow, Hanley, Mewhinney &
Strauss, LLC
Portfolio Managers:
James P. Barrow,
Executive Director
Mark Giambrone,
Managing Director
The markets have seen a great deal of uncertainty and volatility in the last six months, which created significant head-winds for our strategy. We ended 2015 with the first Federal Reserve rate increase and the announcement that further increases would occur in 2016. However, within months, significant global concerns steered the Fed’s discussions toward recession and negative interest rates. This scenario could not have been worse for our expectations and positioning, both of which are rooted in our belief that rates will slowly rise, economic growth will continue, and there will be some global stability.
As a consequence of the global concerns noted above, areas of the market that were already expensive but which benefit from lower rates and their defensive characteristics—such as utilities and REITs (real estate investment trusts), where we are underweight—did well. But groups that need interest rates and the economy to improve steadily, like consumer discretionary, consumer finance, and industrials, where we are overweight, did poorly. We believe that we are positioned appropriately for where the value is in the market and that we are past the point of maximum uncertainty; we expect our performance to slowly recover throughout the year. Given that an election year creates its own uncertainty, and usually some pressure on health-care-related names (where we are overweight), we believe that it may take getting through the election to remove the largest overhang. After that, we would expect valuations and cash flows to matter most. The portfolio is well situated for such an environment.
We continue to benefit from a pickup in merger and acquisition activity, as both St. Jude Medical and Tyco International were taken out during the period. If we are finding good companies with attractive valuations and cash flow, and the market doesn’t recognize this, it is a proof statement of our process to then see a financial or strategic buyer come along.
We are underweighted in utilities, information technology, energy, and REITs. We believe that traditional yield plays like utilities and REITs have had substantial runs thanks to a continued low-interest rate environment and that they have very little room for valuation upside or meaningful yield relative to their own histories. We also see considerable risk to their valuation levels when interest rates rise.
9
Pzena Investment Management, LLC
Portfolio Managers: Richard Pzena, Founder, Chief Executive Officer, and Co-Chief Investment Officer John Flynn, Principal Eli Rabinowich, Principal
After a dramatic start to the year, markets stabilized and recovered in March. The portfolio’s performance was driven by strong stock selection in the energy and producer durable sectors, which was offset by exposure to interest rate-sensitive financials. On a relative basis, the portfolio lagged because of lower exposure to sectors that perform well in a lower-interest rate environment, although that drag was partially offset by lower exposure to health care.
Murphy Oil, Terex, and Edison International were the top contributors. Murphy Oil suffered until oil prices rebounded in February. We took advantage of the weakness to increase our position and the stock then rallied as the oil market showed signs of stabilizing. Terex shot up in January on rumors of an unsolicited offer from Chinese construction equipment firm Zoomlion. The two parties continued to negotiate the deal and the offer currently stands at $31 per share versus Terex’s current share price of $25. Edison International performed well, as utilities in general outperformed against a backdrop of “lower for longer” interest rate expectations.
News Corp., Legg Mason, and Dana Holding Corp. were the top three detractors. News Corp. was down because of sharp earnings declines in its newspapers, books, Fox Sports (Australia), and Foxtel segments. The conglomerate’s only business segment to perform well was digital real estate. Legg Mason declined as the investment management industry continued to face outflows and the firm took on debt to make seemingly expensive acquisitions. Dana Holding performed poorly on weak earnings. The continuous miss was driven by currency effects and weak commercial vehicle demand in South America, especially Brazil. Dana Holding also revised its guidance downward because of weak demand in South America and Asia.
The portfolio remains focused on economically sensitive names. We increased our energy positions and decreased our exposure to health care. Overall, we continue to see very attractive valuation spreads and to find compelling investment opportunities.
10
Donald Smith & Co., Inc.
Portfolio Managers:
Donald G. Smith,
Chief Investment Officer
Richard L. Greenberg, CFA,
Senior Vice President
The portfolio continues to meet our criteria of owning a concentrated portfolio of low price-to-tangible book value stocks with attractive long-term earnings potential. The portfolio currently sells at 114% of tangible book value and 8 times our estimate of normalized earnings. In contrast, the S&P 500 sells at over 600% of tangible book value and 16 times normalized earnings.
The rebound in precious metals accounted for the vast majority of returns, with Kinross Gold Corporation and Yamana Gold returning 183.6% and 126.0%, respectively. Other large positive contributors included Ingram Micro (+17.4%), which agreed to be acquired by a Chinese company; WPX Energy (+40.8%); and Air France-KLM (+23.8%). The two largest negative contributors were Micron Technology (–35.1%) and JetBlue Airways (–20.3%).
We eliminated the following names from the portfolio: Coeur Mining, New Gold, American National Insurance Company,
Valero Energy Corporation, Royal Caribbean Cruises, and Validus Holdings. We added one name, Axis Capital Holdings, at a share price of $55.04. Axis is a Bermuda-based insurer/reinsurer. In 2015, the unraveling of a merger deal with PartnerRe provided Axis with a $280 million break fee. The company has been returning this fee, plus all annual earnings, to shareholders through an aggressive stock buyback. Management had wisely decided to grow the firm organically rather than through dilutive acquisitions. Returns should gradually improve as a result of expense savings and more efficient use of capital. We estimate that the current book value of approximately $55 per share is understated by $5–$10 per share in redundant reserves.
There are some signs that value is beginning to outperform growth after a long period of underperforming it: The Russell Midcap Value Index returned 6.15% for the first four months of 2016, while the Russell Midcap Growth Index returned 0.52%. It is interesting to note that 45% of the companies in the portfolio have active stock repurchase programs. We view these repurchases as accretive to long-term shareholder value, with the stocks, on average, selling below tangible book value. Our largest industry weightings are to precious metals, insurance, airlines/ aircraft leasing, and technology.
11
Selected Value Fund
Fund Profile
As of April 30, 2016
Portfolio Characteristics | |||
DJ | |||
U.S. | |||
Russell | Total | ||
Midcap | Market | ||
Value | FA | ||
Fund | Index | Index | |
Number of Stocks | 120 | 558 | 3,887 |
Median Market Cap | $10.5B | $10.4B | $51.6B |
Price/Earnings Ratio | 18.5x | 26.4x | 22.0x |
Price/Book Ratio | 1.7x | 1.8x | 2.7x |
Return on Equity | 11.8% | 9.7% | 16.8% |
Earnings Growth | |||
Rate | 9.2% | 5.5% | 7.8% |
Dividend Yield | 2.1% | 2.3% | 2.1% |
Foreign Holdings | 11.3% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 28% | — | — |
Ticker Symbol | VASVX | — | — |
Expense Ratio1 | 0.39% | — | — |
30-Day SEC Yield | 1.58% | — | — |
Short-Term | |||
Reserves | 4.5% | — | — |
Sector Diversification (% of equity exposure) | |||
DJ | |||
U.S. | |||
Russell | Total | ||
Midcap | Market | ||
Value | FA | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 13.7% | 8.1% | 13.5% |
Consumer Staples | 3.1 | 4.4 | 9.0 |
Energy | 7.2 | 9.1 | 6.7 |
Financials | 28.5 | 32.7 | 17.8 |
Health Care | 6.2 | 5.8 | 14.1 |
Industrials | 19.9 | 9.9 | 10.8 |
Information | |||
Technology | 8.9 | 8.9 | 19.0 |
Materials | 7.7 | 6.7 | 3.3 |
Telecommunication | |||
Services | 0.0 | 1.6 | 2.4 |
Utilities | 4.8 | 12.8 | 3.4 |
Volatility Measures | ||
Russell | DJ | |
Midcap | U.S. Total | |
Value | Market | |
Index | FA Index | |
R-Squared | 0.89 | 0.88 |
Beta | 1.02 | 1.03 |
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months. | ||
Ten Largest Holdings (% of total net assets) | ||
Kinross Gold Corp. | Gold | 3.0% |
Reynolds American Inc. | Tobacco | 2.6 |
Owens Corning | Building Products | 2.5 |
Cigna Corp. | Managed Health | |
Care | 2.4 | |
Stanley Black & Decker | ||
Inc. | Industrial Machinery | 2.3 |
Tyco International plc | Security & Alarm | |
Services | 2.3 | |
Hanesbrands Inc. | Apparel, Accessories | |
& Luxury Goods | 2.2 | |
Royal Caribbean Cruises | Hotels, Resorts & | |
Ltd. | Cruise Lines | 2.2 |
Cardinal Health Inc. | Health Care | |
Distributors | 2.1 | |
Willis Towers Watson | ||
plc | Insurance Brokers | 2.0 |
Top Ten | 23.6% | |
The holdings listed exclude any temporary cash investments and equity index products. | ||
Investment Focus
1 The expense ratio shown is from the prospectus dated February 25, 2016, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2016, the annualized expense ratio was 0.39%.
12
Selected Value Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Fiscal-Year Total Returns (%): October 31, 2005, Through April 30, 2016
Average Annual Total Returns: Periods Ended March 31, 2016 | ||||
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period. | ||||
Securities and Exchange Commission rules require that we provide this information. | ||||
Inception | One | Five | Ten | |
Date | Year | Years | Years | |
Selected Value Fund | 2/15/1996 | -3.87% | 9.86% | 7.59% |
See Financial Highlights for dividend and capital gains information.
13
Selected Value Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2016
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (96.8%)1 | |||
Consumer Discretionary (13.2%) | |||
Hanesbrands Inc. | 7,078,200 | 205,480 | |
Royal Caribbean | |||
Cruises Ltd. | 2,651,200 | 205,203 | |
Whirlpool Corp. | 1,018,900 | 177,431 | |
* | Norwegian Cruise Line | ||
Holdings Ltd. | 3,435,500 | 167,962 | |
L Brands Inc. | 1,889,800 | 147,952 | |
^,2 | SeaWorld | ||
Entertainment Inc. | 5,141,400 | 102,468 | |
News Corp. Class A | 4,150,475 | 51,549 | |
Interpublic Group of | |||
Cos. Inc. | 2,152,894 | 49,387 | |
Omnicom Group Inc. | 531,150 | 44,070 | |
Staples Inc. | 3,090,600 | 31,524 | |
Dana Holding Corp. | 2,360,300 | 30,519 | |
Meredith Corp. | 394,800 | 20,257 | |
1,233,802 | |||
Consumer Staples (2.9%) | |||
Reynolds American Inc. | 4,973,276 | 246,674 | |
Kellogg Co. | 337,425 | 25,918 | |
272,592 | |||
Energy (7.0%) | |||
2 | PBF Energy Inc. Class A | 5,342,057 | 171,907 |
Devon Energy Corp. | 2,449,900 | 84,963 | |
^ | Golar LNG Ltd. | 4,546,708 | 75,384 |
Murphy Oil Corp. | 1,968,304 | 70,347 | |
^ | Noble Corp. plc | 3,160,316 | 35,490 |
Cenovus Energy Inc. | 2,004,475 | 31,751 | |
Apache Corp. | 556,900 | 30,295 | |
* | WPX Energy Inc. | 3,037,079 | 29,338 |
Superior Energy | |||
Services Inc. | 1,639,925 | 27,649 | |
Vermilion Energy Inc. | 618,300 | 21,282 | |
Baker Hughes Inc. | 437,251 | 21,146 | |
* | FMC Technologies Inc. | 637,475 | 19,437 |
Rowan Cos. plc Class A | 996,725 | 18,748 | |
Nabors Industries Ltd. | 885,000 | 8,673 |
Market | |||
Value• | |||
Shares | ($000) | ||
^ | Tidewater Inc. | 556,400 | 4,874 |
*,^ | Paragon Offshore plc | 870,105 | 305 |
651,589 | |||
Financials (27.7%) | |||
Willis Towers Watson plc | 1,529,844 | 191,078 | |
Discover Financial | |||
Services | 3,217,300 | 181,037 | |
Host Hotels & | |||
Resorts Inc. | 10,279,000 | 162,614 | |
Fifth Third Bancorp | 8,811,675 | 161,342 | |
Capital One Financial | |||
Corp. | 2,207,600 | 159,808 | |
Unum Group | 4,292,805 | 146,857 | |
New York Community | |||
Bancorp Inc. | 9,056,200 | 136,115 | |
Ameriprise Financial Inc. | 1,314,700 | 126,080 | |
Navient Corp. | 8,676,447 | 118,607 | |
Everest Re Group Ltd. | 448,462 | 82,921 | |
^ | People’s United | ||
Financial Inc. | 5,287,000 | 81,949 | |
Axis Capital Holdings Ltd. | 1,509,138 | 80,392 | |
Corporate Office | |||
Properties Trust | 2,812,800 | 72,233 | |
CNA Financial Corp. | 2,259,996 | 71,416 | |
Valley National Bancorp | 6,006,800 | 56,824 | |
XL Group plc Class A | 1,631,430 | 53,397 | |
Lamar Advertising Co. | |||
Class A | 840,850 | 52,166 | |
KeyCorp | 4,077,700 | 50,115 | |
Voya Financial Inc. | 1,497,390 | 48,620 | |
^ | Element Financial Corp. | 4,215,200 | 47,302 |
Torchmark Corp. | 735,933 | 42,603 | |
First Niagara Financial | |||
Group Inc. | 3,743,500 | 39,531 | |
Regions Financial Corp. | 4,105,725 | 38,512 | |
Comerica Inc. | 787,450 | 34,963 | |
Invesco Ltd. | 1,113,675 | 34,535 | |
Franklin Resources Inc. | 913,575 | 34,113 | |
* | SLM Corp. | 4,507,900 | 30,518 |
14
Selected Value Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Validus Holdings Ltd. | 541,925 | 24,977 | |
Webster Financial Corp. | 668,525 | 24,495 | |
MFA Financial Inc. | 3,014,000 | 20,827 | |
Legg Mason Inc. | 639,775 | 20,543 | |
EPR Properties | 288,275 | 18,992 | |
Allstate Corp. | 269,225 | 17,513 | |
Endurance Specialty | |||
Holdings Ltd. | 260,000 | 16,635 | |
Aspen Insurance | |||
Holdings Ltd. | 353,251 | 16,373 | |
Progressive Corp. | 495,225 | 16,144 | |
Hospitality Properties Trust | 583,800 | 14,939 | |
Hartford Financial Services | |||
Group Inc. | 313,800 | 13,926 | |
Synovus Financial Corp. | 420,221 | 13,094 | |
FNF Group | 379,100 | 12,093 | |
* | Genworth Financial Inc. | ||
Class A | 2,224,850 | 7,631 | |
Assurant Inc. | 80,045 | 6,769 | |
RMR Group Inc. Class A | 9,691 | 242 | |
2,580,841 | |||
Health Care (6.0%) | |||
Cigna Corp. | 1,646,700 | 228,134 | |
Cardinal Health Inc. | 2,448,100 | 192,078 | |
St. Jude Medical Inc. | 1,544,200 | 117,668 | |
Aetna Inc. | 154,800 | 17,379 | |
555,259 | |||
Industrials (19.4%) | |||
Owens Corning | 5,140,582 | 236,827 | |
Stanley Black & | |||
Decker Inc. | 1,899,775 | 212,623 | |
Tyco International plc | 5,470,000 | 210,704 | |
* | AerCap Holdings NV | 4,273,188 | 170,970 |
* | Spirit AeroSystems | ||
Holdings Inc. Class A | 3,070,507 | 144,774 | |
Eaton Corp. plc | 2,283,000 | 144,445 | |
^ | CNH Industrial NV | 16,692,100 | 129,197 |
KBR Inc. | 6,720,300 | 104,568 | |
* | JetBlue Airways Corp. | 5,138,340 | 101,688 |
Ryder System Inc. | 1,140,400 | 78,596 | |
* | Air France-KLM ADR | 7,538,085 | 68,220 |
Parker-Hannifin Corp. | 427,475 | 49,596 | |
* | AECOM | 1,380,510 | 44,853 |
Dover Corp. | 664,325 | 43,646 | |
Terex Corp. | 1,650,377 | 39,427 | |
Actuant Corp. Class A | 1,038,025 | 27,726 | |
1,807,860 | |||
Information Technology (8.6%) | |||
Ingram Micro Inc. | 4,595,009 | 160,596 | |
Microchip Technology Inc. | 2,544,500 | 123,637 | |
Total System Services Inc. | 2,336,836 | 119,506 | |
* | Micron Technology Inc. | 8,980,588 | 96,541 |
* | ON Semiconductor Corp. | 4,216,096 | 39,926 |
Avnet Inc. | 960,391 | 39,491 |
Market | |||
Value• | |||
Shares | ($000) | ||
Hewlett Packard | |||
Enterprise Co. | 2,214,625 | 36,896 | |
* | Flextronics | ||
International Ltd. | 2,982,200 | 36,234 | |
* | Celestica Inc. | 2,855,249 | 30,637 |
* | Genpact Ltd. | 1,016,327 | 28,345 |
HP Inc. | 2,175,125 | 26,689 | |
Seagate Technology plc | 1,115,225 | 24,279 | |
* | Arrow Electronics Inc. | 304,204 | 18,891 |
Jabil Circuit Inc. | 711,890 | 12,358 | |
CDW Corp. | 145,485 | 5,601 | |
799,627 | |||
Materials (7.4%) | |||
* | Kinross Gold Corp. | 49,757,791 | 283,620 |
CRH plc ADR | 5,655,100 | 164,620 | |
FMC Corp. | 3,211,400 | 138,925 | |
Yamana Gold Inc. | |||
(New York Shares) | 19,703,040 | 97,530 | |
684,695 | |||
Utilities (4.6%) | |||
Pinnacle West | |||
Capital Corp. | 2,203,500 | 160,084 | |
Xcel Energy Inc. | 3,348,437 | 134,038 | |
CenterPoint Energy Inc. | 2,234,617 | 47,933 | |
Edison International | 558,150 | 39,467 | |
Exelon Corp. | 607,518 | 21,318 | |
PG&E Corp. | 312,425 | 18,183 | |
NRG Energy Inc. | 796,234 | 12,023 | |
433,046 | |||
Total Common Stocks | |||
(Cost $7,238,683) | 9,019,311 | ||
Temporary Cash Investments (6.0%)1 | |||
Money Market Fund (5.9%) | |||
3,4 | Vanguard Market | ||
Liquidity Fund, | |||
0.495% | 553,791,981 | 553,792 | |
Face | |||
Amount | |||
($000) | |||
U.S. Government and Agency Obligations (0.1%) | |||
5,6 | Federal Home Loan Bank | ||
Discount Notes, | |||
0.431%, 7/22/16 | 2,000 | 1,999 | |
5,6 | Federal Home Loan Bank | ||
Discount Notes, | |||
0.516%, 8/31/16 | 5,000 | 4,994 | |
6,993 | |||
Total Temporary Cash Investments | |||
(Cost $560,781) | 560,785 | ||
Total Investments (102.8%) | |||
(Cost $7,799,464) | 9,580,096 |
15
Selected Value Fund
Market | |
Value• | |
($000) | |
Other Assets and Liabilities (-2.8%) | |
Other Assets | 230,040 |
Liabilities | (491,028) |
(260,988) | |
Net Assets (100%) | |
Applicable to 345,590,032 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 9,319,108 |
Net Asset Value Per Share | $26.97 |
Amount | |
($000) | |
Statement of Assets and Liabilities | |
Assets | |
Investments in Securities, at Value | |
Unaffiliated Issuers | 8,751,929 |
Affiliated Vanguard Funds | 553,792 |
Other Affiliated Issuers | 274,375 |
Total Investments in Securities | 9,580,096 |
Investment in Vanguard | 785 |
Receivables for Investment | |
Securities Sold | 214,201 |
Receivables for Accrued Income | 9,956 |
Receivables for Capital Shares Issued | 4,799 |
Other Assets | 299 |
Total Assets | 9,810,136 |
Liabilities | |
Payables for Investment Securities | |
Purchased | 141,663 |
Collateral for Securities on Loan | 67,668 |
Payables to Investment Advisor | 4,576 |
Payables for Capital Shares Redeemed | 264,319 |
Payables to Vanguard | 11,985 |
Other Liabilities | 817 |
Total Liabilities | 491,028 |
Net Assets | 9,319,108 |
At April 30, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 7,451,558 |
Undistributed Net Investment Income | 41,815 |
Accumulated Net Realized Gains | 45,115 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 1,780,632 |
Futures Contracts | 33 |
Foreign Currencies | (45) |
Net Assets | 9,319,108 |
• 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 $59,693,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 97.5% and 5.3%, respectively, of net assets.
2 Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
4 Includes $67,668,000 of collateral received for securities on loan.
5 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
6 Securities with a value of $5,994,000 have been segregated as initial margin for open futures contracts.
ADR—American Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
16
Selected Value Fund
Statement of Operations
Six Months Ended | |
April 30, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 102,264 |
Interest | 841 |
Securities Lending | 550 |
Total Income | 103,655 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 9,896 |
Performance Adjustment | (644) |
The Vanguard Group—Note C | |
Management and Administrative | 7,408 |
Marketing and Distribution | 817 |
Custodian Fees | 46 |
Shareholders’ Reports | 98 |
Trustees’ Fees and Expenses | 5 |
Total Expenses | 17,626 |
Expenses Paid Indirectly | (123) |
Net Expenses | 17,503 |
Net Investment Income | 86,152 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 44,019 |
Futures Contracts | 6,814 |
Foreign Currencies | (1) |
Realized Net Gain (Loss) | 50,832 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | (25,732) |
Futures Contracts | (6,122) |
Foreign Currencies | (45) |
Change in Unrealized Appreciation (Depreciation) | (31,899) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 105,085 |
1 Dividends are net of foreign withholding taxes of $443,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
Selected Value Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 86,152 | 163,790 |
Realized Net Gain (Loss) | 50,832 | 379,722 |
Change in Unrealized Appreciation (Depreciation) | (31,899) | (444,590) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 105,085 | 98,922 |
Distributions | ||
Net Investment Income | (150,372) | (138,609) |
Realized Capital Gain1 | (347,588) | (401,073) |
Total Distributions | (497,960) | (539,682) |
Capital Share Transactions | ||
Issued | 1,024,226 | 1,787,330 |
Issued in Lieu of Cash Distributions | 457,613 | 496,488 |
Redeemed | (1,433,202) | (2,333,003) |
Net Increase (Decrease) from Capital Share Transactions | 48,637 | (49,185) |
Total Increase (Decrease) | (344,238) | (489,945) |
Net Assets | ||
Beginning of Period | 9,663,346 | 10,153,291 |
End of Period2 | 9,319,108 | 9,663,346 |
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $29,192,000 and $33,623,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes. | ||
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $41,815,000 and $106,036,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
18
Selected Value Fund
Financial Highlights
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | April 30, | Year Ended October 31, | ||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 |
Net Asset Value, Beginning of Period | $28.15 | $29.49 | $28.07 | $21.01 | $18.81 | $17.73 |
Investment Operations | ||||||
Net Investment Income | . 255 | .478 | .415 | . 395 | .405 | . 334 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | .032 | (.245) | 2.555 | 7.105 | 2.122 | 1.037 |
Total from Investment Operations | .287 | .233 | 2.970 | 7.500 | 2.527 | 1.371 |
Distributions | ||||||
Dividends from Net Investment Income | (. 443) | (. 404) | (. 330) | (. 440) | (. 327) | (. 291) |
Distributions from Realized Capital Gains | (1.024) | (1.169) | (1.220) | — | — | — |
Total Distributions | (1.467) | (1.573) | (1.550) | (.440) | (.327) | (.291) |
Net Asset Value, End of Period | $26.97 | $28.15 | $29.49 | $28.07 | $21.01 | $18.81 |
Total Return1 | 1.19% | 0.88% | 11.02% | 36.43% | 13.64% | 7.74% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $9,319 | $9,663 | $10,153 | $7,019 | $4,337 | $3,956 |
Ratio of Total Expenses to | ||||||
Average Net Assets2 | 0.39% | 0.39% | 0.41% | 0.43% | 0.38% | 0.45% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.86% | 1.62% | 1.53% | 1.70% | 2.00% | 1.74% |
Portfolio Turnover Rate | 28% | 24% | 18% | 27% | 18% | 25% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | ||||||
1 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. | ||||||
2 Includes performance-based investment advisory fee increases (decreases) of (0.01%), (0.02%), 0.01%, 0.02%, (0.03%), and 0.04%. |
See accompanying Notes, which are an integral part of the Financial Statements.
19
Selected Value Fund
Notes to Financial Statements
Vanguard Selected Value Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
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 acquired over 60 days to maturity 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. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. 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.
Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
During the six months ended April 30, 2016, the fund’s average investments in long and short futures contracts represented 1% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.
20
Selected Value 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 (October 31, 2012–2015), and for the period ended April 30, 2016, 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.
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 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 absence 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.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2016, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
21
Selected Value Fund
B. The investment advisory firms Barrow, Hanley, Mewhinney & Strauss, LLC, Donald Smith & Co., Inc., and Pzena Investment Management, 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 fee of Barrow, Hanley, Mewhinney & Strauss, LLC, is subject to quarterly adjustments based on performance relative to the Russell Midcap Value Index for the preceding three years. The basic fee of Donald Smith & Co., Inc., is subject to quarterly adjustments based on performance relative to the MSCI Investable Market 2500 Index for the preceding five years. The basic fee of Pzena Investment Management, LLC, is subject to quarterly adjustments based on performance relative to the Russell Midcap Value Index since April 30, 2014.
Vanguard manages the cash reserves of the fund as described below.
For the six months ended April 30, 2016, the aggregate investment advisory fee represented an effective annual basic rate of 0.22% of the fund’s average net assets, before a net decrease of $644,000 (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, distribution, and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Assets and Liabilities.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At April 30, 2016, the fund had contributed to Vanguard capital in the amount of $785,000, representing 0.01% of the fund’s net assets and 0.31% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
D. The fund has asked its investment advisors to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund’s management and administrative expenses. For the six months ended April 30, 2016, these arrangements reduced the fund’s expenses by $123,000 (an annual rate of 0.00% of average net assets).
E. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
22
Selected Value Fund
The following table summarizes the market value of the fund’s investments as of April 30, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 9,019,311 | — | — |
Temporary Cash Investments | 553,792 | 6,993 | — |
Futures Contracts—Assets1 | 33 | — | — |
Futures Contracts—Liabilities1 | (817) | — | — |
Total | 9,572,319 | 6,993 | — |
1 Represents variation margin on the last day of the reporting period. |
F. At April 30, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Aggregate | ||||
Number of | Settlement | Unrealized | ||
Long (Short) | Value | Appreciation | ||
Futures Contracts | Expiration | Contracts | Long (Short) | (Depreciation) |
E-mini S&P 500 Index | June 2016 | 600 | 61,773 | 33 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
G. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
At April 30, 2016, the cost of investment securities for tax purposes was $7,799,464,000. Net unrealized appreciation of investment securities for tax purposes was $1,780,632,000, consisting of unrealized gains of $2,403,618,000 on securities that had risen in value since their purchase and $622,986,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the six months ended April 30, 2016, the fund purchased $1,207,438,000 of investment securities and sold $1,220,206,000 of investment securities, other than temporary cash investments.
23
Selected Value Fund
I. Capital shares issued and redeemed were: | ||
Six Months Ended | Year Ended | |
April 30, 2016 | October 31, 2015 | |
Shares | Shares | |
(000) | (000) | |
Issued | 42,860 | 62,441 |
Issued in Lieu of Cash Distributions | 17,506 | 17,943 |
Redeemed | (58,007) | (81,402) |
Net Increase (Decrease) in Shares Outstanding | 2,359 | (1,018) |
J. 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 | ||||||
Oct. 31, | Proceeds | April 30, | ||||
2015 | from | Capital Gain | 2016 | |||
Market | Purchases | Securities | Distributions | Market | ||
Value | at Cost | Sold1 | Income | Received | Value | |
($000) | ($000) | ($000) | ($000) | ($000) | ($000) | |
PBF Energy Inc. Class A | NA2 | 100,381 | — | 2,288 | — | 171,907 |
SeaWorld Entertainment Inc. | 102,468 | — | — | 2,160 | — | 102,468 |
SPX FLOW Inc. | 84,631 | — | 52,087 | — | — | — |
Vanguard Market Liquidity Fund | 708,715 | NA3 | NA 3 | 820 | — | 553,792 |
Vanguard Mid-Cap Value ETF | 29,626 | — | 29,453 | 283 | — | — |
Total | 925,440 | 5,551 | — | 828,167 | ||
1 Includes net realized gain (loss) on affiliated investment securities sold of ($53,045,000). | ||||||
2 Not applicable—at October 31, 2015, the issuer was not an affiliated company of the fund. | ||||||
3 Not applicable—purchases and sales are for temporary cash investment purposes. |
K. Management has determined that no material events or transactions occurred subsequent to April 30, 2016, that would require recognition or disclosure in these financial statements.
24
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.
25
Six Months Ended April 30, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Selected Value Fund | 10/31/2015 | 4/30/2016 | Period |
Based on Actual Fund Return | $1,000.00 | $1,011.85 | $1.95 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,022.92 | 1.96 |
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 0.39%. 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). | |||
26
Trustees Approve Advisory Arrangements
The board of trustees of Vanguard Selected Value Fund has renewed the fund’s investment advisory arrangements with Barrow, Hanley, Mewhinney & Strauss, LLC (Barrow Hanley), Donald Smith & Co., Inc. (Donald Smith & Co.), and Pzena Investment Management, LLC (Pzena). The board determined that renewing the 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. The trustees 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:
Barrow Hanley. Founded in 1979, Barrow Hanley is known for its commitment to value investing. A subsidiary of Old Mutual Asset Managers, Barrow Hanley remains independently managed. Using fundamental research, Barrow Hanley seeks to make long-term investments in quality or improving businesses that are undervalued because of short-term disappointments. The firm seeks to construct a portfolio with strict adherence to valuation factors, with a below-average price-to-earnings and price-to-book value ratios, and above-average current yields. Barrow Hanley has advised the fund since its inception in 1996.
Donald Smith & Co. Founded in 1983, Donald Smith & Co. is a deep-value-oriented firm that manages large-, mid-, and small-capitalization value portfolios and employs a strictly bottom-up approach. The firm looks for companies in the bottom decile of price-to-tangible-book value in the benchmark and employs fundamental analysis to invest in those companies that it considers to be inexpensive relative to their estimated or normalized earnings power and to have solid balance sheets and asset quality. Donald Smith & Co. has managed a portion of the fund since 2005.
Pzena. Founded in 1995, Pzena is a global investment management firm that employs a deep-value investment approach. Pzena employs in-depth fundamental research to identify companies that are temporarily underperforming their long-term earnings power. Companies are purchased when Pzena judges that: (1) the company’s problems are temporary; (2) management has a viable strategy to generate recovery; and (3) there is meaningful downside protection in case the earnings recovery does not materialize. Pzena has advised a portion of the fund since 2014.
The board concluded that each advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangements.
Investment performance
The board considered the short- and long-term performance of the fund and each advisor, including any periods of outperformance or underperformance relative to a benchmark index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.
27
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. Information about the fund’s expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
The board did not consider profitability of Barrow Hanley, Donald Smith & Co., or Pzena 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 Barrow Hanley, Donald Smith & Co., and Pzena. 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.
28
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
29
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
30
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
InterestedTrustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International plc (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive plc |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
IndependentTrustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | ||
Partner of HighVista Strategies LLC (private investment | Mortimer J. Buckley | James M. Norris |
firm); Director of Rand Merchant Bank; Overseer of | Kathleen C. Gubanich | Thomas M. Rampulla |
the Museum of Fine Arts Boston. | Martha G. King | Glenn W. Reed |
John T. Marcante | Karin A. Risi | |
Peter F. Volanakis | Chris D. McIsaac | |
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
P.O. Box 2600 | ||
Valley Forge, PA 19482-2600 | ||
Connect with Vanguard® > vanguard.com | ||
Fund Information > 800-662-7447 | CFA® is a registered trademark owned by CFA Institute. | |
Direct Investor Account Services > 800-662-2739 | ||
Institutional Investor Services > 800-523-1036 | ||
Text Telephone for People | ||
Who Are Deaf or Hard of Hearing> 800-749-7273 | ||
This material may be used in conjunction | ||
with the offering of shares of any Vanguard | ||
fund only if preceded or accompanied by | ||
the fund’s current prospectus. | ||
All comparative mutual fund data are from Lipper, a | ||
Thomson Reuters Company, or Morningstar, Inc., unless | ||
otherwise noted. | ||
You can obtain a free copy of Vanguard’s proxy voting | ||
guidelines by visiting vanguard.com/proxyreporting or by | ||
calling Vanguard at 800-662-2739. The guidelines are | ||
also available from the SEC’s website, sec.gov. In | ||
addition, you may obtain a free report on how your fund | ||
voted the proxies for securities it owned during the 12 | ||
months ended June 30. To get the report, visit either | ||
vanguard.com/proxyreporting or sec.gov. | ||
You can review and copy information about your fund at | ||
the SEC’s Public Reference Room in Washington, D.C. To | ||
find out more about this public service, call the SEC at | ||
202-551-8090. Information about your fund is also | ||
available on the SEC’s website, and you can receive | ||
copies of this information, for a fee, by sending a | ||
request in either of two ways: via email addressed to | ||
publicinfo@sec.gov or via regular mail addressed to the | ||
Public Reference Section, Securities and Exchange | ||
Commission, Washington, DC 20549-1520. | ||
© 2016 The Vanguard Group, Inc. | ||
All rights reserved. | ||
Vanguard Marketing Corporation, Distributor. | ||
Q9342 062016 |
Semiannual Report | April 30, 2016
Vanguard Mid-Cap Growth Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisors’ Report. | 8 |
Fund Profile. | 12 |
Performance Summary. | 13 |
Financial Statements. | 14 |
About Your Fund’s Expenses. | 24 |
Trustees Approve Advisory Arrangements. | 26 |
Glossary. | 28 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended April 30, 2016 | |
Total | |
Returns | |
Vanguard Mid-Cap Growth Fund | -5.45% |
Russell Midcap Growth Index | -1.54 |
Mid-Cap Growth Funds Average | -3.35 |
Mid-Cap Growth Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Your Fund’s Performance at a Glance | ||||
October 31, 2015, Through April 30, 2016 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Mid-Cap Growth Fund | $24.88 | $21.76 | $0.070 | $1.770 |
1
Chairman’s Letter
Dear Shareholder,
For the six months ended April 30, 2016, Vanguard Mid-Cap Growth Fund returned –5.45%, trailing both its benchmark, the Russell Midcap Growth Index, and its mid-cap growth fund peers.
There was little difference between large-company stocks and those of smaller companies, while so-called value stocks outpaced growth stocks. Mid-Cap Growth underperformed its benchmark index in six industries, including financials, consumer discretionary, and health care.
The fund employs two investment advisors––Chartwell Investment Partners, LLC, and William Blair Investment Management, LLC. I’d like to congratulate Chartwell on its tenth anniversary of managing a portion of the fund’s assets, which occurred on February 1. William Blair will reach the same milestone on June 8.
U.S. stocks traveled a rocky road, finishing the period about even
The broad U.S. stock market delivered flat returns for a half year marked by inconsistency, sharp declines, and even sharper rallies.
After struggling during the first four months of the period, U.S. stocks rebounded in the final two. Most of the surge came in March as investors cheered the Federal Reserve’s
2
indication that it would scale back its original plan for interest rate hikes in 2016. Continued aggressive stimulus by central bankers in Europe and Asia and a recovery in oil prices also helped.
International stocks traced an even rockier path than their U.S. counterparts en route to modestly negative returns. Developed markets, especially Europe, notched weak results, while emerging markets managed a slight advance.
Bonds have proved attractive with some help from the Fed
The broad U.S. bond market returned 2.82% for the half year. After retreating in November and December, the bond market recorded positive results for each of the next four months. It also received a boost from the Fed’s cautious approach to raising short-term interest rates.
The yield of the 10-year U.S. Treasury note closed at 1.83% at the end of April, down from 2.17% six months earlier. (Bond prices and yields move in opposite directions.)
Even though the Fed raised short-term interest rates a quarter percentage point in December, the target rate of 0.25%–0.5% is still very low historically, and it restrained returns for money market funds and savings accounts.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 8.72%. In a reversal
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 0.22% | 0.34% | 10.81% |
Russell 2000 Index (Small-caps) | -1.90 | -5.94 | 6.98 |
Russell 3000 Index (Broad U.S. market) | 0.06 | -0.18 | 10.50 |
FTSE All-World ex US Index (International) | -1.52 | -10.65 | 0.25 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 2.82% | 2.72% | 3.60% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.55 | 5.29 | 5.37 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.08 | 0.10 | 0.05 |
CPI | |||
Consumer Price Index | 0.60% | 1.13% | 1.25% |
3
from the trend of recent years, foreign currencies strengthened against the dollar, helping international bonds. Even without this currency benefit, however, international bond returns were solid.
Materials was the only standout as most other sectors retreated
Vanguard Mid-Cap Growth Fund’s two advisors invest in mid-size companies they believe have potential for long-term growth and superior earnings. They battled the market’s defensive mindset during a half year that saw mid-cap growth stocks trail both their mid-cap value counterparts and the broader market.
The fund’s composition can differ from that of its benchmark, with correspondingly divergent returns. At times, Mid-Cap Growth can underperform as it seeks superior long-term results.
The advisors remain focused on five of the ten industry sectors: consumer discretionary, financials, information technology, industrials, and health care. Consumer discretionary, the fund’s largest sector, on average, during the period, was its second-biggest detractor from performance. Casinos, cruise lines, and leisure products were notable sore points.
Expense Ratios | ||
Your Fund Compared With Its Peer Group | ||
Peer Group | ||
Fund | Average | |
Mid-Cap Growth Fund | 0.43% | 1.31% |
The fund expense ratio shown is from the prospectus dated February 25, 2016, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2016, the fund’s annualized expense ratio was 0.39%. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2015.
Peer group: Mid-Cap Growth Funds.
4
Do U.S.-based multinationals provide enough global diversification? |
Some investors believe that their portfolios get enough exposure to international stocks |
through their holdings in large-capitalization, multinational U.S. companies such as the ones |
represented in the Standard & Poor’s 500 Index. After all, those firms generated almost half |
of their total sales outside the United States in 2014.* |
However, international exposure based only on a broad index of U.S.-based companies would |
be patchy at best. The near-even split of domestic and foreign sales for S&P 500 companies |
is an average; when you look at individual sectors, a different picture emerges. Information |
technology firms earned the highest percentage of sales abroad (almost 60% in 2014). Utilities |
and telecommunication services, which tend to operate regionally or nationally, generated the |
least overseas revenue. |
As the chart below shows, such a portfolio would also differ significantly from a broadly |
diversified global portfolio in some sector weightings. It would, for example, have more |
exposure to IT and health care stocks and considerably less to materials and financials. |
The bottom line: Large-cap U.S. stocks can give you a degree of exposure to international |
economic and market forces, but not to the same extent as a combination of both U.S. and |
non-U.S. stocks. |
S&P 500 Index sector weightings vary from those of global stocks |
(Differences in percentage points) |
Notes: Data are 12-month-average sector weightings as of March 31, 2016. Global stocks are represented by the FTSE All-World Index. |
Sources: Vanguard calculations, based on data from S&P Dow Jones Indices LLC and FTSE International Limited. |
* All S&P 500 Index and sector revenue data are from S&P Dow Jones Indices LLC for 2014. |
There are additional risks when investing outside the United States, including the possibility that returns will be hurt |
by a decline in the value of foreign currencies or by unfavorable developments in a particular country or region. |
5
The fund’s sizable financial holdings underperformed their index counterparts as insurance and financial services holdings lost ground. The advisors’ decision not to hold real estate investment trusts (REITs) hurt, as REITs posted solid gains.
Health care also held back the fund’s performance, with several pharmaceutical holdings retreating significantly. The advisors’ decision to underweight biotech-nology stocks, however, helped returns, since the subsector performed poorly.
One of the fund’s few outperformers was the materials sector, which returned 16%. The fund’s information technology portfolio also outperformed its benchmark counterpart, although it still recorded a negative return.
You can find more information on the fund’s positioning and performance in the Advisors’ Report that follows this letter.
Whether it’s index or active, low costs and talent matter
If you listen to some investing pundits, you might think index investing and actively managed investing are incompatible opposites. We at Vanguard don’t see it that way.
To us, it’s not index versus active. In fact, depending on your goals, it could well be index and active.
Vanguard is a pioneer in index investing. In 1976, we opened the first index mutual fund, giving shareholders an opportunity to track the performance of the S&P 500 Index. But our roots in active management—which aims to choose investments that will outperform the market—go back to the 1929 launch of what became Vanguard Wellington™ Fund.
Our index and active funds share important traits. Both are low cost, and as their assets grow, we can take advantage of the economies of scale by further reducing fund expense ratios. That allows you to keep more of your fund’s returns.
And low costs aren’t the whole story. Talent and experience are vital, regardless of a fund’s management style.
When it comes to indexing, portfolio managers in our Equity Index Group and Fixed Income Group have honed their expertise over decades. That expertise helps our index funds meet their objectives of closely tracking their benchmarks.
Our active funds, too, benefit from world-class managers—both our own experts and premier money managers we hire around the globe. There’s no guarantee that active management will lead to market-beating results, but the combination of talent and low costs can give investors a better chance of success.
6
If you’d like to know more, see Keys to Improving the Odds of Active Management Success and The Case for Index-Fund Investing, available at vanguard.com/research.
As always, thank you for investing with Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
May 12, 2016
7
Advisors’ Report
During the six months ended April 30, 2016, Vanguard Mid-Cap Growth Fund returned –5.45%. Your fund is managed by two independent advisors, a strategy that enhances the fund’s diversification by providing exposure to distinct yet complementary investment approaches. It’s not uncommon for different advisors to have different views about individual securities or the broader investment environment.
The advisors, the percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal
year and of how their portfolio positioning reflects this assessment. These comments were prepared on May 18, 2016.
Chartwell Investment Partners, LLC
Portfolio Manager:
John A. Heffern, Managing Partner and
Senior Portfolio Manager
Equity markets began a strong and rapid rally in mid-February, offsetting the steep losses seen since late last year. Recession fears that had roiled financial markets at the beginning of 2016 abated with a rebound sparked by higher oil prices, improving macroeconomic data, and dovish Federal Reserve actions.
Vanguard Mid-Cap Growth Fund Investment Advisors | ||||
Fund Assets Managed | ||||
Investment Advisor | % | $ Million | Investment Strategy | |
Chartwell Investment Partners, | 49 | 2,045 | Uses a bottom-up, fundamental, research-driven | |
LLC | stock-selection strategy focusing on companies with | |||
sustainable growth, strong management teams, | ||||
competitive positions, and outstanding product and | ||||
service offerings. These companies should continually | ||||
demonstrate growth in earnings per share. | ||||
William Blair Investment | 48 | 2,033 | Uses a fundamental investment approach in pursuit of | |
Management, LLC | superior long-term investment results from | |||
growth-oriented companies with leadership positions | ||||
and strong market presence. | ||||
Cash Investments | 3 | 123 | These short-term reserves are invested by Vanguard in | |
equity index products to simulate investment in stocks. | ||||
Each advisor may also maintain a modest cash | ||||
position. |
8
Throughout the period, slowing global growth pressured financial markets worldwide.
More than ever, stock selection seems central to investment performance. Accordingly, we are navigating these uncertain times with a portfolio focused on mid-capitalization companies demonstrating above-average growth potential supported by good products and expanding markets. This approach leads to portfolio decisions that steadfastly reflect our bias toward quality, leadership, defensible margins, and a pattern of successful execution around growth-oriented business models.
Our stock selection was notably successful within the technology and consumer services sectors. Vantiv, which provides processing services, posted strong results through organic revenue growth, stable margins, and shareholder-friendly capital allocation. Ultimate Software Group, a provider of web-based payroll and workforce management software solutions, also did well. Healthy results drove price appreciation for this competitively advantaged company, thanks to margin improvements and continued strength in customer additions and retention rates.
Within consumer services, outerwear business at national off-price retailer Burlington Stores was affected by unseasonably warm weather. However, management predicted strong sales in 2016, because of traction in their non-outerwear business and advantageous purchasing of inventory. Tractor Supply Company, a farm and ranch products
retailer, was also pressured by warm weather, but performance rebounded with strong sales and margin guidance for 2016. Theme park operator Six Flags Entertainment Corporation reported strong traffic and revenue per visitor, thanks to increased season pass sales and new attractions.
The portfolio also benefited from our investments in Old Dominion Freight Line, Charles River Laboratories International, and Diamondback Energy. Old Dominion, a so-called less-than-truckload motor carrier, was aided by improved sentiment despite soft freight trends. Charles River, a leader in early-stage clinical research organizations, outperformed on better-than-expected earnings results and the acquisition of a competitor, which should improve its growth potential and product offerings.
A commodity price rebound and structural cost improvements buoyed the stock price of independent oil and natural gas company Diamondback Energy.
Cyclical consumer and business services stocks detracted the most from performance. Global cruise ship operators suffered. Macroeconomic concerns around the world, terrorist attacks in Europe, and Zika virus worries all hurt Norwegian Cruise Line and Royal Caribbean, despite these companies’ solid results. The continued acquisition integration issues of automotive parts retailer Advance Auto Parts resulted in revenue and margin pressure. ManpowerGroup, an international provider of staffing services, fell on global macroeconomic concerns, despite its solid financial results. Cognizant
9
Technology Solutions, a provider of information technology services, faced macroeconomic-related weakness in its banking segment and consolidation-related weakness in its health care segment. And stock market volatility and expenses related to new software development led to lower-than-expected results for SEI Investments, a provider of investment services to the asset management industry.
Elsewhere, global real estate services company Jones Lang LaSalle missed earnings estimates because of a meaningful foreign exchange impact. Hospital staffing firm Team Health Holdings underperformed, pulled down by concerns over volume growth and a lower earnings contribution from a recent acquisition. Lastly, expectations of further delays in Federal Reserve tightening should weigh on earnings at online broker E*TRADE Financial, given its significant percent of revenue from interest-rate-sensitive products.
William Blair Investment
Management, LLC
Portfolio Managers:
Robert C. Lanphier, Partner
David Ricci, CFA, Partner
The six-month period was characterized by heightened volatility. The Russell Midcap Growth Index was positive in November, declined in December, and began 2016 with a sharp fall. During the December-to-mid-February decline, investor concerns included continued weakness in the manufacturing segment of the U.S. economy, falling oil
prices, and persistent headwinds from global economic growth challenges. In this “risk-off” environment, equity investors gravitated toward high-dividend-yielding stocks and away from more speculative areas of the market, such as biotechnology. As the market rallied from mid-February to the end of March—recouping most of its recent losses—its drivers shifted significantly. Cyclical companies that were spurred by further easing from foreign central banks, stable-to-improving macro data points globally, and cheap valuations lay behind the rally. The six-month period ended with a relatively flat April.
From a style perspective, our bias toward companies with less-volatile fundamentals helped—but it was counterbalanced by our bias toward companies with higher growth. The latter bias resulted in lower-dividend-yield exposure, and investors strongly favored high-dividend-yielding stocks in the first six weeks of 2016. Our portfolio tends to significantly underweight such companies, preferring sustainable growth companies that have significant reinvestment opportunities to enable superior, durable long-term growth. At the stock level, Airgas, in the materials sector, was the top contributor to performance. In November of 2015, Airgas agreed to be acquired by Air Liquide, a French multinational industrial gas company, for a significant premium. Other strong performers included Dollar General (consumer discretionary), Genpact (information technology), Old Dominion Freight Line, and Carlisle Companies Incorporated (both industrials).
10
In terms of negatives, Polaris Industries (consumer discretionary) was a notable detractor. The underperformance was largely the result of higher off-road vehicle and snowmobile inventory levels caused by softer end-market demand and increasing competition. Other notable detractors were Perrigo and Cerner (both health care), Williams-Sonoma (consumer discretionary), and SBA Communications (telecommunication services).
The Federal Reserve implemented its first rate hike in late 2015 and telegraphed a path for its future actions. Increased global growth challenges and divergent monetary policies, however, have renewed uncertainty as to how the Fed will proceed from here. The upcoming U.S. presidential election and a more challenging environment for corporate earnings growth will also probably keep equity markets volatile. We are now seven years into an economic recovery and, with profit margins near peak levels, fundamentally driven earnings growth should be scarce and a more important driver of market returns. Given our focus on sustainable, long-term growth opportunities, we believe the earnings of our companies should be more durable than those of the index. We also believe these longstanding characteristics should benefit the portfolio over the long term and in the quarters ahead.
11
Mid-Cap Growth Fund
Fund Profile
As of April 30, 2016
Portfolio Characteristics | |||
DJ | |||
U.S. | |||
Russell | Total | ||
Midcap | Market | ||
Growth | FA | ||
Fund | Index | Index | |
Number of Stocks | 97 | 498 | 3,887 |
Median Market Cap | $9.9B | $12.1B | $51.6B |
Price/Earnings Ratio | 25.3x | 26.7x | 22.0x |
Price/Book Ratio | 3.5x | 5.3x | 2.7x |
Return on Equity | 16.7% | 20.6% | 16.8% |
Earnings Growth | |||
Rate | 17.6% | 12.9% | 7.8% |
Dividend Yield | 0.8% | 1.2% | 2.1% |
Foreign Holdings | 0.8% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 76% | — | — |
Ticker Symbol | VMGRX | — | — |
Expense Ratio1 | 0.43% | — | — |
30-Day SEC Yield | 0.38% | — | — |
Short-Term Reserves | 1.1% | — | — |
Sector Diversification (% of equity exposure) | |||
DJ | |||
U.S. | |||
Russell | Total | ||
Midcap | Market | ||
Growth | FA | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 27.3% | 24.5% | 13.5% |
Consumer Staples | 0.8 | 8.4 | 9.0 |
Energy | 1.5 | 0.9 | 6.7 |
Financials | 17.9 | 12.3 | 17.8 |
Health Care | 12.3 | 13.1 | 14.1 |
Industrials | 14.7 | 16.2 | 10.8 |
Information | |||
Technology | 21.7 | 18.8 | 19.0 |
Materials | 2.2 | 5.3 | 3.3 |
Telecommunication | |||
Services | 1.6 | 0.4 | 2.4 |
Utilities | 0.0 | 0.1 | 3.4 |
Volatility Measures | ||
Russell | DJ | |
Midcap | U.S. Total | |
Growth | Market | |
Index | FA Index | |
R-Squared | 0.96 | 0.87 |
Beta | 1.03 | 1.07 |
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months. | ||
Ten Largest Holdings (% of total net assets) | ||
Intercontinental | ||
Exchange Inc. | Specialized Finance | 3.2% |
Brunswick Corp. | Leisure Products | 2.8 |
Old Dominion Freight | ||
Line Inc. | Trucking | 2.7 |
Vantiv Inc. | Data Processing & | |
Outsourced Services | 2.6 | |
Tractor Supply Co. | Specialty Stores | 2.2 |
SEI Investments Co. | Asset Management | |
& Custody Banks | 2.1 | |
Norwegian Cruise Line | Hotels, Resorts & | |
Holdings Ltd. | Cruise Lines | 2.1 |
Popular Inc. | Regional Banks | 2.0 |
Hilton Worldwide | Hotels, Resorts & | |
Holdings Inc. | Cruise Lines | 1.9 |
ManpowerGroup Inc. | Human Resource & | |
Employment | ||
Services | 1.9 | |
Top Ten | 23.5% | |
The holdings listed exclude any temporary cash investments and equity index products. | ||
Investment Focus
1 The expense ratio shown is from the prospectus dated February 25, 2016, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2016, the annualized expense ratio was 0.39%.
12
Mid-Cap Growth Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Fiscal-Year Total Returns (%): October 31, 2005, Through April 30, 2016
Average Annual Total Returns: Periods Ended March 31, 2016 | ||||
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period. | ||||
Securities and Exchange Commission rules require that we provide this information. | ||||
Inception | One | Five | Ten | |
Date | Year | Years | Years | |
Mid-Cap Growth Fund | 12/31/1997 | -8.76% | 9.23% | 7.29% |
See Financial Highlights for dividend and capital gains information.
13
Mid-Cap Growth Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2016
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (95.7%)1 | |||
Consumer Discretionary (26.1%) | |||
Brunswick Corp. | 2,451,855 | 117,763 | |
Tractor Supply Co. | 990,860 | 93,795 | |
* | Norwegian Cruise Line | ||
Holdings Ltd. | 1,806,980 | 88,343 | |
Hilton Worldwide | |||
Holdings Inc. | 3,649,930 | 80,481 | |
Dollar General Corp. | 968,426 | 79,324 | |
Newell Brands Inc. | 1,477,000 | 67,262 | |
Royal Caribbean Cruises | |||
Ltd. | 836,300 | 64,730 | |
Ross Stores Inc. | 1,070,700 | 60,794 | |
Six Flags Entertainment | |||
Corp. | 1,001,647 | 60,149 | |
Hanesbrands Inc. | 2,013,400 | 58,449 | |
* | Burlington Stores Inc. | 833,139 | 47,464 |
* | MGM Resorts | ||
International | 1,866,825 | 39,763 | |
BorgWarner Inc. | 1,063,804 | 38,212 | |
* | O’Reilly Automotive Inc. | 143,821 | 37,779 |
* | JC Penney Co. Inc. | 3,093,530 | 28,708 |
* | Sally Beauty Holdings Inc. | 790,292 | 24,815 |
Interpublic Group of Cos. | |||
Inc. | 1,069,480 | 24,534 | |
* | Chipotle Mexican Grill Inc. | ||
Class A | 45,300 | 19,070 | |
Domino’s Pizza Inc. | 138,660 | 16,761 | |
^ | Wynn Resorts Ltd. | 167,725 | 14,810 |
* | AutoZone Inc. | 16,200 | 12,397 |
* | Steven Madden Ltd. | 292,425 | 10,238 |
Darden Restaurants Inc. | 116,650 | 7,261 | |
Harman International | |||
Industries Inc. | 42,850 | 3,289 | |
1,096,191 | |||
Consumer Staples (0.7%) | |||
Tyson Foods Inc. Class A | 457,100 | 30,087 |
Market | |||
Value• | |||
Shares | ($000) | ||
Energy (1.5%) | |||
* | Concho Resources Inc. | 227,675 | 26,449 |
* | Diamondback Energy Inc. | 251,126 | 21,743 |
Superior Energy Services | |||
Inc. | 750,970 | 12,661 | |
60,853 | |||
Financials (17.1%) | |||
Intercontinental Exchange | |||
Inc. | 567,790 | 136,287 | |
SEI Investments Co. | 1,855,640 | 89,219 | |
Popular Inc. | 2,872,770 | 85,379 | |
* | Signature Bank | 381,484 | 52,580 |
* | Affiliated Managers | ||
Group Inc. | 304,390 | 51,844 | |
Willis Towers Watson plc | 408,400 | 51,009 | |
* | MGIC Investment Corp. | 6,732,455 | 48,676 |
Lazard Ltd. Class A | 1,338,208 | 48,242 | |
Moody’s Corp. | 479,500 | 45,898 | |
Assured Guaranty Ltd. | 1,583,900 | 40,975 | |
Jones Lang LaSalle Inc. | 316,740 | 36,479 | |
* | CBRE Group Inc. Class A | 936,500 | 27,748 |
IBERIABANK Corp. | 82,442 | 4,863 | |
719,199 | |||
Health Care (11.7%) | |||
* | Centene Corp. | 1,246,688 | 77,245 |
* | MEDNAX Inc. | 1,007,700 | 71,839 |
* | Cerner Corp. | 855,300 | 48,016 |
* | Quintiles Transnational | ||
Holdings Inc. | 693,472 | 47,898 | |
DENTSPLY SIRONA Inc. | 624,207 | 37,203 | |
* | Mettler-Toledo | ||
International Inc. | 100,800 | 36,081 | |
* | BioMarin Pharmaceutical | ||
Inc. | 380,412 | 32,213 | |
Zoetis Inc. | 662,300 | 31,148 | |
* | Intuitive Surgical Inc. | 48,903 | 30,631 |
* | Align Technology Inc. | 334,200 | 24,126 |
14
Mid-Cap Growth Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | IDEXX Laboratories Inc. | 285,958 | 24,121 |
Perrigo Co. plc | 219,400 | 21,209 | |
* | Charles River Laboratories | ||
International Inc. | 129,351 | 10,254 | |
491,984 | |||
Industrials (14.0%) | |||
* | Old Dominion Freight | ||
Line Inc. | 1,703,265 | 112,501 | |
ManpowerGroup Inc. | 1,038,435 | 79,991 | |
Delta Air Lines Inc. | 1,372,645 | 57,198 | |
Rockwell Collins Inc. | 623,700 | 55,004 | |
KAR Auction Services Inc. | 1,107,575 | 41,645 | |
* | Verisk Analytics Inc. | ||
Class A | 444,900 | 34,515 | |
Equifax Inc. | 283,365 | 34,075 | |
* | HD Supply Holdings Inc. | 936,970 | 32,119 |
* | TransDigm Group Inc. | 139,600 | 31,811 |
* | Middleby Corp. | 264,100 | 28,956 |
AMETEK Inc. | 600,104 | 28,859 | |
Carlisle Cos. Inc. | 201,600 | 20,543 | |
* | IHS Inc. Class A | 155,175 | 19,114 |
Southwest Airlines Co. | 181,200 | 8,083 | |
JB Hunt Transport | |||
Services Inc. | 50,475 | 4,183 | |
Alaska Air Group Inc. | 13,540 | 954 | |
589,551 | |||
Information Technology (20.8%) | |||
* | Vantiv Inc. Class A | 2,034,454 | 110,959 |
* | Genpact Ltd. | 2,293,122 | 63,955 |
* | salesforce.com Inc. | 840,165 | 63,685 |
SS&C Technologies | |||
Holdings Inc. | 953,061 | 58,280 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 944,680 | 55,141 | |
* | CoStar Group Inc. | 264,479 | 52,184 |
Booz Allen Hamilton | |||
Holding Corp. Class A | 1,743,445 | 48,067 | |
* | Red Hat Inc. | 631,900 | 46,362 |
* | Guidewire Software Inc. | 768,000 | 43,753 |
* | Euronet Worldwide Inc. | 474,435 | 36,579 |
* | Akamai Technologies Inc. | 712,172 | 36,314 |
CSRA Inc. | 1,330,800 | 34,548 | |
* | Manhattan Associates Inc. | 567,795 | 34,374 |
* | Ultimate Software Group | ||
Inc. | 170,510 | 33,521 | |
* | Tyler Technologies Inc. | 228,085 | 33,394 |
MAXIMUS Inc. | 558,700 | 29,555 | |
*,^ | Check Point Software | ||
Technologies Ltd. | 237,700 | 19,698 | |
* | NXP Semiconductors NV | 183,815 | 15,676 |
Global Payments Inc. | 186,190 | 13,439 | |
* | Electronics For Imaging | ||
Inc. | 325,587 | 12,971 |
Market | |||
Value• | |||
Shares | ($000) | ||
Monolithic Power Systems | |||
Inc. | 144,120 | 8,996 | |
Broadcom Ltd. | 60,900 | 8,876 | |
Belden Inc. | 139,655 | 8,818 | |
* | PTC Inc. | 62,130 | 2,265 |
871,410 | |||
Materials (2.1%) | |||
Ball Corp. | 650,100 | 46,404 | |
Vulcan Materials Co. | 379,900 | 40,889 | |
87,293 | |||
Other (0.2%) | |||
2 | Vanguard Mid-Cap Growth | ||
ETF | 100,223 | 10,050 | |
Telecommunication Services (1.5%) | |||
* | SBA Communications | ||
Corp. Class A | 621,120 | 64,000 | |
Total Common Stocks | |||
(Cost $3,685,184) | 4,020,618 | ||
Temporary Cash Investments (3.9%)1 | |||
Money Market Fund (3.8%) | |||
3,4 | Vanguard Market | ||
Liquidity Fund, | |||
0.495% | 157,368,000 | 157,368 | |
Face | |||
Amount | |||
($000) | |||
U.S. Government and Agency Obligations (0.1%) | |||
5 | Federal Home Loan | ||
Bank Discount Notes, | |||
0.609%, 6/17/16 | 1,000 | 1,000 | |
5,6 | Federal Home Loan | ||
Bank Discount Notes, | |||
0.572%, 7/6/16 | 5,000 | 4,997 | |
5,997 | |||
Total Temporary Cash Investments | |||
(Cost $163,351) | 163,365 | ||
Total Investments (99.6%) | |||
(Cost $3,848,535) | 4,183,983 |
15
Mid-Cap Growth Fund
Amount | |
($000) | |
Other Assets and Liabilities (0.4%) | |
Other Assets | |
Investment in Vanguard | 354 |
Receivables for Investment Securities Sold | 32,592 |
Receivables for Accrued Income | 706 |
Receivables for Capital Shares Issued | 21,017 |
Other Assets | 1 |
Total Other Assets | 54,670 |
Liabilities | |
Payables for Investment Securities | |
Purchased | (16,402) |
Collateral for Securities on Loan | (9,772) |
Payables to Investment Advisor | (1,636) |
Payables for Capital Shares Redeemed | (3,878) |
Payables to Vanguard | (5,338) |
Other Liabilities | (599) |
Total Liabilities | (37,625) |
Net Assets (100%) | |
Applicable to 193,086,461 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 4,201,028 |
Net Asset Value Per Share | $21.76 |
At April 30, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 4,009,685 |
Undistributed Net Investment Income | 6,624 |
Accumulated Net Realized Losses | (154,581) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 335,448 |
Futures Contracts | 3,852 |
Net Assets | 4,201,028 |
• 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 $9,510,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 98.3% and 1.3%, respectively, of net assets.
2 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
4 Includes $9,772,000 of collateral received for securities on loan.
5 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
6 Securities with a value of $4,597,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
16
Mid-Cap Growth Fund
Statement of Operations
Six Months Ended | |
April 30, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 21,790 |
Interest1 | 385 |
Securities Lending | 72 |
Total Income | 22,247 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 4,039 |
Performance Adjustment | (532) |
The Vanguard Group—Note C | |
Management and Administrative | 4,006 |
Marketing and Distribution | 393 |
Custodian Fees | 21 |
Shareholders’ Reports | 38 |
Trustees’ Fees and Expenses | 3 |
Total Expenses | 7,968 |
Expenses Paid Indirectly | (137) |
Net Expenses | 7,831 |
Net Investment Income | 14,416 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | (142,215) |
Futures Contracts | 773 |
Realized Net Gain (Loss) | (141,442) |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | (110,234) |
Futures Contracts | (208) |
Change in Unrealized Appreciation (Depreciation) | (110,442) |
Net Increase (Decrease) in Net Assets Resulting from Operations | (237,468) |
1 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $52,000, $364,000, and $0, | |
respectively. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
Mid-Cap Growth Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 14,416 | 9,595 |
Realized Net Gain (Loss) | (141,442) | 343,380 |
Change in Unrealized Appreciation (Depreciation) | (110,442) | (137,353) |
Net Increase (Decrease) in Net Assets Resulting from Operations | (237,468) | 215,622 |
Distributions | ||
Net Investment Income | (12,324) | (4,856) |
Realized Capital Gain1 | (311,613) | (405,208) |
Total Distributions | (323,937) | (410,064) |
Capital Share Transactions | ||
Issued | 640,081 | 1,505,655 |
Issued in Lieu of Cash Distributions | 314,619 | 398,819 |
Redeemed | (509,670) | (711,728) |
Net Increase (Decrease) from Capital Share Transactions | 445,030 | 1,192,746 |
Total Increase (Decrease) | (116,375) | 998,304 |
Net Assets | ||
Beginning of Period | 4,317,403 | 3,319,099 |
End of Period2 | 4,201,028 | 4,317,403 |
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $15,141,000 and $80,760,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes. | ||
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $6,624,000 and $4,532,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
18
Mid-Cap Growth Fund
Financial Highlights
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | April 30, | Year Ended October 31, | ||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 |
Net Asset Value, Beginning of Period | $24.88 | $26.40 | $25.72 | $20.95 | $19.40 | $17.54 |
Investment Operations | ||||||
Net Investment Income | . 078 | . 0641 | .045 | .048 | .041 | .040 2 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | (1.358) | 1.625 | 3.134 | 5.965 | 1.892 | 1.840 |
Total from Investment Operations | (1.280) | 1.689 | 3.179 | 6.013 | 1.933 | 1.880 |
Distributions | ||||||
Dividends from Net Investment Income | (. 070) | (. 038) | (. 007) | (. 075) | (. 030) | (. 020) |
Distributions from Realized Capital Gains | (1.770) | (3.171) | (2.492) | (1.168) | (.353) | — |
Total Distributions | (1.840) | (3.209) | (2.499) | (1.243) | (.383) | (.020) |
Net Asset Value, End of Period | $21.76 | $24.88 | $26.40 | $25.72 | $20.95 | $19.40 |
Total Return3 | -5.45% | 6.68% | 13.42% | 30.32% | 10.24% | 10.72% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $4,201 | $4,317 | $3,319 | $2,837 | $2,129 | $1,804 |
Ratio of Total Expenses to | ||||||
Average Net Assets4 | 0.39% | 0.43% | 0.46% | 0.51% | 0.54% | 0.53% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.70% | 0.25%1 | 0.16% | 0.19% | 0.19% | 0.20%2 |
Portfolio Turnover Rate | 76% | 93% | 82% | 83% | 97% | 127% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | ||||||
1 Net investment income per share and the ratio of net investment income to average net assets include $.006 and 0.03%, respectively, resulting from a special dividend from Lazard Ltd in February 2015. 2 Net investment income per share and the ratio of net investment income to average net assets include $.02 and 0.11%, respectively, resulting from a special dividend from VeriSign Inc. in December 2010. 3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. 4 Includes performance-based investment advisory fee increases (decreases) of (0.03%), (0.01%), (0.02%), 0.02%, 0.04%, and 0.01%. | ||||||
See accompanying Notes, which are an integral part of the Financial Statements.
19
Mid-Cap Growth Fund
Notes to Financial Statements
Vanguard Mid-Cap Growth Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
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 acquired over 60 days to maturity 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. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. 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.
Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
During the six months ended April 30, 2016, the fund’s average investments in long and short futures contracts represented 3% and 0% of net assets, respectively, based on the average of aggregate settlement values 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 (October 31, 2012–2015), and for the period ended April 30, 2016, 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.
20
Mid-Cap Growth 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 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 absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2016, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
B. The investment advisory firms Chartwell Investment Partners, LLC, and William Blair Investment Management, 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 fee of Chartwell Investment Partners, LLC, is subject to quarterly adjustments based on performance relative to the Russell Midcap Growth Index for the preceding three years. The basic fee of William Blair Investment Management, LLC, is subject to quarterly adjustments based on performance relative to the Russell Midcap Growth Index for the preceding five years.
21
Mid-Cap Growth Fund
Vanguard manages the cash reserves of the fund as described below.
For the six months ended April 30, 2016, the aggregate investment advisory fee represented an effective annual basic rate of 0.20% of the fund’s average net assets, before a decrease of $532,000 (0.03%) based on performance.
C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, distribution, and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At April 30, 2016, the fund had contributed to Vanguard capital in the amount of $354,000, representing 0.01% of the fund’s net assets and 0.14% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
D. The fund has asked its investment advisors to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund’s management and administrative expenses. For the six months ended April 30, 2016, these arrangements reduced the fund’s expenses by $137,000 (an annual rate of 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).
The following table summarizes the market value of the fund’s investments as of April 30, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 4,020,618 | — | — |
Temporary Cash Investments | 157,368 | 5,997 | — |
Futures Contracts—Liabilities1 | (595) | — | — |
Total | 4,177,391 | 5,997 | — |
1 Represents variation margin on the last day of the reporting period. |
22
Mid-Cap Growth Fund
F. At April 30, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Aggregate | ||||
Number of | Settlement | Unrealized | ||
Long (Short) | Value | Appreciation | ||
Futures Contracts | Expiration | Contracts | Long (Short) | (Depreciation) |
E-mini S&P Mid-Cap 400 Index | June 2016 | 610 | 88,956 | 3,934 |
E-mini S&P 500 Index | June 2016 | 148 | 15,237 | (76) |
E-mini Russell 2000 Index | June 2016 | 40 | 4,510 | (6) |
3,852 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
G. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
At April 30, 2016, the cost of investment securities for tax purposes was $3,848,535,000. Net unrealized appreciation of investment securities for tax purposes was $335,448,000, consisting of unrealized gains of $460,898,000 on securities that had risen in value since their purchase and $125,450,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the six months ended April 30, 2016, the fund purchased $1,695,093,000 of investment securities and sold $1,519,566,000 of investment securities, other than temporary cash investments.
I. Capital shares issued and redeemed were:
Six Months Ended | Year Ended | |
April 30, 2016 | October 31, 2015 | |
Shares | Shares | |
(000) | (000) | |
Issued | 29,276 | 59,434 |
Issued in Lieu of Cash Distributions | 13,866 | 16,399 |
Redeemed | (23,607) | (28,005) |
Net Increase (Decrease) in Shares Outstanding | 19,535 | 47,828 |
J. Management has determined that no material events or transactions occurred subsequent to April 30, 2016, that would require recognition or disclosure in these financial statements.
23
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.
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Six Months Ended April 30, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Mid-Cap Growth Fund | 10/31/2015 | 4/30/2016 | Period |
Based on Actual Fund Return | $1,000.00 | $945.52 | $1.89 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,022.92 | 1.96 |
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 0.39%. 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). | |||
25
Trustees Approve Advisory Arrangements
The board of trustees of Vanguard Mid-Cap Growth Fund has renewed the fund’s investment advisory arrangements with Chartwell Investment Partners, LLC (Chartwell) and William Blair & Company, L.L.C. (William Blair & Company). 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 decisions upon an evaluation of each advisor’s investment staff, portfolio management process, and performance. The trustees 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:
Chartwell. Chartwell, founded in 1997, is a wholly owned subsidiary of TriState Capital. The firm concentrates on small- and mid-cap equity management and employs a bottom-up research approach to invest in companies that it believes will deliver accelerating earnings-per-share growth. The team focuses on what it terms “secular” growth companies that deliver competitive growth in revenue, profits, and cash flows by enhancing their competitive advantages, product and service offerings, and customer bases. Chartwell utilizes an intermediate-term horizon to purchase these companies at attractive valuations, and seeks to concentrate positions in the companies it believes will grow most rapidly. Chartwell has advised a portion of the fund since 2006.
William Blair & Company. Founded in 1935, William Blair & Company is an independently owned, full-service investment firm. The firm utilizes in-depth fundamental research to identify quality growth companies that can sustain an above-average growth rate for a longer period than the market expects. The team focuses on businesses with durable franchises, sustainable competitive advantages and business models, solid balance sheets, high returns on invested capital, and quality management teams. Relative valuation is also analyzed in comparison with historical averages, the market, and industry peers. William Blair & Company has advised a portion of the fund since 2006.
The board concluded that each advisor���s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangements.
Investment performance
The board considered the short- and long-term performance of the fund and each advisor, including any periods of outperformance or underperformance relative to a benchmark index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below the peer-group average. Information about the fund’s expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
26
The board did not consider profitability of Chartwell or William Blair & Company 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 Chartwell and William Blair & Company. 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.
27
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
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Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard���s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
InterestedTrustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International plc (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive plc |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
IndependentTrustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | Mortimer J. Buckley | James M. Norris |
Partner of HighVista Strategies LLC (private investment | Kathleen C. Gubanich | Thomas M. Rampulla |
firm); Director of Rand Merchant Bank; Overseer of | Martha G. King | Glenn W. Reed |
the Museum of Fine Arts Boston. | John T. Marcante | Karin A. Risi |
Chris D. McIsaac | ||
Peter F. Volanakis | ||
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
P.O. Box 2600 | ||
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Q3012 062016 |
Semiannual Report | April 30, 2016
Vanguard International Explorer™ Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisors’ Report. | 8 |
Fund Profile. | 13 |
Performance Summary. | 15 |
Financial Statements. | 16 |
About Your Fund’s Expenses. | 33 |
Glossary. | 35 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended April 30, 2016 | |
Total | |
Returns | |
Vanguard International Explorer Fund | -0.65% |
S&P EPAC SmallCap Index | 1.94 |
International Small-Cap Funds Average | 0.14 |
International Small-Cap Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Your Fund’s Performance at a Glance | ||||
October 31, 2015, Through April 30, 2016 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard International Explorer Fund | $17.76 | $16.72 | $0.263 | $0.661 |
Chairman’s Letter
Dear Shareholder,
Amid considerable stock market volatility, markets around the globe collectively posted small losses or minimal gains for the six months ended April 30, 2016. Small-capitalization international stocks outperformed their large-cap counterparts for the period, ending the six months with a modestly positive return.
Vanguard International Explorer Fund returned –0.65%, behind both its benchmark index, the S&P EPAC SmallCap Index, and the average return of international small-cap peer funds.
U.S. stocks traveled a rocky road, finishing the period about even
The broad U.S. stock market delivered flat returns for a half year marked by inconsistency, sharp declines, and distinct rallies.
After struggling during the first four months of the period, U.S. stocks rebounded in the final two. Most of the surge came in March, as investors cheered the Federal Reserve’s indication that it would scale back its original plan for interest rate hikes in 2016. Continued aggressive stimulus by central bankers in Europe and Asia and a recovery in oil prices also helped.
International stocks traced an even rockier path than their U.S. counterparts en route to modestly negative returns. Developed
2
markets, especially Europe, notched weak results, while emerging markets managed a slight advance.
Bonds have proved attractive with some help from the Fed
The broad U.S. bond market returned 2.82% for the half year. After retreating in November and December, the bond market recorded positive results for each of the next four months. It also received a boost from the Fed’s cautious approach to raising short-term interest rates.
The yield of the 10-year U.S. Treasury note closed at 1.83% at the end of April, down from 2.17% six months earlier. (Bond prices and yields move in opposite directions.)
Even though the Fed raised short-term interest rates a quarter percentage point in December, the target rate of 0.25%–0.5% is still very low historically, and it restrained returns for money market funds and savings accounts.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 8.72%. In a reversal from the trend of recent years, foreign currencies strengthened against the dollar, helping international bonds. Even without this currency benefit, however, international bond returns were solid.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 0.22% | 0.34% | 10.81% |
Russell 2000 Index (Small-caps) | -1.90 | -5.94 | 6.98 |
Russell 3000 Index (Broad U.S. market) | 0.06 | -0.18 | 10.50 |
FTSE All-World ex US Index (International) | -1.52 | -10.65 | 0.25 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 2.82% | 2.72% | 3.60% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.55 | 5.29 | 5.37 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.08 | 0.10 | 0.05 |
CPI | |||
Consumer Price Index | 0.60% | 1.13% | 1.25% |
3
Underperformance in Europe was one reason the fund lagged
International Explorer invests in small- capitalization international growth stocks, particularly those of the developed markets of Europe and the Pacific region. Schroder Investment Management North America and Wellington Management Company––the fund’s two advisors––invest in more than 300 stocks of small companies they believe will grow faster than the overall market.
The advisors analyze individual companies rather than trying to identify industries or countries that will outperform. Your fund remained broadly diversified, with about 60% of its assets in Europe, about 30% in the developed Pacific region, and about 8% in emerging markets as of the end of the period.
The fund trailed its benchmark because of underperformance in Europe and the developed Pacific region. Strong results in Norway and Sweden were not enough to offset losses in Italy and the United Kingdom. Japan, the country with the largest presence in the fund, was a notable drag on performance.
The advisors’ selections in emerging markets roughly kept pace with those markets’ overall results. Impressive performances by Chinese stocks were offset by losses in India.
Expense Ratios | ||
Your Fund Compared With Its Peer Group | ||
Peer Group | ||
Fund | Average | |
International Explorer Fund | 0.42% | 1.59% |
The fund expense ratio shown is from the prospectus dated February 25, 2016, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2016, the fund’s annualized expense ratio was 0.43%. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2015.
Peer group: International Small-Cap Funds.
4
Do U.S.-based multinationals provide enough global diversification? |
Some investors believe that their portfolios get enough exposure to international stocks |
through their holdings in large-capitalization, multinational U.S. companies such as the ones |
represented in the Standard & Poor’s 500 Index. After all, those firms generated almost half |
of their total sales outside the United States in 2014.* |
However, international exposure based only on a broad index of U.S.-based companies would |
be patchy at best. The near-even split of domestic and foreign sales for S&P 500 companies |
is an average; when you look at individual sectors, a different picture emerges. Information |
technology firms earned the highest percentage of sales abroad (almost 60% in 2014). Utilities |
and telecommunication services, which tend to operate regionally or nationally, generated the |
least overseas revenue. |
As the chart below shows, such a portfolio would also differ significantly from a broadly |
diversified global portfolio in some sector weightings. It would, for example, have more |
exposure to IT and health care stocks and considerably less to materials and financials. |
The bottom line: Large-cap U.S. stocks can give you a degree of exposure to international |
economic and market forces, but not to the same extent as a combination of both U.S. and |
non-U.S. stocks. |
S&P 500 Index sector weightings vary from those of global stocks |
(Differences in percentage points) |
Notes: Data are 12-month-average sector weightings as of March 31, 2016. Global stocks are represented by the FTSE All-World Index. |
Sources: Vanguard calculations, based on data from S&P Dow Jones Indices LLC and FTSE International Limited. |
* All S&P 500 Index and sector revenue data are from S&P Dow Jones Indices LLC for 2014. |
There are additional risks when investing outside the United States, including the possibility that returns will be hurt |
by a decline in the value of foreign currencies or by unfavorable developments in a particular country or region. |
5
The fund recorded negative results in six of the ten industry sectors. Relative underperformance was most noticeable among financials, materials, and health care stocks. In a result similar to the one described in our most recent annual report, industrials—the fund’s largest sector—contributed the most to relative returns.
In recent letters, I’ve discussed the role of the stronger U.S. dollar, which—broadly speaking—had been trimming international stocks’ returns when translated into dollars for U.S. investors. For the six months covered in this report, however, currency effects were more nuanced. The rising value of the yen and euro boosted returns from Japanese and European markets when translated into U.S. dollars. But British pound weakness took a bite out of U.K. stock returns. Currency translation effects were minimal for the fund’s emerging markets holdings.
You can find more information on the fund’s positioning and performance in the Advisors’ Report that follows this letter.
Whether it’s index or active, low costs and talent matter
If you listen to some investing pundits, you might think index investing and actively managed investing are incompatible opposites. We at Vanguard don’t see it that way.
To us, it’s not index versus active. In fact, depending on your goals, it could well be index and active.
Vanguard is known as a pioneer in index investing. In 1976, we opened the first index mutual fund, giving shareholders an opportunity to track the performance of the S&P 500 Index. But our roots in active management—which aims to choose investments that will outperform the market—go back to the 1929 launch of what later became Vanguard Wellington™ Fund.
Our index and active funds share important traits. Both are low cost, and as their assets grow, we can take advantage of the economies of scale by further reducing fund expense ratios. That allows you to keep more of your fund’s returns.
And low costs aren’t the whole story. Talent and experience are vital, regardless of what a fund’s management style might be.
When it comes to indexing, portfolio managers in our Equity Index Group and Fixed Income Group have honed their expertise over decades. That expertise helps our index funds meet their objectives of closely tracking their benchmarks.
6
Our active funds, too, benefit from world-class managers—both our own experts and premier money managers we hire from around the globe. There’s no guarantee that active management will lead to market-beating results, but the combination of talent and low costs can give investors a better chance of success.
If you’d like to know more, see Keys to Improving the Odds of Active Management Success and The Case for Index-Fund Investing, available at vanguard.com/research.
As always, thank you for investing with Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
May 16, 2016
7
Advisors’ Report
For the six months ended April 30, 2016, Vanguard International Explorer Fund returned –0.65%. Your fund is managed by two independent advisors, a strategy that enhances its diversification by providing exposure to distinct yet complementary investment approaches. It is not uncommon for different advisors to have different views about individual securities or the broader investment environment.
The advisors, the amount and percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the period and of how their portfolio positioning reflects this assessment. These comments were prepared on May 20, 2016.
Vanguard International Explorer Fund Investment Advisors | ||||
Fund Assets Managed | ||||
Investment Advisor | % | $ Million | Investment Strategy | |
Schroder Investment | 71 | 2,103 | The advisor employs a fundamental investment | |
Management North America Inc. | approach that considers macroeconomic factors while | |||
focusing primarily on company-specific factors, | ||||
including a company’s potential for long-term growth, | ||||
financial condition, quality of management, and | ||||
sensitivity to cyclical factors. The advisor also | ||||
considers the relative value of a company’s securities | ||||
compared with those of other companies and the | ||||
market as a whole. | ||||
Wellington Management | 27 | 813 | The advisor employs a traditional, bottom-up approach | |
Company LLP | that is opportunistic in nature, relying on global and | |||
regional research resources to identify both | ||||
growth-oriented and neglected or misunderstood | ||||
companies. | ||||
Cash Investments | 2 | 64 | These short-term reserves are invested by Vanguard in | |
equity index products to simulate investment in stocks. | ||||
Each advisor also may maintain a modest cash | ||||
position. |
8
Schroder Investment Management
North America Inc.
Portfolio Manager:
Matthew F. Dobbs
Head of Global Small Companies
International small-company equities eked out fairly muted gains over the period: The S&P EPAC SmallCap Index returned 1.94%, outpacing larger-capitalization international stocks by several percentage points.
The limited overall progress of international small-cap equities disguises a high degree of volatility, not least in global currency markets. After strengthening steadily until mid-January, the U.S. dollar weakened on expectations of more modest increases in U.S. interest rates. This sparked a notable recovery in commodities and emerging markets, which coincided with some stability in the Chinese currency and economy. At the end of January, the Bank of Japan’s announcement of a negative-interest-rate policy led to a stronger yen (which, given small-caps’ lower overseas exposure, helps them relative to large-caps). Similarly, the euro’s upward trend supported small-caps in continental Europe. In the United Kingdom, small-caps’ returns were pulled down by weakness in the British pound related to the forthcoming U.K. referendum on European Union membership.
Stock selection in Japan, particularly in the health care, consumer discretionary, and materials sectors, has been the largest drag on the portfolio’s relative performance. Although our holdings in health care managed positive returns, health care stocks we did not hold—especially biotech stocks—outperformed them. In consumer discretionary, some of our auto-related holdings (Unipres, Eagle Industry) struggled, in part because of investor concern over a stronger yen. In materials, Lintec and JSP reflected similar worries. OBIC Business Consultants (information technology) declined on slowing revenue momentum, and Shinmaywa Industrials (industrials) declined on concerns over domestic capital spending.
Within financials, our avoidance of REITs (real estate investment trusts) detracted the most. REITs performed well in the low-interest-rate environment, which favored high-yielding sectors.
Our exposure in emerging markets was also a headwind over the six months. Exposure in India detracted, most notably Idea Cellular, as concerns over a potentially disruptive new entrant persisted. Stock selection in Taiwan was mixed, with strong performance from Gourmet Master and Chroma Ate canceled out by weakness in bicycle maker Giant Manufacturing.
Overall, stock selection in continental Europe added value, with strong selection among industrials (Bufab, Komax, SPIE and Loomis) partly offset by weak selection among financials, notably in Italy (Anima, Banca Popolare dell’Emilia Romagna, and Banca Sistema). Other notable contributors
9
included Paddy Power Betfair, Storebrand, and Borregaard. Stock selection in developed Pacific markets excluding Japan also added value to a modest degree; Baoxin Auto Group rose on a takeover offer, while Samsonite International rose on appreciation of its brand strength and exposure to growing regional travel.
Activity has been relatively modest during the period. We added to continental Europe, building up holdings in industrials, information technology, and materials at the expense of consumer cyclicals. We marginally increased exposure to Japan (mainly in industrials), funding the increase from elsewhere in Asia (financials). Overall, we are overweight in industrials (and, to a lesser extent, consumer cyclicals) and underweight in financials and health care.
The outlook for global economic activity remains subdued given low inflation, widespread corporate caution over capital spending, debt constraints in the developed world, and arguably a more secular slowdown in the trend of emerging-market expansion. The implication in aggregate for equity markets is for continued low growth in earnings, cash flows, and dividends. On the plus side, there is still a high level of innovation and change that correctly positioned smaller companies can exploit. We continue to focus on identifying these longer-term growth opportunities.
Wellington Management Company llp
Portfolio Manager:
Simon H. Thomas
Senior Managing Director and
Equity Portfolio Manager
The rally in global equities stalled during the six months, and stocks finished moderately lower. Geopolitical tensions flared and monetary policy divergence came to fruition early in the period. Sentiment shifted toward the end of 2015, fueled by robust merger and acquisition activity and positive moves from China. This shift was temporary, though, as an early-January plunge in Chinese stocks sparked a global risk-off trade. The market then rebounded on news of extended monetary easing by major central banks, as well as strength in emerging-market equities. The global equity rally continued in April, although Japanese securities limped into the close after the Bank of Japan decided against further stimulus, leading to yen appreciation and an equity sell-off. For the period, U.S. equities outperformed non-U.S. equities and emerging-market equities outperformed their developed-market counterparts.
The portfolio’s relative performance was hurt most by stock selection within the materials, financials, and consumer discretionary sectors. These losses were partially offset by stronger selection within consumer staples and by overweight exposure to health care, the period’s
10
best-performing sector. In terms of regions, selection within Japan and Europe detracted from relative performance. On the other hand, stock selection within Latin America (especially Brazil) helped.
The largest individual detractors from relative performance included Restaurant Group, Nippon Shokubai, and Spotless Group.
Restaurant Group, an owner and operator of restaurants and pubs in the United Kingdom, sold off sharply after it reported disappointing like-for-like sales, pushed down by winter floods and investor concerns over the looming EU referendum. We feel the market largely overreacted, and we still see the company as a winner with a very strong management team.
We trimmed our exposure to Nippon Shokubai, a Japanese manufacturer and distributor of industrial chemicals and catalysts, but maintain a small position. Fundamentals within the key superabsorbent polymers division have weakened on increased competition in the lower end of the market and sluggish Asian diaper sales seen by its main customer, Procter & Gamble. We do not see further competitor capacity additions in the near term, and we believe the firm’s profitability will improve. Spotless, a leading provider of catering, cleaning, and laundry facility services in Australia and New Zealand, declined in
December when its board revised 2016 fiscal year guidance downward. Problems integrating acquisitions made last year, along with delayed or deferred new contract awards, underpinned the move. Despite this short-term setback, we maintain our position. A new CEO and strong recurring business should benefit the stock.
Top contributors to relative performance included Gategroup, oOh!media, and Nippon Shinyaku. In April, HNA Group, a Chinese travel and logistics conglomerate, made a bid to acquire Switzerland-based Gategroup, a leading provider of catering, hospitality, and logistics services to the travel industry. Its board approved the deal, which is expected to close this summer. We believe the offer price is fair, and support the acquisition, given that shares are at an all-time high.
Strong results which drove positive revisions from the sell side, were reported by oOh!media, an Australian advertising company specializing in billboards, mobile, retail, and experiential marketing. Additionally, oOh!media is focused on digital advertising, a business we expect will grow. Shares of Nippon Shinyaku rallied after the Japanese pharmaceutical company reported strong results that showed double-digit growth in operating profit. We remain optimistic about the company’s new pulmonary hypertension drug, which was recently approved in the
11
United States, with European approval expected soon, and we added to our position.
We are most overweight in consumer discretionary and health care; we are most underweight in information technology and consumer staples. In terms of regions, we are most overweight in Japan, most underweight in the rest of Asia, and modestly underweight in Europe. We remain focused on high-quality companies that have been neglected by the market and thus offer attractive investment opportunities.
12
International Explorer Fund
Fund Profile
As of April 30, 2016
Portfolio Characteristics | |||
MSCI | |||
S&P | AC | ||
EPAC | World | ||
SmallCap | Index ex | ||
Fund | Index | USA | |
Number of Stocks | 322 | 3,867 | 1,847 |
Median Market Cap | $1.9B | $1.8B | $28.4B |
Price/Earnings Ratio | 21.2x | 19.7x | 18.6x |
Price/Book Ratio | 1.9x | 1.5x | 1.5x |
Return on Equity | 11.7% | 10.8% | 15.0% |
Earnings Growth | |||
Rate | 12.9% | 9.7% | 7.4% |
Dividend Yield | 2.1% | 2.4% | 3.2% |
Turnover Rate | |||
(Annualized) | 34% | — | — |
Ticker Symbol | VINEX | — | — |
Expense Ratio1 | 0.42% | — | — |
Short-Term Reserves | 2.8% | — | — |
Sector Diversification (% of equity exposure) | |||
MSCI | |||
S&P | AC | ||
EPAC | World | ||
SmallCap | Index ex | ||
Fund | Index | USA | |
Consumer Discretionary 20.2% | 16.2% | 11.6% | |
Consumer Staples | 5.9 | 6.9 | 11.0 |
Energy | 1.0 | 2.0 | 6.7 |
Financials | 17.8 | 21.7 | 25.9 |
Health Care | 7.9 | 8.6 | 9.0 |
Industrials | 26.5 | 22.0 | 11.5 |
Information Technology | 9.0 | 10.4 | 8.0 |
Materials | 8.5 | 9.2 | 7.4 |
Other | 0.6 | 0.0 | 0.0 |
Telecommunication | |||
Services | 1.1 | 1.2 | 5.3 |
Utilities | 1.5 | 1.8 | 3.6 |
Volatility Measures | ||
MSCI | ||
S&P | AC | |
EPAC | World | |
SmallCap | Index ex | |
Index | USA | |
R-Squared | 0.94 | 0.85 |
Beta | 0.89 | 0.80 |
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months. | ||
Ten Largest Holdings (% of total net assets) | ||
Cerved Information | ||
Solutions SPA | Specialized Finance | 1.3% |
Anima Holding SPA | Asset Management | |
& Custody Banks | 1.3 | |
Nippon Shinyaku Co. | ||
Ltd. | Pharmaceuticals | 1.1 |
BRAAS Monier Building | Construction | |
Group SA | Materials | 1.0 |
Smurfit Kappa Group plc | Paper Packaging | 1.0 |
UBISOFT Entertainment | Home Entertainment | |
Software | 1.0 | |
Rubis SCA | Gas Utilities | 0.9 |
Elis SA | Diversified Support | |
Services | 0.9 | |
Matas A/S | Specialty Stores | 0.9 |
OC Oerlikon Corp. AG | Industrial Machinery | 0.9 |
Top Ten | 10.3% | |
The holdings listed exclude any temporary cash investments and equity index products. | ||
Allocation by Region (% of equity exposure)
1 The expense ratio shown is from the prospectus dated February 25, 2016, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2016, the annualized expense ratio was 0.43%.
13
International Explorer Fund
Market Diversification (% of equity exposure) | |||
S&P | MSCI | ||
EPAC | AC World | ||
SmallCap | Index ex | ||
Fund | Index | USA | |
Europe | |||
United Kingdom | 17.0% | 15.9% | 13.9% |
Italy | 9.8 | 2.3 | 1.6 |
France | 7.4 | 8.2 | 7.1 |
Germany | 5.0 | 7.9 | 6.4 |
Switzerland | 4.6 | 8.5 | 6.5 |
Ireland | 4.3 | 0.2 | 0.4 |
Sweden | 2.8 | 3.6 | 2.1 |
Norway | 1.7 | 0.7 | 0.4 |
Denmark | 1.7 | 1.5 | 1.4 |
Netherlands | 1.5 | 1.8 | 2.1 |
Austria | 1.4 | 0.2 | 0.1 |
Luxembourg | 1.2 | 0.0 | 0.0 |
Other | 1.2 | 4.8 | 4.2 |
Subtotal | 59.6% | 55.6% | 46.2% |
Pacific | |||
Japan | 24.5% | 24.0% | 16.5% |
Australia | 4.1 | 6.3 | 5.2 |
South Korea | 1.7 | 4.1 | 3.3 |
Hong Kong | 1.5 | 2.2 | 2.3 |
Other | 0.9 | 1.4 | 1.0 |
Subtotal | 32.7% | 38.0% | 28.3% |
Emerging Markets | |||
India | 2.7% | 0.0% | 1.7% |
China | 2.0 | 0.8 | 5.1 |
Taiwan | 1.3 | 0.0 | 2.5 |
Other | 1.3 | 0.0 | 8.6 |
Subtotal | 7.3% | 0.8% | 17.9% |
North America | 0.4% | 0.2% | 6.9% |
Middle East | 0.0% | 0.7% | 0.5% |
Other | 0.0% | 4.7% | 0.2% |
"Other" represents securities that are not classified by the fund's benchmark index. | |||
14
International Explorer Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Fiscal-Year Total Returns (%): October 31, 2005, Through April 30, 2016
Average Annual Total Returns: Periods Ended March 31, 2016 | ||||
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period. | ||||
Securities and Exchange Commission rules require that we provide this information. | ||||
Inception | One | Five | Ten | |
Date | Year | Years | Years | |
International Explorer Fund | 11/4/1996 | -0.80% | 4.46% | 3.98% |
See Financial Highlights for dividend and capital gains information.
15
International Explorer Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2016
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (96.0%)1 | |||
Australia (3.9%) | |||
Mirvac Group | 7,419,796 | 10,498 | |
Computershare Ltd. | 1,339,861 | 10,257 | |
Iluka Resources Ltd. | 2,094,685 | 10,166 | |
Asaleo Care Ltd. | 6,618,650 | 9,860 | |
oOh!media Ltd. | 2,752,429 | 9,717 | |
Tox Free Solutions Ltd. | 3,966,415 | 8,712 | |
Ansell Ltd. | 547,555 | 8,264 | |
Amcor Ltd. | 651,293 | 7,593 | |
Spotless Group Holdings | |||
Ltd. | 7,158,756 | 7,016 | |
Domino’s Pizza | |||
Enterprises Ltd. | 144,222 | 6,755 | |
Incitec Pivot Ltd. | 2,439,068 | 5,927 | |
Japara Healthcare Ltd. | 2,488,970 | 5,340 | |
Mantra Group Ltd. | 1,696,631 | 4,749 | |
SEEK Ltd. | 367,097 | 4,543 | |
Regis Healthcare Ltd. | 598,433 | 2,311 | |
* | Link Administration | ||
Holdings Ltd. | 262,865 | 1,596 | |
*,^ | Karoon Gas Australia Ltd. | 1,374,635 | 1,509 |
114,813 | |||
Austria (1.3%) | |||
ANDRITZ AG | 428,542 | 24,055 | |
Wienerberger AG | 251,638 | 4,970 | |
BUWOG AG | 185,240 | 3,900 | |
Schoeller-Bleckmann | |||
Oilfield Equipment AG | 56,552 | 3,816 | |
CA Immobilien Anlagen AG | 135,754 | 2,593 | |
39,334 | |||
Belgium (0.5%) | |||
D’ieteren SA | 153,346 | 6,802 | |
Cie d’Entreprises CFE | 50,016 | 4,971 | |
* | Galapagos NV | 49,600 | 2,255 |
14,028 |
Market | |||
Value• | |||
Shares | ($000) | ||
China (1.9%) | |||
New Oriental Education | |||
& Technology Group Inc. | |||
ADR | 310,350 | 12,153 | |
Shenzhou International | |||
Group Holdings Ltd. | 1,860,000 | 9,615 | |
ANTA Sports Products | |||
Ltd. | 3,477,000 | 8,857 | |
Haitian International | |||
Holdings Ltd. | 3,259,000 | 5,561 | |
^ | Baoxin Auto Group Ltd. | 8,638,500 | 5,465 |
Belle International | |||
Holdings Ltd. | 8,858,000 | 5,402 | |
CSPC Pharmaceutical | |||
Group Ltd. | 4,756,000 | 4,227 | |
Dah Chong Hong | |||
Holdings Ltd. | 10,202,000 | 4,223 | |
* | E-House China Holdings | ||
Ltd. ADR | 331,024 | 2,188 | |
57,691 | |||
Denmark (1.6%) | |||
Matas A/S | 1,375,000 | 26,239 | |
* | H Lundbeck A/S | 341,508 | 11,411 |
^ | FLSmidth & Co. A/S | 150,000 | 5,830 |
^ | Ambu A/S Class B | 158,000 | 5,449 |
* | OW Bunker A/S | 1,000,000 | — |
48,929 | |||
Finland (0.1%) | |||
Vaisala Oyj | 70,000 | 1,994 | |
France (7.0%) | |||
* | UBISOFT Entertainment | 1,000,000 | 29,025 |
Rubis SCA | 360,611 | 28,171 | |
Elis SA | 1,450,000 | 26,633 | |
* | SPIE SA | 1,300,000 | 25,550 |
* | Marie Brizard Wine & | ||
Spirits SA | 850,000 | 16,273 | |
Imerys SA | 159,261 | 11,761 | |
* | Naturex | 120,000 | 10,119 |
16
International Explorer Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Lectra | 600,000 | 9,119 | |
Euler Hermes Group | 90,598 | 8,613 | |
Eurazeo SA | 103,523 | 7,290 | |
* | ID Logistics Group | 59,732 | 7,188 |
Virbac SA | 30,135 | 5,496 | |
Coface SA | 609,435 | 4,923 | |
Albioma SA | 300,000 | 4,891 | |
Orpea | 49,080 | 4,049 | |
BioMerieux | 23,801 | 3,072 | |
Wendel SA | 26,177 | 3,025 | |
Eurofins Scientific SE | 5,000 | 1,855 | |
207,053 | |||
Germany (4.7%) | |||
BRAAS Monier Building | |||
Group SA | 1,111,525 | 30,900 | |
^ | Duerr AG | 300,000 | 24,072 |
^ | Wacker Chemie AG | 187,500 | 18,015 |
XING AG | 87,891 | 16,686 | |
Zeal Network SE | 318,921 | 14,785 | |
RIB Software AG | 900,000 | 9,521 | |
* | STRATEC Biomedical AG | 119,202 | 6,838 |
Grand City Properties SA | 308,752 | 6,831 | |
ElringKlinger AG | 173,940 | 4,270 | |
SAF-Holland SA | 339,483 | 4,008 | |
Sartorius AG Preference | |||
Shares | 10,999 | 2,718 | |
*,2 | windeln.de AG | 110,000 | 1,242 |
139,886 | |||
Hong Kong (1.4%) | |||
Techtronic Industries | |||
Co. Ltd. | 5,349,500 | 20,054 | |
Johnson Electric Holdings | |||
Ltd. | 2,472,625 | 7,307 | |
Hysan Development Co. | |||
Ltd. | 1,501,000 | 6,632 | |
HKBN Ltd. | 4,091,500 | 5,031 | |
Yue Yuen Industrial | |||
Holdings Ltd. | 1,068,000 | 3,890 | |
42,914 | |||
India (2.7%) | |||
* | Gujarat Pipavav Port Ltd. | 9,210,502 | 23,629 |
Apollo Hospitals | |||
Enterprise Ltd. | 940,155 | 18,579 | |
Idea Cellular Ltd. | 8,449,659 | 15,067 | |
Container Corp. Of India | |||
Ltd. | 511,547 | 10,416 | |
Phoenix Mills Ltd. | 1,438,800 | 6,967 | |
Multi Commodity | |||
Exchange of India Ltd. | 205,558 | 2,721 | |
Ipca Laboratories Ltd. | 248,267 | 1,861 | |
79,240 | |||
Indonesia (0.4%) | |||
Matahari Department | |||
Store Tbk PT | 6,010,500 | 8,618 |
Market | |||
Value• | |||
Shares | ($000) | ||
Ciputra Property Tbk PT | 74,669,491 | 2,792 | |
Gajah Tunggal Tbk PT | 5,295,190 | 318 | |
11,728 | |||
Ireland (4.1%) | |||
Smurfit Kappa Group plc | 1,125,000 | 29,862 | |
* | Dalata Hotel Group plc | 4,450,000 | 22,484 |
Glanbia plc | 925,000 | 17,460 | |
Irish Continental Group | |||
plc | 2,000,000 | 11,812 | |
Irish Residential | |||
Properties REIT plc | 8,400,000 | 10,763 | |
Origin Enterprises plc | 1,250,000 | 8,795 | |
* | Cairn Homes plc | 5,561,651 | 7,135 |
IFG Group plc | 2,360,000 | 5,620 | |
Kingspan Group plc | 182,412 | 4,807 | |
* | FBD Holdings plc | 650,000 | 4,750 |
Paddy Power Betfair plc | 1 | — | |
123,488 | |||
Italy (9.5%) | |||
Cerved Information | |||
Solutions SPA | 4,683,634 | 37,758 | |
2 | Anima Holding SPA | 5,295,040 | 37,606 |
* | Maire Tecnimont SPA | 7,500,000 | 22,832 |
*,2 | OVS SPA | 2,891,793 | 18,929 |
FinecoBank Banca | |||
Fineco SPA | 2,250,000 | 18,125 | |
Banca Popolare dell’Emilia | |||
Romagna SC | 2,900,000 | 17,004 | |
* | Yoox Net-A-Porter Group | ||
SPA | 525,000 | 15,404 | |
Credito Emiliano SPA | 2,125,000 | 15,374 | |
Salvatore Ferragamo SPA | 505,004 | 11,705 | |
Moncler SPA | 675,572 | 10,981 | |
* | Rizzoli Corriere Della | ||
Sera Mediagroup SPA | 15,500,000 | 10,005 | |
DiaSorin SPA | 151,219 | 8,840 | |
*,2 | Infrastrutture Wireless | ||
Italiane SPA | 1,685,799 | 8,656 | |
^ | Brunello Cucinelli SPA | 421,753 | 8,281 |
*,2 | Banca Sistema SPA | 2,371,523 | 7,661 |
* | Autogrill SPA | 875,980 | 7,434 |
Industria Macchine | |||
Automatiche SPA | 120,523 | 7,035 | |
Beni Stabili SpA SIIQ | 7,257,301 | 5,388 | |
*,2 | Technogym SPA | 1,188,726 | 4,424 |
Banca Generali SPA | 147,308 | 4,384 | |
Immobiliare Grande | |||
Distribuzione SIIQ SPA | 3,797,779 | 3,458 | |
Moleskine SPA | 1,151,632 | 2,656 | |
283,940 | |||
Japan (23.1%) | |||
Nippon Shinyaku Co. Ltd. | 741,600 | 33,497 | |
Tsuruha Holdings Inc. | 237,535 | 22,783 | |
Digital Garage Inc. | 1,125,000 | 22,528 |
17
International Explorer Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Tokai Tokyo Financial | |||
Holdings Inc. | 3,353,400 | 17,380 | |
Ai Holdings Corp. | 605,600 | 17,305 | |
Trusco Nakayama Corp. | 428,300 | 17,019 | |
Aica Kogyo Co. Ltd. | 756,400 | 16,879 | |
Arcs Co. Ltd. | 689,400 | 16,185 | |
Hitachi Transport System | |||
Ltd. | 950,500 | 15,929 | |
Zenkoku Hosho Co. Ltd. | 446,855 | 15,715 | |
Nippon Densetsu Kogyo | |||
Co. Ltd. | 807,600 | 15,701 | |
Nitta Corp. | 548,700 | 13,421 | |
Asahi Intecc Co. Ltd. | 273,470 | 13,156 | |
TPR Co. Ltd. | 513,600 | 12,943 | |
Kakaku.com Inc. | 699,000 | 12,590 | |
Unipres Corp. | 698,600 | 12,293 | |
Glory Ltd. | 369,700 | 12,108 | |
^ | Kyudenko Corp. | 476,300 | 12,095 |
Kuroda Electric Co. Ltd. | 760,900 | 11,734 | |
Kureha Corp. | 3,298,000 | 11,314 | |
Daikyonishikawa Corp. | 768,000 | 10,584 | |
Daibiru Corp. | 1,195,400 | 10,431 | |
Kissei Pharmaceutical Co. | |||
Ltd. | 448,100 | 10,307 | |
Koito Manufacturing Co. | |||
Ltd. | 236,100 | 10,229 | |
SCSK Corp. | 279,400 | 10,134 | |
^ | Kumiai Chemical Industry | ||
Co. Ltd. | 1,179,200 | 10,060 | |
OBIC Business | |||
Consultants Co. Ltd. | 239,000 | 9,984 | |
Musashi Seimitsu | |||
Industry Co. Ltd. | 522,400 | 9,972 | |
Nabtesco Corp. | 414,100 | 9,342 | |
Nihon Parkerizing Co. Ltd. | 1,040,100 | 9,174 | |
Temp Holdings Co. Ltd. | 603,200 | 9,055 | |
JSP Corp. | 512,500 | 8,821 | |
Mitsubishi UFJ Lease & | |||
Finance Co. Ltd. | 1,916,195 | 8,351 | |
Shinmaywa Industries | |||
Ltd. | 1,180,000 | 8,087 | |
IHI Corp. | 3,719,245 | 8,065 | |
Obara Group Inc. | 216,600 | 7,925 | |
Start Today Co. Ltd. | 187,200 | 7,865 | |
Sumitomo Real Estate | |||
Sales Co. Ltd. | 388,400 | 7,789 | |
Mitsui Sugar Co. Ltd. | 1,635,000 | 7,374 | |
Lintec Corp. | 381,400 | 7,311 | |
Fukushima Industries | |||
Corp. | 321,000 | 7,113 | |
Miura Co. Ltd. | 376,300 | 7,046 | |
NEC Networks & System | |||
Integration Corp. | 448,500 | 6,956 | |
Kenedix Inc. | 1,626,900 | 6,953 |
Market | |||
Value• | |||
Shares | ($000) | ||
Iida Group Holdings Co. | |||
Ltd. | 363,985 | 6,798 | |
Takasago International | |||
Corp. | 299,400 | 6,673 | |
Sanwa Holdings Corp. | 824,965 | 6,401 | |
H2O Retailing Corp. | 380,200 | 6,239 | |
Eagle Industry Co. Ltd. | 473,600 | 6,227 | |
Konami Holdings Corp. | 196,900 | 6,208 | |
Asahi Diamond Industrial | |||
Co. Ltd. | 606,600 | 6,053 | |
Taiheiyo Cement Corp. | 2,178,000 | 5,763 | |
Shinsei Bank Ltd. | 4,100,235 | 5,747 | |
Teijin Ltd. | 1,602,000 | 5,735 | |
Tokyo TY Financial Group | |||
Inc. | 204,643 | 5,208 | |
Welcia Holdings Co. Ltd. | 98,500 | 5,203 | |
Ferrotec Corp. | 530,400 | 5,158 | |
Leopalace21 Corp. | 829,600 | 4,978 | |
Ezaki Glico Co. Ltd. | 97,000 | 4,955 | |
EPS Holdings Inc. | 383,800 | 4,807 | |
^ | Jamco Corp. | 183,400 | 4,693 |
Ain Holdings Inc. | 95,500 | 4,639 | |
Tsutsumi Jewelry Co. Ltd. | 217,700 | 4,547 | |
Takara Leben Co. Ltd. | 670,300 | 4,264 | |
Mitsubishi Materials Corp. | 1,307,000 | 4,145 | |
Tokyo Steel | |||
Manufacturing Co. Ltd. | 665,100 | 4,097 | |
Nippon Shokubai Co. Ltd. | 75,961 | 3,934 | |
DMG Mori Co. Ltd. | 348,400 | 3,909 | |
Shimadzu Corp. | 257,000 | 3,847 | |
Kobe Steel Ltd. | 3,983,000 | 3,825 | |
Disco Corp. | 44,300 | 3,765 | |
Toyo Tire & Rubber Co. | |||
Ltd. | 246,100 | 3,681 | |
Tenma Corp. | 243,100 | 3,619 | |
Tokyo Ohka Kogyo Co. | |||
Ltd. | 122,346 | 3,421 | |
Yushin Precision | |||
Equipment Co. Ltd. | 175,200 | 2,996 | |
Denyo Co. Ltd. | 274,811 | 2,948 | |
^ | Ichigo Inc. | 604,900 | 2,623 |
688,609 | |||
Luxembourg (1.2%) | |||
L’Occitane International | |||
SA | 6,307,750 | 12,157 | |
B&M European Value | |||
Retail SA | 2,591,904 | 10,518 | |
Reinet Investments SCA | 323,015 | 6,550 | |
* | Stabilus SA | 125,000 | 6,248 |
2 | O’Key Group SA GDR | 305,733 | 705 |
36,178 | |||
Malaysia (0.3%) | |||
Bursa Malaysia Bhd. | 3,741,200 | 8,048 |
18
International Explorer Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Netherlands (1.4%) | |||
Beter Bed Holding NV | 400,000 | 9,714 | |
*,2 | Refresco Gerber NV | 501,952 | 9,295 |
IMCD Group NV | 219,155 | 8,866 | |
*,2 | Intertrust NV | 343,011 | 6,956 |
Wessanen | 600,000 | 6,193 | |
Kendrion NV | 30,841 | 755 | |
Delta Lloyd NV | 4 | — | |
41,779 | |||
New Zealand (0.3%) | |||
Fletcher Building Ltd. | 1,475,159 | 8,575 | |
Norway (1.7%) | |||
* | Storebrand ASA | 5,000,000 | 21,176 |
Borregaard ASA | 2,200,000 | 16,466 | |
Kongsberg Gruppen ASA | 518,433 | 8,692 | |
Tomra Systems ASA | 350,000 | 4,066 | |
50,400 | |||
Other (0.8%) | |||
3 | Vanguard FTSE All World | ||
ex-US Small-Cap ETF | 249,010 | 23,955 | |
Singapore (0.6%) | |||
* | UOL Group Ltd. | 2,279,700 | 10,381 |
First Resources Ltd. | 4,816,500 | 6,807 | |
17,188 | |||
South Africa (0.2%) | |||
Brait SE | 491,036 | 5,494 | |
South Korea (1.6%) | |||
^ | Medy-Tox Inc. | 39,438 | 14,579 |
S-1 Corp. | 104,582 | 8,530 | |
^ | Nexen Tire Corp. | 612,663 | 7,796 |
Hanon Systems | 740,479 | 6,667 | |
^ | Hotel Shilla Co. Ltd. | 95,134 | 6,098 |
^ | Mando Corp. | 32,377 | 5,341 |
49,011 | |||
Spain (0.6%) | |||
^ | Melia Hotels International | ||
SA | 595,330 | 7,512 | |
Applus Services SA | 675,000 | 6,246 | |
Naturhouse Health SAU | 550,000 | 2,776 | |
16,534 | |||
Sweden (2.7%) | |||
4 | Bufab AB | 2,301,057 | 18,002 |
Modern Times Group | |||
MTG AB Class B | 550,000 | 16,513 | |
Loomis AB Class B | 450,000 | 12,500 | |
2 | Coor Service | ||
Management Holding | |||
AB | 2,500,000 | 11,838 | |
AAK AB | 100,000 | 7,563 | |
Concentric AB | 469,805 | 5,325 | |
*,2 | Nordax Group AB | 1,020,000 | 5,207 |
Market | |||
Value• | |||
Shares | ($000) | ||
*,2 | Bravida Holding AB | 510,000 | 3,447 |
Opus Group AB | 1,427,025 | 773 | |
81,168 | |||
Switzerland (4.4%) | |||
OC Oerlikon Corp. AG | 2,690,923 | 26,032 | |
Helvetia Holding AG | 45,000 | 24,237 | |
Logitech International SA | 1,000,000 | 15,365 | |
Ascom Holding AG | 800,000 | 13,110 | |
Interroll Holding AG | 14,000 | 12,435 | |
Komax Holding AG | 55,000 | 12,163 | |
Gategroup Holding AG | 105,194 | 5,801 | |
Comet Holding AG | 6,000 | 4,181 | |
* | Dufry AG | 30,908 | 4,074 |
U-Blox AG | 19,100 | 3,798 | |
*,2 | VAT Group AG | 62,640 | 3,461 |
Tecan Group AG | 20,025 | 2,783 | |
Orior AG | 40,000 | 2,555 | |
ams AG | 82,979 | 2,199 | |
132,194 | |||
Taiwan (1.2%) | |||
Giant Manufacturing Co. | |||
Ltd. | 2,060,000 | 12,352 | |
Chroma ATE Inc. | 3,824,000 | 8,470 | |
Gourmet Master Co. Ltd. | 995,000 | 8,000 | |
CTCI Corp. | 4,336,000 | 5,641 | |
Catcher Technology Co. | |||
Ltd. | 381,000 | 2,666 | |
37,129 | |||
Thailand (0.2%) | |||
LPN Development PCL | 14,565,300 | 5,825 | |
United Arab Emirates (0.2%) | |||
* | Lamprell plc | 3,650,000 | 4,630 |
United Kingdom (16.2%) | |||
Dechra Pharmaceuticals | |||
plc | 1,075,000 | 17,390 | |
DCC plc | 189,905 | 16,844 | |
Grainger plc | 4,915,405 | 15,991 | |
Grafton Group plc | 1,425,000 | 14,409 | |
Kennedy Wilson Europe | |||
Real Estate plc | 879,949 | 14,013 | |
Dunelm Group plc | 922,500 | 11,912 | |
Tyman plc | 2,766,867 | 11,765 | |
IG Group Holdings plc | 1,023,416 | 11,579 | |
Keller Group plc | 851,494 | 10,991 | |
SuperGroup plc | 610,647 | 10,887 | |
Micro Focus International | |||
plc | 474,844 | 10,621 | |
Hikma Pharmaceuticals | |||
plc | 316,020 | 10,189 | |
Elementis plc | 3,226,933 | 10,183 | |
Northgate plc | 1,700,208 | 10,034 | |
Berendsen plc | 575,000 | 9,935 |
19
International Explorer Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Ricardo plc | 800,000 | 9,493 | |
SSP Group plc | 2,226,437 | 9,365 | |
^ | Telecom Plus plc | 685,216 | 9,334 |
Photo-Me International | |||
plc | 3,750,000 | 9,139 | |
Eco Animal Health Group | |||
plc | 1,608,166 | 8,911 | |
AA plc | 2,162,564 | 8,815 | |
Halma plc | 675,000 | 8,809 | |
HomeServe plc | 1,450,993 | 8,793 | |
Redrow plc | 1,563,146 | 8,754 | |
^ | Millennium & Copthorne | ||
Hotels plc | 1,250,000 | 8,415 | |
Bodycote plc | 932,890 | 8,144 | |
London Stock Exchange | |||
Group plc | 201,795 | 8,016 | |
Pets at Home Group plc | 2,142,073 | 7,600 | |
Investec plc | 977,662 | 7,487 | |
Polypipe Group plc | 1,744,012 | 7,477 | |
Big Yellow Group plc | 594,240 | 7,000 | |
Abcam plc | 806,669 | 6,978 | |
UNITE Group plc | 749,653 | 6,932 | |
Saga plc | 2,176,552 | 6,670 | |
2 | Auto Trader Group plc | 1,203,759 | 6,611 |
WS Atkins plc | 337,387 | 6,584 | |
Kier Group plc | 356,301 | 6,204 | |
JRP Group plc | 3,077,692 | 6,191 | |
Ultra Electronics Holdings | |||
plc | 237,200 | 6,125 | |
Mears Group plc | 1,052,686 | 6,122 | |
N Brown Group plc | 1,520,497 | 5,961 | |
Inchcape plc | 600,000 | 5,951 | |
Consort Medical plc | 382,925 | 5,534 | |
Victrex plc | 268,040 | 5,496 | |
A.G. Barr plc | 650,000 | 5,314 | |
Soco International plc | 2,311,526 | 5,006 | |
LondonMetric Property | |||
plc | 2,000,000 | 4,635 | |
Michael Page | |||
International plc | 748,427 | 4,455 | |
Cineworld Group plc | 583,867 | 4,421 | |
Senior plc | 1,359,368 | 4,336 | |
Genus plc | 192,011 | 4,215 | |
James Fisher & Sons plc | 202,693 | 4,190 | |
Crest Nicholson Holdings | |||
plc | 543,144 | 4,145 | |
Brewin Dolphin Holdings | |||
plc | 984,495 | 3,946 | |
SIG plc | 1,975,000 | 3,916 | |
Hays plc | 1,955,295 | 3,668 |
Market | |||
Value• | |||
Shares | ($000) | ||
QinetiQ Group plc | 1,000,000 | 3,275 | |
Hunting plc | 569,549 | 3,061 | |
Laird plc | 588,080 | 2,994 | |
Restaurant Group plc | 738,665 | 2,972 | |
Volution Group plc | 1,179,915 | 2,848 | |
* | Findel plc | 1,104,252 | 2,744 |
Electra Private Equity plc | 52,600 | 2,721 | |
PZ Cussons plc | 571,754 | 2,695 | |
* | LMS Capital plc | 2,133,690 | 2,028 |
* | Ophir Energy plc | 1,408,565 | 1,557 |
482,796 | |||
United States (0.2%) | |||
Samsonite International | |||
SA | 2,284,500 | 7,347 | |
Total Common Stocks | |||
(Cost $2,558,031) | 2,861,898 | ||
Temporary Cash Investments (7.5%)1 | |||
Money Market Fund (6.9%) | |||
5,6 | Vanguard Market | ||
Liquidity Fund, | |||
0.495% | 206,034,891 | 206,035 | |
Face | |||
Amount | |||
($000) | |||
Repurchase Agreement (0.2%) | |||
Goldman Sachs & Co. | |||
0.280%, 5/2/16 | |||
(Dated 4/29/16, | |||
Repurchase Value | |||
$7,000,000 collateralized | |||
by Federal National | |||
Mortgage Assn. | |||
2.800%–4.500%, | |||
6/1/22–9/1/35 and Federal | |||
Home Loan Mortgage | |||
Corp. 3.500%, | |||
5/1/28–12/1/43, with a | |||
value of $7,140,000) | 7,000 | 7,000 | |
U.S. Government and Agency Obligations (0.4%) | |||
7,8 | Federal Home Loan | ||
Bank Discount Notes, | |||
0.335%, 7/22/16 | 10,000 | 9,992 | |
Total Temporary Cash | |||
Investments (Cost $223,027) | 223,027 | ||
Total Investments (103.5%) | |||
(Cost $2,781,058) | 3,084,925 |
20
International Explorer Fund
Amount | |
($000) | |
Other Assets and Liabilities (-3.5%) | |
Other Assets | |
Investment in Vanguard | 252 |
Receivables for Investment Securities Sold 2,965 | |
Receivables for Accrued Income | 10,774 |
Receivables for Capital Shares Issued | 1,332 |
Other Assets | 2,635 |
Total Other Assets | 17,958 |
Liabilities | |
Payables for Investment Securities | |
Purchased | (14,600) |
Collateral for Securities on Loan | (92,839) |
Payables to Investment Advisor | (1,487) |
Payables for Capital Shares Redeemed | (4,464) |
Payables to Vanguard | (4,987) |
Other Liabilities | (4,495) |
Total Liabilities | (122,872) |
Net Assets (100%) | |
Applicable to 178,224,830 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 2,980,011 |
Net Asset Value Per Share | $16.72 |
At April 30, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 2,739,087 |
Overdistributed Net Investment Income | (18,459) |
Accumulated Net Realized Losses | (47,342) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 303,867 |
Futures Contracts | 784 |
Forward Currency Contracts | 1,880 |
Foreign Currencies | 194 |
Net Assets | 2,980,011 |
• 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 $79,458,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 97.5% and 6.0%, respectively, of net assets.
2 Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2016, the aggregate value of these securities was $126,038,000, representing 4.2% of net assets.
3 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
4 Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.
5 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
6 Includes $92,839,000 of collateral received for securities on loan.
7 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
8 Securities with a value of $3,397,000 have been segregated as initial margin for open futures contracts.
ADR—American Depositary Receipt.
GDR—Global Depositary Receipt.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.
21
International Explorer Fund
Statement of Operations
Six Months Ended | |
April 30, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 23,354 |
Interest | 271 |
Securities Lending | 1,207 |
Total Income | 24,832 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 3,115 |
Performance Adjustment | 197 |
The Vanguard Group—Note C | |
Management and Administrative | 2,261 |
Marketing and Distribution | 234 |
Custodian Fees | 259 |
Shareholders’ Reports | 26 |
Trustees’ Fees and Expenses | 2 |
Total Expenses | 6,094 |
Net Investment Income | 18,738 |
Realized Net Gain (Loss) | |
Investment Securities Sold | (39,910) |
Futures Contracts | (2,987) |
Foreign Currencies and Forward Currency Contracts | (255) |
Realized Net Gain (Loss) | (43,152) |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 7,671 |
Futures Contracts | (2,388) |
Foreign Currencies and Forward Currency Contracts | 2,789 |
Change in Unrealized Appreciation (Depreciation) | 8,072 |
Net Increase (Decrease) in Net Assets Resulting from Operations | (16,342) |
1 Dividends are net of foreign withholding taxes of $1,844,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
22
International Explorer Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 18,738 | 41,153 |
Realized Net Gain (Loss) | (43,152) | 121,585 |
Change in Unrealized Appreciation (Depreciation) | 8,072 | (29,075) |
Net Increase (Decrease) in Net Assets Resulting from Operations | (16,342) | 133,663 |
Distributions | ||
Net Investment Income | (43,678) | (45,599) |
Realized Capital Gain1 | (109,775) | (153,304) |
Total Distributions | (153,453) | (198,903) |
Capital Share Transactions | ||
Issued | 381,933 | 712,308 |
Issued in Lieu of Cash Distributions | 139,822 | 183,328 |
Redeemed | (258,677) | (541,440) |
Net Increase (Decrease) from Capital Share Transactions | 263,078 | 354,196 |
Total Increase (Decrease) | 93,283 | 288,956 |
Net Assets | ||
Beginning of Period | 2,886,728 | 2,597,772 |
End of Period2 | 2,980,011 | 2,886,728 |
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $0 and $26,297,000 respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes. | ||
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($18,459,000) and $4,878,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
23
International Explorer Fund
Financial Highlights
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | April 30, | Year Ended October 31, | ||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 |
Net Asset Value, Beginning of Period | $17.76 | $18.26 | $18.50 | $14.50 | $14.41 | $15.81 |
Investment Operations | ||||||
Net Investment Income | .120 | .287 | .335 | .327 | .362 | .322 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | (.236) | .635 | .133 | 4.078 | .287 | (1.498) |
Total from Investment Operations | (.116) | .922 | .468 | 4.405 | .649 | (1.176) |
Distributions | ||||||
Dividends from Net Investment Income | (. 263) | (. 326) | (. 420) | (. 405) | (. 346) | (. 224) |
Distributions from Realized Capital Gains | (.661) | (1.096) | (.288) | — | (.213) | — |
Total Distributions | (. 924) | (1.422) | (.708) | (. 405) | (. 559) | (. 224) |
Net Asset Value, End of Period | $16.72 | $17.76 | $18.26 | $18.50 | $14.50 | $14.41 |
Total Return1 | -0.65% | 5.65% | 2.66% | 31.13% | 5.02% | -7.60% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $2,980 | $2,887 | $2,598 | $2,281 | $1,819 | $2,187 |
Ratio of Total Expenses to | ||||||
Average Net Assets2 | 0.43% | 0.42% | 0.40% | 0.36% | 0.43% | 0.42% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.31% | 1.53% | 1.69% | 2.03% | 2.35% | 1.93% |
Portfolio Turnover Rate | 34% | 42% | 39% | 36% | 28% | 43% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | ||||||
1 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees. | ||||||
2 Includes performance-based investment advisory fee increases (decreases) of 0.01%, 0.00%, 0.00%, (0.05%), 0.02%, and 0.03%. |
See accompanying Notes, which are an integral part of the Financial Statements.
24
International Explorer Fund
Notes to Financial Statements
Vanguard International Explorer 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.
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 acquired over 60 days to maturity 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. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearing-house, 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.
25
International Explorer Fund
The fund enters into forward currency contracts to provide the appropriate currency exposure related to any open futures contracts or to protect the value of securities and related receivables and payables against changes in foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The aggregate settlement values and notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.
During the six months ended April 30, 2016, the fund’s average investments in long and short futures contracts represented 1% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period. The fund’s average investment in forward currency contracts represented 4% of net assets, based on the average of notional amounts at each quarter-end during the period.
4. Repurchase Agreements: The fund enters into repurchase agreements with institutional counter-parties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. 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 counter-party’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 (October 31, 2012–2015), and for the period ended April 30, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
26
International Explorer Fund
6. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
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 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 absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.
8. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2016, or at any time during the period then ended.
9. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
B. The investment advisory firms Schroder Investment Management North America Inc. and Wellington Management Company LLP 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 Schroder Investment Management North America Inc. and Wellington Management Company LLP is subject to quarterly adjustments based on performance relative to the S&P EPAC SmallCap Index for the preceding three years.
27
International Explorer Fund
Vanguard manages the cash reserves of the fund as described below.
For the six months ended April 30, 2016, the aggregate investment advisory fee represented an effective annual basic rate of 0.22% of the fund’s average net assets, before an increase of $197,000 (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, distribution, and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At April 30, 2016, the fund had contributed to Vanguard capital in the amount of $252,000, representing 0.01% of the fund’s net assets and 0.10% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
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).
The following table summarizes the market value of the fund’s investments as of April 30, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 38,296 | 2,823,602 | — |
Temporary Cash Investments | 206,035 | 16,992 | — |
Futures Contracts—Assets1 | 26 | — | — |
Futures Contracts—Liabilities1 | (580) | — | — |
Forward Currency Contracts—Assets | — | 2,081 | — |
Forward Currency Contracts—Liabilities | — | (201) | — |
Total | 243,777 | 2,842,474 | — |
1 Represents variation margin on the last day of the reporting period. |
28
International Explorer Fund
E. At April 30, 2016, the fair values of derivatives were reflected in the Statement of Net Assets as follows:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Statement of Net Assets Caption | ($000) | ($000) | ($000) |
Other Assets | 26 | 2,081 | 2,107 |
Other Liabilities | (580) | (201) | (781) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended April 30, 2016, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | (2,987) | — | (2,987) |
Forward Currency Contracts | — | (1,089) | (1,089) |
Realized Net Gain (Loss) on Derivatives | (2,987) | (1,089) | (4,076) |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | (2,388) | — | (2,388) |
Forward Currency Contracts | — | 2,308 | 2,308 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | (2,338) | 2,308 | (80) |
At April 30, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Aggregate | ||||
Number of | Settlement | Unrealized | ||
Long (Short) | Value | Appreciation | ||
Futures Contracts | Expiration | Contracts | Long (Short) | (Depreciation) |
Dow Jones EURO STOXX 50 Index | June 2016 | 518 | 17,662 | (57) |
Topix Index | June 2016 | 112 | 13,885 | 155 |
FTSE 100 Index | June 2016 | 103 | 9,373 | 581 |
S&P ASX 200 Index | June 2016 | 42 | 4,192 | 105 |
784 |
Unrealized appreciation (depreciation) on open Dow Jones EURO STOXX 50 Index and FTSE 100 Index futures contracts is required to be treated as realized gain (loss) for tax purposes.
29
International Explorer Fund
At April 30, 2016, the fund had open forward currency contracts to receive and deliver currencies as follows. Unrealized appreciation (depreciation) on open forward currency contracts is treated as realized gain (loss) for tax purposes.
Unrealized | ||||||
Contract | Appreciation | |||||
Contract Amount (000) | ||||||
Settlement | (Depreciation) | |||||
Counterparty | Date | Receive | Deliver | ($000) | ||
Deutsche Bank AG | 6/22/16 | EUR | 19,946 | USD | 22,141 | 738 |
BNP Paribas | 6/14/16 | JPY | 2,058,976 | USD | 18,321 | 1,055 |
Deutsche Bank AG | 6/22/16 | GBP | 6,024 | USD | 8,720 | 83 |
Morgan Stanely Capital Services LLC | 6/21/16 | AUD | 8,160 | USD | 6,039 | 151 |
Goldman Sachs International | 6/22/16 | GBP | 1,033 | USD | 1,471 | 39 |
BNP Paribas | 6/22/16 | GBP | 206 | USD | 298 | 2 |
Barclays Bank PLC | 6/22/16 | USD | 4,928 | EUR | 4,323 | (30) |
BNP Paribas | 6/14/16 | USD | 2,726 | JPY | 294,170 | (42) |
UBS AG | 6/21/16 | USD | 1,573 | AUD | 2,085 | (8) |
Barclays Bank PLC | 6/14/16 | USD | 1,495 | JPY | 164,840 | (56) |
Citibank, N.A. | 6/14/16 | USD | 1,123 | JPY | 122,535 | (30) |
Goldman Sachs International | 6/22/16 | USD | 775 | GBP | 548 | (25) |
Barclays Bank PLC | 6/22/16 | USD | 634 | GBP | 441 | (10) |
BNP Paribas | 6/21/16 | USD | 504 | AUD | 648 | 13 |
1,880 | ||||||
AUD—Australian dollar. | ||||||
EUR—Euro. | ||||||
GBP—British pound. | ||||||
JPY—Japanese yen. | ||||||
USD—U.S. dollar. |
At April 30, 2016, the counterparty (counterparties) had deposited in segregated accounts securities with a value of $1,298,000 in connection with amounts due to the fund for open forward currency contracts.
F. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
30
International Explorer Fund
During the six months ended April 30, 2016, the fund realized net foreign currency gains of $834,000, which increased distributable net income for tax purposes; accordingly, such gains have been reclassified from accumulated net realized losses to overdistributed net investment income. Certain of the fund’s investments are in securities considered to be passive foreign investment companies, for which any unrealized appreciation and/or realized gains are required to be included in distributable net investment income for tax purposes. During the six months ended April 30, 2016, the fund realized gains on the sale of passive foreign investment companies of $803,000 which have been included in current and prior periods’ taxable income; accordingly, such gains have been reclassified from accumulated net realized losses to overdistributed net investment income. Passive foreign investment companies had unrealized appreciation of $29,239,000 at April 30, 2016.
The fund realized gains on the sale of securities that were subject to capital gains tax in certain foreign countries. Capital gains taxes reduce realized gains for financial statement purposes but are treated as an expense for tax purposes. Accordingly, $34,000 of capital gains tax has been reclassified from accumulated net realized losses to undistributed net investment income.
At April 30, 2016, the cost of investment securities for tax purposes was $2,810,297,000. Net unrealized appreciation of investment securities for tax purposes was $274,628,000, consisting of unrealized gains of $477,207,000 on securities that had risen in value since their purchase and $202,579,000 in unrealized losses on securities that had fallen in value since their purchase.
G. During the six months ended April 30, 2016, the fund purchased $619,973,000 of investment securities and sold $475,802,000 of investment securities, other than temporary cash investments.
H. Capital shares issued and redeemed were:
Six Months Ended | Year Ended | |
April 30, 2016 | October 31, 2015 | |
Shares | Shares | |
(000) | (000) | |
Issued | 23,128 | 39,930 |
Issued in Lieu of Cash Distributions | 8,363 | 11,118 |
Redeemed | (15,816) | (30,786) |
Net Increase (Decrease) in Shares Outstanding | 15,675 | 20,262 |
31
International Explorer Fund
I. Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company or the issuer is another member of The Vanguard Group. Transactions during the period in securities of these companies were as follows:
Current Period Transactions | ||||||
Oct. 31, | Proceeds | April 30, | ||||
2015 | from | Capital Gain | 2016 | |||
Market | Purchases | Securities | Distributions | Market | ||
Value | at Cost | Sold1 | Income | Received | Value | |
($000) | ($000) | ($000) | ($000) | ($000) | ($000) | |
Bufab AB | 12,344 | 469 | 911 | — | — | 18,002 |
Vanguard FTSE All World | ||||||
ex-US Small-Cap ETF | 23,646 | — | — | 317 | — | 23,955 |
Vanguard Market Liquidity | 208,878 | NA2 | NA 2 | 243 | — | 206,035 |
Total | 244,868 | 560 | — | 247,992 | ||
1 Includes net realized gain (loss) on affiliated investment securities sold of $186,000. | ||||||
2 Not applicable—purchases and sales are for temporary cash investment purposes. |
J. Management has determined that no material events or transactions occurred subsequent to April 30, 2016, that would require recognition or disclosure in these financial statements.
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.
33
Six Months Ended April 30, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
International Explorer Fund | 10/31/2015 | 4/30/2016 | Period |
Based on Actual Fund Return | $1,000.00 | $993.47 | $2.13 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,022.73 | 2.16 |
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 0.43%. 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). | |||
34
Glossary
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
35
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
36
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
InterestedTrustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International plc (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive plc |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
IndependentTrustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | ||
Partner of HighVista Strategies LLC (private investment | Mortimer J. Buckley | James M. Norris |
firm); Director of Rand Merchant Bank; Overseer of | Kathleen C. Gubanich | Thomas M. Rampulla |
the Museum of Fine Arts Boston. | Martha G. King | Glenn W. Reed |
John T. Marcante | Karin A. Risi | |
Peter F. Volanakis | Chris D. McIsaac | |
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the
Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 | |
Connect with Vanguard® > vanguard.com | |
Fund Information > 800-662-7447 | |
Direct Investor Account Services > 800-662-2739 | |
Institutional Investor Services > 800-523-1036 | |
Text Telephone for People | |
Who Are Deaf or Hard of Hearing> 800-749-7273 | |
This material may be used in conjunction | |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by | |
the fund’s current prospectus. | |
All comparative mutual fund data are from Lipper, a | |
Thomson Reuters Company, or Morningstar, Inc., unless | |
otherwise noted. | |
You can obtain a free copy of Vanguard’s proxy voting | |
guidelines by visiting vanguard.com/proxyreporting or by | |
calling Vanguard at 800-662-2739. The guidelines are | |
also available from the SEC’s website, sec.gov. In | |
addition, you may obtain a free report on how your fund | |
voted the proxies for securities it owned during the 12 | |
months ended June 30. To get the report, visit either | |
vanguard.com/proxyreporting or sec.gov. | |
You can review and copy information about your fund at | |
the SEC’s Public Reference Room in Washington, D.C. To | |
find out more about this public service, call the SEC at | |
202-551-8090. Information about your fund is also | |
available on the SEC’s website, and you can receive | |
copies of this information, for a fee, by sending a | |
request in either of two ways: via email addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2016 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q1262 062016 |
Semiannual Report | April 30, 2016
Vanguard High Dividend Yield Index Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Fund Profile. | 7 |
Performance Summary. | 9 |
Financial Statements. | 10 |
About Your Fund’s Expenses. | 26 |
Trustees Approve Advisory Arrangement. | 28 |
Glossary. | 29 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended April 30, 2016 | |
Total | |
Returns | |
Vanguard High Dividend Yield Index Fund | |
Investor Shares | 4.02% |
ETF Shares | |
Market Price | 4.02 |
Net Asset Value | 4.05 |
FTSE High Dividend Yield Index | 4.08 |
Equity Income Funds Average | 1.49 |
Equity Income Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
The Vanguard ETF® Shares shown are traded on the NYSE Arca exchange and are available only through brokers. The table provides ETF returns based on both the NYSE Arca market price and the net asset value for a share. U.S. Pat. Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.
For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares' market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares' market price was above or below the NAV.
Your Fund’s Performance at a Glance | ||||
October 31, 2015, Through April 30, 2016 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard High Dividend Yield Index Fund | ||||
Investor Shares | $26.89 | $27.53 | $0.420 | $0.000 |
ETF Shares | 67.88 | 69.50 | 1.077 | 0.000 |
1
Chairman’s Letter
Dear Shareholder,
For the six months ended April 30, 2016, Vanguard High Dividend Yield Index Fund returned 4.02% for Investor Shares and 4.05% for ETF Shares based on net asset value. The fund met its objective of closely tracking the performance of its target, the FTSE High Dividend Yield Index, and outdistanced the average return of its peers.
Compared with the broad U.S. stock market, the fund outperformed as large-capitalization and dividend-paying stocks bested smaller-company stocks.
At the period’s close, the 30-day SEC yield of the fund’s Investor Shares was 3.17%, compared with the 1.92% yield of the broad stock market, as measured by Investor Shares of Vanguard Total Stock Market Index Fund.
The fund posted positive results in eight of its ten market sectors. Utilities and consumer goods stocks were among the leading contributors to performance.
U.S. stocks traveled a rocky road, finishing the period about even
The broad U.S. stock market delivered flat returns for a half year marked by inconsistency, sharp declines, and even sharper rallies.
After struggling during the first four months of the period, U.S. stocks rebounded. Most of the surge came in March, as investors cheered the Federal Reserve’s indication that it would scale back its plan for interest
2
rate hikes in 2016. Continued aggressive stimulus by central bankers in Europe and Asia and a recovery in oil prices also helped.
International stocks traced an even rockier path than their U.S. counterparts en route to modestly negative returns. Developed markets, especially Europe, notched weak results, while emerging markets managed a slight advance.
Bonds have proved attractive with help from the Fed
The broad U.S. bond market returned 2.82% for the half year. After retreating in November and December, the bond market recorded positive results for each of the next four months. It also received a boost from the Fed’s cautious approach to raising short-term interest rates. The yield of the 10-year U.S. Treasury note closed at 1.83% at the end of April, down from 2.17% six months earlier. (Bond prices and yields move in opposite directions.)
Even though the Fed raised short-term rates a quarter of a percentage point in December, the target rate of 0.25%–0.5% is still very low historically, and it restrained returns for money market funds and savings accounts.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 8.72%. In a reversal from the trend of recent years, foreign currencies strengthened against the dollar, helping
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 0.22% | 0.34% | 10.81% |
Russell 2000 Index (Small-caps) | -1.90 | -5.94 | 6.98 |
Russell 3000 Index (Broad U.S. market) | 0.06 | -0.18 | 10.50 |
FTSE All-World ex US Index (International) | -1.52 | -10.65 | 0.25 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 2.82% | 2.72% | 3.60% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.55 | 5.29 | 5.37 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.08 | 0.10 | 0.05 |
CPI | |||
Consumer Price Index | 0.60% | 1.13% | 1.25% |
3
international bonds. Even without this currency benefit, international bond returns were solid.
Stocks with higher dividends helped the fund to a decent gain
Vanguard High Dividend Yield Index Fund gives investors broad exposure to stocks of U.S. companies that are committed to paying above-average dividends. Although the U.S. stock market struggled to avoid losing ground during the period, companies with a track record of paying dividends higher than market averages found favor with investors. This often happens when the market experiences uncertainty and volatility because dividend-paying stocks offer a measure of comparative stability and predictability, especially to investors with a “show me the money” mindset.
Traditionally higher-yielding sectors such as consumer goods, utilities, and telecommunications are well-represented in the fund. These three industries were the leading contributors during the period.
Consumer goods returned about 6% as retail sales were helped by an improving labor market and lower energy prices. Household goods and home construction stocks stood out as the housing market continued to show growing strength. Consumer services—notably, travel and leisure companies—was another bright spot.
Utilities (+13%) and telecommunications (+15%) did particularly well as so-called defensive stocks outperformed sectors that are typically more volatile, such as
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | ETF | Peer Group | |
Shares | Shares | Average | |
High Dividend Yield Index Fund | 0.16% | 0.09% | 1.20% |
The fund expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2016, the fund’s annualized expense ratios were 0.15% for Investor Shares and 0.08% for ETF Shares. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2015.
Peer group: Equity Income Funds.
4
Do U.S.-based multinationals provide enough global diversification? |
Some investors believe that their portfolios get enough exposure to international stocks |
through their holdings in large-capitalization, multinational U.S. companies such as the ones |
represented in the Standard & Poor’s 500 Index. After all, those firms generated almost half |
of their total sales outside the United States in 2014.* |
However, international exposure based only on a broad index of U.S.-based companies would |
be patchy at best. The near-even split of domestic and foreign sales for S&P 500 companies |
is an average; when you look at individual sectors, a different picture emerges. Information |
technology firms earned the highest percentage of sales abroad (almost 60% in 2014). Utilities |
and telecommunication services, which tend to operate regionally or nationally, generated the |
least overseas revenue. |
As the chart below shows, such a portfolio would also differ significantly from a broadly |
diversified global portfolio in some sector weightings. It would, for example, have more |
exposure to IT and health care stocks and considerably less to materials and financials. |
The bottom line: Large-cap U.S. stocks can give you a degree of exposure to international |
economic and market forces, but not to the same extent as a combination of both U.S. and |
non-U.S. stocks. |
S&P 500 Index sector weightings vary from those of global stocks |
(Differences in percentage points) |
Notes: Data are 12-month-average sector weightings as of March 31, 2016. Global stocks are represented by the FTSE All-World Index. |
Sources: Vanguard calculations, based on data from S&P Dow Jones Indices LLC and FTSE International Limited. |
* All S&P 500 Index and sector revenue data are from S&P Dow Jones Indices LLC for 2014. |
There are additional risks when investing outside the United States, including the possibility that returns will be hurt |
by a decline in the value of foreign currencies or by unfavorable developments in a particular country or region. |
5
technology. Technology, a recent outperformer for the fund, returned –4% as worries arose about lagging hardware sales.
Financials, the second-largest sector in the fund on average during the period, lost about 1% as pressure on banks continued because of ultra-low interest rates, which limit their ability to make profitable loans.
Oil and gas stocks, which have been beaten down by plummeting prices, stabilized along with energy prices. They returned about 1%.
Whether index or active investing, low costs and experience matter
If you listen to some investing pundits, you might think index investing and actively managed investing are incompatible opposites. At Vanguard, we don’t see it that way.
To us, it’s not index versus active. In fact, depending on your goals, it could well be index and active.
Vanguard is known as a pioneer in index investing. In 1976, we opened the first index mutual fund, giving shareholders an opportunity to track the performance of the S&P 500 Index. But our roots in active management—which aims to choose investments that will outperform the market—go back to the 1929 launch of what later became Vanguard Wellington™ Fund.
Our index and active funds share important traits. Both are low-cost, and as their assets grow, we can take advantage of economies of scale by further reducing fund expense ratios. That allows you to keep more of your fund’s returns.
But low costs aren’t the whole story. Talent and experience are vital regardless of a fund’s management style.
When it comes to indexing, portfolio managers in our Equity Index Group and Fixed Income Group have honed their expertise over decades. That expertise helps our index funds meet their objectives of closely tracking their benchmarks.
Our active funds also benefit from world-class managers—both our own experts and those we hire from around the globe. There’s no guarantee that active management will lead to market-beating results, but the combination of talent and low costs can give investors a better chance of success.
If you’d like to know more, see Keys to Improving the Odds of Active Management Success and The Case for Index-Fund Investing, available at vanguard.com/research.
As always, thank you for investing with Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
May 10, 2016
6
High Dividend Yield Index Fund
Fund Profile
As of April 30, 2016
Share-Class Characteristics | ||
Investor | ETF | |
Shares | Shares | |
Ticker Symbol | VHDYX | VYM |
Expense Ratio1 | 0.16% | 0.09% |
30-Day SEC Yield | 3.17% | 3.24% |
Portfolio Characteristics | |||
DJ | |||
U.S. | |||
FTSE High | Total | ||
Dividend | Market | ||
Yield | FA | ||
Fund | Index | Index | |
Number of Stocks | 427 | 423 | 3,887 |
Median Market Cap | $120.3B | $120.3B | $51.6B |
Price/Earnings Ratio | 18.8x | 18.8x | 22.0x |
Price/Book Ratio | 2.6x | 2.6x | 2.7x |
Return on Equity | 17.2% | 17.2% | 16.8% |
Earnings Growth | |||
Rate | 2.1% | 2.1% | 7.8% |
Dividend Yield | 3.3% | 3.3% | 2.1% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 11% | — | — |
Short-Term | |||
Reserves | 0.0% | — | — |
Volatility Measures | ||
FTSE High | DJ | |
Dividend | U.S. Total | |
Yield | Market | |
Index | FA Index | |
R-Squared | 1.00 | 0.90 |
Beta | 1.00 | 0.87 |
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months. | ||
Ten Largest Holdings (% of total net assets) | ||
Microsoft Corp. | Software | 4.5% |
Exxon Mobil Corp. | Integrated Oil & Gas | 4.3 |
Johnson & Johnson | Pharmaceuticals | 3.6 |
General Electric Co. | Diversified Industrials | 3.4 |
Wells Fargo & Co. | Banks | 3.0 |
AT&T Inc. | Fixed Line | |
Telecommunications | 2.8 | |
JPMorgan Chase & Co. | Banks | 2.7 |
Procter & Gamble Co. | Nondurable | |
Household Products | 2.6 | |
Verizon Communications | Fixed Line | |
Inc. | Telecommunications | 2.4 |
Pfizer Inc. | Pharmaceuticals | 2.3 |
Top Ten | 31.6% | |
The holdings listed exclude any temporary cash investments and equity index products. | ||
Investment Focus
1 The expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2016, the annualized expense ratios were 0.15% for Investor Shares and 0.08% for ETF Shares.
7
High Dividend Yield Index Fund
Sector Diversification (% of equity exposure) | |||
DJ | |||
U.S. | |||
FTSE High | Total | ||
Dividend | Market | ||
Yield | FA | ||
Fund | Index | Index | |
Basic Materials | 3.2% | 3.2% | 2.5% |
Consumer Goods | 15.6 | 15.7 | 10.5 |
Consumer Services | 6.0 | 6.0 | 14.0 |
Financials | 13.6 | 13.6 | 19.0 |
Health Care | 11.5 | 11.4 | 13.7 |
Industrials | 12.7 | 12.7 | 12.6 |
Oil & Gas | 10.7 | 10.7 | 6.6 |
Technology | 12.8 | 12.8 | 15.4 |
Telecommunications | 5.6 | 5.6 | 2.4 |
Utilities | 8.3 | 8.3 | 3.3 |
8
High Dividend Yield Index Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Fiscal-Year Total Returns (%): November 16, 2006, Through April 30, 2016
Note: For 2016, performance data reflect the six months ended April 30, 2016.
Average Annual Total Returns: Periods Ended March 31, 2016
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | One | Five | Since | |
Date | Year | Years | Inception | |
Investor Shares | 11/16/2006 | 4.68% | 12.59% | 6.51% |
ETF Shares | 11/10/2006 | |||
Market Price | 4.70 | 12.67 | 6.71 | |
Net Asset Value | 4.74 | 12.70 | 6.71 |
See Financial Highlights for dividend and capital gains information.
9
High Dividend Yield Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2016
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | ||
Value• | ||
Shares | ($000) | |
Common Stocks (99.6%)1 | ||
Basic Materials (3.2%) | ||
Dow Chemical Co. | 2,404,919 | 126,523 |
EI du Pont de Nemours | ||
& Co. | 1,887,094 | 124,378 |
Air Products | ||
& Chemicals Inc. | 461,092 | 67,269 |
LyondellBasell Industries | ||
NV Class A | 780,879 | 64,555 |
International Paper Co. | 892,037 | 38,598 |
Nucor Corp. | 680,175 | 33,859 |
Mosaic Co. | 758,717 | 21,236 |
CF Industries Holdings Inc. | 502,504 | 16,618 |
Avery Dennison Corp. | 197,639 | 14,351 |
RPM International Inc. | 283,210 | 14,311 |
Steel Dynamics Inc. | 487,339 | 12,286 |
Reliance Steel | ||
& Aluminum Co. | 142,283 | 10,525 |
Olin Corp. | 346,461 | 7,549 |
Huntsman Corp. | 360,502 | 5,674 |
Compass Minerals | ||
International Inc. | 73,182 | 5,486 |
Domtar Corp. | 127,841 | 4,940 |
Commercial Metals Co. | 223,950 | 4,013 |
Axiall Corp. | 150,994 | 3,556 |
KapStone Paper and | ||
Packaging Corp. | 171,465 | 2,725 |
A Schulman Inc. | 64,537 | 1,800 |
Innophos Holdings Inc. | 42,829 | 1,583 |
Ferroglobe plc | 133,015 | 1,355 |
Rayonier Advanced | ||
Materials Inc. | 92,943 | 953 |
584,143 | ||
Consumer Goods (15.6%) | ||
Procter & Gamble Co. | 5,856,392 | 469,214 |
Coca-Cola Co. | 8,901,668 | 398,795 |
Philip Morris International | ||
Inc. | 3,363,722 | 330,048 |
PepsiCo Inc. | 3,138,154 | 323,104 |
Market | |||
Value• | |||
Shares | ($000) | ||
Altria Group Inc. | 4,227,155 | 265,085 | |
Ford Motor Co. | 8,365,602 | 113,438 | |
Kraft Heinz Co. | 1,267,724 | 98,971 | |
Kimberly-Clark Corp. | 784,249 | 98,180 | |
General Motors Co. | 3,084,728 | 98,094 | |
Reynolds American Inc. | 1,786,948 | 88,633 | |
General Mills Inc. | 1,282,001 | 78,638 | |
Johnson Controls Inc. | 1,397,134 | 57,841 | |
Archer-Daniels-Midland | |||
Co. | 1,281,592 | 51,187 | |
ConAgra Foods Inc. | 927,295 | 41,320 | |
Kellogg Co. | 528,998 | 40,632 | |
Stanley Black & Decker Inc. | 325,834 | 36,467 | |
Clorox Co. | 277,670 | 34,773 | |
Genuine Parts Co. | 327,193 | 31,401 | |
Coca-Cola Enterprises Inc. | 492,314 | 25,837 | |
Coach Inc. | 596,397 | 24,017 | |
Mattel Inc. | 727,181 | 22,608 | |
Hasbro Inc. | 243,268 | 20,590 | |
Bunge Ltd. | 307,466 | 19,217 | |
Harley-Davidson Inc. | 395,841 | 18,933 | |
Leggett & Platt Inc. | 293,754 | 14,479 | |
Pinnacle Foods Inc. | 244,794 | 10,426 | |
Flowers Foods Inc. | 384,881 | 7,374 | |
Tupperware Brands Corp. | 98,123 | 5,698 | |
Scotts Miracle-Gro Co. | |||
Class A | 76,431 | 5,410 | |
B&G Foods Inc. | 127,218 | 5,243 | |
Nu Skin Enterprises Inc. | |||
Class A | 102,118 | 4,163 | |
Vector Group Ltd. | 183,610 | 3,966 | |
HNI Corp. | 88,079 | 3,851 | |
Steelcase Inc. Class A | 196,863 | 3,004 | |
^ | Cal-Maine Foods Inc. | 54,196 | 2,751 |
Universal Corp. | 49,293 | 2,689 | |
Schweitzer-Mauduit | |||
International Inc. | 63,426 | 2,181 | |
Knoll Inc. | 93,355 | 2,180 | |
MDC Holdings Inc. | 79,421 | 1,955 | |
Briggs & Stratton Corp. | 88,807 | 1,880 |
10
High Dividend Yield Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Cosan Ltd. | 240,719 | 1,295 | |
Superior Industries | |||
International Inc. | 46,881 | 1,225 | |
National Presto Industries | |||
Inc. | 11,861 | 1,034 | |
2,867,827 | |||
Consumer Services (5.9%) | |||
McDonald’s Corp. | 1,904,033 | 240,841 | |
Wal-Mart Stores Inc. | 3,386,897 | 226,482 | |
Target Corp. | 1,328,903 | 105,648 | |
Sysco Corp. | 1,131,367 | 52,122 | |
Carnival Corp. | 896,796 | 43,988 | |
Omnicom Group Inc. | 516,220 | 42,831 | |
Las Vegas Sands Corp. | 862,733 | 38,952 | |
L Brands Inc. | 470,106 | 36,805 | |
Viacom Inc. Class B | 745,137 | 30,476 | |
Macy’s Inc. | 676,061 | 26,765 | |
Best Buy Co. Inc. | 592,565 | 19,010 | |
Darden Restaurants Inc. | 276,065 | 17,185 | |
Kohl’s Corp. | 378,733 | 16,778 | |
Wynn Resorts Ltd. | 176,725 | 15,605 | |
^ | Nordstrom Inc. | 300,887 | 15,384 |
Staples Inc. | 1,375,341 | 14,028 | |
Six Flags Entertainment | |||
Corp. | 197,259 | 11,845 | |
Gap Inc. | 491,722 | 11,398 | |
TEGNA Inc. | 477,536 | 11,155 | |
KAR Auction Services Inc. | 288,296 | 10,840 | |
H&R Block Inc. | 507,101 | 10,264 | |
Cinemark Holdings Inc. | 221,797 | 7,685 | |
^ | GameStop Corp. Class A | 226,010 | 7,413 |
^ | Cracker Barrel Old Country | ||
Store Inc. | 48,800 | 7,145 | |
American Eagle Outfitters | |||
Inc. | 398,958 | 5,709 | |
John Wiley & Sons Inc. | |||
Class A | 90,634 | 4,495 | |
Gannett Co. Inc. | 252,208 | 4,250 | |
Meredith Corp. | 82,336 | 4,225 | |
International Game | |||
Technology plc | 240,791 | 4,175 | |
Hillenbrand Inc. | 135,303 | 4,101 | |
Abercrombie & Fitch Co. | 143,688 | 3,841 | |
^ | Regal Entertainment Group | ||
Class A | 176,260 | 3,675 | |
Time Inc. | 224,994 | 3,307 | |
DineEquity Inc. | 36,325 | 3,124 | |
SeaWorld Entertainment | |||
Inc. | 145,453 | 2,899 | |
Interval Leisure Group Inc. | 187,555 | 2,648 | |
Extended Stay America Inc. | 165,794 | 2,595 | |
Guess? Inc. | 139,035 | 2,551 | |
National CineMedia Inc. | 135,049 | 1,918 | |
Bob Evans Farms Inc. | 42,084 | 1,917 | |
ClubCorp Holdings Inc. | 136,944 | 1,828 |
Market | |||
Value• | |||
Shares | ($000) | ||
Cato Corp. Class A | 48,991 | 1,793 | |
Tailored Brands Inc. | 99,847 | 1,739 | |
Rent-A-Center Inc. | 108,248 | 1,591 | |
^ | Buckle Inc. | 53,011 | 1,534 |
New Media Investment | |||
Group Inc. | 85,909 | 1,379 | |
Weis Markets Inc. | 28,107 | 1,279 | |
Pier 1 Imports Inc. | 181,474 | 1,250 | |
^ | Copa Holdings SA Class A | 18,550 | 1,183 |
Speedway Motorsports Inc. 29,516 | 517 | ||
1,090,168 | |||
Financials (13.6%) | |||
Wells Fargo & Co. | 10,896,522 | 544,608 | |
JPMorgan Chase & Co. | 7,930,423 | 501,203 | |
Chubb Ltd. | 999,162 | 117,761 | |
PNC Financial Services | |||
Group Inc. | 1,093,438 | 95,982 | |
BlackRock Inc. | 265,905 | 94,750 | |
MetLife Inc. | 1,944,402 | 87,693 | |
Prudential Financial Inc. | 979,888 | 76,078 | |
Travelers Cos. Inc. | 636,772 | 69,981 | |
CME Group Inc. | 687,502 | 63,188 | |
BB&T Corp. | 1,773,348 | 62,741 | |
Aflac Inc. | 882,904 | 60,894 | |
SunTrust Banks Inc. | 1,093,801 | 45,655 | |
T. Rowe Price Group Inc. | 513,540 | 38,664 | |
M&T Bank Corp. | 323,742 | 38,305 | |
Ameriprise Financial Inc. | 373,235 | 35,793 | |
Fifth Third Bancorp | 1,699,103 | 31,111 | |
Invesco Ltd. | 889,779 | 27,592 | |
Principal Financial Group | |||
Inc. | 623,571 | 26,614 | |
Regions Financial Corp. | 2,750,109 | 25,796 | |
KeyCorp | 1,783,943 | 21,925 | |
Western Union Co. | 1,082,703 | 21,654 | |
Cincinnati Financial Corp. | 305,876 | 20,191 | |
FNF Group | 589,464 | 18,804 | |
Arthur J Gallagher & Co. | 377,920 | 17,399 | |
Huntington Bancshares | |||
Inc. | 1,690,450 | 17,006 | |
New York Community | |||
Bancorp Inc. | 994,517 | 14,948 | |
Navient Corp. | 772,410 | 10,559 | |
Axis Capital Holdings Ltd. | 195,047 | 10,390 | |
People’s United Financial | |||
Inc. | 654,764 | 10,149 | |
Old Republic International | |||
Corp. | 520,493 | 9,624 | |
PacWest Bancorp | 238,480 | 9,534 | |
First American Financial | |||
Corp. | 231,248 | 8,330 | |
Eaton Vance Corp. | 237,177 | 8,190 | |
Lazard Ltd. Class A | 223,440 | 8,055 | |
First Niagara Financial | |||
Group Inc. | 741,348 | 7,829 |
11
High Dividend Yield Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
FirstMerit Corp. | 342,822 | 7,597 | |
Umpqua Holdings Corp. | 478,413 | 7,573 | |
Cullen/Frost Bankers Inc. | 115,435 | 7,387 | |
BankUnited Inc. | 204,151 | 7,043 | |
Allied World Assurance Co. | |||
Holdings AG | 193,061 | 6,869 | |
Validus Holdings Ltd. | 145,916 | 6,725 | |
Bank of Hawaii Corp. | 91,465 | 6,257 | |
Federated Investors Inc. | |||
Class B | 196,785 | 6,218 | |
Janus Capital Group Inc. | 407,526 | 5,950 | |
FNB Corp. | 427,862 | 5,656 | |
ProAssurance Corp. | 116,455 | 5,558 | |
Fulton Financial Corp. | 377,020 | 5,275 | |
IBERIABANK Corp. | 88,056 | 5,194 | |
NorthStar Asset | |||
Management Group Inc. | 413,438 | 5,143 | |
RLI Corp. | 79,882 | 4,967 | |
United Bankshares Inc. | 127,861 | 4,947 | |
Valley National Bancorp | 518,767 | 4,908 | |
Washington Federal Inc. | 185,789 | 4,513 | |
Hancock Holding Co. | 170,093 | 4,417 | |
^ | LPL Financial Holdings Inc. | 162,088 | 4,279 |
Glacier Bancorp Inc. | 164,133 | 4,249 | |
Columbia Banking System | |||
Inc. | 124,821 | 3,681 | |
Capitol Federal Financial | |||
Inc. | 272,346 | 3,619 | |
TFS Financial Corp. | 199,572 | 3,572 | |
Waddell & Reed Financial | |||
Inc. Class A | 169,224 | 3,442 | |
Community Bank System | |||
Inc. | 85,824 | 3,396 | |
Old National Bancorp | 249,563 | 3,344 | |
CVB Financial Corp. | 194,332 | 3,339 | |
BGC Partners Inc. Class A | 366,811 | 3,331 | |
Trustmark Corp. | 132,902 | 3,257 | |
Chemical Financial Corp. | 82,536 | 3,174 | |
Mercury General Corp. | 59,920 | 3,170 | |
Northwest Bancshares Inc. | 219,200 | 3,073 | |
Horace Mann Educators | |||
Corp. | 88,300 | 2,746 | |
Provident Financial | |||
Services Inc. | 134,713 | 2,692 | |
^ | BOK Financial Corp. | 44,310 | 2,667 |
NBT Bancorp Inc. | 94,040 | 2,665 | |
Artisan Partners Asset | |||
Management Inc. Class A | 81,547 | 2,635 | |
BBCN Bancorp Inc. | 165,320 | 2,582 | |
First Financial Bancorp | 131,350 | 2,561 | |
HFF Inc. Class A | 79,852 | 2,542 | |
^ | Westamerica | ||
Bancorporation | 51,685 | 2,518 | |
Simmons First National | |||
Corp. Class A | 53,626 | 2,504 |
Market | ||
Value• | ||
Shares | ($000) | |
LegacyTexas Financial | ||
Group Inc. | 99,639 | 2,457 |
Park National Corp. | 26,729 | 2,454 |
Independent Bank Corp. | 51,605 | 2,427 |
Kemper Corp. | 76,827 | 2,379 |
Boston Private Financial | ||
Holdings Inc. | 184,310 | 2,252 |
American National | ||
Insurance Co. | 18,646 | 2,165 |
WesBanco Inc. | 66,718 | 2,144 |
CNA Financial Corp. | 59,066 | 1,866 |
NRG Yield Inc. | 115,346 | 1,866 |
Tompkins Financial Corp. | 28,431 | 1,858 |
Safety Insurance Group | ||
Inc. | 32,534 | 1,842 |
S&T Bancorp Inc. | 67,852 | 1,742 |
Brookline Bancorp Inc. | 150,925 | 1,718 |
Cohen & Steers Inc. | 43,373 | 1,703 |
Oritani Financial Corp. | 94,686 | 1,641 |
First Commonwealth | ||
Financial Corp. | 171,334 | 1,573 |
City Holding Co. | 31,556 | 1,550 |
Dime Community | ||
Bancshares Inc. | 83,888 | 1,519 |
Sandy Spring Bancorp Inc. | 52,286 | 1,495 |
FBL Financial Group Inc. | ||
Class A | 23,905 | 1,446 |
Maiden Holdings Ltd. | 118,194 | 1,446 |
Greenhill & Co. Inc. | 61,756 | 1,360 |
1st Source Corp. | 36,616 | 1,261 |
NRG Yield Inc. Class A | 81,241 | 1,229 |
TrustCo Bank Corp. NY | 191,510 | 1,228 |
Flushing Financial Corp. | 59,948 | 1,196 |
Washington Trust Bancorp | ||
Inc. | 31,583 | 1,157 |
Stock Yards Bancorp Inc. | 28,058 | 1,135 |
Community Trust Bancorp | ||
Inc. | 30,658 | 1,100 |
BancFirst Corp. | 16,790 | 1,047 |
First Financial Corp. | 20,520 | 727 |
Republic Bancorp Inc. | ||
Class A | 13,704 | 374 |
Willis Towers Watson plc | 8 | 1 |
2,497,589 | ||
Health Care (11.4%) | ||
Johnson & Johnson | 5,916,111 | 663,078 |
Pfizer Inc. | 13,201,691 | 431,827 |
Merck & Co. Inc. | 5,977,658 | 327,815 |
Bristol-Myers Squibb Co. | 3,591,426 | 259,229 |
AbbVie Inc. | 3,520,632 | 214,759 |
Eli Lilly & Co. | 2,141,522 | 161,749 |
Quest Diagnostics Inc. | 308,569 | 23,195 |
Owens & Minor Inc. | 130,211 | 4,738 |
Kindred Healthcare Inc. | 182,391 | 2,692 |
^,* Innoviva Inc. | 191,988 | 2,369 |
12
High Dividend Yield Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Abaxis Inc. | 47,043 | 2,132 |
Meridian Bioscience Inc. | 90,222 | 1,724 |
PDL BioPharma Inc. | 359,139 | 1,354 |
2,096,661 | ||
Industrials (12.6%) | ||
General Electric Co. | 20,099,807 | 618,069 |
3M Co. | 1,300,765 | 217,722 |
Boeing Co. | 1,297,723 | 174,933 |
United Parcel Service Inc. | ||
Class B | 1,505,999 | 158,235 |
Lockheed Martin Corp. | 661,695 | 153,765 |
Caterpillar Inc. | 1,249,447 | 97,107 |
Automatic Data | ||
Processing Inc. | 993,865 | 87,897 |
Raytheon Co. | 643,149 | 81,262 |
Emerson Electric Co. | 1,379,626 | 75,369 |
Eaton Corp. plc | 1,002,363 | 63,419 |
Norfolk Southern Corp. | 642,221 | 57,871 |
CSX Corp. | 2,073,958 | 56,557 |
Waste Management Inc. | 958,485 | 56,349 |
Deere & Co. | 637,720 | 53,639 |
PACCAR Inc. | 754,519 | 44,449 |
Cummins Inc. | 373,401 | 43,699 |
Paychex Inc. | 705,272 | 36,759 |
Republic Services Inc. | ||
Class A | 607,292 | 28,585 |
Fastenal Co. | 567,067 | 26,533 |
WestRock Co. | 545,118 | 22,813 |
CH Robinson Worldwide | ||
Inc. | 308,960 | 21,927 |
Xerox Corp. | 2,168,571 | 20,818 |
Packaging Corp. of | ||
America | 211,338 | 13,712 |
Sonoco Products Co. | 202,076 | 9,475 |
MDU Resources Group | ||
Inc. | 427,016 | 8,566 |
MSC Industrial Direct Co. | ||
Inc. Class A | 105,720 | 8,193 |
Ryder System Inc. | 113,323 | 7,810 |
RR Donnelley & Sons Co. | 440,310 | 7,661 |
National Instruments Corp. | 215,675 | 5,946 |
Timken Co. | 148,655 | 5,297 |
CEB Inc. | 68,968 | 4,255 |
Kennametal Inc. | 170,170 | 3,979 |
Covanta Holding Corp. | 236,842 | 3,851 |
GATX Corp. | 77,404 | 3,556 |
MSA Safety Inc. | 68,256 | 3,282 |
Applied Industrial | ||
Technologies Inc. | 69,129 | 3,168 |
Aircastle Ltd. | 144,928 | 3,145 |
^ Nordic American Tankers | ||
Ltd. | 185,673 | 2,861 |
Scorpio Tankers Inc. | 401,583 | 2,514 |
Brady Corp. Class A | 93,190 | 2,469 |
Market | |||
Value• | |||
Shares | ($000) | ||
^ | Ship Finance International | ||
Ltd. | 134,570 | 2,041 | |
Otter Tail Corp. | 70,286 | 2,033 | |
Greif Inc. Class A | 56,148 | 1,948 | |
^ | Seaspan Corp. Class A | 108,636 | 1,837 |
ManTech International | |||
Corp. Class A | 52,822 | 1,785 | |
Greenbrier Cos. Inc. | 59,007 | 1,770 | |
General Cable Corp. | 107,249 | 1,677 | |
AVX Corp. | 112,106 | 1,482 | |
^ | Outerwall Inc. | 35,705 | 1,475 |
TAL International Group | |||
Inc. | 77,850 | 1,331 | |
Raven Industries Inc. | 80,253 | 1,291 | |
H&E Equipment Services | |||
Inc. | 61,132 | 1,237 | |
Teekay Corp. | 108,304 | 1,213 | |
Schnitzer Steel Industries | |||
Inc. | 57,401 | 1,184 | |
McGrath RentCorp | 42,381 | 1,033 | |
^ | GasLog Ltd. | 79,082 | 1,013 |
^ | Textainer Group Holdings | ||
Ltd. | 60,189 | 929 | |
Daktronics Inc. | 98,836 | 860 | |
^ | American Railcar | ||
Industries Inc. | 19,085 | 783 | |
Myers Industries Inc. | 50,563 | 682 | |
2,325,121 | |||
Oil & Gas (10.7%) | |||
Exxon Mobil Corp. | 8,979,568 | 793,794 | |
Chevron Corp. | 4,069,867 | 415,859 | |
ConocoPhillips | 2,639,914 | 126,161 | |
Occidental Petroleum | |||
Corp. | 1,641,595 | 125,828 | |
Phillips 66 | 1,134,434 | 93,148 | |
Kinder Morgan Inc. | 4,077,770 | 72,421 | |
Valero Energy Corp. | 1,035,860 | 60,981 | |
Marathon Petroleum Corp. | 1,152,602 | 45,044 | |
Spectra Energy Corp. | 1,412,320 | 44,163 | |
Williams Cos. Inc. | 1,606,579 | 31,152 | |
National Oilwell Varco Inc. | 821,788 | 29,617 | |
Columbia Pipeline Group | |||
Inc. | 856,792 | 21,951 | |
HollyFrontier Corp. | 392,662 | 13,979 | |
^ | Helmerich & Payne Inc. | 207,771 | 13,738 |
Targa Resources Corp. | 318,824 | 12,900 | |
Murphy Oil Corp. | 352,472 | 12,597 | |
OGE Energy Corp. | 424,512 | 12,561 | |
Oceaneering International | |||
Inc. | 212,390 | 7,784 | |
Patterson-UTI Energy Inc. | 341,887 | 6,752 | |
PBF Energy Inc. Class A | 209,722 | 6,749 | |
Noble Corp. plc | 538,524 | 6,048 | |
Western Refining Inc. | 141,987 | 3,800 |
13
High Dividend Yield Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
SemGroup Corp. Class A | 96,887 | 2,970 | |
Pattern Energy Group Inc. | |||
Class A | 129,750 | 2,725 | |
Delek US Holdings Inc. | 126,787 | 2,015 | |
^ | Frank’s International NV | 115,574 | 1,924 |
Archrock Inc. | 164,132 | 1,617 | |
CVR Energy Inc. | 40,739 | 989 | |
1,969,267 | |||
Other (0.0%)2 | |||
* | Safeway Inc CVR | ||
(Casa Ley) Expire | |||
1/30/2018 | 364 | — | |
* | Safeway Inc CVR (PDC) | ||
Expire 1/30/2017 | 364 | — | |
Technology (12.8%) | |||
Microsoft Corp. | 16,526,150 | 824,159 | |
Intel Corp. | 10,202,093 | 308,919 | |
International Business | |||
Machines Corp. | 2,089,638 | 304,962 | |
Cisco Systems Inc. | 10,842,894 | 298,071 | |
QUALCOMM Inc. | 3,236,270 | 163,496 | |
Texas Instruments Inc. | 2,185,022 | 124,634 | |
HP Inc. | 3,708,559 | 45,504 | |
Analog Devices Inc. | 665,980 | 37,508 | |
Xilinx Inc. | 549,381 | 23,667 | |
KLA-Tencor Corp. | 337,865 | 23,630 | |
Linear Technology Corp. | 513,300 | 22,832 | |
Microchip Technology Inc. | 458,096 | 22,259 | |
Maxim Integrated | |||
Products Inc. | 611,586 | 21,846 | |
Harris Corp. | 265,979 | 21,281 | |
CA Inc. | 669,816 | 19,867 | |
Western Digital Corp. | 471,018 | 19,248 | |
Seagate Technology plc | 610,728 | 13,296 | |
Garmin Ltd. | 227,814 | 9,712 | |
Pitney Bowes Inc. | 407,465 | 8,544 | |
Cypress Semiconductor | |||
Corp. | 713,261 | 6,441 | |
Lexmark International Inc. | |||
Class A | 134,475 | 5,191 | |
Science Applications | |||
International Corp. | 82,518 | 4,381 | |
Diebold Inc. | 141,566 | 3,719 | |
Cogent Communications | |||
Holdings Inc. | 93,513 | 3,619 | |
Intersil Corp. Class A | 239,119 | 2,795 | |
West Corp. | 130,079 | 2,788 | |
Computer Programs | |||
& Systems Inc. | 27,573 | 1,415 | |
Brooks Automation Inc. | 137,041 | 1,296 | |
Epiq Systems Inc. | 68,232 | 1,008 | |
2,346,088 |
Market | ||
Value• | ||
Shares | ($000) | |
Telecommunications (5.5%) | ||
AT&T Inc. | 13,314,040 | 516,851 |
Verizon Communications | ||
Inc. | 8,791,252 | 447,826 |
CenturyLink Inc. | 1,176,563 | 36,415 |
Frontier Communications | ||
Corp. | 2,500,714 | 13,904 |
Consolidated | ||
Communications | ||
Holdings Inc. | 110,408 | 2,610 |
^ Windstream Holdings Inc. | 221,969 | 1,927 |
EarthLink Holdings Corp. | 198,285 | 1,152 |
1,020,685 | ||
Utilities (8.3%) | ||
Duke Energy Corp. | 1,488,584 | 117,271 |
NextEra Energy Inc. | 992,647 | 116,715 |
Southern Co. | 1,957,717 | 98,082 |
Dominion Resources Inc. | 1,275,504 | 91,160 |
Exelon Corp. | 1,978,666 | 69,431 |
American Electric Power | ||
Co. Inc. | 1,045,789 | 66,408 |
PG&E Corp. | 1,051,471 | 61,196 |
Sempra Energy | 528,897 | 54,661 |
PPL Corp. | 1,441,346 | 54,252 |
Public Service Enterprise | ||
Group Inc. | 1,093,767 | 50,455 |
Edison International | 701,519 | 49,604 |
Consolidated Edison Inc. | 631,845 | 47,136 |
Xcel Energy Inc. | 1,085,206 | 43,441 |
WEC Energy Group Inc. | 684,802 | 39,862 |
Eversource Energy | 677,424 | 38,234 |
DTE Energy Co. | 383,021 | 34,150 |
FirstEnergy Corp. | 903,523 | 29,446 |
Entergy Corp. | 380,782 | 28,627 |
Ameren Corp. | 517,725 | 24,851 |
CMS Energy Corp. | 599,992 | 24,408 |
CenterPoint Energy Inc. | 916,413 | 19,657 |
SCANA Corp. | 276,289 | 18,978 |
Alliant Energy Corp. | 246,612 | 17,391 |
Pinnacle West Capital | ||
Corp. | 235,430 | 17,104 |
AES Corp. | 1,488,217 | 16,608 |
ONEOK Inc. | 449,163 | 16,237 |
AGL Resources Inc. | 245,609 | 16,176 |
Atmos Energy Corp. | 218,823 | 15,876 |
Westar Energy Inc. | ||
Class A | 302,853 | 15,630 |
NiSource Inc. | 685,608 | 15,570 |
UGI Corp. | 366,911 | 14,764 |
TECO Energy Inc. | 529,241 | 14,697 |
Piedmont Natural Gas Co. | ||
Inc. | 178,820 | 10,693 |
NRG Energy Inc. | 683,817 | 10,326 |
14
High Dividend Yield Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Aqua America Inc. | 308,621 | 9,771 |
Great Plains Energy Inc. | 307,399 | 9,600 |
Questar Corp. | 377,718 | 9,469 |
National Fuel Gas Co. | 160,895 | 8,930 |
Vectren Corp. | 175,858 | 8,591 |
IDACORP Inc. | 116,989 | 8,509 |
Portland General Electric | ||
Co. | 192,795 | 7,658 |
Hawaiian Electric | ||
Industries Inc. | 233,516 | 7,634 |
WGL Holdings Inc. | 105,239 | 7,145 |
Southwest Gas Corp. | 103,289 | 6,704 |
Black Hills Corp. | 110,114 | 6,672 |
New Jersey Resources | ||
Corp. | 181,397 | 6,472 |
ONE Gas Inc. | 109,641 | 6,411 |
NorthWestern Corp. | 104,660 | 5,949 |
Spire Inc. | 87,833 | 5,618 |
ALLETE Inc. | 99,392 | 5,585 |
PNM Resources Inc. | 173,160 | 5,486 |
Avista Corp. | 134,782 | 5,401 |
Avangrid Inc. | 121,649 | 4,878 |
South Jersey Industries | ||
Inc. | 150,427 | 4,198 |
MGE Energy Inc. | 80,226 | 3,999 |
El Paso Electric Co. | 87,488 | 3,946 |
Empire District Electric Co. | 95,056 | 3,200 |
Northwest Natural Gas Co. | 59,602 | 3,072 |
California Water Service | ||
Group | 102,683 | 2,868 |
^ Abengoa Yield plc | 109,405 | 1,973 |
American States Water Co. | 77 | 3 |
1,518,839 | ||
Total Common Stocks | ||
(Cost $15,999,010) | 18,316,388 |
Market | ||
Value• | ||
Shares | ($000) | |
Temporary Cash Investments (0.5%)1 | ||
Money Market Fund (0.5%) | ||
3,4 Vanguard Market | ||
Liquidity Fund, | ||
0.495% | 80,573,825 | 80,574 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.0%) | ||
5,6 Federal Home Loan | ||
Bank Discount Notes, | ||
0.572%, 6/22/16 | 5,000 | 4,998 |
Total Temporary Cash Investments | ||
(Cost $85,570) | 85,572 | |
Total Investments (100.1%) | ||
(Cost $16,084,580) | 18,401,960 | |
Amount | ||
($000) | ||
Other Assets and Liabilities (-0.1%) | ||
Other Assets | ||
Investment in Vanguard | 1,509 | |
Receivables for Accrued Income | 27,589 | |
Receivables for Capital Shares Issued | 9,957 | |
Other Assets | 3,704 | |
Total Other Assets | 42,759 | |
Liabilities | ||
Payables for Investment Securities | ||
Purchased | (19,577) | |
Collateral for Securities on Loan | (24,912) | |
Payables for Capital Shares Redeemed | (4,040) | |
Payables to Vanguard | (6,184) | |
Other Liabilities | (391) | |
Total Liabilities | (55,104) | |
Net Assets (100%) | 18,389,615 |
15
High Dividend Yield Index Fund
At April 30, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 16,202,127 |
Undistributed Net Investment Income | 43,345 |
Accumulated Net Realized Losses | (173,844) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 2,317,380 |
Futures Contracts | 607 |
Net Assets | 18,389,615 |
Investor Shares—Net Assets | |
Applicable to 179,723,977 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 4,947,072 |
Net Asset Value Per Share— | |
Investor Shares | $27.53 |
ETF Shares—Net Assets | |
Applicable to 193,420,644 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 13,442,543 |
Net Asset Value Per Share— | |
ETF Shares | $69.50 |
• 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 $23,796,000.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.1%, respectively, of net assets.
2 “Other” represents securities that are not classified by the fund’s benchmark index.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
4 Includes $24,912,000 of collateral received for securities on loan.
5 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
6 Securities with a value of $2,699,000 have been segregated as initial margin for open futures contracts.
CVR—Contingent Value Rights.
See accompanying Notes, which are an integral part of the Financial Statements.
16
High Dividend Yield Index Fund
Statement of Operations
| |
Six Months Ended | |
April 30, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends | 283,294 |
Interest1 | 80 |
Securities Lending | 575 |
Total Income | 283,949 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 986 |
Management and Administrative—Investor Shares | 2,357 |
Management and Administrative—ETF Shares | 3,487 |
Marketing and Distribution—Investor Shares | 508 |
Marketing and Distribution—ETF Shares | 410 |
Custodian Fees | 257 |
Shareholders’ Reports—Investor Shares | 21 |
Shareholders’ Reports—ETF Shares | 172 |
Trustees’ Fees and Expenses | 4 |
Total Expenses | 8,202 |
Net Investment Income | 275,747 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 201,577 |
Futures Contracts | 1,744 |
Realized Net Gain (Loss) | 203,321 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 271,691 |
Futures Contracts | (3,867) |
Change in Unrealized Appreciation (Depreciation) | 267,824 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 746,892 |
1 Interest income from an affiliated company of the fund was $68,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
High Dividend Yield Index Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 275,747 | 471,533 |
Realized Net Gain (Loss) | 203,321 | 709,023 |
Change in Unrealized Appreciation (Depreciation) | 267,824 | (758,580) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 746,892 | 421,976 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (70,209) | (131,007) |
ETF Shares | (196,341) | (338,220) |
Realized Capital Gain | ||
Investor Shares | — | — |
ETF Shares | — | — |
Total Distributions | (266,550) | (469,227) |
Capital Share Transactions | ||
Investor Shares | 461,257 | 316,638 |
ETF Shares | 1,866,326 | 1,464,202 |
Net Increase (Decrease) from Capital Share Transactions | 2,327,583 | 1,780,840 |
Total Increase (Decrease) | 2,807,925 | 1,733,589 |
Net Assets | ||
Beginning of Period | 15,581,690 | 13,848,101 |
End of Period1 | 18,389,615 | 15,581,690 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $43,345,000 and $34,148,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
18
High Dividend Yield Index Fund
Financial Highlights
Investor Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | April 30, | Year Ended October 31, | ||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 |
Net Asset Value, Beginning of Period | $26.89 | $26.98 | $23.83 | $19.76 | $17.30 | $15.94 |
Investment Operations | ||||||
Net Investment Income | . 425 | . 815 | .727 | . 667 | . 579 | . 489 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | .635 | (.088) | 3.147 | 4.063 | 2.446 | 1.355 |
Total from Investment Operations | 1.060 | .727 | 3.874 | 4.730 | 3.025 | 1.844 |
Distributions | ||||||
Dividends from Net Investment Income | (. 420) | (. 817) | (.724) | (. 660) | (. 565) | (. 484) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (. 420) | (. 817) | (.724) | (. 660) | (. 565) | (. 484) |
Net Asset Value, End of Period | $27.53 | $26.89 | $26.98 | $23.83 | $19.76 | $17.30 |
Total Return1 | 4.02% | 2.78% | 16.48% | 24.35% | 17.69% | 11.70% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $4,947 | $4,368 | $4,066 | $3,019 | $1,596 | $761 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.15% | 0.16% | 0.18% | 0.19% | 0.20% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.29% | 3.06% | 2.92% | 3.10% | 3.22% | 3.04% |
Portfolio Turnover Rate2 | 11% | 11% | 12% | 13% | 11% | 16% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | ||||||
1 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. | ||||||
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. | ||||||
See accompanying Notes, which are an integral part of the Financial Statements.
19
High Dividend Yield Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | April 30, | Year Ended October 31, | ||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 |
Net Asset Value, Beginning of Period | $67.88 | $68.11 | $60.16 | $49.89 | $43.68 | $40.22 |
Investment Operations | ||||||
Net Investment Income | 1.093 | 2.104 | 1.885 | 1.732 | 1.506 | 1.283 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 1.604 | (.222) | 7.943 | 10.247 | 6.180 | 3.442 |
Total from Investment Operations | 2.697 | 1.882 | 9.828 | 11.979 | 7.686 | 4.725 |
Distributions | ||||||
Dividends from Net Investment Income | (1.077) | (2.112) | (1.878) | (1.709) | (1.476) | (1.265) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.077) | (2.112) | (1.878) | (1.709) | (1.476) | (1.265) |
Net Asset Value, End of Period | $69.50 | $67.88 | $68.11 | $60.16 | $49.89 | $43.68 |
Total Return | 4.05% | 2.84% | 16.56% | 24.43% | 17.80% | 11.88% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $13,443 | $11,214 | $9,782 | $6,918 | $4,203 | $1,984 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.08% | 0.09% | 0.10% | 0.10% | 0.10% | 0.13% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.36% | 3.13% | 3.00% | 3.19% | 3.32% | 3.16% |
Portfolio Turnover Rate1 | 11% | 11% | 12% | 13% | 11% | 16% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | ||||||
1 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. | ||||||
See accompanying Notes, which are an integral part of the Financial Statements.
20
High Dividend Yield Index Fund
Notes to Financial Statements
Vanguard High Dividend Yield 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: Investor and ETF Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. 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 acquired over 60 days to maturity 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. Other temporary cash investments are valued at amortized cost, which approximates market 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, enhancing returns, 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 fund may seek to enhance returns by using futures contracts instead of the underlying securities when futures are believed to be priced more attractively than the underlying securities. 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.
Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
During the six months ended April 30, 2016, 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 aggregate settlement values at each quarter-end during the period.
21
High Dividend Yield 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 (October 31, 2012–2015), and for the period ended April 30, 2016, 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.
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 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 absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2016, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
22
High Dividend Yield Index Fund
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At April 30, 2016, the fund had contributed to Vanguard capital in the amount of $1,509,000, representing 0.01% of the fund’s net assets and 0.60% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the market value of the fund’s investments as of April 30, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 18,316,388 | — | — |
Temporary Cash Investments | 80,574 | 4,998 | — |
Futures Contracts-Liabilities1 | (387) | — | — |
Total | 18,396,575 | 4,998 | — |
1 Represents variation margin on the last day of the reporting period. |
23
High Dividend Yield Index Fund
D. At April 30, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Aggregate | ||||
Number of | Settlement | Unrealized | ||
Long (Short) | Value | Appreciation | ||
Futures Contracts | Expiration | Contracts | Long (Short) | (Depreciation) |
E-mini S&P 500 Index | June 2016 | 582 | 59,920 | 607 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
During the six months ended April 30, 2016, the fund realized $288,384,000 of net capital gains resulting from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the fund rather than for cash. Because such gains are not taxable to the fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized losses to paid-in capital.
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at October 31, 2015, the fund had available capital losses totaling $84,307,000 to offset future net capital gains. Of this amount, $18,315,000 is subject to expiration on October 31, 2018. Capital losses of $65,992,000 realized beginning in fiscal 2012 may be carried forward indefinitely under the Regulated Investment Company Modernization Act of 2010, but must be used before any expiring loss carryforwards. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending October 31, 2016; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At April 30, 2016, the cost of investment securities for tax purposes was $16,085,501,000. Net unrealized appreciation of investment securities for tax purposes was $2,316,459,000, consisting of unrealized gains of $2,767,808,000 on securities that had risen in value since their purchase and $451,349,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended April 30, 2016, the fund purchased $4,147,417,000 of investment securities and sold $1,810,999,000 of investment securities, other than temporary cash investments. Purchases and sales include $2,516,751,000 and $885,140,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.
24
High Dividend Yield Index Fund
G. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
April 30, 2016 | October 31, 2015 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 839,277 | 31,710 | 1,160,012 | 43,020 |
Issued in Lieu of Cash Distributions | 58,420 | 2,218 | 106,677 | 4,039 |
Redeemed | (436,440) | (16,651) | (950,051) | (35,330) |
Net Increase (Decrease)—Investor Shares | 461,257 | 17,277 | 316,638 | 11,729 |
ETF Shares | ||||
Issued | 2,757,081 | 41,374 | 3,664,582 | 53,660 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (890,755) | (13,150) | (2,200,380) | (32,075) |
Net Increase (Decrease)—ETF Shares | 1,866,326 | 28,224 | 1,464,202 | 21,585 |
H. Management has determined that no material events or transactions occurred subsequent to April 30, 2016, that would require recognition or disclosure in these financial statements.
25
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.
26
Six Months Ended April 30, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
High Dividend Yield Index Fund | 10/31/2015 | 4/30/2016 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,040.20 | $0.76 |
ETF Shares | 1,000.00 | 1,040.47 | 0.41 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,024.12 | $0.75 |
ETF Shares | 1,000.00 | 1,024.47 | 0.40 |
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 0.15% for Investor Shares and 0.08% for ETF 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).
27
Trustees Approve Advisory Arrangement
The board of trustees of Vanguard High Dividend Yield Index Fund has renewed the fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard)—through its Equity Index Group. The board determined that continuing the fund’s internalized management structure 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. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the fund’s investment management services since the fund’s inception in 2006, and took into account the organizational depth and stability of the advisor. The board considered that Vanguard has been managing investments for more than three decades. The Equity Index Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The board considered the fund’s performance since its inception, including any periods of outperformance or underperformance relative to a target index and peer group. The board concluded that the performance was such that the advisory arrangement should continue. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section.
The board does not conduct a profitability analysis of Vanguard because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees, and produces “profits” only in the form of reduced expenses for fund shareholders.
The benefit of economies of scale
The board concluded that the fund’s at-cost 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 increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
28
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
29
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
30
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
InterestedTrustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International plc (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive plc |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
IndependentTrustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | ||
Partner of HighVista Strategies LLC (private investment | Mortimer J. Buckley | James M. Norris |
firm); Director of Rand Merchant Bank; Overseer of | Kathleen C. Gubanich | Thomas M. Rampulla |
the Museum of Fine Arts Boston. | Martha G. King | Glenn W. Reed |
John T. Marcante | Karin A. Risi | |
Peter F. Volanakis | Chris D. McIsaac | |
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 | |
Connect with Vanguard® > vanguard.com | |
Fund Information > 800-662-7447 | London Stock Exchange Group companies include FTSE |
Direct Investor Account Services > 800-662-2739 | International Limited (”FTSE”), Frank Russell Company |
Institutional Investor Services > 800-523-1036 | (”Russell”), MTS Next Limited (”MTS”), and FTSE TMX |
Text Telephone for People | Global Debt Capital Markets Inc. (”FTSE TMX”). All |
Who Are Deaf or Hard of Hearing> 800-749-7273 | rights reserved. ”FTSE®”, ”Russell®”, ”MTS®”, ”FTSE |
TMX®” and ”FTSE Russell” and other service marks | |
and trademarks related to the FTSE or Russell indexes | |
This material may be used in conjunction | are trademarks of the London Stock Exchange Group |
with the offering of shares of any Vanguard | companies and are used by FTSE, MTS, FTSE TMX and |
fund only if preceded or accompanied by | Russell under licence. All information is provided for |
the fund’s current prospectus. | information purposes only. No responsibility or liability |
can be accepted by the London Stock Exchange Group | |
All comparative mutual fund data are from Lipper, a | companies nor its licensors for any errors or for any |
Thomson Reuters Company, or Morningstar, Inc., unless | loss from use of this publication. Neither the London |
otherwise noted. | Stock Exchange Group companies nor any of its |
licensors make any claim, prediction, warranty or | |
You can obtain a free copy of Vanguard’s proxy voting | representation whatsoever, expressly or impliedly, |
guidelines by visiting vanguard.com/proxyreporting or by | either as to the results to be obtained from the use of |
calling Vanguard at 800-662-2739. The guidelines are | the FTSE Indexes or the fitness or suitability of the |
also available from the SEC’s website, sec.gov. In | Indexes for any particular purpose to which they might |
addition, you may obtain a free report on how your fund | be put. |
voted the proxies for securities it owned during the 12 | |
months ended June 30. To get the report, visit either | |
vanguard.com/proxyreporting or sec.gov. | |
You can review and copy information about your fund at | |
the SEC’s Public Reference Room in Washington, D.C. To | |
find out more about this public service, call the SEC at | |
202-551-8090. Information about your fund is also | |
available on the SEC’s website, and you can receive | |
copies of this information, for a fee, by sending a | |
request in either of two ways: via email addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2016 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q6232 062016 |
Semiannual Report | April 30, 2016
Vanguard Emerging Markets
Government Bond Index Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Fund Profile. | 7 |
Performance Summary. | 9 |
Financial Statements. | 10 |
About Your Fund’s Expenses. | 44 |
Trustees Approve Advisory Arrangement. | 46 |
Glossary. | 47 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended April 30, 2016 | ||||
30-Day SEC | Income | Capital | Total | |
Yield | Returns | Returns | Returns | |
Vanguard Emerging Markets Government Bond Index Fund | ||||
Investor Shares | 4.14% | 2.46% | 2.53% | 4.99% |
ETF Shares | 4.44 | |||
Market Price | 5.29 | |||
Net Asset Value | 5.00 | |||
Admiral™ Shares | 4.44 | 2.55 | 2.47 | 5.02 |
Institutional Shares | 4.54 | 2.56 | 2.46 | 5.02 |
Barclays USD Emerging Markets Government RIC Capped Index | 5.04 | |||
Emerging Markets Hard Currency Debt Funds Average | 4.38 |
Emerging Markets Hard Currency Debt Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements. The Vanguard ETF® Shares shown are traded on the Nasdaq exchange and are available only through brokers. The table provides ETF returns based on both the Nasdaq market price and the net asset value for a share. U.S. Pat. Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.
For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares' market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares' market price was above or below the NAV.
Your Fund’s Performance at a Glance | ||||
October 31, 2015, Through April 30, 2016 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Emerging Markets Government Bond | ||||
Index Fund | ||||
Investor Shares | $9.50 | $9.74 | $0.224 | $0.000 |
ETF Shares | 75.81 | 77.67 | 1.836 | 0.000 |
Admiral Shares | 19.00 | 19.47 | 0.464 | 0.000 |
Institutional Shares | 30.50 | 31.25 | 0.750 | 0.000 |
1
Chairman’s Letter
Dear Shareholder,
For the six months ended April 30, 2016, Vanguard Emerging Markets Government Bond Index Fund returned about 5%. Interest income and higher bond prices contributed about equally to this result.
The fund’s performance was in line with the 5.04% return of its benchmark index, which was more than 2 percentage points ahead of the broad U.S. bond market.
Your fund invests only in dollar-denominated bonds issued by governments in developing countries; its peers may invest in bonds issued in other major currencies as well as in corporate and other bonds. Currency may have played a nuanced role in helping the fund stay a step ahead of the average return of peer funds. After a long stretch of strengthening, the dollar weakened against some—but not all—major currencies during the half year. If the dollar were to weaken across the board, your fund could be at a disadvantage to funds that invest in other currencies.
The 30-day SEC yield for Investor Shares began the new fiscal year at 4.75%, rose well above 5%, then fell to 4.14% at the end of April. Reflecting the higher risk of emerging-market debt, the fund’s yield was about double that of the broad U.S. bond market (as measured by Vanguard Total Bond Market Index Fund).
2
Still-low interest rates helped bonds outperform stocks
The broad U.S. bond market returned almost 3% for the half year. After modest declines in November and December, the U.S. bond market posted four months of gains, helped by the Federal Reserve’s cautious approach to raising short-term interest rates.
The yield of the 10-year U.S. Treasury note closed at 1.83% at the end of April, down from 2.17% six months earlier. (Bond prices and yields move in opposite directions.)
Even though the Fed raised short-term rates a quarter percentage point in December, the target rate of 0.25%–0.5% is still very low historically, and it restrained returns for money market funds and savings accounts.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned almost 9% in local currencies. After currency hedging, international bonds returned more than 3%, ahead of the broad U.S. bond market and the broad U.S. and international stock markets.
U.S. stocks traveled a rocky road, finishing the period about even
The broad U.S. stock market delivered flat returns for a half year marked by inconsistency, sharp declines, and even sharper rallies.
After struggling during the first four months of the period, U.S. stocks rebounded in the final two. Most of the surge came in March as investors cheered the Fed’s indication that it would scale back its plan for interest
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable | |||
market) | 2.82% | 2.72% | 3.60% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.55 | 5.29 | 5.37 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.08 | 0.10 | 0.05 |
Stocks | |||
Russell 1000 Index (Large-caps) | 0.22% | 0.34% | 10.81% |
Russell 2000 Index (Small-caps) | -1.90 | -5.94 | 6.98 |
Russell 3000 Index (Broad U.S. market) | 0.06 | -0.18 | 10.50 |
FTSE All-World ex US Index (International) | -1.52 | -10.65 | 0.25 |
CPI | |||
Consumer Price Index | 0.60% | 1.13% | 1.25% |
3
rate hikes in 2016. Continued aggressive stimulus by central bankers in Europe and Asia and a recovery in oil prices also helped.
International stocks traced an even rockier path than their U.S. counterparts en route to modestly negative returns. Developed markets, especially Europe, notched weak results, while emerging markets managed a slight advance.
Solid returns were driven in part by Fed policy
Global bond prices were fairly steady as the fund’s new fiscal year began and markets awaited the Fed’s move. But some bond markets stumbled in December, when the Fed raised its short-term interest rate target for the first time in nearly a decade. The fall was steeper among emerging-market bonds—in part because developing countries often depend more on capital inflows, which can ebb when credit becomes tighter.
Slumping prices for oil and other commodities also played a role in pulling down prices of emerging-market bonds in December and January. After oil prices had seemed to find their footing for a while, they fell again in late 2015 and into 2016, hurting the finances of export-dependent economies including Brazil and Venezuela.
After a disappointing start to the fiscal year, emerging-market government bonds rallied. A turnaround in oil prices helped. So did indications that the Fed and other major central banks are likely to keep rates “lower for longer,” making the higher yields on
Expense Ratios | |||||
Your Fund Compared With Its Peer Group | |||||
Investor | ETF | Admiral | Institutional | Peer Group | |
Shares | Shares | Shares | Shares | Average | |
Emerging Markets Government Bond Index | |||||
Fund | 0.49% | 0.34% | 0.33% | 0.29% | 1.18% |
The fund expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2016, the fund’s annualized expense ratios were 0.50% for Investor Shares, 0.33% for ETF Shares, 0.33% for Admiral Shares, and 0.30% for Institutional Shares. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2015.
Peer group: Emerging Markets Hard Currency Debt Funds.
4
riskier bonds more attractive to some investors. For example, in late January, the Bank of Japan unexpectedly adopted a negative interest rate policy for certain bank reserves. In March, the European Central Bank further cut its target rates and expanded and extended its bond-buying program. Several central banks in emerging markets, including India, Indonesia, and Turkey, have also cut interest rates to spur economic growth.
When Vanguard Emerging Markets Government Bond Index Fund was launched about three years ago, Russia and Brazil were the largest country positions in the fund and its index (each about 10%). China ranked seventh. As a sign of the significant shift in fortunes of those countries, China has become the largest country holding (about 13%).
China’s ascent partly reflects the increase in bond issuance by Chinese quasi-sovereign entities (such as large, state-owned enterprises). It also reflects the major financial challenges faced by oil exporters Brazil and Russia, and political scandals plaguing Brazil. For the six months, the returns of all three countries were positive, led by a roughly 10% gain by Brazilian government bonds after a double-digit decline in the 2015 fiscal year.
In Argentina, a smaller slice of the fund and its index, the government made headlines in April with the largest-ever sale of bonds from an emerging market. The 10-year bonds, sporting a hefty yield of 7.5%, were well-received by investors despite previous defaults by the government, which had been in protracted negotiations with some creditors for many years.
In the fund’s index overall, bonds with longer maturities were among the best performers, as were bonds with lower credit ratings. Such bonds tend to have higher yields to compensate investors for their greater risk.
Whether it’s index or active, low costs and talent matter
If you listen to some investing pundits, you might think index investing and actively managed investing are incompatible opposites.
At Vanguard, it’s not index versus active. In fact, depending on your goals, it could well be index and active.
As an indexing pioneer, we opened the first index mutual fund in 1976, giving shareholders an opportunity to track the performance of the S&P 500 Index. But our roots in active management—which aims to choose investments that will outperform the market—go back to the 1929 launch of what became Vanguard Wellington™ Fund.
Our index and active funds share important traits. Both are low cost, and as their assets grow, we can take advantage of the economies of scale by further reducing fund expense ratios. That allows you to keep more of your fund’s returns.
5
Talent and experience are also vital no matter a fund’s management style.
The indexing expertise honed over many decades by our portfolio managers—including those in the Fixed Income Group who manage your fund—helps our index funds meet their objectives of closely tracking their benchmarks.
Our active funds also benefit from world-class managers—both our own experts and premier money managers we hire around the globe. There’s no guarantee that active management will lead to market-beating results, but the combination of talent and low costs can give investors a better chance of success.
If you’d like to know more, see Keys to Improving the Odds of Active Management Success and The Case for Index-Fund Investing, available at vanguard.com/research.
As always, thank you for investing with Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
May 17, 2016
6
Emerging Markets Government Bond Index Fund
Fund Profile
As of April 30, 2016
Share-Class Characteristics | ||||
Investor | Admiral | Institutional | ||
Shares | ETF Shares | Shares | Shares | |
Ticker Symbol | VGOVX | VWOB | VGAVX | VGIVX |
Expense Ratio1 | 0.49% | 0.34% | 0.33% | 0.29% |
30-Day SEC Yield | 4.14% | 4.44% | 4.44% | 4.54% |
Financial Attributes | ||
Barclays USD | ||
Emerging Mkts | ||
Government | ||
Fund | RIC Capped Idx | |
Number of Bonds | 883 | 867 |
Yield to Maturity | ||
(before expenses) | 5.3% | 5.3% |
Average Coupon | 5.6% | 5.7% |
Average Duration | 6.5 years | 6.3 years |
Average Effective | ||
Maturity | 10.2 years | 10.1 years |
Short-Term | ||
Reserves | 1.1% | — |
Sector Diversification (% of portfolio) | |
Foreign Government | 100.0% |
The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are generally not backed by the full faith and credit of the U.S. government. | |
Distribution by Credit Quality (% of portfolio) | |
Aa | 5.9 |
A | 15.3 |
Baa | 41.9 |
Less Than Baa | 36.9 |
Credit-quality ratings are obtained from Barclays and are from Moody's, Fitch, and S&P. When ratings from all three agencies are used, the median rating is shown. When ratings from two of the agencies are used, the lower rating for each issue is shown. "Not Rated" is used to classify securities for which a rating is not available. For more information about these ratings, see the Glossary entry for Credit Quality. | |
Distribution by Effective Maturity | |
(% of portfolio) | |
Under 1 Year | 0.6% |
1 - 3 Years | 13.3 |
3 - 5 Years | 23.5 |
5 - 10 Years | 36.6 |
10 - 20 Years | 9.7 |
20 - 30 Years | 15.0 |
Over 30 Years | 1.3 |
1 The expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2016, the annualized expense ratios were 0.50% for Investor Shares, 0.33% for ETF Shares, 0.33% for Admiral Shares, and 0.30% for Institutional Shares.
7
Emerging Markets Government Bond Index Fund
Market Diversification (% of portfolio) | |
Emerging Markets | |
China | 13.2% |
Mexico | 8.8 |
Brazil | 7.2 |
Indonesia | 6.4 |
Russia | 6.4 |
Turkey | 5.8 |
United Arab Emirates | 4.7 |
Argentina | 3.5 |
Colombia | 3.1 |
Philippines | 3.1 |
Qatar | 2.9 |
Venezuela | 2.5 |
India | 2.0 |
Chile | 2.0 |
Lebanon | 1.9 |
Hungary | 1.8 |
South Africa | 1.7 |
Malaysia | 1.6 |
Poland | 1.6 |
Kazakhstan | 1.5 |
Peru | 1.5 |
Ukraine | 1.4 |
Uruguay | 1.0 |
Other | 13.2 |
Subtotal | 98.8% |
Other | |
Panama | 1.2% |
8
Emerging Markets Government Bond Index Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Fiscal-Year Total Returns (%): May 31, 2013, Through April 30, 2016 | ||||
Barclays USD | ||||
Emerging Mkts | ||||
Government | ||||
Investor Shares | RIC Capped Idx | |||
Fiscal Year | Income Returns | Capital Returns | Total Returns | Total Returns |
2013 | 1.51% | -2.89% | -1.38% | -1.39% |
2014 | 4.46 | 2.16 | 6.62 | 7.00 |
2015 | 4.36 | -4.52 | -0.16 | -0.08 |
2016 | 2.46 | 2.53 | 4.99 | 5.04 |
Note: For 2016, performance data reflect the six months ended April 30, 2016. |
Total Returns: Periods Ended March 31, 2016
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Since Inception | |||||
Inception Date | One Year | Income | Capital | Total | |
Investor Shares | 5/31/2013 | 3.64% | 4.37% | -1.57% | 2.80% |
Fee-Adjusted Returns | 2.86 | 2.52 | |||
ETF Shares | 5/31/2013 | ||||
Market Price | 3.69 | 3.19 | |||
Net Asset Value | 3.83 | 2.93 | |||
Admiral Shares | 5/31/2013 | 3.86 | 4.52 | -1.57 | 2.95 |
Fee-Adjusted Returns | 3.08 | 2.68 | |||
Institutional Shares | 2/11/2015 | 3.87 | 5.06 | 0.20 | 5.26 |
Fee-Adjusted Returns | 3.09 | 4.56 |
Vanguard fund returns are adjusted to reflect the 0.75% fee on purchases of fund shares. The fee does not apply to the ETF Shares. The Fiscal-Year Total Returns table is not adjusted for fees.
See Financial Highlights for dividend and capital gains information.
9
Emerging Markets Government Bond Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2016
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Angola (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Republic of Angola | 9.500% | 11/12/25 | 1,200 | 1,174 | |
1 | Republic of Angola Via Northern Lights III BV | 7.000% | 8/16/19 | 656 | 661 |
Total Angola (Cost $1,848) | 1,835 | ||||
Argentina (3.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (3.2%) | |||||
1 | City of Buenos Aires Argentina | 8.950% | 2/19/21 | 200 | 215 |
1 | Provincia de Buenos Aires | 10.875% | 1/26/21 | 350 | 390 |
1 | Provincia de Buenos Aires | 9.950% | 6/9/21 | 600 | 654 |
1,2 | Provincia de Buenos Aires | 9.950% | 6/9/21 | 400 | 436 |
1 | Provincia de Buenos Aires | 9.125% | 3/16/24 | 1,000 | 1,063 |
Provincia de Cordoba | 12.375% | 8/17/17 | 500 | 533 | |
Republic of Argentina | 8.750% | 6/2/17 | 1,050 | 1,099 | |
Republic of Argentina | 6.250% | 4/22/19 | 3,000 | 3,110 | |
Republic of Argentina | 7.500% | 4/22/26 | 6,000 | 6,102 | |
Republic of Argentina | 8.280% | 12/31/33 | 2,452 | 2,570 | |
Republic of Argentina | 8.280% | 12/31/33 | 1,012 | 1,043 | |
1 | Republic of Argentina | 2.500% | 12/31/38 | 5,594 | 3,559 |
Republic of Argentina | 7.625% | 4/22/46 | 2,500 | 2,453 | |
2 | YPF SA | 8.875% | 12/19/18 | 50 | 53 |
YPF SA | 8.875% | 12/19/18 | 750 | 805 | |
YPF SA | 8.500% | 3/23/21 | 800 | 836 | |
1 | YPF SA | 8.750% | 4/4/24 | 1,145 | 1,190 |
YPF SA | 8.500% | 7/28/25 | 1,475 | 1,518 | |
Total Argentina (Cost $26,068) | 27,629 | ||||
Armenia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
Republic of Armenia | 6.000% | 9/30/20 | 200 | 199 | |
2 | Republic of Armenia | 6.000% | 9/30/20 | 200 | 200 |
Republic of Armenia | 7.150% | 3/26/25 | 200 | 199 | |
Total Armenia (Cost $588) | 598 |
10
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Azerbaijan (0.4%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.4%) | ||||
International Bank of Azerbaijan OJSC | 5.625% | 6/11/19 | 400 | 376 |
2 Republic of Azerbaijan | 4.750% | 3/18/24 | 400 | 389 |
Republic of Azerbaijan | 4.750% | 3/18/24 | 300 | 290 |
3 Southern Gas Corridor CJSC | 6.875% | 3/24/26 | 750 | 777 |
State Oil Co. of the Azerbaijan Republic | 5.450% | 2/9/17 | 200 | 203 |
State Oil Co. of the Azerbaijan Republic | 4.750% | 3/13/23 | 1,500 | 1,354 |
State Oil Co. of the Azerbaijan Republic | 6.950% | 3/18/30 | 200 | 191 |
Total Azerbaijan (Cost $3,668) | 3,580 | |||
Bahrain (0.9%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.9%) | ||||
Bahrain Mumtalakat Holding Co. BSC | 4.000% | 11/25/21 | 250 | 242 |
Batelco International Finance No. 1 Ltd. | 4.250% | 5/1/20 | 400 | 395 |
Kingdom of Bahrain | 6.273% | 11/22/18 | 550 | 588 |
2 Kingdom of Bahrain | 5.500% | 3/31/20 | 1,650 | 1,685 |
4 Kingdom of Bahrain | 5.875% | 1/26/21 | 200 | 202 |
2 Kingdom of Bahrain | 6.125% | 7/5/22 | 1,400 | 1,402 |
Kingdom of Bahrain | 6.125% | 8/1/23 | 425 | 422 |
2 Kingdom of Bahrain | 6.125% | 8/1/23 | 150 | 149 |
2 Kingdom of Bahrain | 7.000% | 1/26/26 | 1,000 | 995 |
Kingdom of Bahrain | 7.000% | 1/26/26 | 750 | 753 |
Kingdom of Bahrain | 6.000% | 9/19/44 | 400 | 320 |
2 Kingdom of Bahrain | 6.000% | 9/19/44 | 500 | 396 |
Total Bahrain (Cost $7,850) | 7,549 | |||
Belarus (0.1%) | ||||
Sovereign Bond (U.S. Dollar-Denominated) (0.1%) | ||||
Republic of Belarus | 8.950% | 1/26/18 | 450 | 471 |
Total Belarus (Cost $436) | 471 | |||
Belize (0.0%) | ||||
Sovereign Bond (U.S. Dollar-Denominated) (0.0%) | ||||
1 Belize | 5.000% | 2/20/38 | 200 | 104 |
Total Belize (Cost $141) | 104 | |||
Bermuda (0.1%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | ||||
2 Bermuda | 5.603% | 7/20/20 | 200 | 220 |
Bermuda | 4.854% | 2/6/24 | 400 | 424 |
2 Bermuda | 4.854% | 2/6/24 | 150 | 159 |
Total Bermuda (Cost $779) | 803 | |||
Bolivia (0.1%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | ||||
Plurinational State of Bolivia | 4.875% | 10/29/22 | 200 | 217 |
Plurinational State of Bolivia | 5.950% | 8/22/23 | 200 | 231 |
Total Bolivia (Cost $395) | 448 | |||
Brazil (6.8%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (6.8%) | ||||
Banco do Brasil SA | 6.000% | 1/22/20 | 800 | 830 |
Banco do Brasil SA | 5.375% | 1/15/21 | 375 | 361 |
11
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Banco do Brasil SA | 5.875% | 1/26/22 | 1,675 | 1,566 |
Banco do Brasil SA | 3.875% | 10/10/22 | 1,426 | 1,251 |
Banco do Brasil SA | 5.875% | 1/19/23 | 450 | 418 |
1 Banco do Brasil SA | 8.500% | 10/29/49 | 950 | 876 |
Banco Nacional de Desenvolvimento | ||||
Economico e Social | 6.369% | 6/16/18 | 725 | 753 |
Banco Nacional de Desenvolvimento | ||||
Economico e Social | 6.500% | 6/10/19 | 1,750 | 1,820 |
Banco Nacional de Desenvolvimento | ||||
Economico e Social | 5.750% | 9/26/23 | 1,000 | 976 |
Caixa Economica Federal | 2.375% | 11/6/17 | 775 | 746 |
Caixa Economica Federal | 4.500% | 10/3/18 | 860 | 843 |
2 Caixa Economica Federal | 4.500% | 10/3/18 | 200 | 196 |
Caixa Economica Federal | 4.250% | 5/13/19 | 1,400 | 1,344 |
Caixa Economica Federal | 3.500% | 11/7/22 | 150 | 129 |
Centrais Eletricas Brasileiras SA | 6.875% | 7/30/19 | 550 | 546 |
Centrais Eletricas Brasileiras SA | 5.750% | 10/27/21 | 1,300 | 1,173 |
Federative Republic of Brazil | 5.875% | 1/15/19 | 2,020 | 2,194 |
Federative Republic of Brazil | 8.875% | 10/14/19 | 175 | 209 |
Federative Republic of Brazil | 4.875% | 1/22/21 | 2,706 | 2,757 |
Federative Republic of Brazil | 2.625% | 1/5/23 | 3,206 | 2,785 |
Federative Republic of Brazil | 8.875% | 4/15/24 | 707 | 861 |
Federative Republic of Brazil | 4.250% | 1/7/25 | 2,572 | 2,382 |
Federative Republic of Brazil | 8.750% | 2/4/25 | 350 | 427 |
Federative Republic of Brazil | 6.000% | 4/7/26 | 200 | 206 |
Federative Republic of Brazil | 10.125% | 5/15/27 | 916 | 1,261 |
Federative Republic of Brazil | 8.250% | 1/20/34 | 1,725 | 1,986 |
Federative Republic of Brazil | 7.125% | 1/20/37 | 1,840 | 1,909 |
Federative Republic of Brazil | 5.625% | 1/7/41 | 2,526 | 2,220 |
Federative Republic of Brazil | 5.000% | 1/27/45 | 2,561 | 2,068 |
Petrobras Global Finance BV | 3.250% | 3/17/17 | 100 | 99 |
4 Petrobras Global Finance BV | 2.768% | 1/15/19 | 750 | 655 |
Petrobras Global Finance BV | 3.000% | 1/15/19 | 1,765 | 1,584 |
Petrobras Global Finance BV | 4.875% | 3/17/20 | 1,925 | 1,711 |
Petrobras Global Finance BV | 4.375% | 5/20/23 | 2,200 | 1,727 |
Petrobras Global Finance BV | 6.250% | 3/17/24 | 2,625 | 2,290 |
Petrobras Global Finance BV | 5.625% | 5/20/43 | 100 | 71 |
Petrobras Global Finance BV | 7.250% | 3/17/44 | 340 | 275 |
Petrobras Global Finance BV | 6.850% | 6/5/15 | 2,475 | 1,807 |
Petrobras International Finance Co. SA | 5.875% | 3/1/18 | 1,255 | 1,238 |
Petrobras International Finance Co. SA | 8.375% | 12/10/18 | 350 | 357 |
Petrobras International Finance Co. SA | 7.875% | 3/15/19 | 2,000 | 1,995 |
Petrobras International Finance Co. SA | 5.750% | 1/20/20 | 2,550 | 2,340 |
Petrobras International Finance Co. SA | 5.375% | 1/27/21 | 3,505 | 3,106 |
Petrobras International Finance Co. SA | 6.875% | 1/20/40 | 1,565 | 1,227 |
Petrobras International Finance Co. SA | 6.750% | 1/27/41 | 2,877 | 2,251 |
Total Brazil (Cost $59,378) | 57,826 | |||
Cameroon (0.1%) | ||||
Sovereign Bond (U.S. Dollar-Denominated) (0.1%) | ||||
1 Republic of Cameroon | 9.500% | 11/19/25 | 500 | 490 |
Total Cameroon (Cost $492) | 490 |
12
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Chile (1.8%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.8%) | ||||
2 Banco del Estado de Chile | 2.000% | 11/9/17 | 385 | 386 |
2 Banco del Estado de Chile | 4.125% | 10/7/20 | 400 | 428 |
2 Banco del Estado de Chile | 3.875% | 2/8/22 | 625 | 668 |
2 Corp. Nacional del Cobre de Chile | 7.500% | 1/15/19 | 800 | 913 |
Corp. Nacional del Cobre de Chile | 3.750% | 11/4/20 | 800 | 845 |
2 Corp. Nacional del Cobre de Chile | 3.750% | 11/4/20 | 300 | 319 |
Corp. Nacional del Cobre de Chile | 3.875% | 11/3/21 | 400 | 419 |
2 Corp. Nacional del Cobre de Chile | 3.875% | 11/3/21 | 800 | 838 |
2 Corp. Nacional del Cobre de Chile | 3.000% | 7/17/22 | 150 | 147 |
Corp. Nacional del Cobre de Chile | 3.000% | 7/17/22 | 400 | 391 |
Corp. Nacional del Cobre de Chile | 4.500% | 8/13/23 | 475 | 498 |
2 Corp. Nacional del Cobre de Chile | 4.500% | 8/13/23 | 150 | 157 |
Corp. Nacional del Cobre de Chile | 4.500% | 9/16/25 | 900 | 938 |
2 Corp. Nacional del Cobre de Chile | 5.625% | 9/21/35 | 300 | 320 |
2 Corp. Nacional del Cobre de Chile | 6.150% | 10/24/36 | 100 | 115 |
2 Corp. Nacional del Cobre de Chile | 4.250% | 7/17/42 | 400 | 360 |
Corp. Nacional del Cobre de Chile | 5.625% | 10/18/43 | 900 | 977 |
2 Corp. Nacional del Cobre de Chile | 5.625% | 10/18/43 | 200 | 217 |
Corp. Nacional del Cobre de Chile | 4.875% | 11/4/44 | 900 | 886 |
2 Corp. Nacional del Cobre de Chile | 4.875% | 11/4/44 | 400 | 397 |
2 Empresa de Transporte de Pasajeros Metro SA | 4.750% | 2/4/24 | 200 | 211 |
2 Empresa Nacional del Petroleo | 5.250% | 8/10/20 | 500 | 539 |
2 Empresa Nacional del Petroleo | 4.750% | 12/6/21 | 600 | 633 |
Empresa Nacional del Petroleo | 4.375% | 10/30/24 | 500 | 511 |
Republic of Chile | 3.875% | 8/5/20 | 500 | 542 |
Republic of Chile | 3.125% | 1/21/26 | 2,290 | 2,351 |
Republic of Chile | 3.625% | 10/30/42 | 300 | 295 |
Total Chile (Cost $14,636) | 15,301 | |||
China (12.7%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (12.7%) | ||||
Agricultural Bank Of China | 2.000% | 5/21/18 | 1,300 | 1,301 |
Agricultural Bank Of China | 2.750% | 5/21/20 | 250 | 254 |
Agricultural Bank of China Ltd. | 2.250% | 12/9/17 | 500 | 503 |
Amber Circle Funding Ltd. | 2.000% | 12/4/17 | 400 | 402 |
Amber Circle Funding Ltd. | 3.250% | 12/4/22 | 600 | 620 |
Amipeace Ltd. | 2.000% | 12/6/16 | 250 | 251 |
2 Avi Funding Co. Ltd. | 2.850% | 9/16/20 | 1,400 | 1,427 |
Avi Funding Co. Ltd. | 3.800% | 9/16/25 | 700 | 737 |
Bank of China Ltd. | 3.125% | 1/23/19 | 200 | 206 |
Bank of China Ltd. | 2.875% | 6/30/20 | 2,000 | 2,040 |
2 Bank of China Ltd. | 5.000% | 11/13/24 | 500 | 521 |
Bank of China Ltd. | 5.000% | 11/13/24 | 1,100 | 1,147 |
Bank of China Ltd. | 3.875% | 6/30/25 | 1,000 | 1,059 |
Bank of China Ltd./Hong Kong | 2.125% | 6/30/18 | 1,000 | 1,006 |
Bao-trans Enterprises Ltd. | 3.750% | 12/12/18 | 725 | 740 |
Beijing State-Owned Assets Management | ||||
Hong Kong | 4.125% | 5/26/25 | 500 | 503 |
Bluestar Finance Holdings Ltd. | 3.500% | 6/11/18 | 1,000 | 1,006 |
BOC Aviation Pte Ltd. | 2.875% | 10/10/17 | 500 | 506 |
BOC Aviation Pte Ltd. | 3.000% | 3/30/20 | 800 | 808 |
BOC Aviation Pte Ltd. | 4.375% | 5/2/23 | 200 | 210 |
13
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
1 | CCCI Treasure Ltd. | 3.500% | 12/29/49 | 550 | 556 |
Century Master Investment Co. Ltd. | 4.750% | 9/19/18 | 200 | 210 | |
CGNPC International Ltd. | 4.000% | 5/19/25 | 500 | 517 | |
Charming Light Investments Ltd. | 3.750% | 9/3/19 | 1,050 | 1,081 | |
China Cinda Finance 2014 Ltd. | 4.000% | 5/14/19 | 500 | 518 | |
China Cinda Finance 2014 Ltd. | 5.625% | 5/14/24 | 200 | 218 | |
China Cinda Finance 2015 I Ltd. | 3.125% | 4/23/20 | 2,000 | 2,012 | |
China Cinda Finance 2015 I Ltd. | 4.250% | 4/23/25 | 1,300 | 1,286 | |
China Clean Energy Development Ltd. | 4.000% | 11/5/25 | 600 | 621 | |
China Construction Bank Asia Corp. Ltd. | 3.250% | 7/2/19 | 700 | 727 | |
1 | China Construction Bank Asia Corp. Ltd. | 4.250% | 8/20/24 | 400 | 408 |
1 | China Construction Bank Corp. | 3.875% | 5/13/25 | 1,400 | 1,408 |
China Development Bank Corp. | 2.500% | 10/9/20 | 500 | 511 | |
China Great Wall International Holdings Ltd. | 2.500% | 9/17/17 | 200 | 201 | |
1 | China Life Insurance Co. Ltd. | 4.000% | 7/3/75 | 1,000 | 997 |
2 | China Resources Gas Group Ltd. | 4.500% | 4/5/22 | 400 | 431 |
China Resources Land Ltd. | 4.375% | 2/27/19 | 450 | 472 | |
China Resources Land Ltd. | 6.000% | 2/27/24 | 400 | 459 | |
China Shenhua Overseas Capital Co. Ltd. | 3.125% | 1/20/20 | 650 | 659 | |
China Shenhua Overseas Capital Co. Ltd. | 3.875% | 1/20/25 | 400 | 403 | |
CITIC Ltd. | 6.375% | 4/10/20 | 1,000 | 1,138 | |
CITIC Ltd. | 6.625% | 4/15/21 | 200 | 235 | |
CITIC Ltd. | 6.800% | 1/17/23 | 1,700 | 2,025 | |
1 | CITIC Ltd. | 8.625% | 5/29/49 | 900 | 1,011 |
CITIC Securities Finance MTN Co. Ltd. | 3.500% | 10/30/19 | 400 | 406 | |
2 | CNOOC Curtis Funding No 1 Pty Ltd. | 4.500% | 10/3/23 | 300 | 317 |
CNOOC Curtis Funding No 1 pty Ltd. | 4.500% | 10/3/23 | 2,920 | 3,099 | |
2 | CNOOC Finance 2011 Ltd. | 4.250% | 1/26/21 | 1,388 | 1,479 |
2 | CNOOC Finance 2011 Ltd. | 5.750% | 1/26/41 | 200 | 233 |
2 | CNOOC Finance 2012 Ltd. | 3.875% | 5/2/22 | 1,200 | 1,244 |
2 | CNOOC Finance 2012 Ltd. | 5.000% | 5/2/42 | 200 | 213 |
CNOOC Finance 2013 Ltd. | 1.750% | 5/9/18 | 200 | 199 | |
CNOOC Finance 2013 Ltd. | 3.000% | 5/9/23 | 850 | 823 | |
CNOOC Finance 2013 Ltd. | 4.250% | 5/9/43 | 200 | 190 | |
CNOOC Finance 2015 Australia Pty Ltd. | 2.625% | 5/5/20 | 1,150 | 1,144 | |
CNOOC Finance 2015 USA LLC | 3.500% | 5/5/25 | 1,300 | 1,288 | |
CNOOC Nexen Finance 2014 ULC | 1.625% | 4/30/17 | 1,050 | 1,050 | |
CNOOC Nexen Finance 2014 ULC | 4.250% | 4/30/24 | 1,810 | 1,888 | |
CNOOC Nexen Finance 2014 ULC | 4.875% | 4/30/44 | 900 | 949 | |
2 | CNPC General Capital Ltd. | 2.750% | 4/19/17 | 50 | 51 |
2,4 | CNPC General Capital Ltd. | 1.518% | 5/14/17 | 200 | 200 |
4 | CNPC General Capital Ltd. | 1.518% | 5/14/17 | 500 | 499 |
CNPC General Capital Ltd. | 1.950% | 4/16/18 | 350 | 350 | |
2 | CNPC General Capital Ltd. | 2.750% | 5/14/19 | 200 | 203 |
CNPC General Capital Ltd. | 2.750% | 5/14/19 | 450 | 457 | |
CNPC General Capital Ltd. | 2.700% | 11/25/19 | 1,200 | 1,222 | |
2 | CNPC General Capital Ltd. | 3.950% | 4/19/22 | 200 | 211 |
CNPC General Capital Ltd. | 3.400% | 4/16/23 | 250 | 252 | |
2 | CNPC HK Overseas Capital Ltd. | 4.500% | 4/28/21 | 1,525 | 1,636 |
2 | CNPC HK Overseas Capital Ltd. | 5.950% | 4/28/41 | 400 | 487 |
COSCO Finance 2011 Ltd. | 4.000% | 12/3/22 | 750 | 779 | |
2 | COSL Finance BVI Ltd. | 3.250% | 9/6/22 | 550 | 541 |
COSL Singapore Capital Ltd. | 3.500% | 7/30/20 | 1,200 | 1,227 | |
1 | CRCC Yupeng Ltd. | 3.950% | 2/28/49 | 300 | 308 |
14
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
CRCC Yuxiang Ltd. | 3.500% | 5/16/23 | 950 | 961 | |
1 | Dianjian Haixing Ltd. | 4.050% | 10/29/49 | 200 | 205 |
Eastern Creation II Investment Holdings Ltd. | 2.625% | 11/20/17 | 400 | 402 | |
2 | Export-Import Bank of China | 2.500% | 7/31/19 | 700 | 714 |
Export-Import Bank of China | 2.500% | 7/31/19 | 1,060 | 1,080 | |
Export-Import Bank of China | 3.625% | 7/31/24 | 200 | 211 | |
Franshion Brilliant Ltd. | 5.750% | 3/19/19 | 400 | 427 | |
2 | Franshion Development Ltd. | 6.750% | 4/15/21 | 500 | 566 |
Franshion Investment Ltd. | 4.700% | 10/26/17 | 200 | 205 | |
Hebei Iron & Steel Hong Kong International | |||||
Trade Co. Ltd. | 2.750% | 10/27/17 | 200 | 201 | |
Huarong Finance Co. Ltd. | 4.000% | 7/17/19 | 700 | 726 | |
Huarong Finance II Co. Ltd. | 3.500% | 1/16/18 | 250 | 254 | |
Huarong Finance II Co. Ltd. | 2.875% | 11/19/18 | 1,200 | 1,213 | |
Huarong Finance II Co. Ltd. | 4.500% | 1/16/20 | 850 | 894 | |
Huarong Finance II Co. Ltd. | 3.750% | 11/19/20 | 350 | 361 | |
Huarong Finance II Co. Ltd. | 5.500% | 1/16/25 | 1,300 | 1,389 | |
Huarong Finance II Co. Ltd. | 5.000% | 11/19/25 | 400 | 414 | |
ICBCIL Finance Co. Ltd. | 3.250% | 3/17/20 | 800 | 812 | |
ICBCIL Finance Co. Ltd. | 3.200% | 11/10/20 | 700 | 709 | |
Industrial & Commercial Bank of China Asia Ltd. | 5.125% | 11/30/20 | 550 | 598 | |
Industrial & Commercial Bank of China Ltd. | 2.351% | 11/13/17 | 1,000 | 1,007 | |
Industrial & Commercial Bank of China Ltd. | 2.500% | 11/21/17 | 600 | 606 | |
Industrial & Commercial Bank of China Ltd. | 3.231% | 11/13/19 | 1,250 | 1,297 | |
Industrial & Commercial Bank of China Ltd. | 4.875% | 9/21/25 | 1,550 | 1,598 | |
King Power Capital Ltd. | 5.625% | 11/3/24 | 500 | 541 | |
Kunlun Energy Co. Ltd. | 3.750% | 5/13/25 | 350 | 349 | |
MCC Holding Hong Kong Corp. Ltd. | 2.625% | 6/16/17 | 200 | 201 | |
MCC Holding Hong Kong Corp. Ltd. | 2.500% | 8/28/17 | 400 | 402 | |
Minmetals Bounteous Finance BVI Ltd. | 4.750% | 7/30/25 | 600 | 619 | |
Nexen Energy ULC | 7.875% | 3/15/32 | 200 | 264 | |
Nexen Energy ULC | 5.875% | 3/10/35 | 808 | 897 | |
Nexen Energy ULC | 6.400% | 5/15/37 | 725 | 846 | |
Nexen Energy ULC | 7.500% | 7/30/39 | 300 | 384 | |
Prosperous Ray Ltd. | 3.000% | 11/12/18 | 400 | 407 | |
Prosperous Ray Ltd. | 4.625% | 11/12/23 | 350 | 379 | |
Shanghai Electric Group Global Investment Ltd. | 3.000% | 8/14/19 | 500 | 509 | |
Shanghai Electric Power Finance Ltd. | 3.625% | 8/11/20 | 600 | 620 | |
Sino-Ocean Land Treasure Finance I Ltd. | 4.625% | 7/30/19 | 1,100 | 1,134 | |
Sino-Ocean Land Treasure Finance I Ltd. | 6.000% | 7/30/24 | 350 | 362 | |
Sino-Ocean Land Treasure Finance II Ltd. | 4.450% | 2/4/20 | 400 | 410 | |
Sino-Ocean Land Treasure Finance II Ltd. | 5.950% | 2/4/27 | 250 | 254 | |
1,2 | Sinochem Global Capital Co. Ltd. | 5.000% | 12/29/49 | 200 | 205 |
2 | Sinochem Offshore Capital Co. Ltd. | 3.250% | 4/29/19 | 200 | 204 |
Sinochem Offshore Capital Co. Ltd. | 3.250% | 4/29/19 | 200 | 204 | |
Sinochem Overseas Capital Co. Ltd. | 4.500% | 11/12/20 | 600 | 638 | |
2 | Sinochem Overseas Capital Co. Ltd. | 4.500% | 11/12/20 | 1,375 | 1,464 |
2 | Sinochem Overseas Capital Co. Ltd. | 6.300% | 11/12/40 | 450 | 562 |
Sinopec Capital 2013 Ltd. | 1.875% | 4/24/18 | 600 | 598 | |
Sinopec Capital 2013 Ltd. | 3.125% | 4/24/23 | 1,000 | 987 | |
2 | Sinopec Capital 2013 Ltd. | 3.125% | 4/24/23 | 400 | 395 |
Sinopec Capital 2013 Ltd. | 4.250% | 4/24/43 | 200 | 196 | |
2 | Sinopec Group Overseas Development 2012 Ltd. | 2.750% | 5/17/17 | 775 | 785 |
2 | Sinopec Group Overseas Development 2012 Ltd. | 3.900% | 5/17/22 | 1,119 | 1,173 |
15
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Sinopec Group Overseas Development 2012 Ltd. | 3.900% | 5/17/22 | 500 | 523 |
Sinopec Group Overseas Development 2012 Ltd. | 3.900% | 5/17/22 | 807 | 845 |
2 Sinopec Group Overseas Development 2012 Ltd. | 4.875% | 5/17/42 | 775 | 837 |
Sinopec Group Overseas Development 2013 Ltd. | 2.500% | 10/17/18 | 300 | 303 |
Sinopec Group Overseas Development 2013 Ltd. | 4.375% | 10/17/23 | 1,425 | 1,518 |
Sinopec Group Overseas Development 2013 Ltd. | 5.375% | 10/17/43 | 200 | 233 |
4 Sinopec Group Overseas Development 2014 Ltd. | 1.409% | 4/10/17 | 600 | 599 |
2 Sinopec Group Overseas Development 2014 Ltd. | 2.750% | 4/10/19 | 400 | 407 |
Sinopec Group Overseas Development 2014 Ltd. | 4.375% | 4/10/24 | 1,200 | 1,276 |
Sinopec Group Overseas Development 2015 Ltd. | 2.500% | 4/28/20 | 3,400 | 3,399 |
Sinopec Group Overseas Development 2015 Ltd. | 3.250% | 4/28/25 | 700 | 691 |
Sinopec Group Overseas Development 2015 Ltd. | 4.100% | 4/28/45 | 600 | 574 |
Skysea International Capital Management | 4.875% | 12/7/21 | 400 | 442 |
State Elite Global Ltd. | 3.125% | 1/20/20 | 1,450 | 1,487 |
2 State Grid Overseas Investment 2013 Ltd. | 1.750% | 5/22/18 | 200 | 200 |
State Grid Overseas Investment 2013 Ltd. | 3.125% | 5/22/23 | 1,410 | 1,429 |
2 State Grid Overseas Investment 2013 Ltd. | 4.375% | 5/22/43 | 200 | 213 |
2 State Grid Overseas Investment 2014 Ltd. | 2.750% | 5/7/19 | 700 | 715 |
State Grid Overseas Investment 2014 Ltd. | 2.750% | 5/7/19 | 1,370 | 1,402 |
State Grid Overseas Investment 2014 Ltd. | 4.125% | 5/7/24 | 1,470 | 1,591 |
2 State Grid Overseas Investment 2014 Ltd. | 4.850% | 5/7/44 | 350 | 402 |
Three Gorges Finance I Cayman Islands Ltd. | 3.700% | 6/10/25 | 700 | 733 |
Total China (Cost $106,931) | 108,954 | |||
Colombia (3.0%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (3.0%) | ||||
Ecopetrol SA | 7.625% | 7/23/19 | 1,525 | 1,697 |
Ecopetrol SA | 5.875% | 9/18/23 | 590 | 592 |
Ecopetrol SA | 4.125% | 1/16/25 | 975 | 853 |
Ecopetrol SA | 5.375% | 6/26/26 | 2,000 | 1,835 |
Ecopetrol SA | 7.375% | 9/18/43 | 700 | 658 |
Ecopetrol SA | 5.875% | 5/28/45 | 1,200 | 981 |
Empresa de Energia de Bogota SA ESP | 6.125% | 11/10/21 | 900 | 938 |
Empresas Publicas de Medellin ESP | 7.625% | 7/29/19 | 300 | 341 |
Oleoducto Central SA | 4.000% | 5/7/21 | 200 | 192 |
Republic of Colombia | 7.375% | 3/18/19 | 1,735 | 1,967 |
Republic of Colombia | 11.750% | 2/25/20 | 450 | 587 |
Republic of Colombia | 4.375% | 7/12/21 | 1,434 | 1,499 |
1 Republic of Colombia | 2.625% | 3/15/23 | 675 | 630 |
Republic of Colombia | 4.000% | 2/26/24 | 2,645 | 2,665 |
Republic of Colombia | 8.125% | 5/21/24 | 540 | 681 |
1 Republic of Colombia | 4.500% | 1/28/26 | 1,500 | 1,541 |
Republic of Colombia | 7.375% | 9/18/37 | 1,150 | 1,394 |
Republic of Colombia | 6.125% | 1/18/41 | 1,507 | 1,633 |
1 Republic of Colombia | 5.625% | 2/26/44 | 2,134 | 2,187 |
1 Republic of Colombia | 5.000% | 6/15/45 | 2,400 | 2,298 |
Transportadora de Gas Internacional SA ESP | 5.700% | 3/20/22 | 200 | 208 |
Total Colombia (Cost $25,604) | 25,377 | |||
Costa Rica (0.6%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.6%) | ||||
Banco de Costa Rica | 5.250% | 8/12/18 | 250 | 252 |
Banco Nacional de Costa Rica | 4.875% | 11/1/18 | 400 | 402 |
2 Banco Nacional de Costa Rica | 4.875% | 11/1/18 | 200 | 204 |
16
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
2 Banco Nacional de Costa Rica | 5.875% | 4/25/21 | 1,000 | 1,003 |
Banco Nacional de Costa Rica | 6.250% | 11/1/23 | 200 | 201 |
Instituto Costarricense de Electricidad | 6.950% | 11/10/21 | 475 | 485 |
Instituto Costarricense de Electricidad | 6.375% | 5/15/43 | 200 | 151 |
Republic of Costa Rica | 4.250% | 1/26/23 | 900 | 827 |
Republic of Costa Rica | 5.625% | 4/30/43 | 1,200 | 957 |
Republic of Costa Rica | 7.000% | 4/4/44 | 600 | 556 |
Republic of Costa Rica | 7.158% | 3/12/45 | 600 | 561 |
Total Costa Rica (Cost $5,681) | 5,599 | |||
Cote d’Ivoire (0.4%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.4%) | ||||
Republic of Cote d’Ivoire | 5.375% | 7/23/24 | 950 | 878 |
1 Republic of Cote d’Ivoire | 6.375% | 3/3/28 | 500 | 474 |
1 Republic of Cote d’Ivoire | 5.750% | 12/31/32 | 2,295 | 2,085 |
Total Cote d’Ivoire (Cost $3,504) | 3,437 | |||
Croatia (0.9%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.9%) | ||||
Hrvatska Elektroprivreda | 5.875% | 10/23/22 | 500 | 518 |
Republic of Croatia | 6.750% | 11/5/19 | 1,200 | 1,317 |
Republic of Croatia | 6.625% | 7/14/20 | 1,094 | 1,200 |
Republic of Croatia | 6.375% | 3/24/21 | 1,600 | 1,751 |
Republic of Croatia | 5.500% | 4/4/23 | 700 | 742 |
Republic of Croatia | 6.000% | 1/26/24 | 1,735 | 1,897 |
Total Croatia (Cost $7,225) | 7,425 | |||
Dominican Republic (0.9%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.9%) | ||||
1 Dominican Republic | 7.500% | 5/6/21 | 752 | 823 |
Dominican Republic | 6.600% | 1/28/24 | 450 | 479 |
1 Dominican Republic | 5.875% | 4/18/24 | 1,600 | 1,644 |
Dominican Republic | 5.500% | 1/27/25 | 1,550 | 1,548 |
Dominican Republic | 6.875% | 1/29/26 | 1,000 | 1,072 |
Dominican Republic | 7.450% | 4/30/44 | 450 | 477 |
1 Dominican Republic | 6.850% | 1/27/45 | 644 | 644 |
2 Dominican Republic | 6.850% | 1/27/45 | 1,000 | 997 |
Total Dominican Republic (Cost $7,602) | 7,684 | |||
Ecuador (0.3%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.3%) | ||||
Republic of Ecuador | 10.500% | 3/24/20 | 1,100 | 1,035 |
Republic of Ecuador | 7.950% | 6/20/24 | 1,550 | 1,348 |
Total Ecuador (Cost $2,489) | 2,383 | |||
Egypt (0.3%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.3%) | ||||
African Export-Import Bank | 3.875% | 6/4/18 | 250 | 252 |
African Export-Import Bank | 4.750% | 7/29/19 | 200 | 206 |
Arab Republic of Egypt | 5.750% | 4/29/20 | 812 | 822 |
Arab Republic of Egypt | 5.875% | 6/11/25 | 1,200 | 1,078 |
Arab Republic of Egypt | 6.875% | 4/30/40 | 300 | 259 |
Total Egypt (Cost $2,759) | 2,617 |
17
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
El Salvador (0.5%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.5%) | |||||
Republic of El Salvador | 7.375% | 12/1/19 | 345 | 346 | |
Republic of El Salvador | 7.750% | 1/24/23 | 535 | 534 | |
Republic of El Salvador | 5.875% | 1/30/25 | 300 | 266 | |
2 | Republic of El Salvador | 6.375% | 1/18/27 | 300 | 264 |
Republic of El Salvador | 6.375% | 1/18/27 | 400 | 351 | |
Republic of El Salvador | 8.250% | 4/10/32 | 778 | 745 | |
Republic of El Salvador | 7.650% | 6/15/35 | 1,190 | 1,057 | |
Republic of El Salvador | 7.625% | 2/1/41 | 458 | 402 | |
Total El Salvador (Cost $4,332) | 3,965 | ||||
Ethiopia (0.1%) | |||||
Sovereign Bond (U.S. Dollar-Denominated) (0.1%) | |||||
Republic of Ethiopia | 6.625% | 12/11/24 | 850 | 770 | |
Total Ethiopia (Cost $819) | 770 | ||||
Gabon (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
1,2 | Gabonese Republic | 6.375% | 12/12/24 | 400 | 350 |
1 | Gabonese Republic | 6.375% | 12/12/24 | 1,061 | 927 |
Gabonese Republic | 6.950% | 6/16/25 | 200 | 175 | |
Total Gabon (Cost $1,596) | 1,452 | ||||
Georgia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
Georgian Railway JSC | 7.750% | 7/11/22 | 200 | 216 | |
Republic of Georgia | 6.875% | 4/12/21 | 400 | 440 | |
Total Georgia (Cost $662) | 656 | ||||
Ghana (0.3%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.3%) | |||||
Republic of Ghana | 8.500% | 10/4/17 | 300 | 298 | |
Republic of Ghana | 7.875% | 8/7/23 | 200 | 159 | |
2 | Republic of Ghana | 7.875% | 8/7/23 | 400 | 318 |
1,2 | Republic of Ghana | 8.125% | 1/18/26 | 300 | 236 |
1 | Republic of Ghana | 8.125% | 1/18/26 | 550 | 433 |
1 | Republic of Ghana | 10.750% | 10/14/30 | 1,000 | 982 |
Total Ghana (Cost $2,673) | 2,426 | ||||
Guatemala (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Republic of Guatemala | 5.750% | 6/6/22 | 700 | 766 | |
Republic of Guatemala | 4.500% | 5/3/26 | 1,000 | 993 | |
Republic of Guatemala | 4.875% | 2/13/28 | 400 | 408 | |
Total Guatemala (Cost $2,118) | 2,167 | ||||
Honduras (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
Republic of Honduras | 8.750% | 12/16/20 | 500 | 561 | |
1 | Republic of Honduras | 7.500% | 3/15/24 | 200 | 213 |
Total Honduras (Cost $726) | 774 |
18
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Hungary (1.8%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.8%) | ||||
Magyar Export-Import Bank Zrt | 5.500% | 2/12/18 | 750 | 787 |
2,5 MFB Magyar Fejlesztesi Bank Zrt | 6.250% | 10/21/20 | 400 | 442 |
Republic of Hungary | 4.125% | 2/19/18 | 1,150 | 1,192 |
Republic of Hungary | 4.000% | 3/25/19 | 500 | 520 |
Republic of Hungary | 6.250% | 1/29/20 | 1,315 | 1,466 |
Republic of Hungary | 6.375% | 3/29/21 | 3,472 | 3,955 |
Republic of Hungary | 5.375% | 2/21/23 | 1,762 | 1,945 |
Republic of Hungary | 5.750% | 11/22/23 | 1,370 | 1,550 |
Republic of Hungary | 5.375% | 3/25/24 | 1,625 | 1,808 |
Republic of Hungary | 7.625% | 3/29/41 | 1,050 | 1,480 |
Total Hungary (Cost $14,669) | 15,145 | |||
India (2.0%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (2.0%) | ||||
Bank of Baroda | 4.875% | 7/23/19 | 975 | 1,039 |
Bank of India | 3.625% | 9/21/18 | 350 | 359 |
Bank of India | 3.125% | 5/6/20 | 400 | 398 |
Bank of India | 6.250% | 2/16/21 | 900 | 1,012 |
Bharat Petroleum Corp. Ltd. | 4.625% | 10/25/22 | 400 | 426 |
Bharat Petroleum Corp. Ltd. | 4.000% | 5/8/25 | 400 | 400 |
Canara Bank | 5.250% | 10/18/18 | 200 | 212 |
Export-Import Bank of India | 4.000% | 8/7/17 | 675 | 692 |
Export-Import Bank of India | 3.875% | 10/2/19 | 1,000 | 1,045 |
Export-Import Bank of India | 2.750% | 4/1/20 | 1,000 | 1,002 |
Export-Import Bank of India | 4.000% | 1/14/23 | 400 | 416 |
IDBI Bank Ltd. | 4.375% | 3/26/18 | 200 | 205 |
IDBI Bank Ltd. | 3.750% | 1/25/19 | 600 | 607 |
Indian Oil Corp. Ltd. | 5.625% | 8/2/21 | 500 | 557 |
Indian Oil Corp. Ltd. | 5.750% | 8/1/23 | 400 | 448 |
Indian Overseas Bank | 4.625% | 2/21/18 | 400 | 411 |
Indian Railway Finance Corp. Ltd. | 3.917% | 2/26/19 | 200 | 208 |
NTPC Ltd. | 5.625% | 7/14/21 | 400 | 452 |
NTPC Ltd. | 4.750% | 10/3/22 | 200 | 216 |
NTPC Ltd. | 4.375% | 11/26/24 | 400 | 418 |
Oil India Ltd. | 3.875% | 4/17/19 | 600 | 623 |
Oil India Ltd. | 5.375% | 4/17/24 | 250 | 270 |
ONGC Videsh Ltd. | 3.250% | 7/15/19 | 700 | 716 |
ONGC Videsh Ltd. | 3.750% | 5/7/23 | 400 | 401 |
ONGC Videsh Ltd. | 4.625% | 7/15/24 | 500 | 522 |
Power Grid Corp. of India Ltd. | 3.875% | 1/17/23 | 400 | 407 |
State Bank of India | 4.125% | 8/1/17 | 250 | 257 |
State Bank of India | 3.250% | 4/18/18 | 1,100 | 1,122 |
State Bank of India | 3.622% | 4/17/19 | 1,100 | 1,138 |
2 State Bank of India | 4.875% | 4/17/24 | 400 | 440 |
Syndicate Bank | 4.125% | 4/12/18 | 400 | 410 |
Total India (Cost $16,477) | 16,829 | |||
Indonesia (6.2%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (6.2%) | ||||
Bank Negara Indonesia Persero Tbk PT | 4.125% | 4/27/17 | 400 | 406 |
Lembaga Pembiayaan Ekspor Indonesia | 3.750% | 4/26/17 | 300 | 305 |
Majapahit Holding BV | 7.250% | 6/28/17 | 200 | 212 |
19
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Majapahit Holding BV | 8.000% | 8/7/19 | 350 | 399 |
Majapahit Holding BV | 7.750% | 1/20/20 | 1,925 | 2,198 |
Majapahit Holding BV | 7.875% | 6/29/37 | 400 | 485 |
Pelabuhan Indonesia II PT | 4.250% | 5/5/25 | 600 | 583 |
2 Pelabuhan Indonesia II PT | 4.250% | 5/5/25 | 600 | 581 |
Pelabuhan Indonesia II PT | 5.375% | 5/5/45 | 500 | 455 |
2 Pelabuhan Indonesia III PT | 4.875% | 10/1/24 | 200 | 204 |
Pertamina Persero PT | 5.250% | 5/23/21 | 450 | 473 |
Pertamina Persero PT | 4.875% | 5/3/22 | 2,550 | 2,627 |
Pertamina Persero PT | 4.300% | 5/20/23 | 250 | 248 |
2 Pertamina Persero PT | 4.300% | 5/20/23 | 430 | 427 |
Pertamina Persero PT | 6.500% | 5/27/41 | 200 | 204 |
2 Pertamina Persero PT | 6.000% | 5/3/42 | 750 | 720 |
Pertamina Persero PT | 6.000% | 5/3/42 | 1,250 | 1,203 |
Pertamina Persero PT | 5.625% | 5/20/43 | 425 | 392 |
2 Pertamina Persero PT | 5.625% | 5/20/43 | 200 | 185 |
Pertamina Persero PT | 6.450% | 5/30/44 | 1,100 | 1,125 |
Perusahaan Gas Negara Persero Tbk | 5.125% | 5/16/24 | 600 | 621 |
2 Perusahaan Gas Negara Persero Tbk PT | 5.125% | 5/16/24 | 400 | 413 |
Perusahaan Listrik Negara PT | 5.500% | 11/22/21 | 950 | 1,023 |
Perusahaan Listrik Negara PT | 5.250% | 10/24/42 | 500 | 460 |
2 Perusahaan Listrik Negara PT | 5.250% | 10/24/42 | 300 | 275 |
Perusahaan Penerbit SBSN Indonesia II | 4.000% | 11/21/18 | 600 | 624 |
Perusahaan Penerbit SBSN Indonesia III | 6.125% | 3/15/19 | 400 | 438 |
2 Perusahaan Penerbit SBSN Indonesia III | 6.125% | 3/15/19 | 200 | 219 |
Perusahaan Penerbit SBSN Indonesia III | 3.300% | 11/21/22 | 628 | 628 |
2 Perusahaan Penerbit SBSN Indonesia III | 4.350% | 9/10/24 | 600 | 610 |
Perusahaan Penerbit SBSN Indonesia III | 4.350% | 9/10/24 | 1,500 | 1,526 |
6 Perusahaan Penerbit SBSN Indonesia III | 4.325% | 5/28/25 | 950 | 952 |
Perusahaan Penerbit SBSN Indonesia III | 4.550% | 3/29/26 | 800 | 820 |
Republic of Indonesia | 6.875% | 1/17/18 | 1,957 | 2,117 |
Republic of Indonesia | 11.625% | 3/4/19 | 2,386 | 2,988 |
2 Republic of Indonesia | 5.875% | 3/13/20 | 350 | 389 |
Republic of Indonesia | 5.875% | 3/13/20 | 810 | 901 |
Republic of Indonesia | 4.875% | 5/5/21 | 2,300 | 2,489 |
Republic of Indonesia | 3.750% | 4/25/22 | 950 | 973 |
Republic of Indonesia | 3.375% | 4/15/23 | 1,100 | 1,090 |
Republic of Indonesia | 5.375% | 10/17/23 | 709 | 787 |
Republic of Indonesia | 5.875% | 1/15/24 | 1,000 | 1,141 |
Republic of Indonesia | 4.125% | 1/15/25 | 400 | 409 |
2 Republic of Indonesia | 4.125% | 1/15/25 | 200 | 205 |
Republic of Indonesia | 4.750% | 1/8/26 | 2,800 | 2,978 |
Republic of Indonesia | 8.500% | 10/12/35 | 1,350 | 1,879 |
Republic of Indonesia | 6.625% | 2/17/37 | 1,267 | 1,500 |
Republic of Indonesia | 7.750% | 1/17/38 | 1,520 | 1,991 |
Republic of Indonesia | 5.250% | 1/17/42 | 1,300 | 1,331 |
Republic of Indonesia | 4.625% | 4/15/43 | 2,175 | 2,113 |
2 Republic of Indonesia | 6.750% | 1/15/44 | 100 | 122 |
Republic of Indonesia | 6.750% | 1/15/44 | 850 | 1,041 |
Republic of Indonesia | 5.125% | 1/15/45 | 2,869 | 2,914 |
Republic of Indonesia | 5.950% | 1/8/46 | 1,000 | 1,125 |
Total Indonesia (Cost $50,641) | 52,524 |
20
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Iraq (0.2%) | ||||
Sovereign Bond (U.S. Dollar-Denominated) (0.2%) | ||||
1 Republic of Iraq | 5.800% | 1/15/28 | 1,960 | 1,389 |
Total Iraq (Cost $1,562) | 1,389 | |||
Jamaica (0.4%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.4%) | ||||
1 Jamaica | 8.000% | 6/24/19 | 550 | 599 |
1 Jamaica | 7.625% | 7/9/25 | 450 | 497 |
Jamaica | 6.750% | 4/28/28 | 1,200 | 1,230 |
1 Jamaica | 8.000% | 3/15/39 | 325 | 354 |
Jamaica | 7.875% | 7/28/45 | 600 | 624 |
Total Jamaica (Cost $3,167) | 3,304 | |||
Jordan (0.0%) | ||||
Sovereign Bond (U.S. Dollar-Denominated) (0.0%) | ||||
Kingdom of Jordan | 6.125% | 1/29/26 | 350 | 370 |
Total Jordan (Cost $357) | 370 | |||
Kazakhstan (1.5%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.5%) | ||||
Development Bank of Kazakhstan JSC | 4.125% | 12/10/22 | 1,600 | 1,450 |
KazAgro National Management Holding JSC | 4.625% | 5/24/23 | 600 | 503 |
2 Kazakhstan Temir Zholy Finance BV | 6.375% | 10/6/20 | 900 | 911 |
Kazakhstan Temir Zholy Finance BV | 6.950% | 7/10/42 | 900 | 842 |
KazMunayGas National Co. JSC | 9.125% | 7/2/18 | 1,025 | 1,125 |
KazMunayGas National Co. JSC | 7.000% | 5/5/20 | 1,170 | 1,250 |
KazMunayGas National Co. JSC | 6.375% | 4/9/21 | 1,029 | 1,077 |
KazMunayGas National Co. JSC | 5.750% | 4/30/43 | 350 | 305 |
Republic of Kazakhstan | 3.875% | 10/14/24 | 900 | 879 |
Republic of Kazakhstan | 5.125% | 7/21/25 | 1,900 | 2,007 |
2 Republic of Kazakhstan | 4.875% | 10/14/44 | 400 | 362 |
Republic of Kazakhstan | 6.500% | 7/21/45 | 1,600 | 1,755 |
Total Kazakhstan (Cost $12,227) | 12,466 | |||
Kenya (0.2%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | ||||
Republic of Kenya | 5.875% | 6/24/19 | 300 | 296 |
2 Republic of Kenya | 5.875% | 6/24/19 | 200 | 198 |
2 Republic of Kenya | 6.875% | 6/24/24 | 200 | 188 |
Republic of Kenya | 6.875% | 6/24/24 | 1,525 | 1,434 |
Total Kenya (Cost $2,197) | 2,116 | |||
Lebanon (1.8%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.8%) | ||||
Republic of Lebanon | 9.000% | 3/20/17 | 500 | 517 |
Republic of Lebanon | 5.000% | 10/12/17 | 825 | 819 |
Republic of Lebanon | 5.150% | 6/12/18 | 150 | 149 |
Republic of Lebanon | 5.150% | 11/12/18 | 975 | 970 |
Republic of Lebanon | 5.500% | 4/23/19 | 50 | 50 |
Republic of Lebanon | 6.000% | 5/20/19 | 450 | 453 |
Republic of Lebanon | 5.450% | 11/28/19 | 925 | 912 |
Republic of Lebanon | 6.375% | 3/9/20 | 2,041 | 2,066 |
Republic of Lebanon | 5.800% | 4/14/20 | 100 | 99 |
Republic of Lebanon | 8.250% | 4/12/21 | 1,890 | 2,062 |
21
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Republic of Lebanon | 6.100% | 10/4/22 | 1,914 | 1,892 |
Republic of Lebanon | 6.000% | 1/27/23 | 1,185 | 1,158 |
Republic of Lebanon | 6.200% | 2/26/25 | 100 | 97 |
Republic of Lebanon | 6.250% | 6/12/25 | 400 | 388 |
Republic of Lebanon | 6.600% | 11/27/26 | 1,700 | 1,670 |
Republic of Lebanon | 6.750% | 11/29/27 | 961 | 956 |
Republic of Lebanon | 6.650% | 2/26/30 | 1,100 | 1,075 |
Total Lebanon (Cost $15,528) | 15,333 | |||
Malaysia (1.5%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.5%) | ||||
Axiata SPV2 Bhd. | 3.466% | 11/19/20 | 350 | 359 |
Cagamas Global plc | 2.745% | 12/10/19 | 200 | 202 |
Export-Import Bank of Malaysia Bhd. | 2.875% | 12/14/17 | 400 | 407 |
2 Federation of Malaysia | 4.646% | 7/6/21 | 250 | 276 |
1 Malayan Banking Berhad | 3.250% | 9/20/22 | 700 | 708 |
Malaysia Sovereign Sukuk Bhd. | 3.043% | 4/22/25 | 900 | 900 |
7 Malaysia Sovereign Sukuk Bhd. | 4.236% | 4/22/45 | 550 | 573 |
Petroliam Nasional Bhd. | 7.625% | 10/15/26 | 430 | 584 |
Petronas Capital Ltd. | 5.250% | 8/12/19 | 1,663 | 1,832 |
2 Petronas Capital Ltd. | 5.250% | 8/12/19 | 1,323 | 1,456 |
2 Petronas Capital Ltd. | 7.875% | 5/22/22 | 750 | 964 |
Petronas Capital Ltd. | 3.500% | 3/18/25 | 2,250 | 2,319 |
Petronas Capital Ltd. | 4.500% | 3/18/45 | 1,050 | 1,108 |
Petronas Global Sukuk Ltd. | 2.707% | 3/18/20 | 850 | 856 |
SSG Resources Ltd. | 4.250% | 10/4/22 | 400 | 415 |
Total Malaysia (Cost $12,613) | 12,959 | |||
Mexico (8.4%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (8.4%) | ||||
Banco Nacional de Comercio Exterior SNC | 4.375% | 10/14/25 | 500 | 510 |
Comision Federal de Electricidad | 4.875% | 5/26/21 | 1,250 | 1,309 |
Comision Federal de Electricidad | 4.875% | 1/15/24 | 400 | 414 |
2 Comision Federal de Electricidad | 4.875% | 1/15/24 | 600 | 620 |
Comision Federal de Electricidad | 5.750% | 2/14/42 | 700 | 691 |
2 Comision Federal de Electricidad | 6.125% | 6/16/45 | 200 | 202 |
Petroleos Mexicanos | 5.750% | 3/1/18 | 1,695 | 1,781 |
Petroleos Mexicanos | 3.500% | 7/18/18 | 800 | 809 |
2 Petroleos Mexicanos | 5.500% | 2/4/19 | 500 | 525 |
Petroleos Mexicanos | 8.000% | 5/3/19 | 2,273 | 2,535 |
Petroleos Mexicanos | 6.000% | 3/5/20 | 1,600 | 1,705 |
Petroleos Mexicanos | 3.500% | 7/23/20 | 800 | 784 |
Petroleos Mexicanos | 5.500% | 1/21/21 | 1,289 | 1,352 |
2 Petroleos Mexicanos | 6.375% | 2/4/21 | 1,100 | 1,188 |
Petroleos Mexicanos | 4.875% | 1/24/22 | 2,830 | 2,861 |
Petroleos Mexicanos | 3.500% | 1/30/23 | 1,550 | 1,445 |
Petroleos Mexicanos | 4.875% | 1/18/24 | 1,569 | 1,565 |
Petroleos Mexicanos | 4.250% | 1/15/25 | 1,460 | 1,384 |
Petroleos Mexicanos | 4.500% | 1/23/26 | 850 | 812 |
2 Petroleos Mexicanos | 6.875% | 8/4/26 | 3,950 | 4,349 |
Petroleos Mexicanos | 6.625% | 6/15/35 | 2,005 | 2,047 |
Petroleos Mexicanos | 6.500% | 6/2/41 | 2,020 | 2,030 |
Petroleos Mexicanos | 5.500% | 6/27/44 | 3,311 | 2,916 |
Petroleos Mexicanos | 6.375% | 1/23/45 | 1,460 | 1,442 |
Petroleos Mexicanos | 5.625% | 1/23/46 | 2,922 | 2,597 |
22
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
United Mexican States | 5.950% | 3/19/19 | 1,695 | 1,898 | |
United Mexican States | 8.125% | 12/30/19 | 850 | 1,038 | |
United Mexican States | 5.125% | 1/15/20 | 1,580 | 1,746 | |
United Mexican States | 3.500% | 1/21/21 | 675 | 700 | |
United Mexican States | 3.625% | 3/15/22 | 2,232 | 2,312 | |
United Mexican States | 4.000% | 10/2/23 | 3,691 | 3,888 | |
United Mexican States | 3.600% | 1/30/25 | 1,949 | 1,992 | |
United Mexican States | 4.125% | 1/21/26 | 1,050 | 1,108 | |
United Mexican States | 8.300% | 8/15/31 | 520 | 793 | |
United Mexican States | 7.500% | 4/8/33 | 1,090 | 1,508 | |
United Mexican States | 6.750% | 9/27/34 | 1,386 | 1,810 | |
United Mexican States | 6.050% | 1/11/40 | 3,004 | 3,590 | |
United Mexican States | 4.750% | 3/8/44 | 2,650 | 2,703 | |
United Mexican States | 5.550% | 1/21/45 | 2,775 | 3,158 | |
United Mexican States | 4.600% | 1/23/46 | 2,875 | 2,865 | |
United Mexican States | 5.750% | 10/12/10 | 2,400 | 2,485 | |
Total Mexico (Cost $70,756) | 71,467 | ||||
Mongolia (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Mongolia | 4.125% | 1/5/18 | 400 | 374 | |
Mongolia | 5.125% | 12/5/22 | 1,050 | 827 | |
2,8 | Trade & Development Bank of Mongolia LLC | 9.375% | 5/19/20 | 200 | 186 |
Total Mongolia (Cost $1,481) | 1,387 | ||||
Morocco (0.5%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.5%) | |||||
Kingdom of Morocco | 4.250% | 12/11/22 | 1,300 | 1,348 | |
Kingdom of Morocco | 5.500% | 12/11/42 | 425 | 448 | |
2 | OCP SA | 5.625% | 4/25/24 | 350 | 368 |
OCP SA | 5.625% | 4/25/24 | 900 | 946 | |
OCP SA | 4.500% | 10/22/25 | 500 | 484 | |
2 | OCP SA | 4.500% | 10/22/25 | 450 | 438 |
OCP SA | 6.875% | 4/25/44 | 300 | 313 | |
2 | OCP SA | 6.875% | 4/25/44 | 200 | 209 |
Total Morocco (Cost $4,433) | 4,554 | ||||
Mozambique (0.0%) | |||||
Sovereign Bond (U.S. Dollar-Denominated) (0.0%) | |||||
Republic of Mozambique | 10.500% | 1/18/23 | 344 | 281 | |
Total Mozambique (Cost $308) | 281 | ||||
Namibia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
Republic of Namibia | 5.500% | 11/3/21 | 500 | 525 | |
Republic of Namibia | 5.250% | 10/29/25 | 400 | 394 | |
Total Namibia (Cost $911) | 919 | ||||
Nigeria (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
2 | Africa Finance Corp. | 4.375% | 4/29/20 | 350 | 357 |
2 | Federal Republic of Nigeria | 5.125% | 7/12/18 | 200 | 198 |
Federal Republic of Nigeria | 6.750% | 1/28/21 | 250 | 243 | |
Federal Republic of Nigeria | 6.375% | 7/12/23 | 600 | 559 | |
Total Nigeria (Cost $1,357) | 1,357 |
23
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Oman (0.1%) | ||||
Sovereign Bond (U.S. Dollar-Denominated) (0.1%) | ||||
Lamar Funding Ltd. | 3.958% | 5/7/25 | 500 | 458 |
Total Oman (Cost $503) | 458 | |||
Pakistan (0.4%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.4%) | ||||
Islamic Republic of Pakistan | 6.875% | 6/1/17 | 375 | 388 |
2 Islamic Republic of Pakistan | 7.250% | 4/15/19 | 400 | 421 |
Islamic Republic of Pakistan | 7.250% | 4/15/19 | 900 | 944 |
Islamic Republic of Pakistan | 6.750% | 12/3/19 | 800 | 833 |
2 Islamic Republic of Pakistan | 8.250% | 4/15/24 | 250 | 264 |
Islamic Republic of Pakistan | 8.250% | 4/15/24 | 750 | 790 |
Islamic Republic of Pakistan | 8.250% | 9/30/25 | 200 | 211 |
Total Pakistan (Cost $3,733) | 3,851 | |||
Panama (1.2%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.2%) | ||||
Republic of Panama | 5.200% | 1/30/20 | 1,973 | 2,175 |
1 Republic of Panama | 4.000% | 9/22/24 | 550 | 579 |
1 Republic of Panama | 3.750% | 3/16/25 | 1,300 | 1,339 |
Republic of Panama | 7.125% | 1/29/26 | 760 | 982 |
Republic of Panama | 8.875% | 9/30/27 | 1,245 | 1,790 |
1 Republic of Panama | 3.875% | 3/17/28 | 700 | 717 |
Republic of Panama | 9.375% | 4/1/29 | 450 | 674 |
1 Republic of Panama | 6.700% | 1/26/36 | 937 | 1,203 |
1 Republic of Panama | 4.300% | 4/29/53 | 600 | 578 |
Total Panama (Cost $9,692) | 10,037 | |||
Paraguay (0.2%) | ||||
Republic of Paraguay | 4.625% | 1/25/23 | 800 | 813 |
Republic of Paraguay | 6.100% | 8/11/44 | 1,250 | 1,275 |
Total Paraguay (Cost $2,116) | 2,088 | |||
Peru (1.4%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.4%) | ||||
2 Corp. Financiera de Desarrollo SA | 3.250% | 7/15/19 | 250 | 256 |
Corp. Financiera de Desarrollo SA | 3.250% | 7/15/19 | 500 | 513 |
Corp. Financiera de Desarrollo SA | 4.750% | 2/8/22 | 200 | 212 |
Fondo MIVIVIENDA SA | 3.500% | 1/31/23 | 750 | 747 |
Republic of Peru | 7.125% | 3/30/19 | 471 | 541 |
Republic of Peru | 7.350% | 7/21/25 | 1,268 | 1,697 |
Republic of Peru | 4.125% | 8/25/27 | 1,000 | 1,071 |
Republic of Peru | 8.750% | 11/21/33 | 1,910 | 2,921 |
1 Republic of Peru | 6.550% | 3/14/37 | 861 | 1,114 |
Republic of Peru | 5.625% | 11/18/50 | 2,373 | 2,773 |
Total Peru (Cost $11,358) | 11,845 | |||
Philippines (3.0%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (3.0%) | ||||
9 Power Sector Assets & Liabilities | ||||
Management Corp. | 7.250% | 5/27/19 | 1,064 | 1,237 |
9 Power Sector Assets & Liabilities | ||||
Management Corp. | 7.390% | 12/2/24 | 800 | 1,075 |
Republic of the Philippines | 9.875% | 1/15/19 | 450 | 550 |
24
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Republic of the Philippines | 8.375% | 6/17/19 | 1,066 | 1,290 | |
Republic of the Philippines | 6.500% | 1/20/20 | 150 | 177 | |
Republic of the Philippines | 4.000% | 1/15/21 | 1,110 | 1,218 | |
Republic of the Philippines | 4.200% | 1/21/24 | 1,964 | 2,227 | |
Republic of the Philippines | 10.625% | 3/16/25 | 834 | 1,364 | |
Republic of the Philippines | 5.500% | 3/30/26 | 1,650 | 2,067 | |
Republic of the Philippines | 9.500% | 2/2/30 | 1,253 | 2,143 | |
Republic of the Philippines | 7.750% | 1/14/31 | 2,254 | 3,479 | |
Republic of the Philippines | 6.375% | 1/15/32 | 800 | 1,119 | |
Republic of the Philippines | 6.375% | 10/23/34 | 1,450 | 2,064 | |
Republic of the Philippines | 5.000% | 1/13/37 | 1,480 | 1,870 | |
Republic of the Philippines | 3.950% | 1/20/40 | 1,500 | 1,652 | |
Republic of the Philippines | 3.700% | 3/1/41 | 1,750 | 1,857 | |
Total Philippines (Cost $23,786) | 25,389 | ||||
Poland (1.5%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.5%) | |||||
Republic of Poland | 6.375% | 7/15/19 | 3,381 | 3,850 | |
Republic of Poland | 5.125% | 4/21/21 | 1,210 | 1,355 | |
Republic of Poland | 5.000% | 3/23/22 | 2,484 | 2,781 | |
Republic of Poland | 3.000% | 3/17/23 | 1,175 | 1,185 | |
Republic of Poland | 4.000% | 1/22/24 | 1,928 | 2,058 | |
Republic of Poland | 3.250% | 4/6/26 | 1,300 | 1,297 | |
Total Poland (Cost $12,283) | 12,526 | ||||
Qatar (2.9%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (2.9%) | |||||
1,2 | Nakilat Inc. | 6.067% | 12/31/33 | 700 | 801 |
2 | Ooredoo International Finance Ltd. | 7.875% | 6/10/19 | 300 | 350 |
2 | Ooredoo International Finance Ltd. | 4.750% | 2/16/21 | 500 | 550 |
2 | Ooredoo International Finance Ltd. | 3.250% | 2/21/23 | 850 | 851 |
2 | Ooredoo International Finance Ltd. | 5.000% | 10/19/25 | 900 | 997 |
2 | Ooredoo International Finance Ltd. | 3.875% | 1/31/28 | 1,750 | 1,737 |
Ooredoo Tamweel Ltd. | 3.039% | 12/3/18 | 225 | 230 | |
2,10 Qatari Diar Finance QSC | 5.000% | 7/21/20 | 2,130 | 2,343 | |
QNB Finance Ltd. | 2.125% | 2/14/18 | 200 | 201 | |
QNB Finance Ltd. | 2.750% | 10/31/18 | 400 | 406 | |
QNB Finance Ltd. | 2.875% | 4/29/20 | 1,200 | 1,222 | |
1,2 | Ras Laffan Liquefied Natural Gas Co. Ltd. II | 5.298% | 9/30/20 | 238 | 254 |
2 | Ras Laffan Liquefied Natural Gas Co. Ltd. III | 6.750% | 9/30/19 | 950 | 1,083 |
1,2 | Ras Laffan Liquefied Natural Gas Co. Ltd. III | 5.838% | 9/30/27 | 770 | 839 |
1,2 | Ras Laffan Liquefied Natural Gas Co. Ltd. III | 6.332% | 9/30/27 | 250 | 280 |
10 | State of Qatar | 2.099% | 1/18/18 | 1,700 | 1,721 |
2 | State of Qatar | 6.550% | 4/9/19 | 450 | 512 |
State of Qatar | 5.250% | 1/20/20 | 1,100 | 1,221 | |
2 | State of Qatar | 5.250% | 1/20/20 | 1,857 | 2,061 |
2 | State of Qatar | 4.500% | 1/20/22 | 1,050 | 1,162 |
10 | State of Qatar | 3.241% | 1/18/23 | 475 | 494 |
2 | State of Qatar | 9.750% | 6/15/30 | 600 | 983 |
State of Qatar | 9.750% | 6/15/30 | 325 | 532 | |
2 | State of Qatar | 6.400% | 1/20/40 | 500 | 668 |
State of Qatar | 6.400% | 1/20/40 | 1,062 | 1,419 | |
2 | State of Qatar | 5.750% | 1/20/42 | 616 | 768 |
State of Qatar | 5.750% | 1/20/42 | 600 | 748 | |
Total Qatar (Cost $23,897) | 24,433 |
25
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Romania (0.7%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.7%) | ||||
Republic of Romania | 6.750% | 2/7/22 | 2,242 | 2,651 |
Republic of Romania | 4.375% | 8/22/23 | 1,754 | 1,862 |
Republic of Romania | 4.875% | 1/22/24 | 300 | 328 |
2 Republic of Romania | 4.875% | 1/22/24 | 100 | 109 |
2 Republic of Romania | 6.125% | 1/22/44 | 200 | 243 |
Republic of Romania | 6.125% | 1/22/44 | 520 | 632 |
Total Romania (Cost $5,662) | 5,825 | |||
Russia (8.0%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (8.0%) | ||||
AK Transneft OJSC Via TransCapitalInvest Ltd. | 8.700% | 8/7/18 | 770 | 854 |
Gazprom Neft OAO Via GPN Capital SA | 4.375% | 9/19/22 | 900 | 858 |
2 Gazprom Neft OAO Via GPN Capital SA | 6.000% | 11/27/23 | 200 | 206 |
Gazprom Neft OAO Via GPN Capital SA | 6.000% | 11/27/23 | 1,150 | 1,174 |
Gazprom OAO Via Gaz Capital SA | 8.146% | 4/11/18 | 900 | 982 |
Gazprom OAO Via Gaz Capital SA | 9.250% | 4/23/19 | 2,300 | 2,639 |
Gazprom OAO Via Gaz Capital SA | 3.850% | 2/6/20 | 278 | 274 |
Gazprom OAO Via Gaz Capital SA | 5.999% | 1/23/21 | 1,100 | 1,164 |
Gazprom OAO Via Gaz Capital SA | 6.510% | 3/7/22 | 925 | 998 |
Gazprom OAO Via Gaz Capital SA | 4.950% | 7/19/22 | 350 | 354 |
Gazprom OAO Via Gaz Capital SA | 4.950% | 2/6/28 | 650 | 614 |
Gazprom OAO Via Gaz Capital SA | 8.625% | 4/28/34 | 725 | 880 |
Gazprom OAO Via Gaz Capital SA | 7.288% | 8/16/37 | 1,125 | 1,245 |
Gazprombank OJSC Via GPB Eurobond Finance plc | 5.625% | 5/17/17 | 600 | 614 |
Gazprombank OJSC Via GPB Eurobond Finance plc | 7.250% | 5/3/19 | 200 | 210 |
Gazprombank OJSC Via GPB Eurobond Finance plc | 4.960% | 9/5/19 | 900 | 908 |
2 Rosneft Finance SA | 7.875% | 3/13/18 | 100 | 107 |
Rosneft Finance SA | 7.875% | 3/13/18 | 850 | 914 |
Rosneft Finance SA | 7.250% | 2/2/20 | 200 | 219 |
Rosneft Oil Co. via Rosneft International | ||||
Finance Ltd. | 4.199% | 3/6/22 | 1,727 | 1,660 |
Russian Agricultural Bank OJSC Via RSHB | ||||
Capital SA | 6.299% | 5/15/17 | 300 | 307 |
Russian Agricultural Bank OJSC Via RSHB | ||||
Capital SA | 5.298% | 12/27/17 | 818 | 837 |
Russian Agricultural Bank OJSC Via RSHB | ||||
Capital SA | 7.750% | 5/29/18 | 500 | 537 |
Russian Agricultural Bank OJSC Via RSHB | ||||
Capital SA | 5.100% | 7/25/18 | 1,700 | 1,743 |
2 Russian Agricultural Bank OJSC Via RSHB | ||||
Capital SA | 5.100% | 7/25/18 | 100 | 103 |
Russian Federation | 3.250% | 4/4/17 | 1,000 | 1,010 |
Russian Federation | 11.000% | 7/24/18 | 2,003 | 2,352 |
Russian Federation | 3.500% | 1/16/19 | 1,000 | 1,011 |
2 Russian Federation | 3.500% | 1/16/19 | 300 | 303 |
Russian Federation | 5.000% | 4/29/20 | 4,000 | 4,234 |
Russian Federation | 4.500% | 4/4/22 | 1,600 | 1,669 |
2 Russian Federation | 4.875% | 9/16/23 | 450 | 480 |
Russian Federation | 4.875% | 9/16/23 | 4,400 | 4,686 |
Russian Federation | 12.750% | 6/24/28 | 1,475 | 2,535 |
1 Russian Federation | 7.500% | 3/31/30 | 7,748 | 9,432 |
Russian Federation | 5.625% | 4/4/42 | 2,200 | 2,311 |
26
Emerging Markets Government Bond Index Fund
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Russian Federation | 5.875% | 9/16/43 | 1,400 | 1,516 |
Russian Railways via RZD Capital plc | 5.700% | 4/5/22 | 1,800 | 1,867 |
Sberbank of Russia Via SB Capital SA | 5.180% | 6/28/19 | 750 | 781 |
Sberbank of Russia Via SB Capital SA | 5.717% | 6/16/21 | 1,500 | 1,584 |
Sberbank of Russia Via SB Capital SA | 6.125% | 2/7/22 | 2,100 | 2,248 |
Sberbank of Russia Via SB Capital SA | 5.125% | 10/29/22 | 224 | 224 |
SCF Capital Ltd. | 5.375% | 10/27/17 | 200 | 203 |
Vnesheconombank Via VEB Finance plc | 5.375% | 2/13/17 | 300 | 304 |
Vnesheconombank Via VEB Finance plc | 4.224% | 11/21/18 | 1,000 | 999 |
Vnesheconombank Via VEB Finance plc | 6.902% | 7/9/20 | 1,050 | 1,103 |
Vnesheconombank Via VEB Finance plc | 6.025% | 7/5/22 | 1,025 | 1,028 |
Vnesheconombank Via VEB Finance plc | 5.942% | 11/21/23 | 1,125 | 1,124 |
2 Vnesheconombank Via VEB Finance plc | 5.942% | 11/21/23 | 200 | 200 |
Vnesheconombank Via VEB Finance plc | 6.800% | 11/22/25 | 450 | 471 |
VTB Bank OJSC Via VTB Capital SA | 6.000% | 4/12/17 | 275 | 282 |
VTB Bank OJSC Via VTB Capital SA | 6.315% | 2/22/18 | 400 | 420 |
VTB Bank OJSC Via VTB Capital SA | 6.875% | 5/29/18 | 875 | 930 |
VTB Bank OJSC Via VTB Capital SA | 6.551% | 10/13/20 | 1,050 | 1,130 |
VTB Bank OJSC Via VTB Capital SA | 6.950% | 10/17/22 | 1,125 | 1,119 |
Total Russia (Cost $64,347) | 67,957 | |||
Saudi Arabia (0.7%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.7%) | ||||
SABIC Capital II BV | 2.625% | 10/3/18 | 1,000 | 1,012 |
Saudi Electricity Global Sukuk Co. | 2.665% | 4/3/17 | 400 | 402 |
Saudi Electricity Global Sukuk Co. | 4.211% | 4/3/22 | 625 | 649 |
Saudi Electricity Global Sukuk Co. 2 | 3.473% | 4/8/23 | 750 | 748 |
Saudi Electricity Global Sukuk Co. 2 | 5.060% | 4/8/43 | 700 | 669 |
2 Saudi Electricity Global Sukuk Co. 3 | 4.000% | 4/8/24 | 650 | 661 |
Saudi Electricity Global Sukuk Co. 3 | 4.000% | 4/8/24 | 850 | 864 |
Saudi Electricity Global Sukuk Co. 3 | 5.500% | 4/8/44 | 500 | 494 |
2 Saudi Electricity Global Sukuk Co. 3 | 5.500% | 4/8/44 | 300 | 298 |
Total Saudi Arabia (Cost $5,831) | 5,797 | |||
Senegal (0.1%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | ||||
Republic of Senegal | 8.750% | 5/13/21 | 500 | 543 |
Republic of Senegal | 6.250% | 7/30/24 | 200 | 188 |
Total Senegal (Cost $740) | 731 | |||
Serbia, Republic Of (0.7%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.7%) | ||||
Republic of Serbia | 5.250% | 11/21/17 | 720 | 744 |
2 Republic of Serbia | 5.875% | 12/3/18 | 200 | 211 |
Republic of Serbia | 5.875% | 12/3/18 | 1,300 | 1,370 |
Republic of Serbia | 4.875% | 2/25/20 | 700 | 716 |
Republic of Serbia | 7.250% | 9/28/21 | 2,300 | 2,604 |
Total Serbia, Republic Of (Cost $5,563) | 5,645 | |||
South Africa (1.6%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.6%) | ||||
Eskom Holdings SOC Ltd. | 5.750% | 1/26/21 | 2,100 | 1,976 |
Eskom Holdings SOC Ltd. | 6.750% | 8/6/23 | 880 | 828 |
Eskom Holdings SOC Ltd. | 7.125% | 2/11/25 | 100 | 94 |
2 Eskom Holdings SOC Ltd. | 7.125% | 2/11/25 | 200 | 187 |
27
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Republic of South Africa | 6.875% | 5/27/19 | 1,195 | 1,315 | |
Republic of South Africa | 5.500% | 3/9/20 | 2,270 | 2,415 | |
Republic of South Africa | 5.875% | 5/30/22 | 971 | 1,062 | |
Republic of South Africa | 4.665% | 1/17/24 | 1,200 | 1,203 | |
Republic of South Africa | 5.875% | 9/16/25 | 1,800 | 1,940 | |
Republic of South Africa | 6.250% | 3/8/41 | 993 | 1,087 | |
Republic of South Africa | 5.375% | 7/24/44 | 700 | 687 | |
2 | Transnet SOC Ltd. | 4.000% | 7/26/22 | 800 | 731 |
Total South Africa (Cost $13,682) | 13,525 | ||||
Sri Lanka (0.8%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.8%) | |||||
Bank of Ceylon | 6.875% | 5/3/17 | 250 | 254 | |
Bank of Ceylon | 5.325% | 4/16/18 | 500 | 496 | |
Democratic Socialist Republic of Sri Lanka | 6.000% | 1/14/19 | 400 | 408 | |
2 | Democratic Socialist Republic of Sri Lanka | 6.000% | 1/14/19 | 200 | 204 |
2 | Democratic Socialist Republic of Sri Lanka | 5.125% | 4/11/19 | 250 | 250 |
Democratic Socialist Republic of Sri Lanka | 6.250% | 10/4/20 | 1,032 | 1,050 | |
Democratic Socialist Republic of Sri Lanka | 5.875% | 7/25/22 | 800 | 773 | |
Democratic Socialist Republic of Sri Lanka | 6.850% | 11/3/25 | 1,000 | 979 | |
National Savings Bank | 8.875% | 9/18/18 | 400 | 420 | |
Republic of Sri Lanka | 6.250% | 7/27/21 | 1,950 | 1,946 | |
Total Sri Lanka (Cost $6,825) | 6,780 | ||||
Supranational (0.1%) | |||||
Corporate Bond (0.1%) | |||||
2 | Banque Ouest Africaine de Developpement | 5.500% | 5/6/21 | 1,200 | 1,189 |
Total Supranational (Cost $1,187) | 1,189 | ||||
Thailand (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Krung Thai Bank PCL | 2.250% | 9/11/18 | 400 | 402 | |
1 | Krung Thai Bank PCL | 5.200% | 12/26/24 | 450 | 464 |
PTT Public Co. Ltd. | 3.375% | 10/25/22 | 525 | 537 | |
PTT Public Co. Ltd. | 4.500% | 10/25/42 | 400 | 389 | |
Total Thailand (Cost $1,734) | 1,792 | ||||
Trinidad And Tobago (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
2 | Petroleum Co. of Trinidad & Tobago Ltd. | 9.750% | 8/14/19 | 700 | 731 |
2 | Republic of Trinidad & Tobago | 4.375% | 1/16/24 | 200 | 210 |
Total Trinidad And Tobago (Cost $979) | 941 | ||||
Tunisia (0.1%) | |||||
Sovereign Bond (U.S. Dollar-Denominated) (0.1%) | |||||
Banque Centrale de Tunisie SA | 5.750% | 1/30/25 | 850 | 765 | |
Total Tunisia (Cost $808) | 765 | ||||
Turkey (5.6%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (5.6%) | |||||
Export Credit Bank of Turkey | 5.875% | 4/24/19 | 600 | 634 | |
2 | Export Credit Bank of Turkey | 5.375% | 2/8/21 | 500 | 516 |
2 | Export Credit Bank of Turkey | 5.000% | 9/23/21 | 400 | 404 |
Hazine Mustesarligi Varlik Kiralama AS | 4.557% | 10/10/18 | 250 | 259 | |
2,11 Hazine Mustesarligi Varlik Kiralama AS | 4.489% | 11/25/24 | 400 | 401 |
28
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Republic of Turkey | 7.500% | 7/14/17 | 991 | 1,057 | |
11 | Republic of Turkey | 2.803% | 3/26/18 | 700 | 701 |
Republic of Turkey | 6.750% | 4/3/18 | 1,987 | 2,140 | |
2 | Republic of Turkey | 4.557% | 10/10/18 | 150 | 155 |
Republic of Turkey | 7.000% | 3/11/19 | 2,290 | 2,544 | |
Republic of Turkey | 7.500% | 11/7/19 | 2,166 | 2,480 | |
Republic of Turkey | 7.000% | 6/5/20 | 630 | 716 | |
Republic of Turkey | 5.625% | 3/30/21 | 1,901 | 2,060 | |
Republic of Turkey | 5.125% | 3/25/22 | 825 | 876 | |
Republic of Turkey | 6.250% | 9/26/22 | 2,004 | 2,248 | |
Republic of Turkey | 3.250% | 3/23/23 | 1,601 | 1,527 | |
Republic of Turkey | 5.750% | 3/22/24 | 2,250 | 2,469 | |
Republic of Turkey | 7.375% | 2/5/25 | 2,750 | 3,334 | |
Republic of Turkey | 4.250% | 4/14/26 | 1,000 | 986 | |
Republic of Turkey | 4.875% | 10/9/26 | 1,550 | 1,598 | |
Republic of Turkey | 11.875% | 1/15/30 | 775 | 1,337 | |
Republic of Turkey | 8.000% | 2/14/34 | 757 | 998 | |
Republic of Turkey | 6.875% | 3/17/36 | 2,698 | 3,213 | |
Republic of Turkey | 7.250% | 3/5/38 | 335 | 417 | |
Republic of Turkey | 6.750% | 5/30/40 | 1,110 | 1,318 | |
Republic of Turkey | 6.000% | 1/14/41 | 2,100 | 2,282 | |
Republic of Turkey | 4.875% | 4/16/43 | 3,919 | 3,677 | |
Republic of Turkey | 6.625% | 2/17/45 | 1,700 | 2,013 | |
2 | TC Ziraat Bankasi AS | 4.250% | 7/3/19 | 200 | 202 |
2 | TC Ziraat Bankasi AS | 4.750% | 4/29/21 | 800 | 800 |
Turkiye Halk Bankasi AS | 4.875% | 7/19/17 | 425 | 433 | |
Turkiye Halk Bankasi AS | 4.750% | 6/4/19 | 400 | 404 | |
2 | Turkiye Halk Bankasi AS | 4.750% | 6/4/19 | 250 | 253 |
Turkiye Halk Bankasi AS | 3.875% | 2/5/20 | 400 | 387 | |
Turkiye Halk Bankasi AS | 4.750% | 2/11/21 | 700 | 686 | |
Turkiye Vakiflar Bankasi Tao | 5.750% | 4/24/17 | 200 | 206 | |
Turkiye Vakiflar Bankasi Tao | 3.750% | 4/15/18 | 700 | 701 | |
Turkiye Vakiflar Bankasi Tao | 5.000% | 10/31/18 | 200 | 205 | |
Turkiye Vakiflar Bankasi Tao | 6.000% | 11/1/22 | 800 | 798 | |
1 | Turkiye Vakiflar Bankasi Tao | 6.875% | 2/3/25 | 200 | 200 |
Total Turkey (Cost $46,577) | 47,635 | ||||
Ukraine (1.4%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.4%) | |||||
1 | Oschadbank Via SSB #1 plc | 9.625% | 3/20/25 | 1,200 | 1,080 |
2 | Oschadbank Via SSB #1 plc | 9.625% | 3/20/25 | 200 | 178 |
Ukraine | 7.750% | 9/1/19 | 1,500 | 1,449 | |
Ukraine | 7.750% | 9/1/20 | 500 | 480 | |
2 | Ukraine | 7.750% | 9/1/20 | 1,428 | 1,383 |
2 | Ukraine | 7.750% | 9/1/21 | 907 | 874 |
Ukraine | 7.750% | 9/1/22 | 500 | 477 | |
Ukraine | 7.750% | 9/1/23 | 1,500 | 1,423 | |
Ukraine | 7.750% | 9/1/24 | 1,750 | 1,657 | |
Ukraine | 7.750% | 9/1/26 | 1,500 | 1,401 | |
Ukraine | 7.750% | 9/1/27 | 800 | 745 | |
2 | Ukraine Railways via Shortline plc | 9.500% | 5/21/18 | 200 | 176 |
1 | Ukreximbank Via Biz Finance plc | 9.625% | 4/27/22 | 600 | 555 |
1,2 | Ukreximbank Via Biz Finance plc | 9.750% | 1/22/25 | 200 | 181 |
Total Ukraine (Cost $11,925) | 12,059 |
29
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
United Arab Emirates (4.4%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (4.4%) | |||||
2 | Abu Dhabi National Energy Co. PJSC | 4.125% | 3/13/17 | 400 | 407 |
2 | Abu Dhabi National Energy Co. PJSC | 6.165% | 10/25/17 | 850 | 897 |
2 | Abu Dhabi National Energy Co. PJSC | 2.500% | 1/12/18 | 400 | 401 |
2 | Abu Dhabi National Energy Co. PJSC | 6.250% | 9/16/19 | 275 | 306 |
2 | Abu Dhabi National Energy Co. PJSC | 5.875% | 12/13/21 | 200 | 222 |
2 | Abu Dhabi National Energy Co. PJSC | 3.625% | 1/12/23 | 1,800 | 1,763 |
Abu Dhabi National Energy Co. PJSC | 3.875% | 5/6/24 | 200 | 198 | |
2 | Abu Dhabi National Energy Co. PJSC | 6.500% | 10/27/36 | 825 | 1,009 |
4 | ADCB Finance Cayman Ltd. | 1.929% | 1/9/17 | 200 | 200 |
ADCB Finance Cayman Ltd. | 2.500% | 3/6/18 | 1,000 | 1,003 | |
ADCB Finance Cayman Ltd. | 3.000% | 3/4/19 | 400 | 403 | |
ADCB Finance Cayman Ltd. | 2.625% | 3/10/20 | 900 | 896 | |
ADCB Finance Cayman Ltd. | 4.500% | 3/6/23 | 425 | 440 | |
AHB Sukuk Co. Ltd. | 3.267% | 10/8/18 | 200 | 204 | |
DEWA Sukuk 2013 Ltd. | 3.000% | 3/5/18 | 650 | 659 | |
1,2 | Dolphin Energy Ltd. | 5.888% | 6/15/19 | 716 | 762 |
2 | Dolphin Energy Ltd. | 5.500% | 12/15/21 | 820 | 921 |
DP World Ltd. | 3.250% | 5/18/20 | 1,250 | 1,263 | |
2 | DP World Ltd. | 6.850% | 7/2/37 | 1,250 | 1,295 |
2 | DP World Sukuk Ltd. | 6.250% | 7/2/17 | 670 | 700 |
Dubai DOF Sukuk Ltd. | 6.450% | 5/2/22 | 200 | 232 | |
2 | Dubai Electricity & Water Authority | 7.375% | 10/21/20 | 1,475 | 1,739 |
2 | Emirate of Abu Dhabi | 6.750% | 4/8/19 | 950 | 1,092 |
2 | Emirate of Abu Dhabi | 3.125% | 5/3/26 | 1,800 | 1,813 |
Emirate of Dubai | 4.900% | 5/2/17 | 400 | 411 | |
Emirate of Dubai | 7.750% | 10/5/20 | 500 | 597 | |
Emirate of Dubai | 3.875% | 1/30/23 | 1,100 | 1,123 | |
Emirate of Dubai | 5.250% | 1/30/43 | 200 | 185 | |
1,2 | Emirates Airline | 4.500% | 2/6/25 | 823 | 831 |
Emirates NBD PJSC | 4.625% | 3/28/17 | 675 | 691 | |
Emirates NBD PJSC | 3.250% | 11/19/19 | 335 | 339 | |
1 | Emirates NBD PJSC | 4.875% | 3/28/23 | 950 | 973 |
Emirates Telecommunications Group Co. PJSC | 2.375% | 6/18/19 | 600 | 605 | |
Emirates Telecommunications Group Co. PJSC | 3.500% | 6/18/24 | 200 | 206 | |
ICD Sukuk Co. Ltd. | 3.508% | 5/21/20 | 250 | 251 | |
2 | IPIC GMTN Ltd. | 5.000% | 11/15/20 | 1,400 | 1,536 |
2 | IPIC GMTN Ltd. | 5.500% | 3/1/22 | 710 | 801 |
2 | IPIC GMTN Ltd. | 6.875% | 11/1/41 | 800 | 1,073 |
Jafz Sukuk Ltd. | 7.000% | 6/19/19 | 400 | 448 | |
2 | MDC-GMTN B.V. | 7.625% | 5/6/19 | 500 | 580 |
2 | MDC-GMTN B.V. | 5.500% | 4/20/21 | 450 | 509 |
MDC-GMTN B.V. | 3.250% | 4/28/22 | 500 | 510 | |
2 | MDC-GMTN B.V. | 3.250% | 4/28/22 | 200 | 204 |
1 | Medjool Ltd. | 3.875% | 3/19/23 | 265 | 266 |
National Bank of Abu Dhabi PJSC | 3.000% | 8/13/19 | 1,100 | 1,126 | |
National Bank of Abu Dhabi PJSC | 2.250% | 2/11/20 | 425 | 425 | |
Noor Sukuk Co. Ltd. | 2.788% | 4/28/20 | 350 | 344 | |
2 | NOVA Chemicals Corp. | 5.250% | 8/1/23 | 900 | 908 |
RAK Capital | 3.297% | 10/21/18 | 400 | 410 | |
RAK Capital | 3.094% | 3/31/25 | 500 | 488 | |
RAKFunding Cayman Ltd. | 3.250% | 6/24/19 | 950 | 949 |
30
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
1 | Ruwais Power Co. PJSC | 6.000% | 8/31/36 | 400 | 445 |
Sharjah Sukuk Ltd. | 3.764% | 9/17/24 | 400 | 414 | |
1,2 | Waha Aerospace BV | 3.925% | 7/28/20 | 666 | 691 |
Total United Arab Emirates (Cost $36,927) | 37,164 | ||||
United States (0.0%) | |||||
U.S. Government and Agency Obligations (0.0%) | |||||
United States Treasury Note/Bond | 5.125% | 5/15/16 | 15 | 15 | |
United States Treasury Note/Bond | 0.500% | 2/28/17 | 20 | 20 | |
United States Treasury Note/Bond | 0.875% | 2/28/17 | 5 | 5 | |
United States Treasury Note/Bond | 3.000% | 2/28/17 | 10 | 10 | |
United States Treasury Note/Bond | 2.125% | 8/15/21 | 5 | 5 | |
United States Treasury Note/Bond | 2.750% | 2/15/24 | 35 | 38 | |
United States Treasury Note/Bond | 3.750% | 8/15/41 | 5 | 6 | |
Total United States (Cost $97) | 99 | ||||
Uruguay (0.9%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.9%) | |||||
1 | Oriental Republic of Uruguay | 8.000% | 11/18/22 | 298 | 375 |
1 | Oriental Republic of Uruguay | 4.500% | 8/14/24 | 1,589 | 1,688 |
1 | Oriental Republic of Uruguay | 4.375% | 10/27/27 | 710 | 730 |
Oriental Republic of Uruguay | 7.875% | 1/15/33 | 346 | 453 | |
1 | Oriental Republic of Uruguay | 7.625% | 3/21/36 | 1,316 | 1,709 |
1 | Oriental Republic of Uruguay | 4.125% | 11/20/45 | 350 | 302 |
1 | Oriental Republic of Uruguay | 5.100% | 6/18/50 | 3,065 | 2,877 |
Total Uruguay (Cost $8,078) | 8,134 | ||||
Venezuela (2.4%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (2.4%) | |||||
Bolivarian Republic of Venezuela | 13.625% | 8/15/18 | 566 | 393 | |
Bolivarian Republic of Venezuela | 7.000% | 12/1/18 | 1,260 | 564 | |
Bolivarian Republic of Venezuela | 7.750% | 10/13/19 | 1,606 | 644 | |
Bolivarian Republic of Venezuela | 6.000% | 12/9/20 | 956 | 351 | |
1 | Bolivarian Republic of Venezuela | 12.750% | 8/23/22 | 3,265 | 1,512 |
Bolivarian Republic of Venezuela | 9.000% | 5/7/23 | 1,851 | 714 | |
Bolivarian Republic of Venezuela | 8.250% | 10/13/24 | 1,909 | 714 | |
Bolivarian Republic of Venezuela | 7.650% | 4/21/25 | 1,700 | 620 | |
Bolivarian Republic of Venezuela | 11.750% | 10/21/26 | 1,427 | 606 | |
Bolivarian Republic of Venezuela | 9.250% | 9/15/27 | 2,622 | 1,111 | |
Bolivarian Republic of Venezuela | 9.250% | 5/7/28 | 540 | 207 | |
1 | Bolivarian Republic of Venezuela | 11.950% | 8/5/31 | 4,129 | 1,753 |
Bolivarian Republic of Venezuela | 9.375% | 1/13/34 | 1,400 | 541 | |
Bolivarian Republic of Venezuela | 7.000% | 3/31/38 | 1,375 | 492 | |
CA La Electricidad de Caracas | 8.500% | 4/10/18 | 320 | 128 | |
CITGO Holding Inc. | 10.750% | 2/15/20 | 100 | 98 | |
2 | CITGO Holding Inc. | 10.750% | 2/15/20 | 950 | 929 |
2 | CITGO Petroleum Corp. | 6.250% | 8/15/22 | 535 | 522 |
CITGO Petroleum Corp. | 6.250% | 8/15/22 | 100 | 98 | |
1 | Petroleos de Venezuela SA | 8.500% | 11/2/17 | 2,972 | 1,733 |
1 | Petroleos de Venezuela SA | 9.000% | 11/17/21 | 1,858 | 731 |
1 | Petroleos de Venezuela SA | 12.750% | 2/17/22 | 555 | 257 |
1 | Petroleos de Venezuela SA | 6.000% | 5/16/24 | 6,250 | 2,109 |
1 | Petroleos de Venezuela SA | 6.000% | 11/15/26 | 3,966 | 1,335 |
31
Emerging Markets Government Bond Index Fund
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Petroleos de Venezuela SA | 5.375% | 4/12/27 | 3,745 | 1,316 | |
1 | Petroleos de Venezuela SA | 9.750% | 5/17/35 | 2,063 | 825 |
Petroleos de Venezuela SA | 5.500% | 4/12/37 | 1,410 | 487 | |
Total Venezuela (Cost $24,512) | 20,790 | ||||
Vietnam (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Socialist Republic of Vietnam | 6.750% | 1/29/20 | 519 | 578 | |
Socialist Republic of Vietnam | 4.800% | 11/19/24 | 575 | 587 | |
2 | Socialist Republic of Vietnam | 4.800% | 11/19/24 | 200 | 203 |
Total Vietnam (Cost $1,330) | 1,368 | ||||
Zambia (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Republic of Zambia | 5.375% | 9/20/22 | 725 | 538 | |
Republic of Zambia | 8.500% | 4/14/24 | 600 | 496 | |
2 | Republic of Zambia | 8.500% | 4/14/24 | 450 | 372 |
1 | Zambia Government International Bond | 8.970% | 7/30/27 | 700 | 575 |
Total Zambia (Cost $2,292) | 1,981 | ||||
Shares | |||||
Temporary Cash Investments (1.0%) | |||||
12 | Vanguard Market Liquidity Fund | 0.495% | 8,948,000 | 8,948 | |
Total Temporary Cash Investments (Cost $8,948) | 8,948 | ||||
Total Investments (99.3%) (Cost $835,096) | 844,472 | ||||
Amount | |||||
($000) | |||||
Other Assets and Liabilities (0.7%) | |||||
Other Assets | |||||
Investment in Vanguard | 67 | ||||
Receivables for Investment Securities Sold | 7,785 | ||||
Receivables for Accrued Income | 12,022 | ||||
Receivables for Capital Shares Issued | 707 | ||||
Total Other Assets | 20,581 | ||||
Liabilities | |||||
Payables for Investment Securities Purchased | (14,229) | ||||
Payables for Capital Shares Redeemed | (40) | ||||
Payables for Distributions | (104) | ||||
Payables to Vanguard | (315) | ||||
Other Liabilities | (209) | ||||
Total Liabilities | (14,897) | ||||
Net Assets (100%) | 850,156 |
32
Emerging Markets Government Bond Index Fund
At April 30, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 844,681 |
Undistributed Net Investment Income | 2,754 |
Accumulated Net Realized Losses | (6,655) |
Unrealized Appreciation (Depreciation) | 9,376 |
Net Assets | 850,156 |
Investor Shares—Net Assets | |
Applicable to 1,024,662 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 9,976 |
Net Asset Value Per Share—Investor Shares | $9.74 |
ETF Shares—Net Assets | |
Applicable to 8,605,928 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 668,434 |
Net Asset Value Per Share—ETF Shares | $77.67 |
Admiral Shares—Net Assets | |
Applicable to 7,793,063 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 151,743 |
Net Asset Value Per Share—Admiral Shares | $19.47 |
Institutional Shares—Net Assets | |
Applicable to 640,110 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 20,003 |
Net Asset Value Per Share—Institutional Shares | $31.25 |
• See Note A in Notes to Financial Statements.
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 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 April 30, 2016, the aggregate value of these securities was $104,175,000, representing 12.3% of net assets.
3 Guaranteed by the Republic of Azerbaijan.
4 Adjustable-rate security.
5 Guaranteed by the Republic of Hungary.
6 Guaranteed by the Republic of Indonesia.
7 Guaranteed by the Federation of Malaysia.
8 Guaranteed by the Government of Mongolia.
9 Guaranteed by the Republic of the Philippines.
10 Guaranteed by the State of Qatar.
11 Guaranteed by the Republic of Turkey.
12 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.
33
Emerging Markets Government Bond Index Fund
Statement of Operations
Six Months Ended | |
April 30, 2016 | |
($000) | |
Investment Income | |
Income | |
Interest1 | 20,103 |
Total Income | 20,103 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 10 |
Management and Administrative—Investor Shares | 14 |
Management and Administrative—ETF Shares | 891 |
Management and Administrative—Admiral Shares | 217 |
Management and Administrative—Institutional Shares | 20 |
Marketing and Distribution—Investor Shares | 1 |
Marketing and Distribution—ETF Shares | 22 |
Marketing and Distribution—Admiral Shares | 7 |
Marketing and Distribution—Institutional Shares | — |
Custodian Fees | 17 |
Shareholders’ Reports—Investor Shares | 6 |
Shareholders’ Reports—ETF Shares | 9 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—Institutional Shares | — |
Total Expenses | 1,214 |
Net Investment Income | 18,889 |
Realized Net Gain (Loss) on Investment Securities Sold | (3,645) |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 23,768 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 39,012 |
1 Interest income from an affiliated company of the fund was $15,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
34
Emerging Markets Government Bond Index Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 18,889 | 22,613 |
Realized Net Gain (Loss) | (3,645) | (3,826) |
Change in Unrealized Appreciation (Depreciation) | 23,768 | (18,102) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 39,012 | 685 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (220) | (399) |
ETF Shares | (13,556) | (15,477) |
Admiral Shares | (3,439) | (5,622) |
Institutional Shares | (363) | (388) |
Realized Capital Gain | ||
Investor Shares | — | — |
ETF Shares | — | — |
Admiral Shares | — | — |
Institutional Shares | — | — |
Total Distributions | (17,578) | (21,886) |
Capital Share Transactions | ||
Investor Shares | 713 | 2,155 |
ETF Shares | 151,015 | 292,555 |
Admiral Shares | 17,355 | 18,272 |
Institutional Shares | 9,089 | 10,675 |
Net Increase (Decrease) from Capital Share Transactions | 178,172 | 323,657 |
Total Increase (Decrease) | 199,606 | 302,456 |
Net Assets | ||
Beginning of Period | 650,550 | 348,094 |
End of Period1 | 850,156 | 650,550 |
1 Net Assets—End of Period includes undistributed net investment income of $2,754,000 and $1,443,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
35
Emerging Markets Government Bond Index Fund
Financial Highlights
Investor Shares | ||||
Six Months | May 14, | |||
Year Ended | ||||
Ended | 20131 to | |||
October 31, | ||||
April 30, | Oct. 31, | |||
For a Share Outstanding Throughout Each Period | 2016 | 2015 | 2014 | 2013 |
Net Asset Value, Beginning of Period | $9.50 | $9.95 | $9.74 | $10.00 |
Investment Operations | ||||
Net Investment Income | . 233 | . 427 | . 417 | .149 |
Net Realized and Unrealized Gain (Loss) on Investments2 | .231 | (.447) | .213 | (.261) |
Total from Investment Operations | . 464 | (. 020) | . 630 | (.112) |
Distributions | ||||
Dividends from Net Investment Income | (. 224) | (. 430) | (. 420) | (.148) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (. 224) | (. 430) | (. 420) | (.148) |
Net Asset Value, End of Period | $9.74 | $9.50 | $9.95 | $9.74 |
Total Return3 | 4.99% | -0.16% | 6.62% | -1.38% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $10 | $9 | $7 | $4 |
Ratio of Total Expenses to Average Net Assets | 0.50% | 0.49% | 0.49% | 0.49%4 |
Ratio of Net Investment Income to Average Net Assets | 5.04% | 4.52% | 4.35% | 3.81%4 |
Portfolio Turnover Rate 5 | 24% | 20% | 27% | 38% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | ||||
1 Subscription period for the fund was May 14, 2013, to May 30, 2013, during which time all assets were held in money market instruments. Performance measurement began May 31, 2013, at a net asset value of $10.03. 2 Includes increases from purchase fees of $.00, $.01, $.00, and $.03. 3 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees. 4 Annualized. 5 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. | ||||
See accompanying Notes, which are an integral part of the Financial Statements.
36
Emerging Markets Government Bond Index Fund
Financial Highlights
ETF Shares | ||||
Six Months | May 31, | |||
Ended | Year Ended | 20131 to | ||
April 30, | October 31, | Oct. 31, | ||
For a Share Outstanding Throughout Each Period | 2016 | 2015 | 2014 | 2013 |
Net Asset Value, Beginning of Period | $75.81 | $79.40 | $77.71 | $79.52 |
Investment Operations | ||||
Net Investment Income | 1.916 | 3.516 | 3.429 | 1.217 |
Net Realized and Unrealized Gain (Loss) on Investments2 | 1.780 | (3.556) | 1.700 | (2.086) |
Total from Investment Operations | 3.696 | (.040) | 5.129 | (.869) |
Distributions | ||||
Dividends from Net Investment Income | (1.836) | (3.550) | (3.439) | (.941) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (1.836) | (3.550) | (3.439) | (.941) |
Net Asset Value, End of Period | $77.67 | $75.81 | $79.40 | $77.71 |
Total Return | 5.00% | -0.01% | 6.79% | -1.39% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $668 | $501 | $222 | $85 |
Ratio of Total Expenses to Average Net Assets | 0.33% | 0.34% | 0.34% | 0.35%3 |
Ratio of Net Investment Income to Average Net Assets | 5.21% | 4.67% | 4.50% | 3.95%3 |
Portfolio Turnover Rate 4 | 24% | 20% | 27% | 38% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | ||||
1 Inception. | ||||
2 Includes increases from purchase fees of $.03, $.06, $.01, and $.30. | ||||
3 Annualized. | ||||
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. | ||||
See accompanying Notes, which are an integral part of the Financial Statements.
37
Emerging Markets Government Bond Index Fund
Financial Highlights
Admiral Shares | ||||
Six Months | May 14, | |||
Ended | Year Ended | 20131 to | ||
April 30, | October 31, | Oct. 31, | ||
For a Share Outstanding Throughout Each Period | 2016 | 2015 | 2014 | 2013 |
Net Asset Value, Beginning of Period | $19.00 | $19.90 | $19.48 | $20.00 |
Investment Operations | ||||
Net Investment Income | . 482 | . 885 | . 863 | . 309 |
Net Realized and Unrealized Gain (Loss) on Investments2 | .452 | (. 894) | .427 | (.522) |
Total from Investment Operations | .934 | (.009) | 1.290 | (.213) |
Distributions | ||||
Dividends from Net Investment Income | (. 464) | (. 891) | (. 870) | (. 307) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (. 464) | (. 891) | (. 870) | (. 307) |
Net Asset Value, End of Period | $19.47 | $19.00 | $19.90 | $19.48 |
Total Return3 | 5.02% | 0% | 6.78% | -1.37% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $152 | $131 | $118 | $55 |
Ratio of Total Expenses to Average Net Assets | 0.33% | 0.33% | 0.34% | 0.34%4 |
Ratio of Net Investment Income to Average Net Assets | 5.21% | 4.68% | 4.50% | 3.96%4 |
Portfolio Turnover Rate 5 | 24% | 20% | 27% | 38% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | ||||
1 Subscription period for the fund was May 14, 2013, to May 30, 2013, during which time all assets were held in money market instruments. Performance measurement began May 31, 2013, at a net asset value of $20.07. 2 Includes increases from purchase fees of $.01, $.02, $.00, and $.06. 3 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees. 4 Annualized. 5 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. | ||||
See accompanying Notes, which are an integral part of the Financial Statements.
38
Emerging Markets Government Bond Index Fund
Financial Highlights
Institutional Shares | |||
Six Months | Feb. 11, | Nov. 25, | |
Ended | 20151 to | 20141 to | |
April 30, | Oct. 31, | Dec. 18, | |
For a Share Outstanding Throughout Each Period | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $30.50 | $30.72 | $31.53 |
Investment Operations | |||
Net Investment Income | .781 | 1.019 | .108 |
Net Realized and Unrealized Gain (Loss) on Investments2 | .719 | (.159) | (1.240) |
Total from Investment Operations | 1.500 | .860 | (1.132) |
Distributions | |||
Dividends from Net Investment Income | (.750) | (1.080) | (.108) |
Distributions from Realized Capital Gains | — | — | — |
Total Distributions | (.750) | (1.080) | (.108) |
Net Asset Value, End of Period | $31.25 | $30.50 | $30.29 |
Total Return 3 | 5.02% | 2.82% | -3.60% |
Ratios/Supplemental Data | |||
Net Assets, End of Period (Millions) | $20 | $10 | $0 |
Ratio of Total Expenses to Average Net Assets | 0.30% | 0.29% | 0.30% |
Ratio of Net Investment Income to Average Net Assets | 5.24% | 4.74% | 4.72% |
Portfolio Turnover Rate4 | 24% | 20%5 | 20%5 |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 The class commenced operations on November 25, 2014. On December 18, 2014, all outstanding shares were redeemed and the Net Asset Value represents the per share amount at which such shares were redeemed. On February 11, 2015, the class recommenced operations.
2 Includes increases from purchase fees of $.01 for the current period and $.04 in aggregate for the periods related to the fiscal year ended October 31, 2015.
3 Total returns do not include transaction or account service fees that may have applied in the period shown. Fund prospectuses provide information about any applicable transaction and account service fees.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
5 Reflects the fund’s portfolio turnover for the fiscal year ended October 31, 2015.
See accompanying Notes, which are an integral part of the Financial Statements.
39
Emerging Markets Government Bond Index Fund
Notes to Financial Statements
Vanguard Emerging Markets Government Bond Index 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 four classes of shares: Investor Shares, ETF Shares, Admiral Shares, and Institutional Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker. Admiral Shares and Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria.
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 acquired over 60 days to maturity, 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. Other temporary cash investments are valued at amortized cost, which approximates market 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. 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 October 31, 2013–2015, and for the period ended April 30, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of
Emerging Markets Government Bond Index Fund
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.
The fund had no borrowings outstanding at April 30, 2016, or at any time during the period then ended.
5. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on capital share transactions are credited to paid-in capital.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At April 30, 2016, the fund had contributed to Vanguard capital in the amount of $67,000, representing 0.01% of the fund’s net assets and 0.03% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
41
Emerging Markets Government Bond Index Fund
The following table summarizes the market value of the fund’s investments as of April 30, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 99 | — |
Sovereign Bonds | — | 835,425 | — |
Temporary Cash Investments | 8,948 | — | — |
Total | 8,948 | 835,524 | — |
D. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
During the six months ended April 30, 2016, the fund realized $669,000 of net capital losses resulting from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the fund rather than for cash. Because such losses are not taxable to the fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized losses to paid-in capital.
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at October 31, 2015, the fund had available capital losses totaling $3,679,000 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 October 31, 2016; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At April 30, 2016, the cost of investment securities for tax purposes was $835,096,000. Net unrealized appreciation of investment securities for tax purposes was $9,376,000, consisting of unrealized gains of $20,727,000 on securities that had risen in value since their purchase and $11,351,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended April 30, 2016, the fund purchased $281,239,000 of investment securities and sold $106,395,000 of investment securities, other than U.S. government securities and temporary cash investments. There were no purchases and sales of U.S. government securities. Total purchases and sales include $155,066,000 and $21,249,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.
42
Emerging Markets Government Bond Index Fund
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
April 30, 2016 | October 31, 2015 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued1 | 1,792 | 189 | 6,261 | 646 |
Issued in Lieu of Cash Distributions | 187 | 20 | 339 | 35 |
Redeemed | (1,266) | (135) | (4,445) | (461) |
Net Increase (Decrease)—Investor Shares | 713 | 74 | 2,155 | 220 |
ETF Shares | ||||
Issued1 | 173,032 | 2,301 | 338,399 | 4,403 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (22,017) | (300) | (45,844) | (600) |
Net Increase (Decrease)—ETF Shares | 151,015 | 2,001 | 292,555 | 3,803 |
Admiral Shares | ||||
Issued1 | 31,367 | 1,667 | 53,419 | 2,758 |
Issued in Lieu of Cash Distributions | 2,918 | 155 | 4,782 | 249 |
Redeemed | (16,930) | (903) | (39,929) | (2,079) |
Net Increase (Decrease)—Admiral Shares | 17,355 | 919 | 18,272 | 928 |
Institutional Shares2 | ||||
Issued1 | 8,764 | 295 | 19,856 | 637 |
Issued in Lieu of Cash Distributions | 363 | 12 | 354 | 12 |
Redeemed | (38) | (1) | (9,535) | (315) |
Net Increase (Decrease)—Institutional Shares | 9,089 | 306 | 10,675 | 334 |
1 Includes purchase fees for fiscal 2016 and 2015 of $282,000 and $592,000, respectively (fund totals). | ||||
2 Institutional shares were first issued on November 25, 2014, and were redeemed shortly thereafter. Institutional shares were next issued on February 11, 2015. The table reflects all Institutional transactions beginning November 25, 2014. | ||||
G. Management has determined that no material events or transactions occurred subsequent to April 30, 2016, that would require recognition or disclosure in these financial statements.
43
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.
44
Six Months Ended April 30, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Emerging Markets Government Bond Index Fund | 10/31/2015 | 4/30/2016 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,049.87 | $2.55 |
ETF Shares | 1,000.00 | 1,049.97 | 1.68 |
Admiral Shares | 1,000.00 | 1,050.20 | 1.68 |
Institutional Shares | 1,000.00 | 1,050.24 | 1.53 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,022.38 | $2.51 |
ETF Shares | 1,000.00 | 1,023.22 | 1.66 |
Admiral Shares | 1,000.00 | 1,023.22 | 1.66 |
Institutional Shares | 1,000.00 | 1,023.37 | 1.51 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.50% for Investor Shares, 0.33% for ETF Shares, 0.33% for Admiral Shares, and 0.30% 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).
Trustees Approve Advisory Arrangement
The board of trustees of Vanguard Emerging Markets Government Bond Index Fund has renewed the fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard)—through its Fixed Income Group. The board determined that continuing the fund’s internalized management structure 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. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the investment management services provided to the fund since its inception in 2013, and took into account the organizational depth and stability of the advisor. The board considered that Vanguard has been managing investments for more than three decades. The Fixed Income Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The board considered the performance of the fund since its inception, including any periods of outperformance or underperformance relative to a target index and peer group. The board concluded that the performance was such that the advisory arrangement should continue. Information about the fund’s performance since inception can be found in the Performance Summary section of this report.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section.
The board did not conduct a profitability analysis of Vanguard, because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees, and produces “profits” only in the form of reduced expenses for fund shareholders.
The benefit of economies of scale
The board concluded that the fund’s at-cost arrangement with Vanguard ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as fund assets increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
46
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Average Coupon. The average interest rate paid on the fixed income securities held by a fund. It is expressed as a percentage of face value.
Average Duration. An estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. To see how the value could change, multiply the average duration by the change in rates. If interest rates rise by 1 percentage point, the value of the bonds in a fund with an average duration of five years would decline by about 5%. If rates decrease by a percentage point, the value would rise by 5%.
Average Effective Maturity. The average length of time until fixed income securities held by a fund reach maturity and are repaid, taking into consideration the possibility that the issuer may call the bond before its maturity date. The figure reflects the proportion of fund assets represented by each security; it also reflects any futures contracts held. In general, the longer the average effective maturity, the more a fund’s share price will fluctuate in response to changes in market interest rates.
Credit Quality. Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities appear under “U.S. Government.” Credit-quality ratings are obtained from Barclays and are from Moody’s, Fitch, and S&P. When ratings from all three agencies are used, the median rating is shown. When ratings from two of the agencies are used, the lower rating for each issue is shown. “Not Rated” is used to classify securities for which a rating is not available.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Yield to Maturity. The rate of return an investor would receive if the fixed income securities held by a fund were held to their maturity dates.
47
Vanguard Emerging Markets Government Bond Index Fund is not sponsored, endorsed, issued, sold, or promoted by Barclays Capital Inc. or any of its affiliates (“Barclays”). Barclays makes no representation or warranty, express or implied, to the owners or purchasers of the fund or any member of the public regarding the advisability of investing in securities generally or in the fund particularly or the ability of the Barclays index to track general bond market performance. Barclays has not passed on the legality or suitability of the fund with respect to any person or entity. Barclays’ only relationship to Vanguard and the fund is the licensing of the Barclays index, which is determined, composed, and calculated by Barclays without regard to Vanguard or the fund or any owners or purchasers of the fund. Barclays has no obligation to take the needs of Vanguard, the fund, or the owners of the fund into consideration in determining, composing, or calculating the Barclays index. Barclays is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the fund to be issued. Barclays has no obligation or liability in connection with the administration, marketing, or trading of the fund.
Barclays shall have no liability to third parties for the quality, accuracy, and/or completeness of the index or any data included therein or for interruptions in the delivery of the index. Barclays makes no warranty, express or implied, as to results to be obtained by owners of the fund or any other person or entity from the use of the index or any data included therein in connection with the rights licensed hereunder or for any other use. Barclays reserves the right to change the methods of calculation or publication, or to cease the calculation or publication of the Barclays USD Emerging Markets Government RIC Capped Index, and Barclays shall not be liable for any miscalculation of or any incorrect, delayed, or interrupted publication with respect to the index. Barclays makes no express or implied warranties, and hereby expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the index or any data included therein. Barclays shall not be liable for any damages, including, without limitation, any indirect or consequential damages resulting from the use of the index or any data included therein.
48
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International plc (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive plc |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
Independent Trustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | ||
Partner of HighVista Strategies LLC (private investment | Mortimer J. Buckley | James M. Norris |
firm); Director of Rand Merchant Bank; Overseer of | Kathleen C. Gubanich | Thomas M. Rampulla |
the Museum of Fine Arts Boston. | Martha G. King | Glenn W. Reed |
John T. Marcante | Karin A. Risi | |
Peter F. Volanakis | Chris D. McIsaac | |
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the
Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 | |
Connect with Vanguard® > vanguard.com | |
Fund Information > 800-662-7447 | |
Direct Investor Account Services > 800-662-2739 | |
Institutional Investor Services > 800-523-1036 | |
Text Telephone for People | |
Who Are Deaf or Hard of Hearing> 800-749-7273 | |
This material may be used in conjunction | |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by | |
the fund’s current prospectus. | |
All comparative mutual fund data are from Lipper, a | |
Thomson Reuters Company, or Morningstar, Inc., unless | |
otherwise noted. | |
You can obtain a free copy of Vanguard’s proxy voting | |
guidelines by visiting vanguard.com/proxyreporting or by | |
calling Vanguard at 800-662-2739. The guidelines are | |
also available from the SEC’s website, sec.gov. In | |
addition, you may obtain a free report on how your fund | |
voted the proxies for securities it owned during the 12 | |
months ended June 30. To get the report, visit either | |
vanguard.com/proxyreporting or sec.gov. | |
You can review and copy information about your fund at | |
the SEC’s Public Reference Room in Washington, D.C. To | |
find out more about this public service, call the SEC at | |
202-551-8090. Information about your fund is also | |
available on the SEC’s website, and you can receive | |
copies of this information, for a fee, by sending a | |
request in either of two ways: via email addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2016 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q11202 062016 |
Semiannual Report | April 30, 2016
Vanguard Global Minimum Volatility Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisor’s Report. | 8 |
Fund Profile. | 11 |
Performance Summary. | 13 |
Financial Statements. | 14 |
About Your Fund’s Expenses. | 33 |
Trustees Approve Advisory Arrangement. | 35 |
Glossary. | 36 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended April 30, 2016 | |
Total | |
Returns | |
Vanguard Global Minimum Volatility Fund | |
Investor Shares | 0.12% |
Admiral™ Shares | 0.24 |
FTSE Global All Cap Index (USD Hedged) | -1.96 |
Global Funds Average | -1.49 |
Global Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Your Fund’s Performance at a Glance | ||||
October 31, 2015, Through April 30, 2016 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Global Minimum Volatility Fund | ||||
Investor Shares | $11.81 | $11.45 | $0.205 | $0.159 |
Admiral Shares | 23.62 | 22.91 | 0.427 | 0.318 |
1
Chairman’s Letter
Dear Shareholder,
For the six months ended April 30, 2016, Vanguard Global Minimum Volatility Fund returned 0.12% for Investor Shares and 0.24% for Admiral Shares. This modest gain placed it ahead of its benchmark index and the average return of global funds.
However, as I’ve written in the past, you should evaluate this fund based on whether it met its objective of delivering a smoother ride than the global stock market as a whole. Once again, it did—a tribute to the skill of its advisor, Vanguard Quantitative Equity Group (QEG).
During the bumpy half year, the monthly returns of the global stock market—as measured by the fund’s benchmark, the FTSE Global All Cap Index (USD Hedged)—ranged from a low of about –6% to a high of about 6%. By comparison, your fund’s monthly returns ranged from about –2% to about 4%.
Statistically, we assess volatility using standard deviation, a calculation of the degree to which the fund’s return in a given period varies from its average return. Your fund’s annualized daily volatility for the six months was nearly 17% less than that of the benchmark.
2
Another indicator of your fund’s success is its risk-adjusted return—its return divided by the standard deviation of its returns. Because this is a measure of return earned per unit of risk taken, higher is better. For the six months, the fund’s risk-adjusted return was positive, while that of its benchmark was negative.
After traveling a rocky road, global stocks didn’t move far
The broad U.S. stock market delivered flat returns for a half year marked by inconsistency, sharp declines, and even sharper rallies.
After a modest early gain, stocks tumbled, especially in January. They surged in March as investors cheered the Federal Reserve’s indication that it would scale back its original plan for interest rate hikes in 2016. Continued aggressive stimulus by central bankers in Europe and Asia and a recovery in oil prices also helped.
International stocks traced an even rockier path than their U.S. counterparts en route to modestly negative returns for U.S.-based investors. Developed markets, especially Europe, notched weak results, while emerging markets advanced slightly.
Still-low interest rates helped bonds outperform stocks
The broad U.S. bond market returned almost 3% for the half year. After modest declines in November and December, the U.S. bond market posted four months of gains, helped by the Fed’s cautious approach to raising short-term interest rates.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 0.22% | 0.34% | 10.81% |
Russell 2000 Index (Small-caps) | -1.90 | -5.94 | 6.98 |
Russell 3000 Index (Broad U.S. market) | 0.06 | -0.18 | 10.50 |
FTSE All-World ex US Index (International) | -1.52 | -10.65 | 0.25 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 2.82% | 2.72% | 3.60% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.55 | 5.29 | 5.37 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.08 | 0.10 | 0.05 |
CPI | |||
Consumer Price Index | 0.60% | 1.13% | 1.25% |
3
The yield of the 10-year U.S. Treasury note closed at 1.83% at the end of April, down from 2.17% six months earlier. (Bond prices and yields move in opposite directions.)
Even though the Fed raised short-term rates a quarter of a percentage point in December, the target rate of 0.25%–0.5% is still very low historically, and it restrained returns for money market funds and savings accounts.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned almost 9% in local currencies. After currency hedging, international bonds returned more than 3%, ahead of the broad U.S. bond market and the broad U.S. and international stock markets.
As stocks sank then climbed, your fund’s path was steadier
Anyone hoping that markets might settle a bit after the Fed’s long-anticipated December interest rate increase would have been disappointed. In January, many U.S. and international stock markets fell into or near bear-market territory, in part because of concerns about global economic growth. (A decline of 20% or more lasting at least two months generally qualifies as a bear market for stocks.) As I noted, stocks rebounded in March and, to a lesser extent, in April.
This type of roller-coaster environment can help set the stage for the success of your fund’s lower-volatility investment strategy. Of course, whether the fund does outperform depends on its stock
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
Global Minimum Volatility Fund | 0.27% | 0.21% | 1.27% |
The fund expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal period. For the six months ended April 30, 2016, the fund’s annualized expense ratios were 0.27% for Investor Shares and 0.18% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2015.
Peer group: Global Funds.
4
Do U.S.-based multinationals provide enough global diversification? |
Some investors believe that their portfolios get enough exposure to international stocks |
through their holdings in large-capitalization, multinational U.S. companies such as the ones |
represented in the Standard & Poor’s 500 Index. After all, those firms generated almost half |
of their total sales outside the United States in 2014.* |
However, international exposure based only on a broad index of U.S.-based companies would |
be patchy at best. The near-even split of domestic and foreign sales for S&P 500 companies |
is an average; when you look at individual sectors, a different picture emerges. Information |
technology firms earned the highest percentage of sales abroad (almost 60% in 2014). Utilities |
and telecommunication services, which tend to operate regionally or nationally, generated the |
least overseas revenue. |
As the chart below shows, such a portfolio would also differ significantly from a broadly |
diversified global portfolio in some sector weightings. It would, for example, have more |
exposure to IT and health care stocks and considerably less to materials and financials. |
The bottom line: Large-cap U.S. stocks can give you a degree of exposure to international |
economic and market forces, but not to the same extent as a combination of both U.S. and |
non-U.S. stocks. |
S&P 500 Index sector weightings vary from those of global stocks |
(Differences in percentage points) |
Notes: Data are 12-month-average sector weightings as of March 31, 2016. Global stocks are represented by the FTSE All-World Index. |
Sources: Vanguard calculations, based on data from S&P Dow Jones Indices LLC and FTSE International Limited. |
* All S&P 500 Index and sector revenue data are from S&P Dow Jones Indices LLC for 2014. |
There are additional risks when investing outside the United States, including the possibility that returns will be hurt |
by a decline in the value of foreign currencies or by unfavorable developments in a particular country or region. |
5
selection process, which is more fully explained in the Advisor’s Report that follows this letter.
Your fund’s holdings in the United States, which make up about half of its total assets, earned a modest single-digit gain that provided a meaningful edge over its benchmark. Holdings in the developed Pacific Rim, especially Japan, also helped. But some emerging-market holdings, including Brazilian energy and industrial stocks, held back results.
With about half of the fund’s assets invested in the stocks of companies with headquarters outside the United States, foreign currency hedging is an important element of the fund’s strategy to manage volatility. Because swings in currency exchange rates can create significant “noise,” QEG uses forward currency contracts to lock in future exchange rates, which helps to tame volatility.
When the U.S. dollar was strengthening, hedging also helped the fund’s return—although this was not the strategy’s goal. Hedging doesn’t materially affect your fund’s performance versus its benchmark, which is similarly hedged. But you can see the effect of hedging in the current period, when the dollar weakened against several major currencies: The FTSE Global All Cap Index before hedging returned –0.42%, compared with –1.96% when hedged.
Among industry groups, the advisor’s selections in financials, the fund’s largest sector, performed especially well compared with those in the benchmark. Holdings in the consumer discretionary sector declined a bit more than the benchmark’s.
Whether index or active investing, low costs and talent matter
If you listen to some investing pundits, you might think index investing and actively managed investing are incompatible opposites.
At Vanguard, it’s not index versus active. In fact, depending on your goals, it could well be index and active.
As an indexing pioneer, we opened the first index mutual fund in 1976, giving shareholders an opportunity to track the performance of the S&P 500 Index. But our roots in active management—which aims to choose investments that will outperform the market—go back to the 1929 launch of what later became Vanguard Wellington™ Fund.
Our index and active funds share important traits. Both are low cost, and as their assets grow, we can take advantage of economies of scale by further reducing fund expense ratios. That allows you to keep more of your fund’s returns.
6
Talent and experience are also vital regardless of a fund’s management style.
The indexing expertise honed over many decades by our portfolio managers helps our stock and bond index funds meet their objectives of closely tracking their benchmarks.
Our active funds also benefit from world-class managers—both our own experts, such as the team that manages your fund, and those we hire from around the globe. There’s no guarantee that active management will lead to market-beating results, but the combination of talent and low costs can give investors a better chance of success.
If you’d like to know more, see
Keys to Improving the Odds of Active Management Success and The Case for Index-Fund Investing, available at vanguard.com/research.
As always, thank you for investing with Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
May 18, 2016
7
Advisor’s Report
For the six months ended April 30, 2016, Vanguard Global Minimum Volatility Fund returned 0.12% for Investor Shares and 0.24% for Admiral Shares with an annualized daily volatility of 11.93%. Its benchmark, the FTSE Global All Cap Index (USD Hedged), returned –1.96% with an annualized daily volatility of 14.32%.1
Investment objective
Our objective is to create a portfolio that has broad equity exposure with less volatility than the global equity market. We achieved this over the performance period, as the fund’s daily volatility averaged about 17% less than that of its benchmark.
It is important to mention, as we have in the past, that we do not target a specific volatility level. Rather, we seek to provide an equity fund that has lower absolute risk than the broad global market. Thus, when the broad global equity market is experiencing periods with spikes in volatility, you should expect this fund’s volatility to rise as well—just not by the same magnitude.
We recognize that equity-like returns are also an important outcome of an investment in this fund, but achieving a total return higher than the benchmark’s is not our objective. Although our research leads us to expect that, on average, a minimum volatility fund may outperform the overall global market in sharp downturns (while still experiencing losses), the fund should be expected to trail in strong bull markets. With that in mind, because the fund is expected to have a lower level of risk than the global equity market, you should not expect it to outperform the market over the long run.
We think an acceptable comparative performance measure in the long term is the fund’s risk-adjusted return. This can be calculated by dividing the portfolio’s total return for the period by the annualized standard deviation of daily returns. We caution that a six-month window can be too short of a time frame for a proper analysis, but for the semiannual period, the risk-adjusted return was 0.01, compared with –0.14 for the benchmark. Global equity markets experienced lower returns and a higher level of volatility than in the prior fiscal year, resulting in lower risk-adjusted returns. Since the fund’s inception on December 12, 2013, its risk-adjusted return was 1.05, compared with 0.50 for the benchmark.
Investment strategy
In building our portfolio, we use quantitative models that evaluate a variety of factors that drive a stock’s volatility. These fundamental drivers include risk factors such as growth, value, dividend yields, size, volatility, and liquidity. In addition, our portfolio construction process includes estimates of each stock’s correlation—or how their returns move in relation to one another. This approach allows us to make appropriate risk/diversification trade-offs, while not relying solely on volatility estimates.
1 To get the annualized daily volatility, we calculate the standard deviation of daily returns and multiply it by the square root of 252, generally the number of trading days in a year.
8
Our process also considers currency exposure and its impact on a portfolio in a specific manner. We recognize that owning companies in foreign markets involves the risk of movements in foreign currency exchange rates relative to the U.S. dollar. Because of this, an optimization process that focuses solely on volatilities tied to an investor’s home currency will tend to overweight exposures to that currency. We aim to avoid such currency-specific exposures by focusing on equity volatilities and correlations measured in local currency terms. Then we use currency forward contracts to hedge the resulting exposure for U.S. investors. We believe this process can further reduce the volatility of the portfolio overall in the long run.
Finally, when constructing the portfolio, we apply constraints to reduce stock, sector, and country concentration risk. We find that these constraints, which allow for broader diversification and liquidity, reduce unnecessarily high risk exposures without significantly affecting our ability to reduce overall volatility. Drawing from the universe of about 7,700 stocks in the FTSE index, we construct a portfolio of about 400–450 stocks.
The investment environment
The return of the unhedged FTSE Global All Cap Index was –0.42%. This highlights the unimpressive six-month results of global equities, which struggled in late 2015 and early 2016 but substantially recovered in March and April. Although only four of the ten sectors within the benchmark had negative returns, larger sectors such as financials and health care drove down its overall return.
The fund’s hedged benchmark under-performed its unhedged counterpart by about 1½ percentage points. As foreign currencies strengthened, hedging removed the opportunity for U.S. investors to benefit when foreign stocks’ local returns were translated into dollars. Previously, when those currencies were generally weakening, hedging helped the fund’s absolute performance. We have cautioned in prior reports that this benefit could reverse.
It is important to remember that Vanguard doesn’t forecast exchange rates or use currency hedging to enhance returns. Rather, hedging currency exposure is an important element of our volatility-reduction strategy.
Although the market did experience spikes in volatility over the period, average levels were still below longer-term expectations. For example, the Chicago Board Options Exchange Volatility Index (known as VIX), which is a measure of implied volatility of S&P 500 index options, had a 10-year average level of 20.2, compared with 18.2 for the last six months.
The fund’s successes and shortfalls
As we stated earlier, the fund met its objective of lower volatility than the broader equity market measured by daily volatility for the semiannual period. When we look at volatility over longer periods
9
of monthly returns, the benefits are even clearer. Since inception, the fund has delivered a 34% reduction in the annualized volatility of monthly returns relative to its benchmark.
A combination of factors helped reduce the fund’s volatility during the six months. Our strategy of holding stocks that have lower correlations with one another provided diversification benefits. Among sectors, on average, we were overweighted in less volatile ones such as consumer staples and telecommunication services and underweighted in one of the benchmark’s more volatile industry groups, energy.
As for country allocations, we benefited by limiting our exposure to Greece, one of the period’s most volatile countries. However, our volatility estimates led to small overweight positions in the United Kingdom and India, both of which proved more volatile than anticipated, modestly trimming our results.
We continue to see our approach to portfolio construction pay off in reduced volatility. The portfolio also outperformed the benchmark in terms of relative return, but as we’ve noted, a strategy such as ours can reward or fall short of investor expectations over shorter periods. With this in mind, we find that focusing on the long-term risk-adjusted returns of the portfolio relative to the benchmark realigns expectations with the fund’s objective.
We thank you for your investment and look forward to the second half of the fiscal year.
Portfolio Managers:
Michael R. Roach, CFA
Anatoly Shtekhman, CFA
Binbin Guo, Principal, Head of Equity
Research and Portfolio Strategies
Vanguard Quantitative Equity Group
May 20, 2016
10
Global Minimum Volatility Fund
Fund Profile
As of April 30, 2016
Share-Class Characteristics | ||
Investor | Admiral | |
Shares | Shares | |
Ticker Symbol | VMVFX | VMNVX |
Expense Ratio1 | 0.27% | 0.21% |
Portfolio Characteristics | ||
FTSE Global | ||
All Cap Index | ||
Fund | (USD Hedged) | |
Number of Stocks | 401 | 7,692 |
Median Market Cap | $7.2B | $32.0B |
Price/Earnings Ratio | 21.8x | 20.3x |
Price/Book Ratio | 2.5x | 2.0x |
Return on Equity | 15.5% | 15.7% |
Earnings Growth | ||
Rate | 4.0% | 7.6% |
Dividend Yield | 2.7% | 2.6% |
Turnover Rate | ||
(Annualized) | 40% | — |
Short-Term | ||
Reserves | 0.6% | — |
Sector Diversification (% of equity exposure) | ||
FTSE Global | ||
All Cap Index | ||
Fund | (USD Hedged) | |
Consumer Discretionary | 10.6% | 12.8% |
Consumer Staples | 14.2 | 9.8 |
Energy | 1.8 | 6.6 |
Financials | 19.1 | 21.2 |
Health Care | 11.3 | 11.5 |
Industrials | 10.7 | 11.6 |
Information Technology | 9.6 | 13.9 |
Materials | 6.9 | 5.6 |
Telecommunication Services | 8.0 | 3.5 |
Utilities | 7.8 | 3.5 |
Ten Largest Holdings (% of total net assets) | ||
BCE Inc. | Integrated | |
Telecommunication | ||
Services | 1.6% | |
CLP Holdings Ltd. | Electric Utilities | 1.5 |
Jack Henry & Associates | Data Processing & | |
Inc. | Outsourced Services | 1.4 |
Church & Dwight Co. | ||
Inc. | Household Products | 1.4 |
Kaiser Aluminum Corp. | Aluminum | 1.3 |
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. | Semiconductors | 1.3 |
RenaissanceRe Holdings | ||
Ltd. | Reinsurance | 1.3 |
Clorox Co. | Household Products | 1.3 |
Spectrum Brands | ||
Holdings Inc. | Household Products | 1.2 |
Owens & Minor Inc. | Health Care | |
Distributors | 1.2 | |
Top Ten | 13.5% |
Allocation by Region (% of equity exposure)
1 The expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal period. For the six months ended April 30, 2016, the annualized expense ratios were 0.27% for Investor Shares and 0.18% for Admiral Shares.
11
Global Minimum Volatility Fund
Market Diversification (% of equity exposure) | ||
FTSE | ||
Global | ||
All Cap | ||
Index | ||
(USD | ||
Fund | Hedged) | |
Europe | ||
United Kingdom | 10.4% | 6.7% |
Switzerland | 5.4 | 2.8 |
Other | 3.6 | 11.9 |
Subtotal | 19.4% | 21.4% |
Pacific | ||
Australia | 4.8% | 2.4% |
Japan | 3.3 | 8.2 |
South Korea | 3.2 | 1.6 |
Hong Kong | 3.0 | 1.2 |
Singapore | 1.0 | 0.5 |
Other | 0.0 | 0.1 |
Subtotal | 15.3% | 14.0% |
Emerging Markets | ||
India | 2.1% | 1.1% |
Taiwan | 2.0 | 1.4 |
Brazil | 1.3 | 0.7 |
Other | 2.7 | 5.5 |
Subtotal | 8.1% | 8.7% |
North America | ||
United States | 50.4% | 52.5% |
Canada | 6.3 | 3.2 |
Subtotal | 56.7% | 55.7% |
Middle East | 0.5% | 0.2% |
12
Global Minimum Volatility Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Fiscal-Year Total Returns (%): December 12, 2013, Through April 30, 2016
Average Annual Total Returns: Periods Ended March 31, 2016
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | One | Since | |
Date | Year | Inception | |
Investor Shares | 12/12/2013 | 2.64% | 10.90% |
Admiral Shares | 12/12/2013 | 2.72 | 10.99 |
See Financial Highlights for dividend and capital gains information.
13
Global Minimum Volatility Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2016
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | ||
Value• | ||
Shares | ($000) | |
Common Stocks (99.5%)1 | ||
Australia (4.8%) | ||
Transurban Group | 1,571,950 | 13,794 |
AGL Energy Ltd. | 569,797 | 7,893 |
Stockland | 2,180,702 | 7,213 |
Telstra Corp. Ltd. | 1,382,977 | 5,615 |
Sydney Airport | 800,565 | 4,128 |
DUET Group | 2,412,205 | 4,121 |
Vicinity Centres | 1,335,197 | 3,356 |
Wesfarmers Ltd. | 86,441 | 2,799 |
JB Hi-Fi Ltd. | 161,247 | 2,683 |
Cochlear Ltd. | 32,158 | 2,630 |
Ramsay Health Care Ltd. | 51,356 | 2,525 |
Coca-Cola Amatil Ltd. | 358,529 | 2,336 |
BWP Trust | 796,405 | 2,113 |
CIMIC Group Ltd. | 65,789 | 1,779 |
GPT Group | 454,735 | 1,732 |
Caltex Australia Ltd. | 64,387 | 1,580 |
ASX Ltd. | 44,032 | 1,458 |
Boral Ltd. | 165,845 | 807 |
Sonic Healthcare Ltd. | 53,870 | 790 |
BlueScope Steel Ltd. | 148,193 | 724 |
Aristocrat Leisure Ltd. | 93,005 | 703 |
Charter Hall Retail REIT | 191,055 | 689 |
71,468 | ||
Belgium (0.6%) | ||
Colruyt SA | 109,656 | 6,323 |
Sofina SA | 9,541 | 1,217 |
Elia System Operator | ||
SA/NV | 23,212 | 1,201 |
* Cofinimmo SA | 5,474 | 680 |
9,421 | ||
Brazil (1.3%) | ||
Telefonica Brasil SA ADR | 661,534 | 8,150 |
BRF SA ADR | 472,930 | 6,725 |
Embraer SA ADR | 134,940 | 3,117 |
Ambev SA ADR | 201,006 | 1,124 |
19,116 |
Market | |||
Value• | |||
Shares | ($000) | ||
Canada (6.3%) | |||
BCE Inc. | 497,321 | 23,322 | |
Dollarama Inc. | 152,419 | 10,989 | |
TELUS Corp. | 344,477 | 10,922 | |
^ | Shaw Communications Inc. | ||
Class B | 406,197 | 7,517 | |
^ | Emera Inc. | 195,982 | 7,102 |
^ | Canadian Tire Corp. Ltd. | ||
Class A | 63,338 | 6,899 | |
Open Text Corp. | 59,234 | 3,316 | |
^ | Pembina Pipeline Corp. | 108,535 | 3,260 |
Intact Financial Corp. | 36,766 | 2,721 | |
Metro Inc. | 79,721 | 2,668 | |
Manitoba Telecom | |||
Services Inc. | 90,200 | 2,361 | |
Progressive Waste | |||
Solutions Ltd. | 69,203 | 2,227 | |
^ | Cineplex Inc. | 49,300 | 1,949 |
Thomson Reuters Corp. | 39,800 | 1,638 | |
Fortis Inc. | 38,775 | 1,230 | |
^ | RioCan REIT | 54,246 | 1,179 |
Saputo Inc. | 37,283 | 1,172 | |
^ | H&R REIT | 63,400 | 1,108 |
Rogers Communications | |||
Inc. Class B | 27,227 | 1,059 | |
^ | Parkland Fuel Corp. | 45,600 | 870 |
TransCanada Corp. | 19,052 | 791 | |
* | CGI Group Inc. Class A | 15,400 | 704 |
Husky Energy Inc. | 1 | — | |
95,004 | |||
Chile (0.2%) | |||
Enersis Americas SA ADR | 165,762 | 1,419 | |
Cia Cervecerias Unidas | |||
SA ADR | 33,795 | 757 | |
Banco Santander Chile | |||
ADR | 23,500 | 456 | |
2,632 |
14
Global Minimum Volatility Fund
Market | |||
Value• | |||
Shares | ($000) | ||
China (0.5%) | |||
China Mobile Ltd. ADR | 126,903 | 7,299 | |
Denmark (0.3%) | |||
ISS A/S | 44,768 | 1,701 | |
Carlsberg A/S Class B | 13,143 | 1,281 | |
* | William Demant Holding | ||
A/S | 7,916 | 814 | |
Royal Unibrew A/S | 9,785 | 442 | |
4,238 | |||
France (0.2%) | |||
^ | Bouygues SA | 62,168 | 2,074 |
BioMerieux | 6,466 | 835 | |
Sodexo SA | 5,000 | 505 | |
3,414 | |||
Germany (0.5%) | |||
Fielmann AG | 39,184 | 2,895 | |
Celesio AG | 61,654 | 1,780 | |
RHOEN-KLINIKUM AG | 49,613 | 1,544 | |
MTU Aero Engines AG | 15,632 | 1,478 | |
7,697 | |||
Hong Kong (3.0%) | |||
CLP Holdings Ltd. | 2,463,850 | 22,778 | |
Want Want China | |||
Holdings Ltd. | 8,952,000 | 6,866 | |
Link REIT | 753,500 | 4,572 | |
Yuexiu REIT | 5,326,000 | 2,950 | |
Hong Kong & China Gas | |||
Co. Ltd. | 776,000 | 1,445 | |
Chow Tai Fook Jewellery | |||
Group Ltd. | 1,969,600 | 1,369 | |
Cheung Kong | |||
Infrastructure Holdings | |||
Ltd. | 138,000 | 1,302 | |
Hang Seng Bank Ltd. | 68,300 | 1,238 | |
Hopewell Highway | |||
Infrastructure Ltd. | 1,879,500 | 937 | |
CK Hutchison Holdings | |||
Ltd. | 74,000 | 885 | |
44,342 | |||
India (2.1%) | |||
2 | Infosys Ltd. ADR | 842,775 | 15,844 |
HDFC Bank Ltd. ADR | 131,060 | 8,240 | |
Dr Reddy’s Laboratories | |||
Ltd. ADR | 147,931 | 6,746 | |
30,830 | |||
Indonesia (0.2%) | |||
* | Telekomunikasi Indonesia | ||
Persero Tbk PT ADR | 70,163 | 3,745 | |
Ireland (0.1%) | |||
Kerry Group plc Class A | 19,684 | 1,755 |
Market | |||
Value• | |||
Shares | ($000) | ||
Israel (0.5%) | |||
Bezeq The Israeli | |||
Telecommunication Corp. | |||
Ltd. | 962,191 | 2,028 | |
Bank Hapoalim BM | 382,781 | 1,972 | |
Teva Pharmaceutical | |||
Industries Ltd. ADR | 26,908 | 1,465 | |
Teva Pharmaceutical | |||
Industries Ltd. | 17,663 | 970 | |
Paz Oil Co. Ltd. | 5,690 | 889 | |
7,324 | |||
Italy (0.6%) | |||
Terna Rete Elettrica | |||
Nazionale SPA | 749,507 | 4,234 | |
Italcementi SPA | 156,181 | 1,853 | |
Davide Campari-Milano | |||
SPA | 167,064 | 1,616 | |
Parmalat SPA | 493,741 | 1,377 | |
9,080 | |||
Japan (3.3%) | |||
Takeda Pharmaceutical Co. | |||
Ltd. | 180,200 | 8,607 | |
Sawai Pharmaceutical Co. | |||
Ltd. | 93,600 | 6,030 | |
^ | Kagome Co. Ltd. | 225,700 | 4,819 |
Ricoh Co. Ltd. | 461,000 | 4,698 | |
TonenGeneral Sekiyu KK | 405,000 | 3,836 | |
Konami Holdings Corp. | 62,500 | 1,971 | |
Canon Inc. | 68,900 | 1,927 | |
Taisho Pharmaceutical | |||
Holdings Co. Ltd. | 23,200 | 1,905 | |
Mitsubishi Tanabe Pharma | |||
Corp. | 100,300 | 1,786 | |
Shimamura Co. Ltd. | 12,400 | 1,674 | |
MOS Food Services Inc. | 56,200 | 1,499 | |
Sega Sammy Holdings Inc. | 129,000 | 1,405 | |
Kappa Create Co. Ltd. | 94,500 | 1,095 | |
Takashimaya Co. Ltd. | 119,000 | 869 | |
Rohto Pharmaceutical Co. | |||
Ltd. | 51,000 | 868 | |
Sankyo Co. Ltd. | 18,600 | 704 | |
Studio Alice Co. Ltd. | 28,500 | 704 | |
Nissin Foods Holdings Co. | |||
Ltd. | 15,000 | 696 | |
Kisoji Co. Ltd. | 32,100 | 682 | |
Ringer Hut Co. Ltd. | 28,800 | 600 | |
Matsuya Foods Co. Ltd. | 23,000 | 594 | |
* | Fujiya Co. Ltd. | 309,000 | 561 |
Earth Chemical Co. Ltd. | 13,200 | 549 | |
Key Coffee Inc. | 27,900 | 473 | |
^ | Keiyo Co. Ltd. | 80,900 | 394 |
Daisyo Corp. | 15,300 | 198 | |
Kourakuen Holdings Corp. | 10,400 | 144 | |
49,288 |
15
Global Minimum Volatility Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Mexico (0.9%) | |||
Fomento Economico | |||
Mexicano SAB de | |||
CV ADR | 94,632 | 8,821 | |
Grupo Aeroportuario del | |||
Pacifico SAB de CV ADR | 38,217 | 3,608 | |
Grupo Televisa SAB ADR | 27,913 | 816 | |
13,245 | |||
Netherlands (0.0%) | |||
Wereldhave NV | 12,582 | 649 | |
Norway (0.4%) | |||
^ | Orkla ASA | 475,088 | 4,148 |
^ | Norsk Hydro ASA | 599,429 | 2,608 |
6,756 | |||
Russia (0.8%) | |||
MMC Norilsk Nickel | |||
PJSC ADR | 254,232 | 3,757 | |
Novatek OAO GDR | 33,250 | 3,209 | |
Gazprom PAO ADR | 544,085 | 2,827 | |
Rosneft OAO GDR | 450,752 | 2,473 | |
12,266 | |||
Singapore (1.0%) | |||
Singapore | |||
Telecommunications | |||
Ltd. | 1,695,300 | 4,849 | |
Oversea-Chinese Banking | |||
Corp. Ltd. | 649,548 | 4,219 | |
Singapore Airlines Ltd. | 218,500 | 1,865 | |
Wilmar International Ltd. | 459,500 | 1,262 | |
ComfortDelGro Corp. Ltd. | 484,700 | 1,039 | |
Keppel Corp. Ltd. | 172,800 | 691 | |
CapitaLand Mall Trust | 270,700 | 416 | |
14,341 | |||
South Korea (3.2%) | |||
KT Corp. | 522,754 | 14,003 | |
Korea Zinc Co. Ltd. | 21,604 | 9,368 | |
SK Telecom Co. Ltd. | 32,657 | 5,931 | |
KT&G Corp. | 54,361 | 5,857 | |
GS Holdings Corp. | 54,230 | 2,618 | |
Woori Bank | 199,220 | 1,831 | |
Kakao Corp. | 20,238 | 1,780 | |
CJ CheilJedang Corp. | 3,918 | 1,302 | |
S-Oil Corp. | 12,292 | 934 | |
LG Corp. | 14,482 | 863 | |
POSCO | 3,893 | 816 | |
Macquarie Korea | |||
Infrastructure Fund | 106,880 | 794 | |
Kangwon Land Inc. | 20,741 | 775 | |
Daewoong | |||
Pharmaceutical Co. Ltd. | 8,942 | 702 | |
Samsung Electronics Co. | |||
Ltd. | 371 | 404 | |
47,978 |
Market | |||
Value• | |||
Shares | ($000) | ||
Spain (0.1%) | |||
Red Electrica Corp. SA | 9,300 | 832 | |
Viscofan SA | 9,941 | 558 | |
Ebro Foods SA | 17,809 | 404 | |
1,794 | |||
Sweden (0.7%) | |||
^ | Swedish Match AB | 319,252 | 10,140 |
Switzerland (5.4%) | |||
Swisscom AG | 32,097 | 16,311 | |
Sonova Holding AG | 96,863 | 12,968 | |
^ | Galenica AG | 7,108 | 10,406 |
Logitech International SA | 632,863 | 9,724 | |
Baloise Holding AG | 62,098 | 7,698 | |
Kuehne & Nagel | |||
International AG | 38,419 | 5,544 | |
dorma&kaba Holding AG | 5,720 | 3,714 | |
Sika AG | 742 | 3,162 | |
Chocoladefabriken Lindt | |||
& Spruengli AG | 360 | 2,206 | |
* | Flughafen Zuerich AG | 1,978 | 1,817 |
Allreal Holding AG | 9,242 | 1,288 | |
Swiss Prime Site AG | 12,819 | 1,124 | |
* | Dufry AG | 8,125 | 1,071 |
EMS-Chemie Holding AG | 1,975 | 977 | |
Straumann Holding AG | 2,352 | 817 | |
Schindler Holding AG | 4,203 | 767 | |
Siegfried Holding AG | 3,851 | 722 | |
Chocoladefabriken Lindt | |||
& Spruengli AG | |||
Registered Shares | 5 | 366 | |
Alpiq Holding AG | 3,343 | 224 | |
80,906 | |||
Taiwan (2.0%) | |||
Taiwan Semiconductor | |||
Manufacturing Co. Ltd. | |||
ADR | 851,484 | 20,087 | |
Chunghwa Telecom Co. | |||
Ltd. ADR | 161,501 | 5,507 | |
Siliconware Precision | |||
Industries Co. Ltd. ADR | 486,505 | 3,520 | |
United Microelectronics | |||
Corp. ADR | 649,400 | 1,227 | |
30,341 | |||
United Kingdom (10.4%) | |||
RELX NV | 798,616 | 14,149 | |
Direct Line Insurance | |||
Group plc | 2,324,934 | 12,317 | |
Next plc | 163,088 | 12,138 | |
National Grid plc | 709,038 | 10,117 | |
Fresnillo plc | 566,744 | 9,238 | |
Marks & Spencer | |||
Group plc | 1,308,548 | 8,117 | |
Royal Mail plc | 1,034,005 | 7,365 |
16
Global Minimum Volatility Fund
Market | ||
Value• | ||
Shares | ($000) | |
Randgold Resources Ltd. | 59,335 | 5,927 |
DCC plc | 66,217 | 5,873 |
GlaxoSmithKline plc | 253,081 | 5,409 |
British American Tobacco | ||
plc | 75,852 | 4,625 |
Imperial Brands plc | 78,168 | 4,250 |
Inmarsat plc | 311,491 | 4,238 |
Greene King plc | 352,886 | 4,223 |
Howden Joinery Group plc | 545,238 | 3,944 |
3 Merlin Entertainments plc | 549,396 | 3,470 |
Kingfisher plc | 644,606 | 3,434 |
Admiral Group plc | 113,897 | 3,096 |
UBM plc | 370,749 | 3,089 |
Bunzl plc | 93,744 | 2,798 |
Mediclinic International plc | 207,191 | 2,741 |
SSE plc | 114,920 | 2,539 |
William Hill plc | 512,637 | 2,347 |
Meggitt plc | 371,553 | 2,234 |
Reckitt Benckiser Group | ||
plc | 20,794 | 2,026 |
RPC Group plc | 164,674 | 1,757 |
Compass Group plc | 73,630 | 1,311 |
Melrose Industries plc | 236,701 | 1,293 |
Hikma Pharmaceuticals | ||
plc | 39,602 | 1,277 |
Regus plc | 286,213 | 1,225 |
BAE Systems plc | 171,174 | 1,194 |
UK Commercial Property | ||
Trust Ltd. | 946,030 | 1,146 |
F&C Commercial Property | ||
Trust Ltd. | 537,029 | 1,045 |
Inchcape plc | 82,750 | 821 |
Rightmove plc | 13,460 | 761 |
Indivior plc | 305,438 | 719 |
Sage Group plc | 81,666 | 708 |
Dixons Carphone plc | 113,209 | 705 |
Tate & Lyle plc | 65,251 | 562 |
Ultra Electronics Holdings | ||
plc | 17,786 | 459 |
Severn Trent plc | 14,055 | 458 |
Playtech plc | 27,488 | 324 |
155,469 | ||
United States (50.1%) | ||
Consumer Discretionary (3.3%) | ||
Children’s Place Inc. | 177,693 | 13,844 |
Pool Corp. | 60,608 | 5,298 |
Service Corp. International | 140,000 | 3,734 |
Genuine Parts Co. | 36,647 | 3,517 |
Six Flags Entertainment | ||
Corp. | 50,873 | 3,055 |
Texas Roadhouse Inc. | ||
Class A | 71,395 | 2,907 |
John Wiley & Sons Inc. | ||
Class A | 50,800 | 2,519 |
Chico’s FAS Inc. | 187,647 | 2,366 |
Market | |||
Value• | |||
Shares | ($000) | ||
Churchill Downs Inc. | 17,600 | 2,361 | |
Monro Muffler Brake Inc. | 29,134 | 2,017 | |
DineEquity Inc. | 22,892 | 1,969 | |
* | Murphy USA Inc. | 31,141 | 1,788 |
* | AutoZone Inc. | 2,050 | 1,569 |
* | Madison Square Garden Co. | ||
Class A | 9,000 | 1,413 | |
* | Krispy Kreme Doughnuts | ||
Inc. | 42,344 | 737 | |
New York Times Co. | |||
Class A | 45,523 | 584 | |
49,678 | |||
Consumer Staples (8.1%) | |||
Church & Dwight Co. Inc. | 219,777 | 20,373 | |
Clorox Co. | 156,421 | 19,589 | |
Spectrum Brands Holdings | |||
Inc. | 161,208 | 18,313 | |
2 | Kimberly-Clark Corp. | 131,329 | 16,441 |
Vector Group Ltd. | 558,040 | 12,054 | |
2 | Colgate-Palmolive Co. | 90,100 | 6,390 |
Kellogg Co. | 69,002 | 5,300 | |
Lancaster Colony Corp. | 33,726 | 3,929 | |
Altria Group Inc. | 56,300 | 3,531 | |
Philip Morris International | |||
Inc. | 31,600 | 3,101 | |
B&G Foods Inc. | 74,760 | 3,081 | |
Sysco Corp. | 66,402 | 3,059 | |
Procter & Gamble Co. | 37,521 | 3,006 | |
JM Smucker Co. | 14,400 | 1,828 | |
Energizer Holdings Inc. | 18,076 | 786 | |
McCormick & Co. Inc. | 5,400 | 506 | |
J&J Snack Foods Corp. | 4,400 | 445 | |
121,732 | |||
Energy (0.2%) | |||
World Fuel Services Corp. | 70,913 | 3,314 | |
Financials (13.8%) | |||
RenaissanceRe Holdings | |||
Ltd. | 179,017 | 19,855 | |
People’s United Financial | |||
Inc. | 783,150 | 12,139 | |
Lamar Advertising Co. | |||
Class A | 184,396 | 11,440 | |
Washington Federal Inc. | 397,132 | 9,646 | |
Brown & Brown Inc. | 226,200 | 7,942 | |
* | Markit Ltd. | 218,158 | 7,612 |
Two Harbors Investment | |||
Corp. | 926,577 | 7,255 | |
Healthcare Trust of | |||
America Inc. Class A | 242,312 | 7,000 | |
Rayonier Inc. | 272,400 | 6,723 | |
ProAssurance Corp. | 132,894 | 6,343 | |
Capitol Federal Financial | |||
Inc. | 455,900 | 6,059 |
17
Global Minimum Volatility Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Beneficial Bancorp Inc. | 433,982 | 6,028 |
4 | Hudson Pacific Properties | ||
Inc. | 156,400 | 4,575 | |
WP Carey Inc. | 67,700 | 4,136 | |
* | Essent Group Ltd. | 200,000 | 4,084 |
Axis Capital Holdings Ltd. | 76,459 | 4,073 | |
* | Arch Capital Group Ltd. | 55,810 | 3,934 |
TFS Financial Corp. | 219,700 | 3,933 | |
Oritani Financial Corp. | 206,400 | 3,577 | |
New York REIT Inc. | 356,734 | 3,507 | |
* | Markel Corp. | 3,798 | 3,415 |
Mack-Cali Realty Corp. | 129,948 | 3,321 | |
PS Business Parks Inc. | 34,375 | 3,292 | |
Marsh & McLennan Cos. | |||
Inc. | 46,600 | 2,943 | |
Liberty Property Trust | 83,320 | 2,908 | |
MFA Financial Inc. | 418,444 | 2,891 | |
Chimera Investment Corp. | 201,983 | 2,868 | |
Blackstone Mortgage | |||
Trust Inc. Class A | 102,500 | 2,817 | |
Federal Realty Investment | |||
Trust | 16,846 | 2,562 | |
Piedmont Office Realty | |||
Trust Inc. Class A | 120,630 | 2,402 | |
Healthcare Realty Trust Inc. | 77,676 | 2,352 | |
Capstead Mortgage Corp. | 241,849 | 2,351 | |
Acadia Realty Trust | 56,000 | 1,887 | |
Empire State Realty Trust | |||
Inc. | 98,485 | 1,823 | |
Arthur J Gallagher & Co. | 38,497 | 1,772 | |
Education Realty Trust Inc. | 43,935 | 1,747 | |
EverBank Financial Corp. | 113,559 | 1,712 | |
National Retail Properties | |||
Inc. | 36,500 | 1,597 | |
Everest Re Group Ltd. | 8,043 | 1,487 | |
Sovran Self Storage Inc. | 13,705 | 1,456 | |
Valley National Bancorp | 151,917 | 1,437 | |
Northwest Bancshares Inc. | 97,172 | 1,362 | |
Ramco-Gershenson | |||
Properties Trust | 76,300 | 1,351 | |
Gramercy Property Trust | 138,100 | 1,170 | |
Post Properties Inc. | 19,000 | 1,090 | |
EPR Properties | 15,261 | 1,005 | |
Urstadt Biddle Properties | |||
Inc. Class A | 47,000 | 966 | |
Franklin Street Properties | |||
Corp. | 87,350 | 928 | |
DuPont Fabros | |||
Technology Inc. | 21,323 | 849 | |
EastGroup Properties Inc. | 13,400 | 801 | |
Brookline Bancorp Inc. | 68,100 | 775 | |
STAG Industrial Inc. | 34,189 | 682 | |
Equity One Inc. | 24,100 | 682 | |
Cousins Properties Inc. | 62,700 | 649 | |
Camden Property Trust | 8,000 | 646 |
Market | |||
Value• | |||
Shares | ($000) | ||
National Health Investors | |||
Inc. | 9,400 | 640 | |
* | Equity Commonwealth | 22,653 | 632 |
Investors Bancorp Inc. | 54,095 | 625 | |
American Homes 4 Rent | |||
Class A | 38,400 | 608 | |
Alexandria Real Estate | |||
Equities Inc. | 5,900 | 548 | |
Investors Real Estate Trust | 82,500 | 497 | |
Universal Health Realty | |||
Income Trust | 8,800 | 480 | |
Dime Community | |||
Bancshares Inc. | 25,000 | 453 | |
American Financial Group | |||
Inc. | 6,444 | 445 | |
Safety Insurance Group Inc. | 6,600 | 374 | |
207,159 | |||
Health Care (6.2%) | |||
Owens & Minor Inc. | 481,544 | 17,524 | |
Teleflex Inc. | 75,311 | 11,732 | |
* | Henry Schein Inc. | 64,164 | 10,825 |
AmerisourceBergen Corp. | |||
Class A | 123,973 | 10,550 | |
Patterson Cos. Inc. | 212,931 | 9,231 | |
Johnson & Johnson | 61,700 | 6,915 | |
Hill-Rom Holdings Inc. | 127,985 | 6,188 | |
DENTSPLY SIRONA Inc. | 83,997 | 5,006 | |
Chemed Corp. | 34,310 | 4,453 | |
*,2 | MEDNAX Inc. | 53,336 | 3,802 |
* | DaVita HealthCare Partners | ||
Inc. | 38,000 | 2,808 | |
* | Integra LifeSciences | ||
Holdings Corp. | 13,121 | 929 | |
* | Bio-Rad Laboratories Inc. | ||
Class A | 5,785 | 821 | |
CR Bard Inc. | 3,609 | 766 | |
* | Intuitive Surgical Inc. | 1,145 | 717 |
Cantel Medical Corp. | 10,318 | 691 | |
Analogic Corp. | 4,269 | 337 | |
93,295 | |||
Industrials (5.7%) | |||
Expeditors International of | |||
Washington Inc. | 337,960 | 16,766 | |
United Parcel Service Inc. | |||
Class B | 93,900 | 9,866 | |
Carlisle Cos. Inc. | 75,218 | 7,665 | |
Waste Connections Inc. | 108,343 | 7,289 | |
Rollins Inc. | 194,918 | 5,237 | |
* | Copart Inc. | 121,313 | 5,197 |
2 | Republic Services Inc. | ||
Class A | 97,995 | 4,613 | |
Danaher Corp. | 36,900 | 3,570 | |
Waste Management Inc. | 51,148 | 3,007 | |
General Dynamics Corp. | 20,100 | 2,824 |
18
Global Minimum Volatility Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Healthcare Services | |||
Group Inc. | 66,991 | 2,536 | |
3M Co. | 14,100 | 2,360 | |
KAR Auction Services Inc. | 57,833 | 2,174 | |
Herman Miller Inc. | 65,563 | 1,978 | |
Huntington Ingalls | |||
Industries Inc. | 12,812 | 1,855 | |
National Presto Industries | |||
Inc. | 20,674 | 1,803 | |
* | Teledyne Technologies | ||
Inc. | 17,400 | 1,617 | |
Matthews International | |||
Corp. Class A | 22,400 | 1,179 | |
BWX Technologies Inc. | 24,544 | 820 | |
Rockwell Collins Inc. | 8,803 | 776 | |
IDEX Corp. | 8,788 | 720 | |
EMCOR Group Inc. | 14,519 | 704 | |
84,556 | |||
Information Technology (5.1%) | |||
Jack Henry & Associates | |||
Inc. | 260,027 | 21,070 | |
Amdocs Ltd. | 172,400 | 9,748 | |
* | CACI International Inc. | ||
Class A | 90,017 | 8,655 | |
2 | Paychex Inc. | 145,368 | 7,577 |
Broadridge Financial | |||
Solutions Inc. | 111,948 | 6,699 | |
2 | Motorola Solutions Inc. | 68,600 | 5,158 |
* | VeriSign Inc. | 55,500 | 4,795 |
* | Genpact Ltd. | 75,832 | 2,115 |
CSG Systems | |||
International Inc. | 34,060 | 1,512 | |
* | Check Point Software | ||
Technologies Ltd. | 13,689 | 1,134 | |
* | Synopsys Inc. | 22,330 | 1,061 |
* | Itron Inc. | 25,444 | 1,046 |
Dolby Laboratories Inc. | |||
Class A | 21,327 | 1,015 | |
* | Electronics For Imaging | ||
Inc. | 23,668 | 943 | |
* | Gartner Inc. | 9,500 | 828 |
* | Viavi Solutions Inc. | 125,722 | 818 |
Cognex Corp. | 22,595 | 803 | |
Littelfuse Inc. | 5,994 | 698 | |
National Instruments Corp. | 19,000 | 524 | |
* | Progress Software Corp. | 19,000 | 485 |
76,684 | |||
Materials (4.1%) | |||
Kaiser Aluminum Corp. | 213,203 | 20,218 | |
Compass Minerals | |||
International Inc. | 191,756 | 14,374 | |
AptarGroup Inc. | 133,358 | 10,135 | |
Sonoco Products Co. | 163,788 | 7,680 |
Market | |||
Value• | |||
Shares | ($000) | ||
Reliance Steel | |||
& Aluminum Co. | 68,438 | 5,062 | |
RPM International Inc. | 38,981 | 1,970 | |
Bemis Co. Inc. | 25,433 | 1,276 | |
Silgan Holdings Inc. | 16,625 | 844 | |
61,559 | |||
Telecommunication Services (0.3%) | |||
Cogent Communications | |||
Holdings Inc. | 108,601 | 4,203 | |
Utilities (3.3%) | |||
Vectren Corp. | 174,331 | 8,516 | |
IDACORP Inc. | 103,387 | 7,519 | |
2 | Southern Co. | 133,667 | 6,697 |
Portland General Electric | |||
Co. | 146,147 | 5,805 | |
ALLETE Inc. | 74,053 | 4,161 | |
NorthWestern Corp. | 58,887 | 3,347 | |
Avista Corp. | 77,012 | 3,086 | |
OGE Energy Corp. | 67,790 | 2,006 | |
* | Spire Inc. | 29,904 | 1,912 |
2 | Ameren Corp. | 36,454 | 1,750 |
Duke Energy Corp. | 18,700 | 1,473 | |
Great Plains Energy Inc. | 38,995 | 1,218 | |
* | Enersis Chile SA ADR | 165,762 | 1,056 |
Dominion Resources Inc. | 6,600 | 472 | |
49,018 | |||
751,198 | |||
Total Common Stocks | |||
(Cost $1,418,117) | 1,491,736 | ||
Temporary Cash Investment (4.7%)1 | |||
Money Market Fund (4.7%) | |||
5,6 | Vanguard Market Liquidity | ||
Fund, 0.495% | |||
(Cost $70,560) | 70,559,899 | 70,560 | |
Total Investments (104.2%) | |||
(Cost $1,488,677) | 1,562,296 |
19
Global Minimum Volatility Fund
Amount | |
($000) | |
Other Assets and Liabilities (-4.2%) | |
Other Assets | |
Investment in Vanguard | 125 |
Receivables for Investment Securities Sold 4,822 | |
Receivables for Accrued Income | 4,116 |
Receivables for Capital Shares Issued | 1,632 |
Other Assets | 1,363 |
Total Other Assets | 12,058 |
Liabilities | |
Payables for Investment Securities | |
Purchased | (1,657) |
Collateral for Securities on Loan | (55,637) |
Payables for Capital Shares Redeemed | (1,085) |
Payables to Vanguard | (376) |
Other Liabilities | (16,776) |
Total Liabilities | (75,531) |
Net Assets (100%) | 1,498,823 |
At April 30, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 1,462,329 |
Undistributed Net Investment Income | 10,064 |
Accumulated Net Realized Losses | (31,078) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 73,619 |
Futures Contracts | 43 |
Forward Currency Contracts | (16,189) |
Foreign Currencies | 35 |
Net Assets | 1,498,823 |
Investor Shares—Net Assets | |
Applicable to 45,114,407 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 516,599 |
Net Asset Value Per Share— | |
Investor Shares | $11.45 |
Admiral Shares—Net Assets | |
Applicable to 42,878,463 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 982,224 |
Net Asset Value Per Share— | |
Admiral Shares | $22.91 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $51,087,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.9% and 4.3%, respectively, of net assets.
2 Securities with a value of $20,655,000 have been segregated as collateral for open forward currency contracts.
3 Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2016, the value of this security represented 0.2% of net assets.
4 Securities with a value of $927,000 have been segregated as initial margin for open futures contracts.
5 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
6 Includes $55,637,000 of collateral received for securities on loan.
ADR—American Depositary Receipt.
GDR—Global Depositary Receipt.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.
20
Global Minimum Volatility Fund
Statement of Operations
Six Months Ended | |
April 30, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 19,254 |
Interest2 | 32 |
Securities Lending | 177 |
Total Income | 19,463 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 677 |
Management and Administrative—Investor Shares | 309 |
Management and Administrative—Admiral Shares | 204 |
Marketing and Distribution—Investor Shares | 60 |
Marketing and Distribution—Admiral Shares | 46 |
Custodian Fees | 104 |
Auditing Fees | 4 |
Shareholders’ Reports—Investor Shares | 7 |
Shareholders’ Reports—Admiral Shares | 5 |
Total Expenses | 1,416 |
Net Investment Income | 18,047 |
Realized Net Gain (Loss) | |
Investment Securities Sold | (26,041) |
Futures Contracts | (308) |
Foreign Currencies and Forward Currency Contracts | (2,410) |
Realized Net Gain (Loss) | (28,759) |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 34,564 |
Futures Contracts | (188) |
Foreign Currencies and Forward Currency Contracts | (17,999) |
Change in Unrealized Appreciation (Depreciation) | 16,377 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 5,665 |
1 Dividends are net of foreign withholding taxes of $918,000. | |
2 Interest income from an affiliated company of the fund was $32,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
21
Global Minimum Volatility Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 18,047 | 21,205 |
Realized Net Gain (Loss) | (28,759) | 31,565 |
Change in Unrealized Appreciation (Depreciation) | 16,377 | 11,764 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 5,665 | 64,534 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (8,415) | (9,075) |
Admiral Shares | (15,208) | (3,883) |
Realized Capital Gain1 | ||
Investor Shares | (6,527) | (13,061) |
Admiral Shares | (11,326) | (5,350) |
Total Distributions | (41,476) | (31,369) |
Capital Share Transactions | ||
Investor Shares | 79,096 | 73,567 |
Admiral Shares | 247,226 | 626,768 |
Net Increase (Decrease) from Capital Share Transactions | 326,322 | 700,335 |
Total Increase (Decrease) | 290,511 | 733,500 |
Net Assets | ||
Beginning of Period | 1,208,312 | 474,812 |
End of Period2 | 1,498,823 | 1,208,312 |
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $2,919,000 and $13,523,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes. 2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $10,064,000 and $15,621,000. | ||
See accompanying Notes, which are an integral part of the Financial Statements.
22
Global Minimum Volatility Fund
Financial Highlights
Investor Shares | |||
Six Months | Year | Dec. 12, | |
Ended | Ended | 20131 to | |
April 30, | Oct. 31, | Oct. 31, | |
For a Share Outstanding Throughout Each Period | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $11.81 | $11.41 | $10.00 |
Investment Operations | |||
Net Investment Income | .132 | . 288 2 | .262 |
Net Realized and Unrealized Gain (Loss) on Investments | (.128) | .795 | 1.172 |
Total from Investment Operations | .004 | 1.083 | 1.434 |
Distributions | |||
Dividends from Net Investment Income | (. 205) | (. 280) | (. 024) |
Distributions from Realized Capital Gains | (.159) | (.403) | — |
Total Distributions | (. 364) | (. 683) | (. 024) |
Net Asset Value, End of Period | $11.45 | $11.81 | $11.41 |
Total Return3 | 0.12% | 9.93% | 14.37% |
Ratios/Supplemental Data | |||
Net Assets, End of Period (Millions) | $517 | $451 | $360 |
Ratio of Total Expenses to Average Net Assets | 0.27% | 0.27% | 0.30%4 |
Ratio of Net Investment Income to Average Net Assets | 2.57% | 2.52% | 3.18%4 |
Portfolio Turnover Rate | 40% | 57% | 49% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | |||
1 Inception. | |||
2 Calculated based on average shares outstanding. | |||
3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. | |||
4 Annualized. |
See accompanying Notes, which are an integral part of the Financial Statements.
23
Global Minimum Volatility Fund
Financial Highlights
Admiral Shares | |||
Six Months | Year | Dec. 12, | |
Ended | Ended | 20131 to | |
April 30, | Oct. 31, | Oct. 31, | |
For a Share Outstanding Throughout Each Period | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $23.62 | $22.83 | $20.00 |
Investment Operations | |||
Net Investment Income | . 272 | . 605 2 | .546 |
Net Realized and Unrealized Gain (Loss) on Investments | (.237) | 1.576 | 2.332 |
Total from Investment Operations | .035 | 2.181 | 2.878 |
Distributions | |||
Dividends from Net Investment Income | (. 427) | (. 585) | (. 048) |
Distributions from Realized Capital Gains | (.318) | (.806) | — |
Total Distributions | (.745) | (1.391) | (.048) |
Net Asset Value, End of Period | $22.91 | $23.62 | $22.83 |
Total Return3 | 0.24% | 10.00% | 14.42% |
Ratios/Supplemental Data | |||
Net Assets, End of Period (Millions) | $982 | $757 | $115 |
Ratio of Total Expenses to Average Net Assets | 0.18% | 0.21% | 0.20%4 |
Ratio of Net Investment Income to Average Net Assets | 2.66% | 2.58% | 3.28%4 |
Portfolio Turnover Rate | 40% | 57% | 49% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | |||
1 Inception. | |||
2 Calculated based on average shares outstanding. | |||
3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. | |||
4 Annualized. |
See accompanying Notes, which are an integral part of the Financial Statements.
24
Global Minimum Volatility Fund
Notes to Financial Statements
Vanguard Global Minimum Volatility 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. To minimize the currency risk and volatility associated with investment in securities denominated in currencies other than the U.S. dollar, the fund attempts to hedge its currency exposure. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.
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.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse 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.
25
Global Minimum Volatility Fund
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. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The aggregate settlement values and notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.
During the six months ended April 30, 2016, 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 aggregate settlement values at each quarter-end during the period. The fund’s average investment in forward currency contracts represented 48% 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 (October 31, 2014–2015), and for the period ended April 30, 2016, 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.
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 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
26
Global Minimum Volatility Fund
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 absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.
7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2016, or at any time during the period then ended.
8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At April 30, 2016, the fund had contributed to Vanguard capital in the amount of $125,000, representing 0.01% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
27
Global Minimum Volatility 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).
The following table summarizes the market value of the fund’s investments as of April 30, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—International | 203,677 | 536,861 | — |
Common Stocks—United States | 751,198 | — | — |
Temporary Cash Investments | 70,560 | — | — |
Futures Contracts—Assets1 | 2 | — | — |
Futures Contracts—Liabilities1 | (29) | — | — |
Forward Currency Contracts—Assets | — | 474 | — |
Forward Currency Contracts—Liabilities | — | (16,663) | — |
Total | 1,025,408 | 520,672 | — |
1 Represents variation margin on the last day of the reporting period. |
D. At April 30, 2016, the fair values of derivatives were reflected in the Statement of Net Assets as follows:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Statement of Net Assets Caption | ($000) | ($000) | ($000) |
Other Assets | 2 | 474 | 476 |
Other Liabilities | (29) | (16,663) | (16,692) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended April 30, 2016, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | (308) | — | (308) |
Forward Currency Contracts | — | (2,429) | (2,429) |
Realized Net Gain (Loss) on Derivatives | (308) | (2,429) | (2,737) |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | (188) | — | (188) |
Forward Currency Contracts | — | (18,048) | (18,048) |
Change in Unrealized Appreciation (Depreciation) on Derivatives | (188) | (18,048) | (18,236) |
28
Global Minimum Volatility Fund
At April 30, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Aggregate | ||||
Number of | Settlement | Unrealized | ||
Long (Short) | Value | Appreciation | ||
Futures Contracts | Expiration | Contracts | Long (Short) | (Depreciation) |
E-mini S&P 500 Index | June 2016 | 30 | 3,089 | (37) |
Dow Jones EURO STOXX 50 Index | June 2016 | 24 | 818 | 37 |
FTSE 100 Index | June 2016 | 8 | 728 | 15 |
Topix Index | June 2016 | 5 | 620 | (3) |
S&P ASX 200 Index | June 2016 | 4 | 399 | 31 |
43 |
Unrealized appreciation (depreciation) on open E-mini S&P 500 Index, Dow Jones EURO STOXX 50 Index, and FTSE 100 Index futures contracts is required to be treated as realized gain (loss) for tax purposes.
At April 30, 2016, the fund had open forward currency contracts to receive and deliver currencies as follows. Unrealized appreciation (depreciation) on open forward currency contracts, except for Danish krone, Hong Kong dollar, Indonesian rupiah, Singapore dollar, and Taiwan dollar contracts, is treated as realized gain (loss) for tax purposes.
Unrealized | ||||||
Contract | Appreciation | |||||
Settlement | Contract Amount (000) | (Depreciation) | ||||
Counterparty | Date | Receive | Deliver | ($000) | ||
Goldman Sachs International | 5/13/16 | GBP | 2,189 | USD | 3,203 | (4) |
Goldman Sachs International | 5/13/16 | USD | 151,746 | GBP | 107,657 | (5,563) |
Goldman Sachs International | 5/13/16 | USD | 87,233 | CAD | 114,925 | (4,364) |
BNP Paribas | 5/13/16 | USD | 80,261 | CHF | 76,511 | 459 |
Deutsche Bank AG | 5/13/16 | USD | 67,464 | AUD | 90,000 | (930) |
Deutsche Bank AG | 5/13/16 | USD | 48,364 | JPY | 5,217,209 | (685) |
Goldman Sachs International | 5/13/16 | USD | 48,093 | HKD | 372,986 | 2 |
BNP Paribas | 5/13/16 | USD | 47,132 | KRW | 54,784,091 | (940) |
BNP Paribas | 5/13/16 | USD | 32,266 | TWD | 1,047,804 | (225) |
Deutsche Bank AG | 5/13/16 | USD | 31,713 | EUR | 27,827 | (163) |
BNP Paribas | 5/13/16 | USD | 30,608 | INR | 2,055,477 | (301) |
BNP Paribas | 5/13/16 | USD | 17,694 | BRL | 66,178 | (1,464) |
Goldman Sachs International | 5/13/16 | USD | 14,294 | SGD | 19,327 | (72) |
BNP Paribas | 5/13/16 | USD | 12,075 | MXN | 216,747 | (507) |
BNP Paribas | 5/13/16 | USD | 10,696 | SEK | 87,124 | (158) |
BNP Paribas | 5/13/16 | USD | 10,598 | RUB | 729,912 | (628) |
29
Global Minimum Volatility Fund
Unrealized | ||||||
Contract | Appreciation | |||||
Settlement | Contract Amount (000) | (Depreciation) | ||||
Counterparty | Date | Receive | Deliver | ($000) | ||
Deutsche Bank AG | 5/16/16 | USD | 7,452 | ILS | 28,197 | (96) |
BNP Paribas | 5/13/16 | USD | 6,546 | NOK | 54,498 | (222) |
BNP Paribas | 5/13/16 | USD | 4,332 | DKK | 28,280 | (20) |
BNP Paribas | 5/13/16 | USD | 3,628 | IDR | 48,047,151 | (9) |
BNP Paribas | 5/13/16 | USD | 3,377 | CLP | 2,312,466 | (119) |
Deutsche Bank AG | 5/13/16 | USD | 2,917 | HKD | 22,628 | — |
Deutsche Bank AG | 5/13/16 | USD | 2,613 | CHF | 2,494 | 13 |
BNP Paribas | 5/13/16 | USD | 2,486 | GBP | 1,749 | (69) |
Goldman Sachs International | 5/13/16 | USD | 1,566 | EUR | 1,374 | (8) |
BNP Paribas | 5/13/16 | USD | 1,476 | CAD | 1,942 | (72) |
Deutsche Bank AG | 5/13/16 | USD | 722 | MXN | 13,884 | (34) |
BNP Paribas | 5/13/16 | USD | 431 | AUD | 576 | (6) |
Deutsche Bank AG | 5/13/16 | USD | 235 | SEK | 1,916 | (3) |
Goldman Sachs International | 5/13/16 | USD | 35 | NOK | 293 | (1) |
(16,189) | ||||||
AUD—Australian dollar. | INR—Indian rupee. | |||||
BRL—Brazilian real. | JPY—Japanese yen. | |||||
CAD—Canadian dollar. | KRW—Korean won. | |||||
CHF—Swiss franc. | MXN—Mexican peso. | |||||
CLP—Chilean peso. | NOK—Norwegian krone. | |||||
DKK—Danish krone. | RUB—Russian ruble. | |||||
EUR—Euro. | SEK—Swedish krona. | |||||
GBP—British pound. | SGD—Singapore dollar. | |||||
HKD—Hong Kong dollar. | TWD—Taiwanese dollar. | |||||
IDR—Indonesian rupiah. | USD—U.S. dollar. | |||||
ILS—Israeli shekel. |
At April 30, 2016, the counterparty had deposited in segregated accounts cash with a value of $970,000 in connection with amounts due to the fund for open forward currency contracts.
30
Global Minimum Volatility Fund
The following table summarizes the fund’s derivative assets and liabilities by counterparty for derivatives subject to arrangements that provide for offsetting assets and liabilities. Exchange traded derivatives are listed separately.
Assets | Liabilities | Amounts not Offset in the | Net | |||
Reflected in | Reflected in | Net Amount | Statement of Net Assets | Exposure3 | ||
Statement of | Statement of | Receivable | Collateral | Collateral | (not less | |
Net Assets1 | Net Assets1 | (Payable) | Pledged 2 | Received 2 | than $0) | |
($000) | ($000) | ($000) | ($000) | ($000) | ($000) | |
Forwards Subject to Offsetting | ||||||
Arrangements, by Counterparty | ||||||
BNP Paribas | 459 | (4,740) | (4,281) | 3,547 | — | — |
Deutsche Bank AG | 13 | (1,911) | (1,898) | — | 970 | — |
Goldman Sachs International | 2 | (10,012) | (10,010) | 17,108 | — | — |
Exchange Traded Futures Contracts | 2 | (29) | (27) | 927 | — | — |
Total | 476 | (16,692) | (16,216) | 21,582 | 970 | — |
1 Absent an event of default or early termination, derivative assets and liabilities are presented gross and not offset in the Statement of Net Assets. 2 Securities or other assets pledged as collateral are noted in the Statement of Net Assets. Securities or other assets received as collateral are held in a segregated account and not included in the fund’s security holdings in the Statement of Net Assets. 3 Net Exposure represents the net amount receivable from the counterparty in the event of default. Counterparties are not required to exchange collateral if amount is below a specified minimum transfer amount. | ||||||
E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; such differences are primarily attributed to mark-to-market open forward currency contracts. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
During the six months ended April 30, 2016, the fund realized net foreign currency gains of $19,000, which increased distributable net income for tax purposes; accordingly, such gains have been reclassified from accumulated net realized losses to undistributed net investment income.
At April 30, 2016, the cost of investment securities for tax purposes was $1,489,510,000. Net unrealized appreciation of investment securities for tax purposes was $72,786,000, consisting of unrealized gains of $122,634,000 on securities that had risen in value since their purchase and $49,848,000 in unrealized losses on securities that had fallen in value since their purchase.
31
Global Minimum Volatility Fund
F. During the six months ended April 30, 2016, the fund purchased $561,831,000 of investment securities and sold $273,016,000 of investment securities, other than temporary cash investments.
G. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
April 30, 2016 | October 31, 2015 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 139,625 | 12,274 | 259,472 | 22,420 |
Issued in Lieu of Cash Distributions | 14,502 | 1,302 | 21,996 | 2,000 |
Redeemed | (75,031) | (6,663) | (207,901) | (17,760) |
Net Increase (Decrease)—Investor Shares | 79,096 | 6,913 | 73,567 | 6,660 |
Admiral Shares | ||||
Issued | 418,356 | 18,448 | 772,864 | 33,351 |
Issued in Lieu of Cash Distributions | 23,214 | 1,042 | 8,043 | 366 |
Redeemed | (194,344) | (8,670) | (154,139) | (6,699) |
Net Increase (Decrease)—Admiral Shares | 247,226 | 10,820 | 626,768 | 27,018 |
H. Management has determined that no material events or transactions occurred subsequent to April 30, 2016, that would require recognition or disclosure in these financial statements.
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.
33
Six Months Ended April 30, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Global Minimum Volatility Fund | 10/31/2015 | 4/30/2016 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,001.20 | $1.34 |
Admiral Shares | 1,000.00 | 1,002.37 | 0.90 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,023.52 | $1.36 |
Admiral Shares | 1,000.00 | 1,023.97 | 0.91 |
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 0.27% for Investor Shares and 0.18% 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).
34
Trustees Approve Advisory Arrangement
The board of trustees of Vanguard Global Minimum Volatility Fund has renewed the fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard)—through its Quantitative Equity Group. The board determined that continuing the fund’s internalized management structure 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. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the investment management services provided to the fund since its inception in 2013, and took into account the organizational depth and stability of the advisor. The board considered that Vanguard has been managing investments for more than three decades. The Quantitative Equity Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The board considered the performance of the fund since its inception, including any periods of outperformance or underperformance relative to a benchmark and peer group. The board concluded that the performance was such that the advisory arrangement should continue. Information about the fund’s performance since inception can be found in the Performance Summary section of this report.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expense appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section.
The board did not conduct a profitability analysis of Vanguard, because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees, and produces “profits” only in the form of reduced expenses for fund shareholders.
The benefit of economies of scale
The board concluded that the fund’s at-cost arrangement with Vanguard ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as fund assets increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
35
Glossary
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
InterestedTrustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International plc (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive plc |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
IndependentTrustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | ||
Partner of HighVista Strategies LLC (private investment | Mortimer J. Buckley | James M. Norris |
firm); Director of Rand Merchant Bank; Overseer of | Kathleen C. Gubanich | Thomas M. Rampulla |
the Museum of Fine Arts Boston. | Martha G. King | Glenn W. Reed |
John T. Marcante | Karin A. Risi | |
Peter F. Volanakis | Chris D. McIsaac | |
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
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All comparative mutual fund data are from Lipper, a | ||
Thomson Reuters Company, or Morningstar, Inc., unless | ||
otherwise noted. | ||
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Vanguard Marketing Corporation, Distributor. | ||
Q11942 062016 |
Semiannual Report | April 30, 2016
Vanguard International Dividend Index Funds
Vanguard International Dividend Appreciation Index Fund
Vanguard International High Dividend Yield Index Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
International Dividend Appreciation Index Fund. | 10 |
International High Dividend Yield Index Fund. | 27 |
About Your Fund’s Expenses. | 53 |
Trustees Approve Advisory Arrangements. | 55 |
Glossary. | 56 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended April 30, 2016 | |
Returns | |
Since Inception | |
Vanguard International Dividend Appreciation Index Fund | |
Investor Shares (Inception: 2/25/2016) | 9.14% |
ETF Shares (Inception: 2/25/2016) | |
Market Price | 9.49 |
Net Asset Value | 9.17 |
Admiral™ Shares (Inception: 3/2/2016) | 6.09 |
NASDAQ International Dividend Achievers Select Index | 10.36 |
International Large-Cap Core Funds Average | 8.73 |
International Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. | |
Vanguard International High Dividend Yield Index Fund | |
Investor Shares (Inception: 2/25/2016) | 11.17% |
ETF Shares (Inception: 2/25/2016) | |
Market Price | 11.63 |
Net Asset Value | 11.17 |
Admiral Shares (Inception: 3/2/2016) | 7.65 |
FTSE All-World ex US High Dividend Yield Index | 12.45 |
International Income Funds Average | 5.06 |
International Income Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements. The Vanguard ETF® Shares shown are traded on the Nasdaq exchange and are available only through brokers. The table provides ETF returns based on both the Nasdaq market price and the net asset value for a share. U.S. Pat. Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.
For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares' market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares' market price was above or below the NAV.
Benchmark returns are calculated from the start of the reporting period or from the earliest share-class inception date.
1
Chairman’s Letter
Dear Shareholder,
I am pleased to provide you with the first shareholder report for the Vanguard International Dividend Index Funds.
Vanguard International High Dividend Yield Index Fund follows an income investing strategy, focusing on companies with high dividend yields. It seeks to track the FTSE All-World ex US High Dividend Yield Index, a benchmark of more than 800 of the highest-yielding large- and mid-capitalization stocks in developed and emerging markets.
Vanguard International Dividend Appreciation Index Fund emphasizes stocks exhibiting dividend growth. It seeks to track the NASDAQ International Dividend Achievers Select Index, which is made up of about 200 developed- and emerging-market stocks with a track record of increasing annual dividend payments.
Both funds offer Investor, Admiral, and ETF Shares. The Investor and ETF Shares began investing on February 25, 2016. From their inception through April 30, those shares of the International High Dividend Yield Index Fund returned 11.17%, based on net asset value. The fund’s Admiral Shares, which launched on March 2 and thus posted a noticeably different result, returned 7.65%.
The corresponding returns for the International Dividend Appreciation Index Fund: Investor Shares returned 9.14%,
ETF Shares returned 9.17% based on net asset value, and Admiral Shares returned 6.09%.
The funds’ returns trailed their indexes in part because of fair-value adjustments to their net asset values, a bookkeeping exercise described later in this letter. The two funds did outperform their peer groups (except for International Dividend Appreciation’s Admiral Shares), although two months is not a sufficient time period from which to draw any conclusions.
This report includes an overview of the financial markets during the full six months ended April 30, followed by a brief discussion of the funds’ performance since late February.
U.S. stocks traveled a rocky road, finishing the period about even
The broad U.S. stock market delivered flat returns for a half year marked by inconsistency, sharp declines, and even sharper rallies.
After struggling during the first four months of the period, U.S. stocks rebounded. Most of the surge came in March, as investors cheered the Federal Reserve’s indication that it would scale back its plan for interest rate hikes in 2016. Continued aggressive stimulus by central bankers in Europe and Asia and a recovery in oil prices also helped.
International stocks traced an even rockier path than their U.S. counterparts en route to modestly negative returns. Developed
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 0.22% | 0.34% | 10.81% |
Russell 2000 Index (Small-caps) | -1.90 | -5.94 | 6.98 |
Russell 3000 Index (Broad U.S. market) | 0.06 | -0.18 | 10.50 |
FTSE All-World ex US Index (International) | -1.52 | -10.65 | 0.25 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 2.82% | 2.72% | 3.60% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.55 | 5.29 | 5.37 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.08 | 0.10 | 0.05 |
CPI | |||
Consumer Price Index | 0.60% | 1.13% | 1.25% |
3
markets, especially Europe, notched weak results, while emerging markets managed a slight advance.
Bonds have proved attractive with help from the Fed
The broad U.S. bond market returned 2.82% for the half year. After retreating in November and December, it recorded positive results for each of the next four months. It also received a boost from the Fed’s cautious approach to raising short-term interest rates.
The yield of the 10-year U.S. Treasury note closed at 1.83% at the end of April, down from 2.17% six months earlier. (Bond prices and yields move in opposite directions.)
Even though the Fed raised short-term rates a quarter of a percentage point in December, the target rate of 0.25%–0.5% is still very low historically, and it restrained returns for money market funds and savings accounts.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 8.72%, helped by foreign currencies’ strength against the dollar, in a reversal from the trend of recent years. Even without this currency benefit, their returns were solid.
International investing has both pros and cons
Vanguard International High Dividend Yield Index Fund and Vanguard International Dividend Appreciation Index Fund offer
Expense Ratios | ||||
Your Fund Compared With Its Peer Group | ||||
Investor | ETF | Admiral | Peer Group | |
Shares | Shares | Shares | Average | |
International Dividend Appreciation Index | ||||
Fund | 0.35% | 0.25% | 0.25% | 1.23% |
International High Dividend Yield Index Fund | 0.40 | 0.30 | 0.30 | 1.05 |
The fund expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2016, the funds’ annualized expense ratios were: for the International Dividend Appreciation Index Fund, 0.34% for Investor Shares, 0.25% for ETF Shares, and 0.25% for Admiral Shares; and for the International High Dividend Yield Index Fund, 0.39% for Investor Shares, 0.30% for ETF Shares, and 0.29% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2015.
Peer groups: For the International Dividend Appreciation Index Fund, International Large-Cap Core Funds Average; for the International High Dividend Yield Index Fund, International Income Funds Average.
4
investors the opportunity to diversify their equity portfolios with dividend-oriented stocks from around the globe.
We launched these funds to complement our existing U.S. dividend-oriented index funds, which have similar names. Diversifying beyond the United States can reduce a portfolio’s overall risk. (See the box on page 6 for more about this.) Also, in recent years, international dividend portfolios have experienced higher dividend yields than those with U.S.-only exposure. According to FTSE, U.S. stocks have had slightly lower yields from March 2004 through March 2015.
Thus, stock investors seeking to diversify an existing equity portfolio with regular dividend-payers could find these funds attractive. Of course, stocks that emphasize dividends can often trail market averages during bull markets, when many investors gravitate toward those with high growth potential.
In addition, returns from international stocks can often be more volatile than those of domestic equities because of geopolitical events, currency fluctuations, and other factors.
The two funds benefited from rising markets during the period
At the end of the period, the International High Dividend Yield Index Fund held a little more than half of its assets in European markets. Developed Pacific markets made
A note on fair-value pricing |
The reported return of a fund that tracks an index sometimes diverges from the index’s return |
a bit more than would be expected. This may be the result of a fair-value pricing adjustment. |
These adjustments, which are required by the Securities and Exchange Commission, address |
pricing discrepancies that may arise because of time-zone differences among global stock |
markets. Foreign stocks may trade on exchanges that close many hours before a fund’s |
closing share price is calculated in the United States, generally at 4 p.m., Eastern time. In |
the hours between the foreign close and the U.S. close, the value of these foreign securities |
may change—because of company-specific announcements or market-wide developments, |
for example. Such price changes are not immediately reflected in international index values. |
Fair-value pricing takes such changes into account in calculating the fund’s daily net asset |
value, thus ensuring that the NAV doesn’t include “stale” prices. The result can be a temporary |
divergence between the return of the fund and that of its benchmark index—a difference that |
usually corrects itself when the foreign markets reopen. |
5
Do U.S.-based multinationals provide enough global diversification? |
Some investors believe that their portfolios get enough exposure to international stocks |
through their holdings in large-capitalization, multinational U.S. companies such as the ones |
represented in the Standard & Poor’s 500 Index. After all, those firms generated almost half |
of their total sales outside the United States in 2014.* |
However, international exposure based only on a broad index of U.S.-based companies would |
be patchy at best. The near-even split of domestic and foreign sales for S&P 500 companies |
is an average; when you look at individual sectors, a different picture emerges. Information |
technology firms earned the highest percentage of sales abroad (almost 60% in 2014). Utilities |
and telecommunication services, which tend to operate regionally or nationally, generated the |
least overseas revenue. |
As the chart below shows, such a portfolio would also differ significantly from a broadly |
diversified global portfolio in some sector weightings. It would, for example, have more |
exposure to IT and health care stocks and considerably less to materials and financials. |
The bottom line: Large-cap U.S. stocks can give you a degree of exposure to international |
economic and market forces, but not to the same extent as a combination of both U.S. and |
non-U.S. stocks. |
S&P 500 Index sector weightings vary from those of global stocks |
(Differences in percentage points) |
Notes: Data are 12-month-average sector weightings as of March 31, 2016. Global stocks are represented by the FTSE All-World Index. |
Sources: Vanguard calculations, based on data from S&P Dow Jones Indices LLC and FTSE International Limited. |
* All S&P 500 Index and sector revenue data are from S&P Dow Jones Indices LLC for 2014. |
There are additional risks when investing outside the United States, including the possibility that returns will be hurt |
by a decline in the value of foreign currencies or by unfavorable developments in a particular country or region. |
6
up about one-fifth of assets, and emerging markets a bit less. About 7% of assets consisted of Canadian stocks.
By comparison, the International Dividend Appreciation Index Fund held a higher percentage of assets in emerging markets and Canada and a slightly lower proportion in Europe.
In the short time since the funds’ inception, their positive returns were mostly powered by strong performances in the Pacific region and emerging markets. In the International High Dividend Yield Index Fund, Australia, Japan, and Brazil had noticeable impacts. Although United Kingdom results were flat, positive returns came from Switzerland, Germany, and France.
The International Dividend Appreciation Index Fund showed a similar pattern. Japan and India were among the best contributors to performance, along with Canada. European results were more tepid.
The advisor to the two funds, Vanguard Equity Index Group, has decades of experience in managing stock index funds. The group, which oversees more than 100 indexed portfolios with assets of about $2 trillion, has developed sophisticated quantitative tools and rigorous risk management processes. This combination of tools and experience is key to meeting the funds’ objective of tracking their benchmark indexes. Vanguard’s low costs also help, because an index incurs no expenses on its own to detract from its returns.
Whether a fund is indexed or active, low costs and experience matter
If you listen to some investing pundits, you might think index investing and actively managed investing are incompatible opposites. At Vanguard, we don’t see it that way.
To us, it’s not index versus active. In fact, depending on your goals, it could well be both.
Vanguard is known as a pioneer in index investing. In 1976, we opened the first index mutual fund, giving shareholders an opportunity to track the performance of the S&P 500 Index. But our roots in active management—which aims to choose investments that will outperform the market—go back to the 1929 launch of what later became Vanguard Wellington™ Fund.
Our index and active funds share important traits. Both are low cost, and as their assets grow, we can take advantage of economies of scale by further reducing fund expense ratios. That allows you to keep more of your fund’s returns.
7
But low costs aren’t the whole story. Talent and experience are vital regardless of a fund’s management style.
When it comes to indexing, portfolio managers in our Equity Index Group and Fixed Income Group have honed their expertise over decades. That knowledge helps our index funds meet their objectives of closely tracking their benchmarks.
Our active funds also benefit from world-class managers—both our own experts and those we hire from around the globe. There’s no guarantee that active management will lead to market-beating results, but the combination of talent and low costs can give investors a better chance of success.
If you’d like to know more, see Keys to Improving the Odds of Active Management Success and The Case for Index-Fund Investing, available at vanguard.com/research.
As always, thank you for investing with Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
May 17, 2016
8
Your Fund’s Performance at a Glance | ||||
Inception Through April 30, 2016 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard International Dividend Appreciation | ||||
Index Fund | ||||
Investor Shares (Inception: 2/25/2016) | $20.00 | $21.81 | $0.018 | $0.000 |
ETF Shares (Inception: 2/25/2016) | 50.00 | 54.54 | 0.045 | 0.000 |
Admiral Shares (Inception: 3/2/2016) | 25.00 | 26.50 | 0.022 | 0.000 |
Vanguard International High Dividend Yield | ||||
Index Fund | ||||
Investor Shares (Inception: 2/25/2016) | $20.00 | $22.20 | $0.034 | $0.000 |
ETF Shares (Inception: 2/25/2016) | 50.00 | 55.50 | 0.085 | 0.000 |
Admiral Shares (Inception: 3/2/2016) | 25.00 | 26.87 | 0.041 | 0.000 |
9
International Dividend Appreciation Index Fund
Fund Profile
As of April 30, 2016
Share-Class Characteristics | |||
Investor | ETF | Admiral | |
Shares | Shares | Shares | |
Ticker Symbol | VIAIX | VIGI | VIAAX |
Expense Ratio1 | 0.35% | 0.25% | 0.25% |
Portfolio Characteristics | ||
NASDAQ | ||
International | ||
Dividend | ||
Achievers | ||
Fund | Select Index | |
Number of Stocks | 202 | 199 |
Median Market Cap | $39.7B | $39.7B |
Price/Earnings Ratio | 24.5x | 25.5x |
Price/Book Ratio | 2.8x | 2.8x |
Return on Equity | 20.4% | 20.4% |
Earnings Growth | ||
Rate | 7.2% | 7.5% |
Dividend Yield | 2.3% | 2.3% |
Turnover Rate | ||
(Annualized) | 36% | — |
Short-Term Reserves | 3.2% | — |
Sector Diversification (% of equity exposure) | ||
NASDAQ | ||
International | ||
Dividend | ||
Achievers | ||
Fund | Select Index | |
Basic Materials | 3.3% | 3.3% |
Consumer Goods | 18.7 | 18.8 |
Consumer Services | 9.9 | 10.0 |
Financials | 7.9 | 7.5 |
Health Care | 25.6 | 25.7 |
Industrials | 8.0 | 7.9 |
Oil & Gas | 6.6 | 6.6 |
Technology | 9.8 | 9.8 |
Telecommunications | 6.7 | 6.8 |
Utilities | 3.5 | 3.6 |
Ten Largest Holdings (% of total net assets) | ||
Tencent Holdings Ltd. | Internet | 4.1% |
Nestle SA | Food Products | 3.9 |
Novartis AG | Pharmaceuticals | 3.9 |
Novo Nordisk A/S | Pharmaceuticals | 3.8 |
Roche Holding AG | Pharmaceuticals | 3.6 |
Sanofi | Pharmaceuticals | 3.5 |
L'Oreal SA | Personal Products | 3.4 |
Nippon Telegraph & | Fixed Line | |
Telephone Corp. | Telecommunications | 3.0 |
BHP Billiton | General Mining | 2.6 |
Tata Consultancy | ||
Services Ltd. | Computer Services | 2.5 |
Top Ten | 34.3% | |
The holdings listed exclude any temporary cash investments and equity index products. | ||
Allocation by Region (% of equity exposure)
Investment Focus
1 The expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2016, the annualized expense ratios were 0.34% for Investor Shares, 0.25% for ETF Shares, and 0.25% for Admiral Shares.
10
International Dividend Appreciation Index Fund
Market Diversification (% of equity exposure) | ||
NASDAQ | ||
International | ||
Dividend | ||
Achievers | ||
Fund | Select Index | |
Europe | ||
Switzerland | 11.9% | 11.9% |
France | 9.4 | 9.4 |
United Kingdom | 6.3 | 6.2 |
Denmark | 4.7 | 4.7 |
Netherlands | 2.8 | 2.9 |
Germany | 2.7 | 2.7 |
Spain | 1.3 | 1.3 |
Other | 1.8 | 1.8 |
Subtotal | 40.9% | 40.9% |
Pacific | ||
Japan | 8.8% | 9.1% |
Hong Kong | 5.1 | 5.1 |
Australia | 4.2 | 4.1 |
South Korea | 1.7 | 1.7 |
Other | 0.1 | 0.1 |
Subtotal | 19.9% | 20.1% |
Emerging Markets | ||
India | 10.0% | 10.0% |
China | 6.1 | 6.1 |
South Africa | 2.2 | 2.2 |
Mexico | 1.5 | 1.5 |
Other | 1.9 | 1.8 |
Subtotal | 21.7% | 21.6% |
North America | ||
Canada | 15.7% | 15.1% |
Middle East | ||
Israel | 1.8% | 1.9% |
Other | 0.0% | 0.4% |
11
International Dividend Appreciation Index Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Fiscal-Period Total Returns (%): February 25, 2016, Through April 30, 2016
NASDAQ | ||
International | ||
Dividend Achievers | ||
Investor Shares | Select Index | |
Fiscal Year | Total Returns | Total Returns |
2016 | 9.14% | 10.36% |
Note: For 2016, performance data reflect the six months ended April 30, 2016. |
Total Returns: Periods Ended March 31, 2016 | ||
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period. | ||
Securities and Exchange Commission rules require that we provide this information. | ||
Inception | Since | |
Date | Inception | |
Investor Shares | 2/25/2016 | 7.34% |
ETF Shares | 2/25/2016 | |
Market Price | 7.81 | |
Net Asset Value | 7.37 | |
Admiral Shares | 3/2/2016 | 4.33 |
See Financial Highlights for dividend and capital gains information.
12
International Dividend Appreciation Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2016
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | ||
Value• | ||
Shares | ($000) | |
Common Stocks (99.4%)1 | ||
Australia (4.2%) | ||
BHP Billiton Ltd. | 52,202 | 815 |
CSL Ltd. | 7,433 | 592 |
Woolworths Ltd. | 20,331 | 340 |
Ramsay Health Care Ltd. | 3,135 | 154 |
Domino’s Pizza | ||
Enterprises Ltd. | 1,320 | 62 |
Washington H Soul | ||
Pattinson & Co. Ltd. | 4,093 | 51 |
FlexiGroup Ltd. | 12,966 | 23 |
InvoCare Ltd. | 2,319 | 22 |
Retail Food Group Ltd. | 3,409 | 14 |
Collection House Ltd. | 660 | 1 |
2,074 | ||
Belgium (0.6%) | ||
Groupe Bruxelles | ||
Lambert SA | 2,593 | 229 |
Sofina SA | 612 | 78 |
Fagron | 361 | 3 |
310 | ||
Brazil (0.1%) | ||
Ez Tec Empreendimentos | ||
e Participacoes SA | 5,700 | 28 |
Canada (15.2%) | ||
Canadian National | ||
Railway Co. | 12,748 | 785 |
Suncor Energy Inc. | 25,349 | 744 |
BCE Inc. | 13,914 | 652 |
Enbridge Inc. | 13,968 | 580 |
Canadian Natural | ||
Resources Ltd. | 17,784 | 534 |
Thomson Reuters Corp. | 12,215 | 503 |
TransCanada Corp. | 11,257 | 467 |
Imperial Oil Ltd. | 13,810 | 458 |
TELUS Corp. | 9,688 | 307 |
Market | |||
Value• | |||
Shares | ($000) | ||
Rogers Communications | |||
Inc. Class B | 6,544 | 254 | |
Franco-Nevada Corp. | 2,880 | 202 | |
Saputo Inc. | 6,171 | 194 | |
Intact Financial Corp. | 2,133 | 158 | |
Fortis Inc. | 4,593 | 146 | |
Shaw Communications Inc. | |||
Class B | 7,119 | 132 | |
Metro Inc. | 3,716 | 124 | |
Inter Pipeline Ltd. | 5,278 | 113 | |
CCL Industries Inc. Class B | 530 | 97 | |
Canadian Utilities Ltd. | |||
Class A | 3,086 | 89 | |
Keyera Corp. | 2,696 | 87 | |
SNC-Lavalin Group Inc. | 2,278 | 86 | |
Emera Inc. | 2,213 | 80 | |
Atco Ltd. | 1,722 | 56 | |
CAE Inc. | 4,542 | 54 | |
Ritchie Bros Auctioneers Inc. | 1,853 | 53 | |
Finning International Inc. | 2,518 | 45 | |
Empire Co. Ltd. | 2,435 | 40 | |
Stella-Jones Inc. | 1,025 | 39 | |
ShawCor Ltd. | 1,350 | 36 | |
Toromont Industries Ltd. | 1,208 | 36 | |
Home Capital Group Inc. | |||
Class B | 1,141 | 34 | |
Boyd Group Income Fund | 566 | 34 | |
Cogeco Communications Inc. | 615 | 31 | |
Pason Systems Inc. | 2,036 | 30 | |
Canadian Western Bank | 1,208 | 27 | |
Corus Entertainment Inc. | |||
Class B | 2,415 | 24 | |
Transcontinental Inc. | |||
Class A | 1,512 | 24 | |
* | Enghouse Systems Ltd. | 519 | 22 |
Jean Coutu Group PJC Inc. | |||
Class A | 1,316 | 20 | |
Alaris Royalty Corp. | 780 | 19 |
13
International Dividend Appreciation Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Ensign Energy Services Inc. | 2,893 | 18 | |
* | Molson Coors Canada Inc. | ||
Class B | 183 | 17 | |
Laurentian Bank of Canada | 420 | 17 | |
Gluskin Sheff & | |||
Associates Inc. | 1,050 | 15 | |
Computer Modelling | |||
Group Ltd. | 1,588 | 13 | |
* | High Liner Foods Inc. | 900 | 12 |
7,508 | |||
China (6.1%) | |||
Tencent Holdings Ltd. | 99,300 | 2,020 | |
China Overseas Land | |||
& Investment Ltd. | 160,000 | 508 | |
Hengan International | |||
Group Co. Ltd. | 19,000 | 170 | |
China Gas Holdings Ltd. | 85,000 | 123 | |
ENN Energy Holdings Ltd. | 18,000 | 88 | |
China Everbright | |||
International Ltd. | 72,000 | 81 | |
Huaxin Cement Co. Ltd. | |||
Class B | 17,300 | 12 | |
3,002 | |||
Colombia (0.5%) | |||
Grupo de Inversiones | |||
Suramericana SA | 8,378 | 113 | |
* | Isagen SA ESP | 46,825 | 68 |
Bancolombia SA | |||
Preference Shares | 4,617 | 44 | |
Bancolombia SA ADR | 812 | 31 | |
256 | |||
Denmark (4.7%) | |||
Novo Nordisk A/S Class B | 33,509 | 1,871 | |
Coloplast A/S Class B | 3,166 | 237 | |
Novozymes A/S | 4,230 | 203 | |
2,311 | |||
Finland (0.0%) | |||
Raisio Oyj | 4,827 | 24 | |
France (9.4%) | |||
Sanofi | 21,212 | 1,749 | |
L’Oreal SA | 9,146 | 1,661 | |
Hermes International | 1,702 | 606 | |
Essilor International SA | 3,476 | 450 | |
SEB SA | 754 | 85 | |
Rubis SCA | 716 | 56 | |
IPSOS | 1,081 | 32 | |
4,639 | |||
Germany (2.7%) | |||
Fresenius SE & Co. KGaA | 8,812 | 642 | |
Fresenius Medical Care | |||
AG & Co. KGaA | 4,998 | 435 | |
Fielmann AG | 1,270 | 94 |
Market | ||
Value• | ||
Shares | ($000) | |
CTS Eventim AG & Co. | ||
KGaA | 1,507 | 53 |
Fuchs Petrolub SE | ||
Preference Shares | 1,198 | 51 |
AURELIUS SE & Co. KGaA | 603 | 36 |
BayWa AG | 791 | 28 |
1,339 | ||
Hong Kong (5.1%) | ||
Jardine Matheson | ||
Holdings Ltd. | 11,483 | 633 |
Jardine Strategic | ||
Holdings Ltd. | 18,000 | 520 |
MTR Corp. Ltd. | 94,000 | 465 |
Cheung Kong Infrastructure | ||
Holdings Ltd. | 41,000 | 387 |
Hong Kong & China Gas | ||
Co. Ltd. | 188,000 | 350 |
Techtronic Industries | ||
Co. Ltd. | 29,500 | 111 |
Minth Group Ltd. | 25,000 | 65 |
2,531 | ||
India (10.0%) | ||
Tata Consultancy | ||
Services Ltd. | 32,077 | 1,225 |
ITC Ltd. | 129,704 | 635 |
Housing Development | ||
Finance Corp. Ltd. | 25,448 | 417 |
HDFC Bank Ltd. | 22,105 | 375 |
HDFC Bank Ltd. ADR | 5,964 | 375 |
Infosys Ltd. | 19,314 | 351 |
Infosys Ltd. ADR | 17,584 | 330 |
Larsen & Toubro Ltd. | 15,187 | 287 |
Axis Bank Ltd. | 39,072 | 278 |
Asian Paints Ltd. | 15,548 | 203 |
Lupin Ltd. | 7,194 | 174 |
IndusInd Bank Ltd. | 9,505 | 150 |
LIC Housing Finance Ltd. | 8,308 | 58 |
Power Finance Corp. Ltd. | 19,283 | 52 |
Reliance Infrastructure Ltd. | 3,989 | 32 |
4,942 | ||
Indonesia (0.2%) | ||
Indocement Tunggal | ||
Prakarsa Tbk PT | 64,600 | 96 |
Ireland (0.7%) | ||
Kerry Group plc Class A | 2,892 | 258 |
Glanbia plc | 4,507 | 85 |
343 | ||
Israel (1.8%) | ||
Teva Pharmaceutical | ||
Industries Ltd. | 16,448 | 904 |
Italy (0.1%) | ||
DiaSorin SPA | 942 | 55 |
14
International Dividend Appreciation Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Japan (8.7%) | ||
Nippon Telegraph | ||
& Telephone Corp. | 33,712 | 1,509 |
Yahoo Japan Corp. | 90,400 | 404 |
Asahi Group Holdings Ltd. | 7,600 | 241 |
Sysmex Corp. | 3,400 | 213 |
Unicharm Corp. | 9,900 | 205 |
Daito Trust Construction | ||
Co. Ltd. | 1,300 | 184 |
West Japan Railway Co. | 3,000 | 181 |
Nitori Holdings Co. Ltd. | 1,800 | 167 |
M3 Inc. | 5,400 | 146 |
Lawson Inc. | 1,600 | 124 |
Don Quijote Holdings | ||
Co. Ltd. | 2,400 | 85 |
Shimamura Co. Ltd. | 500 | 67 |
Mitsubishi UFJ Lease | ||
& Finance Co. Ltd. | 14,900 | 65 |
Sundrug Co. Ltd. | 900 | 64 |
Rinnai Corp. | 700 | 62 |
Kakaku.com Inc. | 3,100 | 56 |
Kobayashi Pharmaceutical | ||
Co. Ltd. | 600 | 48 |
Miraca Holdings Inc. | 1,100 | 47 |
Kaken Pharmaceutical Co. Ltd. | 800 | 44 |
Glory Ltd. | 1,200 | 39 |
San-A Co. Ltd. | 800 | 37 |
Yaoko Co. Ltd. | 800 | 35 |
Fuyo General Lease Co. Ltd. | 800 | 34 |
GMO Payment Gateway Inc. | 500 | 32 |
Relo Holdings Inc. | 200 | 25 |
Aeon Delight Co. Ltd. | 900 | 25 |
Ci:z Holdings Co. Ltd. | 1,100 | 22 |
Kissei Pharmaceutical Co. Ltd. | 900 | 21 |
SHO-BOND Holdings Co. Ltd. | 448 | 19 |
Modec Inc. | 1,100 | 17 |
Hiday Hidaka Corp. | 700 | 16 |
Hamakyorex Co. Ltd. | 900 | 16 |
NEC Networks & System | ||
Integration Corp. | 1,000 | 15 |
Siix Corp. | 500 | 15 |
F@N Communications Inc. | 2,000 | 14 |
Meiko Network Japan | ||
Co. Ltd. | 1,000 | 11 |
JP-Holdings Inc. | 2,900 | 11 |
4,316 | ||
Mexico (1.5%) | ||
America Movil SAB de CV | 673,336 | 476 |
Grupo Financiero Inbursa | ||
SAB de CV | 106,110 | 208 |
Kimberly-Clark de Mexico | ||
SAB de CV Class A | 27,900 | 66 |
750 |
Market | ||
Value• | ||
Shares | ($000) | |
Netherlands (2.8%) | ||
Unilever NV | 27,719 | 1,207 |
Wolters Kluwer NV | 4,961 | 189 |
1,396 | ||
New Zealand (0.1%) | ||
Ryman Healthcare Ltd. | 8,877 | 55 |
Norway (0.1%) | ||
Tomra Systems ASA | 3,167 | 37 |
Philippines (0.7%) | ||
SM Investments Corp. | 13,000 | 261 |
Jollibee Foods Corp. | 16,750 | 82 |
Manila Water Co. Inc. | 35,600 | 21 |
364 | ||
Poland (0.1%) | ||
Asseco Poland SA | 1,891 | 29 |
South Africa (2.2%) | ||
Naspers Ltd. | 7,062 | 972 |
Discovery Ltd. | 11,538 | 103 |
EOH Holdings Ltd. | 2,709 | 27 |
1,102 | ||
South Korea (1.7%) | ||
Hyundai Motor Co. | 3,545 | 445 |
Hyundai Mobis Co. Ltd. | 1,581 | 361 |
Dongsuh Cos. Inc. | 1,571 | 44 |
850 | ||
Spain (1.3%) | ||
Abertis Infraestructuras SA | 14,593 | 246 |
Red Electrica Corp. SA | 2,116 | 189 |
Enagas SA | 3,879 | 119 |
Viscofan SA | 675 | 38 |
Vidrala SA | 522 | 31 |
Miquel y Costas & Miquel SA | 460 | 19 |
* Abengoa SA Class A | 414 | — |
642 | ||
Sweden (0.4%) | ||
Hufvudstaden AB Class A | 3,326 | 51 |
Intrum Justitia AB | 1,331 | 48 |
Castellum AB | 2,536 | 41 |
Wihlborgs Fastigheter AB | 1,591 | 32 |
172 | ||
Switzerland (11.9%) | ||
Nestle SA | 25,750 | 1,922 |
Novartis AG | 25,192 | 1,917 |
Roche Holding AG | 7,024 | 1,777 |
Galenica AG | 106 | 155 |
Chocoladefabriken Lindt | ||
& Spruengli AG | 15 | 92 |
5,863 |
15
International Dividend Appreciation Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Thailand (0.1%) | ||
* Glow Energy PCL | 26,700 | 68 |
Turkey (0.2%) | ||
BIM Birlesik Magazalar AS | 5,197 | 114 |
United Kingdom (6.2%) | ||
Shire plc | 9,535 | 595 |
Associated British Foods plc | 12,821 | 575 |
BHP Billiton plc | 34,614 | 473 |
ARM Holdings plc | 22,611 | 310 |
Experian plc | 15,681 | 287 |
Smith & Nephew plc | 14,442 | 245 |
Hikma Pharmaceuticals plc | 3,930 | 127 |
Inmarsat plc | 7,113 | 97 |
Rightmove plc | 1,595 | 90 |
Micro Focus International plc | 3,408 | 76 |
Regus plc | 15,183 | 65 |
JD Sports Fashion plc | 3,377 | 62 |
John Wood Group plc | 6,309 | 58 |
Abcam plc | 3,453 | 30 |
3,090 | ||
Total Common Stocks | ||
(Cost $48,216) | 49,210 | |
Temporary Cash Investments (3.5%)1 | ||
Money Market Fund (3.3%) | ||
2 Vanguard Market | ||
Liquidity Fund, 0.495% | 1,629,471 | 1,629 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.2%) | ||
3 Federal Home Loan | ||
Bank Discount Notes, | ||
0.350%, 7/15/16 | 100 | 100 |
Total Temporary Cash Investments | ||
(Cost $1,729) | 1,729 | |
Total Investments (102.9%) | ||
(Cost $49,945) | 50,939 | |
Other Assets and Liabilities (-2.9%) | ||
Other Assets | 4,324 | |
Liabilities | (5,779) | |
(1,455) | ||
Net Assets (100%) | 49,484 |
Amount | |
($000) | |
Statement of Assets and Liabilities | |
Assets | |
Investments in Securities, at Value | |
Unaffiliated Issuers | 49,310 |
Affiliated Vanguard Funds | 1,629 |
Total Investments in Securities | 50,939 |
Investment in Vanguard | 2 |
Receivables for Accrued Income | 66 |
Receivables for Capital Shares Issued | 3,710 |
Other Assets | 546 |
Total Assets | 55,263 |
Liabilities | |
Payables for Investment Securities | |
Purchased | 2,261 |
Payables for Capital Shares Redeemed | 127 |
Payables to Vanguard | 5 |
Other Liabilities | 3,386 |
Total Liabilities | 5,779 |
Net Assets | 49,484 |
16
International Dividend Appreciation Index Fund
At April 30, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 48,266 |
Undistributed Net Investment Income | 107 |
Accumulated Net Realized Gains | 107 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 994 |
Foreign Currencies | 10 |
Net Assets | 49,484 |
Investor Shares—Net Assets | |
Applicable to 65,059 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 1,419 |
Net Asset Value Per Share— | |
Investor Shares | $21.81 |
Amount | |
($000) | |
ETF—Net Assets | |
Applicable to 600,000 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 32,724 |
Net Asset Value Per Share— | |
ETF Shares | $54.54 |
Admiral—Net Assets | |
Applicable to 578,894 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 15,341 |
Net Asset Value Per Share— | |
Admiral Shares | $26.50 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.6% and 3.3%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
ADR—American Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
17
International Dividend Appreciation Index Fund
Statement of Operations
February 25, 20161 to | |
April 30, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends2 | 134 |
Interest3 | 1 |
Total Income | 135 |
Expenses | |
The Vanguard Group—Note B | |
Management and Administrative—Investor Shares | 1 |
Management and Administrative—ETF Shares | 5 |
Management and Administrative—Admiral Shares | 3 |
Shareholders’ Reports—Investor Shares | — |
Shareholders’ Reports—ETF Shares | 1 |
Shareholders’ Reports—Admiral Shares | — |
Total Expenses | 10 |
Net Investment Income | 125 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 99 |
Futures Contracts | 8 |
Foreign Currencies | (5) |
Realized Net Gain (Loss) | 102 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 994 |
Foreign Currencies and Forward Currency Contracts | 10 |
Change in Unrealized Appreciation (Depreciation) | 1,004 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,231 |
1 Inception. | |
2 Dividends are net of foreign withholding taxes of $20,000. | |
3 Interest income from an affiliated company of the fund was $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
18
International Dividend Appreciation Index Fund
Statement of Changes in Net Assets
February 25, 20161 to | |
April 30, 2016 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 125 |
Realized Net Gain (Loss) | 102 |
Change in Unrealized Appreciation (Depreciation) | 1,004 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,231 |
Distributions | |
Net Investment Income | |
Investor Shares | — |
ETF Shares | (9) |
Admiral Shares | (4) |
Realized Capital Gain | |
Investor Shares | — |
ETF Shares | — |
Admiral Shares | — |
Total Distributions | (13) |
Capital Share Transactions | |
Investor Shares | 1,389 |
ETF Shares | 31,808 |
Admiral Shares | 15,069 |
Net Increase (Decrease) from Capital Share Transactions | 48,266 |
Total Increase (Decrease) | 49,484 |
Net Assets | |
Beginning of Period | — |
End of Period2 | 49,484 |
1 Inception. | |
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $107,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
19
International Dividend Appreciation Index Fund
Financial Highlights
Investor Shares | |
February 25, 20161 to | |
For a Share Outstanding Throughout the Period | April 30, 2016 |
Net Asset Value, Beginning of Period | $20.00 |
Investment Operations | |
Net Investment Income | .102 2 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.726 |
Total from Investment Operations | 1.828 |
Distributions | |
Dividends from Net Investment Income | (.018) |
Distributions from Realized Capital Gains | — |
Total Distributions | (. 018) |
Net Asset Value, End of Period | $21.81 |
Total Return3 | 9.14% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $1 |
Ratio of Total Expenses to Average Net Assets | 0.34% |
Ratio of Net Investment Income to Average Net Assets | 2.89% |
Portfolio Turnover Rate 4 | 36% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | |
1 Inception. | |
2 Calculated based on average shares outstanding. | |
3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. | |
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. | |
See accompanying Notes, which are an integral part of the Financial Statements.
20
International Dividend Appreciation Index Fund
Financial Highlights
ETF Shares | |
February 25, 20161 to | |
For a Share Outstanding Throughout the Period | April 30, 2016 |
Net Asset Value, Beginning of Period | $50.00 |
Investment Operations | |
Net Investment Income | . 344 2 |
Net Realized and Unrealized Gain (Loss) on Investments | 4.241 |
Total from Investment Operations | 4.585 |
Distributions | |
Dividends from Net Investment Income | (.045) |
Distributions from Realized Capital Gains | — |
Total Distributions | (. 045) |
Net Asset Value, End of Period | $54.54 |
Total Return | 9.17% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $33 |
Ratio of Total Expenses to Average Net Assets | 0.25% |
Ratio of Net Investment Income to Average Net Assets | 2.98% |
Portfolio Turnover Rate 3 | 36% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | |
1 Inception. | |
2 Calculated based on average shares outstanding. | |
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, | |
including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
21
International Dividend Appreciation Index Fund
Financial Highlights
Admiral Shares | |
March 2, 20161 to | |
For a Share Outstanding Throughout the Period | April 30, 2016 |
Net Asset Value, Beginning of Period | $25.00 |
Investment Operations | |
Net Investment Income | .123 2 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.399 |
Total from Investment Operations | 1.522 |
Distributions | |
Dividends from Net Investment Income | (.022) |
Distributions from Realized Capital Gains | — |
Total Distributions | (. 022) |
Net Asset Value, End of Period | $26.50 |
Total Return3 | 6.09% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $15 |
Ratio of Total Expenses to Average Net Assets | 0.25% |
Ratio of Net Investment Income to Average Net Assets | 2.98% |
Portfolio Turnover Rate 4 | 36% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. | |
1 Inception. | |
2 Calculated based on average shares outstanding. | |
3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. | |
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. | |
See accompanying Notes, which are an integral part of the Financial Statements.
22
International Dividend Appreciation Index Fund
Notes to Financial Statements
Vanguard International Dividend Appreciation Index 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 three classes of shares: Investor Shares, ETF Shares, and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.
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 acquired over 60 days to maturity 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. Other temporary cash investments are valued at amortized cost, which approximates market value.
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 objectives of maintaining full exposure to the stock market, enhancing returns, 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 fund may seek to enhance returns by using futures contracts instead of the underlying securities when futures are believed to be priced more attractively than the underlying securities. 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
23
International Dividend Appreciation Index Fund
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.
Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
During the six months ended April 30, 2016, 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 aggregate settlement values at each quarter-end during the period.
4. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for the period ended April 30, 2016, 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.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2016, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
24
International Dividend Appreciation 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.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At April 30, 2016, the fund had contributed to Vanguard capital in the amount of $2,000, representing 0.00% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. 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).
The following table summarizes the market value of the fund’s investments as of April 30, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—North and South America | 8,542 | — | — |
Common Stocks—Other | 706 | 39,962 | — |
Temporary Cash Investments | 1,629 | 100 | — |
Total | 10,877 | 40,062 | — |
D. At April 30, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Aggregate | ||||
Number of | Settlement | Unrealized | ||
Long (Short) | Value | Appreciation | ||
Futures Contracts | Expiration | Contracts | Long (Short) | (Depreciation) |
E-mini S&P 500 Index | June 2016 | 1 | 103 | — |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
25
International Dividend Appreciation Index Fund
E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
During the period ended April 30, 2016, the fund realized net foreign currency losses of $5,000, which decreased distributable net income for tax purposes; accordingly, such losses have been reclassified from accumulated net realized losses to undistributed net investment income.
At April 30, 2016, the cost of investment securities for tax purposes was $49,945,000. Net unrealized appreciation of investment securities for tax purposes was $994,000, consisting of unrealized gains of $1,327,000 on securities that had risen in value since their purchase and $333,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the period ended April 30, 2016, the fund purchased $51,000,000 of investment securities and sold $2,884,000 of investment securities, other than temporary cash investments
G. Capital share transactions for each class of shares were:
Period Ended April 30, 2016 | ||
Amount | Shares | |
($000) | (000) | |
Investor Shares1 | ||
Issued | 1,587 | 74 |
Issued in Lieu of Cash Distributions | 1 | — |
Redeemed | (199) | (9) |
Net Increase (Decrease)—Investor Shares | 1,389 | 65 |
ETF Shares1 | ||
Issued | 31,808 | 600 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | — | — |
Net Increase (Decrease)—ETF Shares | 31,808 | 600 |
Admiral Shares2 | ||
Issued | 15,848 | 609 |
Issued in Lieu of Cash Distributions | 3 | — |
Redeemed | (782) | (30) |
Net Increase (Decrease) —Admiral Shares | 15,069 | 579 |
1 Inception was February 25, 2016, for Investor Shares and ETF Shares. | ||
2 Inception was March 2, 2016, for Admiral Shares. |
H. Management has determined that no material events or transactions occurred subsequent to April 30, 2016, that would require recognition or disclosure in these financial statements.
26
International High Dividend Yield Index Fund
Fund Profile
As of April 30, 2016
Share-Class Characteristics | |||
Investor | ETF | Admiral | |
Shares | Shares | Shares | |
Ticker Symbol | VIHIX | VYMI | VIHAX |
Expense Ratio1 | 0.40% | 0.30% | 0.30% |
Portfolio Characteristics | ||
FTSE | ||
All-World | ||
ex US High | ||
Dividend Yield | ||
Fund | Index | |
Number of Stocks | 884 | 893 |
Median Market Cap | $43.6B | $43.6B |
Price/Earnings Ratio | 15.9x | 16.5x |
Price/Book Ratio | 1.3x | 1.3x |
Return on Equity | 15.2% | 15.3% |
Earnings Growth | ||
Rate | 3.4% | 3.6% |
Dividend Yield | 4.6% | 4.6% |
Turnover Rate | ||
(Annualized) | 42% | — |
Short-Term Reserves | 2.2% | — |
Sector Diversification (% of equity exposure) | ||
FTSE | ||
All-World | ||
ex US High | ||
Dividend Yield | ||
Fund | Index | |
Basic Materials | 5.2% | 5.5% |
Consumer Goods | 12.0 | 12.1 |
Consumer Services | 4.1 | 4.2 |
Financials | 36.6 | 36.4 |
Health Care | 7.7 | 7.7 |
Industrials | 9.2 | 9.1 |
Oil & Gas | 9.6 | 9.5 |
Technology | 2.7 | 2.7 |
Telecommunications | 7.2 | 7.2 |
Utilities | 5.7 | 5.6 |
Ten Largest Holdings (% of total net assets) | ||
Nestle SA | Food Products | 2.7% |
Royal Dutch Shell plc | Integrated Oil & Gas | 2.4 |
Roche Holding AG | Pharmaceuticals | 2.1 |
Novartis AG | Pharmaceuticals | 1.9 |
Toyota Motor Corp. | Automobiles | 1.6 |
HSBC Holdings plc | Banks | 1.5 |
British American | ||
Tobacco plc | Tobacco | 1.3 |
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. | Semiconductors | 1.3 |
TOTAL SA | Integrated Oil & Gas | 1.2 |
GlaxoSmithKline plc | Pharmaceuticals | 1.2 |
Top Ten | 17.2% | |
The holdings listed exclude any temporary cash investments and | ||
equity index products. |
Allocation by Region (% of equity exposure)
Investment Focus
1 The expense ratios shown are from the prospectus dated February 25, 2016, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2016, the annualized expense ratios were 0.39% for Investor Shares, 0.30% for ETF Shares, and 0.29% for Admiral Shares.
27
International High Dividend Yield Index Fund
Market Diversification (% of equity exposure) | ||
FTSE | ||
All-World | ||
ex US High | ||
Dividend | ||
Yield | ||
Fund | Index | |
Europe | ||
United Kingdom | 17.9% | 17.7% |
Switzerland | 10.1 | 10.0 |
France | 6.6 | 6.6 |
Germany | 6.5 | 6.5 |
Spain | 3.7 | 3.6 |
Sweden | 2.8 | 2.8 |
Italy | 2.5 | 2.5 |
Netherlands | 2.5 | 2.4 |
Finland | 1.1 | 1.1 |
Other | 2.0 | 2.1 |
Subtotal | 55.7% | 55.3% |
Pacific | ||
Australia | 8.0% | 8.0% |
Japan | 7.3 | 7.5 |
Hong Kong | 2.6 | 2.6 |
Singapore | 1.4 | 1.4 |
Other | 1.0 | 0.9 |
Subtotal | 20.3% | 20.4% |
Emerging Markets | ||
China | 4.5% | 4.5% |
Taiwan | 4.3 | 4.2 |
Brazil | 2.2 | 2.3 |
South Africa | 1.4 | 1.4 |
Russia | 1.0 | 1.1 |
Other | 3.3 | 3.7 |
Subtotal | 16.7% | 17.2% |
North America | ||
Canada | 7.1% | 7.0% |
Middle East | 0.2% | 0.1% |
28
International High Dividend Yield Index Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Fiscal-Period Total Returns (%): February 25, 2016, Through April 30, 2016
FTSE | ||
All-World | ||
ex US High | ||
Dividend Yield | ||
Investor Shares | Index | |
Fiscal Year | Total Returns | Total Returns |
2016 | 11.17% | 12.45% |
Note: For 2016, performance data reflect the six months ended April 30, 2016. |
Total Returns: Periods Ended March 31, 2016
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | Since | |
Date | Inception | |
Investor Shares | 2/25/2016 | 7.97% |
ETF Shares | 2/25/2016 | |
Market Price | 8.44 | |
Net Asset Value | 7.99 | |
Admiral Shares | 3/2/2016 | 4.56 |
See Financial Highlights for dividend and capital gains information.
29
International High Dividend Yield Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2016
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | ||
Value• | ||
Shares | ($000) | |
Common Stocks (100.0%) | ||
Australia (8.0%) | ||
Commonwealth | ||
Bank of Australia | 6,973 | 389 |
Westpac Banking Corp. | 13,658 | 321 |
National Australia Bank Ltd. | 10,783 | 221 |
Australia & New Zealand | ||
Banking Group Ltd. | 11,941 | 219 |
BHP Billiton Ltd. | 13,116 | 205 |
Wesfarmers Ltd. | 4,674 | 151 |
Woolworths Ltd. | 5,261 | 88 |
Transurban Group | 8,409 | 74 |
Telstra Corp. Ltd. | 17,113 | 70 |
Rio Tinto Ltd. | 1,702 | 66 |
Woodside Petroleum Ltd. | 2,936 | 63 |
Macquarie Group Ltd. | 1,247 | 60 |
Amcor Ltd. | 4,765 | 56 |
AMP Ltd. | 11,843 | 53 |
Suncorp Group Ltd. | 5,264 | 50 |
QBE Insurance Group Ltd. | 5,593 | 47 |
Insurance Australia | ||
Group Ltd. | 10,082 | 44 |
AGL Energy Ltd. | 2,750 | 38 |
APA Group | 4,758 | 32 |
Origin Energy Ltd. | 7,127 | 29 |
Caltex Australia Ltd. | 1,139 | 28 |
Aurizon Holdings Ltd. | 8,467 | 27 |
Medibank Pvt Ltd. | 11,242 | 27 |
Sonic Healthcare Ltd. | 1,774 | 26 |
ASX Ltd. | 769 | 25 |
James Hardie Industries plc | 1,794 | 25 |
Sydney Airport | 4,856 | 25 |
LendLease Group | 2,217 | 21 |
Coca-Cola Amatil Ltd. | 2,795 | 18 |
Orica Ltd. | 1,543 | 18 |
Challenger Ltd. | 2,564 | 17 |
Incitec Pivot Ltd. | 7,125 | 17 |
Asciano Ltd. | 2,554 | 17 |
Tatts Group Ltd. | 5,868 | 17 |
Boral Ltd. | 3,171 | 15 |
Market | ||
Value• | ||
Shares | ($000) | |
DUET Group | 8,972 | 15 |
Bendigo & Adelaide | ||
Bank Ltd. | 1,901 | 13 |
Bank of Queensland Ltd. | 1,520 | 13 |
Meridian Energy Ltd. | 6,462 | 12 |
CIMIC Group Ltd. | 441 | 12 |
Tabcorp Holdings Ltd. | 3,325 | 11 |
Computershare Ltd. | 1,423 | 11 |
Adelaide Brighton Ltd. | 2,592 | 10 |
Alumina Ltd. | 8,826 | 10 |
AusNet Services | 8,387 | 10 |
Orora Ltd. | 4,315 | 9 |
IOOF Holdings Ltd. | 1,182 | 8 |
ALS Ltd. | 2,209 | 8 |
Macquarie Atlas | ||
Roads Group | 2,066 | 8 |
Recall Holdings Ltd. | 1,206 | 8 |
Magellan Financial Group Ltd. | 400 | 7 |
Harvey Norman Holdings Ltd. | 1,909 | 6 |
Fairfax Media Ltd. | 9,240 | 6 |
DuluxGroup Ltd. | 1,120 | 5 |
CSR Ltd. | 2,056 | 5 |
Sims Metal Management Ltd. | 714 | 5 |
WorleyParsons Ltd. | 952 | 5 |
Downer EDI Ltd. | 1,773 | 5 |
Flight Centre Travel | ||
Group Ltd. | 160 | 5 |
Seven West Media Ltd. | 4,348 | 3 |
Platinum Asset | ||
Management Ltd. | 676 | 3 |
Perpetual Ltd. | 93 | 3 |
New Hope Corp. Ltd. | 1,315 | 1 |
2,816 | ||
Austria (0.1%) | ||
OMV AG | 636 | 19 |
voestalpine AG | 377 | 14 |
Vienna Insurance Group AG | ||
Wiener Versicherung Gruppe | 139 | 3 |
36 |
30
International High Dividend Yield Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Belgium (0.5%) | |||
KBC Groep NV | 1,123 | 63 | |
Ageas | 795 | 31 | |
Solvay SA Class A | 263 | 27 | |
Groupe Bruxelles Lambert SA | 289 | 26 | |
Proximus SADP | 454 | 15 | |
bpost SA | 402 | 12 | |
* | Telenet Group Holding NV | 167 | 8 |
182 | |||
Brazil (2.2%) | |||
Itau Unibanco Holding | |||
SA ADR | 9,224 | 88 | |
Ambev SA ADR | 13,700 | 77 | |
* | Petroleo Brasileiro SA | ||
ADR Type A | 11,848 | 70 | |
Banco Bradesco SA ADR | 7,352 | 55 | |
Banco Bradesco SA | 4,900 | 40 | |
Itausa - Investimentos Itau | |||
SA Preference Shares | 14,600 | 37 | |
* | Petroleo Brasileiro SA ADR | 4,616 | 36 |
BM&FBovespa SA - Bolsa | |||
de Valores Mercadorias | |||
e Futuros | 7,100 | 36 | |
Itau Unibanco Holding SA | |||
Preference Shares | 3,200 | 31 | |
Vale SA Class B ADR | 4,784 | 27 | |
Vale SA Class B Pref. ADR | 5,964 | 27 | |
Ambev SA | 4,500 | 25 | |
Banco do Brasil SA | 3,600 | 23 | |
Kroton Educacional SA | 6,200 | 23 | |
BB Seguridade | |||
Participacoes SA | 2,400 | 21 | |
CCR SA | 3,400 | 16 | |
Telefonica Brasil SA ADR | 1,136 | 14 | |
Banco Bradesco SA | |||
Preference Shares | 1,620 | 12 | |
Tractebel Energia SA | 1,000 | 11 | |
Banco Santander Brasil SA | 1,800 | 10 | |
CETIP SA - Mercados | |||
Organizados | 752 | 9 | |
JBS SA | 2,800 | 7 | |
Vale SA Preference Shares | 1,500 | 7 | |
CPFL Energia SA | 1,100 | 6 | |
* | Petroleo Brasileiro SA | ||
Preference Shares | 2,100 | 6 | |
BTG Pactual Group | 1,000 | 6 | |
Telefonica Brasil SA | |||
Preference Shares | 400 | 5 | |
Sul America SA | 1,000 | 5 | |
Braskem SA ADR | 320 | 5 | |
Cia Energetica de Minas | |||
Gerais ADR | 2,228 | 4 | |
TOTVS SA | 500 | 4 | |
Vale SA | 700 | 4 | |
Cia Energetica de Sao Paulo | |||
Preference Shares | 900 | 4 |
Market | |||
Value• | |||
Shares | ($000) | ||
Natura Cosmeticos SA | 500 | 4 | |
EDP - Energias do Brasil SA | 900 | 3 | |
Porto Seguro SA | 400 | 3 | |
Centrais Eletricas Brasileiras | |||
SA Preference Shares | 800 | 3 | |
AES Tiete Energia SA | 600 | 2 | |
Cia Paranaense de | |||
Energia ADR | 296 | 2 | |
Centrais Eletricas Brasileiras | |||
SA ADR | 656 | 2 | |
Estacio Participacoes SA | 700 | 2 | |
Multiplus SA | 200 | 2 | |
* | Centrais Eletricas | ||
Brasileiras SA | 800 | 2 | |
Transmissora Alianca de | |||
Energia Eletrica SA | 300 | 2 | |
Cia de Transmissao de | |||
Energia Eletrica Paulista | |||
Preference Shares | 100 | 2 | |
Cia Paranaense de Energia | 300 | 2 | |
Cia Energetica de Minas | |||
Gerais Preference Shares | 800 | 2 | |
CPFL Energia SA ADR | 132 | 2 | |
Cia Energetica de | |||
Minas Gerais | 700 | 1 | |
Cia de Gas de Sao Paulo | |||
COMGAS Preference | |||
Shares Class A | 100 | 1 | |
Smiles SA | 100 | 1 | |
* | Cia de Transmissao de | ||
Energia Eletrica Paulista | |||
Preference Shares Temp Line | 2 | — | |
* | Cia de Gas de Sao Paulo | ||
COMGAS Preference | |||
Shares Class A Rights | |||
Exp. 05/27/2016 | 2 | — | |
789 | |||
Canada (7.0%) | |||
Royal Bank of Canada | 6,072 | 377 | |
Toronto-Dominion Bank | 7,601 | 338 | |
Bank of Nova Scotia | 4,931 | 259 | |
Bank of Montreal | 2,680 | 175 | |
Enbridge Inc. | 3,844 | 160 | |
Canadian Imperial | |||
Bank of Commerce | 1,700 | 137 | |
TransCanada Corp. | 2,932 | 122 | |
Manulife Financial Corp. | 8,100 | 119 | |
Sun Life Financial Inc. | 2,464 | 84 | |
Potash Corp. of | |||
Saskatchewan Inc. | 3,380 | 60 | |
Thomson Reuters Corp. | 1,380 | 57 | |
Rogers Communications Inc. | |||
Class B | 1,448 | 56 | |
BCE Inc. | 1,176 | 55 | |
Agrium Inc. | 600 | 52 | |
National Bank of Canada | 1,428 | 51 |
31
International High Dividend Yield Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Pembina Pipeline Corp. | 1,568 | 47 |
Fortis Inc. | 1,200 | 38 |
Power Corp. of Canada | 1,504 | 37 |
Crescent Point Energy Corp. | 2,152 | 36 |
Great-West Lifeco Inc. | 1,156 | 34 |
Shaw Communications Inc. | ||
Class B | 1,676 | 31 |
Inter Pipeline Ltd. | 1,364 | 29 |
Power Financial Corp. | 1,000 | 26 |
ARC Resources Ltd. | 1,492 | 25 |
TELUS Corp. | 780 | 25 |
Canadian Utilities Ltd. Class A | 800 | 23 |
CI Financial Corp. | 880 | 19 |
IGM Financial Inc. | 380 | 12 |
2,484 | ||
Chile (0.2%) | ||
Enersis Americas SA ADR | 1,486 | 13 |
Banco Santander Chile ADR | 615 | 12 |
AES Gener SA | 19,007 | 10 |
Enersis Chile SA ADR | 1,486 | 9 |
Colbun SA | 33,955 | 9 |
Sociedad Quimica y | ||
Minera de Chile SA | ||
Preference Shares Class B | 351 | 8 |
Banco de Credito | ||
e Inversiones | 169 | 7 |
Banco de Chile | 63,605 | 7 |
Itau CorpBanca | 637,779 | 6 |
Aguas Andinas SA Class A | 9,197 | 5 |
86 | ||
China (4.5%) | ||
China Mobile Ltd. | 21,500 | 247 |
China Construction | ||
Bank Corp. | 378,000 | 240 |
Industrial & Commercial | ||
Bank of China Ltd. | 296,000 | 158 |
Bank of China Ltd. | 310,000 | 125 |
China Petroleum | ||
& Chemical Corp. | 106,000 | 75 |
China Merchants | ||
Bank Co. Ltd. | 18,500 | 41 |
Agricultural Bank | ||
of China Ltd. | 106,000 | 38 |
PICC Property | ||
& Casualty Co. Ltd. | 16,000 | 29 |
Hengan International | ||
Group Co. Ltd. | 3,000 | 27 |
China Minsheng | ||
Banking Corp. Ltd. | 26,500 | 25 |
China Shenhua | ||
Energy Co. Ltd. | 14,000 | 24 |
Haitong Securities Co. Ltd. | 14,000 | 23 |
Bank of Communications | ||
Co. Ltd. | 35,000 | 22 |
China Communications | ||
Construction Co. Ltd. | 17,000 | 20 |
Market | |||
Value• | |||
Shares | ($000) | ||
China CITIC Bank Corp. Ltd. | 30,000 | 19 | |
CITIC Securities Co. Ltd. | 8,500 | 19 | |
1 | Dalian Wanda Commercial | ||
Properties Co. Ltd. | 2,800 | 18 | |
China Merchants Holdings | |||
International Co. Ltd. | 6,000 | 18 | |
Guangdong Investment Ltd. | 12,000 | 17 | |
China Resources Power | |||
Holdings Co. Ltd. | 10,000 | 17 | |
Huaneng Power | |||
International Inc. | 22,000 | 16 | |
GF Securities Co. Ltd. | 6,200 | 14 | |
China Cinda Asset | |||
Management Co. Ltd. | 42,000 | 14 | |
1 | China Galaxy Securities | ||
Co. Ltd. | 15,500 | 14 | |
China Vanke Co. Ltd. | 5,300 | 13 | |
Beijing Enterprises | |||
Holdings Ltd. | 2,500 | 13 | |
Anhui Conch Cement | |||
Co. Ltd. | 4,500 | 12 | |
Evergrande Real Estate | |||
Group Ltd. | 16,000 | 12 | |
Guangzhou Automobile | |||
Group Co. Ltd. | 10,000 | 12 | |
Belle International | |||
Holdings Ltd. | 19,000 | 12 | |
Country Garden | |||
Holdings Co. Ltd. | 29,000 | 11 | |
ANTA Sports Products Ltd. | 4,000 | 10 | |
Far East Horizon Ltd. | 12,000 | 9 | |
COSCO Pacific Ltd. | 8,000 | 8 | |
Longfor Properties Co. Ltd. | 6,000 | 8 | |
Great Wall Motor Co. Ltd. | 11,000 | 8 | |
China Everbright Ltd. | 4,000 | 8 | |
China Power International | |||
Development Ltd. | 18,000 | 8 | |
Guangzhou R&F | |||
Properties Co. Ltd. | 5,200 | 7 | |
Shimao Property | |||
Holdings Ltd. | 5,000 | 7 | |
Shanghai Industrial | |||
Holdings Ltd. | 3,000 | 7 | |
Shenzhen International | |||
Holdings Ltd. | 4,000 | 7 | |
Huadian Power International | |||
Corp. Ltd. | 12,000 | 6 | |
Zhejiang Expressway | |||
Co. Ltd. | 6,000 | 6 | |
Sino-Ocean Land | |||
Holdings Ltd. | 13,500 | 6 | |
Zijin Mining Group Co. Ltd. | 18,000 | 6 | |
Sinopec Shanghai | |||
Petrochemical Co. Ltd. | 12,000 | 6 | |
Chongqing Rural | |||
Commercial Bank Co. Ltd. | 11,000 | 6 |
32
International High Dividend Yield Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Kingboard Chemical | |||
Holdings Ltd. | 3,000 | 6 | |
Sunac China Holdings Ltd. | 9,000 | 6 | |
China Jinmao Holdings | |||
Group Ltd. | 20,000 | 6 | |
Shenzhen Investment Ltd. | 14,000 | 6 | |
GOME Electrical Appliances | |||
Holding Ltd. | 43,000 | 5 | |
Jiangsu Expressway | |||
Co. Ltd. | 4,000 | 5 | |
Datang International Power | |||
Generation Co. Ltd. | 18,000 | 5 | |
Beijing Jingneng Clean | |||
Energy Co. Ltd. | 16,000 | 5 | |
China Everbright Bank | |||
Co. Ltd. | 11,000 | 5 | |
Agile Property Holdings Ltd. | 8,000 | 5 | |
1 | Fuyao Glass Industry | ||
Group Co. Ltd. | 2,000 | 4 | |
Chongqing Changan | |||
Automobile Co. Ltd. | |||
Class B | 2,500 | 4 | |
Guangdong Electric Power | |||
Development Co. Ltd. | |||
Class B | 7,600 | 4 | |
Sinotrans Ltd. | 9,000 | 4 | |
Yuexiu Property Co. Ltd. | 28,000 | 4 | |
Lee & Man Paper | |||
Manufacturing Ltd. | 6,000 | 4 | |
KWG Property Holding Ltd. | 6,000 | 4 | |
*,1 | China Huarong Asset | ||
Management Co. Ltd. | 11,000 | 4 | |
China Communications | |||
Services Corp. Ltd. | 8,000 | 4 | |
1 | Sinopec Engineering | ||
Group Co. Ltd. | 4,000 | 4 | |
Huishang Bank Corp. Ltd. | 7,000 | 3 | |
1 | BAIC Motor Corp. Ltd. | 4,000 | 3 |
Huadian Fuxin Energy | |||
Corp. Ltd. | 14,000 | 3 | |
SOHO China Ltd. | 6,000 | 3 | |
* | Greentown China | ||
Holdings Ltd. | 3,500 | 3 | |
1 | Red Star Macalline | ||
Group Corp. Ltd. | 2,200 | 2 | |
China Zhongwang | |||
Holdings Ltd. | 4,400 | 2 | |
China Resources Cement | |||
Holdings Ltd. | 6,000 | 2 | |
Shenzhen Expressway | |||
Co. Ltd. | 2,000 | 2 | |
China International Marine | |||
Containers Group Co. Ltd. | 1,100 | 2 | |
Xinjiang Goldwind Science | |||
& Technology Co. Ltd. | 1,000 | 2 | |
Anhui Expressway Co. Ltd. | 2,000 | 2 |
Market | ||
Value• | ||
Shares | ($000) | |
CSG Holding Co. Ltd. | ||
Class B | 1,900 | 2 |
Kingboard Laminates | ||
Holdings Ltd. | 3,000 | 2 |
China South City | ||
Holdings Ltd. | 8,000 | 2 |
Lao Feng Xiang Co. Ltd. | ||
Class B | 400 | 1 |
China Hongqiao Group Ltd. | 2,000 | 1 |
China Dongxiang Group | ||
Co. Ltd. | 7,000 | 1 |
Sichuan Expressway Co. Ltd. | 4,000 | 1 |
China BlueChemical Ltd. | 4,000 | 1 |
Inner Mongolia Yitai Coal | ||
Co. Ltd. Class B | 100 | — |
1,602 | ||
Colombia (0.1%) | ||
Bancolombia SA ADR | 448 | 17 |
Ecopetrol SA ADR | 917 | 9 |
Grupo Aval Acciones | ||
y Valores SA ADR | 752 | 6 |
Almacenes Exito SA | 1,059 | 6 |
Corp Financiera | ||
Colombiana SA | 403 | 6 |
Interconexion Electrica | ||
SA ESP | 1,769 | 5 |
Ecopetrol SA | 3,607 | 2 |
Grupo Aval Acciones | ||
y Valores Preference Shares | 3,640 | 2 |
53 | ||
Czech Republic (0.1%) | ||
Komercni banka as | 52 | 11 |
CEZ AS | 544 | 10 |
21 | ||
Denmark (0.3%) | ||
Danske Bank A/S | 3,148 | 89 |
TDC A/S | 3,051 | 15 |
Tryg A/S | 407 | 8 |
112 | ||
Egypt (0.1%) | ||
Commercial International | ||
Bank Egypt SAE | 4,393 | 22 |
Talaat Moustafa Group | 6,981 | 5 |
Telecom Egypt Co. | 3,577 | 3 |
Sidi Kerir Petrochemicals Co. | 1,624 | 3 |
ElSewedy Electric Co. | 356 | 2 |
* Orascom Construction Ltd. | 217 | 1 |
36 | ||
Finland (1.1%) | ||
Sampo Oyj Class A | 1,954 | 85 |
Kone Oyj Class B | 1,521 | 69 |
UPM-Kymmene Oyj | 2,193 | 42 |
Fortum Oyj | 1,959 | 30 |
Wartsila OYJ Abp | 607 | 26 |
Elisa Oyj | 685 | 26 |
33
International High Dividend Yield Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Stora Enso Oyj | 2,513 | 22 |
Nokian Renkaat Oyj | 546 | 20 |
Neste Oyj | 616 | 20 |
Orion Oyj Class B | 427 | 15 |
Metso Oyj | 554 | 13 |
Kesko Oyj Class B | 317 | 13 |
381 | ||
France (6.6%) | ||
TOTAL SA | 8,591 | 434 |
Sanofi | 4,610 | 380 |
BNP Paribas SA | 4,035 | 214 |
AXA SA | 7,919 | 200 |
Schneider Electric SE | 2,250 | 147 |
Orange SA | 7,805 | 130 |
Societe Generale SA | 3,012 | 118 |
Engie SA | 5,856 | 97 |
Vivendi SA | 4,762 | 91 |
Cie de Saint-Gobain | 1,810 | 83 |
Cie Generale des | ||
Etablissements Michelin | 734 | 77 |
Credit Agricole SA | 4,307 | 48 |
Veolia Environnement SA | 1,902 | 47 |
SES SA | 1,171 | 32 |
Technip SA | 461 | 27 |
Bouygues SA | 795 | 26 |
Suez Environnement Co. | 1,219 | 22 |
SCOR SE | 643 | 22 |
Natixis SA | 3,751 | 21 |
Eutelsat Communications SA | 642 | 20 |
Rexel SA | 1,246 | 19 |
STMicroelectronics NV | 2,478 | 15 |
Edenred | 757 | 15 |
Electricite de France SA | 1,036 | 15 |
Casino Guichard Perrachon SA | 245 | 15 |
CNP Assurances | 733 | 12 |
Lagardere SCA | 436 | 11 |
Euler Hermes Group | 53 | 5 |
2,343 | ||
Germany (6.5%) | ||
Siemens AG | 3,148 | 329 |
Allianz SE | 1,868 | 318 |
BASF SE | 3,756 | 311 |
Daimler AG | 3,919 | 273 |
Deutsche Telekom AG | 12,842 | 225 |
Bayerische Motoren | ||
Werke AG | 1,329 | 123 |
Deutsche Post AG | 3,996 | 117 |
Muenchener | ||
Rueckversicherungs- | ||
Gesellschaft AG in | ||
Muenchen | 600 | 112 |
E.ON SE | 7,798 | 81 |
Vonovia SE | 1,941 | 65 |
ProSiebenSat.1 Media SE | 883 | 45 |
Commerzbank AG | 4,295 | 40 |
Market | |||
Value• | |||
Shares | ($000) | ||
Porsche Automobil Holding | |||
SE Preference Shares | 656 | 37 | |
Hannover Rueck SE | 253 | 29 | |
METRO AG | 757 | 24 | |
RWE AG | 1,544 | 23 | |
K&S AG | 782 | 20 | |
Bayerische Motoren Werke | |||
AG Preference Shares | 225 | 18 | |
Evonik Industries AG | 534 | 17 | |
HUGO BOSS AG | 261 | 17 | |
Deutsche Lufthansa AG | 1,022 | 16 | |
RTL Group SA | 157 | 13 | |
Telefonica Deutschland | |||
Holding AG | 2,501 | 13 | |
MAN SE | 110 | 12 | |
Axel Springer SE | 187 | 10 | |
RWE AG Preference Shares | 783 | 9 | |
Talanx AG | 222 | 7 | |
2,304 | |||
Greece (0.0%) | |||
OPAP SA | 599 | 5 | |
* | Hellenic Petroleum SA | 299 | 1 |
6 | |||
Hong Kong (2.7%) | |||
Hong Kong Exchanges | |||
and Clearing Ltd. | 4,800 | 121 | |
Sun Hung Kai Properties Ltd. | 7,000 | 88 | |
Cheung Kong Property | |||
Holdings Ltd. | 11,500 | 79 | |
CLP Holdings Ltd. | 6,500 | 60 | |
Hang Seng Bank Ltd. | 3,100 | 56 | |
Power Assets Holdings Ltd. | 5,500 | 52 | |
BOC Hong Kong | |||
Holdings Ltd. | 15,000 | 45 | |
Sands China Ltd. | 9,600 | 34 | |
Wharf Holdings Ltd. | 6,000 | 32 | |
MTR Corp. Ltd. | 5,500 | 27 | |
Swire Pacific Ltd. Class A | 2,500 | 27 | |
New World | |||
Development Co. Ltd. | 27,000 | 27 | |
Sino Land Co. Ltd. | 14,000 | 22 | |
Want Want China | |||
Holdings Ltd. | 26,000 | 20 | |
Wheelock & Co. Ltd. | 4,000 | 19 | |
Hang Lung Properties Ltd. | 9,000 | 18 | |
Bank of East Asia Ltd. | 4,800 | 17 | |
Hysan Development Co. Ltd. | 3,000 | 13 | |
Li & Fung Ltd. | 20,000 | 12 | |
Hang Lung Group Ltd. | 4,000 | 12 | |
PCCW Ltd. | 17,000 | 12 | |
Yue Yuen Industrial | |||
Holdings Ltd. | 3,000 | 11 | |
Kerry Properties Ltd. | 4,000 | 11 | |
NWS Holdings Ltd. | 7,000 | 11 | |
Hopewell Holdings Ltd. | 3,000 | 10 |
34
International High Dividend Yield Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Tingyi Cayman Islands | |||
Holding Corp. | 8,000 | 9 | |
ASM Pacific Technology Ltd. | 1,000 | 7 | |
Cathay Pacific Airways Ltd. | 4,000 | 6 | |
VTech Holdings Ltd. | 600 | 6 | |
Cafe de Coral Holdings Ltd. | 2,000 | 6 | |
Orient Overseas | |||
International Ltd. | 1,500 | 6 | |
Dah Sing Financial | |||
Holdings Ltd. | 800 | 6 | |
Xinyi Glass Holdings Ltd. | 8,000 | 5 | |
First Pacific Co. Ltd. | 8,000 | 5 | |
Television Broadcasts Ltd. | 1,300 | 5 | |
Xinyi Solar Holdings Ltd. | 12,000 | 5 | |
Shun Tak Holdings Ltd. | 14,000 | 5 | |
Haitong International | |||
Securities Group Ltd. | 8,000 | 5 | |
SJM Holdings Ltd. | 6,000 | 4 | |
Guotai Junan International | |||
Holdings Ltd. | 11,000 | 4 | |
Huabao International | |||
Holdings Ltd. | 8,000 | 3 | |
Lifestyle International | |||
Holdings Ltd. | 1,500 | 3 | |
Chow Tai Fook Jewellery | |||
Group Ltd. | 3,200 | 2 | |
Texwinca Holdings Ltd. | 2,000 | 2 | |
Kowloon Development | |||
Co. Ltd. | 2,000 | 2 | |
Hutchison | |||
Telecommunications | |||
Hong Kong Holdings Ltd. | 4,000 | 1 | |
SA Sa International | |||
Holdings Ltd. | 4,000 | 1 | |
Hopewell Highway | |||
Infrastructure Ltd. | 2,000 | 1 | |
935 | |||
Hungary (0.1%) | |||
OTP Bank plc | 837 | 22 | |
MOL Hungarian Oil & Gas plc | 224 | 14 | |
Magyar Telekom | |||
Telecommunications plc | 1,192 | 2 | |
38 | |||
Indonesia (0.2%) | |||
Telekomunikasi Indonesia | |||
Persero Tbk PT | 210,800 | 57 | |
Indocement Tunggal | |||
Prakarsa Tbk PT | 6,800 | 10 | |
Perusahaan Gas Negara | |||
Persero Tbk | 47,100 | 9 | |
United Tractors Tbk PT | 6,500 | 7 | |
Tambang Batubara Bukit | |||
Asam Persero Tbk PT | 4,500 | 3 | |
* | Vale Indonesia Tbk PT | 9,100 | 1 |
87 |
Market | ||
Value• | ||
Shares | ($000) | |
Ireland (0.1%) | ||
* Bank of Ireland | 111,583 | 34 |
Israel (0.2%) | ||
Bezeq The Israeli | ||
Telecommunication | ||
Corp. Ltd. | 8,744 | 18 |
Israel Chemicals Ltd. | 2,146 | 11 |
Amot Investments Ltd. | 1,697 | 6 |
Paz Oil Co. Ltd. | 32 | 5 |
Gazit-Globe Ltd. | 494 | 5 |
Harel Insurance | ||
Investments & Financial | ||
Services Ltd. | 1,050 | 4 |
Shikun & Binui Ltd. | 2,056 | 4 |
Israel Corp. Ltd. | 19 | 4 |
Migdal Insurance & | ||
Financial Holding Ltd. | 2,097 | 1 |
58 | ||
Italy (2.5%) | ||
Eni SPA | 10,216 | 167 |
Enel SPA | 31,205 | 142 |
Intesa Sanpaolo SPA | ||
(Registered) | 45,731 | 127 |
UniCredit SPA | 20,177 | 78 |
Assicurazioni Generali SPA | 5,078 | 78 |
Snam SPA | 10,182 | 62 |
Atlantia SPA | 1,945 | 54 |
Terna Rete Elettrica | ||
Nazionale SPA | 5,771 | 32 |
Tenaris SA | 1,995 | 27 |
Intesa Sanpaolo SPA | 7,652 | 20 |
Mediobanca SPA | 2,282 | 19 |
Telecom Italia SPA (Bearer) | 23,797 | 19 |
Unione di Banche | ||
Italiane SPA | 3,443 | 15 |
Banco Popolare SC | 1,555 | 11 |
UnipolSai SPA | 3,628 | 8 |
Banca Mediolanum SPA | 923 | 8 |
FinecoBank Banca | ||
Fineco SPA | 762 | 6 |
873 | ||
Japan (7.3%) | ||
Toyota Motor Corp. | 11,300 | 573 |
Mitsubishi UFJ Financial | ||
Group Inc. | 57,100 | 263 |
Honda Motor Co. Ltd. | 7,400 | 200 |
Sumitomo Mitsui Financial | ||
Group Inc. | 5,400 | 162 |
Mizuho Financial Group Inc. | 102,500 | 154 |
Takeda Pharmaceutical | ||
Co. Ltd. | 3,200 | 153 |
Canon Inc. | 4,100 | 115 |
Nissan Motor Co. Ltd. | 10,400 | 92 |
Mitsui & Co. Ltd. | 7,000 | 85 |
Fuji Heavy Industries Ltd. | 2,500 | 82 |
35
International High Dividend Yield Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
ITOCHU Corp. | 5,900 | 75 | |
Nomura Holdings Inc. | 14,100 | 60 | |
Sumitomo Corp. | 4,900 | 52 | |
Sumitomo Mitsui Trust | |||
Holdings Inc. | 16,000 | 49 | |
JX Holdings Inc. | 10,500 | 45 | |
Sekisui House Ltd. | 2,400 | 42 | |
Daiwa Securities Group Inc. | 7,000 | 41 | |
Marubeni Corp. | 7,000 | 37 | |
Resona Holdings Inc. | 9,000 | 32 | |
Japan Post Bank Co. Ltd. | 1,700 | 21 | |
Dai Nippon Printing Co. Ltd. | 2,000 | 19 | |
Yamaha Motor Co. Ltd. | 1,100 | 18 | |
Aozora Bank Ltd. | 5,000 | 18 | |
Chugoku Electric | |||
Power Co. Inc. | 1,300 | 17 | |
Kawasaki Heavy | |||
Industries Ltd. | 6,000 | 17 | |
Japan Airlines Co. Ltd. | 300 | 11 | |
Hino Motors Ltd. | 1,100 | 11 | |
Kobe Steel Ltd. | 11,000 | 10 | |
Showa Shell Sekiyu KK | 1,000 | 10 | |
Sojitz Corp. | 5,100 | 10 | |
TonenGeneral Sekiyu KK | 1,000 | 9 | |
DIC Corp. | 4,000 | 9 | |
Sony Financial Holdings Inc. | 700 | 9 | |
Aoyama Trading Co. Ltd. | 200 | 7 | |
Hitachi Construction | |||
Machinery Co. Ltd. | 400 | 6 | |
NTN Corp. | 2,000 | 6 | |
Senshu Ikeda Holdings Inc. | 1,500 | 6 | |
Okasan Securities Group Inc. | 1,000 | 5 | |
North Pacific Bank Ltd. | 1,900 | 5 | |
Hitachi Capital Corp. | 200 | 4 | |
Tokai Tokyo Financial | |||
Holdings Inc. | 800 | 4 | |
Sanrio Co. Ltd. | 200 | 4 | |
Sankyo Co. Ltd. | 100 | 4 | |
Mitsui Mining & | |||
Smelting Co. Ltd. | 2,000 | 4 | |
Matsui Securities Co. Ltd. | 200 | 2 | |
2,558 | |||
Malaysia (0.7%) | |||
Malayan Banking Bhd. | 22,100 | 50 | |
Sime Darby Bhd. | 14,400 | 28 | |
CIMB Group Holdings Bhd. | 23,500 | 28 | |
Axiata Group Bhd. | 17,500 | 25 | |
Maxis Bhd. | 10,900 | 16 | |
DiGi.Com Bhd. | 12,900 | 14 | |
AMMB Holdings Bhd. | 9,800 | 11 | |
YTL Corp. Bhd. | 25,100 | 10 | |
Telekom Malaysia Bhd. | 3,900 | 7 | |
Westports Holdings Bhd. | 5,800 | 6 | |
YTL Power International Bhd. | 15,500 | 6 | |
1 | Astro Malaysia Holdings Bhd. | 8,400 | 6 |
Market | |||
Value• | |||
Shares | ($000) | ||
British American Tobacco | |||
Malaysia Bhd. | 500 | 6 | |
Alliance Financial Group Bhd. | 5,600 | 6 | |
KLCCP Stapled Group | 3,100 | 6 | |
UMW Holdings Bhd. | 2,700 | 5 | |
Lafarge Malaysia Bhd. | 1,900 | 4 | |
SP Setia Bhd Group | 4,700 | 4 | |
Berjaya Sports Toto Bhd. | 2,600 | 2 | |
240 | |||
Mexico (0.1%) | |||
Grupo Aeroportuario del | |||
Pacifico SAB de CV Class B | 1,400 | 13 | |
Grupo Financiero Santander | |||
Mexico SAB de CV Class B | 6,300 | 11 | |
Kimberly-Clark de Mexico | |||
SAB de CV Class A | 2,800 | 7 | |
Grupo Sanborns SAB de CV | 1,200 | 2 | |
Infraestructura Energetica | |||
Nova SAB de CV | 400 | 2 | |
35 | |||
Netherlands (2.5%) | |||
Unilever NV | 6,170 | 269 | |
ING Groep NV | 15,960 | 196 | |
Koninklijke Philips NV | 3,877 | 107 | |
Koninklijke KPN NV | 12,842 | 50 | |
NN Group NV | 1,401 | 49 | |
Aegon NV | 7,910 | 45 | |
Koninklijke DSM NV | 703 | 43 | |
ArcelorMittal | 6,813 | 38 | |
Randstad Holding NV | 515 | 28 | |
1 | ABN AMRO Group NV | 1,021 | 22 |
Boskalis Westminster | 361 | 15 | |
* | OCI NV | 328 | 6 |
868 | |||
New Zealand (0.2%) | |||
Spark New Zealand Ltd. | 7,231 | 19 | |
Fletcher Building Ltd. | 2,703 | 16 | |
Contact Energy Ltd. | 3,047 | 11 | |
SKYCITY Entertainment | |||
Group Ltd. | 2,122 | 7 | |
Mighty River Power Ltd. | 2,786 | 6 | |
SKY Network Television Ltd. | 1,541 | 6 | |
Air New Zealand Ltd. | 2,214 | 4 | |
Vector Ltd. | 1,418 | 3 | |
Warehouse Group Ltd. | 713 | 1 | |
73 | |||
Norway (0.8%) | |||
Statoil ASA | 3,992 | 70 | |
DNB ASA | 4,403 | 56 | |
Telenor ASA | 2,800 | 48 | |
Orkla ASA | 3,370 | 29 | |
Yara International ASA | 690 | 28 | |
Marine Harvest ASA | 1,632 | 26 | |
Gjensidige Forsikring ASA | 700 | 12 | |
269 |
36
International High Dividend Yield Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Pakistan (0.1%) | ||
Oil & Gas Development | ||
Co. Ltd. | 6,000 | 8 |
Fauji Fertilizer Co. Ltd. | 7,100 | 7 |
Pakistan Petroleum Ltd. | 4,400 | 6 |
National Bank of Pakistan | 7,000 | 4 |
25 | ||
Philippines (0.1%) | ||
Philippine Long Distance | ||
Telephone Co. | 310 | 11 |
Aboitiz Power Corp. | 11,200 | 11 |
Manila Electric Co. | 1,290 | 10 |
Globe Telecom Inc. | 110 | 5 |
37 | ||
Poland (0.4%) | ||
Polski Koncern Naftowy | ||
ORLEN SA | 1,304 | 24 |
Powszechna Kasa | ||
Oszczednosci Bank | ||
Polski SA | 3,192 | 20 |
Bank Pekao SA | 487 | 20 |
Powszechny Zaklad | ||
Ubezpieczen SA | 1,989 | 18 |
PGE Polska Grupa | ||
Energetyczna SA | 2,953 | 10 |
KGHM Polska Miedz SA | 486 | 10 |
Polskie Gornictwo Naftowe | ||
i Gazownictwo SA | 6,142 | 8 |
Bank Zachodni WBK SA | 102 | 7 |
Energa SA | 1,407 | 5 |
Tauron Polska Energia SA | 4,844 | 4 |
* mBank SA | 36 | 3 |
Asseco Poland SA | 163 | 2 |
Orange Polska SA | 1,338 | 2 |
Enea SA | 622 | 2 |
Bank Handlowy w | ||
Warszawie SA | 96 | 2 |
Synthos SA | 1,487 | 2 |
Budimex SA | 27 | 1 |
140 | ||
Portugal (0.2%) | ||
EDP - Energias de | ||
Portugal SA | 9,113 | 32 |
Galp Energia SGPS SA | 2,117 | 29 |
61 | ||
Russia (1.0%) | ||
Gazprom PAO ADR | 13,332 | 69 |
Lukoil PJSC ADR | 1,221 | 52 |
Gazprom PAO | 17,940 | 47 |
Lukoil PJSC | 794 | 34 |
Tatneft PAO ADR | 889 | 28 |
Rosneft OAO GDR | 4,633 | 25 |
Surgutneftegas OAO | ||
Preference Shares | 30,600 | 20 |
Market | |||
Value• | |||
Shares | ($000) | ||
Mobile TeleSystems | |||
PJSC ADR | 1,958 | 18 | |
Moscow Exchange | |||
MICEX-RTS PJSC | 4,370 | 7 | |
MMC Norilsk Nickel | |||
PJSC ADR | 420 | 6 | |
Severstal PAO GDR | 442 | 5 | |
Alrosa PAO | 4,200 | 5 | |
Rostelecom PJSC | 2,810 | 4 | |
PhosAgro OAO GDR | 244 | 4 | |
* | Bashneft PAO | ||
Preference Shares | 131 | 4 | |
Tatneft PAO | |||
Preference Shares | 1,100 | 3 | |
Bashneft PAO | 71 | 3 | |
MegaFon PJSC GDR | 242 | 3 | |
Sistema JSFC GDR | 375 | 3 | |
Novolipetsk Steel OJSC | 1,720 | 2 | |
E.ON Russia JSC | 53,000 | 2 | |
Rostelecom PJSC ADR | 220 | 2 | |
* | Aeroflot - Russian | ||
Airlines OJSC | 1,600 | 2 | |
Inter RAO UES PJSC | 59,000 | 2 | |
LSR Group PJSC GDR | 701 | 2 | |
352 | |||
Singapore (1.4%) | |||
Oversea-Chinese | |||
Banking Corp. Ltd. | 13,400 | 87 | |
Singapore | |||
Telecommunications Ltd. | 29,700 | 85 | |
DBS Group Holdings Ltd. | 7,200 | 81 | |
United Overseas Bank Ltd. | 4,900 | 67 | |
Keppel Corp. Ltd. | 6,000 | 24 | |
Singapore Press | |||
Holdings Ltd. | 6,600 | 20 | |
Singapore Exchange Ltd. | 3,400 | 19 | |
Singapore Airlines Ltd. | 2,100 | 18 | |
ComfortDelGro Corp. Ltd. | 7,400 | 16 | |
Singapore Technologies | |||
Engineering Ltd. | 6,300 | 15 | |
Hutchison Port | |||
Holdings Trust | 20,200 | 9 | |
Golden Agri-Resources Ltd. | 29,500 | 9 | |
Sembcorp Industries Ltd. | 3,900 | 8 | |
Singapore Post Ltd. | 6,200 | 7 | |
SATS Ltd. | 2,300 | 7 | |
Noble Group Ltd. | 17,100 | 6 | |
Yangzijiang Shipbuilding | |||
Holdings Ltd. | 7,900 | 6 | |
Venture Corp. Ltd. | 900 | 6 | |
Sembcorp Marine Ltd. | 3,600 | 4 | |
StarHub Ltd. | 1,700 | 4 | |
Frasers Centrepoint Ltd. | 1,700 | 2 | |
SIA Engineering Co. Ltd. | 300 | 1 | |
M1 Ltd. | 400 | 1 | |
502 |
37
International High Dividend Yield Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
South Africa (1.4%) | ||
MTN Group Ltd. | 7,254 | 76 |
Sasol Ltd. | 2,284 | 75 |
Standard Bank Group Ltd. | 4,890 | 44 |
FirstRand Ltd. | 12,584 | 40 |
Sanlam Ltd. | 7,488 | 36 |
Woolworths Holdings Ltd. | 3,896 | 25 |
Tiger Brands Ltd. | 720 | 18 |
Vodacom Group Ltd. | 1,350 | 16 |
Barclays Africa Group Ltd. | 1,336 | 14 |
Truworths International Ltd. | 1,713 | 13 |
Mr Price Group Ltd. | 978 | 12 |
Life Healthcare Group | ||
Holdings Ltd. | 4,562 | 12 |
SPAR Group Ltd. | 757 | 11 |
AVI Ltd. | 1,748 | 11 |
RMB Holdings Ltd. | 2,620 | 11 |
Investec Ltd. | 1,286 | 10 |
Nedbank Group Ltd. | 740 | 9 |
Imperial Holdings Ltd. | 631 | 7 |
MMI Holdings Ltd. | 3,713 | 6 |
Coronation Fund | ||
Managers Ltd. | 1,071 | 6 |
Telkom SA SOC Ltd. | 1,366 | 5 |
Liberty Holdings Ltd. | 549 | 5 |
JSE Ltd. | 461 | 5 |
Tsogo Sun Holdings Ltd. | 2,731 | 5 |
Barloworld Ltd. | 849 | 5 |
Nampak Ltd. | 2,809 | 5 |
Tongaat Hulett Ltd. | 529 | 4 |
Massmart Holdings Ltd. | 413 | 4 |
DataTec Ltd. | 1,028 | 3 |
Santam Ltd. | 192 | 3 |
AECI Ltd. | 331 | 2 |
Omnia Holdings Ltd. | 181 | 2 |
Oceana Group Ltd. | 197 | 2 |
Sun International Ltd. | 284 | 2 |
PPC Ltd. | 1,308 | 1 |
Alexander Forbes Group | ||
Holdings Ltd. | 2,484 | 1 |
506 | ||
South Korea (0.8%) | ||
POSCO | 271 | 57 |
KB Financial Group Inc. | 1,648 | 51 |
KT&G Corp. | 454 | 49 |
Hyundai Motor Co. 2nd | ||
Preference Shares | 243 | 21 |
SK Telecom Co. Ltd. ADR | 821 | 16 |
Woori Bank | 1,608 | 15 |
Industrial Bank of Korea | 1,294 | 14 |
Hyundai Marine & Fire | ||
Insurance Co. Ltd. | 294 | 8 |
DGB Financial Group Inc. | 821 | 7 |
Hanwha Life Insurance | ||
Co. Ltd. | 1,084 | 6 |
Daewoo Securities Co. Ltd. | 859 | 6 |
Market | |||
Value• | |||
Shares | ($000) | ||
Doosan Heavy Industries | |||
& Construction Co. Ltd. | 252 | 6 | |
Woori Investment | |||
& Securities Co. Ltd. | 605 | 5 | |
Doosan Corp. | 53 | 5 | |
Samsung Card Co. Ltd. | 143 | 5 | |
Hite Jinro Co. Ltd. | 196 | 5 | |
Hyundai Motor Co. | |||
Preference Shares | 16 | 1 | |
277 | |||
Spain (3.7%) | |||
Banco Santander SA | 59,262 | 301 | |
Telefonica SA | 17,344 | 190 | |
Banco Bilbao Vizcaya | |||
Argentaria SA | 26,180 | 180 | |
Iberdrola SA | 23,166 | 165 | |
Repsol SA | 4,654 | 61 | |
* | Ferrovial SA | 1,958 | 42 |
Banco de Sabadell SA | 19,815 | 38 | |
Red Electrica Corp. SA | 422 | 38 | |
Abertis Infraestructuras SA | 2,033 | 34 | |
CaixaBank SA | 10,462 | 31 | |
Enagas SA | 921 | 28 | |
Gas Natural SDG SA | 1,296 | 27 | |
Endesa SA | 1,246 | 26 | |
ACS Actividades de | |||
Construccion y Servicios SA | 730 | 24 | |
Bankinter SA | 2,730 | 21 | |
Banco Popular Espanol SA | 6,708 | 18 | |
Bankia SA | 19,132 | 18 | |
Distribuidora Internacional | |||
de Alimentacion SA | 2,470 | 14 | |
Mapfre SA | 4,219 | 11 | |
Mediaset Espana | |||
Comunicacion SA | 813 | 11 | |
Zardoya Otis SA | 590 | 6 | |
* | Acerinox SA | 400 | 5 |
1,289 | |||
Sweden (2.8%) | |||
Hennes & Mauritz AB | |||
Class B | 3,831 | 136 | |
Nordea Bank AB | 13,144 | 128 | |
Telefonaktiebolaget LM | |||
Ericsson Class B | 12,188 | 99 | |
Swedbank AB Class A | 4,283 | 92 | |
Svenska Handelsbanken | |||
AB Class A | 5,843 | 78 | |
Volvo AB Class B | 6,200 | 73 | |
Investor AB Class B | 1,900 | 70 | |
Skandinaviska Enskilda | |||
Banken AB Class A | 5,951 | 57 | |
Telia Co. AB | 10,173 | 49 | |
Sandvik AB | 4,368 | 45 | |
Skanska AB Class B | 1,480 | 33 | |
SKF AB | 1,336 | 25 | |
Investment AB Kinnevik | 810 | 23 |
38
International High Dividend Yield Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Swedish Match AB | 724 | 23 |
Industrivarden AB Class A | 1,142 | 22 |
Tele2 AB | 1,234 | 12 |
Husqvarna AB | 1,281 | 10 |
Svenska Handelsbanken | ||
AB Class B | 329 | 4 |
Industrivarden AB | 223 | 4 |
SKF AB Class A | 162 | 3 |
986 | ||
Switzerland (10.1%) | ||
Nestle SA | 12,838 | 958 |
Roche Holding AG | 2,856 | 723 |
Novartis AG | 8,688 | 661 |
UBS Group AG | 14,399 | 250 |
ABB Ltd. | 7,859 | 166 |
Zurich Insurance Group AG | 606 | 136 |
Swiss Re AG | 1,399 | 124 |
Credit Suisse Group AG | 7,962 | 121 |
LafargeHolcim Ltd. | 2,009 | 102 |
SGS SA | 24 | 53 |
Adecco SA | 704 | 46 |
Swisscom AG | 78 | 40 |
Swiss Life Holding AG | 132 | 33 |
Kuehne & Nagel | ||
International AG | 215 | 31 |
Swiss Prime Site AG | 274 | 24 |
Baloise Holding AG | 165 | 21 |
PSP Swiss Property AG | 170 | 16 |
Pargesa Holding SA | 178 | 12 |
Helvetia Holding AG | 20 | 11 |
Banque Cantonale Vaudoise | 13 | 9 |
GAM Holding AG | 469 | 6 |
3,543 | ||
Taiwan (4.3%) | ||
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. | 98,000 | 450 |
Hon Hai Precision Industry | ||
Co. Ltd. | 56,000 | 133 |
Formosa Plastics Corp. | 20,000 | 50 |
Formosa Chemicals | ||
& Fibre Corp. | 18,000 | 46 |
Nan Ya Plastics Corp. | 23,000 | 45 |
MediaTek Inc. | 6,000 | 43 |
Delta Electronics Inc. | 9,000 | 42 |
Chunghwa Telecom Co. | ||
Ltd. ADR | 1,180 | 40 |
Fubon Financial Holding | ||
Co. Ltd. | 30,000 | 36 |
Cathay Financial Holding | ||
Co. Ltd. | 32,000 | 36 |
CTBC Financial Holding | ||
Co. Ltd. | 69,000 | 35 |
Mega Financial Holding | ||
Co. Ltd. | 45,000 | 32 |
Asustek Computer Inc. | 3,000 | 26 |
Taiwan Mobile Co. Ltd. | 7,000 | 23 |
Market | ||
Value• | ||
Shares | ($000) | |
Formosa Petrochemical Corp. | 8,000 | 23 |
Catcher Technology Co. Ltd. | 3,000 | 21 |
Hotai Motor Co. Ltd. | 2,000 | 20 |
Advanced Semiconductor | ||
Engineering Inc. ADR | 3,748 | 19 |
First Financial Holding | ||
Co. Ltd. | 35,000 | 17 |
Pegatron Corp. | 8,000 | 17 |
Cheng Shin Rubber | ||
Industry Co. Ltd. | 8,000 | 17 |
Quanta Computer Inc. | 10,000 | 16 |
Taishin Financial Holding | ||
Co. Ltd. | 40,000 | 15 |
Far Eastern New Century | ||
Corp. | 20,000 | 15 |
Hua Nan Financial Holdings | ||
Co. Ltd. | 30,000 | 15 |
United Microelectronics | ||
Corp. ADR | 7,688 | 15 |
Yuanta Financial Holding | ||
Co. Ltd. | 44,000 | 14 |
China Development | ||
Financial Holding Corp. | 56,000 | 14 |
Taiwan Cement Corp. | 14,000 | 14 |
Far EasTone | ||
Telecommunications | ||
Co. Ltd. | 6,000 | 14 |
Chunghwa Telecom Co. Ltd. | 4,000 | 14 |
Siliconware Precision | ||
Industries Co. Ltd. ADR | 1,848 | 13 |
SinoPac Financial | ||
Holdings Co. Ltd. | 43,000 | 13 |
Pou Chen Corp. | 10,000 | 13 |
Innolux Corp. | 40,000 | 12 |
Novatek Microelectronics | ||
Corp. | 3,000 | 10 |
Asia Cement Corp. | 11,000 | 10 |
Lite-On Technology Corp. | 8,000 | 10 |
Compal Electronics Inc. | 15,000 | 9 |
Inventec Corp. | 13,000 | 9 |
Foxconn Technology | ||
Co. Ltd. | 4,000 | 8 |
Advanced Semiconductor | ||
Engineering Inc. | 7,000 | 7 |
Teco Electric and | ||
Machinery Co. Ltd. | 8,000 | 6 |
Vanguard International | ||
Semiconductor Corp. | 4,000 | 6 |
Synnex Technology | ||
International Corp. | 6,000 | 6 |
Realtek Semiconductor Corp. | 2,000 | 6 |
Wistron Corp. | 9,000 | 5 |
Chicony Electronics Co. Ltd. | 2,000 | 5 |
U-Ming Marine Transport | ||
Corp. | 4,000 | 3 |
United Microelectronics Corp. | 8,000 | 3 |
39
International High Dividend Yield Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Taiwan Secom Co. Ltd. | 1,000 | 3 | |
Transcend Information Inc. | 1,000 | 3 | |
Formosa Taffeta Co. Ltd. | 3,000 | 3 | |
Nanya Technology Corp. | 2,000 | 2 | |
Far Eastern International | |||
Bank | 8,000 | 2 | |
Cathay Real Estate | |||
Development Co. Ltd. | 5,000 | 2 | |
Wan Hai Lines Ltd. | 4,000 | 2 | |
YFY Inc. | 7,000 | 2 | |
China Motor Corp. | 3,000 | 2 | |
Eternal Materials Co. Ltd. | 2,000 | 2 | |
Oriental Union Chemical Corp. | 3,000 | 2 | |
Capital Securities Corp. | 7,000 | 2 | |
Feng Hsin Steel Co. Ltd. | 1,000 | 1 | |
Cheng Uei Precision | |||
Industry Co. Ltd. | 1,000 | 1 | |
President Securities Corp. | 3,000 | 1 | |
Ton Yi Industrial Corp. | 1,000 | — | |
1,501 | |||
Thailand (0.6%) | |||
PTT PCL | 3,600 | 31 | |
Siam Commercial Bank | |||
PCL (Local) | 6,700 | 25 | |
Advanced Info Service | |||
PCL (Local) | 4,664 | 21 | |
Siam Cement PCL (Foreign) | 1,350 | 19 | |
PTT Global Chemical PCL | 7,200 | 13 | |
Charoen Pokphand Foods | |||
PCL | 16,200 | 11 | |
Bangkok Bank PCL (Foreign) | 2,200 | 10 | |
Intouch Holdings PCL | 6,600 | 10 | |
Electricity Generating PCL | 1,900 | 10 | |
Krung Thai Bank PCL | 17,200 | 9 | |
Thai Oil PCL | 4,100 | 8 | |
Glow Energy PCL | 3,000 | 7 | |
IRPC PCL | 48,600 | 7 | |
Thai Union Group PCL | 10,700 | 6 | |
Land & Houses PCL | 25,300 | 6 | |
Delta Electronics | |||
Thailand PCL | 2,200 | 4 | |
Ratchaburi Electricity | |||
Generating Holding PCL | |||
(Local) | 3,000 | 4 | |
BEC World PCL | 5,100 | 4 | |
Siam City Cement PCL | |||
(Local) | 400 | 4 | |
Total Access Communication | |||
PCL (Local) | 3,800 | 4 | |
Banpu PCL (Local) | 5,700 | 2 | |
* | Banpu PCL (Local) Rights | ||
Exp. 05/31/2016 | 2,850 | 1 | |
216 |
Market | ||
Value• | ||
Shares | ($000) | |
Turkey (0.2%) | ||
Tupras Turkiye Petrol | ||
Rafinerileri AS | 545 | 15 |
Turkcell Iletisim | ||
Hizmetleri AS | 3,151 | 14 |
Eregli Demir ve Celik | ||
Fabrikalari TAS | 4,942 | 8 |
Turk Telekomunikasyon AS | 2,223 | 5 |
Arcelik AS | 744 | 5 |
Ford Otomotiv Sanayi AS | 351 | 5 |
Tofas Turk Otomobil | ||
Fabrikasi AS | 545 | 4 |
TAV Havalimanlari | ||
Holding AS | 688 | 4 |
Aygaz AS | 480 | 2 |
62 | ||
United Arab Emirates (0.3%) | ||
Emirates | ||
Telecommunications | ||
Group Co. PJSC | 7,139 | 37 |
First Gulf Bank PJSC | 4,792 | 17 |
Abu Dhabi Commercial | ||
Bank PJSC | 7,475 | 13 |
Emaar Malls Group PJSC | 8,363 | 6 |
Dubai Islamic Bank PJSC | 3,718 | 6 |
DAMAC Properties | ||
Dubai Co. PJSC | 5,795 | 4 |
Union National Bank PJSC | 4,142 | 4 |
Dubai Investments PJSC | 6,142 | 4 |
Union Properties PJSC | 11,914 | 3 |
Al Waha Capital PJSC | 4,621 | 2 |
Air Arabia PJSC | 6,071 | 2 |
98 | ||
United Kingdom (17.9%) | ||
HSBC Holdings plc | 80,173 | 531 |
British American | ||
Tobacco plc | 7,603 | 464 |
Royal Dutch Shell plc | ||
Class A | 16,506 | 432 |
GlaxoSmithKline plc | 19,897 | 425 |
Royal Dutch Shell plc | ||
Class B | 16,101 | 423 |
BP plc | 76,145 | 420 |
Vodafone Group plc | 108,737 | 350 |
AstraZeneca plc | 5,167 | 296 |
Lloyds Banking Group plc | 262,075 | 257 |
National Grid plc | 15,557 | 222 |
BT Group plc | 33,980 | 220 |
Imperial Brands plc | 3,929 | 214 |
Barclays plc | 69,588 | 175 |
Rio Tinto plc | 4,940 | 166 |
BHP Billiton plc | 8,580 | 117 |
Aviva plc | 16,486 | 104 |
40
International High Dividend Yield Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
SSE plc | 4,104 | 91 |
Standard Chartered plc | 11,132 | 90 |
BAE Systems plc | 12,835 | 90 |
Legal & General Group plc | 24,545 | 80 |
Centrica plc | 20,841 | 73 |
Sky plc | 4,194 | 58 |
Old Mutual plc | 20,068 | 55 |
Next plc | 596 | 44 |
Marks & Spencer Group plc | 6,669 | 41 |
United Utilities Group plc | 2,957 | 41 |
Pearson plc | 3,438 | 40 |
Standard Life plc | 7,867 | 38 |
Persimmon plc | 1,211 | 35 |
Severn Trent plc | 1,076 | 35 |
Taylor Wimpey plc | 12,877 | 35 |
Barratt Developments plc | 4,089 | 32 |
Direct Line Insurance | ||
Group plc | 5,790 | 31 |
RSA Insurance Group plc | 4,351 | 29 |
Royal Mail plc | 4,043 | 29 |
TUI AG | 1,929 | 28 |
Smiths Group plc | 1,716 | 28 |
J Sainsbury plc | 6,270 | 27 |
St. James’s Place plc | 2,055 | 26 |
Provident Financial plc | 586 | 25 |
Inmarsat plc | 1,793 | 24 |
Admiral Group plc | 841 | 23 |
Pennon Group plc | 1,880 | 22 |
Berkeley Group Holdings plc | 502 | 22 |
DS Smith plc | 3,641 | 20 |
Meggitt plc | 3,194 | 19 |
easyJet plc | 864 | 19 |
Aberdeen Asset | ||
Management plc | 4,155 | 18 |
Bellway plc | 506 | 18 |
Tate & Lyle plc | 2,095 | 18 |
G4S plc | 6,357 | 18 |
Investec plc | 2,205 | 17 |
Henderson Group plc | 4,430 | 17 |
Weir Group plc | 843 | 15 |
IMI plc | 1,034 | 14 |
ICAP plc | 2,040 | 14 |
Market | ||
Value• | ||
Shares | ($000) | |
John Wood Group plc | 1,517 | 14 |
Petrofac Ltd. | 1,109 | 14 |
Cable & Wireless | ||
Communications plc | 11,433 | 12 |
New Europe Property | ||
Investments plc | 826 | 10 |
Cobham plc | 4,509 | 10 |
Ashmore Group plc | 1,857 | 8 |
TalkTalk Telecom Group plc | 1,909 | 7 |
6,290 | ||
Total Common Stocks | ||
(Cost $33,362) | 35,204 | |
Temporary Cash Investment (2.3%) | ||
Money Market Fund (2.3%) | ||
2 Vanguard Market | ||
Liquidity Fund, 0.495% | ||
(Cost $800) | 799,575 | 800 |
Total Investments (102.3%) | ||
(Cost $34,162) | 36,004 | |
Amount | ||
($000) | ||
Other Assets and Liabilities (-2.3%) | ||
Other Assets | ||
Investment in Vanguard | 3 | |
Receivables for Accrued Income | 127 | |
Receivables for Capital Shares Issued | 92 | |
Other Assets | 61 | |
Total Other Assets | 283 | |
Liabilities | ||
Payables for Investment Securities | ||
Purchased | (398) | |
Payables for Capital Shares Redeemed | (138) | |
Payables to Vanguard | (5) | |
Other Liabilities | (539) | |
Total Liabilities | (1,080) | |
Net Assets (100%) | 35,207 |
41
International High Dividend Yield Index Fund
At April 30, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 33,007 |
Undistributed Net Investment Income | 233 |
Accumulated Net Realized Gains | 120 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 1,842 |
Forward Currency Contracts | (1) |
Foreign Currencies | 6 |
Net Assets | 35,207 |
Investor Shares—Net Assets | |
Applicable to 51,622 outstanding $.001 | |
par value shares of beneficial interest | |
(unlimited authorization) | 1,146 |
Net Asset Value Per Share— | |
Investor Shares | $22.20 |
Amount | |
($000) | |
ETF Shares—Net Assets | |
Applicable to 400,000 outstanding $.001 | |
par value shares of beneficial interest | |
(unlimited authorization) | 22,199 |
Net Asset Value Per Share— | |
ETF Shares | $55.50 |
Admiral Shares—Net Assets | |
Applicable to 441,515 outstanding $.001 | |
par value shares of beneficial interest | |
(unlimited authorization) | 11,862 |
Net Asset Value Per Share— | |
Admiral Shares | $26.87 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
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 April 30, 2016, the aggregate value of these securities was $77,000, representing 0.2% 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.
ADR—American Depositary Receipt.
GDR—Global Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
42
International High Dividend Yield Index Fund
Statement of Operations
February 25, 20161 to | |
April 30, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends2 | 294 |
Interest3 | 2 |
Total Income | 296 |
Expenses | |
The Vanguard Group—Note B | |
Management and Administrative—Investor Shares | 1 |
Management and Administrative—ETF Shares | 10 |
Management and Administrative—Admiral Shares | 3 |
Shareholders’ Reports—Investor Shares | — |
Shareholders’ Reports—ETF Shares | 1 |
Shareholders’ Reports—Admiral Shares | — |
Total Expenses | 15 |
Net Investment Income | 281 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 114 |
Futures Contracts | 6 |
Foreign Currencies and Forward Currency Contracts | (5) |
Realized Net Gain (Loss) | 115 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 1,842 |
Foreign Currencies and Forward Currency Contracts | 5 |
Change in Unrealized Appreciation (Depreciation) | 1,847 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 2,243 |
1 Inception. | |
2 Dividends are net of foreign withholding taxes of $36,000. | |
3 Interest income from an affiliated company of the fund was $2,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
43
International High Dividend Yield Index Fund
Statement of Changes in Net Assets
February 25, 20161 to | |
April 30, 2016 | |
($000) | |
Increase (Decrease) in Net Assets | |
Operations | |
Net Investment Income | 281 |
Realized Net Gain (Loss) | 115 |
Change in Unrealized Appreciation (Depreciation) | 1,847 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 2,243 |
Distributions | |
Net Investment Income | |
Investor Shares | (1) |
ETF Shares | (34) |
Admiral Shares | (8) |
Realized Capital Gain | |
Investor Shares | — |
ETF Shares | — |
Admiral Shares | — |
Total Distributions | (43) |
Capital Share Transactions | |
Investor Shares | 1,111 |
ETF Shares | 20,387 |
Admiral Shares | 11,509 |
Net Increase (Decrease) from Capital Share Transactions | 33,007 |
Total Increase (Decrease) | 35,207 |
Net Assets | |
Beginning of Period | — |
End of Period2 | 35,207 |
1 Inception. | |
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $233,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
44
International High Dividend Yield Index Fund
Financial Highlights
Investor Shares | |
February 25, 20161 to | |
For a Share Outstanding Throughout the Period | April 30, 2016 |
Net Asset Value, Beginning of Period | $20.00 |
Investment Operations | |
Net Investment Income | . 220 2 |
Net Realized and Unrealized Gain (Loss) on Investments | 2.014 |
Total from Investment Operations | 2.234 |
Distributions | |
Dividends from Net Investment Income | (.034) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.034) |
Net Asset Value, End of Period | $22.20 |
Total Return3 | 11.17% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $1 |
Ratio of Total Expenses to Average Net Assets | 0.39% |
Ratio of Net Investment Income to Average Net Assets | 5.65% |
Portfolio Turnover Rate 4 | 42% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
45
International High Dividend Yield Index Fund
Financial Highlights
ETF Shares | |
February 25, 20161 to | |
For a Share Outstanding Throughout the Period | April 30, 2016 |
Net Asset Value, Beginning of Period | $50.00 |
Investment Operations | |
Net Investment Income | . 593 2 |
Net Realized and Unrealized Gain (Loss) on Investments | 4.992 |
Total from Investment Operations | 5.585 |
Distributions | |
Dividends from Net Investment Income | (.085) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.085) |
Net Asset Value, End of Period | $55.50 |
Total Return | 11.17% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $22 |
Ratio of Total Expenses to Average Net Assets | 0.30% |
Ratio of Net Investment Income to Average Net Assets | 5.74% |
Portfolio Turnover Rate 3 | 42% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
46
International High Dividend Yield Index Fund
Financial Highlights
Admiral Shares | |
March 2, 20161 to | |
For a Share Outstanding Throughout the Period | April 30, 2016 |
Net Asset Value, Beginning of Period | $25.00 |
Investment Operations | |
Net Investment Income | . 276 2 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.635 |
Total from Investment Operations | 1.911 |
Distributions | |
Dividends from Net Investment Income | (.041) |
Distributions from Realized Capital Gains | — |
Total Distributions | (.041) |
Net Asset Value, End of Period | $26.87 |
Total Return3 | 7.65% |
Ratios/Supplemental Data | |
Net Assets, End of Period (Millions) | $12 |
Ratio of Total Expenses to Average Net Assets | 0.29% |
Ratio of Net Investment Income to Average Net Assets | 5.75% |
Portfolio Turnover Rate 4 | 42% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
47
International High Dividend Yield Index Fund
Notes to Financial Statements
Vanguard International High Dividend Yield Index 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 three classes of shares: Investor Shares, ETF Shares, and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.
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.
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, enhancing returns, 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 fund may seek to enhance returns by using futures contracts instead of the underlying securities when futures are believed to be priced more attractively than the underlying securities. 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
48
International High Dividend Yield Index Fund
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.
The fund also enters into forward currency contracts to provide the appropriate currency exposure related to open futures contracts or to protect the value of securities and related receivables and payables against changes in foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The aggregate settlement values and notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.
During the period ended April 30, 2016, the fund’s average investments in long and short futures contracts represented 0% and 0% of net assets, respectively, based on the average of aggregate settlement values 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 notional amounts at each quarter-end during the period. The fund had no open futures contracts at April 30, 2016.
4. Federal Income Taxes: The fund intends to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for the period ended April 30, 2016, 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.
49
International High Dividend Yield Index Fund
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2016, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At April 30, 2016, the fund had contributed to Vanguard capital in the amount of $3,000, representing 0.01% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. 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).
50
International High Dividend Yield Index Fund
The following table summarizes the market value of the fund’s investments as of April 30, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—North and South America | 3,441 | 6 | — |
Common Stocks—Other | 121 | 31,610 | 26 |
Temporary Cash Investments | 800 | — | — |
Futures Contracts—Liabilities1 | (1) | — | — |
Forward Currency Contracts—Liabilities | — | (1) | — |
Total | 4,361 | 31,615 | 26 |
1 Represents variation margin on the last day of the reporting period for recently closed futures contracts.
D. At April 30, 2016, the fair values of derivatives were reflected in the Statement of Net Assets as follows:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Statement of Net Assets Caption | ($000) | ($000) | ($000) |
Other Liabilities | (1) | (1) | (2) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the period ended April 30, 2016, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | 6 | — | 6 |
Forward Currency Contracts | — | — | — |
Realized Net Gain (Loss) on Derivatives | 6 | — | 6 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | — | — | — |
Forward Currency Contracts | — | (1) | (1) |
Change in Unrealized Appreciation (Depreciation) on Derivatives | — | — | (1) |
At April 30, 2016, the fund had open forward currency contracts to receive and deliver currencies as follows. Unrealized appreciation (depreciation) on open forward currency contracts is treated as realized gain (loss) for tax purposes.
Unrealized | ||||||
Contract | Appreciation | |||||
Settlement | Contract Amount (000) | (Depreciation) | ||||
Counterparty | Date | Receive | Deliver | ($000) | ||
BNP Paribas | 6/14/16 | USD | 32 | JPY | 3,500 | (1) |
JPY—Japanese yen. | ||||||
USD—U.S. dollar. |
51
International High Dividend Yield Index Fund
E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
During the period ended April 30, 2016, the fund realized net foreign currency losses of $5,000, which decreased distributable net income for tax purposes; accordingly, such losses have been reclassified from accumulated net realized losses to undistributed net investment income.
At April 30, 2016, the cost of investment securities for tax purposes was $34,162,000. Net unrealized appreciation of investment securities for tax purposes was $1,842,000, consisting of unrealized gains of $2,176,000 on securities that had risen in value since their purchase and $334,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the period ended April 30, 2016, the fund purchased $36,937,000 of investment securities and sold $3,689,000 of investment securities, other than temporary cash investments. Purchases and sales include $19,445,000 and $0, 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:
Period Ended April 30, 2016 | ||
Amount | Shares | |
($000) | (000) | |
Investor Shares1 | ||
Issued | 1,455 | 68 |
Issued in Lieu of Cash Distributions | 1 | — |
Redeemed | (345) | (16) |
Net Increase (Decrease)—Investor Shares | 1,111 | 52 |
ETF Shares1 | ||
Issued | 20,387 | 400 |
Issued in Lieu of Cash Distributions | — | — |
Redeemed | — | — |
Net Increase (Decrease)—ETF Shares | 20,387 | 400 |
Admiral Shares2 | ||
Issued | 12,889 | 495 |
Issued in Lieu of Cash Distributions | 7 | — |
Redeemed | (1,387) | (53) |
Net Increase (Decrease) —Admiral Shares | 11,509 | 442 |
1 Inception was February 25, 2016, for Investor Shares and ETF Shares. | ||
2 Inception was March 2, 2016, for Admiral Shares. |
H. Management has determined that no material events or transactions occurred subsequent to April 30, 2016, that would require recognition or disclosure in these financial statements.
52
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.
53
Period Ended April 30, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Since Inception | 4/30/2016 | Period | |
Based on Actual Fund Return | |||
International Dividend Appreciation Index Fund | |||
Investor Shares (Inception: 2/25/2016) | $1,000.00 | $1,091.42 | $0.64 |
ETF Shares (Inception: 2/25/2016) | 1,000.00 | 1,091.72 | 0.47 |
Admiral Shares (Inception: 3/2/2016) | 1,000.00 | 1,060.90 | 0.42 |
International High Dividend Yield Index Fund | |||
Investor Shares (Inception: 2/25/2016) | $1,000.00 | $1,111.73 | $0.74 |
ETF Shares (Inception: 2/25/2016) | 1,000.00 | 1,111.74 | 0.57 |
Admiral Shares (Inception: 3/2/2016) | 1,000.00 | 1,076.47 | 0.49 |
Based on Hypothetical 5% Yearly Return | |||
International Dividend Appreciation Index Fund | |||
Investor Shares (Inception: 2/25/2016) | $1,000.00 | $1,008.40 | $0.62 |
ETF Shares (Inception: 2/25/2016) | 1,000.00 | 1,008.57 | 0.45 |
Admiral Shares (Inception: 3/2/2016) | 1,000.00 | 1,007.79 | 0.41 |
International High Dividend Yield Index Fund | |||
Investor Shares (Inception: 2/25/2016) | $1,000.00 | $1,008.31 | $0.71 |
ETF Shares (Inception: 2/25/2016) | 1,000.00 | 1,008.48 | 0.54 |
Admiral Shares (Inception: 3/2/2016) | 1,000.00 | 1,007.72 | 0.48 |
The calculations are based on expenses incurred in the current period. The funds’ annualized expense ratios for that period are: for the International Dividend Appreciation Index Fund, 0.34% for Investor Shares, 0.25% for ETF Shares, and 0.25% for Admiral Shares; and for the International High Dividend Yield Index Fund, 0.39% for Investor Shares, 0.30% for ETF Shares, and 0.29% 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 current period, then divided by the number of days in the most recent 12-month period (66/366 for Investor and ETF Shares and 60/366 for Admiral Shares).
54
Trustees Approve Advisory Arrangements
The board of trustees approved the launch of Vanguard International Dividend Appreciation Index Fund and Vanguard International High Dividend Yield Index Fund, utilizing an internalized management structure whereby The Vanguard Group, Inc. (Vanguard)—through its Equity Index Group—would provide investment advisory services to each fund at cost. The board determined that the investment advisory arrangements with Vanguard were in the best interests of each fund and its prospective shareholders.
The board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. The trustees 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 investment management services to be provided to the funds and took into account the organizational depth and stability of the advisor. The board considered that Vanguard has been managing investments for more than three decades. The Equity Index Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted approval of the advisory arrangements.
Investment performance
The board could not consider the performance of the funds because they were newly launched. However, the board determined that, in its management of other Vanguard index funds, the Equity Index Group has a track record of consistent performance and disciplined investment processes. Information about each fund’s performance since inception can be found in the Performance Summary section of this report.
Cost
The board considered the cost of services to be provided and concluded that each fund’s expense ratio would be below the average expense ratios charged by funds in its peer group. Information about each fund’s expense ratio appears in the Financial Statements sections.
The board did not conduct a profitability analysis of Vanguard because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees and produces “profits” only in the form of reduced expenses for fund shareholders.
The benefit of economies of scale
The board concluded that each fund’s at-cost arrangement with Vanguard ensures that the funds will realize economies of scale as they grow, with the cost to shareholders declining as fund assets increase.
The board will consider whether to renew the advisory arrangements after a one-year period.
55
Glossary
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
56
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
InterestedTrustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International plc (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive plc |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
IndependentTrustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | ||
Partner of HighVista Strategies LLC (private investment | Mortimer J. Buckley | James M. Norris |
firm); Director of Rand Merchant Bank; Overseer of | Kathleen C. Gubanich | Thomas M. Rampulla |
the Museum of Fine Arts Boston. | Martha G. King | Glenn W. Reed |
John T. Marcante | Karin A. Risi | |
Peter F. Volanakis | Chris D. McIsaac | |
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the
Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 | |
Connect with Vanguard® > vanguard.com | |
Fund Information > 800-662-7447 | “Dividend Achievers” is a trademark of The NASDAQ |
Direct Investor Account Services > 800-662-2739 | OMX Group, Inc. (collectively, with its affiliates |
Institutional Investor Services > 800-523-1036 | “NASDAQ OMX”), and has been licensed for use by The |
Text Telephone for People | Vanguard Group, Inc. Vanguard mutual funds are not |
Who Are Deaf or Hard of Hearing> 800-749-7273 | sponsored, endorsed, sold, or promoted by NASDAQ |
OMX and NASDAQ OMX makes no representation | |
This material may be used in conjunction | regarding the advisability of investing in the funds. |
with the offering of shares of any Vanguard | NASDAQ OMX makes no warranties and bears no |
fund only if preceded or accompanied by | liability with respect to the Vanguard mutual funds. |
the fund’s current prospectus. | London Stock Exchange Group companies include FTSE |
International Limited (”FTSE”), Frank Russell Company | |
All comparative mutual fund data are from Lipper, a | (”Russell”), MTS Next Limited (”MTS”), and FTSE TMX |
Thomson Reuters Company, or Morningstar, Inc., unless | Global Debt Capital Markets Inc. (”FTSE TMX”). All |
otherwise noted. | rights reserved. ”FTSE®”, ”Russell®”, ”MTS®”, ”FTSE |
TMX®” and ”FTSE Russell” and other service marks | |
You can obtain a free copy of Vanguard’s proxy voting | and trademarks related to the FTSE or Russell indexes |
guidelines by visiting vanguard.com/proxyreporting or by | are trademarks of the London Stock Exchange Group |
calling Vanguard at 800-662-2739. The guidelines are | companies and are used by FTSE, MTS, FTSE TMX and |
also available from the SEC’s website, sec.gov. In | Russell under licence. All information is provided for |
addition, you may obtain a free report on how your fund | information purposes only. No responsibility or liability |
voted the proxies for securities it owned during the 12 | can be accepted by the London Stock Exchange Group |
months ended June 30. To get the report, visit either | companies nor its licensors for any errors or for any |
vanguard.com/proxyreporting or sec.gov. | loss from use of this publication. Neither the London |
Stock Exchange Group companies nor any of its | |
You can review and copy information about your fund at | licensors make any claim, prediction, warranty or |
the SEC’s Public Reference Room in Washington, D.C. To | representation whatsoever, expressly or impliedly, |
find out more about this public service, call the SEC at | either as to the results to be obtained from the use of |
202-551-8090. Information about your fund is also | the FTSE Indexes or the fitness or suitability of the |
available on the SEC’s website, and you can receive | Indexes for any particular purpose to which they might |
copies of this information, for a fee, by sending a | be put. |
request in either of two ways: via email addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2016 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q20152 062016 |
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: Exhibits.
(a) Certifications.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VANGUARD WHITEHALL FUNDS | |
BY: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: June 15, 2016 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
VANGUARD WHITEHALL FUNDS | |
BY: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: June 15, 2016 | |
VANGUARD WHITEHALL FUNDS | |
BY: | /s/ THOMAS J. HIGGINS* |
THOMAS J. HIGGINS | |
CHIEF FINANCIAL OFFICER | |
Date: June 15, 2016 |
* By: /s/ Heidi Stam
Heidi Stam, pursuant to a Power of Attorney filed on April 22, 2014 see file Number 2-17620, Incorporated by Reference.