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: | Anne E. Robinson, Esquire | |
P.O. Box 876 | ||
Valley Forge, PA 19482 |
Registrant’s telephone number, including area code: (610) 669-1000 Date of fiscal year end: October 31 Date of reporting period: October 31, 2016 – April 30, 2017 Item 1: Reports to Sha
Semiannual Report | April 30, 2017
Vanguard Selected Value Fund
A new format, unwavering commitment
As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.
Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.
In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.
We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.
At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
Chairman’s Perspective. | 2 |
Advisors’ Report. | 6 |
Fund Profile. | 10 |
Performance Summary. | 11 |
Financial Statements. | 12 |
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: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown translated into seven languages, reflecting our expanding global presence.
Your Fund’s Performance at a Glance
• Vanguard Selected Value Fund returned 16.73% for the six months ended April 30, 2017, more than 4 percentage points ahead of the 12.42% return of its benchmark, the Russell Midcap Value Index, and the 12.68% average return of its mid-capitalization value fund peers.
• Growth stocks surpassed value, while small-cap stocks exceeded mid- and large-caps.
• The Selected Value Fund’s three advisors invest in the stocks of mid-cap companies they consider undervalued by the marketplace with solid prospects for recovery.
• All ten of the industry sectors represented in the fund recorded positive results.
Only energy stocks, which returned less than 1%, failed to post double digits.
• Financials, the fund’s largest sector holding, contributed more than 5 percentage points to results. The advisors’ significant sector exposure boosted performance.
• Industrials, information technology, and consumer discretionary stocks were also strong contributors and outpaced their benchmark sector returns.
Total Returns: Six Months Ended April 30, 2017 | |
Total | |
Returns | |
Vanguard Selected Value Fund | 16.73% |
Russell Midcap Value Index | 12.42 |
Mid-Cap Value Funds Average | 12.68 |
Mid-Cap Value Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Expense Ratios | ||
Your Fund Compared With Its Peer Group | ||
Peer Group | ||
Fund | Average | |
Selected Value Fund | 0.35% | 1.20% |
The fund expense ratio shown is from the prospectus dated February 23, 2017, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2017, the fund’s annualized expense ratio was 0.38%. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2016.
Peer group: Mid-Cap Value Funds.
1
Chairman’s Perspective
Bill McNabb
Chairman and Chief Executive Officer
Dear Shareholder,
“Buy what you know.”
It’s one of the adages of investing, and it has plenty of intuitive appeal. After all, the familiar seems inherently less risky. It’s no wonder that many investors heavily tilt their portfolios toward the stocks and bonds of their home country. This is known in investing parlance as “home bias.”
U.S. investors sometimes think they can get all the global diversification they need by owning shares of U.S.-based multinational companies. And that may seem like the best of both worlds: international diversification without ever leaving the friendly confines of home.
The potential pitfall is that, as Vanguard research has suggested, the performance of a company’s shares tends to be highly correlated to its domestic market, regardless of where that company conducts most of its business.
Americans aren’t alone in being portfolio homebodies. Vanguard has found that in a range of developed countries—Australia, Canada, Japan, and the United Kingdom, as well as the United States—investors held a greater percentage of domestic stocks than would be indicated if they had taken their cues from a globally diversified, market-weighted benchmark. (You can see this tendency in the chart later in this letter.)
2
Why home bias exists
Vanguard’s Investment Strategy Group identified a range of reasons why investors might not embrace global diversification, including concerns about currency risk and an expectation that their home country will deliver outsized returns.
One factor we identified—preference for the familiar—seems particularly relevant. With so much global uncertainty about geopolitics, monetary policy, and the economic outlook, it’s understandable why investors may not want to stray too far from home.
But in their aversion to the unknown, investors can end up increasing, rather than lessening, their risks. That’s
because they’re sacrificing broad global diversification—one of the best ways I know of to help control risk.
In many cases, individual country markets are much less diversified than the global market in total. Global investing, then, can be an answer for investors who want to reduce concentration risk. That can include overconcentration in a particular country, region, or industry.
And the good news is that global investing is easier than ever, thanks to the wide availability of low-cost, internationally diversified stock and bond funds. It’s possible, in a sense, to own the whole world with just a couple of funds.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2017 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.46% | 18.03% | 13.63% |
Russell 2000 Index (Small-caps) | 18.37 | 25.63 | 12.95 |
Russell 3000 Index (Broad U.S. market) | 13.83 | 18.58 | 13.57 |
FTSE All-World ex US Index (International) | 10.55 | 12.98 | 5.60 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -0.67% | 0.83% | 2.27% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | -0.34 | 0.14 | 3.16 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.23 | 0.37 | 0.11 |
CPI | |||
Consumer Price Index | 1.16% | 2.20% | 1.22% |
3
Expanding our opportunities
A key to overcoming home bias is reframing the way we look at investing outside our home countries. Take, for example, automakers or pharmaceutical companies. There are well-regarded firms in both industries located throughout the world. Over the next five years, nobody can know for sure whether a Japanese or U.S. or European company will produce a popular new sedan that outsells the competition or come up with new treatments to combat illness. So why not own them all? And that includes their bonds along with their stocks.
Full global diversification also allows you to capitalize on opportunities in both developed and emerging economies. Betting on which individual country—let alone company—will be the next market darling can be a fool’s errand.
A better choice can be to harness the potential of all markets. In my personal investment account, I have an emerging markets position that complements my developed-market holdings. Not only can global diversification help control risk, but it can also expand our set of opportunities among stocks and bonds.
Home bias shows investors across the world are fixated on the familiar
Investors often own a greater share of their home country’s stocks than would be indicated by the allocations of a globally diversified, market-capitalization-weighted index fund.
Notes: Data as of December 31, 2014 (the latest available from the International Monetary Fund, or IMF), in U.S. dollars. Domestic investment is calculated by subtracting total foreign investment (as reported by the IMF) in a given country from its market capitalization in the MSCI All Country World Index. Given that the IMF data are voluntary, there may be some discrepancies between the market values in the survey and the MSCI ACWI.
Sources: Vanguard, based on data from the IMF’s Coordinated Portfolio Investment Survey (2014), Bloomberg, Thomson Reuters Datastream, and FactSet.
4
Ultimately, I believe we have the best chance for investment success by giving ourselves more opportunities, not fewer. Own the whole haystack and you never have to worry about finding the needle.
Thank you for entrusting your assets to Vanguard.
F. William McNabb III
Chairman and Chief Executive Officer
May 12, 2017
5
Advisors’ Report
For the six months ended April 30, 2017, Vanguard Selected Value Fund returned 16.73%. 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. (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 May 17, 2017.
Vanguard Selected Value Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Barrow, Hanley, Mewhinney & | 60 | 6,035 | 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, | 21 | 2,145 | 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. | 17 | 1,708 | 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 | 2 | 194 | 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. |
6
Barrow, Hanley, Mewhinney &
Strauss, LLC
Portfolio Managers:
James P. Barrow,
Executive Director
Mark Giambrone,
Managing Director
Equity performance over the last six months has been positive for our strategy, as the outlook for global and economic growth is improving and the new administration in Washington is being viewed as business-friendly. If markets cannot rely on potential new policy and tax initiatives or continued easy-money policies as an incentive to drive valuations higher, investors must once again look at companies’ earnings and underlying fundamentals. Our bottom-up value process will benefit from such change and the opportunities it creates.
We are underweighted in utilities, real estate investment trusts (REITs), and information technology, believing that traditional yield plays like utilities and REITs have had substantial runs because of continued low interest rates and that they have little room for valuation upside or meaningful yield relative to their histories. We also see considerable risk to these valuation levels as interest rates rise.
Markets appear to be priced for robust earnings growth, a continuation of high margins, and an expectation of pro-growth policies. We believe we are positioned appropriately to take advantage of value in the market, believe we are past the point
of maximum uncertainty, and expect our performance to continue to recover and benefit from such an environment. Further, we believe that the highly correlated, macro-driven bull market—now in its eighth year—is turning in favor of differentiated stock selection and that our active management will reap the benefits.
Pzena Investment Management , LLC
Portfolio Managers:
Richard Pzena, Managing Principal
and Co-Chief Investment Officer
John Flynn, Principal
Ben Silver, CFA, CPA, Principal
The market rotation that began in early 2016 out of the bond proxies and into economically sensitive sectors continued and accelerated after the U.S. election, as the market concluded that the new administration would lower taxes, increase infrastructure spending, and reduce regulation.
Our financial holdings, which constituted almost 40% of the portfolio, rose 22% for the period. An improving economic outlook, rising interest rates, and increasing trading volumes drove financials’ performance. Benefiting most were Voya Financial, Comerica, Regions Financial, and KeyCorp. Despite the strong performance, we have not materially changed the portfolio’s positioning in financials, as these companies were the most deeply discounted in the portfolio heading into last year, and we believe
7
they still represent the most compelling risk/reward opportunity in the investment universe today.
In producer durables, Terex, which makes aerials and cranes, was the top individual performer, gaining nearly 50%. Terex also benefited from an improving economic outlook and the possibility of increased infrastructure investment. In December, the company hosted a well-received investor day at which the new CEO laid out a series of restructuring initiatives. We trimmed some shares but maintain the position as management moves to simplify the business and improve returns.
Our energy holdings partly detracted from relative performance. Although we are underweighted in the sector, one holding in particular, Cenovus Energy, fell more than 30% because of its announced buyout of Conoco Phillips’ oil sands interest.
As pharmaceutical drug pricing and overall health care spending garnered more attention in last year’s presidential election, health care companies began appearing on our research screens. Our initial work focused on the pharmaceutical supply chain, and the addition of Mylan NV and Cardinal Health reflects the outcome of some of this work. To fund our new purchases, we trimmed our positions in Parker Hannifin and Seagate Technology as their prices appreciated.
Portfolio positioning has consistently focused on financials and other economically sensitive industries where we
continue to see opportunity despite the recent run-up in prices. Valuation spreads remain wide, and when we look at past cycles, we conclude that we are still in the foothills of the current value upswing.
Donald Smith & Co., Inc.
Portfolio Managers:
Donald G. Smith, President and
Chief Investment Officer
Richard L. Greenberg, CFA, Senior Portfolio
Manager and Director of Research
The portfolio as of the end of April 2017 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 8.9 times our estimate of “normalized” earnings. In contrast, the S&P 500 Index sells at 882% of tangible book value and 17.7 times normalized earnings.
The top contributors to performance were technology holdings (Micron Technology rose 61.3% and Celestica 20.3%); financials (Unum rose 30.9%, CNA 23.8%, Everest 23.7%, and XL Group 20.6%); airlines/aircraft leasing companies (Air France rose 38.8%, JetBlue Airways 24.9%, and Aercap 11.9%); and home builders (Toll Brothers rose 31.2% and Taylor Morrison 21.5%).
In the months after the election, Donald Trump’s victory and the prospect of higher interest rates and industry deregulation
8
lifted stocks across the board. The portfolio’s insurance holdings benefited from this broad-based rally in financial stocks. Micron rose amid a strong increase in memory prices, lower costs with the completion of key technology transitions, and strong earnings guidance. Air France has benefited from improving employee relations and higher ticket prices.
Precious metals companies detracted most from performance (Yamana Gold fell 24.2% and Kinross Gold fell 9.6%). Gold declined immediately after the election, but it rebounded early in 2017 with increased market uncertainty over President Trump’s various trade and immigration policies.
We trimmed our holdings in CNA Financial, XL Group, Axis, Micron, MFA Financial, Celestica, and Unum. We added to Yamana, IAMGold, and Toll Brothers. We sold our shares of Tidewater, NRG Energy, and Paragon Offshore. Ingram Micro was eliminated after the Chinese conglomerate HNA Group completed its acquisition of the company in December.
The portfolio has two new holdings. We had an opportunity to develop a position in high-quality home builder Taylor Morrison
(share price of $19.02) as its private equity sponsors accelerated the liquidation of their shares. Net orders grew 33% in the first quarter as higher demand and low inventories are leading to increased new-home construction. We continue to see opportunities for Taylor Morrison to grow deliveries as housing starts remain well below long-term average levels. The stock trades at less than nine times our two- to four-year earnings estimate.
Brio Gold (share price of $3.25 Canadian) is a gold miner formed by Yamana Gold to own and operate some of its smaller Brazilian mines. We expect Brio Gold’s three operating mines to produce significant free cash flow, and there is strong potential for production growth and valuation uplift from a new project. The stock trades at 91% of tangible book value and has no debt on its balance sheet.
The portfolio’s largest industry weightings are airlines/aircraft leasing, insurance, precious metals, and technology.
9
Selected Value Fund
Fund Profile
As of April 30, 2017
Portfolio Characteristics | |||
DJ | |||
U.S. | |||
Russell | Total | ||
Midcap | Market | ||
Value | FA | ||
Fund | Index | Index | |
Number of Stocks | 122 | 566 | 3,788 |
Median Market Cap | $11.0B | $12.6B | $58.1B |
Price/Earnings Ratio | 29.0x | 40.3x | 27.1x |
Price/Book Ratio | 1.8x | 1.9x | 2.8x |
Return on Equity | 10.1% | 6.6% | 24.8% |
Earnings Growth | |||
Rate | 13.5% | 8.9% | 9.8% |
Dividend Yield | 1.8% | 2.1% | 1.8% |
Foreign Holdings | 10.9% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 25% | — | — |
Ticker Symbol | VASVX | — | — |
Expense Ratio1 | 0.35% | — | — |
30-Day SEC Yield | 1.40% | — | — |
Short-Term | |||
Reserves | 2.7% | — | — |
Sector Diversification (% of equity exposure) | |||
DJ | |||
U.S. | |||
Russell | Total | ||
Midcap | Market | ||
Value | FA | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 15.8% | 8.7% | 12.9% |
Consumer Staples | 3.3 | 3.3 | 8.2 |
Energy | 8.1 | 9.2 | 5.9 |
Financials | 26.0 | 19.6 | 14.6 |
Health Care | 5.9 | 4.1 | 13.4 |
Industrials | 17.2 | 13.0 | 10.8 |
Information | |||
Technology | 10.3 | 9.3 | 21.5 |
Materials | 7.2 | 6.1 | 3.4 |
Real Estate | 1.9 | 14.1 | 4.1 |
Telecommunication | |||
Services | 0.0 | 1.3 | 2.0 |
Utilities | 4.3 | 11.3 | 3.2 |
Volatility Measures | ||
Russell | DJ | |
Midcap | U.S. Total | |
Value | Market | |
Index | FA Index | |
R-Squared | 0.87 | 0.83 |
Beta | 1.04 | 1.06 |
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) | ||
Micron Technology Inc. | Semiconductors | 2.5% |
Royal Caribbean Cruises | Hotels, Resorts & | |
Ltd. | Cruise Lines | 2.2 |
Norwegian Cruise Line | Hotels, Resorts & | |
Holdings Ltd. | Cruise Lines | 2.2 |
Cigna Corp. | Managed Health | |
Care | 2.1 | |
AerCap Holdings NV | Trading Companies & | |
Distributors | 2.0 | |
Stanley Black & Decker | ||
Inc. | Industrial Machinery | 1.9 |
Cardinal Health Inc. | Health Care | |
Distributors | 1.9 | |
Willis Towers Watson | ||
plc | Insurance Brokers | 1.9 |
Owens Corning | Building Products | 1.9 |
Whirlpool Corp. | Household | |
Appliances | 1.8 | |
Top Ten | 20.4% |
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 23, 2017, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2017, the annualized expense ratio was 0.38%.
10
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, 2006, Through April 30, 2017
Average Annual Total Returns: Periods Ended March 31, 2017
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 | 21.59% | 13.33% | 7.67% |
See Financial Highlights for dividend and capital gains information.
11
Selected Value Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2017
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 (95.8%)1 | |||
Consumer Discretionary (15.2%) | |||
Royal Caribbean | |||
Cruises Ltd. | 2,103,800 | 224,265 | |
* | Norwegian Cruise Line | ||
Holdings Ltd. | 4,058,200 | 218,859 | |
Whirlpool Corp. | 989,800 | 183,786 | |
^ | Hanesbrands Inc. | 6,499,800 | 141,761 |
L Brands Inc. | 2,431,300 | 128,397 | |
Dollar General Corp. | 1,257,600 | 91,440 | |
Meredith Corp. | 1,495,544 | 87,564 | |
2 | SeaWorld | ||
Entertainment Inc. | 4,546,700 | 79,704 | |
* | Taylor Morrison Home | ||
Corp. Class A | 3,326,345 | 76,838 | |
* | Toll Brothers Inc. | 1,762,830 | 63,444 |
Omnicom Group Inc. | 651,968 | 53,540 | |
Interpublic Group | |||
of Cos. Inc. | 2,152,894 | 50,744 | |
News Corp. Class A | 3,579,375 | 45,530 | |
Hilton Worldwide | |||
Holdings Inc. | 528,848 | 31,186 | |
Staples Inc. | 3,090,600 | 30,195 | |
Dana Inc. | 1,147,550 | 22,285 | |
1,529,538 | |||
Consumer Staples (3.1%) | |||
Reynolds American Inc. | 2,523,776 | 162,783 | |
Coca-Cola European | |||
Partners plc | 3,155,300 | 121,858 | |
Kellogg Co. | 337,425 | 23,957 | |
308,598 | |||
Energy (7.8%) | |||
Devon Energy Corp. | 3,827,500 | 151,148 | |
2 | Golar LNG Ltd. | 5,437,608 | 138,713 |
^ | Vermilion Energy Inc. | 3,410,700 | 120,057 |
^ | PBF Energy Inc. Class A | 4,662,257 | 104,062 |
*,^ | Chesapeake | ||
Energy Corp. | 10,247,900 | 53,904 | |
Murphy Oil Corp. | 1,711,289 | 44,802 | |
Cenovus Energy Inc. | 4,261,811 | 42,533 | |
* | WPX Energy Inc. | 3,037,079 | 36,232 |
* | TechnipFMC plc | 1,020,373 | 30,744 |
Noble Corp. plc | 3,160,316 | 15,169 | |
* | Rowan Cos. plc Class A | 996,725 | 14,024 |
* | Superior Energy | ||
Services Inc. | 1,120,132 | 13,531 | |
Baker Hughes Inc. | 170,476 | 10,121 | |
Nabors Industries Ltd. | 885,000 | 9,151 | |
784,191 | |||
Financials (25.1%) | |||
Willis Towers | |||
Watson plc | 1,466,441 | 194,479 | |
Discover Financial | |||
Services | 2,845,200 | 178,081 | |
Capital One Financial | |||
Corp. | 1,914,000 | 153,847 | |
New York Community | |||
Bancorp Inc. | 10,701,500 | 142,223 | |
KeyCorp | 7,651,825 | 139,569 | |
FNF Group | 3,258,500 | 133,436 | |
XL Group Ltd. | 3,007,376 | 125,859 | |
Unum Group | 2,666,869 | 123,556 | |
Navient Corp. | 7,757,647 | 117,916 | |
Fifth Third Bancorp | 4,809,000 | 117,484 | |
^ | Element Fleet | ||
Management Corp. | 12,680,200 | 111,377 | |
Everest Re Group Ltd. | 401,462 | 101,052 | |
CNA Financial Corp. | 2,141,885 | 96,942 | |
Axis Capital Holdings Ltd. | 1,292,251 | 85,159 | |
Voya Financial Inc. | 2,123,819 | 79,388 | |
Valley National Bancorp | 5,402,200 | 63,530 | |
Ameriprise Financial Inc. | 462,000 | 59,067 | |
Regions Financial Corp. | 4,105,725 | 56,454 |
12
Selected Value Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
* | SLM Corp. | 4,030,500 | 50,543 |
Franklin Resources Inc. | 1,170,824 | 50,474 | |
Invesco Ltd. | 1,501,950 | 49,474 | |
Allstate Corp. | 579,475 | 47,106 | |
Comerica Inc. | 635,150 | 44,905 | |
Webster Financial Corp. | 682,821 | 34,694 | |
Torchmark Corp. | 426,183 | 32,693 | |
Validus Holdings Ltd. | 541,925 | 29,958 | |
Legg Mason Inc. | 639,775 | 23,915 | |
Progressive Corp. | 495,225 | 19,670 | |
MFA Financial Inc. | 2,274,657 | 18,902 | |
Synovus Financial Corp. | 392,125 | 16,391 | |
Hartford Financial | |||
Services Group Inc. | 313,800 | 15,175 | |
Aspen Insurance | |||
Holdings Ltd. | 200,475 | 10,495 | |
* | Genworth Financial Inc. | ||
Class A | 2,224,850 | 8,988 | |
2,532,802 | |||
Health Care (5.5%) | |||
Cigna Corp. | 1,327,025 | 207,507 | |
Cardinal Health Inc. | 2,697,075 | 195,781 | |
^ | Patterson Cos. Inc. | 2,150,799 | 95,689 |
* | Mylan NV | 868,175 | 32,426 |
Aetna Inc. | 154,800 | 20,909 | |
552,312 | |||
Industrials (16.6%) | |||
* | AerCap Holdings NV | 4,443,188 | 204,431 |
Stanley Black | |||
& Decker Inc. | 1,440,975 | 196,189 | |
Owens Corning | 3,081,732 | 187,523 | |
Spirit AeroSystems | |||
Holdings Inc. Class A | 2,715,407 | 155,213 | |
Johnson Controls | |||
International plc | 3,438,864 | 142,954 | |
* | JetBlue Airways Corp. | 5,138,340 | 112,170 |
Orbital ATK Inc. | 1,048,400 | 103,792 | |
Nielsen Holdings plc | 2,033,100 | 83,621 | |
*,^ | CNH Industrial NV | 7,519,700 | 83,469 |
*,^ | Air France-KLM ADR | 8,488,085 | 71,639 |
Ryder System Inc. | 1,008,600 | 68,494 | |
Terex Corp. | 1,668,265 | 58,356 | |
Dover Corp. | 664,325 | 52,402 | |
* | AECOM | 1,101,235 | 37,673 |
KBR Inc. | 2,416,400 | 33,950 | |
Actuant Corp. Class A | 1,216,150 | 33,201 | |
* | JELD-WEN Holding Inc. | 889,716 | 29,387 |
Parker-Hannifin Corp. | 148,050 | 23,807 | |
1,678,271 |
Information Technology (9.6%) | |||
* | Micron Technology Inc. | 9,175,000 | 253,872 |
Microchip Technology Inc. | 2,250,200 | 170,070 | |
Total System Services Inc. | 1,686,036 | 96,627 | |
* | Versum Materials Inc. | 2,363,701 | 75,686 |
* | ON Semiconductor Corp. | 3,766,983 | 53,416 |
Avnet Inc. | 1,380,066 | 53,395 | |
* | Flex Ltd. | 2,982,200 | 46,105 |
Hewlett Packard | |||
Enterprise Co. | 2,214,625 | 41,258 | |
HP Inc. | 2,175,125 | 40,936 | |
* | Celestica Inc. | 2,081,919 | 29,667 |
Genpact Ltd. | 1,016,327 | 24,819 | |
* | Arrow Electronics Inc. | 304,204 | 21,446 |
Seagate Technology plc | 504,625 | 21,260 | |
Jabil Circuit Inc. | 711,890 | 20,659 | |
* | DXC Technology Co. | 190,245 | 14,333 |
CDW Corp. | 150,246 | 8,878 | |
972,427 | |||
Materials (7.0%) | |||
* | Kinross Gold Corp. | 42,300,000 | 147,627 |
* | Axalta Coating | ||
Systems Ltd. | 4,434,400 | 139,107 | |
^ | Yamana Gold Inc. | 38,000,000 | 102,600 |
CRH plc ADR | 2,692,499 | 97,792 | |
FMC Corp. | 1,293,200 | 94,701 | |
Celanese Corp. Class A | 811,000 | 70,589 | |
*,^ | IAMGOLD Corp. | 12,077,757 | 50,002 |
* | Brio Gold Inc. | 1,639,123 | 3,902 |
706,320 | |||
Real Estate (1.8%) | |||
GEO Group Inc. | 3,082,350 | 102,704 | |
Lamar Advertising Co. | |||
Class A | 856,593 | 61,735 | |
Hospitality Properties | |||
Trust | 583,800 | 18,582 | |
183,021 | |||
Utilities (4.1%) | |||
Xcel Energy Inc. | 2,961,137 | 133,399 | |
Pinnacle West | |||
Capital Corp. | 1,443,700 | 122,845 | |
CenterPoint Energy Inc. | 2,155,284 | 61,490 | |
Edison International | 758,900 | 60,689 | |
PG&E Corp. | 312,425 | 20,948 | |
Avangrid Inc. | 445,533 | 19,381 | |
418,752 | |||
Total Common Stocks | |||
(Cost $6,984,421) | 9,666,232 |
Selected Value Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Temporary Cash Investments (5.9%)1 | |||
Money Market Fund (5.8%) | |||
3,4 | Vanguard Market | ||
Liquidity Fund, | |||
1.034% | 5,815,205 | 581,637 | |
Face | |||
Amount | |||
($000) | |||
U.S. Government and Agency Obligations (0.1%) | |||
5 | United States Treasury Bill, | ||
0.587%–0.597%, 5/4/17 | 7,700 | 7,699 | |
5 | United States Treasury Bill, | ||
0.597%, 5/25/17 | 3,000 | 2,999 | |
10,698 | |||
Total Temporary Cash Investments | |||
(Cost $592,272) | 592,335 | ||
Total Investments (101.7%) | |||
(Cost $7,576,693) | 10,258,567 | ||
Other Assets and Liabilities (-1.7%) | |||
Other Assets | 24,026 | ||
Liabilities 4 | (200,132) | ||
(176,106) | |||
Net Assets (100%) | |||
Applicable to 331,287,014 outstanding | |||
$.001 par value shares of beneficial | |||
interest (unlimited authorization) | 10,082,461 | ||
Net Asset Value Per Share | $30.43 |
Amount | |
($000) | |
Statement of Assets and Liabilities | |
Assets | |
Investments in Securities, at Value | |
Unaffiliated Issuers | 9,458,513 |
Affiliated Vanguard Funds | 581,637 |
Other Affiliated Issuers | 218,417 |
Total Investments in Securities | 10,258,567 |
Investment in Vanguard | 693 |
Receivables for Investment | |
Securities Sold | 8,934 |
Receivables for Accrued Income | 5,146 |
Receivables for Capital Shares Issued | 5,251 |
Other Assets | 4,002 |
Total Assets | 10,282,593 |
Liabilities | |
Payables for Investment Securities | |
Purchased | 49,291 |
Collateral for Securities on Loan | 118,297 |
Payables to Investment Advisor | 5,493 |
Payables for Capital Shares Redeemed | 14,787 |
Payables to Vanguard | 11,772 |
Other Liabilities | 492 |
Total Liabilities | 200,132 |
Net Assets | 10,082,461 |
14
Selected Value Fund
At April 30, 2017, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 7,129,128 |
Undistributed Net Investment Income | 28,270 |
Accumulated Net Realized Gains | 241,870 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 2,681,874 |
Futures Contracts | 1,319 |
Net Assets | 10,082,461 |
• 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 $107,802,000.
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 97.9% and 3.8%, 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 $118,297,000 of collateral received for securities on loan.
5 Securities with a value of $8,714,000 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.
15
Selected Value Fund | |
Statement of Operations | |
Six Months Ended | |
April 30, 2017 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 87,226 |
Interest | 1,927 |
Securities Lending—Net | 289 |
Total Income | 89,442 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 10,737 |
Performance Adjustment | (695) |
The Vanguard Group—Note C | |
Management and Administrative | 7,126 |
Marketing and Distribution | 958 |
Custodian Fees | 47 |
Shareholders’ Reports | 123 |
Trustees’ Fees and Expenses | 7 |
Total Expenses | 18,303 |
Expenses Paid Indirectly | (164) |
Net Expenses | 18,139 |
Net Investment Income | 71,303 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 223,492 |
Futures Contracts | 17,037 |
Foreign Currencies | (520) |
Realized Net Gain (Loss) | 240,009 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 1,146,900 |
Futures Contracts | 3,103 |
Change in Unrealized Appreciation (Depreciation) | 1,150,003 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,461,315 |
1 Dividends are net of foreign withholding taxes of $878,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
16
Selected Value Fund | ||
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2017 | 2016 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 71,303 | 179,837 |
Realized Net Gain (Loss) | 240,009 | 294,122 |
Change in Unrealized Appreciation (Depreciation) | 1,150,003 | (279,329) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,461,315 | 194,630 |
Distributions | ||
Net Investment Income | (160,953) | (150,373) |
Realized Capital Gain1 | (259,949) | (347,588) |
Total Distributions | (420,902) | (497,961) |
Capital Share Transactions | ||
Issued | 743,121 | 1,575,113 |
Issued in Lieu of Cash Distributions | 390,140 | 457,613 |
Redeemed | (892,879) | (2,591,075) |
Net Increase (Decrease) from Capital Share Transactions | 240,382 | (558,349) |
Total Increase (Decrease) | 1,280,795 | (861,680) |
Net Assets | ||
Beginning of Period | 8,801,666 | 9,663,346 |
End of Period2 | 10,082,461 | 8,801,666 |
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $0 and $29,192,000, 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 $28,270,000 and $118,432,000.
See accompanying Notes, which are an integral part of the Financial Statements.
17
Selected Value Fund | ||||||
Financial Highlights | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | April 30, | Year Ended October 31, | ||||
Throughout Each Period | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
Net Asset Value, Beginning of Period | $27.24 | $28.15 | $29.49 | $28.07 | $21.01 | $18.81 |
Investment Operations | ||||||
Net Investment Income | . 221 | . 5271 | .478 | .415 | . 395 | .405 |
Net Realized and Unrealized Gain | ||||||
(Loss) on Investments | 4.268 | .030 | (.245) | 2.555 | 7.105 | 2.122 |
Total from Investment Operations | 4.489 | .557 | .233 | 2.970 | 7.500 | 2.527 |
Distributions | ||||||
Dividends from Net Investment Income | (. 501) | (. 443) | (. 404) | (. 330) | (. 440) | (. 327) |
Distributions from Realized Capital Gains | (.798) | (1.024) | (1.169) | (1.220) | — | — |
Total Distributions | (1.299) | (1.467) | (1.573) | (1.550) | (.440) | (.327) |
Net Asset Value, End of Period | $30.43 | $27.24 | $28.15 | $29.49 | $28.07 | $21.01 |
Total Return2 | 16.73% | 2.20% | 0.88% | 11.02% | 36.43% | 13.64% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $10,082 | $8,802 | $9,663 | $10,153 | $7,019 | $4,337 |
Ratio of Total Expenses to | ||||||
Average Net Assets3 | 0.38% | 0.35% | 0.39% | 0.41% | 0.43% | 0.38% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.50% | 2.00% | 1.62% | 1.53% | 1.70% | 2.00% |
Portfolio Turnover Rate | 25% | 27% | 24% | 18% | 27% | 18% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized. 1 Calculated based on average shares outstanding.
2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.
3 Includes performance-based investment advisory fee increases (decreases) of (0.01%), (0.04%), (0.02%), 0.01%, 0.02%, and (0.03%).
See accompanying Notes, which are an integral part of the Financial Statements.
18
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 are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the 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 Assets and Liabilities. 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, 2017, the fund’s average investments in long and short futures contracts represented 2% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.
19
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, 2013–2016), and for the period ended April 30, 2017, 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 event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facility: 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, 2017, 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.
20
Selected Value Fund
B. The investment advisory firms Barrow, Hanley, Mewhinney & Strauss, LLC, Pzena Investment Management, LLC, and Donald Smith & Co., Inc., each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fees of Barrow, Hanley, Mewhinney & Strauss, LLC, and Pzena Investment Management, LLC, are 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.
Vanguard manages the cash reserves of the fund as described below.
For the six months ended April 30, 2017, 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 $695,000 (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, 2017, the fund had contributed to Vanguard capital in the amount of $693,000, representing 0.01% of the fund’s net assets and 0.28% 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, 2017, these arrangements reduced the fund’s expenses by $164,000 (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).
21
Selected Value Fund
The following table summarizes the market value of the fund’s investments as of April 30, 2017, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 9,666,232 | — | — |
Temporary Cash Investments | 581,637 | 10,698 | — |
Futures Contracts—Liabilities1 | (479) | — | — |
Total | 10,247,390 | 10,698 | — |
1 Represents variation margin on the last day of the reporting period. |
F. At April 30, 2017, 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 2017 | 1,710 | 203,533 | 1,319 |
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, 2017, the cost of investment securities for tax purposes was $7,576,693,000. Net unrealized appreciation of investment securities for tax purposes was $2,681,874,000, consisting of unrealized gains of $3,130,648,000 on securities that had risen in value since their purchase and $448,774,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the six months ended April 30, 2017, the fund purchased $1,138,732,000 of investment securities and sold $1,326,291,000 of investment securities, other than temporary cash investments.
22
Selected Value Fund
I. Capital shares issued and redeemed were:
Six Months Ended | Year Ended | |
April 30, 2017 | October 31, 2016 | |
Shares | Shares | |
(000) | (000) | |
Issued | 24,906 | 63,300 |
Issued in Lieu of Cash Distributions | 13,370 | 17,506 |
Redeemed | (30,055) | (100,972) |
Net Increase (Decrease) in Shares Outstanding | 8,221 | (20,166) |
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, | ||||
2016 | from | Capital Gain | 2017 | |||
Market | Purchases | Securities | Distributions | Market | ||
Value | at Cost | Sold1 | Income | Received | Value | |
($000) | ($000) | ($000) | ($000) | ($000) | ($000 | |
GEO Group Inc. | 92,023 | — | 54,642 | 889 | — | NA2 |
Golar LNG Ltd. | NA3 | 23,971 | — | 544 | 138,713 | |
SeaWorld Entertainment Inc. | 63,699 | — | — | — | — | 79,704 |
Vanguard Market Liquidity Fund | 410,842 | NA 4 | NA 4 | 1,896 | — | 581,637 |
Total | 566,564 | 3,329 | — | 800,054 |
1 Includes net realized gain (loss) on affiliated investment securities sold of $11,863,000.
2 Not applicable—at April 30, 2017, the security was still held, but the issuer was no longer an affiliated company of the fund.
3 Not applicable—at October 31, 2016, the issuer was not an affiliated company of the fund.
4 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, 2017, 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.
24
Six Months Ended April 30, 2017 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Selected Value Fund | 10/31/2016 | 4/30/2017 | Period |
Based on Actual Fund Return | $1,000.00 | $1,167.33 | $2.04 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,022.91 | 1.91 |
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 0.38%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).
25
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. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisors and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangements. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the fund’s investment management services over both the short and long term, and took into account the organizational depth and stability of each advisor. The board considered the following:
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 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. Donald Smith & Co. employs a strictly bottom-up approach, focusing on companies in the bottom decile of price-to-tangible-book value in the benchmark and using 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 uses in-depth fundamental research to identify companies that are temporarily underperforming their long-term earnings power. Companies are purchased when
26
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 managed 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 compared with a relevant benchmark index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below the peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
The board did not consider the profitability of 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.
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.
28
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.
29
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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 197 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. 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
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years and Other Experience: Chairman of the Board of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group, since January 2010; Director of The Vanguard Group since 2008; Chief Executive Officer and President of The Vanguard Group, and of each of the investment companies served by The Vanguard Group, since 2008; Director of Vanguard Marketing Corporation; Managing Director of The Vanguard Group (1995–2008).
IndependentTrustees
Emerson U. Fullwood
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Executive Chief Staff and Marketing Officer for North America and Corporate Vice President (retired 2008) of Xerox Corporation (document management products and services); Executive in Residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology; Lead Director of SPX FLOW, Inc. (multi-industry manufacturing); Director of the United Way of Rochester, the University of Rochester Medical Center, Monroe Community College Foundation, North Carolina A&T University, and Roberts Wesleyan College.
Rajiv L. Gupta
Born 1945. Trustee Since December 2001.2 Principal Occupation(s) During the Past Five Years and Other Experience: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Arconic Inc. (diversified manufacturer), HP Inc. (printer and personal computer manufacturing), and Delphi Automotive plc (automotive components); Senior Advisor at New Mountain Capital.
Amy Gutmann
Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years and Other Experience: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and Professor of Communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania; Trustee of the National Constitution Center; Chair of the Presidential Commission for the Study of Bioethical Issues.
JoAnn Heffernan Heisen
Born 1950. Trustee Since July 1998. Principal Occupation(s) During the Past Five Years and Other Experience: Corporate Vice President and Member of the Executive Committee (1997–2008), Chief Global Diversity Officer (retired 2008), Vice President and Chief Information Officer (1997–2005), Controller (1995–1997), Treasurer (1991–1995), and Assistant Treasurer (1989–1991) 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
Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2009) of Cummins Inc. (industrial machinery); Chairman of the Board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education; Director of SKF AB (industrial machinery), Hyster-Yale Materials Handling, Inc. (forklift trucks), and the V Foundation for Cancer Research; Member of the Advisory Council for the College of Arts and Letters and Chair of the Advisory
Board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born 1953. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Senior Vice President and Chief Financial Officer (retired 2013) at IBM (information technology services); Fiduciary Member of IBM’s Retirement Plan Committee (2004–2013); Director of the Dow Chemical Company; Member of the Council on Chicago Booth.
Scott C. Malpass
Born 1962. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Chief Investment Officer and Vice President at the University of Notre Dame; Assistant Professor of Finance at the Mendoza College of Business at Notre Dame; Member of the Notre Dame 403(b) Investment Committee, the Board of Advisors for Spruceview Capital Partners, and the Investment Advisory Committee of Major League Baseball; Board Member of TIFF Advisory Services, Inc., and Catholic Investment Services, Inc. (investment advisors); Member of the Board of Superintendence of the Institute for the Works of Religion.
André F. Perold
Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years and Other Experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011); Chief Investment Officer and Co-Managing Partner of HighVista Strategies LLC (private investment firm); Overseer of the Museum of Fine Arts Boston.
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Chairman of the Board of Trustees of Colby-Sawyer College; Member of the Board of Hypertherm, Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born 1967. Investment Stewardship Officer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Treasurer (2015–2017), Controller (2010–2015), and Assistant Controller (2001–2010) of each of the investment companies served by The Vanguard Group.
Thomas J. Higgins
Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).
Peter Mahoney
Born 1974. Controller Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group; Head of International Fund Services at The Vanguard Group (2008–2014).
Anne E. Robinson
Born 1970. Secretary Since September 2016. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; General Counsel of The Vanguard Group; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Director and Senior Vice President of Vanguard Marketing Corporation; Managing Director and General Counsel of Global Cards and Consumer Services at Citigroup (2014–2016); Counsel at American Express (2003–2014).
Michael Rollings
Born 1963. Treasurer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group; Executive Vice President and Chief Financial Officer of MassMutual Financial Group (2006–2016).
Vanguard Senior ManagementTeam | |
Mortimer J. Buckley | James M. Norris |
John James | Thomas M. Rampulla |
Martha G. King | Glenn W. Reed |
John T. Marcante | Karin A. Risi |
Chris D. McIsaac |
Chairman Emeritus and Senior Advisor
John J. Brennan
Chairman, 1996–2009
Chief Executive Officer and President, 1996–2008
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 | |
Connect with Vanguard® >vanguard.com | Valley Forge, PA 19482-2600 |
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. | |
© 2017 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q9342 062017 |
Semiannual Report | April 30, 2017
Vanguard Mid-Cap Growth Fund
A new format, unwavering commitment
As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.
Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.
In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.
We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.
At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
Chairman’s Perspective. | 2 |
Advisors’ Report. | 6 |
Fund Profile. | 10 |
Performance Summary. | 11 |
Financial Statements. | 12 |
About Your Fund’s Expenses. | 22 |
Trustees Approve Advisory Arrangement. | 24 |
Glossary. | 26 |
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: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown translated into seven languages, reflecting our expanding global presence.
Your Fund’s Performance at a Glance
• During the six months ended April 30, 2017, Vanguard Mid-Cap Growth Fund returned
11.77%, trailing its benchmark, the Russell Midcap Growth Index, and its mid-cap growth
fund peers.
• Growth stocks outperformed their value counterparts during the period, reversing
a prominent trend from 2016. Small-capitalization stocks surpassed large-caps.
• Consumer staples and financial stocks helped drive relative performance. Industrial and
information technology stocks were among the top detractors from relative performance.
Total Returns: Six Months Ended April 30, 2017 | |
Total | |
Returns | |
Vanguard Mid-Cap Growth Fund | 11.77% |
Russell Midcap Growth Index | 13.59 |
Mid-Cap Growth Funds Average | 14.54 |
Mid-Cap Growth Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Expense Ratios
Your Fund Compared With Its Peer Group
Peer Group | ||
Fund | Average | |
Mid-Cap Growth Fund | 0.36% | 1.28% |
The fund expense ratio shown is from the prospectus dated February 23, 2017, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2017, the fund’s annualized expense ratio was 0.36%. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2016.
Peer group: Mid-Cap Growth Funds.
1
Chairman’s Perspective
Bill McNabb
Chairman and Chief Executive Officer
Dear Shareholder,
“Buy what you know.”
It’s one of the adages of investing, and it has plenty of intuitive appeal. After all, the familiar seems inherently less risky. It’s no wonder that many investors heavily tilt their portfolios toward the stocks and bonds of their home country. This is known in investing parlance as “home bias.”
U.S. investors sometimes think they can get all the global diversification they need by owning shares of U.S.-based multinational companies. And that may seem like the best of both worlds: international diversification without ever leaving the friendly confines of home.
The potential pitfall is that, as Vanguard research has suggested, the performance of a company’s shares tends to be highly correlated to its domestic market, regardless of where that company conducts most of its business.
Americans aren’t alone in being portfolio homebodies. Vanguard has found that in a range of developed countries—Australia, Canada, Japan, and the United Kingdom, as well as the United States—investors held a greater percentage of domestic stocks than would be indicated if they had taken their cues from a globally diversified, market-weighted benchmark. (You can see this tendency in the chart later in this letter.)
2
Why home bias exists
Vanguard’s Investment Strategy Group identified a range of reasons why investors might not embrace global diversification, including concerns about currency risk and an expectation that their home country will deliver outsized returns.
One factor we identified—preference for the familiar—seems particularly relevant. With so much global uncertainty about geopolitics, monetary policy, and the economic outlook, it’s understandable why investors may not want to stray too far from home.
But in their aversion to the unknown, investors can end up increasing, rather than lessening, their risks. That’s
because they’re sacrificing broad global diversification—one of the best ways I know of to help control risk.
In many cases, individual country markets are much less diversified than the global market in total. Global investing, then, can be an answer for investors who want to reduce concentration risk. That can include overconcentration in a particular country, region, or industry.
And the good news is that global investing is easier than ever, thanks to the wide availability of low-cost, internationally diversified stock and bond funds. It’s possible, in a sense, to own the whole world with just a couple of funds.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2017 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.46% | 18.03% | 13.63% |
Russell 2000 Index (Small-caps) | 18.37 | 25.63 | 12.95 |
Russell 3000 Index (Broad U.S. market) | 13.83 | 18.58 | 13.57 |
FTSE All-World ex US Index (International) | 10.55 | 12.98 | 5.60 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -0.67% | 0.83% | 2.27% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | -0.34 | 0.14 | 3.16 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.23 | 0.37 | 0.11 |
CPI | |||
Consumer Price Index | 1.16% | 2.20% | 1.22% |
3
Expanding our opportunities
A key to overcoming home bias is reframing the way we look at investing outside our home countries. Take, for example, automakers or pharmaceutical companies. There are well-regarded firms in both industries located throughout the world. Over the next five years, nobody can know for sure whether a Japanese or U.S. or European company will produce a popular new sedan that outsells the competition or come up with new treatments to combat illness. So why not own them all? And that includes their bonds along with their stocks.
Full global diversification also allows you to capitalize on opportunities in both developed and emerging economies. Betting on which individual country—let alone company—will be the next market darling can be a fool’s errand.
A better choice can be to harness the potential of all markets. In my personal investment account, I have an emerging markets position that complements my developed-market holdings. Not only can global diversification help control risk, but it can also expand our set of opportunities among stocks and bonds.
Home bias shows investors across the world are fixated on the familiar
Investors often own a greater share of their home country’s stocks than would be indicated by the allocations of a globally diversified, market-capitalization-weighted index fund.
Global index weight
Investor holdings in domestic equities
Notes: Data as of December 31, 2014 (the latest available from the International Monetary Fund, or IMF), in U.S. dollars. Domestic investment is calculated by subtracting total foreign investment (as reported by the IMF) in a given country from its market capitalization in the MSCI All Country World Index. Given that the IMF data are voluntary, there may be some discrepancies between the market values in the survey and the MSCI ACWI.
Sources: Vanguard, based on data from the IMF’s Coordinated Portfolio Investment Survey (2014), Bloomberg, Thomson Reuters Datastream, and FactSet.
4
Ultimately, I believe we have the best chance for investment success by giving ourselves more opportunities, not fewer. Own the whole haystack and you never have to worry about finding the needle.
Thank you for entrusting your assets to Vanguard.
F. William McNabb III
Chairman and Chief Executive Officer
May 12, 2017
5
Advisors’ Report
During the six months ended April 30, 2017, Vanguard Mid-Cap Growth Fund returned 11.77%, lagging the performance of its benchmark, the Russell Midcap Growth Index, and the average return of its mid-cap growth peer funds. 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 fund’s advisors, the percentage of fund assets each manages, and brief descriptions of their investment strategies
are presented in the table that follows. 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. As previously announced, RS Investments, a franchise of Victory Capital Management Inc., started managing a portion of the fund’s assets in December 2016. (Please note that the RS Investments discussion refers to industry sectors as defined by Russell classifications, rather than by the Global Industry Classification Standard used elsewhere in this report.) These comments were prepared on May 10, 2017.
Vanguard Mid-Cap Growth Fund Investment Advisors
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
William Blair Investment | 49 | 2,046 | 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. | |||
RS Investments | 49 | 2,018 | RS Investments, a Victory Capital investment |
franchise, employs both fundamental analysis and | |||
quantitative screening in seeking to identify companies | |||
that the investment team believes will produce | |||
sustainable earnings growth over a multiyear horizon. | |||
Investment candidates typically exhibit some or all of | |||
the following key criteria: strong organic revenue | |||
growth, expanding margins and profitability, innovative | |||
products or services, defensible competitive | |||
advantages, growing market share, and experienced | |||
management teams. | |||
Cash Investments | 2 | 68 | 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. |
6
William Blair Investment Management, LLC
Portfolio Managers:
Robert C. Lanphier, Partner
David Ricci, CFA, Partner
Daniel E. Crowe, CFA, Partner
During the period, the election of Donald Trump, whose proposed policies were generally perceived as reflationary and pro-U.S. growth, provided a boost for more economically sensitive areas of the market. At the same time, U.S. economic data surprised to the upside. Retail sales, housing starts, unemployment claims, and wages were among the positively trending data points. Accordingly, 10-year Treasury yields moved higher as investor confidence rose.
In addition, corporate earnings growth improved as corporations in the Standard & Poor’s 500 Index reported that fourth-quarter profits rose by almost 6% year-over-year, nearly double that of the third quarter.
Market returns slowed in March when President Trump and Republicans failed to enact a replacement for the Affordable Care Act, placing doubt in investors’ minds about the sustainability of the strong post-election bull market. Although the market appeared to become more discerning in March and April, our benchmark continued to move higher, albeit at a more measured pace than earlier in the period.
From a style perspective, the post-election market rotation into more cyclical areas was a challenge given our emphasis on companies with more consistent business models and more durable (as opposed to cyclical) growth drivers. For example, we are typically underweighted in semiconductors because of their commodity-like nature, limited pricing power, and cyclicality of the businesses. Instead, we gravitate toward software and services, which tend to have more differentiated products and services, higher value propositions, and better growth durability. Lack of exposure to the strong-performing semiconductor industry during the period detracted meaningfully from returns.
At the stock level, health care and consumer discretionary were notable areas of weakness, including positions in Cerner and Hanesbrands. Other top detractors included TransDigm Group in industrials, Tyson Foods in consumer staples, and Akamai Technologies in information technology.
Conversely, top stock contributors included CoStar Group and Arista Networks (information technology), Panera Bread and Vail Resorts (consumer discretionary), and Align Technology (health care). From a factor perspective, our higher-growth bias provided a boost, as such stocks outperformed.
Despite robust equity returns and investor optimism, many risks remain to the economic recovery. Cognizant of that, we remain focused on investing in businesses
7
with durable growth drivers. We are steadfast in our belief that our time is best spent analyzing companies to find quality growth businesses that are less dependent on the macroeconomic environment for growth and whose stocks present compelling risk/reward opportunities.
RS Investments
Portfolio Managers: D. Scott Tracy, CFA, Chief Investment Officer Stephen J. Bishop Melissa Chadwick-Dunn Christopher W. Clark, CFA
Robust job growth and the prospect for large corporate tax cuts and deregulation under the Trump administration led to a surge in consumer confidence during the period. Against this backdrop, the Federal Reserve raised the federal funds target rate by another 25 basis points in December and March. Despite Fed policymakers’ hinting at more aggressive tightening in 2017 to counterbalance the recent uptick in inflation expectations, the prospect of higher interest rates barely tempered the strength of the equity market rally.
Growth-oriented stocks surpassed their value counterparts during the six months, a reversal from 2016, when value-oriented stocks significantly outperformed growth stocks. As 2017 began, sectors that underperformed after the election, such as health care and technology, rebounded
sharply, while sectors viewed as favorable in a deregulatory environment, notably financials, lagged the overall market.
We experienced mixed performance across the eight core sectors we allocate to, reflecting the market’s less enthusiastic response to mid-cap companies with high reported growth rates. Stock selection in technology, materials and processing, producer durables, and health care held back performance, while selection in consumer discretionary, financial services, consumer staples, and energy contributed to relative performance.
Performance in technology was hurt by our holding in Yelp, which provides a platform for consumers to share their local business experiences by posting reviews, tips, photos, and videos; ordering food; and making reservations. Yelp had a challenging first quarter because of lower sales force productivity; we view this as temporary, given that it was a function of outbound sales call volume rather than its conversion rate. We also view this as correctable, as Yelp has a history of leveraging its headcount growth to exponentially increase revenue. We believe that the company’s investment in performance advertising should yield benefits this year, and we continue to hold the stock.
Consumer discretionary contributed most to excess performance. Within the sector, the largest driver of relative performance was Hasbro, which was up more than 19%. Hasbro is known for its toys, games, and content development, which includes
8
television programming, motion pictures, and digital gaming. The outperformance was driven by the company’s strong execution, resulting in sales that beat expectations. It is rare to see such broad outperformance across categories during the holiday season, which reflects the strength of Hasbro’s franchises and businesses. We continue to have high expectations for the company, and our forecasted earnings are higher than Wall Street’s because of brand strength (Disney Princess, Marvel, Star Wars, Transformers, My Little Pony) and channel mix.
9
Mid-Cap Growth Fund
Fund Profile
As of April 30, 2017
Portfolio Characteristics | |||
DJ | |||
U.S. | |||
Russell | Total | ||
Midcap | Market | ||
Growth | FA | ||
Fund | Index | Index | |
Number of Stocks | 103 | 469 | 3,788 |
Median Market Cap | $10.1B | $12.5B | $58.1B |
Price/Earnings Ratio | 36.4x | 31.3x | 27.1x |
Price/Book Ratio | 4.6x | 5.0x | 2.8x |
Return on Equity | 19.0% | 25.9% | 24.8% |
Earnings Growth | |||
Rate | 22.8% | 12.7% | 9.8% |
Dividend Yield | 0.7% | 1.1% | 1.8% |
Foreign Holdings | 3.2% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 125% | — | — |
Ticker Symbol | VMGRX | — | — |
Expense Ratio1 | 0.36% | — | — |
30-Day SEC Yield | 0.44% | — | — |
Short-Term Reserves | 2.4% | — | — |
Sector Diversification (% of equity exposure) | |||
DJ | |||
U.S. | |||
Russell | Total | ||
Midcap | Market | ||
Growth | FA | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 21.4% | 22.7% | 12.9% |
Consumer Staples | 4.1 | 6.6 | 8.2 |
Energy | 1.5 | 1.2 | 5.9 |
Financials | 7.5 | 5.4 | 14.6 |
Health Care | 15.8 | 16.2 | 13.4 |
Industrials | 17.4 | 14.6 | 10.8 |
Information | |||
Technology | 24.7 | 22.5 | 21.5 |
Materials | 4.5 | 5.2 | 3.4 |
Real Estate | 3.1 | 5.4 | 4.1 |
Telecommunication | |||
Services | 0.0 | 0.2 | 2.0 |
Utilities | 0.0 | 0.0 | 3.2 |
Volatility Measures | ||
Russell | DJ | |
Midcap | U.S. Total | |
Growth | Market | |
Index | FA Index | |
R-Squared | 0.94 | 0.87 |
Beta | 0.99 | 1.05 |
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) | ||
Six Flags Entertainment | ||
Corp. | Leisure Facilities | 2.3% |
O'Reilly Automotive Inc. | Automotive Retail | 2.2 |
Vantiv Inc. | Data Processing & | |
Outsourced Services | 2.1 | |
Vail Resorts Inc. | Leisure Facilities | 2.1 |
Pinnacle Foods Inc. | Packaged Foods & | |
Meats | 1.8 | |
Progressive Corp. | Property & Casualty | |
Insurance | 1.7 | |
CoStar Group Inc. | Internet Software & | |
Services | 1.7 | |
Red Hat Inc. | Systems Software | 1.7 |
Copart Inc. | Diversified Support | |
Services | 1.6 | |
Newell Brands Inc. | Housewares & | |
Specialties | 1.6 | |
Top Ten | 18.8% |
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 23, 2017, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2017, the annualized expense ratio was 0.36%.
10
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, 2006, Through April 30, 2017
Note: For 2017, performance data reflect the six months ended April 30, 2017.
Average Annual Total Returns: Periods Ended March 31, 2017
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 | 9.51% | 9.70% | 7.67% |
See Financial Highlights for dividend and capital gains information.
11
Mid-Cap Growth Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2017
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 (96.1%)1 | |||
Consumer Discretionary (20.7%) | |||
Six Flags Entertainment | |||
Corp. | 1,489,922 | 93,284 | |
* | O’Reilly Automotive Inc. | 368,632 | 91,476 |
Vail Resorts Inc. | 435,212 | 86,024 | |
Newell Brands Inc. | 1,389,100 | 66,316 | |
Ross Stores Inc. | 925,400 | 60,151 | |
Tractor Supply Co. | 759,200 | 47,002 | |
^ | Hanesbrands Inc. | 2,135,300 | 46,571 |
* | Ulta Beauty Inc. | 162,052 | 45,608 |
Wendy’s Co. | 2,892,635 | 42,637 | |
Hilton Worldwide | |||
Holdings Inc. | 663,640 | 39,135 | |
Hasbro Inc. | 369,827 | 36,654 | |
* | Burlington Stores Inc. | 365,267 | 36,132 |
* | Dollar Tree Inc. | 396,292 | 32,801 |
* | IMAX Corp. | 880,356 | 26,851 |
Brunswick Corp. | 415,403 | 23,574 | |
Delphi Automotive plc | 293,209 | 23,574 | |
* | CarMax Inc. | 391,000 | 22,873 |
* | Lululemon Athletica Inc. | 339,585 | 17,658 |
Dunkin’ Brands Group Inc. | 258,090 | 14,417 | |
852,738 | |||
Consumer Staples (3.9%) | |||
Pinnacle Foods Inc. | 1,299,070 | 75,541 | |
* | Post Holdings Inc. | 688,020 | 57,924 |
Tyson Foods Inc. Class A | 430,400 | 27,658 | |
161,123 | |||
Energy (1.4%) | |||
* | Concho Resources Inc. | 286,807 | 36,327 |
* | Diamondback Energy Inc. | 225,881 | 22,552 |
58,879 | |||
Financials (7.1%) | |||
Progressive Corp. | 1,811,220 | 71,942 | |
East West Bancorp Inc. | 1,042,060 | 56,553 | |
Intercontinental | |||
Exchange Inc. | 729,117 | 43,893 | |
* | Signature Bank | 210,484 | 29,141 |
Nasdaq Inc. | 395,300 | 27,224 | |
Affiliated Managers | |||
Group Inc. | 137,790 | 22,817 | |
* | Western Alliance Bancorp | 471,836 | 22,601 |
* | SVB Financial Group | 105,800 | 18,614 |
292,785 | |||
Health Care (15.1%) | |||
* | Align Technology Inc. | 491,794 | 66,205 |
* | Illumina Inc. | 324,790 | 60,041 |
* | Incyte Corp. | 411,610 | 51,155 |
Zoetis Inc. | 907,000 | 50,892 | |
* | Centene Corp. | 676,100 | 50,302 |
* | BioMarin | ||
Pharmaceutical Inc. | 395,762 | 37,930 | |
* | Edwards Lifesciences Corp. | 297,362 | 32,612 |
Cooper Cos. Inc. | 153,319 | 30,714 | |
* | Intuitive Surgical Inc. | 34,979 | 29,238 |
HealthSouth Corp. | 618,100 | 28,989 | |
* | Alkermes plc | 483,227 | 28,148 |
* | Veeva Systems Inc. | ||
Class A | 506,100 | 27,137 | |
* | Hologic Inc. | 577,942 | 26,094 |
* | Bluebird Bio Inc. | 288,190 | 25,634 |
* | WellCare Health Plans Inc. | 146,680 | 22,502 |
* | Mettler-Toledo | ||
International Inc. | 41,500 | 21,307 | |
* | ABIOMED Inc. | 149,600 | 19,496 |
Perrigo Co. plc | 227,200 | 16,799 | |
625,195 | |||
Industrials (16.7%) | |||
* | Copart Inc. | 2,198,200 | 67,924 |
BWX Technologies Inc. | 1,280,446 | 62,960 | |
* | Verisk Analytics Inc. | ||
Class A | 718,500 | 59,499 | |
Equifax Inc. | 420,165 | 56,853 | |
* | Middleby Corp. | 356,455 | 48,524 |
Fastenal Co. | 910,280 | 40,671 | |
Ritchie Bros | |||
Auctioneers Inc. | 1,202,013 | 39,378 |
12
Mid-Cap Growth Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Hexcel Corp. | 718,560 | 37,185 | |
^ | Wabtec Corp. | 426,700 | 35,796 |
Old Dominion Freight | |||
Line Inc. | 362,000 | 32,044 | |
Roper Technologies Inc. | 138,460 | 30,281 | |
* | JetBlue Airways Corp. | 1,306,210 | 28,515 |
Fortive Corp. | 426,400 | 26,974 | |
Alaska Air Group Inc. | 306,310 | 26,064 | |
* | United Rentals Inc. | 213,070 | 23,365 |
Parker-Hannifin Corp. | 125,890 | 20,243 | |
* | TransUnion | 505,187 | 20,223 |
Fortune Brands Home & | |||
Security Inc. | 268,180 | 17,094 | |
Dun & Bradstreet Corp. | 149,539 | 16,391 | |
689,984 | |||
Information Technology (23.7%) | |||
* | Vantiv Inc. Class A | 1,421,768 | 88,207 |
* | CoStar Group Inc. | 288,479 | 69,492 |
* | Red Hat Inc. | 774,000 | 68,174 |
* | Check Point Software | ||
Technologies Ltd. | 517,200 | 53,794 | |
* | Euronet Worldwide Inc. | 632,041 | 52,219 |
*,^ | Black Knight Financial | ||
Services Inc. Class A | 1,225,858 | 50,751 | |
CSRA Inc. | 1,697,500 | 49,363 | |
Booz Allen Hamilton | |||
Holding Corp. Class A | 1,185,900 | 42,609 | |
* | Guidewire Software Inc. | 668,700 | 41,118 |
MAXIMUS Inc. | 656,605 | 40,046 | |
Western Digital Corp. | 442,670 | 39,429 | |
Microchip Technology Inc. | 465,762 | 35,202 | |
LogMeIn Inc. | 280,610 | 31,709 | |
Lam Research Corp. | 208,868 | 30,255 | |
* | Electronic Arts Inc. | 301,020 | 28,543 |
* | Akamai Technologies Inc. | 458,372 | 27,933 |
Marvell Technology | |||
Group Ltd. | 1,817,530 | 27,299 | |
* | Ultimate Software | ||
Group Inc. | 126,770 | 25,693 | |
*,^ | GoDaddy Inc. Class A | 603,219 | 23,477 |
* | Arista Networks Inc. | 166,200 | 23,208 |
* | Yelp Inc. Class A | 652,231 | 23,096 |
NVIDIA Corp. | 214,533 | 22,376 | |
Global Payments Inc. | 256,837 | 20,999 | |
Activision Blizzard Inc. | 390,532 | 20,405 | |
* | FleetCor Technologies Inc. | 122,293 | 17,260 |
Xilinx Inc. | 240,137 | 15,155 | |
* | Criteo SA ADR | 204,180 | 11,105 |
978,917 | |||
Materials (4.3%) | |||
Ball Corp. | 823,800 | 63,342 | |
Vulcan Materials Co. | 400,100 | 48,364 | |
Eagle Materials Inc. | 377,495 | 36,228 | |
* | Axalta Coating Systems Ltd. | 925,400 | 29,030 |
176,964 |
Other (0.3%) | |||
2 | Vanguard Mid-Cap Growth | ||
ETF | 100,223 | 11,557 | |
Real Estate (2.9%) | |||
* | SBA Communications Corp. | ||
Class A | 498,200 | 63,018 | |
Equinix Inc. | 108,794 | 45,443 | |
American Campus | |||
Communities Inc. | 258,242 | 12,238 | |
120,699 | |||
Total Common Stocks | |||
(Cost $3,412,429) | 3,968,841 | ||
Temporary Cash Investments (4.6%)1 | |||
Money Market Fund (4.5%) | |||
3,4 | Vanguard Market | ||
Liquidity Fund, 1.034% | 1,865,612 | 186,598 | |
Face | |||
Amount | |||
($000) | |||
U.S. Government and Agency Obligations (0.1%) | |||
5 | United States Treasury Bill, | ||
0.564%, 5/4/17 | 800 | 800 | |
5 | United States Treasury Bill, | ||
0.587%, 5/18/17 | 1,400 | 1,400 | |
5 | United States Treasury Bill, | ||
0.738%, 6/1/17 | 1,000 | 999 | |
3,199 | |||
Total Temporary Cash Investments | |||
(Cost $189,780) | 189,797 | ||
Total Investments (100.7%) | |||
(Cost $3,602,209) | 4,158,638 | ||
Other Assets and Liabilities (-0.7%) | |||
Other Assets | 39,203 | ||
Liabilities 4 | (66,132) | ||
(26,929) | |||
Net Assets (100%) | |||
Applicable to 171,107,770 outstanding | |||
$.001 par value shares of beneficial | |||
interest (unlimited authorization) | 4,131,709 | ||
Net Asset Value Per Share | $24.15 |
13
Mid-Cap Growth Fund | |
Amount | |
($000) | |
Statement of Assets and Liabilities | |
Assets | |
Investments in Securities, at Value | |
Unaffiliated Issuers | 3,960,483 |
Affiliated Vanguard Funds | 198,155 |
Total Investments in Securities | 4,158,638 |
Investment in Vanguard | 282 |
Receivables for Investment | |
Securities Sold | 35,373 |
Receivables for Accrued Income | 1,159 |
Receivables for Capital Shares Issued | 2,388 |
Other Assets | 1 |
Total Assets | 4,197,841 |
Liabilities | |
Payables for Investment Securities | |
Purchased | 22,784 |
Collateral for Securities on Loan | 34,621 |
Payables to Investment Advisor | 1,602 |
Payables for Capital Shares Redeemed | 1,402 |
Payables to Vanguard | 5,445 |
Other Liabilities | 278 |
Total Liabilities | 66,132 |
Net Assets | 4,131,709 |
At April 30, 2017, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 3,508,862 |
Overdistributed Net Investment Income | (82) |
Accumulated Net Realized Gains | 65,874 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 556,429 |
Futures Contracts | 626 |
Net Assets | 4,131,709 |
• 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 $33,293,000.
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 3.2%, 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 $34,621,000 of collateral received for securities on loan.
5 Securities with a value of $2,699,000 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.
14
Mid-Cap Growth Fund | |
Statement of Operations | |
Six Months Ended | |
April 30, 2017 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 14,644 |
Interest1 | 717 |
Securities Lending—Net | 51 |
Total Income | 15,412 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 3,927 |
Performance Adjustment | (961) |
The Vanguard Group—Note C | |
Management and Administrative | 3,697 |
Marketing and Distribution | 454 |
Custodian Fees | 29 |
Shareholders’ Reports | 85 |
Trustees’ Fees and Expenses | 3 |
Total Expenses | 7,234 |
Expenses Paid Indirectly | (84) |
Net Expenses | 7,150 |
Net Investment Income | 8,262 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | 252,913 |
Futures Contracts | 9,476 |
Realized Net Gain (Loss) | 262,389 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 180,779 |
Futures Contracts | 1,572 |
Change in Unrealized Appreciation (Depreciation) | 182,351 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 453,002 |
1 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $52,000, $695,000, and $16,000, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
15
Mid-Cap Growth Fund | ||
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2017 | 2016 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 8,262 | 26,571 |
Realized Net Gain (Loss) | 262,389 | (183,376) |
Change in Unrealized Appreciation (Depreciation) | 182,351 | (75,038) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 453,002 | (231,843) |
Distributions | ||
Net Investment Income | (27,123) | (12,324) |
Realized Capital Gain1 | — | (311,613) |
Total Distributions | (27,123) | (323,937) |
Capital Share Transactions | ||
Issued | 272,419 | 943,333 |
Issued in Lieu of Cash Distributions | 26,277 | 314,619 |
Redeemed | (572,917) | (1,039,524) |
Net Increase (Decrease) from Capital Share Transactions | (274,221) | 218,428 |
Total Increase (Decrease) | 151,658 | (337,352) |
Net Assets | ||
Beginning of Period | 3,980,051 | 4,317,403 |
End of Period2 | 4,131,709 | 3,980,051 |
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $0 and $15,141,000, 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 ($82,000) and $18,779,000.
See accompanying Notes, which are an integral part of the Financial Statements.
16
Mid-Cap Growth Fund | ||||||
Financial Highlights | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | April 30, | Year Ended October 31, | ||||
Throughout Each Period | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
Net Asset Value, Beginning of Period | $21.75 | $24.88 | $26.40 | $25.72 | $20.95 | $19.40 |
Investment Operations | ||||||
Net Investment Income | .047 | .1471 | .0642 | .045 | .048 | .041 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 2.503 | (1.437) | 1.625 | 3.134 | 5.965 | 1.892 |
Total from Investment Operations | 2.550 | (1.290) | 1.689 | 3.179 | 6.013 | 1.933 |
Distributions | ||||||
Dividends from Net Investment Income | (.150) | (.070) | (.038) | (.007) | (.075) | (.030) |
Distributions from Realized Capital Gains | — | (1.770) | (3.171) | (2.492) | (1.168) | (.353) |
Total Distributions | (.150) | (1.840) | (3.209) | (2.499) | (1.243) | (.383) |
Net Asset Value, End of Period | $24.15 | $21.75 | $24.88 | $26.40 | $25.72 | $20.95 |
Total Return 3 | 11.77% | -5.49% | 6.68% | 13.42% | 30.32% | 10.24% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $4,132 | $3,980 | $4,317 | $3,319 | $2,837 | $2,129 |
Ratio of Total Expenses to | ||||||
Average Net Assets4 | 0.36% | 0.36% | 0.43% | 0.46% | 0.51% | 0.54% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.41% | 0.64%1 | 0.25%2 | 0.16% | 0.19% | 0.19% |
Portfolio Turnover Rate | 125% | 91% | 93% | 82% | 83% | 97% |
The expense ratio, net investment 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 $.018 and 0.08%, respectively, resulting from a special dividend from TransDigm Group in October 2016.
2 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.
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 (0.05)%, (0.04)%, (0.01)%, (0.02)%, 0.02%, and 0.04%.
See accompanying Notes, which are an integral part of the Financial Statements.
17
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 are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the 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 Assets and Liabilities. 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, 2017, the fund’s average investments in long and short futures contracts represented 2% 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, 2013–2016), and for the period ended April 30, 2017, 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.
18
Mid-Cap Growth Fund
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 event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facility: 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, 2017, 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 William Blair Investment Management, LLC, and, beginning December 2016, Victory Capital Management Inc., through RS Investments, 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 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. In accordance with the advisory contract entered into with RS Investments, beginning November 1, 2017, the basic fee is subject to quarterly adjustments based on performance relative to the Russell Midcap Growth Index since January 31, 2017.
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Mid-Cap Growth Fund
Vanguard manages the cash reserves of the fund as described below.
For the six months ended April 30, 2017, the aggregate investment advisory fee represented an effective annual basic rate of 0.19% of the fund’s average net assets, before a decrease of $961,000 (0.05%) 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, 2017, the fund had contributed to Vanguard capital in the amount of $282,000, representing 0.01% of the fund’s net assets and 0.11% 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, 2017, these arrangements reduced the fund’s expenses by $84,000 (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).
The following table summarizes the market value of the fund’s investments as of April 30, 2017, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 3,968,841 | — | — |
Temporary Cash Investments | 186,598 | 3,199 | — |
Futures Contracts—Liabilities1 | (278) | — | — |
Total | 4,155,161 | 3,199 | — |
1 Represents variation margin on the last day of the reporting period. |
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Mid-Cap Growth Fund
F. At April 30, 2017, 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 2017 | 107 | 18,511 | 231 |
E-mini S&P 500 Index | June 2017 | 316 | 37,612 | 395 |
626 |
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 the fiscal year.
At April 30, 2017, the cost of investment securities for tax purposes was $3,602,209,000. Net unrealized appreciation of investment securities for tax purposes was $556,429,000, consisting of unrealized gains of $624,567,000 on securities that had risen in value since their purchase and $68,138,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the six months ended April 30, 2017, the fund purchased $3,092,314,000 of investment securities and sold $3,292,026,000 of investment securities, other than temporary cash investments.
I. Capital shares issued and redeemed were: | ||
Six Months Ended | Year Ended | |
April 30, 2017 | October 31, 2016 | |
Shares | Shares | |
(000) | (000) | |
Issued | 11,831 | 43,119 |
Issued in Lieu of Cash Distributions | 1,160 | 13,866 |
Redeemed | (24,862) | (47,557) |
Net Increase (Decrease) in Shares Outstanding | (11,871) | 9,428 |
J. Management has determined that no material events or transactions occurred subsequent to April 30, 2017, that would require recognition or disclosure in these financial statements.
21
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
22
Six Months Ended April 30, 2017 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Mid-Cap Growth Fund | 10/31/2016 | 4/30/2017 | Period |
Based on Actual Fund Return | $1,000.00 | $1,117.70 | $1.89 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,023.01 | 1.81 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratio for that period is 0.36%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).
23
Trustees Approve Advisory Arrangement
The board of trustees of Vanguard Mid-Cap Growth Fund has renewed the fund’s investment advisory arrangement with William Blair & Company, L.L.C. (William Blair & Company). The board determined that renewing the fund’s advisory arrangement was in the best interests of the fund and its shareholders. Please note that in November, the fund’s trustees modified its investment advisory arrangement. Chartwell Investment Partners no longer serves as one of the fund’s advisors.
The board based its decisions upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the fund’s investment management services over both the short and long term, and took into account the organizational depth and stability of the advisor. The board considered the following:
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 the advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The board considered the short- and long-term performance of the fund and the advisor, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that the advisory arrangement should continue. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.
24
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 expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
The board did not consider profitability of William Blair & Company in determining whether to approve the advisory fee, because the firm is independent of Vanguard and the advisory fee is the result of arm’s-length negotiations.
The benefit of economies of scale
The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the advisory fee schedules for William Blair & Company. The breakpoints reduce the effective rate of the fee as the fund’s assets managed by the advisor increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
25
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.
26
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.
27
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 197 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. 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
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years and Other Experience: Chairman of the Board of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group, since January 2010; Director of The Vanguard Group since 2008; Chief Executive Officer and President of The Vanguard Group, and of each of the investment companies served by The Vanguard Group, since 2008; Director of Vanguard Marketing Corporation; Managing Director of The Vanguard Group (1995–2008).
IndependentTrustees
Emerson U. Fullwood
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Executive Chief Staff and Marketing Officer for North America and Corporate Vice President (retired 2008) of Xerox Corporation (document management products and services); Executive in Residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology; Lead Director of SPX FLOW, Inc. (multi-industry manufacturing); Director of the United Way of Rochester, the University of Rochester Medical Center, Monroe Community College Foundation, North Carolina A&T University, and Roberts Wesleyan College.
Rajiv L. Gupta
Born 1945. Trustee Since December 2001.2 Principal Occupation(s) During the Past Five Years and Other Experience: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Arconic Inc. (diversified manufacturer), HP Inc. (printer and personal computer manufacturing), and Delphi Automotive plc (automotive components); Senior Advisor at New Mountain Capital.
Amy Gutmann
Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years and Other Experience: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and Professor of Communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania; Trustee of the National Constitution Center; Chair of the Presidential Commission for the Study of Bioethical Issues.
JoAnn Heffernan Heisen
Born 1950. Trustee Since July 1998. Principal Occupation(s) During the Past Five Years and Other Experience: Corporate Vice President and Member of the Executive Committee (1997–2008), Chief Global Diversity Officer (retired 2008), Vice President and Chief Information Officer (1997–2005), Controller (1995–1997), Treasurer (1991–1995), and Assistant Treasurer (1989–1991) 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
Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2009) of Cummins Inc. (industrial machinery); Chairman of the Board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education; Director of SKF AB (industrial machinery), Hyster-Yale Materials Handling, Inc. (forklift trucks), and the V Foundation for Cancer Research; Member of the Advisory Council for the College of Arts and Letters and Chair of the Advisory
Board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born 1953. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Senior Vice President and Chief Financial Officer (retired 2013) at IBM (information technology services); Fiduciary Member of IBM’s Retirement Plan Committee (2004–2013); Director of the Dow Chemical Company; Member of the Council on Chicago Booth.
Scott C. Malpass
Born 1962. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Chief Investment Officer and Vice President at the University of Notre Dame; Assistant Professor of Finance at the Mendoza College of Business at Notre Dame; Member of the Notre Dame 403(b) Investment Committee, the Board of Advisors for Spruceview Capital Partners, and the Investment Advisory Committee of Major League Baseball; Board Member of TIFF Advisory Services, Inc., and Catholic Investment Services, Inc. (investment advisors); Member of the Board of Superintendence of the Institute for the Works of Religion.
André F. Perold
Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years and Other Experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011); Chief Investment Officer and Co-Managing Partner of HighVista Strategies LLC (private investment firm); Overseer of the Museum of Fine Arts Boston.
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Chairman of the Board of Trustees of Colby-Sawyer College; Member of the Board of Hypertherm, Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born 1967. Investment Stewardship Officer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Treasurer (2015–2017), Controller (2010–2015), and Assistant Controller (2001–2010) of each of the investment companies served by The Vanguard Group.
Thomas J. Higgins
Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).
Peter Mahoney
Born 1974. Controller Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group; Head of International Fund Services at The Vanguard Group (2008–2014).
Anne E. Robinson
Born 1970. Secretary Since September 2016. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; General Counsel of The Vanguard Group; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Director and Senior Vice President of Vanguard Marketing Corporation; Managing Director and General Counsel of Global Cards and Consumer Services at Citigroup (2014–2016); Counsel at American Express (2003–2014).
Michael Rollings
Born 1963. Treasurer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group; Executive Vice President and Chief Financial Officer of MassMutual Financial Group (2006–2016).
Vanguard Senior Management Team
Mortimer J. Buckley John James Martha G. King John T. Marcante Chris D. McIsaac | James M. Norris Thomas M. Rampulla Glenn W. Reed Karin A. Risi |
Chairman Emeritus and Senior Advisor John J. Brennan
Chairman, 1996–2009
Chief Executive Officer and President, 1996–2008
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. | ||
© 2017 The Vanguard Group, Inc. | ||
All rights reserved. | ||
Vanguard Marketing Corporation, Distributor. | ||
Q3012 062017 |
Semiannual Report | April 30, 2017
Vanguard International Explorer™ Fund
A new format, unwavering commitment
As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.
Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.
In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.
We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.
At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
Chairman’s Perspective. | 2 |
Advisors’ Report. | 6 |
Fund Profile. | 10 |
Performance Summary. | 12 |
Financial Statements. | 13 |
About Your Fund’s Expenses. | 30 |
Glossary. | 32 |
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: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown translated into seven languages, reflecting our expanding global presence.
Your Fund’s Performance at a Glance
• For the six months ended April 30, 2017, Vanguard International Explorer Fund returned 15.06%, well ahead of the 12.13% return of its benchmark and the 11.75% average return of its peers.
• The fund’s two advisors invest in smaller companies—mostly from the developed regions of Europe and the Pacific—that they believe have strong long-term growth prospects. Stock holdings in developed regions and emerging markets boosted performance.
• In Europe, the United Kingdom, Italy, France, Ireland, and Switzerland were leading contributors. Within the Pacific region, relative weakness in Japan was offset by a strong showing from Australia. Taiwan was the top performer in emerging markets.
• The advisors delivered positive returns in all 11 industry sectors; only consumer staples and real estate didn’t reach double digits. Industrials, the fund’s largest holding, added nearly 6 percentage points to returns and outperformed its benchmark counterpart. Information technology stocks also shined.
Total Returns: Six Months Ended April 30, 2017 | ||
Total | ||
Returns | ||
Vanguard International Explorer Fund | 15.06% | |
S&P EPAC SmallCap Index | 12.13 | |
International Small-Cap Funds Average | 11.75 | |
International Small-Cap Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
| ||
Expense Ratios | ||
Your Fund Compared With Its Peer Group | ||
Peer Group | ||
Fund | Average | |
International Explorer Fund | 0.41% | 1.56% |
The fund expense ratio shown is from the prospectus dated February 23, 2017, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2017, the fund’s annualized expense ratio was 0.40%. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2016.
Peer group: International Small-Cap Funds.
1
Chairman’s Perspective
Bill McNabb
Chairman and Chief Executive Officer
Dear Shareholder,
“Buy what you know.”
It’s one of the adages of investing, and it has plenty of intuitive appeal. After all, the familiar seems inherently less risky. It’s no wonder that many investors heavily tilt their portfolios toward the stocks and bonds of their home country. This is known in investing parlance as “home bias.”
U.S. investors sometimes think they can get all the global diversification they need by owning shares of U.S.-based multinational companies. And that may seem like the best of both worlds: international diversification without ever leaving the friendly confines of home.
The potential pitfall is that, as Vanguard research has suggested, the performance of a company’s shares tends to be highly correlated to its domestic market, regardless of where that company conducts most of its business.
Americans aren’t alone in being portfolio homebodies. Vanguard has found that in a range of developed countries—Australia, Canada, Japan, and the United Kingdom, as well as the United States—investors held a greater percentage of domestic stocks than would be indicated if they had taken their cues from a globally diversified, market-weighted benchmark. (You can see this tendency in the chart later in this letter.)
2
Why home bias exists
Vanguard’s Investment Strategy Group identified a range of reasons why investors might not embrace global diversification, including concerns about currency risk and an expectation that their home country will deliver outsized returns.
One factor we identified—preference for the familiar—seems particularly relevant. With so much global uncertainty about geopolitics, monetary policy, and the economic outlook, it’s understandable why investors may not want to stray too far from home.
But in their aversion to the unknown, investors can end up increasing, rather than lessening, their risks. That’s
because they’re sacrificing broad global diversification—one of the best ways I know of to help control risk.
In many cases, individual country markets are much less diversified than the global market in total. Global investing, then, can be an answer for investors who want to reduce concentration risk. That can include overconcentration in a particular country, region, or industry.
And the good news is that global investing is easier than ever, thanks to the wide availability of low-cost, internationally diversified stock and bond funds. It’s possible, in a sense, to own the whole world with just a couple of funds.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2017 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.46% | 18.03% | 13.63% |
Russell 2000 Index (Small-caps) | 18.37 | 25.63 | 12.95 |
Russell 3000 Index (Broad U.S. market) | 13.83 | 18.58 | 13.57 |
FTSE All-World ex US Index (International) | 10.55 | 12.98 | 5.60 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -0.67% | 0.83% | 2.27% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | -0.34 | 0.14 | 3.16 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.23 | 0.37 | 0.11 |
CPI | |||
Consumer Price Index | 1.16% | 2.20% | 1.22% |
3
Expanding our opportunities
A key to overcoming home bias is reframing the way we look at investing outside our home countries. Take, for example, automakers or pharmaceutical companies. There are well-regarded firms in both industries located throughout the world. Over the next five years, nobody can know for sure whether a Japanese or U.S. or European company will produce a popular new sedan that outsells the competition or come up with new treatments to combat illness. So why not own them all? And that includes their bonds along with their stocks.
Full global diversification also allows you to capitalize on opportunities in both developed and emerging economies. Betting on which individual country—let alone company—will be the next market darling can be a fool’s errand.
A better choice can be to harness the potential of all markets. In my personal investment account, I have an emerging markets position that complements my developed-market holdings. Not only can global diversification help control risk, but it can also expand our set of opportunities among stocks and bonds.
Home bias shows investors across the world are fixated on the familiar
Investors often own a greater share of their home country’s stocks than would be indicated by the allocations of a globally diversified, market-capitalization-weighted index fund.
Global index weight
Investor holdings in domestic equities
Notes: Data as of December 31, 2014 (the latest available from the International Monetary Fund, or IMF), in U.S. dollars. Domestic investment is calculated by subtracting total foreign investment (as reported by the IMF) in a given country from its market capitalization in the MSCI All Country World Index. Given that the IMF data are voluntary, there may be some discrepancies between the market values in the survey and the MSCI ACWI.
Sources: Vanguard, based on data from the IMF’s Coordinated Portfolio Investment Survey (2014), Bloomberg, Thomson Reuters Datastream, and FactSet.
4
Ultimately, I believe we have the best chance for investment success by giving ourselves more opportunities, not fewer. Own the whole haystack and you never have to worry about finding the needle.
Thank you for entrusting your assets to Vanguard.
F. William McNabb III
Chairman and Chief Executive Officer
May 12, 2017
5
Advisors’ Report
For the six months ended April 30, 2017, Vanguard International Explorer Fund returned 15.06%. 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 year and of how their portfolio positioning reflected that assessment. These comments were prepared on May 23, 2017.
Vanguard International Explorer Fund Investment Advisors
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Schroder Investment | 67 | 2,100 | 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 | 30 | 919 | 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 | 3 | 95 | 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. |
6
Schroder Investment Management
North America Inc.
Portfolio Manager:
Matthew F. Dobbs,
Head of Global Small Companies
After an uncertain close to 2016, international small-company stocks performed well in the opening months of 2017, rising to all-time highs at the end of the period. They also outperformed their larger peers over the six months. This result was particularly marked in Europe. Large-capitalization stocks outperformed in the Pacific region, excluding Japan, led by more globally sensitive stocks in information technology and consumer cyclicals, such as autos.
Equity returns had a good period. This performance reflected the healthy upturn in leading indicators across a number of developed economies, generally benign monetary conditions (Japanese and European central banks showed little inclination to follow the Federal Reserve in raising rates), and encouraging corporate earnings progress.
Relative and absolute performance were strong. Selection in continental European markets contributed most, notably in the industrial (SPIE, Maire Tecnimont, Duerr, Elis, and Kingspan), materials (Smurfit Kappa and Lenzing), and information technology (Ubisoft and Logitech) sectors. The only significant shortfall was among consumer cyclicals, where both Matas and Yoox Net-A-Porter suffered over fears of heightened competition. Selection in the United Kingdom contributed modestly;
notable stocks included building materials company Grafton, housing firm Redrow, veterinary pharmaceutical company Dechra, and Northgate, a vehicle leasing firm.
Selection in the Pacific region, excluding Japan, also added value, with notable returns including Computershare, the Australian registry group; Iluka Resources, an Australian mineral firm; NCsoft, a Korean computer games developer; and Medy-Tox, a Korean producer and distributor of Botox products. Country positioning helped thanks to underweights in Australia and South Korea. Other emerging markets presented a mixed picture, with strong showings from our stocks in Mexico and Thailand offset by the weakness of PT Matahari Department Store in Indonesia. Taiwan and India yielded positive returns but fell short of the broader index average.
Japan was the only significant developed market where selection detracted, with shortfalls in consumer staples (Tsuruha), industrials (Trusco Nakayama), and information technology (Kakaku.com). Real estate helped because of the lack of REITs and the takeover bid for Sumitomo Real Estate Sales by its parent.
Sentiment in the United States and the reality of a marked recovery in China are underwriting a degree of optimism about the global outlook. At the margin, both might disappoint—the former because of constraints to stronger growth, and the latter because of authorities’ caution in allowing another 2009–10 style blowout in growth and credit.
7
Fundamentals in other emerging economies, Europe, and (less convincingly) Japan appear reasonable, although we doubt it will necessitate any substantial backup in bond yields or material counterinflationary actions. To that extent, this strikes us as a reasonably benign backdrop for international equities (and, by extension, small-caps), though it does call into question some of the more extravagant predictions for cyclical sectors versus the broader markets.
Selective small-caps still can offer attractive earnings growth, and we will continue to focus on companies with high existing returns, competitive advantages, and scope to reinvest at similar returns. This should be a recipe for above-average growth, and we take some comfort from the fact that the portfolio, in aggregate, exhibits superior characteristics but with valuations broadly in line with the benchmark averages.
Wellington Management Company LLP
Portfolio Manager:
Simon H. Thomas, Senior Managing
Director and Equity Portfolio Manager
International small-cap equities rallied during the period, returning 12.1% (as measured by the S&P EPAC SmallCap Index, net of withholding tax). Although risks stemming from President Trump’s ambitious U.S. legislative agenda and European elections were top of mind, economic data releases across most major economies remained robust, supporting stock prices.
Our portion of the fund benefited from stock selection in the consumer discretionary, information technology, industrial, and health care sectors. These results were partially offset by weaker selection in financials and real estate. At a regional level, selection in Europe and emerging markets contributed to relative performance. Underweight exposure to Asia, particularly Hong Kong, also added to results. On the other hand, stock selection in and an overweight allocation to Japan detracted.
Top contributors to relative performance included GlobalWafers, ams AG, and Moncler. During the first quarter of 2017, the stock of Taiwan-based GlobalWafers, which manufactures semiconductor silicon wafers and ingots, rose as many market participants expect wafer price hikes to continue. This comes on the back of the 2017 price increases announced last year following eight years of pricing pressure. In addition, there is optimism around potential synergies from the company’s acquisition of SunEdison Semiconductor in December, one of several value-accretive acquisitions GlobalWafers has made in recent years.
Austria-based ams AG is the market leader in analogue sensor chips. A series of events pressured the stock throughout 2016; however, the company has since undergone significant changes, which improved our outlook. Shares were strong year-to-date through April following two consecutive releases of positive earnings results. Further, we believe ams AG can expand beyond its role as a supplier to Apple Inc. by increasing exposure to Chinese competitors and winning more
8
share with existing customers. We continued to hold the stock as of the end of the period.
The stock of Moncler, an Italian designer of men’s, women’s, and children’s clothing, reacted positively after the company reported fourth quarter and fiscal year 2016 results well ahead of consensus expectations. We believe the company has a very strong management team, a unique brand, and an underdistributed product, offering double-digit organic growth, healthy margins, and stable free-cash-flow generation. As such, we continued to hold the stock.
The largest detractors from relative performance during the period included Japan-based Zenkoku Hosho, Takara Leben, and Kyudenko. Shares of Zenkoku Hosho, which is in the credit guarantee business focusing on mortgages, traded down toward the end of 2016 after the release of weak quarterly results. However, we continue to be encouraged by the supportive macro backdrop, including healthy housing starts, subdued credit costs, and supportive employment data. Furthermore, the company is gaining market share, and we believe it will be benefit from the trend for bigger banks to outsource their mortgage guarantees. We maintained a position as of the end of the period.
Takara Leben, a condominium developer, was hurt by weak demand in the Tokyo condo market. In the broader condo market, where price inflation has hurt affordability, Takara Leben’s strategy of delivering lower-priced units is well-targeted but hasn’t been rewarded year-to-date. We modestly trimmed our position.
The stock of Kyudenko, an electrical engineering company that also owns a sizable solar asset portfolio, was weak without any notable news in the market. Despite the recent underperformance, we like the company. It is benefiting from a healthy construction cycle in Japan, which has driven its order book growth and the appreciation of its solar assets’ value. We continued to hold the stock.
At the end of the period, we were most overweighted in the consumer discretionary and health care sectors relative to the benchmark. We were most underweighted in real estate and financial services. On a regional basis, Japan was our greatest overweight position. We were most underweighted in Europe and Asia, excluding Japan. We continue to look for high-quality companies that have been neglected by the market and, thus, offer attractive investment opportunities.
9
International Explorer Fund
Fund Profile
As of April 30, 2017
Portfolio Characteristics | |||
MSCI | |||
S&P | AC | ||
EPAC | World | ||
SmallCap Index ex | |||
Fund | Index | USA | |
Number of Stocks | 305 | 3,912 | 1,852 |
Median Market Cap | $2.2B | $1.8B | $32.7B |
Price/Earnings Ratio | 24.1x | -96.4x | 20.0x |
Price/Book Ratio | 2.2x | 1.6x | 1.7x |
Return on Equity | 11.5% | 14.0% | 13.6% |
Earnings Growth | |||
Rate | 17.9% | 11.8% | 6.3% |
Dividend Yield | 1.9% | 2.2% | 2.9% |
Turnover Rate | |||
(Annualized) | 36% | — | — |
Ticker Symbol | VINEX | — | — |
Expense Ratio1 | 0.41% | — | — |
Short-Term Reserves | 2.3% | — | — |
Sector Diversification (% of equity exposure) | |||
MSCI | |||
S&P | AC | ||
EPAC | World | ||
SmallCap | Index ex | ||
Fund | Index | USA | |
Consumer Discretionary | 19.1% | 15.9% | 11.4% |
Consumer Staples | 4.9 | 5.9 | 9.9 |
Energy | 0.9 | 2.0 | 6.6 |
Financials | 8.8 | 12.3 | 23.3 |
Health Care | 8.4 | 8.5 | 8.1 |
Industrials | 29.1 | 23.0 | 12.0 |
Information Technology | 12.7 | 11.3 | 10.1 |
Materials | 9.8 | 9.5 | 7.9 |
Real Estate | 4.1 | 9.1 | 3.2 |
Telecommunication | |||
Services | 0.7 | 0.9 | 4.4 |
Utilities | 1.5 | 1.6 | 3.1 |
Volatility Measures | ||
MSCI | ||
S&P | AC | |
EPAC | World | |
SmallCap | Index ex | |
Index | USA | |
R-Squared | 0.93 | 0.76 |
Beta | 0.94 | 0.83 |
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) | ||
Anima Holding SPA | Asset Management | |
& Custody Banks | 1.5% | |
Ubisoft Entertainment | Home Entertainment | |
SA | Software | 1.1 |
Nippon Shinyaku Co. | ||
Ltd. | Pharmaceuticals | 1.1 |
Rubis SCA | Gas Utilities | 1.0 |
Cerved Information | ||
Solutions SPA | Specialized Finance | 1.0 |
Duerr AG | Industrial Machinery | 1.0 |
Yoox Net-A-Porter Group Internet & Direct | ||
SPA | Marketing Retail | 0.9 |
Dalata Hotel Group plc | Hotels, Resorts & | |
Cruise Lines | 0.8 | |
Smurfit Kappa Group plc Paper Packaging | 0.8 | |
Ai Holdings Corp. | Electronic Equipment | |
& Instruments | 0.8 | |
Top Ten | 10.0% |
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 23, 2017, and represents estimated costs for the current fiscal year. For the six months ended April 30, 2017, the annualized expense ratio was 0.40%.
10
International Explorer Fund
Market Diversification (% of equity exposure)
S&P | MSCI | ||
EPAC | AC World | ||
SmallCap | Index ex | ||
Fund | Index | USA | |
Europe | |||
United Kingdom | 16.1% | 15.9% | 12.4% |
France | 7.9 | 8.7 | 7.3 |
Italy | 7.6 | 2.4 | 1.5 |
Switzerland | 4.7 | 8.5 | 6.1 |
Ireland | 4.0 | 0.3 | 0.3 |
Germany | 4.4 | 8.1 | 6.7 |
Netherlands | 4.7 | 2.3 | 2.4 |
Sweden | 3.1 | 3.2 | 2.0 |
Austria | 1.5 | 0.2 | 0.1 |
Spain | 1.6 | 2.9 | 2.4 |
Denmark | 1.2 | 1.5 | 1.2 |
Other | 2.5 | 3.0 | 2.1 |
Subtotal | 59.3% | 57.0% | 44.5% |
Pacific | |||
Japan | 24.9% | 24.0% | 16.1% |
Australia | 4.2 | 6.1 | 5.2 |
South Korea | 2.3 | 3.6 | 3.5 |
Hong Kong | 1.2 | 2.2 | 2.5 |
Other | 0.4 | 1.3 | 1.0 |
Subtotal | 33.0% | 37.2% | 28.3% |
Emerging Markets | |||
China | 2.9% | 0.9% | 6.4% |
India | 1.9 | 0.0 | 2.1 |
Taiwan | 1.8 | 0.0 | 2.9 |
Other | 1.0 | 0.0 | 8.7 |
Subtotal | 7.6% | 0.9% | 20.1% |
North America | |||
Other | 0.1% | 0.2% | 6.6% |
Middle East | 0.0% | 1.0% | 0.5% |
Other | 0.0% | 3.7% | 0.0% |
"Other" represents securities that are not classified by the fund's benchmark index.
11
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, 2006, Through April 30, 2017
Note: For 2017, performance data reflect the six months ended April 30, 2017.
Average Annual Total Returns: Periods Ended March 31, 2017
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 | 10.56% | 8.75% | 2.95% |
See Financial Highlights for dividend and capital gains information.
12
International Explorer Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2017
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 (95.6%)1 | |||
Australia (3.8%) | |||
Iluka Resources Ltd. | 2,094,685 | 13,163 | |
Computershare Ltd. | 1,149,920 | 12,677 | |
Fairfax Media Ltd. | 11,707,454 | 9,281 | |
Tox Free Solutions Ltd. | 5,537,426 | 9,160 | |
^ | Domino’s Pizza | ||
Enterprises Ltd. | 193,528 | 8,850 | |
oOh!media Ltd. | 2,526,869 | 8,524 | |
Mirvac Group | 4,920,818 | 8,358 | |
Ansell Ltd. | 443,360 | 7,892 | |
Incitec Pivot Ltd. | 2,439,068 | 6,910 | |
* | Bingo Industries Ltd. | 4,233,889 | 5,707 |
Japara Healthcare Ltd. | 3,284,183 | 5,088 | |
Link Administration | |||
Holdings Ltd. | 831,980 | 4,809 | |
^ | Mantra Group Ltd. | 1,784,551 | 3,765 |
^ | Regis Healthcare Ltd. | 1,099,902 | 3,693 |
Amcor Ltd. | 303,234 | 3,566 | |
SEEK Ltd. | 215,273 | 2,742 | |
^ | Estia Health Ltd. | 1,003,698 | 2,300 |
^,* | Karoon Gas Australia Ltd. | 1,374,635 | 1,519 |
Asaleo Care Ltd. | 121,015 | 162 | |
118,166 | |||
Austria (1.4%) | |||
* | Lenzing AG | 100,000 | 18,643 |
ANDRITZ AG | 153,495 | 8,482 | |
Wienerberger AG | 350,409 | 8,204 | |
BUWOG AG | 185,240 | 5,002 | |
Schoeller-Bleckmann | |||
Oilfield Equipment AG | 59,483 | 4,153 | |
RHI AG | 20,360 | 593 | |
45,077 | |||
Belgium (0.6%) | |||
Cie d’Entreprises CFE | 52,608 | 7,667 | |
Ontex Group NV | 222,428 | 7,421 | |
* | Galapagos NV | 49,600 | 4,346 |
19,434 |
China (2.8%) | |||
* | SINA Corp. | 271,351 | 20,842 |
* | New Oriental Education | ||
& Technology Group | |||
Inc. ADR | 262,865 | 16,965 | |
Shenzhou International | |||
Group Holdings Ltd. | 2,297,000 | 15,114 | |
* | Vipshop Holdings Ltd. ADR | 718,360 | 9,964 |
* | China Biologic Products Inc. | 56,820 | 6,705 |
CSPC Pharmaceutical | |||
Group Ltd. | 4,756,000 | 6,597 | |
* | Tarena International Inc. | ||
ADR | 315,841 | 5,878 | |
Haitian International | |||
Holdings Ltd. | 1,807,000 | 4,425 | |
86,490 | |||
Denmark (1.2%) | |||
Matas A/S | 850,000 | 13,132 | |
Ambu A/S Class B | 175,000 | 8,610 | |
*,2 | Nets A/S | 450,000 | 8,188 |
FLSmidth & Co. A/S | 125,000 | 7,515 | |
* | OW Bunker A/S | 1,000,000 | — |
37,445 | |||
Finland (0.7%) | |||
* | Huhtamaki Oyj | 500,000 | 19,381 |
* | Tikkurila Oyj | 100,000 | 1,980 |
21,361 | |||
France (7.4%) | |||
* | Ubisoft Entertainment SA | 750,000 | 35,529 |
Rubis SCA | 300,000 | 30,478 | |
Elis SA | 1,000,005 | 20,691 | |
SPIE SA | 675,000 | 18,708 | |
Teleperformance | 125,000 | 15,719 | |
*,2 | Maisons du Monde SA | 413,594 | 14,338 |
* | Marie Brizard Wine & | ||
Spirits SA | 850,000 | 12,803 | |
* | ID Logistics Group | 74,107 | 11,233 |
Imerys SA | 130,122 | 11,195 | |
Nexity SA | 179,887 | 9,780 |
13
International Explorer Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Groupe Eurotunnel SE | 750,000 | 8,239 | |
Lectra | 300,000 | 7,792 | |
Orpea | 61,653 | 6,297 | |
Eurazeo SA | 87,170 | 5,909 | |
* | Virbac SA | 36,521 | 5,750 |
BioMerieux | 25,049 | 5,009 | |
Albioma SA | 225,000 | 4,327 | |
* | Kaufman & Broad SA | 99,896 | 3,918 |
^,* | Innate Pharma SA | 248,788 | 3,073 |
230,788 | |||
Germany (4.0%) | |||
Duerr AG | 300,000 | 29,895 | |
XING AG | 82,500 | 19,300 | |
Grand City Properties SA | 675,000 | 12,821 | |
RIB Software SE | 736,714 | 10,797 | |
^,* | Senvion SA | 770,000 | 10,525 |
STRATEC Biomedical AG | 123,627 | 7,207 | |
*,2 | Aumann AG | 107,300 | 7,057 |
* | SAF-Holland SA | 365,484 | 6,310 |
Zeal Network SE | 200,000 | 5,879 | |
* | Sartorius AG Preference | ||
Shares | 58,461 | 5,352 | |
Deutsche Beteiligungs AG | 100,000 | 3,805 | |
^ | ElringKlinger AG | 173,940 | 3,472 |
*,2 | windeln.de SE | 850,000 | 2,981 |
125,401 | |||
Hong Kong (1.1%) | |||
Techtronic Industries Co. | |||
Ltd. | 4,439,500 | 19,047 | |
Hysan Development Co. | |||
Ltd. | 1,373,000 | 6,475 | |
Johnson Electric Holdings | |||
Ltd. | 1,651,625 | 5,079 | |
Value Partners Group Ltd. | 4,491,000 | 4,150 | |
34,751 | |||
India (1.8%) | |||
Gujarat Pipavav Port Ltd. | 6,724,221 | 16,653 | |
Container Corp. Of India | |||
Ltd. | 770,877 | 14,599 | |
* | Apollo Hospitals Enterprise | ||
Ltd. | 741,632 | 14,212 | |
Idea Cellular Ltd. | 5,135,706 | 6,862 | |
Multi Commodity | |||
Exchange of India Ltd. | 205,558 | 3,885 | |
56,211 | |||
Indonesia (0.4%) | |||
Matahari Department | |||
Store Tbk PT | 9,928,000 | 10,848 |
Ireland (3.9%) | |||
* | Dalata Hotel Group plc | 4,750,000 | 25,553 |
Smurfit Kappa Group plc | 925,000 | 24,808 | |
Glanbia plc | 925,000 | 18,078 | |
Kingspan Group plc | 475,000 | 16,524 | |
Irish Continental Group | |||
plc | 2,240,000 | 12,918 | |
Irish Residential Properties | |||
REIT plc | 7,625,000 | 10,879 | |
Origin Enterprises plc | 1,250,000 | 10,135 | |
Paddy Power Betfair plc | 20,000 | 2,226 | |
121,121 | |||
Italy (7.4%) | |||
2 | Anima Holding SPA | 6,940,386 | 45,371 |
Cerved Information | |||
Solutions SPA | 2,845,887 | 30,383 | |
* | Yoox Net-A-Porter Group | ||
SPA | 1,050,000 | 27,901 | |
Maire Tecnimont SPA | 4,875,000 | 19,369 | |
Moncler SPA | 617,625 | 15,234 | |
^ | Salvatore Ferragamo SPA | 438,753 | 14,050 |
DiaSorin SPA | 185,596 | 13,911 | |
Brunello Cucinelli SPA | 441,865 | 11,578 | |
Autogrill SPA | 967,285 | 11,001 | |
2 | Infrastrutture Wireless | ||
Italiane SPA | 1,908,265 | 10,554 | |
2 | OVS SPA | 1,206,410 | 8,031 |
Credito Emiliano SPA | 1,025,485 | 7,169 | |
2 | Banca Sistema SPA | 2,371,523 | 6,462 |
* | FinecoBank Banca | ||
Fineco SPA | 648,691 | 4,621 | |
Cairo Communication SPA | 750,000 | 3,674 | |
229,309 | |||
Japan (23.5%) | |||
Nippon Shinyaku Co. Ltd. | 628,000 | 33,396 | |
^ | Ai Holdings Corp. | 974,000 | 23,953 |
Digital Garage Inc. | 1,014,400 | 21,474 | |
Tsuruha Holdings Inc. | 209,400 | 21,197 | |
Tokai Tokyo Financial | |||
Holdings Inc. | 4,087,000 | 20,690 | |
^ | Kureha Corp. | 457,700 | 20,287 |
Glory Ltd. | 578,700 | 19,432 | |
Hitachi Transport System | |||
Ltd. | 894,400 | 19,009 | |
Koito Manufacturing Co. | |||
Ltd. | 336,700 | 17,398 | |
Nippon Densetsu Kogyo | |||
Co. Ltd. | 807,600 | 15,963 | |
Nitta Corp. | 548,700 | 15,510 | |
Aica Kogyo Co. Ltd. | 517,900 | 14,761 |
14
International Explorer Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Alps Electric Co. Ltd. | 488,090 | 14,346 | |
Arcs Co. Ltd. | 590,600 | 12,650 | |
Temp Holdings Co. Ltd. | 663,300 | 12,482 | |
Kakaku.com Inc. | 850,700 | 12,277 | |
SCSK Corp. | 302,000 | 12,158 | |
* | IHI Corp. | 3,564,245 | 12,070 |
Daikyonishikawa Corp. | 942,700 | 11,984 | |
Sumitomo Real Estate | |||
Sales Co. Ltd. | 364,700 | 11,759 | |
Toyo Tire & Rubber Co. Ltd. | 646,600 | 11,373 | |
Musashi Seimitsu | |||
Industry Co. Ltd. | 461,300 | 11,331 | |
Trusco Nakayama Corp. | 477,800 | 10,911 | |
Kissei Pharmaceutical Co. | |||
Ltd. | 414,800 | 10,824 | |
Kyudenko Corp. | 370,430 | 10,615 | |
Asahi Intecc Co. Ltd. | 236,970 | 10,535 | |
JSP Corp. | 439,100 | 10,243 | |
DMG Mori Co. Ltd. | 613,500 | 10,130 | |
Sanwa Holdings Corp. | 961,190 | 9,689 | |
Zenkoku Hosho Co. Ltd. | 264,455 | 9,567 | |
Taiheiyo Cement Corp. | 2,616,000 | 8,693 | |
TPR Co. Ltd. | 257,100 | 8,674 | |
Nippon Shokubai Co. Ltd. | 128,161 | 8,609 | |
MINEBEA MITSUMI Inc. | 592,800 | 8,576 | |
Nabtesco Corp. | 298,300 | 8,457 | |
Ezaki Glico Co. Ltd. | 147,800 | 7,789 | |
Shinmaywa Industries Ltd. | 920,000 | 7,753 | |
OBIC Business | |||
Consultants Co. Ltd. | 155,400 | 7,639 | |
NEC Networks & System | |||
Integration Corp. | 356,900 | 7,461 | |
Kenedix Inc. | 1,608,900 | 7,423 | |
Itoham Yonekyu Holdings | |||
Inc. | 802,600 | 7,418 | |
Lintec Corp. | 327,100 | 7,212 | |
Disco Corp. | 45,210 | 7,151 | |
H2O Retailing Corp. | 414,900 | 7,042 | |
Obara Group Inc. | 153,400 | 7,007 | |
Pola Orbis Holdings Inc. | 287,400 | 6,637 | |
Teijin Ltd. | 341,800 | 6,623 | |
Nihon Parkerizing Co. Ltd. | 511,900 | 6,571 | |
^ | Jamco Corp. | 278,900 | 6,508 |
^ | Kumiai Chemical Industry | ||
Co. Ltd. | 1,102,600 | 6,362 | |
Shinsei Bank Ltd. | 3,390,235 | 6,330 | |
Ferrotec Holdings Corp. | 530,400 | 6,312 | |
Tokyo Steel | |||
Manufacturing Co. Ltd. | 846,500 | 6,307 | |
* | Nippon Yusen KK | 3,016,000 | 6,064 |
Nifco Inc. | 119,600 | 5,972 | |
Miura Co. Ltd. | 352,400 | 5,905 | |
Dip Corp. | 262,100 | 5,791 |
Hitachi Metals Ltd. | 409,900 | 5,740 | |
Eagle Industry Co. Ltd. | 382,400 | 5,413 | |
* | Kobe Steel Ltd. | 600,400 | 5,334 |
Daibiru Corp. | 571,100 | 5,270 | |
EPS Holdings Inc. | 396,100 | 5,220 | |
Fukushima Industries Corp. | 147,000 | 5,218 | |
Unipres Corp. | 245,500 | 5,201 | |
^ | Ichigo Inc. | 1,764,900 | 5,131 |
^ | Takara Leben Co. Ltd. | 1,088,600 | 5,118 |
^ | Yushin Precision | ||
Equipment Co. Ltd. | 175,200 | 5,001 | |
Tenma Corp. | 266,900 | 4,971 | |
Tokyo Ohka Kogyo Co. Ltd. | 149,680 | 4,852 | |
Takasago International Corp. 132,300 | 4,406 | ||
Kuroda Electric Co. Ltd. | 186,800 | 3,897 | |
Tsutsumi Jewelry Co. Ltd. | 187,900 | 3,451 | |
* | Ain Holdings Inc. | 47,700 | 3,304 |
Yamato Kogyo Co. Ltd. | 129,200 | 3,232 | |
Mitsui Sugar Co. Ltd. | 118,600 | 2,924 | |
^ | W-Scope Corp. | 184,800 | 2,493 |
Tokyo TY Financial Group | |||
Inc. | 80,845 | 2,353 | |
Mitsubishi Materials Corp. | 65,500 | 1,950 | |
730,779 | |||
Luxembourg (0.7%) | |||
L’Occitane International | |||
SA | 7,419,250 | 15,530 | |
Reinet Investments SCA | 339,753 | 7,325 | |
22,855 | |||
Mexico (0.4%) | |||
Grupo Aeroportuario del | |||
Pacifico SAB de CV | |||
Class B | 1,113,300 | 11,449 | |
Netherlands (4.5%) | |||
* | Van Lanschot NV Class A | 700,000 | 19,024 |
*,2 | Philips Lighting NV | 475,000 | 16,070 |
AMG Advanced | |||
Metallurgical Group NV | 550,000 | 14,426 | |
* | SIF Holding NV | ||
(Berlin Shares) | 581,260 | 12,605 | |
IMCD Group NV | 231,673 | 12,479 | |
* | OCI NV | 600,000 | 11,675 |
* | TKH Group NV | 250,000 | 11,491 |
2 | Refresco Group NV | 550,000 | 10,745 |
* | Kendrion NV | 275,000 | 9,817 |
2 | Intertrust NV | 423,475 | 8,485 |
^ | Beter Bed Holding NV | 375,000 | 6,127 |
*,2 | Basic-Fit NV | 275,000 | 4,811 |
^,* | SIF Holding NV | 143,740 | 3,108 |
140,863 |
15
International Explorer Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
New Zealand (0.2%) | |||
Fletcher Building Ltd. | 1,197,176 | 7,025 | |
Norway (0.4%) | |||
^ | Kongsberg Gruppen ASA | 583,625 | 9,105 |
* | Tomra Systems ASA | 300,000 | 3,482 |
12,587 | |||
Other (0.8%) | |||
3 | Vanguard FTSE All World | ||
ex-US Small-Cap ETF | 249,010 | 26,266 | |
Singapore (0.2%) | |||
First Resources Ltd. | 4,816,500 | 6,458 | |
South Korea (2.2%) | |||
Medy-Tox Inc. | 32,771 | 14,401 | |
NCSoft Corp. | 36,154 | 11,434 | |
Mando Corp. | 44,140 | 8,922 | |
S-1 Corp. | 83,659 | 7,173 | |
Nexen Tire Corp. | 524,207 | 6,286 | |
^ | Hotel Shilla Co. Ltd. | 138,921 | 6,197 |
* | ING Life Insurance Korea | ||
Ltd. | 176,583 | 5,121 | |
Korea Aerospace Industries | |||
Ltd. | 76,086 | 4,265 | |
Samsung Securities Co. Ltd. 119,489 | 3,628 | ||
67,427 | |||
Spain (1.5%) | |||
Applus Services SA | 1,750,000 | 21,937 | |
*,2 | Prosegur Cash SA | 4,400,000 | 11,216 |
Melia Hotels International | |||
SA | 662,935 | 9,830 | |
Naturhouse Health SAU | 575,000 | 3,070 | |
46,053 | |||
Sweden (3.0%) | |||
2 | Bravida Holding AB | 3,225,000 | 22,786 |
2 | Nordax Group AB | 3,275,000 | 16,681 |
Loomis AB Class B | 450,000 | 16,339 | |
Bufab AB | 1,250,000 | 14,979 | |
*,2 | Coor Service Management | ||
Holding AB | 2,250,000 | 14,091 | |
Concentric AB | 469,805 | 7,750 | |
92,626 | |||
Switzerland (4.5%) | |||
* | u-blox Holding AG | 107,532 | 23,832 |
* | OC Oerlikon Corp. AG | 1,909,137 | 22,937 |
Logitech International SA | 650,000 | 21,724 | |
* | Helvetia Holding AG | 37,500 | 20,824 |
* | Ascom Holding AG | 900,000 | 17,006 |
Interroll Holding AG | 10,000 | 11,758 | |
ams AG | 130,653 | 8,405 |
* | Comet Holding AG | 57,500 | 7,680 |
* | Tecan Group AG | 21,312 | 3,637 |
COSMO Pharmaceuticals NV 15,000 | 2,433 | ||
*,2 | Galenica Sante Ltd. | 25,100 | 1,097 |
141,333 | |||
Taiwan (1.7%) | |||
Giant Manufacturing Co. | |||
Ltd. | 1,607,000 | 9,711 | |
Catcher Technology Co. | |||
Ltd. | 858,000 | 8,811 | |
Chroma ATE Inc. | 2,802,000 | 8,760 | |
CTCI Corp. | 4,336,000 | 7,592 | |
Globalwafers Co. Ltd. | 968,000 | 6,911 | |
Gourmet Master Co. Ltd. | 657,300 | 6,600 | |
Eclat Textile Co. Ltd. | 326,000 | 3,566 | |
51,951 | |||
Thailand (0.2%) | |||
LPN Development PCL | 14,565,300 | 4,920 | |
United Arab Emirates (0.0%) | |||
* | Lamprell plc | 1,000,000 | 1,373 |
United Kingdom (15.3%) | |||
Elementis plc | 4,591,961 | 18,092 | |
Restaurant Group plc | 3,370,511 | 15,263 | |
Dechra Pharmaceuticals | |||
plc | 675,000 | 14,792 | |
B&M European Value | |||
Retail SA | 3,250,916 | 14,187 | |
DCC plc | 140,000 | 12,927 | |
SSP Group plc | 2,209,000 | 12,730 | |
Grafton Group plc | 1,283,000 | 12,413 | |
Grainger plc | 3,800,000 | 12,293 | |
Tyman plc | 2,790,923 | 11,932 | |
SuperGroup plc | 574,000 | 11,851 | |
Kennedy Wilson Europe | |||
Real Estate plc | 879,949 | 11,840 | |
Abcam plc | 991,892 | 11,010 | |
Northgate plc | 1,560,000 | 10,896 | |
Keller Group plc | 879,894 | 10,561 | |
Redrow plc | 1,406,831 | 10,509 | |
2 | Auto Trader Group plc | 2,000,000 | 10,388 |
AA plc | 3,012,377 | 10,197 | |
Bodycote plc | 913,000 | 9,859 | |
HomeServe plc | 1,134,604 | 9,844 | |
Polypipe Group plc | 1,846,380 | 9,534 | |
* | Cairn Homes plc | 5,459,098 | 9,306 |
*,2 | ConvaTec Group plc | 2,215,798 | 8,811 |
Telecom Plus plc | 535,193 | 8,698 | |
WS Atkins plc | 310,000 | 8,624 | |
Halma plc | 630,000 | 8,592 |
16
International Explorer Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Eco Animal Health Group | |||
plc | 1,298,166 | 8,415 | |
Kier Group plc | 458,700 | 7,951 | |
Ricardo plc | 700,000 | 7,948 | |
Cineworld Group plc | 839,262 | 7,652 | |
Dunelm Group plc | 972,500 | 7,643 | |
Volution Group plc | 3,008,652 | 7,635 | |
Hill & Smith Holdings plc | 436,786 | 7,519 | |
Photo-Me International plc | 3,240,000 | 7,292 | |
^ | Hikma Pharmaceuticals plc | 286,831 | 7,197 |
Investec plc | 931,000 | 6,897 | |
IG Group Holdings plc | 975,000 | 6,865 | |
Hays plc | 3,072,148 | 6,817 | |
Inchcape plc | 600,000 | 6,638 | |
Hunting plc | 902,050 | 6,562 | |
Micro Focus International | |||
plc | 186,300 | 6,242 | |
Cranswick plc | 166,329 | 5,777 | |
Pets at Home Group plc | 2,356,073 | 5,725 | |
Consort Medical plc | 408,563 | 5,503 | |
Ultra Electronics Holdings | |||
plc | 168,554 | 4,562 | |
Genus plc | 205,292 | 4,560 | |
Victrex plc | 180,040 | 4,466 | |
LondonMetric Property | |||
plc | 2,000,000 | 4,363 | |
JRP Group plc | 2,700,000 | 4,345 | |
UNITE Group plc | 513,676 | 4,306 | |
James Fisher & Sons plc | 202,693 | 4,214 | |
Soco International plc | 2,139,171 | 4,055 | |
A.G. Barr plc | 496,000 | 3,986 | |
QinetiQ Group plc | 1,000,000 | 3,805 | |
Senior plc | 1,263,500 | 3,510 | |
Ted Baker plc | 94,629 | 3,423 | |
Electra Private Equity plc | 87,119 | 3,002 | |
2 | Ibstock plc | 882,259 | 2,618 |
* | Findel plc | 900,000 | 2,332 |
Laird plc | 1,058,544 | 2,056 | |
Howden Joinery Group plc | 274,964 | 1,649 | |
* | Ophir Energy plc | 1,408,565 | 1,567 |
^,* | LMS Capital plc | 1,906,854 | 1,080 |
475,326 | |||
Total Common Stocks | |||
(Cost $2,370,073) | 2,975,693 |
Temporary Cash Investments (6.0%)1 | |||
Money Market Fund (5.3%) | |||
4,5 | Vanguard Market | ||
Liquidity Fund, | |||
1.034% | 1,644,745 | 164,507 | |
Face | |||
Amount | |||
($000) | |||
Repurchase Agreement (0.6%) | |||
Goldman Sachs & Co. | |||
0.790%, 5/1/17 | |||
(Dated 4/28/17, | |||
Repurchase Value | |||
$18,201,000 collateralized | |||
by Federal Home Loan | |||
Mortgage Corp. 4.000%, | |||
10/1/44, and Federal | |||
National Mortgage Assn. | |||
2.960%–3.000%, | |||
4/1/24–12/1/30, with a | |||
value of $18,564,000) | 18,200 | 18,200 | |
U.S. Government and Agency Obligations (0.1%) | |||
6 | United States Treasury Bill, | ||
0.501%, 5/4/17 | 150 | 150 | |
6 | United States Treasury Bill, | ||
0.713%–0.721%, 6/1/17 | 1,500 | 1,499 | |
6 | United States Treasury Bill, | ||
0.746%, 6/22/17 | 1,000 | 999 | |
6 | United States Treasury Bill, | ||
0.602%–0.622%, 7/20/17 | 1,500 | 1,498 | |
4,146 | |||
Total Temporary Cash Investments | |||
(Cost $186,837) | 186,853 | ||
Total Investments (101.6%) | |||
(Cost $2,556,910) | 3,162,546 |
17
International Explorer Fund | |
Market | |
Value• | |
($000) | |
Other Assets and Liabilities (-1.6%) | |
Other Assets7 | 50,074 |
Liabilities 4 | (98,667) |
(48,593) | |
Net Assets (100%) | |
Applicable to 164,086,606 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 3,113,953 |
Net Asset Value Per Share | $18.98 |
Amount | |
($000) | |
Statement of Assets and Liabilities | |
Assests | |
Investments in Securities, at Value | |
Unaffiliated Issuers | 2,971,773 |
Affiliated Vanguard Funds | 190,773 |
Total Investments in Securities | 3,162,546 |
Investment in Vanguard | 201 |
Receivables for Investment Securities Sold | 32,672 |
Receivables for Accrued Income | 13,882 |
Receivables for Capital Shares Issued | 2,096 |
Other Assets7 | 1,223 |
Total Assets | 3,212,620 |
Liabilities | |
Payables for Investment Securities | |
Purchased | 42,197 |
Collateral for Securities on Loan | 48,390 |
Payables to Investment Advisor | 1,528 |
Payables for Capital Shares Redeemed | 1.058 |
Payables to Vanguard | 4,755 |
Other Liabilities | 739 |
Total Liabilities | 98,667 |
Net Assets | 3,113,953 |
At April 30, 2017, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 2,505,559 |
Overdistributed Net Investment Income | (15,780) |
Accumulated Net Realized Gains | 16,506 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 605,636 |
Futures Contracts | 1,220 |
Forward Currency Contracts | 905 |
Foreign Currencies | (93) |
Net Assets | 3,113,953 |
• 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 $46,150,000.
* 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 97.7% and 3.9%, 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, 2017, the aggregate value of these securities was $230,781,000,
representing 7.4% of net assets.
3 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
4 Includes $48,390,000 of collateral received for securities on loan.
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 Securities with a value of $3,646,000 have been segregated as initial margin for open futures contracts.
7 Cash with a value of $30,000 has been segregated as collateral for open forward currency contracts.
ADR—American Depositary Receipt.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.
18
International Explorer Fund | |
Statement of Operations | |
Six Months Ended | |
April 30, 2017 | |
($000) | |
Investment Income | |
Income | |
Dividends1,2 | 22,856 |
Interest2 | 381 |
Securities Lending—Net | 607 |
Total Income | 23,844 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 3,111 |
Performance Adjustment | (187) |
The Vanguard Group—Note C | |
Management and Administrative | 2,147 |
Marketing and Distribution | 269 |
Custodian Fees | 192 |
Shareholders’ Reports | 40 |
Trustees’ Fees and Expenses | 2 |
Total Expenses | 5,574 |
Net Investment Income | 18,270 |
Realized Net Gain (Loss) | |
Investment Securities Sold2 | 40,671 |
Futures Contracts | 3,352 |
Foreign Currencies and Forward Currency Contracts | (2,689) |
Realized Net Gain (Loss) | 41,334 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 341,090 |
Futures Contracts | 46 |
Foreign Currencies and Forward Currency Contracts | 1,960 |
Change in Unrealized Appreciation (Depreciation) | 343,096 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 402,700 |
1 Dividends are net of foreign withholding taxes of $1,574,000.
2 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $382,000, $337,000, and $6,000, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
19
International Explorer Fund | ||
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2017 | 2016 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 18,270 | 53,039 |
Realized Net Gain (Loss) | 41,334 | (18,280) |
Change in Unrealized Appreciation (Depreciation) | 343,096 | (34,081) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 402,700 | 678 |
Distributions | ||
Net Investment Income | (52,250) | (43,678) |
Realized Capital Gain1 | — | (109,775) |
Total Distributions | (52,250) | (153,453) |
Capital Share Transactions | ||
Issued | 221,876 | 533,743 |
Issued in Lieu of Cash Distributions | 47,014 | 139,822 |
Redeemed | (334,090) | (578,815) |
Net Increase (Decrease) from Capital Share Transactions | (65,200) | 94,750 |
Total Increase (Decrease) | 285,250 | (58,025) |
Net Assets | ||
Beginning of Period | 2,828,703 | 2,886,728 |
End of Period2 | 3,113,953 | 2,828,703 |
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $0 and $0, 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 ($15,780,000) and $16,139,000.
See accompanying Notes, which are an integral part of the Financial Statements.
20
International Explorer Fund | ||||||
Financial Highlights | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | April 30, | Year Ended October 31, | ||||
Throughout Each Period | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
Net Asset Value, Beginning of Period | $16.82 | $17.76 | $18.26 | $18.50 | $14.50 | $14.41 |
Investment Operations | ||||||
Net Investment Income | .113 | .318 | .287 | .335 | .327 | .362 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 2.365 | (.334) | .635 | .133 | 4.078 | .287 |
Total from Investment Operations | 2.478 | (.016) | .922 | .468 | 4.405 | .649 |
Distributions | ||||||
Dividends from Net Investment Income | (. 318) | (. 263) | (. 326) | (. 420) | (. 405) | (. 346) |
Distributions from Realized Capital Gains | — | (.661) | (1.096) | (.288) | — | (.213) |
Total Distributions | (. 318) | (. 924) | (1.422) | (.708) | (. 405) | (. 559) |
Net Asset Value, End of Period | $18.98 | $16.82 | $17.76 | $18.26 | $18.50 | $14.50 |
Total Return1 | 15.06% | -0.06% | 5.65% | 2.66% | 31.13% | 5.02% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $3,114 | $2,829 | $2,887 | $2,598 | $2,281 | $1,819 |
Ratio of Total Expenses to | ||||||
Average Net Assets2 | 0.40 | 0.41% | 0.42% | 0.40% | 0.36% | 0.43% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.24% | 1.83% | 1.53% | 1.69% | 2.03% | 2.35% |
Portfolio Turnover Rate | 36% | 37% | 42% | 39% | 36% | 28% |
The expense ratio, net investment 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%, 0.00%, (0.05%), and 0.02%.
See accompanying Notes, which are an integral part of the Financial Statements.
21
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 are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse 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.
22
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. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The aggregate settlement values and notional amounts of the contracts are not recorded in the Statement of Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.
During the six months ended April 30, 2017, the fund’s average investments in long and short futures contracts represented 2% 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 5% 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 counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature, and in the absence of a default, such collateral cannot be repledged, resold, or rehypothecated. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.
23
International Explorer Fund
5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (October 31, 2013–2016), and for the period ended April 30, 2017, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
6. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
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 event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
8. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2017, 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.
Withholding taxes on foreign dividends and capital gains have been provided for in accordance with the fund’s understanding of the applicable countries’ tax rules and rates. The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries.
24
International Explorer Fund
These filings are subject to various administrative and judicial proceedings within these countries. Such tax reclaims received during the year, if any, are included in dividend income. No other amounts for additional tax reclaims are reflected in the financial statements due to the uncertainty as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment.
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.
Vanguard manages the cash reserves of the fund as described below.
For the six months ended April 30, 2017, the aggregate investment advisory fee represented an effective annual basic rate of 0.22% of the fund’s average net assets, before a decrease of $187,000 (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, 2017, the fund had contributed to Vanguard capital in the amount of $201,000, representing 0.01% of the fund’s net assets and 0.08% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
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).
25
International Explorer Fund
The following table summarizes the market value of the fund’s investments as of April 30, 2017, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 98,069 | 2,877,624 | — |
Temporary Cash Investments | 164,507 | 22,346 | — |
Futures Contracts—Assets1 | 57 | — | — |
Futures Contracts—Liabilities1 | (167) | — | — |
Forward Currency Contracts—Assets | — | 1,128 | — |
Forward Currency Contracts—Liabilities | — | (223) | — |
Total | 262,466 | 2,900,875 | — |
1 Represents variation margin on the last day of the reporting period. |
E. At April 30, 2017, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Statement of Assets and Liabilities Caption | ($000) | ($000) | ($000) |
Other Assets | 57 | 1,128 | 1,185 |
Other Liabilities | (167) | (223) | (390) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended April 30, 2017, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | 3,352 | — | 3,352 |
Forward Currency Contracts | — | (1,831) | (1,831) |
Realized Net Gain (Loss) on Derivatives | 3,352 | (1,831) | 1,521 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | 46 | — | 46 |
Forward Currency Contracts | — | 1,621 | 1,621 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | 46 | 1,621 | 1,667 |
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International Explorer Fund
At April 30, 2017, 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 2017 | 651 | 24,869 | 1,203 |
Topix Index | June 2017 | 157 | 21,549 | 50 |
FTSE 100 Index | June 2017 | 123 | 11,402 | (153) |
S&P ASX 200 Index | June 2017 | 78 | 8,623 | 120 |
1,220 |
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.
At April 30, 2017, 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) | ||
Morgan Stanley Capital Services LLC | 6/21/17 | EUR | 9,963 | USD | 10,667 | 214 |
Credit Suisse International | 6/13/17 | JPY | 1,028,912 | USD | 9,070 | 177 |
Barclays Bank plc | 6/13/17 | JPY | 864,165 | USD | 7,793 | (27) |
UBS AG | 6/21/17 | EUR | 6,993 | USD | 7,492 | 145 |
Barclays Bank plc | 6/20/17 | AUD | 6,650 | USD | 5,026 | (51) |
Toronto Dominion Securities | 6/21/17 | GBP | 3,586 | USD | 4,368 | 284 |
UBS AG | 6/21/17 | GBP | 2,701 | USD | 3,394 | 110 |
Barclays Bank plc | 6/21/17 | EUR | 3,011 | USD | 3,245 | 45 |
BNP Paribas | 6/13/17 | JPY | 257,595 | USD | 2,340 | (25) |
Goldman Sachs International | 6/20/17 | AUD | 3,070 | USD | 2,340 | (43) |
BNP Paribas | 6/21/17 | GBP | 1,332 | USD | 1,700 | 27 |
BNP Paribas | 6/21/17 | EUR | 1,370 | USD | 1,467 | 30 |
BNP Paribas | 6/21/17 | EUR | 1,303 | USD | 1,424 | (1) |
Goldman Sachs International | 6/13/17 | JPY | 137,160 | USD | 1,242 | (9) |
Barclays Bank plc | 6/20/17 | AUD | 1,622 | USD | 1,212 | 1 |
Bank of America, N.A | 6/13/17 | JPY | 131,895 | USD | 1,211 | (26) |
JPMorgan Chase Bank N.A. | 6/21/17 | GBP | 650 | USD | 808 | 35 |
Barclays Bank plc | 6/21/17 | GBP | 509 | USD | 637 | 23 |
Goldman Sachs International | 6/21/17 | GBP | 437 | USD | 552 | 16 |
Bank of America, N.A | 6/21/17 | EUR | 376 | USD | 404 | 7 |
BNP Paribas | 6/20/17 | AUD | 436 | USD | 333 | (6) |
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International Explorer Fund | ||||||
Unrealized | ||||||
Contract | Appreciation | |||||
Settlement | Contract Amount (000) | (Depreciation) | ||||
Counterparty | Date | Receive | Deliver | ($000) | ||
BNP Paribas | 6/13/17 | JPY | 35,055 | USD | 309 | 6 |
Barclays Bank plc | 6/21/17 | USD | 1,009 | EUR | 933 | (10) |
Barclays Bank plc | 6/13/17 | USD | 552 | JPY | 62,280 | (8) |
Goldman Sachs International | 6/21/17 | USD | 361 | GBP | 292 | (17) |
Goldman Sachs International | 6/20/17 | USD | 332 | AUD | 434 | 8 |
905 | ||||||
AUD—Australian dollar. | ||||||
EUR—Euro. | ||||||
GBP—British pound. | ||||||
JPY—Japanese yen. | ||||||
USD—U.S. dollar. |
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; such differences are primarily attributed to the tax treatment of unrealized appreciation on passive foreign investment companies. 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, 2017, the fund realized net foreign currency losses of $858,000, which decreased distributable net income for tax purposes; accordingly, such losses have been reclassified from accumulated net realized gains 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 income for tax purposes. During the six months ended April 30, 2017, the fund realized gains on the sale of passive foreign investment companies of $2,919,000, which have been included in current and prior periods’ taxable income; accordingly, such gains have been reclassified from accumulated net realized gains to overdistributed net investment income. Passive foreign investment companies held at April 30, 2017, had unrealized appreciation of $25,965,000, all of which has been distributed and is reflected in the balance of overdistributed net investment income.
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, 2016, the fund had available capital losses totaling $21,093,000 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, 2017; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
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International Explorer Fund
At April 30, 2017, the cost of investment securities for tax purposes was $2,582,875,000. Net unrealized appreciation of investment securities for tax purposes was $579,671,000, consisting of unrealized gains of $713,548,000 on securities that had risen in value since their purchase and $133,877,000 in unrealized losses on securities that had fallen in value since their purchase.
G. During the six months ended April 30, 2017, the fund purchased $495,327,000 of investment securities and sold $619,319,000 of investment securities, other than temporary cash investments.
H. Capital shares issued and redeemed were: | ||
Six Months Ended | Year Ended | |
April 30, 2017 | October 31, 2016 | |
Shares | Shares | |
(000) | (000) | |
Issued | 12,790 | 32,185 |
Issued in Lieu of Cash Distributions | 2,904 | 8,363 |
Redeemed | (19,768) | (34,938) |
Net Increase (Decrease) in Shares Outstanding | (4,074) | 5,610 |
I. Management has determined that no material events or transactions occurred subsequent to April 30, 2017, that would require recognition or disclosure in these financial statements.
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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, 2017 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
International Explorer Fund | 10/31/2016 | 4/30/2017 | Period |
Based on Actual Fund Return | $1,000.00 | $1,150.58 | $2.13 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,022.81 | 2.01 |
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 0.40%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).
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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.
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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 197 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. 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
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years and Other Experience: Chairman of the Board of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group, since January 2010; Director of The Vanguard Group since 2008; Chief Executive Officer and President of The Vanguard Group, and of each of the investment companies served by The Vanguard Group, since 2008; Director of Vanguard Marketing Corporation; Managing Director of The Vanguard Group (1995–2008).
IndependentTrustees
Emerson U. Fullwood
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Executive Chief Staff and Marketing Officer for North America and Corporate Vice President (retired 2008) of Xerox Corporation (document management products and services); Executive in Residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology; Lead Director of SPX FLOW, Inc. (multi-industry manufacturing); Director of the United Way of Rochester, the University of Rochester Medical Center, Monroe Community College Foundation, North Carolina A&T University, and Roberts Wesleyan College.
Rajiv L. Gupta
Born 1945. Trustee Since December 2001.2 Principal Occupation(s) During the Past Five Years and Other Experience: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Arconic Inc. (diversified manufacturer), HP Inc. (printer and personal computer manufacturing), and Delphi Automotive plc (automotive components); Senior Advisor at New Mountain Capital.
Amy Gutmann
Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years and Other Experience: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and Professor of Communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania; Trustee of the National Constitution Center; Chair of the Presidential Commission for the Study of Bioethical Issues.
JoAnn Heffernan Heisen
Born 1950. Trustee Since July 1998. Principal Occupation(s) During the Past Five Years and Other Experience: Corporate Vice President and Member of the Executive Committee (1997–2008), Chief Global Diversity Officer (retired 2008), Vice President and Chief Information Officer (1997–2005), Controller (1995–1997), Treasurer (1991–1995), and Assistant Treasurer (1989–1991) 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
Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2009) of Cummins Inc. (industrial machinery); Chairman of the Board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education; Director of SKF AB (industrial machinery), Hyster-Yale Materials Handling, Inc. (forklift trucks), and the V Foundation for Cancer Research; Member of the Advisory Council for the College of Arts and Letters and Chair of the Advisory
Board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born 1953. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Senior Vice President and Chief Financial Officer (retired 2013) at IBM (information technology services); Fiduciary Member of IBM’s Retirement Plan Committee (2004–2013); Director of the Dow Chemical Company; Member of the Council on Chicago Booth.
Scott C. Malpass
Born 1962. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Chief Investment Officer and Vice President at the University of Notre Dame; Assistant Professor of Finance at the Mendoza College of Business at Notre Dame; Member of the Notre Dame 403(b) Investment Committee, the Board of Advisors for Spruceview Capital Partners, and the Investment Advisory Committee of Major League Baseball; Board Member of TIFF Advisory Services, Inc., and Catholic Investment Services, Inc. (investment advisors); Member of the Board of Superintendence of the Institute for the Works of Religion.
André F. Perold
Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years and Other Experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011); Chief Investment Officer and Co-Managing Partner of HighVista Strategies LLC (private investment firm); Overseer of the Museum of Fine Arts Boston.
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Chairman of the Board of Trustees of Colby-Sawyer College; Member of the Board of Hypertherm, Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born 1967. Investment Stewardship Officer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Treasurer (2015–2017), Controller (2010–2015), and Assistant Controller (2001–2010) of each of the investment companies served by The Vanguard Group.
Thomas J. Higgins
Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).
Peter Mahoney
Born 1974. Controller Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group; Head of International Fund Services at The Vanguard Group (2008–2014).
Anne E. Robinson
Born 1970. Secretary Since September 2016. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; General Counsel of The Vanguard Group; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Director and Senior Vice President of Vanguard Marketing Corporation; Managing Director and General Counsel of Global Cards and Consumer Services at Citigroup (2014–2016); Counsel at American Express (2003–2014).
Michael Rollings
Born 1963. Treasurer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group; Executive Vice President and Chief Financial Officer of MassMutual Financial Group (2006–2016).
Vanguard Senior Management Team
Mortimer J. Buckley John James Martha G. King John T. Marcante Chris D. McIsaac | James M. Norris Thomas M. Rampulla Glenn W. Reed Karin A. Risi |
Chairman Emeritus and Senior Advisor John J. Brennan
Chairman, 1996–2009
Chief Executive Officer and President, 1996–2008
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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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 | |
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copies of this information, for a fee, by sending a | |
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© 2017 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q1262 062017 |
Semiannual Report | April 30, 2017
Vanguard High Dividend Yield Index Fund
A new format, unwavering commitment
As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.
Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.
In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.
We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.
At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
Chairman’s Perspective. | 3 |
Fund Profile. | 7 |
Performance Summary. | 8 |
Financial Statements. | 9 |
About Your Fund’s Expenses. | 25 |
Trustees Approve Advisory Arrangement. | 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: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown translated into seven languages, reflecting our expanding global presence.
Your Fund’s Performance at a Glance
• Vanguard High Dividend Yield Index Fund returned almost 11% for the six months ended April 30, 2017. The fund’s return was in line with its benchmark’s (+10.77%) but was a step behind the average return of its peers (+10.92%).
• In the more risk-tolerant environment that prevailed over much of the period, U.S. companies that committed to paying larger-than-average dividends underperformed the broad U.S. stock market.
• The fund posted positive results in all ten market sectors. Financials turned in the strongest performance, on the prospect of less regulation and a boost to profitability from higher interest rates. A pickup in global growth helped basic materials and industrials post gains of more than 15% as well.
• Oil and gas returned less than 3%. The price of oil rose on an agreement among oil producers to limit production, but then retreated amid continuing surpluses. Utilities and telecommunications also lagged.
Total Returns: Six Months Ended April 30, 2017 | |
Total | |
Returns | |
Vanguard High Dividend Yield Index Fund | |
Investor Shares | 10.68% |
ETF Shares | |
Market Price | 10.72 |
Net Asset Value | 10.72 |
FTSE High Dividend Yield Index | 10.77 |
Equity Income Funds Average | 10.92 |
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.
1
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | ETF | Peer Group | |
Shares | Shares | Average | |
High Dividend Yield Index Fund | 0.15% | 0.08% | 1.20% |
The fund expense ratios shown are from the prospectus dated February 23, 2017, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2017, 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 2016.
Peer group: Equity Income Funds.
2
Chairman’s Perspective
Bill McNabb
Chairman and Chief Executive Officer
Dear Shareholder,
“Buy what you know.”
It’s one of the adages of investing, and it has plenty of intuitive appeal. After all, the familiar seems inherently less risky. It’s no wonder that many investors heavily tilt their portfolios toward the stocks and bonds of their home country. This is known in investing parlance as “home bias.”
U.S. investors sometimes think they can get all the global diversification they need by owning shares of U.S.-based multinational companies. And that may seem like the best of both worlds: international diversification without ever leaving the friendly confines of home.
The potential pitfall is that, as Vanguard research has suggested, the performance of a company’s shares tends to be highly correlated to its domestic market, regardless of where that company conducts most of its business.
Americans aren’t alone in being portfolio homebodies. Vanguard has found that in a range of developed countries—Australia, Canada, Japan, and the United Kingdom, as well as the United States—investors held a greater percentage of domestic stocks than would be indicated if they had taken their cues from a globally diversified, market-weighted benchmark. (You can see this tendency in the chart later in this letter.)
3
Why home bias exists
Vanguard’s Investment Strategy Group identified a range of reasons why investors might not embrace global diversification, including concerns about currency risk and an expectation that their home country will deliver outsized returns.
One factor we identified—preference for the familiar—seems particularly relevant. With so much global uncertainty about geopolitics, monetary policy, and the economic outlook, it’s understandable why investors may not want to stray too far from home.
But in their aversion to the unknown, investors can end up increasing, rather than lessening, their risks. That’s
because they’re sacrificing broad global diversification—one of the best ways I know of to help control risk.
In many cases, individual country markets are much less diversified than the global market in total. Global investing, then, can be an answer for investors who want to reduce concentration risk. That can include overconcentration in a particular country, region, or industry.
And the good news is that global investing is easier than ever, thanks to the wide availability of low-cost, internationally diversified stock and bond funds. It’s possible, in a sense, to own the whole world with just a couple of funds.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2017 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.46% | 18.03% | 13.63% |
Russell 2000 Index (Small-caps) | 18.37 | 25.63 | 12.95 |
Russell 3000 Index (Broad U.S. market) | 13.83 | 18.58 | 13.57 |
FTSE All-World ex US Index (International) | 10.55 | 12.98 | 5.60 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -0.67% | 0.83% | 2.27% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | -0.34 | 0.14 | 3.16 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.23 | 0.37 | 0.11 |
CPI | |||
Consumer Price Index | 1.16% | 2.20% | 1.22% |
4
Expanding our opportunities
A key to overcoming home bias is reframing the way we look at investing outside our home countries. Take, for example, automakers or pharmaceutical companies. There are well-regarded firms in both industries located throughout the world. Over the next five years, nobody can know for sure whether a Japanese or U.S. or European company will produce a popular new sedan that outsells the competition or come up with new treatments to combat illness. So why not own them all? And that includes their bonds along with their stocks.
Full global diversification also allows you to capitalize on opportunities in both developed and emerging economies. Betting on which individual country—let alone company—will be the next market darling can be a fool’s errand.
A better choice can be to harness the potential of all markets. In my personal investment account, I have an emerging markets position that complements my developed-market holdings. Not only can global diversification help control risk, but it can also expand our set of opportunities among stocks and bonds.
Home bias shows investors across the world are fixated on the familiar
Investors often own a greater share of their home country’s stocks than would be indicated by the allocations of a globally diversified, market-capitalization-weighted index fund.
Global index weight
Investor holdings in domestic equities
Notes: Data as of December 31, 2014 (the latest available from the International Monetary Fund, or IMF), in U.S. dollars. Domestic investment is calculated by subtracting total foreign investment (as reported by the IMF) in a given country from its market capitalization in the MSCI All Country World Index. Given that the IMF data are voluntary, there may be some discrepancies between the market values in the survey and the MSCI ACWI.
Sources: Vanguard, based on data from the IMF’s Coordinated Portfolio Investment Survey (2014), Bloomberg, Thomson Reuters Datastream, and FactSet.
5
Ultimately, I believe we have the best chance for investment success by giving ourselves more opportunities, not fewer. Own the whole haystack and you never have to worry about finding the needle.
Thank you for entrusting your assets to Vanguard.
F. William McNabb III
Chairman and Chief Executive Officer
May 12, 2017
6
High Dividend Yield Index Fund
Fund Profile
As of April 30, 2017
Share-Class Characteristics | ||
Investor | ETF | |
Shares | Shares | |
Ticker Symbol | VHDYX | VYM |
Expense Ratio1 | 0.15% | 0.08% |
30-Day SEC Yield | 3.05% | 3.10% |
Volatility Measures | ||
FTSE High | DJ | |
Dividend | U.S. Total | |
Yield | Market | |
Index | FA Index | |
R-Squared | 1.00 | 0.90 |
Beta | 1.00 | 0.86 |
Portfolio Characteristics | |||
DJ | |||
U.S. | |||
FTSE High | Total | ||
Dividend | Market | ||
Yield | FA | ||
Fund | Index | Index | |
Number of Stocks | 428 | 402 | 3,788 |
Median Market Cap | $117.0B | $117.0B | $58.1B |
Price/Earnings Ratio | 21.6x | 21.6x | 27.1x |
Price/Book Ratio | 2.8x | 2.8x | 2.8x |
Return on Equity | 37.7% | 37.7% | 24.8% |
Earnings Growth | |||
Rate | 3.4% | 3.4% | 9.8% |
Dividend Yield | 3.1% | 3.1% | 1.8% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 14% | — | — |
Short-Term Reserves | 0.1% | — | — |
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 | 5.5% |
Exxon Mobil Corp. | Integrated Oil & Gas | 3.6 |
Johnson & Johnson | Pharmaceuticals | 3.6 |
JPMorgan Chase & Co. | Banks | 3.3 |
Wells Fargo & Co. | Banks | 2.9 |
General Electric Co. | Diversified Industrials | 2.7 |
AT&T Inc. | Fixed Line | |
Telecommunications | 2.6 | |
Procter & Gamble Co. | Nondurable | |
Household Products | 2.4 | |
Pfizer Inc. | Pharmaceuticals | 2.2 |
Chevron Corp. | Integrated Oil & Gas | 2.1 |
Top Ten | 30.9% |
Sector Diversification (% of equity exposure) | |||
DJ | |||
U.S. | |||
FTSE High | Total | ||
Dividend | Market | ||
Yield | FA | ||
Fund | Index | Index | |
Basic Materials | 3.6% | 3.6% | 2.6% |
Consumer Goods | 14.9 | 14.9 | 9.7 |
Consumer Services | 5.9 | 5.9 | 13.4 |
Financials | 13.6 | 13.6 | 20.0 |
Health Care | 13.0 | 13.0 | 12.6 |
Industrials | 12.8 | 12.8 | 12.8 |
Oil & Gas | 9.2 | 9.2 | 5.8 |
Technology | 14.3 | 14.3 | 17.8 |
Telecommunications | 4.8 | 4.8 | 2.1 |
Utilities | 7.9 | 7.9 | 3.2 |
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 23, 2017, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2017, the annualized expense ratios were 0.15% for Investor Shares and 0.08% for ETF Shares.
7
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, 2017
Note: For 2017, performance data reflect the six months ended April 30, 2017.
Average Annual Total Returns: Periods Ended March 31, 2017
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 | |
Investor Shares | 11/16/2006 | 15.90% | 13.25% | 7.34% |
ETF Shares | 11/10/2006 | |||
Market Price | 15.99 | 13.34 | 7.46 | |
Net Asset Value | 16.00 | 13.34 | 7.45 |
See Financial Highlights for dividend and capital gains information.
8
High Dividend Yield Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2017
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 (99.8%)1 | |||
Basic Materials (3.6%) | |||
Dow Chemical Co. | 3,194,947 | 200,643 | |
EI du Pont de Nemours | |||
& Co. | 2,275,051 | 181,435 | |
Praxair Inc. | 749,398 | 93,660 | |
Air Products & Chemicals | |||
Inc. | 569,881 | 80,068 | |
LyondellBasell Industries | |||
NV Class A | 903,571 | 76,587 | |
International Paper Co. | 1,095,191 | 59,107 | |
Nucor Corp. | 833,308 | 51,107 | |
Mosaic Co. | 935,172 | 25,184 | |
Avery Dennison Corp. | 234,229 | 19,490 | |
RPM International Inc. | 347,791 | 18,280 | |
CF Industries Holdings Inc. | 624,728 | 16,705 | |
Reliance Steel & | |||
Aluminum Co. | 178,730 | 14,087 | |
Olin Corp. | 416,951 | 13,397 | |
Huntsman Corp. | 424,777 | 10,522 | |
Scotts Miracle-Gro Co. | 90,959 | 8,787 | |
Domtar Corp. | 153,288 | 6,078 | |
^ | Compass Minerals | ||
International Inc. | 88,649 | 5,851 | |
Commercial Metals Co. | 290,563 | 5,416 | |
A Schulman Inc. | 85,880 | 2,718 | |
Innophos Holdings Inc. | 52,161 | 2,501 | |
Ferroglobe plc | 177,437 | 1,712 | |
Rayonier Advanced | |||
Materials Inc. | 118,121 | 1,565 | |
* | Ingevity Corp. | 63 | 4 |
KapStone Paper and | |||
Packaging Corp. | 119 | 2 | |
* | Ferroglobe R&W Trust | 166,085 | — |
894,906 |
Consumer Goods (14.9%) | ||
Procter & Gamble Co. | 6,783,615 | 592,413 |
Coca-Cola Co. | 10,909,100 | 470,728 |
Philip Morris | ||
International Inc. | 4,127,161 | 457,455 |
PepsiCo Inc. | 3,797,806 | 430,215 |
Altria Group Inc. | 5,224,839 | 375,039 |
Reynolds American Inc. | 2,215,718 | 142,914 |
Kraft Heinz Co. | 1,567,655 | 141,700 |
General Motors Co. | 3,643,586 | 126,214 |
Kimberly-Clark Corp. | 939,213 | 121,863 |
Ford Motor Co. | 10,313,646 | 118,298 |
General Mills Inc. | 1,536,350 | 88,355 |
Archer-Daniels-Midland | ||
Co. | 1,517,467 | 69,424 |
VF Corp. | 875,541 | 47,831 |
Clorox Co. | 339,562 | 45,396 |
Kellogg Co. | 629,742 | 44,712 |
Conagra Brands Inc. | 1,148,507 | 44,539 |
Genuine Parts Co. | 395,831 | 36,424 |
Hasbro Inc. | 298,402 | 29,575 |
Coach Inc. | 745,029 | 29,347 |
Bunge Ltd. | 367,123 | 29,014 |
Harley-Davidson Inc. | 466,903 | 26,525 |
Coca-Cola European | ||
Partners plc | 610,114 | 23,563 |
Coty Inc. Class A | 1,276,393 | 22,784 |
Hanesbrands Inc. | 1,003,116 | 21,878 |
Mattel Inc. | 925,812 | 20,757 |
Leggett & Platt Inc. | 352,541 | 18,522 |
Pinnacle Foods Inc. | 301,109 | 17,509 |
^ Polaris Industries Inc. | 160,019 | 13,643 |
Ralph Lauren Corp. | ||
Class A | 153,039 | 12,353 |
Flowers Foods Inc. | 459,406 | 9,009 |
Tupperware Brands Corp. | 117,562 | 8,442 |
9
High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
B&G Foods Inc. | 175,503 | 7,371 | |
Nu Skin Enterprises Inc. | |||
Class A | 128,743 | 7,110 | |
HNI Corp. | 116,015 | 5,425 | |
Vector Group Ltd. | 245,392 | 5,330 | |
Universal Corp. | 69,350 | 5,094 | |
Steelcase Inc. Class A | 239,435 | 4,082 | |
Schweitzer-Mauduit | |||
International Inc. | 79,638 | 3,428 | |
MDC Holdings Inc. | 107,607 | 3,337 | |
Briggs & Stratton Corp. | 116,868 | 2,921 | |
Knoll Inc. | 117,242 | 2,809 | |
Cosan Ltd. | 324,827 | 2,498 | |
Ethan Allen Interiors Inc. | 66,798 | 1,991 | |
National Presto Industries | |||
Inc. | 14,310 | 1,493 | |
Superior Industries | |||
International Inc. | 55,471 | 1,206 | |
Lamb Weston Holdings Inc. | 217 | 9 | |
* | Cal-Maine Foods Inc. | 35 | 1 |
3,690,546 | |||
Consumer Services (5.8%) | |||
McDonald’s Corp. | 2,193,001 | 306,867 | |
Wal-Mart Stores Inc. | 4,051,501 | 304,592 | |
Target Corp. | 1,496,220 | 83,564 | |
Sysco Corp. | 1,321,898 | 69,889 | |
Las Vegas Sands Corp. | 1,058,432 | 62,437 | |
Carnival Corp. | 989,331 | 61,111 | |
Omnicom Group Inc. | 621,537 | 51,041 | |
Nielsen Holdings plc | 911,162 | 37,476 | |
Best Buy Co. Inc. | 663,284 | 34,365 | |
L Brands Inc. | 522,500 | 27,593 | |
Darden Restaurants Inc. | 322,958 | 27,513 | |
Wynn Resorts Ltd. | 217,825 | 26,795 | |
Wyndham Worldwide | |||
Corp. | 275,584 | 26,266 | |
Interpublic Group of Cos. | |||
Inc. | 1,045,014 | 24,631 | |
Macy’s Inc. | 829,564 | 24,240 | |
^ | Nordstrom Inc. | 378,773 | 18,283 |
Kohl’s Corp. | 445,155 | 17,374 | |
Staples Inc. | 1,762,318 | 17,218 | |
Gap Inc. | 609,113 | 15,959 | |
KAR Auction Services Inc. | 356,297 | 15,542 | |
Six Flags Entertainment | |||
Corp. | 242,877 | 15,206 | |
TEGNA Inc. | 568,820 | 14,493 | |
H&R Block Inc. | 555,049 | 13,760 | |
^ | Williams-Sonoma Inc. | 233,611 | 12,627 |
Cinemark Holdings Inc. | 275,393 | 11,897 | |
^ | Cracker Barrel Old Country | ||
Store Inc. | 58,169 | 9,318 | |
Tribune Media Co. Class A | 236,146 | 8,633 | |
ILG Inc. | 314,615 | 7,585 |
American Eagle Outfitters | |||
Inc. | 470,880 | 6,635 | |
GameStop Corp. Class A | 286,514 | 6,501 | |
Hillenbrand Inc. | 172,656 | 6,371 | |
Extended Stay America Inc. | 364,199 | 6,352 | |
Regal Entertainment Group | |||
Class A | 287,084 | 6,336 | |
Meredith Corp. | 107,349 | 6,285 | |
John Wiley & Sons Inc. | |||
Class A | 117,011 | 6,166 | |
Brinker International Inc. | 134,640 | 5,950 | |
International Game | |||
Technology plc | 265,425 | 5,892 | |
Chico’s FAS Inc. | 328,108 | 4,534 | |
Time Inc. | 270,036 | 4,105 | |
DSW Inc. Class A | 194,888 | 4,019 | |
Bob Evans Farms Inc. | 54,871 | 3,662 | |
HSN Inc. | 94,654 | 3,493 | |
* | Liberty Global plc LiLAC | ||
Class A | 135,692 | 2,913 | |
DineEquity Inc. | 47,782 | 2,702 | |
Copa Holdings SA Class A | 21,429 | 2,495 | |
ClubCorp Holdings Inc. | 177,969 | 2,394 | |
^ | Guess? Inc. | 212,436 | 2,371 |
National CineMedia Inc. | 186,929 | 2,219 | |
Weis Markets Inc. | 34,525 | 1,996 | |
^ | Rent-A-Center Inc. | 174,460 | 1,865 |
New Media Investment | |||
Group Inc. | 138,925 | 1,828 | |
Cato Corp. Class A | 76,617 | 1,728 | |
Pier 1 Imports Inc. | 255,521 | 1,722 | |
^ | Buckle Inc. | 91,634 | 1,714 |
Barnes & Noble Inc. | 189,069 | 1,616 | |
^ | Tailored Brands Inc. | 130,690 | 1,611 |
Gannett Co. Inc. | 141,070 | 1,179 | |
Speedway Motorsports Inc. 36,789 | 664 | ||
Abercrombie & Fitch Co. | 29,218 | 350 | |
1,453,943 | |||
Financials (13.6%) | |||
JPMorgan Chase & Co. | 9,548,472 | 830,717 | |
Wells Fargo & Co. | 13,260,952 | 713,970 | |
Chubb Ltd. | 1,229,857 | 168,798 | |
BlackRock Inc. | 320,461 | 123,240 | |
MetLife Inc. | 2,349,559 | 121,731 | |
Prudential Financial Inc. | 1,131,117 | 121,063 | |
CME Group Inc. | 840,547 | 97,663 | |
BB&T Corp. | 2,135,658 | 92,218 | |
Travelers Cos. Inc. | 748,341 | 91,043 | |
Aflac Inc. | 1,035,510 | 77,539 | |
Ameriprise Financial Inc. | 409,238 | 52,321 | |
KeyCorp | 2,844,236 | 51,879 | |
Principal Financial Group | |||
Inc. | 754,693 | 49,153 | |
Fifth Third Bancorp | 1,985,320 | 48,501 |
10
High Dividend Yield Index Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
Regions Financial Corp. | 3,235,040 | 44,482 |
T. Rowe Price Group Inc. | 619,397 | 43,909 |
Huntington Bancshares | ||
Inc. | 2,854,639 | 36,711 |
Invesco Ltd. | 1,102,950 | 36,331 |
FNF Group | 720,620 | 29,509 |
Cincinnati Financial Corp. | 371,393 | 26,774 |
Arthur J Gallagher & Co. | 463,192 | 25,851 |
Western Union Co. | 1,299,703 | 25,812 |
New York Community | ||
Bancorp Inc. | 1,250,459 | 16,619 |
PacWest Bancorp | 295,578 | 14,599 |
People’s United Financial | ||
Inc. | 828,902 | 14,481 |
Axis Capital Holdings Ltd. | 212,985 | 14,036 |
Cullen/Frost Bankers Inc. | 143,545 | 13,549 |
Old Republic International | ||
Corp. | 625,739 | 12,940 |
Navient Corp. | 837,952 | 12,737 |
First American Financial | ||
Corp. | 286,234 | 12,425 |
Eaton Vance Corp. | 288,973 | 12,406 |
Allied World Assurance | ||
Co. Holdings AG | 229,031 | 12,159 |
Lazard Ltd. Class A | 276,061 | 11,854 |
FNB Corp. | 810,875 | 11,547 |
United Bankshares Inc. | 266,996 | 10,653 |
Hancock Holding Co. | 226,295 | 10,568 |
Umpqua Holdings Corp. | 588,146 | 10,393 |
Validus Holdings Ltd. | 169,053 | 9,345 |
BankUnited Inc. | 255,184 | 9,005 |
Bank of Hawaii Corp. | 106,081 | 8,643 |
Chemical Financial Corp. | 181,357 | 8,605 |
ProAssurance Corp. | 136,076 | 8,423 |
Fulton Financial Corp. | 445,635 | 8,222 |
LPL Financial Holdings Inc. | 189,640 | 7,972 |
Valley National Bancorp | 633,446 | 7,449 |
Janus Capital Group Inc. | 519,605 | 7,098 |
Federated Investors Inc. | ||
Class B | 248,618 | 6,668 |
Glacier Bancorp Inc. | 193,190 | 6,526 |
Columbia Banking System | ||
Inc. | 156,981 | 6,202 |
BGC Partners Inc. Class A | 516,849 | 5,882 |
Hope Bancorp Inc. | 320,944 | 5,876 |
RLI Corp. | 101,798 | 5,825 |
Community Bank System | ||
Inc. | 99,404 | 5,562 |
Capitol Federal Financial | ||
Inc. | 376,404 | 5,507 |
Old National Bancorp | 320,983 | 5,393 |
Kennedy-Wilson Holdings | ||
Inc. | 257,418 | 5,251 |
Trustmark Corp. | 151,719 | 5,040 |
CVB Financial Corp. | 228,645 | 4,925 | |
Mercury General Corp. | 75,557 | 4,646 | |
First Financial Bancorp | 165,091 | 4,565 | |
NBT Bancorp Inc. | 119,255 | 4,553 | |
BOK Financial Corp. | 53,847 | 4,539 | |
Northwest Bancshares Inc. | 276,983 | 4,471 | |
Provident Financial | |||
Services Inc. | 172,204 | 4,424 | |
WesBanco Inc. | 109,776 | 4,370 | |
^ | Waddell & Reed Financial | ||
Inc. Class A | 236,890 | 4,262 | |
Horace Mann Educators | |||
Corp. | 109,284 | 4,224 | |
First Hawaiian Inc. | 138,242 | 4,115 | |
Kemper Corp. | 96,478 | 3,796 | |
Artisan Partners Asset | |||
Management Inc. Class A | 123,308 | 3,613 | |
Westamerica | |||
Bancorporation | 65,631 | 3,611 | |
Boston Private Financial | |||
Holdings Inc. | 227,759 | 3,553 | |
Park National Corp. | 33,488 | 3,531 | |
CNA Financial Corp. | 74,257 | 3,361 | |
AmTrust Financial | |||
Services Inc. | 203,630 | 3,268 | |
HFF Inc. Class A | 103,981 | 3,265 | |
NRG Yield Inc. | 176,457 | 3,123 | |
S&T Bancorp Inc. | 86,568 | 3,113 | |
Safety Insurance Group Inc. | 41,649 | 3,015 | |
Tompkins Financial Corp. | 35,904 | 2,968 | |
City Holding Co. | 39,905 | 2,837 | |
Brookline Bancorp Inc. | 193,821 | 2,820 | |
First Commonwealth | |||
Financial Corp. | 215,123 | 2,777 | |
TFS Financial Corp. | 167,642 | 2,773 | |
American National | |||
Insurance Co. | 23,624 | 2,762 | |
Sandy Spring Bancorp Inc. | 62,994 | 2,724 | |
Flushing Financial Corp. | 76,501 | 2,255 | |
Cohen & Steers Inc. | 54,234 | 2,164 | |
Oritani Financial Corp. | 126,122 | 2,138 | |
Maiden Holdings Ltd. | 172,468 | 2,130 | |
^ | WisdomTree Investments | ||
Inc. | 246,403 | 2,057 | |
FBL Financial Group Inc. | |||
Class A | 29,837 | 1,984 | |
Greenhill & Co. Inc. | 75,617 | 1,913 | |
TrustCo Bank Corp. NY | 240,319 | 1,911 | |
Community Trust Bancorp | |||
Inc. | 38,489 | 1,730 | |
NRG Yield Inc. Class A | 92,820 | 1,610 | |
Dime Community | |||
Bancshares Inc. | 81,070 | 1,577 | |
First Financial Corp. | 25,490 | 1,244 |
11
High Dividend Yield Index Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
Republic Bancorp Inc. | ||
Class A | 26,711 | 961 |
Washington Trust Bancorp | ||
Inc. | 9,320 | 459 |
BancFirst Corp. | 259 | 25 |
Independent Bank | ||
Corp./Rockland | 393 | 25 |
LegacyTexas Financial | ||
Group Inc. | 181 | 7 |
IBERIABANK Corp. | 63 | 5 |
Willis Towers Watson plc | 8 | 1 |
1st Source Corp. | 21 | 1 |
3,368,876 | ||
Health Care (12.9%) | ||
Johnson & Johnson | 7,273,744 | 898,089 |
Pfizer Inc. | 16,036,988 | 543,975 |
Merck & Co. Inc. | 7,334,951 | 457,188 |
Amgen Inc. | 1,976,683 | 322,832 |
AbbVie Inc. | 4,273,525 | 281,796 |
Bristol-Myers Squibb Co. | 4,404,217 | 246,856 |
Gilead Sciences Inc. | 3,478,817 | 238,473 |
Eli Lilly & Co. | 2,598,449 | 213,229 |
Owens & Minor Inc. | 160,439 | 5,559 |
* Innoviva Inc. | 239,482 | 2,822 |
Kindred Healthcare Inc. | 88,487 | 849 |
Meridian Bioscience Inc. | 13,883 | 205 |
Abaxis Inc. | 35 | 2 |
3,211,875 | ||
Industrials (12.8%) | ||
General Electric Co. | 23,339,558 | 676,614 |
3M Co. | 1,573,623 | 308,163 |
Boeing Co. | 1,481,342 | 273,796 |
Lockheed Martin Corp. | 775,320 | 208,910 |
United Parcel Service Inc. | ||
Class B | 1,819,084 | 195,479 |
Caterpillar Inc. | 1,539,903 | 157,471 |
Automatic Data | ||
Processing Inc. | 1,181,667 | 123,472 |
Raytheon Co. | 776,275 | 120,486 |
Johnson Controls | ||
International plc | 2,479,073 | 103,055 |
Emerson Electric Co. | 1,697,864 | 102,347 |
Eaton Corp. plc | 1,190,279 | 90,033 |
Norfolk Southern Corp. | 765,082 | 89,890 |
Deere & Co. | 782,246 | 87,306 |
Waste Management Inc. | 1,159,732 | 84,405 |
Cummins Inc. | 442,861 | 66,845 |
PACCAR Inc. | 931,831 | 62,181 |
Paychex Inc. | 849,797 | 50,376 |
Republic Services Inc. | ||
Class A | 610,371 | 38,447 |
WestRock Co. | 659,049 | 35,299 |
TransDigm Group Inc. | 128,914 | 31,807 |
Fastenal Co. | 702,464 | 31,386 |
CH Robinson Worldwide | ||
Inc. | 371,971 | 27,042 |
Packaging Corp. of | |||
America | 247,302 | 24,429 | |
Xerox Corp. | 2,725,595 | 19,597 | |
Macquarie Infrastructure | |||
Corp. | 199,952 | 16,270 | |
MDU Resources Group | |||
Inc. | 507,409 | 13,649 | |
Sonoco Products Co. | 243,125 | 12,718 | |
Watsco Inc. | 78,432 | 10,886 | |
Ryder System Inc. | 143,916 | 9,773 | |
National Instruments Corp. | 258,022 | 9,008 | |
Kennametal Inc. | 211,818 | 8,807 | |
Timken Co. | 172,362 | 8,316 | |
^ | GATX Corp. | 92,142 | 5,519 |
Aircastle Ltd. | 185,248 | 4,376 | |
Covanta Holding Corp. | 295,649 | 4,302 | |
* | Cardtronics plc Class A | 99,176 | 4,124 |
Greif Inc. Class A | 70,232 | 4,117 | |
Brady Corp. Class A | 105,370 | 4,104 | |
Otter Tail Corp. | 94,040 | 3,715 | |
Mobile Mini Inc. | 126,968 | 3,644 | |
Triton International Ltd. | 109,487 | 3,351 | |
Sturm Ruger & Co. Inc. | 51,688 | 3,125 | |
Greenbrier Cos. Inc. | 71,900 | 3,124 | |
^ | Ship Finance International | ||
Ltd. | 206,852 | 2,906 | |
^ | Nordic American Tankers | ||
Ltd. | 332,764 | 2,762 | |
General Cable Corp. | 140,384 | 2,527 | |
ManTech International | |||
Corp. Class A | 69,384 | 2,463 | |
AVX Corp. | 139,990 | 2,367 | |
Scorpio Tankers Inc. | 534,784 | 2,353 | |
Essendant Inc. | 132,306 | 2,210 | |
McGrath RentCorp | 51,945 | 1,808 | |
^ | Frontline Ltd. | 260,780 | 1,734 |
H&E Equipment Services | |||
Inc. | 81,250 | 1,716 | |
Schnitzer Steel Industries | |||
Inc. | 90,456 | 1,710 | |
^ | GasLog Ltd. | 118,928 | 1,665 |
Teekay Corp. | 176,683 | 1,534 | |
^ | American Railcar Industries | ||
Inc. | 28,708 | 1,204 | |
Resources Connection Inc. | 76,532 | 1,064 | |
Myers Industries Inc. | 60,394 | 984 | |
RR Donnelley & Sons Co. | 64,363 | 809 | |
Seaspan Corp. Class A | 44,357 | 312 | |
CSX Corp. | 1,393 | 71 | |
* | Conduent Inc. | 301 | 5 |
Applied Industrial | |||
Technologies Inc. | 49 | 3 | |
* | Donnelley Financial | ||
Solutions Inc. | 50 | 1 | |
3,173,972 |
12
High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Oil & Gas (9.2%) | |||
Exxon Mobil Corp. | 11,010,465 | 899,004 | |
Chevron Corp. | 4,987,942 | 532,213 | |
ConocoPhillips | 3,249,546 | 155,686 | |
Occidental Petroleum | |||
Corp. | 2,028,218 | 124,817 | |
Phillips 66 | 1,377,713 | 109,611 | |
Kinder Morgan Inc. | 5,015,669 | 103,473 | |
Valero Energy Corp. | 1,196,350 | 77,296 | |
Marathon Petroleum | |||
Corp. | 1,400,827 | 71,358 | |
Williams Cos. Inc. | 2,153,227 | 65,953 | |
Targa Resources Corp. | 502,404 | 27,698 | |
Tesoro Corp. | 296,318 | 23,620 | |
OGE Energy Corp. | 521,091 | 18,124 | |
^ | Helmerich & Payne Inc. | 279,775 | 16,966 |
HollyFrontier Corp. | 482,563 | 13,579 | |
Murphy Oil Corp. | 317,955 | 8,324 | |
Oceaneering International | |||
Inc. | 274,298 | 7,239 | |
Western Refining Inc. | 201,220 | 6,940 | |
PBF Energy Inc. Class A | 306,971 | 6,852 | |
SemGroup Corp. Class A | 180,274 | 6,003 | |
Pattern Energy Group Inc. | |||
Class A | 192,907 | 4,248 | |
Delek US Holdings Inc. | 161,378 | 3,884 | |
Archrock Inc. | 180,735 | 2,133 | |
^ | CVR Energy Inc. | 58,976 | 1,291 |
Frank’s International NV | 696 | 6 | |
National Oilwell Varco Inc. | 100 | 3 | |
2,286,321 | |||
Other (0.0%)2 | |||
* | Safeway Inc CVR (Casa Ley) | ||
Expire 1/30/2018 | 364 | — | |
* | Safeway Inc CVR (PDC) | ||
Expire 1/30/2019 | 364 | — | |
— | |||
Technology (14.3%) | |||
Microsoft Corp. | 19,995,707 | 1,368,906 | |
Cisco Systems Inc. | 13,301,446 | 453,180 | |
Intel Corp. | 12,527,242 | 452,860 | |
International Business | |||
Machines Corp. | 2,534,338 | 406,229 | |
Texas Instruments Inc. | 2,656,623 | 210,351 | |
QUALCOMM Inc. | 3,878,099 | 208,409 | |
HP Inc. | 4,506,934 | 84,821 | |
Analog Devices Inc. | 962,151 | 73,316 | |
Western Digital Corp. | 717,080 | 63,870 | |
Xilinx Inc. | 655,310 | 41,357 | |
KLA-Tencor Corp. | 409,281 | 40,200 | |
Maxim Integrated | |||
Products Inc. | 749,404 | 33,086 | |
Seagate Technology plc | 752,549 | 31,705 | |
CA Inc. | 827,071 | 27,153 |
^ | Garmin Ltd. | 291,030 | 14,796 |
Cypress Semiconductor | |||
Corp. | 856,850 | 12,005 | |
Pitney Bowes Inc. | 550,674 | 7,318 | |
TiVo Corp. | 323,850 | 6,396 | |
Cogent Communications | |||
Holdings Inc. | 125,044 | 5,627 | |
West Corp. | 163,662 | 4,368 | |
NIC Inc. | 156,086 | 3,332 | |
Harris Corp. | 182 | 20 | |
Diebold Nixdorf Inc. | 112 | 3 | |
Brooks Automation Inc. | 91 | 2 | |
* | Gartner Inc. | 7 | 1 |
Computer Programs & | |||
Systems Inc. | 21 | 1 | |
3,549,312 | |||
Telecommunications (4.8%) | |||
AT&T Inc. | 16,308,534 | 646,307 | |
Verizon Communications | |||
Inc. | 10,774,020 | 494,635 | |
CenturyLink Inc. | 1,511,499 | 38,800 | |
Frontier Communications | |||
Corp. | 2,017,537 | 3,793 | |
Consolidated | |||
Communications | |||
Holdings Inc. | 158,703 | 3,757 | |
Windstream Holdings Inc. | 584,860 | 3,229 | |
1,190,521 | |||
Utilities (7.9%) | |||
NextEra Energy Inc. | 1,245,666 | 166,371 | |
Duke Energy Corp. | 1,834,563 | 151,351 | |
Southern Co. | 2,592,449 | 129,104 | |
Dominion Resources Inc. | 1,658,898 | 128,448 | |
PG&E Corp. | 1,326,886 | 88,968 | |
American Electric Power | |||
Co. Inc. | 1,296,820 | 87,963 | |
Exelon Corp. | 2,441,289 | 84,542 | |
Sempra Energy | 656,303 | 74,175 | |
Edison International | 859,471 | 68,732 | |
PPL Corp. | 1,795,118 | 68,412 | |
Consolidated Edison Inc. | 799,283 | 63,367 | |
Xcel Energy Inc. | 1,327,741 | 59,815 | |
Public Service Enterprise | |||
Group Inc. | 1,345,982 | 59,291 | |
WEC Energy Group Inc. | 837,617 | 50,693 | |
DTE Energy Co. | 474,040 | 49,580 | |
Eversource Energy | 829,913 | 49,297 | |
Entergy Corp. | 477,032 | 36,378 | |
Ameren Corp. | 634,120 | 34,680 | |
FirstEnergy Corp. | 1,140,003 | 34,132 | |
CMS Energy Corp. | 736,971 | 33,458 | |
CenterPoint Energy Inc. | 1,122,202 | 32,016 | |
ONEOK Inc. | 553,518 | 29,121 |
13
High Dividend Yield Index Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
Pinnacle West Capital | ||
Corp. | 289,999 | 24,676 |
Alliant Energy Corp. | 590,540 | 23,220 |
UGI Corp. | 455,900 | 22,868 |
SCANA Corp. | 341,162 | 22,622 |
Atmos Energy Corp. | 276,770 | 22,424 |
NiSource Inc. | 861,970 | 20,903 |
AES Corp. | 1,778,249 | 20,112 |
Westar Energy Inc. | ||
Class A | 371,388 | 19,323 |
Great Plains Energy Inc. | 546,326 | 16,166 |
Aqua America Inc. | 459,366 | 15,200 |
Vectren Corp. | 215,150 | 12,784 |
National Fuel Gas Co. | 200,745 | 11,117 |
WGL Holdings Inc. | 133,706 | 11,025 |
IDACORP Inc. | 129,010 | 10,904 |
Portland General Electric | ||
Co. | 228,700 | 10,369 |
Southwest Gas Holdings | ||
Inc. | 122,040 | 10,222 |
Black Hills Corp. | 137,630 | 9,362 |
ONE Gas Inc. | 135,903 | 9,354 |
Hawaiian Electric | ||
Industries Inc. | 277,909 | 9,316 |
New Jersey Resources | ||
Corp. | 224,738 | 9,068 |
ALLETE Inc. | 118,786 | 8,304 |
Spire Inc. | 116,114 | 7,960 |
NorthWestern Corp. | 131,591 | 7,867 |
South Jersey Industries | ||
Inc. | 203,784 | 7,646 |
PNM Resources Inc. | 204,213 | 7,607 |
Avista Corp. | 175,025 | 7,061 |
Avangrid Inc. | 151,276 | 6,581 |
El Paso Electric Co. | 109,662 | 5,659 |
Northwest Natural Gas Co. | 76,935 | 4,585 |
* TerraForm Power Inc. | ||
Class A | 232,780 | 2,931 |
Atlantica Yield plc | 130,422 | 2,718 |
California Water Service | ||
Group | 340 | 12 |
1,959,860 | ||
Total Common Stocks | ||
(Cost $20,916,715) | 24,780,132 | |
Temporary Cash Investments (0.4%)1 | ||
Money Market Fund (0.4%) | ||
3,4 Market Liquidity Fund, | ||
1.034% | 1,046,350 | 104,656 |
Face | Market | |
Amount | Value• | |
($000) | ($000) | |
U.S. Government and Agency Obligations (0.0%) | ||
United States Treasury Bill, | ||
0.564%–0.571%, 5/4/17 | 3,100 | 3,100 |
United States Treasury Bill, | ||
0.713%, 5/11/17 | 200 | 200 |
United States Treasury Bill, | ||
0.607%–0.618%, 5/25/17 | 700 | 700 |
United States Treasury Bill, | ||
0.521%–0.621%, 6/1/17 | 2,400 | 2,398 |
United States Treasury Bill, | ||
0.761%, 6/22/17 | 50 | 50 |
6,448 | ||
Total Temporary Cash Investments | ||
(Cost $111,100) | 111,104 | |
Total Investments (100.2%) | ||
(Cost $21,027,815) | 24,891,236 | |
Amount | ||
($000) | ||
Other Assets and Liabilities (-0.2%) | ||
Other Assets | ||
Investment in Vanguard | 1,691 | |
Receivables for Accrued Income | 34,234 | |
Receivables for Capital Shares Issued | 6,539 | |
Other Assets | 728 | |
Total Other Assets | 43,192 | |
Liabilities | ||
Payables for Investment Securities | ||
Purchased | (57,705) | |
Collateral for Securities on Loan | (28,259) | |
Payables for Capital Shares Redeemed | (4,140) | |
Payables to Vanguard | (7,523) | |
Other Liabilities | (368) | |
Total Liabilities | (97,995) | |
Net Assets (100%) | 24,836,433 |
14
High Dividend Yield Index Fund
At April 30, 2017, net assets consisted of:
Amount
($000)
Paid-in Capital | 21,136,729 |
Undistributed Net Investment Income | 47,001 |
Accumulated Net Realized Losses | (211,310) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 3,863,421 |
Futures Contracts | 592 |
Net Assets | 24,836,433 |
Investor Shares—Net Assets | |
Applicable to 229,579,311 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 7,056,221 |
Net Asset Value Per Share— | |
Investor Shares | $30.74 |
ETF Shares—Net Assets | |
Applicable to 229,189,119 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 17,780,212 |
Net Asset Value Per Share— | |
ETF Shares | $77.58 |
- 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 $26,947,000.
- Non-income-producing security.
- 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 0.2%, respectively, of net assets.
- “Other” represents securities that are not classified by the fund’s benchmark index.
- Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
- Includes $28,259,000 of collateral received for securities on loan.
- Securities with a value of $4,658,000 have been segregated as initial margin for open futures contracts. CVR—ContingentValue Rights.
See accompanying Notes, which are an integral part of the Financial Statements.
15
High Dividend Yield Index Fund | |
Statement of Operations | |
Six Months Ended | |
April 30, 2017 | |
($000) | |
Investment Income | |
Income | |
Dividends | 380,654 |
Interest1 | 215 |
Securities Lending—Net | 590 |
Total Income | 381,459 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 1,386 |
Management and Administrative—Investor Shares | 3,911 |
Management and Administrative—ETF Shares | 5,024 |
Marketing and Distribution—Investor Shares | 658 |
Marketing and Distribution—ETF Shares | 515 |
Custodian Fees | 346 |
Shareholders’ Reports—Investor Shares | 85 |
Shareholders’ Reports—ETF Shares | 340 |
Trustees’ Fees and Expenses | 7 |
Total Expenses | 12,272 |
Net Investment Income | 369,187 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | 690,483 |
Futures Contracts | 7,344 |
Realized Net Gain (Loss) | 697,827 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 1,279,546 |
Futures Contracts | 1,145 |
Change in Unrealized Appreciation (Depreciation) | 1,280,691 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 2,347,705 |
1 Interest income and realized net gain (loss) from an affiliated company of the fund were $201,000 and $1,000, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
16
High Dividend Yield Index Fund | ||
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2017 | 2016 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 369,187 | 595,662 |
Realized Net Gain (Loss) | 697,827 | 350,136 |
Change in Unrealized Appreciation (Depreciation) | 1,280,691 | 533,159 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 2,347,705 | 1,478,957 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (103,424) | (149,810) |
ETF Shares | (282,732) | (416,117) |
Realized Capital Gain | ||
Investor Shares | — | — |
ETF Shares | — | — |
Total Distributions | (386,156) | (565,927) |
Capital Share Transactions | ||
Investor Shares | 631,149 | 1,276,227 |
ETF Shares | 867,615 | 3,605,173 |
Net Increase (Decrease) from Capital Share Transactions | 1,498,764 | 4,881,400 |
Total Increase (Decrease) | 3,460,313 | 5,794,430 |
Net Assets | ||
Beginning of Period | 21,376,120 | 15,581,690 |
End of Period1 | 24,836,433 | 21,376,120 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $47,001,000 and $63,970,000.
See accompanying Notes, which are an integral part of the Financial Statements.
17
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 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
Net Asset Value, Beginning of Period | $28.20 | $26.89 | $26.98 | $23.83 | $19.76 | $17.30 |
Investment Operations | ||||||
Net Investment Income | . 440 | . 854 | . 815 | .727 | . 667 | . 579 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 2.565 | 1.286 | (.088) | 3.147 | 4.063 | 2.446 |
Total from Investment Operations | 3.005 | 2.140 | .727 | 3.874 | 4.730 | 3.025 |
Distributions | ||||||
Dividends from Net Investment Income | (. 465) | (. 830) | (. 817) | (.724) | (. 660) | (. 565) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (. 465) | (. 830) | (. 817) | (.724) | (. 660) | (. 565) |
Net Asset Value, End of Period | $30.74 | $28.20 | $26.89 | $26.98 | $23.83 | $19.76 |
Total Return1 | 10.68% | 8.11% | 2.78% | 16.48% | 24.35% | 17.69% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $7,056 | $5,879 | $4,368 | $4,066 | $3,019 | $1,596 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.15% | 0.15% | 0.16% | 0.18% | 0.19% | 0.20% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.05% | 3.19% | 3.06% | 2.92% | 3.10% | 3.22% |
Portfolio Turnover Rate2 | 14% | 7% | 11% | 12% | 13% | 11% |
The expense ratio, net investment 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.
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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 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
Net Asset Value, Beginning of Period | $71.19 | $67.88 | $68.11 | $60.16 | $49.89 | $43.68 |
Investment Operations | ||||||
Net Investment Income | 1.160 | 2.203 | 2.104 | 1.885 | 1.732 | 1.506 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 6.457 | 3.245 | (.222) | 7.943 | 10.247 | 6.180 |
Total from Investment Operations | 7.617 | 5.448 | 1.882 | 9.828 | 11.979 | 7.686 |
Distributions | ||||||
Dividends from Net Investment Income | (1.227) | (2.138) | (2.112) | (1.878) | (1.709) | (1.476) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.227) | (2.138) | (2.112) | (1.878) | (1.709) | (1.476) |
Net Asset Value, End of Period | $77.58 | $71.19 | $67.88 | $68.11 | $60.16 | $49.89 |
Total Return | 10.72% | 8.18% | 2.84% | 16.56% | 24.43% | 17.80% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $17,780 | $15,497 | $11,214 | $9,782 | $6,918 | $4,203 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.08% | 0.08% | 0.09% | 0.10% | 0.10% | 0.10% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.12% | 3.26% | 3.13% | 3.00% | 3.19% | 3.32% |
Portfolio Turnover Rate1 | 14% | 7% | 11% | 12% | 13% | 11% |
The expense ratio, net investment 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.
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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 Shares 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 are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, 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, 2017, 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.
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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, 2013–2016), and for the period ended April 30, 2017, 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 event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2017, 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
21
High Dividend Yield Index Fund
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, 2017, the fund had contributed to Vanguard capital in the amount of $1,691,000, representing 0.01% of the fund’s net assets and 0.68% 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, 2017, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 24,780,132 | — | — |
Temporary Cash Investments | 104,656 | 6,448 | — |
Futures Contracts—Liabilities1 | (368) | — | — |
Total | 24,884,420 | 6,448 | — |
1 Represents variation margin on the last day of the reporting period. |
D. At April 30, 2017, 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 2017 | 450 | 53,561 | 592 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
22
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.
During the six months ended April 30, 2017, the fund realized $698,364,000 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, 2016, the fund had available capital losses totaling $211,326,000 to offset future net capital gains. Of this amount, $18,315,000 is subject to expiration on October 31, 2018. Capital losses of $193,011,000 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, 2017; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At April 30, 2017, the cost of investment securities for tax purposes was $21,028,467,000. Net unrealized appreciation of investment securities for tax purposes was $3,862,769,000, consisting of unrealized gains of $4,293,608,000 on securities that had risen in value since their purchase and $430,839,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended April 30, 2017, the fund purchased $5,099,368,000 of investment securities and sold $3,585,405,000 of investment securities, other than temporary cash investments. Purchases and sales include $2,726,456,000 and $1,947,772,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.
The fund purchased securities from and sold securities to other Vanguard funds or accounts managed by Vanguard or its affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the six months ended April 30, 2017, such purchases and sales were $365,900,000 and $412,894,000, respectively; these amounts are included in the purchases and sales of investment securities noted above.
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High Dividend Yield Index Fund
G. Capital share transactions for each class of shares were: | ||||
Six Months Ended | Year Ended | |||
April 30, 2017 | October 31, 2016 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 1,351,772 | 44,918 | 2,061,346 | 74,813 |
Issued in Lieu of Cash Distributions | 84,247 | 2,771 | 124,953 | 4,577 |
Redeemed | (804,870) | (26,616) | (910,072) | (33,330) |
Net Increase (Decrease)—Investor Shares | 631,149 | 21,073 | 1,276,227 | 46,060 |
ETF Shares | ||||
Issued | 2,943,051 | 38,329 | 5,032,957 | 73,213 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (2,075,436) | (26,825) | (1,427,784) | (20,725) |
Net Increase (Decrease)—ETF Shares | 867,615 | 11,504 | 3,605,173 | 52,488 |
H. Management has determined that no material events or transactions occurred subsequent to April 30, 2017, that would require recognition or disclosure in these financial statements.
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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, 2017 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
High Dividend Yield Index Fund | 10/31/2016 | 4/30/2017 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,106.80 | $0.78 |
ETF Shares | 1,000.00 | 1,107.23 | 0.42 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,024.05 | $0.75 |
ETF Shares | 1,000.00 | 1,024.40 | 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 (181/365).
26
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. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the fund’s investment management services over both the short and long term, 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 short- and long-term performance of the fund, including any periods of outperformance or underperformance compared with its 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 expenses were 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.
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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.
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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 197 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. 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
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years and Other Experience: Chairman of the Board of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group, since January 2010; Director of The Vanguard Group since 2008; Chief Executive Officer and President of The Vanguard Group, and of each of the investment companies served by The Vanguard Group, since 2008; Director of Vanguard Marketing Corporation; Managing Director of The Vanguard Group (1995–2008).
IndependentTrustees
Emerson U. Fullwood
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Executive Chief Staff and Marketing Officer for North America and Corporate Vice President (retired 2008) of Xerox Corporation (document management products and services); Executive in Residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology; Lead Director of SPX FLOW, Inc. (multi-industry manufacturing); Director of the United Way of Rochester, the University of Rochester Medical Center, Monroe Community College Foundation, North Carolina A&T University, and Roberts Wesleyan College.
Rajiv L. Gupta
Born 1945. Trustee Since December 2001.2 Principal Occupation(s) During the Past Five Years and Other Experience: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Arconic Inc. (diversified manufacturer), HP Inc. (printer and personal computer manufacturing), and Delphi Automotive plc (automotive components); Senior Advisor at New Mountain Capital.
Amy Gutmann
Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years and Other Experience: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and Professor of Communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania; Trustee of the National Constitution Center; Chair of the Presidential Commission for the Study of Bioethical Issues.
JoAnn Heffernan Heisen
Born 1950. Trustee Since July 1998. Principal Occupation(s) During the Past Five Years and Other Experience: Corporate Vice President and Member of the Executive Committee (1997–2008), Chief Global Diversity Officer (retired 2008), Vice President and Chief Information Officer (1997–2005), Controller (1995–1997), Treasurer (1991–1995), and Assistant Treasurer (1989–1991) 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
Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2009) of Cummins Inc. (industrial machinery); Chairman of the Board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education; Director of SKF AB (industrial machinery), Hyster-Yale Materials Handling, Inc. (forklift trucks), and the V Foundation for Cancer Research; Member of the Advisory Council for the College of Arts and Letters and Chair of the Advisory
Board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born 1953. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Senior Vice President and Chief Financial Officer (retired 2013) at IBM (information technology services); Fiduciary Member of IBM’s Retirement Plan Committee (2004–2013); Director of the Dow Chemical Company; Member of the Council on Chicago Booth.
Scott C. Malpass
Born 1962. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Chief Investment Officer and Vice President at the University of Notre Dame; Assistant Professor of Finance at the Mendoza College of Business at Notre Dame; Member of the Notre Dame 403(b) Investment Committee, the Board of Advisors for Spruceview Capital Partners, and the Investment Advisory Committee of Major League Baseball; Board Member of TIFF Advisory Services, Inc., and Catholic Investment Services, Inc. (investment advisors); Member of the Board of Superintendence of the Institute for the Works of Religion.
André F. Perold
Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years and Other Experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011); Chief Investment Officer and Co-Managing Partner of HighVista Strategies LLC (private investment firm); Overseer of the Museum of Fine Arts Boston.
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Chairman of the Board of Trustees of Colby-Sawyer College; Member of the Board of Hypertherm, Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born 1967. Investment Stewardship Officer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Treasurer (2015–2017), Controller (2010–2015), and Assistant Controller (2001–2010) of each of the investment companies served by The Vanguard Group.
Thomas J. Higgins
Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).
Peter Mahoney
Born 1974. Controller Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group; Head of International Fund Services at The Vanguard Group (2008–2014).
Anne E. Robinson
Born 1970. Secretary Since September 2016. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; General Counsel of The Vanguard Group; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Director and Senior Vice President of Vanguard Marketing Corporation; Managing Director and General Counsel of Global Cards and Consumer Services at Citigroup (2014–2016); Counsel at American Express (2003–2014).
Michael Rollings
Born 1963. Treasurer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group; Executive Vice President and Chief Financial Officer of MassMutual Financial Group (2006–2016).
Vanguard Senior Management Team
Mortimer J. Buckley John James Martha G. King John T. Marcante Chris D. McIsaac | James M. Norris Thomas M. Rampulla Glenn W. Reed Karin A. Risi |
Chairman Emeritus and Senior Advisor John J. Brennan
Chairman, 1996–2009
Chief Executive Officer and President, 1996–2008
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 | |
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© 2017 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q6232 062017 |
Semiannual Report | April 30, 2017
Vanguard Emerging Markets Government Bond Index Fund
A new format, unwavering commitment
As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.
Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.
In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.
We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.
At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
Chairman’s Perspective. | 3 |
Fund Profile. | 7 |
Performance Summary. | 9 |
Financial Statements. | 10 |
About Your Fund’s Expenses. | 47 |
Trustees Approve Advisory Arrangement. | 49 |
Glossary. | 51 |
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: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown translated into seven languages, reflecting our expanding global presence.
Your Fund’s Performance at a Glance
• Vanguard Emerging Markets Government Bond Index Fund returned well over 2% for the six months ended April 30, 2017. Its performance was in line with that of its benchmark (+2.48%) but lagged the average return of its peers (+3.46%).
• An improved outlook for global growth initially sent emerging-market stocks and bonds lower amid concerns that inflation and the U.S. dollar could rise significantly. The risk of protectionism following the U.S. election surfaced as well. Those concerns eased, however, and the dollar gave back some ground even as the Federal Reserve raised interest rates again in March.
• Brazil, Russia, and Turkey, some of the largest constituents in the index, performed better than average, helping to counter subpar results from other heavyweights including China, Mexico, and Indonesia.
• Bonds with lower credit-quality ratings generally did better than their higher-rated counterparts. By maturity, results were mixed.
Total Returns: Six Months Ended April 30, 2017 | ||||
30-Day SEC | Income | Capital | Total | |
Yield | Returns | Returns | Returns | |
Vanguard Emerging Markets Government Bond Index Fund | ||||
Investor Shares | 4.20% | 2.30% | 0.10% | 2.40% |
ETF Shares | 4.37 | |||
Market Price | 2.65 | |||
Net Asset Value | 2.38 | |||
Admiral™ Shares | 4.37 | 2.37 | 0.00 | 2.37 |
Institutional Shares | 4.40 | 2.40 | 0.00 | 2.40 |
Bloomberg Barclays USD Emerging Markets Government | ||||
RIC Capped Index | 2.48 | |||
Emerging Markets Hard Currency Debt Funds Average | 3.46 |
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.
1
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% | 0.32% | 0.32% | 0.29% | 1.16% |
The fund expense ratios shown are from the prospectus dated February 23, 2017, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2017, the fund’s annualized expense ratios were 0.50% for Investor Shares, 0.33% for ETF Shares, 0.33% for Admiral Shares, and 0.29% 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 2016.
Peer group: Emerging Markets Hard Currency Debt Funds.
2
Chairman’s Perspective
Bill McNabb
Chairman and Chief Executive Officer
Dear Shareholder,
“Buy what you know.”
It’s one of the adages of investing, and it has plenty of intuitive appeal. After all, the familiar seems inherently less risky. It’s no wonder that many investors heavily tilt their portfolios toward the stocks and bonds of their home country. This is known in investing parlance as “home bias.”
U.S. investors sometimes think they can get all the global diversification they need by owning shares of U.S.-based multinational companies. And that may seem like the best of both worlds: international diversification without ever leaving the friendly confines of home.
The potential pitfall is that, as Vanguard research has suggested, the performance of a company’s shares tends to be highly correlated to its domestic market, regardless of where that company conducts most of its business.
Americans aren’t alone in being portfolio homebodies. Vanguard has found that in a range of developed countries—Australia, Canada, Japan, and the United Kingdom, as well as the United States—investors held a greater percentage of domestic stocks than would be indicated if they had taken their cues from a globally diversified, market-weighted benchmark. (You can see this tendency in the chart later in this letter.)
3
Why home bias exists
Vanguard’s Investment Strategy Group identified a range of reasons why investors might not embrace global diversification, including concerns about currency risk and an expectation that their home country will deliver outsized returns.
One factor we identified—preference for the familiar—seems particularly relevant. With so much global uncertainty about geopolitics, monetary policy, and the economic outlook, it’s understandable why investors may not want to stray too far from home.
But in their aversion to the unknown, investors can end up increasing, rather than lessening, their risks. That’s
because they’re sacrificing broad global diversification—one of the best ways I know of to help control risk.
In many cases, individual country markets are much less diversified than the global market in total. Global investing, then, can be an answer for investors who want to reduce concentration risk. That can include overconcentration in a particular country, region, or industry.
And the good news is that global investing is easier than ever, thanks to the wide availability of low-cost, internationally diversified stock and bond funds. It’s possible, in a sense, to own the whole world with just a couple of funds.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2017 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.46% | 18.03% | 13.63% |
Russell 2000 Index (Small-caps) | 18.37 | 25.63 | 12.95 |
Russell 3000 Index (Broad U.S. market) | 13.83 | 18.58 | 13.57 |
FTSE All-World ex US Index (International) | 10.55 | 12.98 | 5.60 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -0.67% | 0.83% | 2.27% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | -0.34 | 0.14 | 3.16 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.23 | 0.37 | 0.11 |
CPI | |||
Consumer Price Index | 1.16% | 2.20% | 1.22% |
4
Expanding our opportunities
A key to overcoming home bias is reframing the way we look at investing outside our home countries. Take, for example, automakers or pharmaceutical companies. There are well-regarded firms in both industries located throughout the world. Over the next five years, nobody can know for sure whether a Japanese or U.S. or European company will produce a popular new sedan that outsells the competition or come up with new treatments to combat illness. So why not own them all? And that includes their bonds along with their stocks.
Full global diversification also allows you to capitalize on opportunities in both developed and emerging economies. Betting on which individual country—let alone company—will be the next market darling can be a fool’s errand.
A better choice can be to harness the potential of all markets. In my personal investment account, I have an emerging markets position that complements my developed-market holdings. Not only can global diversification help control risk, but it can also expand our set of opportunities among stocks and bonds.
Home bias shows investors across the world are fixated on the familiar
Investors often own a greater share of their home country’s stocks than would be indicated by the allocations of a globally diversified, market-capitalization-weighted index fund.
Global index weight
Investor holdings in domestic equities
Notes: Data as of December 31, 2014 (the latest available from the International Monetary Fund, or IMF), in U.S. dollars. Domestic investment is calculated by subtracting total foreign investment (as reported by the IMF) in a given country from its market capitalization in the MSCI All Country World Index. Given that the IMF data are voluntary, there may be some discrepancies between the market values in the survey and the MSCI ACWI.
Sources: Vanguard, based on data from the IMF’s Coordinated Portfolio Investment Survey (2014), Bloomberg, Thomson Reuters Datastream, and FactSet.
5
Ultimately, I believe we have the best chance for investment success by giving ourselves more opportunities, not fewer. Own the whole haystack and you never have to worry about finding the needle.
Thank you for entrusting your assets to Vanguard.
F. William McNabb III
Chairman and Chief Executive Officer
May 12, 2017
6
Emerging Markets Government Bond Index Fund
Fund Profile
As of April 30, 2017
Share-Class Characteristics | ||||
Investor | Admiral | Institutional | ||
Shares | ETF Shares | Shares | Shares | |
Ticker Symbol | VGOVX | VWOB | VGAVX | VGIVX |
Expense Ratio1 | 0.49% | 0.32% | 0.32% | 0.29% |
30-Day SEC Yield | 4.20% | 4.37% | 4.37% | 4.40% |
Financial Attributes | ||
Bloomberg | ||
Barclays USD | ||
Emerging Mkts | ||
Government | ||
Fund | RIC Capped Idx | |
Number of Bonds | 956 | 995 |
Yield to Maturity | ||
(before expenses) | 4.7% | 4.7% |
Average Coupon | 5.5% | 5.5% |
Average Duration | 6.3 years | 6.2 years |
Average Effective | ||
Maturity | 9.7 years | 9.8 years |
Short-Term | ||
Reserves | 0.9% | — |
Sector Diversification (% of portfolio) | |
Foreign | 100.0% |
Volatility Measures | |
Bloomberg | |
Barclays USD | |
Emerging Mkts | |
Government | |
RIC Capped Idx | |
R-Squared | 1.00 |
Beta | 1.02 |
These measures show the degree and timing of the fund’s fluctuations compared with the index over 36 months.
Distribution by Credit Quality (% of portfolio)
Aaa | 0.2% |
Aa | 9.2 |
A | 14.4 |
Baa | 35.1 |
Less Than Baa | 41.1 |
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 | 0.7% |
1 - 3 Years | 18.6 |
3 - 5 Years | 19.6 |
5 - 10 Years | 37.3 |
10 - 20 Years | 8.7 |
20 - 30 Years | 13.7 |
Over 30 Years | 1.4 |
1 The expense ratios shown are from the prospectus dated February 23, 2017, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2017, the annualized expense ratios were 0.50% for Investor Shares, 0.33% for ETF Shares, 0.33% for Admiral Shares, and 0.29% for Institutional Shares.
7
Emerging Markets Government Bond Index Fund
Market Diversification (% of portfolio) | |
Emerging Markets | |
China | 14.8% |
Mexico | 8.2 |
Brazil | 7.1 |
Indonesia | 5.7 |
Russia | 5.2 |
Turkey | 4.7 |
Argentina | 4.4 |
United Arab Emirates | 3.9 |
Qatar | 3.2 |
Colombia | 2.9 |
Saudi Arabia | 2.7 |
Venezuela | 2.5 |
Philippines | 2.5 |
Malaysia | 1.9 |
Lebanon | 1.9 |
Chile | 1.6 |
India | 1.6 |
South Africa | 1.6 |
Kazakhstan | 1.6 |
Hungary | 1.4 |
Ukraine | 1.3 |
Peru | 1.2 |
Poland | 1.2 |
Bahrain | 1.0 |
Uruguay | 1.0 |
Dominican Republic | 1.0 |
Other | 12.7 |
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, 2017 | ||||
Bloomberg | ||||
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 | 4.97 | 5.68 | 10.65 | 11.05 |
2017 | 2.30 | 0.10 | 2.40 | 2.48 |
Note: For 2017, performance data reflect the six months ended April 30, 2017. |
Average Annual Total Returns: Periods Ended March 31, 2017
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 | 8.51% | 4.47% | -0.21% | 4.26% |
Fee-Adjusted Returns | 7.70 | 4.05 | |||
ETF Shares | 5/31/2013 | ||||
Market Price | 8.54 | 4.57 | |||
Net Asset Value | 8.70 | 4.41 | |||
Admiral Shares | 5/31/2013 | 8.70 | 4.63 | -0.21 | 4.42 |
Fee-Adjusted Returns | 7.89 | 4.22 | |||
Institutional Shares | 2/11/2015 | 8.77 | 5.04 | 1.86 | 6.90 |
Fee-Adjusted Returns | 7.95 | 6.52 |
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, 2017
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 | 1,400 | 1,465 | |
1 | Republic of Angola Via Northern Lights III BV | 7.000% | 8/16/19 | 625 | 644 |
Total Angola (Cost $2,013) | 2,109 | ||||
Argentina (4.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (4.2%) | |||||
Argentine Republic | 6.250% | 4/22/19 | 150 | 159 | |
Argentine Republic | 6.250% | 4/22/19 | 3,600 | 3,813 | |
Argentine Republic | 6.875% | 4/22/21 | 4,400 | 4,792 | |
Argentine Republic | 5.625% | 1/26/22 | 2,300 | 2,388 | |
Argentine Republic | 7.500% | 4/22/26 | 5,300 | 5,840 | |
2 | Argentine Republic | 6.875% | 1/26/27 | 200 | 211 |
Argentine Republic | 6.875% | 1/26/27 | 4,200 | 4,426 | |
Argentine Republic | 8.280% | 12/31/33 | 3,854 | 4,307 | |
Argentine Republic | 8.280% | 12/31/33 | 1,012 | 1,107 | |
Argentine Republic | 7.125% | 7/6/36 | 3,365 | 3,406 | |
1 | Argentine Republic | 2.500% | 12/31/38 | 6,194 | 4,073 |
Argentine Republic | 7.625% | 4/22/46 | 2,350 | 2,496 | |
1 | City of Buenos Aires | 8.950% | 2/19/21 | 200 | 226 |
1,2 | City of Buenos Aires | 7.500% | 6/1/27 | 1,000 | 1,073 |
1 | City of Buenos Aires | 7.500% | 6/1/27 | 250 | 268 |
Petrobras Argentina SA | 7.375% | 7/21/23 | 500 | 535 | |
1 | Provincia de Buenos Aires | 10.875% | 1/26/21 | 1,000 | 1,156 |
1 | Provincia de Buenos Aires | 9.950% | 6/9/21 | 600 | 694 |
1,2 | Provincia de Buenos Aires | 9.950% | 6/9/21 | 400 | 463 |
1 | Provincia de Buenos Aires | 9.125% | 3/16/24 | 1,000 | 1,135 |
1 | Provincia de Buenos Aires | 7.875% | 6/15/27 | 2,000 | 2,086 |
1 | Provincia de Mondoza | 8.375% | 5/19/24 | 400 | 423 |
1 | Provincia del Chubut | 7.750% | 7/26/26 | 500 | 503 |
2 | YPF SA | 8.875% | 12/19/18 | 50 | 54 |
YPF SA | 8.875% | 12/19/18 | 1,075 | 1,166 | |
YPF SA | 8.500% | 3/23/21 | 1,200 | 1,349 | |
1 | YPF SA | 8.750% | 4/4/24 | 1,345 | 1,548 |
YPF SA | 8.500% | 7/28/25 | 1,475 | 1,665 | |
Total Argentina (Cost $47,975) | 51,362 |
10
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Armenia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
2 | Republic of Armenia | 6.000% | 9/30/20 | 200 | 210 |
Republic of Armenia | 6.000% | 9/30/20 | 200 | 210 | |
Republic of Armenia | 7.150% | 3/26/25 | 500 | 545 | |
Total Armenia (Cost $898) | 965 | ||||
Azerbaijan (0.4%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.4%) | |||||
International Bank of Azerbaijan OJSC | 5.625% | 6/11/19 | 800 | 804 | |
2 | Republic of Azerbaijan | 4.750% | 3/18/24 | 400 | 407 |
Republic of Azerbaijan | 4.750% | 3/18/24 | 800 | 814 | |
3 | Southern Gas Corridor CJSC | 6.875% | 3/24/26 | 1,150 | 1,270 |
State Oil Co. of the Azerbaijan Republic | 4.750% | 3/13/23 | 1,700 | 1,683 | |
State Oil Co. of the Azerbaijan Republic | 6.950% | 3/18/30 | 200 | 216 | |
Total Azerbaijan (Cost $5,017) | 5,194 | ||||
Bahrain (1.0%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.0%) | |||||
Bahrain Mumtalakat Holding Co. BSC | 4.000% | 11/25/21 | 250 | 247 | |
Batelco International Finance No. 1 Ltd. | 4.250% | 5/1/20 | 400 | 401 | |
CBB International Sukuk Co. SPC | 5.624% | 2/12/24 | 1,000 | 1,041 | |
Kingdom of Bahrain | 6.273% | 11/22/18 | 550 | 579 | |
2 | Kingdom of Bahrain | 5.500% | 3/31/20 | 1,900 | 1,995 |
Kingdom of Bahrain | 5.875% | 1/26/21 | 200 | 210 | |
2 | Kingdom of Bahrain | 6.125% | 7/5/22 | 1,400 | 1,479 |
Kingdom of Bahrain | 6.125% | 8/1/23 | 625 | 661 | |
2 | Kingdom of Bahrain | 6.125% | 8/1/23 | 150 | 159 |
2 | Kingdom of Bahrain | 7.000% | 1/26/26 | 1,000 | 1,070 |
Kingdom of Bahrain | 7.000% | 1/26/26 | 1,300 | 1,390 | |
Kingdom of Bahrain | 7.000% | 10/12/28 | 2,200 | 2,285 | |
Kingdom of Bahrain | 6.000% | 9/19/44 | 400 | 351 | |
2 | Kingdom of Bahrain | 6.000% | 9/19/44 | 500 | 439 |
Total Bahrain (Cost $12,119) | 12,307 | ||||
Belize (0.0%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.0%) | |||||
1 | Belize | 4.938% | 2/20/34 | 450 | 279 |
Total Belize (Cost $296) | 279 | ||||
Bermuda (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
2 | Bermuda | 4.854% | 2/6/24 | 150 | 159 |
Bermuda | 4.854% | 2/6/24 | 400 | 424 | |
1 | Bermuda | 3.717% | 1/25/27 | 850 | 827 |
Total Bermuda (Cost $1,413) | 1,410 | ||||
Bolivia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
1,2 | Plurinational State of Bolivia | 4.500% | 3/20/28 | 850 | 833 |
Total Bolivia (Cost $842) | 833 |
11
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Brazil (6.8%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (6.8%) | ||||
Banco do Brasil SA | 6.000% | 1/22/20 | 695 | 742 |
Banco do Brasil SA | 5.375% | 1/15/21 | 475 | 497 |
Banco do Brasil SA | 5.875% | 1/26/22 | 1,675 | 1,751 |
Banco do Brasil SA | 3.875% | 10/10/22 | 1,626 | 1,573 |
Banco do Brasil SA | 5.875% | 1/19/23 | 650 | 680 |
1 Banco do Brasil SA | 8.500% | 10/29/49 | 825 | 909 |
Banco Nacional de Desenvolvimento | ||||
Economico e Social | 6.369% | 6/16/18 | 925 | 962 |
Banco Nacional de Desenvolvimento | ||||
Economico e Social | 6.500% | 6/10/19 | 950 | 1,019 |
Banco Nacional de Desenvolvimento | ||||
Economico e Social | 5.500% | 7/12/20 | 400 | 423 |
Banco Nacional de Desenvolvimento | ||||
Economico e Social | 5.750% | 9/26/23 | 1,500 | 1,605 |
2 Caixa Economica Federal | 4.500% | 10/3/18 | 200 | 204 |
Caixa Economica Federal | 4.500% | 10/3/18 | 1,090 | 1,109 |
Caixa Economica Federal | 4.250% | 5/13/19 | 1,800 | 1,825 |
Caixa Economica Federal | 3.500% | 11/7/22 | 150 | 143 |
Centrais Electricas Brasileiras SA | 6.875% | 7/30/19 | 800 | 847 |
Centrais Electricas Brasileiras SA | 5.750% | 10/27/21 | 1,900 | 1,941 |
Federative Republic of Brazil | 5.875% | 1/15/19 | 2,120 | 2,263 |
Federative Republic of Brazil | 8.875% | 10/14/19 | 175 | 203 |
Federative Republic of Brazil | 4.875% | 1/22/21 | 3,226 | 3,412 |
Federative Republic of Brazil | 2.625% | 1/5/23 | 2,586 | 2,415 |
Federative Republic of Brazil | 8.875% | 4/15/24 | 707 | 896 |
Federative Republic of Brazil | 4.250% | 1/7/25 | 4,072 | 4,047 |
Federative Republic of Brazil | 8.750% | 2/4/25 | 350 | 446 |
Federative Republic of Brazil | 6.000% | 4/7/26 | 1,800 | 1,973 |
Federative Republic of Brazil | 10.125% | 5/15/27 | 916 | 1,328 |
Federative Republic of Brazil | 8.250% | 1/20/34 | 1,725 | 2,186 |
Federative Republic of Brazil | 7.125% | 1/20/37 | 2,640 | 3,059 |
Federative Republic of Brazil | 5.625% | 1/7/41 | 2,126 | 2,113 |
Federative Republic of Brazil | 5.000% | 1/27/45 | 3,961 | 3,584 |
Federative Republic of Brazil | 5.625% | 2/21/47 | 1,200 | 1,188 |
Petrobras Global Finance BV | 3.000% | 1/15/19 | 750 | 748 |
Petrobras Global Finance BV | 8.375% | 5/23/21 | 10,400 | 11,765 |
Petrobras Global Finance BV | 4.375% | 5/20/23 | 4,600 | 4,405 |
Petrobras Global Finance BV | 6.250% | 3/17/24 | 1,325 | 1,373 |
Petrobras Global Finance BV | 8.750% | 5/23/26 | 3,860 | 4,497 |
Petrobras Global Finance BV | 7.375% | 1/17/27 | 1,150 | 1,233 |
Petrobras Global Finance BV | 5.625% | 5/20/43 | 600 | 500 |
Petrobras Global Finance BV | 7.250% | 3/17/44 | 210 | 208 |
Petrobras Global Finance BV | 6.850% | 6/5/15 | 2,475 | 2,193 |
Petrobras International Finance Co. SA | 7.875% | 3/15/19 | 650 | 706 |
Petrobras International Finance Co. SA | 5.750% | 1/20/20 | 500 | 526 |
Petrobras International Finance Co. SA | 5.375% | 1/27/21 | 4,155 | 4,264 |
Petrobras International Finance Co. SA | 6.875% | 1/20/40 | 2,415 | 2,324 |
Petrobras International Finance Co. SA | 6.750% | 1/27/41 | 3,127 | 2,947 |
Total Brazil (Cost $77,308) | 83,032 |
12
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Cameroon (0.1%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | ||||
1 Republic of Cameroon | 9.500% | 11/19/25 | 500 | 569 |
Total Cameroon (Cost $493) | 569 | |||
Chile (1.6%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.6%) | ||||
2 Banco del Estado de Chile | 4.125% | 10/7/20 | 400 | 422 |
2 Banco del Estado de Chile | 3.875% | 2/8/22 | 975 | 1,016 |
2 Corp. Nacional del Cobre de Chile | 7.500% | 1/15/19 | 335 | 366 |
Corp. Nacional del Cobre de Chile | 3.750% | 11/4/20 | 1,359 | 1,425 |
2 Corp. Nacional del Cobre de Chile | 3.750% | 11/4/20 | 500 | 525 |
2 Corp. Nacional del Cobre de Chile | 3.875% | 11/3/21 | 800 | 840 |
Corp. Nacional del Cobre de Chile | 3.875% | 11/3/21 | 1,054 | 1,105 |
2 Corp. Nacional del Cobre de Chile | 3.000% | 7/17/22 | 650 | 656 |
Corp. Nacional del Cobre de Chile | 3.000% | 7/17/22 | 1,350 | 1,360 |
2 Corp. Nacional del Cobre de Chile | 4.500% | 8/13/23 | 150 | 161 |
Corp. Nacional del Cobre de Chile | 4.500% | 8/13/23 | 675 | 724 |
Corp. Nacional del Cobre de Chile | 4.500% | 9/16/25 | 900 | 949 |
2 Corp. Nacional del Cobre de Chile | 5.625% | 9/21/35 | 300 | 334 |
2 Corp. Nacional del Cobre de Chile | 6.150% | 10/24/36 | 100 | 117 |
2 Corp. Nacional del Cobre de Chile | 4.250% | 7/17/42 | 400 | 373 |
2 Corp. Nacional del Cobre de Chile | 5.625% | 10/18/43 | 200 | 224 |
Corp. Nacional del Cobre de Chile | 5.625% | 10/18/43 | 700 | 780 |
Corp. Nacional del Cobre de Chile | 4.875% | 11/4/44 | 900 | 918 |
2 Corp. Nacional del Cobre de Chile | 4.875% | 11/4/44 | 400 | 410 |
2 Empresa de Transporte de Pasajeros Metro SA | 4.750% | 2/4/24 | 200 | 217 |
2 Empresa de Transporte de Pasajeros Metro SA | 5.000% | 1/25/47 | 400 | 430 |
2 Empresa Nacional del Petroleo | 4.750% | 12/6/21 | 536 | 568 |
Empresa Nacional del Petroleo | 4.375% | 10/30/24 | 500 | 516 |
Republic of Chile | 3.875% | 8/5/20 | 600 | 630 |
Republic of Chile | 3.125% | 3/27/25 | 850 | 870 |
Republic of Chile | 3.125% | 1/21/26 | 2,940 | 2,989 |
Republic of Chile | 3.625% | 10/30/42 | 500 | 497 |
Total Chile (Cost $18,629) | 19,422 | |||
China (14.4%) |
Corporate Bond (U.S. Dollar-Denominated) (0.1%) | ||||
2 China Southern Power Grid International Finance | ||||
BVI Co. Ltd. | 2.750% | 5/8/22 | 1,000 | 997 |
997 | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (14.3%) | ||||
Agricultural Bank of China Ltd. | 2.000% | 5/21/18 | 800 | 799 |
Agricultural Bank of China Ltd. | 2.875% | 12/10/18 | 800 | 808 |
Agricultural Bank of China Ltd. | 2.750% | 5/21/20 | 250 | 250 |
Agricultural Bank of China Ltd. | 2.750% | 10/20/20 | 200 | 200 |
Amber Circle Funding Ltd. | 3.250% | 12/4/22 | 1,700 | 1,723 |
Avi Funding Co. Ltd. | 2.850% | 9/16/20 | 300 | 300 |
2 Avi Funding Co. Ltd. | 2.850% | 9/16/20 | 400 | 400 |
Avi Funding Co. Ltd. | 3.800% | 9/16/25 | 2,200 | 2,260 |
Azure Nova International Finance Ltd. | 2.250% | 11/1/19 | 1,400 | 1,384 |
Bank of China Ltd. | 2.125% | 6/30/18 | 1,300 | 1,300 |
Bank of China Ltd. | 3.125% | 1/23/19 | 200 | 203 |
Bank of China Ltd. | 2.875% | 6/30/20 | 2,400 | 2,415 |
13
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Bank of China Ltd. | 2.375% | 3/1/21 | 750 | 739 |
Bank of China Ltd. | 2.250% | 7/12/21 | 700 | 684 |
2 Bank of China Ltd. | 5.000% | 11/13/24 | 1,000 | 1,066 |
Bank of China Ltd. | 5.000% | 11/13/24 | 1,400 | 1,492 |
Bank of China Ltd. | 3.875% | 6/30/25 | 1,000 | 1,031 |
Bao-trans Enterprises Ltd. | 3.750% | 12/12/18 | 1,225 | 1,244 |
Beijing State-Owned Assets Management | ||||
Hong Kong Co. Ltd. | 4.125% | 5/26/25 | 1,000 | 1,025 |
Bluestar Finance Holdings Ltd. | 3.500% | 6/11/18 | 1,000 | 1,008 |
Bluestar Finance Holdings Ltd. | 3.500% | 9/30/21 | 300 | 300 |
Bluestar Finance Holdings Ltd. | 4.375% | 12/29/49 | 700 | 709 |
BOC Aviation Ltd. | 3.000% | 3/30/20 | 1,000 | 1,004 |
2 BOC Aviation Ltd. | 2.375% | 9/15/21 | 900 | 875 |
BOC Aviation Ltd. | 2.375% | 9/15/21 | 450 | 437 |
BOC Aviation Ltd. | 4.375% | 5/2/23 | 200 | 210 |
BOC Aviation Ltd. | 3.875% | 4/27/26 | 800 | 796 |
CCBL Cayman 1 Corp. Ltd. | 2.750% | 5/31/21 | 450 | 444 |
CCBL Cayman Corp. Ltd. | 3.250% | 7/28/20 | 300 | 302 |
1 CCCI Treasure Ltd. | 3.500% | 12/29/49 | 550 | 553 |
Century Master Investment Co. Ltd. | 4.750% | 9/19/18 | 450 | 463 |
CGNPC International Ltd. | 4.000% | 5/19/25 | 500 | 516 |
1 Chalco Hong Kong Investment Co. Ltd. | 4.250% | 12/31/49 | 450 | 452 |
Charming Light Investments Ltd. | 3.750% | 9/3/19 | 2,210 | 2,256 |
China Cinda Finance 2014 Ltd. | 4.000% | 5/14/19 | 900 | 921 |
China Cinda Finance 2014 Ltd. | 5.625% | 5/14/24 | 600 | 658 |
China Cinda Finance 2015 I Ltd. | 3.125% | 4/23/20 | 2,000 | 2,008 |
China Cinda Finance 2015 I Ltd. | 4.250% | 4/23/25 | 1,100 | 1,105 |
China Clean Energy Development Ltd. | 4.000% | 11/5/25 | 1,000 | 1,025 |
China Construction Bank Asia Corp. Ltd. | 3.250% | 7/2/19 | 700 | 713 |
1 China Construction Bank Asia Corp. Ltd. | 4.250% | 8/20/24 | 400 | 410 |
1 China Construction Bank Corp. | 3.875% | 5/13/25 | 1,950 | 1,984 |
China Development Bank Corp. | 2.500% | 10/9/20 | 2,300 | 2,299 |
China Development Bank Corp. | 2.125% | 6/1/21 | 2,850 | 2,801 |
China Development Bank Corp. | 2.625% | 1/24/22 | 1,000 | 996 |
China Great Wall International Holdings II Ltd. | 2.500% | 6/18/18 | 1,200 | 1,201 |
China Great Wall International Holdings III Ltd. | 2.250% | 10/27/19 | 200 | 198 |
1 China Life Insurance Co. Ltd. | 4.000% | 7/3/75 | 1,000 | 1,002 |
China Overseas Finance Cayman II Ltd. | 5.500% | 11/10/20 | 1,800 | 1,954 |
China Overseas Finance Cayman III Ltd. | 5.375% | 10/29/23 | 1,500 | 1,656 |
China Overseas Finance Cayman V Ltd. | 3.950% | 11/15/22 | 750 | 774 |
China Overseas Finance Cayman VI Ltd. | 5.950% | 5/8/24 | 200 | 227 |
2 China Resources Gas Group Ltd. | 4.500% | 4/5/22 | 400 | 424 |
China Resources Land Ltd. | 4.375% | 2/27/19 | 950 | 983 |
China Resources Land Ltd. | 6.000% | 2/27/24 | 400 | 455 |
China Shenhua Overseas Capital Co. Ltd. | 3.125% | 1/20/20 | 850 | 860 |
China Shenhua Overseas Capital Co. Ltd. | 3.875% | 1/20/25 | 600 | 610 |
China Shipping Overseas Finance 2013 Ltd. | 4.250% | 1/28/19 | 500 | 512 |
CITIC Ltd. | 6.375% | 4/10/20 | 2,200 | 2,416 |
CITIC Ltd. | 6.625% | 4/15/21 | 200 | 227 |
CITIC Ltd. | 2.800% | 12/14/21 | 300 | 298 |
CITIC Ltd. | 6.800% | 1/17/23 | 1,700 | 2,003 |
CITIC Ltd. | 3.700% | 6/14/26 | 500 | 497 |
1 CITIC Ltd. | 8.625% | 5/29/49 | 900 | 975 |
CITIC Securities Finance 2013 Co. Ltd. | 2.500% | 5/3/18 | 400 | 400 |
CITIC Securities Finance MTN Co. Ltd. | 3.500% | 10/30/19 | 1,200 | 1,224 |
14
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
2 CNOOC Curtis Funding No 1 Pty Ltd. | 4.500% | 10/3/23 | 300 | 320 |
CNOOC Curtis Funding No 1 Pty Ltd. | 4.500% | 10/3/23 | 2,220 | 2,363 |
2 CNOOC Finance 2011 Ltd. | 4.250% | 1/26/21 | 1,888 | 1,981 |
2 CNOOC Finance 2011 Ltd. | 5.750% | 1/26/41 | 200 | 239 |
2 CNOOC Finance 2012 Ltd. | 3.875% | 5/2/22 | 1,200 | 1,241 |
2 CNOOC Finance 2012 Ltd. | 5.000% | 5/2/42 | 200 | 219 |
CNOOC Finance 2013 Ltd. | 1.750% | 5/9/18 | 900 | 898 |
CNOOC Finance 2013 Ltd. | 3.000% | 5/9/23 | 850 | 834 |
CNOOC Finance 2013 Ltd. | 4.250% | 5/9/43 | 1,200 | 1,177 |
CNOOC Finance 2015 Australia Pty Ltd. | 2.625% | 5/5/20 | 1,650 | 1,646 |
CNOOC Finance 2015 USA LLC | 3.500% | 5/5/25 | 1,300 | 1,300 |
CNOOC Nexen Finance 2014 ULC | 4.250% | 4/30/24 | 2,560 | 2,669 |
CNOOC Nexen Finance 2014 ULC | 4.875% | 4/30/44 | 1,100 | 1,190 |
2 CNPC General Capital Ltd. | 2.750% | 5/14/19 | 200 | 202 |
CNPC General Capital Ltd. | 2.750% | 5/14/19 | 450 | 453 |
CNPC General Capital Ltd. | 2.700% | 11/25/19 | 1,400 | 1,411 |
2 CNPC General Capital Ltd. | 3.950% | 4/19/22 | 700 | 730 |
CNPC General Capital Ltd. | 3.400% | 4/16/23 | 250 | 253 |
2 CNPC HK Overseas Capital Ltd. | 4.500% | 4/28/21 | 1,225 | 1,303 |
2 CNPC HK Overseas Capital Ltd. | 5.950% | 4/28/41 | 400 | 492 |
COSCO Finance 2011 Ltd. | 4.000% | 12/3/22 | 1,050 | 1,092 |
2 COSL Finance BVI Ltd. | 3.250% | 9/6/22 | 550 | 543 |
COSL Singapore Capital Ltd. | 3.500% | 7/30/20 | 1,200 | 1,217 |
COSL Singapore Capital Ltd. | 4.500% | 7/30/25 | 500 | 519 |
1 CRCC Yupeng Ltd. | 3.950% | 2/28/49 | 300 | 305 |
CRCC Yuxiang Ltd. | 3.500% | 5/16/23 | 950 | 961 |
1 Dianjian Haixing Ltd. | 4.050% | 10/29/49 | 200 | 204 |
2 Export-Import Bank of China | 2.500% | 7/31/19 | 200 | 202 |
Export-Import Bank of China | 2.500% | 7/31/19 | 1,960 | 1,979 |
Export-Import Bank of China | 2.000% | 4/26/21 | 300 | 294 |
Export-Import Bank of China | 2.625% | 3/14/22 | 2,000 | 1,988 |
Export-Import Bank of China | 3.625% | 7/31/24 | 200 | 207 |
Export-Import Bank of China | 2.875% | 4/26/26 | 1,400 | 1,349 |
Franshion Brilliant Ltd. | 5.750% | 3/19/19 | 600 | 629 |
Franshion Brilliant Ltd. | 5.750% | 12/31/49 | 500 | 516 |
2 Franshion Development Ltd. | 6.750% | 4/15/21 | 500 | 559 |
Hongkong Baorong Development Ltd. | 3.625% | 12/9/18 | 200 | 201 |
Huarong Finance Co. Ltd. | 4.000% | 7/17/19 | 1,550 | 1,576 |
Huarong Finance II Co. Ltd. | 2.875% | 11/19/18 | 1,800 | 1,802 |
Huarong Finance II Co. Ltd. | 2.875% | 11/22/19 | 1,000 | 991 |
Huarong Finance II Co. Ltd. | 4.500% | 1/16/20 | 2,650 | 2,733 |
Huarong Finance II Co. Ltd. | 3.750% | 11/19/20 | 550 | 558 |
Huarong Finance II Co. Ltd. | 3.250% | 6/3/21 | 1,250 | 1,236 |
Huarong Finance II Co. Ltd. | 5.500% | 1/16/25 | 1,300 | 1,391 |
Huarong Finance II Co. Ltd. | 5.000% | 11/19/25 | 600 | 622 |
Huarong Finance II Co. Ltd. | 4.625% | 6/3/26 | 1,250 | 1,256 |
Huarong Finance II Co. Ltd. | 4.875% | 11/22/26 | 1,200 | 1,230 |
1 Huarong Finance II Co. Ltd. | 2.875% | 12/31/49 | 1,200 | 1,139 |
2 ICBCIL Finance Co. Ltd. | 2.375% | 5/19/19 | 700 | 696 |
ICBCIL Finance Co. Ltd. | 2.125% | 9/29/19 | 600 | 590 |
ICBCIL Finance Co. Ltd. | 3.250% | 3/17/20 | 800 | 805 |
ICBCIL Finance Co. Ltd. | 3.200% | 11/10/20 | 700 | 702 |
2 ICBCIL Finance Co. Ltd. | 2.750% | 5/19/21 | 600 | 591 |
ICBCIL Finance Co. Ltd. | 2.500% | 9/29/21 | 1,000 | 973 |
Industrial & Commercial Bank of China Asia Ltd. | 5.125% | 11/30/20 | 950 | 1,017 |
15
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Industrial & Commercial Bank of China Ltd. | 2.000% | 5/10/19 | 1,625 | 1,613 | |
Industrial & Commercial Bank of China Ltd. | 1.875% | 8/11/19 | 200 | 198 | |
Industrial & Commercial Bank of China Ltd. | 3.231% | 11/13/19 | 1,300 | 1,326 | |
Industrial & Commercial Bank of China Ltd. | 2.905% | 11/13/20 | 1,300 | 1,303 | |
Industrial & Commercial Bank of China Ltd. | 2.635% | 5/26/21 | 1,700 | 1,689 | |
Industrial & Commercial Bank of China Ltd. | 4.875% | 9/21/25 | 1,750 | 1,851 | |
King Power Capital Ltd. | 5.625% | 11/3/24 | 500 | 554 | |
Kunlun Energy Co. Ltd. | 2.875% | 5/13/20 | 600 | 603 | |
Kunlun Energy Co. Ltd. | 3.750% | 5/13/25 | 350 | 354 | |
Minmetals Bounteous Finance BVI Ltd. | 3.500% | 7/30/20 | 300 | 304 | |
Minmetals Bounteous Finance BVI Ltd. | 4.750% | 7/30/25 | 600 | 637 | |
Minmetals Bounteous Finance BVI Ltd. | 4.200% | 7/27/26 | 850 | 865 | |
Nexen Energy ULC | 7.875% | 3/15/32 | 475 | 651 | |
Nexen Energy ULC | 5.875% | 3/10/35 | 808 | 944 | |
Nexen Energy ULC | 6.400% | 5/15/37 | 920 | 1,151 | |
Nexen Energy ULC | 7.500% | 7/30/39 | 775 | 1,095 | |
Prosperous Ray Ltd. | 3.000% | 11/12/18 | 400 | 404 | |
Prosperous Ray Ltd. | 4.625% | 11/12/23 | 550 | 592 | |
Shanghai Electric Group Global Investment Ltd. | 3.000% | 8/14/19 | 500 | 506 | |
Shanghai Electric Power Finance Ltd. | 3.625% | 8/11/20 | 1,100 | 1,120 | |
Sino-Ocean Land Treasure Finance I Ltd. | 4.625% | 7/30/19 | 1,300 | 1,334 | |
Sino-Ocean Land Treasure Finance I Ltd. | 6.000% | 7/30/24 | 350 | 381 | |
Sino-Ocean Land Treasure Finance II Ltd. | 4.450% | 2/4/20 | 600 | 615 | |
Sino-Ocean Land Treasure Finance II Ltd. | 5.950% | 2/4/27 | 250 | 269 | |
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 | 203 |
Sinochem Offshore Capital Co. Ltd. | 3.250% | 4/29/19 | 900 | 914 | |
2 | Sinochem Overseas Capital Co. Ltd. | 4.500% | 11/12/20 | 1,375 | 1,449 |
2 | Sinochem Overseas Capital Co. Ltd. | 6.300% | 11/12/40 | 450 | 565 |
Sinopec Capital 2013 Ltd. | 3.125% | 4/24/23 | 1,200 | 1,190 | |
2 | Sinopec Capital 2013 Ltd. | 3.125% | 4/24/23 | 400 | 397 |
Sinopec Capital 2013 Ltd. | 4.250% | 4/24/43 | 200 | 198 | |
2 | Sinopec Group Overseas Development 2012 Ltd. | 3.900% | 5/17/22 | 1,619 | 1,682 |
Sinopec Group Overseas Development 2012 Ltd. | 3.900% | 5/17/22 | 707 | 737 | |
2 | Sinopec Group Overseas Development 2012 Ltd. | 4.875% | 5/17/42 | 975 | 1,059 |
Sinopec Group Overseas Development 2013 Ltd. | 2.500% | 10/17/18 | 300 | 302 | |
Sinopec Group Overseas Development 2013 Ltd. | 4.375% | 10/17/23 | 1,425 | 1,513 | |
Sinopec Group Overseas Development 2013 Ltd. | 5.375% | 10/17/43 | 200 | 233 | |
2 | Sinopec Group Overseas Development 2014 Ltd. | 2.750% | 4/10/19 | 400 | 404 |
Sinopec Group Overseas Development 2014 Ltd. | 2.750% | 4/10/19 | 700 | 706 | |
Sinopec Group Overseas Development 2014 Ltd. | 4.375% | 4/10/24 | 2,000 | 2,117 | |
Sinopec Group Overseas Development 2015 Ltd. | 2.500% | 4/28/20 | 4,300 | 4,285 | |
Sinopec Group Overseas Development 2015 Ltd. | 3.250% | 4/28/25 | 1,700 | 1,669 | |
Sinopec Group Overseas Development 2015 Ltd. | 4.100% | 4/28/45 | 800 | 776 | |
Sinopec Group Overseas Development 2016 Ltd. | 2.125% | 5/3/19 | 910 | 907 | |
Sinopec Group Overseas Development 2016 Ltd. | 2.750% | 5/3/21 | 400 | 399 | |
Sinopec Group Overseas Development 2016 Ltd. | 2.000% | 9/29/21 | 200 | 193 | |
Sinopec Group Overseas Development 2016 Ltd. | 3.500% | 5/3/26 | 1,000 | 988 | |
2 | Sinopec Group Overseas Development 2017 Ltd. | 3.625% | 4/12/27 | 1,000 | 997 |
Skysea International Capital Management | 4.875% | 12/7/21 | 400 | 433 | |
State Elite Global Ltd. | 3.125% | 1/20/20 | 1,000 | 1,010 | |
2 | State Grid Overseas Investment 2013 Ltd. | 1.750% | 5/22/18 | 200 | 199 |
State Grid Overseas Investment 2013 Ltd. | 3.125% | 5/22/23 | 1,410 | 1,422 | |
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 | 707 |
16
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
State Grid Overseas Investment 2014 Ltd. | 2.750% | 5/7/19 | 1,670 | 1,688 |
State Grid Overseas Investment 2014 Ltd. | 4.125% | 5/7/24 | 1,670 | 1,767 |
2 State Grid Overseas Investment 2014 Ltd. | 4.850% | 5/7/44 | 350 | 397 |
State Grid Overseas Investment 2014 Ltd. | 4.850% | 5/7/44 | 400 | 453 |
2 State Grid Overseas Investment 2016 Ltd. | 2.750% | 5/4/22 | 600 | 600 |
State Grid Overseas Investment 2016 Ltd. | 2.875% | 5/18/26 | 700 | 673 |
2 State Grid Overseas Investment 2016 Ltd. | 4.000% | 5/4/47 | 700 | 702 |
Three Gorges Finance I Cayman Islands Ltd. | 2.300% | 6/2/21 | 400 | 394 |
Three Gorges Finance I Cayman Islands Ltd. | 3.700% | 6/10/25 | 700 | 714 |
Three Gorges Finance I Cayman Islands Ltd. | 3.150% | 6/2/26 | 1,400 | 1,361 |
174,238 | ||||
Total China (Cost $174,170) | 175,235 | |||
Colombia (2.8%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (2.8%) | ||||
Ecopetrol SA | 7.625% | 7/23/19 | 725 | 805 |
Ecopetrol SA | 5.875% | 9/18/23 | 1,490 | 1,613 |
Ecopetrol SA | 4.125% | 1/16/25 | 1,275 | 1,233 |
Ecopetrol SA | 5.375% | 6/26/26 | 2,000 | 2,042 |
Ecopetrol SA | 7.375% | 9/18/43 | 1,200 | 1,302 |
Ecopetrol SA | 5.875% | 5/28/45 | 1,350 | 1,239 |
Empresa de Energia de Bogota SA ESP | 6.125% | 11/10/21 | 1,100 | 1,134 |
Empresas Publicas de Medellin ESP | 7.625% | 7/29/19 | 300 | 336 |
Oleoducto Central SA | 4.000% | 5/7/21 | 400 | 411 |
Republic of Colombia | 7.375% | 3/18/19 | 1,535 | 1,688 |
Republic of Colombia | 11.750% | 2/25/20 | 1,220 | 1,535 |
Republic of Colombia | 4.375% | 7/12/21 | 2,534 | 2,692 |
1 Republic of Colombia | 2.625% | 3/15/23 | 1,410 | 1,365 |
Republic of Colombia | 4.000% | 2/26/24 | 1,595 | 1,648 |
Republic of Colombia | 8.125% | 5/21/24 | 540 | 688 |
1 Republic of Colombia | 4.500% | 1/28/26 | 1,900 | 2,022 |
1 Republic of Colombia | 3.875% | 4/25/27 | 250 | 252 |
Republic of Colombia | 7.375% | 9/18/37 | 1,750 | 2,257 |
Republic of Colombia | 6.125% | 1/18/41 | 2,407 | 2,780 |
1 Republic of Colombia | 5.625% | 2/26/44 | 2,384 | 2,609 |
1 Republic of Colombia | 5.000% | 6/15/45 | 4,100 | 4,154 |
Transportadora de Gas Internacional SA ESP | 5.700% | 3/20/22 | 600 | 616 |
Total Colombia (Cost $33,327) | 34,421 | |||
Costa Rica (0.5%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.5%) | ||||
Banco de Costa Rica | 5.250% | 8/12/18 | 450 | 458 |
2 Banco Nacional de Costa Rica | 4.875% | 11/1/18 | 200 | 203 |
Banco Nacional de Costa Rica | 4.875% | 11/1/18 | 400 | 407 |
2 Banco Nacional de Costa Rica | 5.875% | 4/25/21 | 1,000 | 1,030 |
Banco Nacional de Costa Rica | 6.250% | 11/1/23 | 200 | 208 |
Instituto Costarricense de Electricidad | 6.950% | 11/10/21 | 475 | 507 |
Instituto Costarricense de Electricidad | 6.375% | 5/15/43 | 200 | 174 |
Republic of Costa Rica | 4.250% | 1/26/23 | 1,132 | 1,103 |
Republic of Costa Rica | 5.625% | 4/30/43 | 800 | 721 |
Republic of Costa Rica | 7.000% | 4/4/44 | 800 | 826 |
Republic of Costa Rica | 7.158% | 3/12/45 | 600 | 626 |
Total Costa Rica (Cost $6,029) | 6,263 |
17
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Cote d’Ivoire (0.3%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.3%) | |||||
Republic of Cote d’Ivoire | 5.375% | 7/23/24 | 950 | 925 | |
1 | Republic of Cote d’Ivoire | 6.375% | 3/3/28 | 1,100 | 1,105 |
1 | Republic of Cote d’Ivoire | 5.750% | 12/31/32 | 2,249 | 2,155 |
Total Cote d’Ivoire (Cost $4,092) | 4,185 | ||||
Croatia (0.7%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.7%) | |||||
Hrvatska Elektroprivreda | 5.875% | 10/23/22 | 500 | 536 | |
Republic of Croatia | 6.750% | 11/5/19 | 422 | 459 | |
Republic of Croatia | 6.625% | 7/14/20 | 1,494 | 1,643 | |
Republic of Croatia | 6.375% | 3/24/21 | 1,600 | 1,769 | |
Republic of Croatia | 5.500% | 4/4/23 | 700 | 759 | |
Republic of Croatia | 6.000% | 1/26/24 | 2,535 | 2,822 | |
Total Croatia (Cost $7,637) | 7,988 | ||||
Dominican Republic (0.9%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.9%) | |||||
1 | Dominican Republic | 7.500% | 5/6/21 | 1,652 | 1,833 |
Dominican Republic | 6.600% | 1/28/24 | 575 | 637 | |
1 | Dominican Republic | 5.875% | 4/18/24 | 650 | 693 |
Dominican Republic | 5.500% | 1/27/25 | 1,860 | 1,930 | |
Dominican Republic | 6.875% | 1/29/26 | 2,545 | 2,840 | |
2 | Dominican Republic | 5.950% | 1/25/27 | 1,000 | 1,048 |
Dominican Republic | 7.450% | 4/30/44 | 200 | 226 | |
1 | Dominican Republic | 6.850% | 1/27/45 | 1,644 | 1,748 |
2 | Dominican Republic | 6.850% | 1/27/45 | 530 | 564 |
Total Dominican Republic (Cost $11,047) | 11,519 | ||||
Ecuador (0.6%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.6%) | |||||
Republic of Ecuador | 10.750% | 3/28/22 | 1,900 | 2,058 | |
Republic of Ecuador | 7.950% | 6/20/24 | 1,950 | 1,862 | |
Republic of Ecuador | 9.650% | 12/13/26 | 1,750 | 1,781 | |
Republic of Ecuador | 10.500% | 3/24/20 | 1,500 | 1,604 | |
Total Ecuador (Cost $7,048) | 7,305 | ||||
Egypt (0.8%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.8%) | |||||
African Export-Import Bank | 3.875% | 6/4/18 | 450 | 455 | |
African Export-Import Bank | 4.750% | 7/29/19 | 400 | 413 | |
Arab Republic of Egypt | 5.750% | 4/29/20 | 1,012 | 1,052 | |
Arab Republic of Egypt | 6.125% | 1/31/22 | 2,300 | 2,391 | |
Arab Republic of Egypt | 5.875% | 6/11/25 | 4,350 | 4,292 | |
Arab Republic of Egypt | 6.875% | 4/30/40 | 300 | 284 | |
Arab Republic of Egypt | 8.500% | 1/31/47 | 1,300 | 1,414 | |
Total Egypt (Cost $9,902) | 10,301 | ||||
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 | 1,035 | 1,039 | |
Republic of El Salvador | 5.875% | 1/30/25 | 300 | 267 |
2 Republic of El Salvador | 6.375% | 1/18/27 | 300 | 268 |
18
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Republic of El Salvador | 6.375% | 1/18/27 | 400 | 357 | |
2 | Republic of El Salvador | 8.625% | 2/28/29 | 550 | 556 |
Republic of El Salvador | 8.250% | 4/10/32 | 604 | 586 | |
Republic of El Salvador | 7.650% | 6/15/35 | 1,390 | 1,261 | |
Republic of El Salvador | 7.625% | 2/1/41 | 1,118 | 1,001 | |
Total El Salvador (Cost $5,971) | 5,681 | ||||
Ethiopia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
Federal Democratic Republic of Ethiopia | 6.625% | 12/11/24 | 1,350 | 1,333 | |
Total Ethiopia (Cost $1,291) | 1,333 | ||||
Gabon (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
1,2 | Gabonese Republic | 6.375% | 12/12/24 | 400 | 392 |
1 | Gabonese Republic | 6.375% | 12/12/24 | 1,186 | 1,160 |
Gabonese Republic | 6.950% | 6/16/25 | 200 | 198 | |
Total Gabon (Cost $1,768) | 1,750 | ||||
Georgia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
Georgian Railway JSC | 7.750% | 7/11/22 | 900 | 989 | |
Republic of Georgia | 6.875% | 4/12/21 | 400 | 442 | |
Total Georgia (Cost $1,412) | 1,431 | ||||
Ghana (0.3%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.3%) | |||||
1 | Republic of Ghana | 9.250% | 9/15/22 | 500 | 529 |
2 | Republic of Ghana | 7.875% | 8/7/23 | 600 | 594 |
Republic of Ghana | 7.875% | 8/7/23 | 200 | 198 | |
1,2 | Republic of Ghana | 8.125% | 1/18/26 | 300 | 296 |
1 | Republic of Ghana | 8.125% | 1/18/26 | 950 | 937 |
1 | Republic of Ghana | 10.750% | 10/14/30 | 1,000 | 1,205 |
Total Ghana (Cost $3,461) | 3,759 | ||||
Guatemala (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Republic of Guatemala | 5.750% | 6/6/22 | 700 | 771 | |
Republic of Guatemala | 4.500% | 5/3/26 | 1,000 | 1,015 | |
Republic of Guatemala | 4.875% | 2/13/28 | 600 | 624 | |
Total Guatemala (Cost $2,332) | 2,410 | ||||
Honduras (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Republic of Honduras | 8.750% | 12/16/20 | 700 | 798 | |
1 | Republic of Honduras | 7.500% | 3/15/24 | 200 | 221 |
Republic of Honduras | 6.250% | 1/19/27 | 800 | 828 | |
Total Honduras (Cost $1,743) | 1,847 | ||||
Hungary (1.3%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.3%) | |||||
2,4 | MFB Magyar Fejlesztesi Bank Zrt | 6.250% | 10/21/20 | 1,100 | 1,211 |
MFB Magyar Fejlesztesi Bank Zrt | 6.250% | 10/21/20 | 200 | 221 | |
Republic of Hungary | 4.000% | 3/25/19 | 600 | 622 | |
Republic of Hungary | 6.250% | 1/29/20 | 1,315 | 1,442 | |
Republic of Hungary | 6.375% | 3/29/21 | 3,822 | 4,319 |
19
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Republic of Hungary | 5.375% | 2/21/23 | 2,362 | 2,622 |
Republic of Hungary | 5.750% | 11/22/23 | 2,670 | 3,040 |
Republic of Hungary | 5.375% | 3/25/24 | 1,025 | 1,151 |
Republic of Hungary | 7.625% | 3/29/41 | 1,050 | 1,555 |
Total Hungary (Cost $15,526) | 16,183 | |||
India (1.5%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.5%) | ||||
Bank of Baroda | 4.875% | 7/23/19 | 975 | 1,019 |
Bank of India | 3.625% | 9/21/18 | 350 | 354 |
Bank of India | 3.125% | 5/6/20 | 400 | 398 |
Bank of India | 6.250% | 2/16/21 | 900 | 985 |
Bharat Petroleum Corp. Ltd. | 4.625% | 10/25/22 | 400 | 427 |
Bharat Petroleum Corp. Ltd. | 4.000% | 5/8/25 | 400 | 407 |
BPRL International Singapore Pte Ltd. | 4.375% | 1/18/27 | 550 | 568 |
Canara Bank | 5.250% | 10/18/18 | 600 | 623 |
Export-Import Bank of India | 3.875% | 10/2/19 | 1,500 | 1,545 |
Export-Import Bank of India | 2.750% | 4/1/20 | 600 | 600 |
Export-Import Bank of India | 3.125% | 7/20/21 | 300 | 303 |
Export-Import Bank of India | 4.000% | 1/14/23 | 600 | 623 |
Export-Import Bank of India | 3.375% | 8/5/26 | 1,300 | 1,250 |
IDBI Bank Ltd. | 3.750% | 1/25/19 | 600 | 607 |
Indian Oil Corp. Ltd. | 5.625% | 8/2/21 | 500 | 551 |
Indian Oil Corp. Ltd. | 5.750% | 8/1/23 | 400 | 450 |
Indian Railway Finance Corp. Ltd. | 3.917% | 2/26/19 | 600 | 615 |
NTPC Ltd. | 5.625% | 7/14/21 | 400 | 441 |
NTPC Ltd. | 4.750% | 10/3/22 | 450 | 482 |
NTPC Ltd. | 4.375% | 11/26/24 | 400 | 416 |
NTPC Ltd. | 4.250% | 2/26/26 | 450 | 461 |
Oil India Ltd. | 3.875% | 4/17/19 | 600 | 614 |
Oil India Ltd. | 5.375% | 4/17/24 | 250 | 275 |
ONGC Videsh Ltd. | 3.250% | 7/15/19 | 1,000 | 1,013 |
ONGC Videsh Ltd. | 3.750% | 5/7/23 | 700 | 712 |
ONGC Videsh Ltd. | 4.625% | 7/15/24 | 700 | 738 |
Power Grid Corp. of India Ltd. | 3.875% | 1/17/23 | 600 | 620 |
State Bank of India | 3.622% | 4/17/19 | 1,300 | 1,325 |
2 State Bank of India | 4.875% | 4/17/24 | 400 | 432 |
Total India (Cost $18,589) | 18,854 | |||
Indonesia (5.5%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (5.5%) | ||||
Majapahit Holding BV | 8.000% | 8/7/19 | 350 | 392 |
Majapahit Holding BV | 7.750% | 1/20/20 | 2,325 | 2,610 |
Majapahit Holding BV | 7.875% | 6/29/37 | 400 | 513 |
2 Pelabuhan Indonesia II PT | 4.250% | 5/5/25 | 600 | 601 |
Pelabuhan Indonesia II PT | 4.250% | 5/5/25 | 1,150 | 1,156 |
Pelabuhan Indonesia II PT | 5.375% | 5/5/45 | 500 | 493 |
2 Pelabuhan Indonesia III PT | 4.875% | 10/1/24 | 200 | 209 |
Pertamina Persero PT | 5.250% | 5/23/21 | 450 | 481 |
Pertamina Persero PT | 4.875% | 5/3/22 | 2,950 | 3,117 |
Pertamina Persero PT | 4.300% | 5/20/23 | 1,100 | 1,132 |
2 Pertamina Persero PT | 4.300% | 5/20/23 | 430 | 442 |
Pertamina Persero PT | 6.500% | 5/27/41 | 200 | 225 |
2 Pertamina Persero PT | 6.000% | 5/3/42 | 750 | 796 |
Pertamina Persero PT | 6.000% | 5/3/42 | 1,450 | 1,539 |
20
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Pertamina Persero PT | 5.625% | 5/20/43 | 625 | 643 |
2 Pertamina Persero PT | 5.625% | 5/20/43 | 200 | 206 |
Pertamina Persero PT | 6.450% | 5/30/44 | 1,100 | 1,240 |
Perusahaan Gas Negara Persero Tbk | 5.125% | 5/16/24 | 800 | 852 |
2 Perusahaan Gas Negara Persero Tbk PT | 5.125% | 5/16/24 | 400 | 426 |
Perusahaan Listrik Negara PT | 5.500% | 11/22/21 | 600 | 655 |
Perusahaan Listrik Negara PT | 5.250% | 10/24/42 | 500 | 495 |
2 Perusahaan Listrik Negara PT | 5.250% | 10/24/42 | 300 | 298 |
Perusahaan Penerbit SBSN Indonesia II | 4.000% | 11/21/18 | 600 | 617 |
2 Perusahaan Penerbit SBSN Indonesia III | 6.125% | 3/15/19 | 200 | 213 |
Perusahaan Penerbit SBSN Indonesia III | 6.125% | 3/15/19 | 600 | 640 |
Perusahaan Penerbit SBSN Indonesia III | 3.300% | 11/21/22 | 1,178 | 1,180 |
2 Perusahaan Penerbit SBSN Indonesia III | 4.350% | 9/10/24 | 600 | 623 |
Perusahaan Penerbit SBSN Indonesia III | 4.350% | 9/10/24 | 2,250 | 2,337 |
5 Perusahaan Penerbit SBSN Indonesia III | 4.325% | 5/28/25 | 1,200 | 1,239 |
Perusahaan Penerbit SBSN Indonesia III | 4.550% | 3/29/26 | 1,050 | 1,099 |
5 Perusahaan Penerbit SBSN Indonesia III | 4.150% | 3/29/27 | 1,500 | 1,528 |
Republic of Indonesia | 11.625% | 3/4/19 | 3,256 | 3,823 |
2 Republic of Indonesia | 5.875% | 3/13/20 | 350 | 382 |
Republic of Indonesia | 5.875% | 3/13/20 | 1,010 | 1,102 |
Republic of Indonesia | 4.875% | 5/5/21 | 2,600 | 2,791 |
Republic of Indonesia | 3.700% | 1/8/22 | 1,500 | 1,540 |
Republic of Indonesia | 3.750% | 4/25/22 | 950 | 976 |
Republic of Indonesia | 3.375% | 4/15/23 | 1,100 | 1,102 |
Republic of Indonesia | 5.375% | 10/17/23 | 1,109 | 1,234 |
Republic of Indonesia | 5.875% | 1/15/24 | 1,400 | 1,597 |
Republic of Indonesia | 4.125% | 1/15/25 | 1,300 | 1,340 |
2 Republic of Indonesia | 4.125% | 1/15/25 | 200 | 206 |
Republic of Indonesia | 4.750% | 1/8/26 | 2,800 | 3,001 |
Republic of Indonesia | 4.350% | 1/8/27 | 700 | 730 |
Republic of Indonesia | 8.500% | 10/12/35 | 2,440 | 3,499 |
Republic of Indonesia | 6.625% | 2/17/37 | 1,887 | 2,313 |
Republic of Indonesia | 7.750% | 1/17/38 | 1,863 | 2,558 |
Republic of Indonesia | 5.250% | 1/17/42 | 1,500 | 1,616 |
Republic of Indonesia | 4.625% | 4/15/43 | 2,175 | 2,207 |
2 Republic of Indonesia | 6.750% | 1/15/44 | 100 | 128 |
Republic of Indonesia | 6.750% | 1/15/44 | 1,850 | 2,378 |
Republic of Indonesia | 5.125% | 1/15/45 | 3,669 | 3,898 |
Republic of Indonesia | 5.950% | 1/8/46 | 200 | 235 |
Republic of Indonesia | 5.250% | 1/8/47 | 500 | 538 |
Total Indonesia (Cost $64,048) | 67,191 | |||
Iraq (0.2%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | ||||
1 Republic of Iraq | 5.800% | 1/15/28 | 2,210 | 1,971 |
Total Iraq (Cost $1,934) | 1,971 | |||
Jamaica (0.4%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.4%) | ||||
1 Jamaica | 7.625% | 7/9/25 | 450 | 522 |
Jamaica | 6.750% | 4/28/28 | 1,800 | 2,016 |
1 Jamaica | 8.000% | 3/15/39 | 1,048 | 1,218 |
Jamaica | 7.875% | 7/28/45 | 600 | 696 |
Total Jamaica (Cost $4,080) | 4,452 |
21
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Jordan (0.2%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | ||||
The Hashemite Kingdom of Jordan | 6.125% | 1/29/26 | 850 | 868 |
The Hashemite Kingdom of Jordan | 5.750% | 1/31/27 | 1,000 | 987 |
Total Jordan (Cost $1,862) | 1,855 | |||
Kazakhstan (1.5%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.5%) | ||||
Development Bank of Kazakhstan JSC | 4.125% | 12/10/22 | 2,050 | 2,038 |
KazAgro National Management Holding JSC | 4.625% | 5/24/23 | 850 | 838 |
2 Kazakhstan Temir Zholy Finance BV | 6.375% | 10/6/20 | 600 | 648 |
Kazakhstan Temir Zholy Finance BV | 6.950% | 7/10/42 | 1,000 | 1,052 |
KazMunayGas National Co. JSC | 9.125% | 7/2/18 | 1,925 | 2,067 |
KazMunayGas National Co. JSC | 7.000% | 5/5/20 | 1,370 | 1,504 |
KazMunayGas National Co. JSC | 6.375% | 4/9/21 | 799 | 877 |
2 KazMunayGas National Co. JSC | 4.750% | 4/19/27 | 400 | 396 |
KazMunayGas National Co. JSC | 5.750% | 4/30/43 | 350 | 346 |
KazMunayGas National Co. JSC | 5.750% | 4/19/47 | 1,500 | 1,463 |
Republic of Kazakhstan | 3.875% | 10/14/24 | 2,900 | 2,933 |
Republic of Kazakhstan | 5.125% | 7/21/25 | 1,900 | 2,073 |
2 Republic of Kazakhstan | 4.875% | 10/14/44 | 400 | 396 |
Republic of Kazakhstan | 4.875% | 10/14/44 | 1,100 | 1,088 |
Republic of Kazakhstan | 6.500% | 7/21/45 | 800 | 951 |
Total Kazakhstan (Cost $17,756) | 18,670 | |||
Kenya (0.2%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | ||||
Republic of Kenya | 5.875% | 6/24/19 | 300 | 310 |
2 Republic of Kenya | 5.875% | 6/24/19 | 200 | 207 |
2 Republic of Kenya | 6.875% | 6/24/24 | 200 | 202 |
Republic of Kenya | 6.875% | 6/24/24 | 2,125 | 2,150 |
Total Kenya (Cost $2,793) | 2,869 | |||
Kuwait (0.7%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.7%) | ||||
Equate Petrochemical BV | 3.000% | 3/3/22 | 900 | 895 |
Equate Petrochemical BV | 4.250% | 11/3/26 | 1,150 | 1,171 |
State of Kuwait | 2.750% | 3/20/22 | 2,525 | 2,547 |
State of Kuwait | 3.500% | 3/20/27 | 4,300 | 4,401 |
Total Kuwait (Cost $8,825) | 9,014 | |||
Lebanon (1.8%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.8%) | ||||
Republic of Lebanon | 5.150% | 6/12/18 | 150 | 152 |
Republic of Lebanon | 5.150% | 11/12/18 | 1,275 | 1,291 |
Republic of Lebanon | 5.500% | 4/23/19 | 50 | 51 |
Republic of Lebanon | 6.000% | 5/20/19 | 450 | 462 |
Republic of Lebanon | 5.450% | 11/28/19 | 925 | 942 |
Republic of Lebanon | 6.375% | 3/9/20 | 2,541 | 2,642 |
Republic of Lebanon | 5.800% | 4/14/20 | 100 | 102 |
Republic of Lebanon | 8.250% | 4/12/21 | 2,078 | 2,298 |
Republic of Lebanon | 6.100% | 10/4/22 | 2,164 | 2,226 |
Republic of Lebanon | 6.000% | 1/27/23 | 1,385 | 1,411 |
Republic of Lebanon | 6.650% | 4/22/24 | 2,191 | 2,263 |
Republic of Lebanon | 6.200% | 2/26/25 | 300 | 299 |
22
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Republic of Lebanon | 6.250% | 6/12/25 | 400 | 400 |
Republic of Lebanon | 6.600% | 11/27/26 | 1,775 | 1,792 |
Republic of Lebanon | 6.750% | 11/29/27 | 961 | 973 |
Republic of Lebanon | 6.650% | 11/3/28 | 750 | 752 |
Republic of Lebanon | 6.850% | 5/25/29 | 800 | 812 |
Republic of Lebanon | 6.650% | 2/26/30 | 1,350 | 1,350 |
Republic of Lebanon | 7.050% | 11/2/35 | 500 | 501 |
Republic of Lebanon | 7.250% | 3/23/37 | 1,350 | 1,369 |
Total Lebanon (Cost $21,666) | 22,088 | |||
Malaysia (1.9%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.9%) | ||||
1MDB Global Investments Ltd. | 4.400% | 3/9/23 | 2,700 | 2,514 |
Axiata SPV2 Bhd. | 3.466% | 11/19/20 | 350 | 359 |
Axiata SPV2 Bhd. | 4.357% | 3/24/26 | 1,350 | 1,410 |
Cagamas Global plc | 2.745% | 12/10/19 | 500 | 503 |
Danga Capital Bhd. | 3.035% | 3/1/21 | 400 | 402 |
2 Federation of Malaysia | 4.646% | 7/6/21 | 750 | 811 |
6 Federation of Malaysia | 3.179% | 4/27/26 | 1,550 | 1,548 |
1 Malayan Banking Bhd. | 3.905% | 10/29/26 | 700 | 709 |
Malaysia Sovereign Sukuk Bhd. | 3.043% | 4/22/25 | 900 | 892 |
6 Malaysia Sovereign Sukuk Bhd. | 4.236% | 4/22/45 | 550 | 572 |
6 Malaysia Sukuk Global Bhd. | 4.080% | 4/27/46 | 500 | 503 |
Petroliam Nasional Bhd. | 7.625% | 10/15/26 | 185 | 248 |
2 Petronas Capital Ltd. | 5.250% | 8/12/19 | 1,423 | 1,514 |
Petronas Capital Ltd. | 5.250% | 8/12/19 | 2,637 | 2,805 |
Petronas Capital Ltd. | 3.125% | 3/18/22 | 400 | 405 |
2 Petronas Capital Ltd. | 7.875% | 5/22/22 | 1,050 | 1,294 |
Petronas Capital Ltd. | 3.500% | 3/18/25 | 2,450 | 2,501 |
Petronas Capital Ltd. | 4.500% | 3/18/45 | 1,250 | 1,314 |
Petronas Global Sukuk Ltd. | 2.707% | 3/18/20 | 1,550 | 1,561 |
SSG Resources Ltd. | 4.250% | 10/4/22 | 700 | 734 |
Total Malaysia (Cost $22,343) | 22,599 | |||
Mexico (7.9%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (7.9%) | ||||
Banco Nacional de Comercio Exterior SNC | 4.375% | 10/14/25 | 900 | 916 |
Comision Federal de Electricidad | 4.875% | 5/26/21 | 1,450 | 1,529 |
2 Comision Federal de Electricidad | 4.875% | 1/15/24 | 900 | 935 |
Comision Federal de Electricidad | 4.875% | 1/15/24 | 600 | 622 |
2 Comision Federal de Electricidad | 4.750% | 2/23/27 | 1,000 | 1,010 |
Comision Federal de Electricidad | 5.750% | 2/14/42 | 700 | 695 |
2 Comision Federal de Electricidad | 6.125% | 6/16/45 | 200 | 207 |
2 Mexico City Airport Trust | 4.250% | 10/31/26 | 1,500 | 1,527 |
Mexico City Airport Trust | 5.500% | 10/31/46 | 200 | 197 |
Petroleos Mexicanos | 3.500% | 7/18/18 | 1,275 | 1,294 |
Petroleos Mexicanos | 5.500% | 2/4/19 | 500 | 524 |
Petroleos Mexicanos | 8.000% | 5/3/19 | 900 | 993 |
Petroleos Mexicanos | 6.000% | 3/5/20 | 1,600 | 1,726 |
Petroleos Mexicanos | 3.500% | 7/23/20 | 1,500 | 1,524 |
Petroleos Mexicanos | 5.500% | 1/21/21 | 2,289 | 2,436 |
Petroleos Mexicanos | 6.375% | 2/4/21 | 3,300 | 3,596 |
Petroleos Mexicanos | 4.875% | 1/24/22 | 1,255 | 1,298 |
2 Petroleos Mexicanos | 5.375% | 3/13/22 | 1,200 | 1,262 |
Petroleos Mexicanos | 3.500% | 1/30/23 | 1,540 | 1,468 |
23
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Petroleos Mexicanos | 4.625% | 9/21/23 | 2,843 | 2,855 | |
Petroleos Mexicanos | 4.875% | 1/18/24 | 1,469 | 1,478 | |
Petroleos Mexicanos | 4.250% | 1/15/25 | 1,460 | 1,413 | |
Petroleos Mexicanos | 4.500% | 1/23/26 | 2,250 | 2,184 | |
Petroleos Mexicanos | 6.875% | 8/4/26 | 3,950 | 4,408 | |
2 | Petroleos Mexicanos | 6.500% | 3/13/27 | 1,412 | 1,529 |
Petroleos Mexicanos | 6.625% | 6/15/35 | 2,305 | 2,386 | |
Petroleos Mexicanos | 6.500% | 6/2/41 | 3,420 | 3,418 | |
Petroleos Mexicanos | 5.500% | 6/27/44 | 3,136 | 2,755 | |
Petroleos Mexicanos | 6.375% | 1/23/45 | 1,160 | 1,132 | |
Petroleos Mexicanos | 5.625% | 1/23/46 | 3,822 | 3,382 | |
Petroleos Mexicanos | 6.750% | 9/21/47 | 4,217 | 4,280 | |
1 | Poinsettia Finance Ltd. | 6.625% | 6/17/31 | 500 | 505 |
United Mexican States | 8.125% | 12/30/19 | 850 | 991 | |
United Mexican States | 5.125% | 1/15/20 | 1,780 | 1,928 | |
United Mexican States | 3.500% | 1/21/21 | 200 | 208 | |
United Mexican States | 3.625% | 3/15/22 | 4,417 | 4,558 | |
United Mexican States | 4.000% | 10/2/23 | 3,691 | 3,835 | |
United Mexican States | 3.600% | 1/30/25 | 3,549 | 3,575 | |
United Mexican States | 4.125% | 1/21/26 | 3,000 | 3,114 | |
United Mexican States | 7.500% | 4/8/33 | 1,125 | 1,493 | |
United Mexican States | 6.750% | 9/27/34 | 2,749 | 3,472 | |
United Mexican States | 6.050% | 1/11/40 | 3,584 | 4,152 | |
United Mexican States | 4.750% | 3/8/44 | 3,650 | 3,612 | |
United Mexican States | 5.550% | 1/21/45 | 3,388 | 3,726 | |
United Mexican States | 4.600% | 1/23/46 | 2,630 | 2,553 | |
United Mexican States | 4.350% | 1/15/47 | 2,000 | 1,861 | |
United Mexican States | 5.750% | 10/12/10 | 2,400 | 2,451 | |
Total Mexico (Cost $96,075) | 97,013 | ||||
Mongolia (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Mongolia | 5.125% | 12/5/22 | 2,050 | 1,961 | |
2,7 | Trade & Development Bank of Mongolia LLC | 9.375% | 5/19/20 | 200 | 215 |
7 | Trade & Development Bank of Mongolia LLC | 9.375% | 5/19/20 | 400 | 431 |
Total Mongolia (Cost $2,466) | 2,607 | ||||
Morocco (0.5%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.5%) | |||||
Kingdom of Morocco | 4.250% | 12/11/22 | 1,950 | 2,028 | |
Kingdom of Morocco | 5.500% | 12/11/42 | 425 | 461 | |
2 | OCP SA | 5.625% | 4/25/24 | 350 | 377 |
OCP SA | 5.625% | 4/25/24 | 1,800 | 1,924 | |
OCP SA | 4.500% | 10/22/25 | 750 | 746 | |
2 | OCP SA | 4.500% | 10/22/25 | 450 | 448 |
2 | OCP SA | 6.875% | 4/25/44 | 200 | 216 |
OCP SA | 6.875% | 4/25/44 | 300 | 325 | |
Total Morocco (Cost $6,314) | 6,525 | ||||
Mozambique (0.0%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.0%) | |||||
Republic of Mozambique | 10.500% | 1/18/23 | 644 | 459 | |
Total Mozambique (Cost $545) | 459 |
24
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Namibia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
Republic of Namibia | 5.500% | 11/3/21 | 500 | 531 | |
Republic of Namibia | 5.250% | 10/29/25 | 700 | 708 | |
Total Namibia (Cost $1,231) | 1,239 | ||||
Nigeria (0.3%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.3%) | |||||
2 | Africa Finance Corp. | 4.375% | 4/29/20 | 350 | 362 |
2 | Africa Finance Corp. | 3.875% | 4/13/24 | 500 | 498 |
2 | Federal Republic of Nigeria | 5.125% | 7/12/18 | 200 | 203 |
Federal Republic of Nigeria | 6.750% | 1/28/21 | 250 | 265 | |
Federal Republic of Nigeria | 6.375% | 7/12/23 | 600 | 619 | |
Republic of Nigeria | 7.875% | 2/16/32 | 1,050 | 1,140 | |
Total Nigeria (Cost $2,933) | 3,087 | ||||
Oman (0.7%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.7%) | |||||
Lamar Funding Ltd. | 3.958% | 5/7/25 | 1,300 | 1,239 | |
Sultanate of Oman | 3.625% | 6/15/21 | 200 | 203 | |
2 | Sultanate of Oman | 4.750% | 6/15/26 | 3,300 | 3,316 |
Sultanate of Oman | 4.750% | 6/15/26 | 500 | 503 | |
Sultanate of Oman | 5.375% | 3/8/27 | 2,000 | 2,086 | |
Sultanate of Oman | 6.500% | 3/8/47 | 1,115 | 1,200 | |
Total Oman (Cost $8,445) | 8,547 | ||||
Pakistan (0.4%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.4%) | |||||
2 | Islamic Republic of Pakistan | 7.250% | 4/15/19 | 400 | 423 |
Islamic Republic of Pakistan | 7.250% | 4/15/19 | 1,300 | 1,377 | |
Islamic Republic of Pakistan | 6.750% | 12/3/19 | 800 | 847 | |
2 | Islamic Republic of Pakistan | 8.250% | 4/15/24 | 250 | 278 |
Islamic Republic of Pakistan | 8.250% | 4/15/24 | 1,150 | 1,286 | |
Islamic Republic of Pakistan | 8.250% | 9/30/25 | 200 | 225 | |
Third Pakistan International Sukuk Co. Ltd. | 5.500% | 10/13/21 | 500 | 516 | |
Total Pakistan (Cost $4,705) | 4,952 | ||||
Panama (1.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.2%) | |||||
1,2 | Aeropuerto Internacional de Tocumen SA | 5.625% | 5/18/36 | 1,500 | 1,566 |
Republic of Panama | 5.200% | 1/30/20 | 1,473 | 1,591 | |
1 | Republic of Panama | 4.000% | 9/22/24 | 550 | 577 |
1 | Republic of Panama | 3.750% | 3/16/25 | 1,200 | 1,233 |
Republic of Panama | 7.125% | 1/29/26 | 900 | 1,149 | |
Republic of Panama | 8.875% | 9/30/27 | 1,445 | 2,044 | |
1 | Republic of Panama | 3.875% | 3/17/28 | 1,600 | 1,653 |
Republic of Panama | 9.375% | 4/1/29 | 800 | 1,188 | |
1 | Republic of Panama | 6.700% | 1/26/36 | 1,962 | 2,542 |
1 | Republic of Panama | 4.300% | 4/29/53 | 600 | 591 |
Total Panama (Cost $13,809) | 14,134 |
25
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Paraguay (0.3%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.3%) | ||||
Republic of Paraguay | 4.625% | 1/25/23 | 800 | 835 |
Republic of Paraguay | 4.700% | 3/27/27 | 1,000 | 1,016 |
Republic of Paraguay | 6.100% | 8/11/44 | 1,550 | 1,667 |
Total Paraguay (Cost $3,411) | 3,518 | |||
Peru (1.2%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.2%) | ||||
2 Corp. Financiera de Desarrollo SA | 3.250% | 7/15/19 | 250 | 255 |
Corp. Financiera de Desarrollo SA | 3.250% | 7/15/19 | 1,200 | 1,223 |
Corp. Financiera de Desarrollo SA | 4.750% | 2/8/22 | 200 | 213 |
Fondo MIVIVIENDA SA | 3.500% | 1/31/23 | 950 | 960 |
Republic of Peru | 7.350% | 7/21/25 | 100 | 131 |
Republic of Peru | 4.125% | 8/25/27 | 1,700 | 1,848 |
Republic of Peru | 8.750% | 11/21/33 | 3,282 | 5,032 |
1 Republic of Peru | 6.550% | 3/14/37 | 1,661 | 2,181 |
Republic of Peru | 5.625% | 11/18/50 | 2,083 | 2,534 |
Total Peru (Cost $13,866) | 14,377 | |||
Philippines (2.4%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (2.4%) | ||||
8 Power Sector Assets & Liabilities | ||||
Management Corp. | 7.250% | 5/27/19 | 1,264 | 1,400 |
8 Power Sector Assets & Liabilities | ||||
Management Corp. | 7.390% | 12/2/24 | 1,250 | 1,601 |
Republic of the Philippines | 9.875% | 1/15/19 | 650 | 739 |
Republic of the Philippines | 8.375% | 6/17/19 | 1,066 | 1,213 |
Republic of the Philippines | 6.500% | 1/20/20 | 150 | 168 |
Republic of the Philippines | 4.000% | 1/15/21 | 1,310 | 1,397 |
Republic of the Philippines | 4.200% | 1/21/24 | 2,164 | 2,359 |
Republic of the Philippines | 10.625% | 3/16/25 | 1,034 | 1,581 |
Republic of the Philippines | 5.500% | 3/30/26 | 1,850 | 2,197 |
Republic of the Philippines | 9.500% | 2/2/30 | 1,853 | 2,944 |
Republic of the Philippines | 7.750% | 1/14/31 | 2,254 | 3,220 |
Republic of the Philippines | 6.375% | 1/15/32 | 1,200 | 1,556 |
Republic of the Philippines | 6.375% | 10/23/34 | 1,425 | 1,902 |
Republic of the Philippines | 5.000% | 1/13/37 | 1,880 | 2,204 |
Republic of the Philippines | 3.950% | 1/20/40 | 2,000 | 2,060 |
Republic of the Philippines | 3.700% | 3/1/41 | 2,000 | 1,995 |
Republic of the Philippines | 3.700% | 2/2/42 | 990 | 989 |
Total Philippines (Cost $29,292) | 29,525 | |||
Poland (1.2%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.2%) | ||||
Republic of Poland | 6.375% | 7/15/19 | 3,211 | 3,520 |
Republic of Poland | 5.125% | 4/21/21 | 1,960 | 2,154 |
Republic of Poland | 5.000% | 3/23/22 | 3,184 | 3,502 |
Republic of Poland | 3.000% | 3/17/23 | 1,175 | 1,176 |
Republic of Poland | 4.000% | 1/22/24 | 1,878 | 1,981 |
Republic of Poland | 3.250% | 4/6/26 | 2,000 | 1,993 |
Total Poland (Cost $14,161) | 14,326 |
26
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Qatar (3.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (3.1%) | |||||
1,2 | Nakilat Inc. | 6.067% | 12/31/33 | 700 | 823 |
2 | Ooredoo International Finance Ltd. | 7.875% | 6/10/19 | 800 | 891 |
2 | Ooredoo International Finance Ltd. | 4.750% | 2/16/21 | 500 | 533 |
2 | Ooredoo International Finance Ltd. | 3.250% | 2/21/23 | 1,250 | 1,249 |
2 | Ooredoo International Finance Ltd. | 5.000% | 10/19/25 | 900 | 984 |
2 | Ooredoo International Finance Ltd. | 3.750% | 6/22/26 | 250 | 251 |
2 | Ooredoo International Finance Ltd. | 3.875% | 1/31/28 | 1,750 | 1,761 |
Ooredoo Tamweel Ltd. | 3.039% | 12/3/18 | 425 | 430 | |
2 | Qatari Diar Finance QSC | 5.000% | 7/21/20 | 2,320 | 2,503 |
QNB Finance Ltd. | 2.750% | 10/31/18 | 400 | 404 | |
QNB Finance Ltd. | 2.875% | 4/29/20 | 2,900 | 2,938 | |
1,2 | Ras Laffan Liquefied Natural Gas Co. Ltd. II | 5.298% | 9/30/20 | 283 | 297 |
2 | Ras Laffan Liquefied Natural Gas Co. Ltd. III | 6.750% | 9/30/19 | 950 | 1,056 |
1,2 | Ras Laffan Liquefied Natural Gas Co. Ltd. III | 5.838% | 9/30/27 | 1,020 | 1,144 |
1,2 | Ras Laffan Liquefied Natural Gas Co. Ltd. III | 6.332% | 9/30/27 | 500 | 581 |
2 | State of Qatar | 6.550% | 4/9/19 | 1,450 | 1,577 |
State of Qatar | 5.250% | 1/20/20 | 1,600 | 1,725 | |
2 | State of Qatar | 5.250% | 1/20/20 | 2,007 | 2,163 |
State of Qatar | 2.375% | 6/2/21 | 3,700 | 3,679 | |
2 | State of Qatar | 4.500% | 1/20/22 | 1,050 | 1,137 |
State of Qatar | 3.241% | 1/18/23 | 475 | 487 | |
State of Qatar | 3.250% | 6/2/26 | 4,400 | 4,421 | |
2 | State of Qatar | 9.750% | 6/15/30 | 600 | 965 |
State of Qatar | 9.750% | 6/15/30 | 325 | 522 | |
2 | State of Qatar | 6.400% | 1/20/40 | 500 | 653 |
State of Qatar | 6.400% | 1/20/40 | 1,428 | 1,859 | |
2 | State of Qatar | 5.750% | 1/20/42 | 316 | 384 |
State of Qatar | 5.750% | 1/20/42 | 850 | 1,031 | |
State of Qatar | 4.625% | 6/2/46 | 1,850 | 1,932 | |
Total Qatar (Cost $37,780) | 38,380 | ||||
Romania (0.5%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.5%) | |||||
Republic of Romania | 6.750% | 2/7/22 | 2,332 | 2,703 | |
Republic of Romania | 4.375% | 8/22/23 | 2,104 | 2,226 | |
2 | Republic of Romania | 4.875% | 1/22/24 | 100 | 109 |
Republic of Romania | 4.875% | 1/22/24 | 500 | 544 | |
2 | Republic of Romania | 6.125% | 1/22/44 | 200 | 248 |
Republic of Romania | 6.125% | 1/22/44 | 520 | 645 | |
Total Romania (Cost $6,291) | 6,475 | ||||
Russia (6.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (6.1%) | |||||
AK Transneft OJSC Via TransCapitalInvest Ltd. | 8.700% | 8/7/18 | 1,270 | 1,371 | |
Gazprom Neft OAO Via GPN Capital SA | 4.375% | 9/19/22 | 1,200 | 1,214 | |
2 | Gazprom Neft OAO Via GPN Capital SA | 6.000% | 11/27/23 | 200 | 216 |
Gazprom Neft OAO Via GPN Capital SA | 6.000% | 11/27/23 | 1,350 | 1,461 | |
Gazprom OAO Via Gaz Capital SA | 9.250% | 4/23/19 | 3,400 | 3,813 | |
Gazprom OAO Via Gaz Capital SA | 3.850% | 2/6/20 | 678 | 689 | |
Gazprom OAO Via Gaz Capital SA | 5.999% | 1/23/21 | 1,500 | 1,626 | |
Gazprom OAO Via Gaz Capital SA | 6.510% | 3/7/22 | 1,225 | 1,362 | |
Gazprom OAO Via Gaz Capital SA | 4.950% | 7/19/22 | 350 | 365 | |
Gazprom OAO Via Gaz Capital SA | 4.950% | 2/6/28 | 650 | 653 |
27
Emerging Markets Government Bond Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value• | ||
Coupon | Date | ($000) | ($000) | |
Gazprom OAO Via Gaz Capital SA | 8.625% | 4/28/34 | 725 | 958 |
Gazprom OAO Via Gaz Capital SA | 7.288% | 8/16/37 | 1,375 | 1,631 |
Gazprombank OJSC Via GPB Eurobond Finance plc | 7.250% | 5/3/19 | 200 | 215 |
Gazprombank OJSC Via GPB Eurobond Finance plc | 4.960% | 9/5/19 | 1,100 | 1,145 |
Rosneft Finance SA | 7.250% | 2/2/20 | 200 | 220 |
Rosneft Oil Co. via Rosneft International | ||||
Finance Ltd. | 4.199% | 3/6/22 | 1,727 | 1,730 |
Russian Agricultural Bank OJSC Via RSHB | ||||
Capital SA | 7.750% | 5/29/18 | 1,000 | 1,055 |
Russian Agricultural Bank OJSC Via RSHB | ||||
Capital SA | 5.100% | 7/25/18 | 1,700 | 1,750 |
2 Russian Agricultural Bank OJSC Via RSHB | ||||
Capital SA | 5.100% | 7/25/18 | 100 | 103 |
Russian Federation | 11.000% | 7/24/18 | 2,053 | 2,286 |
2 Russian Federation | 3.500% | 1/16/19 | 300 | 308 |
Russian Federation | 3.500% | 1/16/19 | 1,800 | 1,846 |
Russian Federation | 5.000% | 4/29/20 | 5,100 | 5,449 |
Russian Federation | 4.500% | 4/4/22 | 1,600 | 1,712 |
2 Russian Federation | 4.875% | 9/16/23 | 450 | 488 |
Russian Federation | 4.875% | 9/16/23 | 6,600 | 7,152 |
Russian Federation | 12.750% | 6/24/28 | 1,235 | 2,187 |
1 Russian Federation | 7.500% | 3/31/30 | 6,926 | 8,340 |
Russian Federation | 5.625% | 4/4/42 | 5,600 | 6,230 |
Russian Railways via RZD Capital plc | 5.700% | 4/5/22 | 1,550 | 1,664 |
Sberbank of Russia Via SB Capital SA | 5.180% | 6/28/19 | 750 | 789 |
Sberbank of Russia Via SB Capital SA | 5.717% | 6/16/21 | 2,000 | 2,158 |
Sberbank of Russia Via SB Capital SA | 6.125% | 2/7/22 | 2,300 | 2,517 |
Sberbank of Russia Via SB Capital SA | 5.125% | 10/29/22 | 224 | 232 |
SCF Capital Ltd. | 5.375% | 6/16/23 | 400 | 413 |
Vnesheconombank Via VEB Finance plc | 4.224% | 11/21/18 | 1,000 | 1,023 |
Vnesheconombank Via VEB Finance plc | 6.902% | 7/9/20 | 1,350 | 1,481 |
Vnesheconombank Via VEB Finance plc | 6.025% | 7/5/22 | 1,225 | 1,314 |
2 Vnesheconombank Via VEB Finance plc | 5.942% | 11/21/23 | 200 | 215 |
Vnesheconombank Via VEB Finance plc | 5.942% | 11/21/23 | 1,125 | 1,205 |
Vnesheconombank Via VEB Finance plc | 6.800% | 11/22/25 | 1,275 | 1,422 |
VTB Bank OJSC Via VTB Capital SA | 6.875% | 5/29/18 | 425 | 445 |
VTB Bank OJSC Via VTB Capital SA | 6.551% | 10/13/20 | 550 | 606 |
VTB Bank OJSC Via VTB Capital SA | 6.950% | 10/17/22 | 1,725 | 1,879 |
Total Russia (Cost $70,257) | 74,938 | |||
Saudi Arabia (2.7%) | ||||
Sovereign Bonds (U.S. Dollar-Denominated) (2.7%) | ||||
2 Kingdom of Saudi Arabia | 2.375% | 10/26/21 | 5,000 | 4,915 |
Kingdom of Saudi Arabia | 2.375% | 10/26/21 | 600 | 589 |
Kingdom of Saudi Arabia | 3.250% | 10/26/26 | 5,050 | 4,930 |
Kingdom of Saudi Arabia | 4.500% | 10/26/46 | 6,700 | 6,619 |
2 KSA Sukuk Ltd. | 2.894% | 4/20/22 | 4,300 | 4,297 |
9 KSA Sukuk Ltd. | 3.628% | 4/20/27 | 4,300 | 4,320 |
SABIC Capital II BV | 2.625% | 10/3/18 | 1,000 | 1,006 |
Saudi Electricity Global Sukuk Co. | 4.211% | 4/3/22 | 625 | 660 |
Saudi Electricity Global Sukuk Co. 2 | 3.473% | 4/8/23 | 1,050 | 1,068 |
Saudi Electricity Global Sukuk Co. 2 | 5.060% | 4/8/43 | 700 | 708 |
2 Saudi Electricity Global Sukuk Co. 3 | 4.000% | 4/8/24 | 650 | 676 |
28
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Saudi Electricity Global Sukuk Co. 3 | 4.000% | 4/8/24 | 1,950 | 2,028 | |
2 | Saudi Electricity Global Sukuk Co. 3 | 5.500% | 4/8/44 | 300 | 316 |
Saudi Electricity Global Sukuk Co. 3 | 5.500% | 4/8/44 | 500 | 525 | |
Total Saudi Arabia (Cost $32,626) | 32,657 | ||||
Senegal (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.1%) | |||||
Republic of Senegal | 8.750% | 5/13/21 | 500 | 574 | |
Republic of Senegal | 6.250% | 7/30/24 | 200 | 204 | |
Total Senegal (Cost $733) | 778 | ||||
Serbia, Republic of (0.4%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.4%) | |||||
2 | Republic of Serbia | 5.875% | 12/3/18 | 200 | 210 |
Republic of Serbia | 5.875% | 12/3/18 | 1,300 | 1,367 | |
Republic of Serbia | 4.875% | 2/25/20 | 1,100 | 1,146 | |
Republic of Serbia | 7.250% | 9/28/21 | 1,750 | 2,014 | |
Total Serbia, Republic of (Cost $4,565) | 4,737 | ||||
South Africa (1.5%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.5%) | |||||
Eskom Holdings SOC Ltd. | 5.750% | 1/26/21 | 2,200 | 2,213 | |
Eskom Holdings SOC Ltd. | 6.750% | 8/6/23 | 930 | 956 | |
Eskom Holdings SOC Ltd. | 7.125% | 2/11/25 | 300 | 308 | |
2 | Eskom Holdings SOC Ltd. | 7.125% | 2/11/25 | 200 | 206 |
Republic of South Africa | 6.875% | 5/27/19 | 500 | 541 | |
Republic of South Africa | 5.500% | 3/9/20 | 2,725 | 2,892 | |
Republic of South Africa | 5.875% | 5/30/22 | 971 | 1,059 | |
Republic of South Africa | 4.665% | 1/17/24 | 1,600 | 1,616 | |
Republic of South Africa | 5.875% | 9/16/25 | 2,600 | 2,808 | |
Republic of South Africa | 4.300% | 10/12/28 | 3,050 | 2,875 | |
Republic of South Africa | 6.250% | 3/8/41 | 993 | 1,097 | |
Republic of South Africa | 5.375% | 7/24/44 | 400 | 399 | |
Republic of South Africa | 5.000% | 10/12/46 | 950 | 898 | |
2 | Transnet SOC Ltd. | 4.000% | 7/26/22 | 800 | 779 |
ZAR Sovereign Capital Fund Propriety Ltd. | 3.903% | 6/24/20 | 200 | 202 | |
Total South Africa (Cost $18,871) | 18,849 | ||||
Sri Lanka (0.8%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.8%) | |||||
2 | Democratic Socialist Republic of Sri Lanka | 6.000% | 1/14/19 | 200 | 207 |
Democratic Socialist Republic of Sri Lanka | 6.000% | 1/14/19 | 200 | 207 | |
2 | Democratic Socialist Republic of Sri Lanka | 5.125% | 4/11/19 | 250 | 256 |
Democratic Socialist Republic of Sri Lanka | 6.250% | 10/4/20 | 1,432 | 1,517 | |
Democratic Socialist Republic of Sri Lanka | 6.250% | 7/27/21 | 1,550 | 1,643 | |
Democratic Socialist Republic of Sri Lanka | 5.875% | 7/25/22 | 1,400 | 1,448 | |
Democratic Socialist Republic of Sri Lanka | 6.125% | 6/3/25 | 700 | 713 | |
Democratic Socialist Republic of Sri Lanka | 6.850% | 11/3/25 | 1,500 | 1,579 | |
Democratic Socialist Republic of Sri Lanka | 6.825% | 7/18/26 | 1,200 | 1,262 | |
National Savings Bank | 8.875% | 9/18/18 | 400 | 425 | |
Total Sri Lanka (Cost $8,889) | 9,257 |
29
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Thailand (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) | (0.2%) | ||||
Krung Thai Bank PCL | 2.250% | 9/11/18 | 400 | 400 | |
1 Krung Thai Bank PCL | 5.200% | 12/26/24 | 1,150 | 1,189 | |
PTT Public Co. Ltd. | 3.375% | 10/25/22 | 525 | 534 | |
PTT Public Co. Ltd. | 4.500% | 10/25/42 | 400 | 399 | |
Total Thailand (Cost $2,455) | 2,522 | ||||
Trinidad and Tobago (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) | (0.2%) | ||||
2 Petroleum Co. of Trinidad & Tobago Ltd. | 9.750% | 8/14/19 | 700 | 743 | |
2 Republic of Trinidad & Tobago | 4.375% | 1/16/24 | 200 | 196 | |
Republic of Trinidad & Tobago | 4.500% | 8/4/26 | 1,250 | 1,212 | |
Total Trinidad and Tobago (Cost $2,206) | 2,151 | ||||
Tunisia (0.1%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) | (0.1%) | ||||
Banque Centrale de Tunisie SA | 5.750% | 1/30/25 | 1,500 | 1,471 | |
Total Tunisia (Cost $1,439) | 1,471 | ||||
Turkey (4.8%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) | (4.8%) | ||||
Export Credit Bank of Turkey | 5.875% | 4/24/19 | 1,200 | 1,253 | |
2 Export Credit Bank of Turkey | 5.375% | 2/8/21 | 500 | 514 | |
2 Export Credit Bank of Turkey | 5.000% | 9/23/21 | 400 | 405 | |
Hazine Mustesarligi Varlik Kiralama AS | 4.251% | 6/8/21 | 1,250 | 1,254 | |
Hazine Mustesarligi Varlik Kiralama AS | 5.004% | 4/6/23 | 500 | 508 | |
2 Hazine Mustesarligi Varlik Kiralama AS | 4.489% | 11/25/24 | 800 | 782 | |
Republic of Turkey | 6.750% | 4/3/18 | 2,687 | 2,791 | |
2 Republic of Turkey | 4.557% | 10/10/18 | 500 | 510 | |
Republic of Turkey | 7.000% | 3/11/19 | 2,380 | 2,547 | |
Republic of Turkey | 7.500% | 11/7/19 | 1,216 | 1,338 | |
Republic of Turkey | 7.000% | 6/5/20 | 1,930 | 2,123 | |
Republic of Turkey | 5.625% | 3/30/21 | 1,701 | 1,801 | |
Republic of Turkey | 5.125% | 3/25/22 | 825 | 854 | |
Republic of Turkey | 6.250% | 9/26/22 | 2,004 | 2,177 | |
Republic of Turkey | 3.250% | 3/23/23 | 1,601 | 1,499 | |
Republic of Turkey | 5.750% | 3/22/24 | 2,550 | 2,703 | |
Republic of Turkey | 7.375% | 2/5/25 | 2,050 | 2,378 | |
Republic of Turkey | 4.250% | 4/14/26 | 2,750 | 2,613 | |
Republic of Turkey | 4.875% | 10/9/26 | 2,900 | 2,867 | |
Republic of Turkey | 6.000% | 3/25/27 | 4,150 | 4,430 | |
Republic of Turkey | 8.000% | 2/14/34 | 1,640 | 2,046 | |
Republic of Turkey | 6.875% | 3/17/36 | 2,998 | 3,388 | |
Republic of Turkey | 6.750% | 5/30/40 | 1,660 | 1,868 | |
Republic of Turkey | 6.000% | 1/14/41 | 3,180 | 3,295 | |
Republic of Turkey | 4.875% | 4/16/43 | 5,419 | 4,897 | |
Republic of Turkey | 6.625% | 2/17/45 | 1,665 | 1,867 | |
2 TC Ziraat Bankasi AS | 4.250% | 7/3/19 | 200 | 201 | |
2 TC Ziraat Bankasi AS | 4.750% | 4/29/21 | 800 | 800 | |
2 Turkiye Halk Bankasi AS | 4.750% | 6/4/19 | 250 | 250 | |
Turkiye Halk Bankasi AS | 4.750% | 6/4/19 | 400 | 399 | |
Turkiye Halk Bankasi AS | 3.875% | 2/5/20 | 600 | 580 |
30
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Turkiye Halk Bankasi AS | 4.750% | 2/11/21 | 700 | 683 | |
2 | Turkiye Halk Bankasi AS | 5.000% | 7/13/21 | 500 | 490 |
Turkiye Halk Bankasi AS | 5.000% | 7/13/21 | 200 | 196 | |
Turkiye Vakiflar Bankasi TAO | 5.000% | 10/31/18 | 700 | 711 | |
Turkiye Vakiflar Bankasi TAO | 6.000% | 11/1/22 | 200 | 199 | |
1 | Turkiye Vakiflar Bankasi TAO | 6.875% | 2/3/25 | 200 | 203 |
1 | Turkiye Vakiflar Bankasi TAO | 8.000% | 11/1/27 | 1,000 | 1,037 |
Total Turkey (Cost $57,924) | 58,457 | ||||
Ukraine (1.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.2%) | |||||
1 | Oschadbank Via SSB #1 plc | 9.625% | 3/20/25 | 1,000 | 1,002 |
2 | Oschadbank Via SSB #1 plc | 9.625% | 3/20/25 | 200 | 200 |
Ukraine | 7.750% | 9/1/19 | 1,500 | 1,527 | |
2 | Ukraine | 7.750% | 9/1/20 | 1,728 | 1,743 |
Ukraine | 7.750% | 9/1/20 | 600 | 605 | |
2 | Ukraine | 7.750% | 9/1/21 | 907 | 905 |
Ukraine | 7.750% | 9/1/22 | 800 | 786 | |
Ukraine | 7.750% | 9/1/23 | 1,900 | 1,837 | |
Ukraine | 7.750% | 9/1/24 | 2,050 | 1,965 | |
Ukraine | 7.750% | 9/1/25 | 250 | 237 | |
Ukraine | 7.750% | 9/1/26 | 1,800 | 1,686 | |
Ukraine | 7.750% | 9/1/27 | 800 | 750 | |
1,2 | Ukraine Railways via Shortline plc | 9.875% | 9/15/21 | 200 | 200 |
1 | Ukreximbank Via Biz Finance plc | 9.625% | 4/27/22 | 600 | 612 |
1,2 | Ukreximbank Via Biz Finance plc | 9.750% | 1/22/25 | 200 | 200 |
1 | Ukreximbank Via Biz Finance plc | 9.750% | 1/22/25 | 700 | 702 |
Total Ukraine (Cost $14,403) | 14,957 | ||||
United Arab Emirates (3.8%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (3.8%) | |||||
2 | Abu Dhabi National Energy Co. PJSC | 6.250% | 9/16/19 | 275 | 300 |
2 | Abu Dhabi National Energy Co. PJSC | 5.875% | 12/13/21 | 200 | 224 |
Abu Dhabi National Energy Co. PJSC | 3.625% | 1/12/23 | 200 | 202 | |
2 | Abu Dhabi National Energy Co. PJSC | 3.625% | 1/12/23 | 2,300 | 2,325 |
Abu Dhabi National Energy Co. PJSC | 3.875% | 5/6/24 | 650 | 658 | |
2 | Abu Dhabi National Energy Co. PJSC | 4.375% | 6/22/26 | 1,000 | 1,029 |
2 | Abu Dhabi National Energy Co. PJSC | 6.500% | 10/27/36 | 1,075 | 1,312 |
ADCB Finance Cayman Ltd. | 3.000% | 3/4/19 | 800 | 810 | |
ADCB Finance Cayman Ltd. | 2.625% | 3/10/20 | 1,300 | 1,308 | |
ADCB Finance Cayman Ltd. | 4.500% | 3/6/23 | 425 | 439 | |
AHB Sukuk Co. Ltd. | 3.267% | 10/8/18 | 200 | 203 | |
1,2 | Dolphin Energy Ltd. | 5.888% | 6/15/19 | 548 | 572 |
2 | Dolphin Energy Ltd. | 5.500% | 12/15/21 | 820 | 908 |
DP World Crescent Ltd. | 3.908% | 5/31/23 | 1,000 | 1,016 | |
DP World Ltd. | 3.250% | 5/18/20 | 1,250 | 1,267 | |
2 | DP World Ltd. | 6.850% | 7/2/37 | 840 | 988 |
Dubai DOF Sukuk Ltd. | 6.450% | 5/2/22 | 200 | 231 | |
2 | Dubai Electricity & Water Authority | 7.375% | 10/21/20 | 1,975 | 2,277 |
2 | Emirate of Abu Dhabi | 6.750% | 4/8/19 | 1,783 | 1,953 |
Emirate of Abu Dhabi | 2.125% | 5/3/21 | 2,065 | 2,049 | |
2 | Emirate of Abu Dhabi | 3.125% | 5/3/26 | 1,800 | 1,820 |
Emirate of Abu Dhabi | 3.125% | 5/3/26 | 1,907 | 1,925 | |
Emirate of Dubai | 7.750% | 10/5/20 | 1,000 | 1,161 | |
Emirate of Dubai | 3.875% | 1/30/23 | 1,100 | 1,136 |
31
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
Emirate of Dubai | 5.250% | 1/30/43 | 200 | 200 | |
1,2 | Emirates Airline | 4.500% | 2/6/25 | 1,036 | 1,051 |
Emirates NBD PJSC | 3.250% | 11/19/19 | 735 | 749 | |
1 | Emirates NBD PJSC | 4.875% | 3/28/23 | 950 | 968 |
Emirates Telecommunications Group Co. PJSC | 2.375% | 6/18/19 | 800 | 802 | |
Emirates Telecommunications Group Co. PJSC | 3.500% | 6/18/24 | 500 | 508 | |
First Abu Dhabi Bank PJSC | 3.000% | 8/13/19 | 1,300 | 1,325 | |
First Abu Dhabi Bank PJSC | 2.250% | 2/11/20 | 1,475 | 1,473 | |
ICD Sukuk Co. Ltd. | 3.508% | 5/21/20 | 250 | 253 | |
ICD Sukuk Co. Ltd. | 5.000% | 2/1/27 | 1,100 | 1,157 | |
2 | IPIC GMTN Ltd. | 5.000% | 11/15/20 | 1,400 | 1,518 |
IPIC GMTN Ltd. | 5.000% | 11/15/20 | 250 | 271 | |
2 | IPIC GMTN Ltd. | 5.500% | 3/1/22 | 710 | 793 |
2 | IPIC GMTN Ltd. | 6.875% | 11/1/41 | 800 | 1,097 |
Jafz Sukuk Ltd. | 7.000% | 6/19/19 | 400 | 436 | |
2 | MDC-GMTN BV | 7.625% | 5/6/19 | 500 | 556 |
2 | MDC-GMTN BV | 5.500% | 4/20/21 | 450 | 496 |
2 | MDC-GMTN BV | 3.250% | 4/28/22 | 200 | 203 |
MDC-GMTN BV | 3.250% | 4/28/22 | 500 | 507 | |
MDC-GMTN BV | 2.750% | 5/11/23 | 250 | 246 | |
1 | Medjool Ltd. | 3.875% | 3/19/23 | 227 | 229 |
Noor Sukuk Co. Ltd. | 2.788% | 4/28/20 | 350 | 346 | |
2 | NOVA Chemicals Corp. | 5.250% | 8/1/23 | 900 | 918 |
RAK Capital | 3.297% | 10/21/18 | 1,050 | 1,067 | |
RAK Capital | 3.094% | 3/31/25 | 700 | 681 | |
RAKFunding Cayman Ltd. | 3.250% | 6/24/19 | 950 | 957 | |
1 | Ruwais Power Co. PJSC | 6.000% | 8/31/36 | 800 | 917 |
Sharjah Sukuk Ltd. | 3.764% | 9/17/24 | 400 | 411 | |
1,2 | Waha Aerospace BV | 3.925% | 7/28/20 | 518 | 531 |
Total United Arab Emirates (Cost $46,330) | 46,779 | ||||
Uruguay (1.0%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (1.0%) | |||||
1 | Oriental Republic of Uruguay | 8.000% | 11/18/22 | 498 | 606 |
1 | Oriental Republic of Uruguay | 4.500% | 8/14/24 | 1,589 | 1,703 |
1 | Oriental Republic of Uruguay | 4.375% | 10/27/27 | 2,030 | 2,129 |
Oriental Republic of Uruguay | 7.875% | 1/15/33 | 546 | 722 | |
1 | Oriental Republic of Uruguay | 7.625% | 3/21/36 | 1,876 | 2,465 |
1 | Oriental Republic of Uruguay | 4.125% | 11/20/45 | 850 | 761 |
1 | Oriental Republic of Uruguay | 5.100% | 6/18/50 | 3,525 | 3,498 |
Total Uruguay (Cost $11,580) | 11,884 | ||||
Venezuela (2.5%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (2.5%) | |||||
Bolivarian Republic of Venezuela | 13.625% | 8/15/18 | 566 | 481 | |
Bolivarian Republic of Venezuela | 7.000% | 12/1/18 | 1,760 | 1,241 | |
Bolivarian Republic of Venezuela | 7.750% | 10/13/19 | 1,306 | 791 | |
Bolivarian Republic of Venezuela | 6.000% | 12/9/20 | 956 | 497 | |
1 | Bolivarian Republic of Venezuela | 12.750% | 8/23/22 | 3,565 | 2,197 |
Bolivarian Republic of Venezuela | 9.000% | 5/7/23 | 2,582 | 1,290 | |
Bolivarian Republic of Venezuela | 8.250% | 10/13/24 | 2,679 | 1,272 | |
Bolivarian Republic of Venezuela | 7.650% | 4/21/25 | 2,200 | 1,025 | |
Bolivarian Republic of Venezuela | 11.750% | 10/21/26 | 2,127 | 1,234 | |
Bolivarian Republic of Venezuela | 9.250% | 9/15/27 | 3,201 | 1,697 | |
Bolivarian Republic of Venezuela | 9.250% | 5/7/28 | 640 | 307 |
32
Emerging Markets Government Bond Index Fund | |||||
Face | Market | ||||
Maturity | Amount | Value• | |||
Coupon | Date | ($000) | ($000) | ||
1 | Bolivarian Republic of Venezuela | 11.950% | 8/5/31 | 4,329 | 2,498 |
Bolivarian Republic of Venezuela | 9.375% | 1/13/34 | 1,900 | 919 | |
Bolivarian Republic of Venezuela | 7.000% | 3/31/38 | 1,375 | 622 | |
CITGO Holding Inc. | 10.750% | 2/15/20 | 100 | 107 | |
2 | CITGO Holding Inc. | 10.750% | 2/15/20 | 1,600 | 1,712 |
CITGO Petroleum Corp. | 6.250% | 8/15/22 | 100 | 102 | |
2 | CITGO Petroleum Corp. | 6.250% | 8/15/22 | 535 | 546 |
1 | Petroleos de Venezuela SA | 8.500% | 10/27/20 | 3,500 | 2,742 |
1 | Petroleos de Venezuela SA | 9.000% | 11/17/21 | 2,158 | 1,128 |
1 | Petroleos de Venezuela SA | 12.750% | 2/17/22 | 555 | 344 |
1 | Petroleos de Venezuela SA | 6.000% | 5/16/24 | 5,050 | 2,006 |
1 | Petroleos de Venezuela SA | 6.000% | 11/15/26 | 5,316 | 2,033 |
Petroleos de Venezuela SA | 5.375% | 4/12/27 | 4,110 | 1,560 | |
1 | Petroleos de Venezuela SA | 9.750% | 5/17/35 | 2,563 | 1,221 |
Petroleos de Venezuela SA | 5.500% | 4/12/37 | 1,810 | 694 | |
Total Venezuela (Cost $28,814) | 30,266 | ||||
Vietnam (0.2%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.2%) | |||||
Socialist Republic of Vietnam | 6.750% | 1/29/20 | 859 | 938 | |
Socialist Republic of Vietnam | 4.800% | 11/19/24 | 1,075 | 1,106 | |
2 | Socialist Republic of Vietnam | 4.800% | 11/19/24 | 200 | 205 |
Total Vietnam (Cost $2,210) | 2,249 | ||||
Zambia (0.3%) | |||||
Sovereign Bonds (U.S. Dollar-Denominated) (0.3%) | |||||
Republic of Zambia | 5.375% | 9/20/22 | 725 | 682 | |
2 | Republic of Zambia | 8.500% | 4/14/24 | 450 | 473 |
Republic of Zambia | 8.500% | 4/14/24 | 1,000 | 1,049 | |
1 | Republic of Zambia | 8.970% | 7/30/27 | 1,100 | 1,171 |
Total Zambia (Cost $3,096) | 3,375 | ||||
Temporary Cash Investments (0.9%) | |||||
Time Deposits (0.0%) | |||||
Sumitomo Mitsui Bank | |||||
(Cost $131) | 0.000% | 5/2/17 | USD 131 | 131 | |
Shares | |||||
Money Market Fund (0.9%) | |||||
10 | Vanguard Market Liquidity Fund | ||||
(Cost $11,324) | 1.034% | 113,219 | 11,324 | ||
Total Temporary Cash Investments (Cost $11,455) | 11,455 | ||||
Total Investments (99.1%) (Cost $1,176,832) | 1,210,602 |
33
Emerging Markets Government Bond Index Fund | |
Amount | |
($000) | |
Other Assets and Liabilities (0.9%) | |
Other Assets | |
Investment in Vanguard | 82 |
Receivables for Investment Securities Sold | 9,771 |
Receivables for Accrued Income | 16,146 |
Receivables for Capital Shares Issued | 632 |
Other Assets11 | 676 |
Total Other Assets | 27,307 |
Liabilities | |
Payables for Investment Securities Purchased | (15,810) |
Payables for Capital Shares Redeemed | (66) |
Payables for Distributions | (147) |
Payables to Vanguard | (387) |
Other Liabilities | (349) |
Total Liabilities | (16,759) |
Net Assets (100%) | 1,221,150 |
At April 30, 2017, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 1,187,753 |
Undistributed Net Investment Income | 3,661 |
Accumulated Net Realized Losses | (4,032) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 33,770 |
Futures Contracts | (2) |
Net Assets | 1,221,150 |
34
Emerging Markets Government Bond Index Fund | |
Amount | |
($000) | |
Investor Shares—Net Assets | |
Applicable to 1,352,033 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 13,582 |
Net Asset Value Per Share—Investor Shares | $10.05 |
ETF Shares—Net Assets | |
Applicable to 12,111,158 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 970,389 |
Net Asset Value Per Share—ETF Shares | $80.12 |
Admiral Shares—Net Assets | |
Applicable to 10,832,552 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 217,656 |
Net Asset Value Per Share—Admiral Shares | $20.09 |
Institutional Shares—Net Assets | |
Applicable to 605,545 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 19,523 |
Net Asset Value Per Share—Institutional Shares | $32.24 |
• 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, 2017, the aggregate value of these securities was
$133,940,000, representing 11.0% of net assets.
3 Guaranteed by the Republic of Azerbaijan.
4 Guaranteed by the Republic of Hungary.
5 Guaranteed by the Republic of Indonesia.
6 Guaranteed by the Republic of Malaysia.
7 Guaranteed by the Government of Mongolia.
8 Guaranteed by the Republic of the Philippines.
9 Guaranteed by the Kingdom of Saudi Arabia.
10 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is
the 7-day yield.
11 Cash collateral of $258,000 has been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
35
Emerging Markets Government Bond Index Fund | |
Statement of Operations | |
Six Months Ended | |
April 30, 2017 | |
($000) | |
Investment Income | |
Income | |
Interest1 | 28,694 |
Total Income | 28,694 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 19 |
Management and Administrative—Investor Shares | 22 |
Management and Administrative—ETF Shares | 1,391 |
Management and Administrative—Admiral Shares | 301 |
Management and Administrative—Institutional Shares | 27 |
Marketing and Distribution—Investor Shares | 1 |
Marketing and Distribution—ETF Shares | 35 |
Marketing and Distribution—Admiral Shares | 10 |
Marketing and Distribution—Institutional Shares | — |
Custodian Fees | 26 |
Shareholders’ Reports—Investor Shares | 6 |
Shareholders’ Reports—ETF Shares | 19 |
Shareholders’ Reports—Admiral Shares | 3 |
Shareholders’ Reports—Institutional Shares | — |
Total Expenses | 1,860 |
Net Investment Income | 26,834 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | 2,341 |
Futures Contracts | (71) |
Realized Net Gain (Loss) | 2,270 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 406 |
Futures Contracts | (2) |
Change in Unrealized Appreciation (Depreciation) | 404 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 29,508 |
1 Interest income and realized net gain (loss) from an affiliated company of the fund was $19,000 and $0, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
36
Emerging Markets Government Bond Index Fund | ||
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2017 | 2016 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 26,834 | 41,754 |
Realized Net Gain (Loss) | 2,270 | (1,858) |
Change in Unrealized Appreciation (Depreciation) | 404 | 47,756 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 29,508 | 87,652 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (273) | (465) |
ETF Shares | (21,111) | (31,046) |
Admiral Shares | (4,676) | (7,488) |
Institutional Shares | (466) | (845) |
Realized Capital Gain | ||
Investor Shares | — | — |
ETF Shares | — | — |
Admiral Shares | — | — |
Institutional Shares | — | — |
Total Distributions | (26,526) | (39,844) |
Capital Share Transactions | ||
Investor Shares | 1,739 | 2,244 |
ETF Shares | 94,068 | 335,485 |
Admiral Shares | 26,349 | 51,874 |
Institutional Shares | (1,528) | 9,579 |
Net Increase (Decrease) from Capital Share Transactions | 120,628 | 399,182 |
Total Increase (Decrease) | 123,610 | 446,990 |
Net Assets | ||
Beginning of Period | 1,097,540 | 650,550 |
End of Period1 | 1,221,150 | 1,097,540 |
1 Net Assets—End of Period includes undistributed net investment income of $3,661,000 and $3,353,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
37
Emerging Markets Government Bond Index Fund | |||||
Financial Highlights | |||||
Investor Shares | |||||
Six Months | May 14, | ||||
Ended | 20131 to | ||||
Year Ended October 31, | |||||
April 30, | Oct. 31, | ||||
For a Share Outstanding Throughout Each Period | 2017 | 2016 | 2015 | 2014 | 2013 |
Net Asset Value, Beginning of Period | $10.04 | $9.50 | $9.95 | $9.74 | $10.00 |
Investment Operations | |||||
Net Investment Income | . 222 | .454 | .427 | .417 | .149 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments 2 | . 012 | . 533 | (. 447) | . 213 | (. 261) |
Total from Investment Operations | . 234 | . 987 | (. 020) | . 630 | (.112) |
Distributions | |||||
Dividends from Net Investment Income | (. 224) | (. 447) | (. 430) | (. 420) | (.148) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (. 224) | (. 447) | (. 430) | (. 420) | (.148) |
Net Asset Value, End of Period | $10.05 | $10.04 | $9.50 | $9.95 | $9.74 |
Total Return3 | 2.40% | 10.65% | -0.16% | 6.62% | -1.38% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $14 | $12 | $9 | $7 | $4 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.50% | 0.49% | 0.49% | 0.49% | 0.49%4 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 4.57% | 4.72% | 4.52% | 4.35% | 3.81%4 |
Portfolio Turnover Rate 5 | 16% | 24% | 20% | 27% | 38% |
The expense ratio, net investment 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, $.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.
38
Emerging Markets Government Bond Index Fund | |||||
Financial Highlights | |||||
ETF Shares | |||||
Six Months | May 31, | ||||
Ended | 20131 to | ||||
Year Ended October 31, | |||||
April 30, | Oct. 31, | ||||
For a Share Outstanding Throughout Each Period | 2017 | 2016 | 2015 | 2014 | 2013 |
Net Asset Value, Beginning of Period | $80.11 | $75.81 | $79.40 | $77.71 | $79.52 |
Investment Operations | |||||
Net Investment Income | 1.832 | 3.753 | 3.516 | 3.429 | 1.217 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments 2 | .013 | 4.228 | (3.556) | 1.700 | (2.086) |
Total from Investment Operations | 1.845 | 7.981 | (.040) | 5.129 | (.869) |
Distributions | |||||
Dividends from Net Investment Income | (1.835) | (3.681) | (3.550) | (3.439) | (.941) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (1.835) | (3.681) | (3.550) | (3.439) | (.941) |
Net Asset Value, End of Period | $80.12 | $80.11 | $75.81 | $79.40 | $77.71 |
Total Return | 2.38% | 10.84% | -0.01% | 6.79% | -1.39% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $970 | $874 | $501 | $222 | $85 |
Ratio of Total Expenses to Average Net Assets | 0.33% | 0.32% | 0.34% | 0.34% | 0.35%3 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 4.74% | 4.89% | 4.67% | 4.50% | 3.95%3 |
Portfolio Turnover Rate 4 | 16% | 24% | 20% | 27% | 38% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Includes increases from purchase fees of $.03, $.04, $.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.
39
Emerging Markets Government Bond Index Fund | |||||
Financial Highlights | |||||
Admiral Shares | |||||
Six Months | May 14, | ||||
Ended | 20131 to | ||||
Year Ended October 31, | |||||
April 30, | Oct. 31, | ||||
For a Share Outstanding Throughout Each Period | 2017 | 2016 | 2015 | 2014 | 2013 |
Net Asset Value, Beginning of Period | $20.09 | $19.00 | $19.90 | $19.48 | $20.00 |
Investment Operations | |||||
Net Investment Income | . 460 | . 941 | . 885 | . 863 | . 309 |
Net Realized and Unrealized Gain | |||||
(Loss) on Investments 2 | . 003 | 1.076 | (. 894) | . 427 | (. 522) |
Total from Investment Operations | .463 | 2.017 | (.009) | 1.290 | (.213) |
Distributions | |||||
Dividends from Net Investment Income | (. 463) | (. 927) | (. 891) | (. 870) | (. 307) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (. 463) | (. 927) | (. 891) | (. 870) | (. 307) |
Net Asset Value, End of Period | $20.09 | $20.09 | $19.00 | $19.90 | $19.48 |
Total Return3 | 2.37% | 10.89% | 0% | 6.78% | -1.37% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $218 | $191 | $131 | $118 | $55 |
Ratio of Total Expenses to Average Net Assets | 0.33% | 0.32% | 0.33% | 0.34% | 0.34%4 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 4.74% | 4.89% | 4.68% | 4.50% | 3.96%4 |
Portfolio Turnover Rate 5 | 16% | 24% | 20% | 27% | 38% |
The expense ratio, net investment 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, $.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.
40
Emerging Markets Government Bond Index Fund | ||||
Financial Highlights | ||||
Institutional Shares | ||||
Six Months | Year | Feb. 11, | Nov. 25 | |
Ended | Ended | 20151, to | 20141 to | |
April 30, | Oct. 31, | Oct. 31, | Dec. 18, | |
For a Share Outstanding Throughout Each Period | 2017 | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $32.24 | $30.50 | $30.72 | $31.53 |
Investment Operations | ||||
Net Investment Income | .748 | 1.521 | 1.019 | .108 |
Net Realized and Unrealized Gain (Loss) on Investments2 | .004 | 1.715 | (.159) | (1.240) |
Total from Investment Operations | .752 | 3.236 | .860 | (1.132) |
Distributions | ||||
Dividends from Net Investment Income | (.752) | (1.496) | (1.080) | (.108) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (.752) | (1.496) | (1.080) | (.108) |
Net Asset Value, End of Period | $32.24 | $32.24 | $30.50 | $30.29 |
Total Return3 | 2.40% | 10.89% | 2.82% | -3.60% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $20 | $21 | $10 | $0 |
Ratio of Total Expenses to Average Net Assets | 0.29% | 0.29% | 0.29% | 0.30% |
Ratio of Net Investment Income to Average Net Assets | 4.78% | 4.92% | 4.75% | 4.72% |
Portfolio Turnover Rate 4 | 16% | 24% | 20%5 | 20%5 |
The expense ratio, net investment 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 2017, $.02 for 2016, and $.04 in aggregate for periods prior to November 1, 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.
41
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 are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued 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. Futures Contracts: The fund uses futures contracts to invest in fixed income asset classes with greater efficiency and lower cost than is possible through direct investment, to add value when these instruments are attractively priced, or to adjust sensitivity to changes in interest rates. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of bonds held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.
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).
42
Emerging Markets Government Bond Index Fund
During the six months ended April 30, 2017, the fund’s average investments in long and short futures contracts each represented less than 1% of net assets, 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, 2013–2016), and for the period ended April 30, 2017, 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. 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, 2017, or at any time during the period then ended.
6. Other: Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on capital share transactions are credited to paid-in capital.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board
43
Emerging Markets Government Bond Index Fund
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, 2017, the fund had contributed to Vanguard capital in the amount of $82,000, 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).
The following table summarizes the market value of the fund’s investments as of April 30, 2017, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Sovereign Bonds | — | 1,198,150 | — |
Corporate Bonds | — | 997 | — |
Temporary Cash Investments | 11,324 | 131 | — |
Futures Contracts–Liabilities1 | (2) | — | — |
Total | 11,322 | 1,199,278 | — |
1 Represents variation margin on the last day of the reporting period. |
At April 30, 2017, 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) |
5-Year U.S. Treasury Note | June 2017 | 34 | 4,026 | 23 |
10-Year U.S. Treasury Note | June 2017 | (13) | (1,634) | (25) |
(2) |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
44
Emerging Markets Government Bond Index Fund
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, 2017, the fund realized $1,434,000 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, 2016, the fund had available capital losses totaling $4,868,000 that may be carried forward indefinitely to offset future capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending October 31, 2017; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At April 30, 2017, the cost of investment securities for tax purposes was $1,176,832,000. Net unrealized appreciation of investment securities for tax purposes was $33,770,000, consisting of unrealized gains of $38,939,000 on securities that had risen in value since their purchase and $5,169,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended April 30, 2017, the fund purchased $228,875,000 of investment securities and sold $113,164,000 of investment securities, other than temporary cash investments. Total purchases and sales include $111,531,000 and $23,067,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.
45
Emerging Markets Government Bond Index Fund
F. Capital share transactions for each class of shares were: | ||||
Six Months Ended | Year Ended | |||
April 30, 2017 | October 31, 2016 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued1 | 4,214 | 426 | 5,566 | 565 |
Issued in Lieu of Cash Distributions | 233 | 24 | 392 | 40 |
Redeemed | (2,708) | (274) | (3,714) | (379) |
Net Increase (Decrease)—Investor Shares | 1,739 | 176 | 2,244 | 226 |
ETF Shares | ||||
Issued | 117,615 | 1,505 | 357,502 | 4,601 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (23,547) | (300) | (22,017) | (300) |
Net Increase (Decrease)—ETF Shares | 94,068 | 1,205 | 335,485 | 4,301 |
Admiral Shares | ||||
Issued1 | 46,858 | 2,369 | 77,994 | 3,984 |
Issued in Lieu of Cash Distributions | 3,876 | 197 | 6,294 | 323 |
Redeemed | (24,385) | (1,241) | (32,414) | (1,673) |
Net Increase (Decrease)—Admiral Shares | 26,349 | 1,325 | 51,874 | 2,634 |
Institutional Shares | ||||
Issued | 6 | (1) | 8,772 | 295 |
Issued in Lieu of Cash Distributions | 466 | 15 | 845 | 27 |
Redeemed | (2,000) | (64) | (38) | (1) |
Net Increase (Decrease)—Institutional Shares | (1,528) | (50) | 9,579 | 321 |
1 Includes purchase fees for fiscal 2017 and 2016 of $386,000 and $620,000, respectively (fund totals). |
G. Management has determined that no material events or transactions occurred subsequent to April 30, 2017, that would require recognition or disclosure in these financial statements.
46
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.
47
Six Months Ended April 30, 2017 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Emerging Markets Government Bond Index Fund | 10/31/2016 | 4/30/2017 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,023.99 | $2.51 |
ETF Shares | 1,000.00 | 1,023.85 | 1.66 |
Admiral Shares | 1,000.00 | 1,023.75 | 1.66 |
Institutional Shares | 1,000.00 | 1,024.04 | 1.46 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,022.32 | $2.51 |
ETF Shares | 1,000.00 | 1,023.16 | 1.66 |
Admiral Shares | 1,000.00 | 1,023.16 | 1.66 |
Institutional Shares | 1,000.00 | 1,023.36 | 1.45 |
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 0.29% for Institutional Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).
48
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. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the 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 compared with its 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 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 expenses were 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.
49
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 fund assets increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
50
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.
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.
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.
51
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.
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.
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Vanguard Emerging Markets Government Bond Index Fund is not sponsored, endorsed, issued, sold, or promoted by Barclays Risk Analytics and Index Solutions Limited or any of its affiliates (“Barclays”). Barclays makes no representation or warranty, express or implied, to the owners or purchasers of Vanguard Emerging Markets Government Bond Index Fund or any member of the public regarding the advisability of investing in securities generally or in Vanguard Emerging Markets Government Bond Index 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 Vanguard Emerging Markets Government Bond Index Fund with respect to any person or entity. Barclays’ only relationship to Vanguard and Vanguard Emerging Markets Government Bond Index Fund is the licensing of the Barclays index, which is determined, composed, and calculated by Barclays without regard to Vanguard or Vanguard Emerging Markets Government Bond Index Fund or any owners or purchasers of Vanguard Emerging Markets Government Bond Index Fund. Barclays has no obligation to take the needs of Vanguard, Vanguard Emerging Markets Government Bond Index Fund, or the owners of Vanguard Emerging Markets Government Bond Index 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 Vanguard Emerging Markets Government Bond Index Fund to be issued. Barclays has no obligation or liability in connection with the administration, marketing, or trading of Vanguard Emerging Markets Government Bond Index 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 VANGUARD EMERGING MARKETS GOVERNMENT BOND INDEX 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 BLOOMBERG 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 BLOOMBERG BARCLAYS USD EMERGING MARKETS GOVERNMENT RIC CAPPED 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.
© 2017 Barclays. Used with Permission.
Source: Barclays Global Family of Indices. Copyright 2017, Barclays. All rights reserved.
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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 197 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. 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
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years and Other Experience: Chairman of the Board of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group, since January 2010; Director of The Vanguard Group since 2008; Chief Executive Officer and President of The Vanguard Group, and of each of the investment companies served by The Vanguard Group, since 2008; Director of Vanguard Marketing Corporation; Managing Director of The Vanguard Group (1995–2008).
IndependentTrustees
Emerson U. Fullwood
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Executive Chief Staff and Marketing Officer for North America and Corporate Vice President (retired 2008) of Xerox Corporation (document management products and services); Executive in Residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology; Lead Director of SPX FLOW, Inc. (multi-industry manufacturing); Director of the United Way of Rochester, the University of Rochester Medical Center, Monroe Community College Foundation, North Carolina A&T University, and Roberts Wesleyan College.
Rajiv L. Gupta
Born 1945. Trustee Since December 2001.2 Principal Occupation(s) During the Past Five Years and Other Experience: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Arconic Inc. (diversified manufacturer), HP Inc. (printer and personal computer manufacturing), and Delphi Automotive plc (automotive components); Senior Advisor at New Mountain Capital.
Amy Gutmann
Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years and Other Experience: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and Professor of Communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania; Trustee of the National Constitution Center; Chair of the Presidential Commission for the Study of Bioethical Issues.
JoAnn Heffernan Heisen
Born 1950. Trustee Since July 1998. Principal Occupation(s) During the Past Five Years and Other Experience: Corporate Vice President and Member of the Executive Committee (1997–2008), Chief Global Diversity Officer (retired 2008), Vice President and Chief Information Officer (1997–2005), Controller (1995–1997), Treasurer (1991–1995), and Assistant Treasurer (1989–1991) 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
Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2009) of Cummins Inc. (industrial machinery); Chairman of the Board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education; Director of SKF AB (industrial machinery), Hyster-Yale Materials Handling, Inc. (forklift trucks), and the V Foundation for Cancer Research; Member of the Advisory Council for the College of Arts and Letters and Chair of the Advisory
Board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born 1953. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Senior Vice President and Chief Financial Officer (retired 2013) at IBM (information technology services); Fiduciary Member of IBM’s Retirement Plan Committee (2004–2013); Director of the Dow Chemical Company; Member of the Council on Chicago Booth.
Scott C. Malpass
Born 1962. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Chief Investment Officer and Vice President at the University of Notre Dame; Assistant Professor of Finance at the Mendoza College of Business at Notre Dame; Member of the Notre Dame 403(b) Investment Committee, the Board of Advisors for Spruceview Capital Partners, and the Investment Advisory Committee of Major League Baseball; Board Member of TIFF Advisory Services, Inc., and Catholic Investment Services, Inc. (investment advisors); Member of the Board of Superintendence of the Institute for the Works of Religion.
André F. Perold
Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years and Other Experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011); Chief Investment Officer and Co-Managing Partner of HighVista Strategies LLC (private investment firm); Overseer of the Museum of Fine Arts Boston.
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Chairman of the Board of Trustees of Colby-Sawyer College; Member of the Board of Hypertherm, Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born 1967. Investment Stewardship Officer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Treasurer (2015–2017), Controller (2010–2015), and Assistant Controller (2001–2010) of each of the investment companies served by The Vanguard Group.
Thomas J. Higgins
Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).
Peter Mahoney
Born 1974. Controller Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group; Head of International Fund Services at The Vanguard Group (2008–2014).
Anne E. Robinson
Born 1970. Secretary Since September 2016. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; General Counsel of The Vanguard Group; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Director and Senior Vice President of Vanguard Marketing Corporation; Managing Director and General Counsel of Global Cards and Consumer Services at Citigroup (2014–2016); Counsel at American Express (2003–2014).
Michael Rollings
Born 1963. Treasurer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group; Executive Vice President and Chief Financial Officer of MassMutual Financial Group (2006–2016).
Vanguard Senior Management Team
Mortimer J. Buckley John James Martha G. King John T. Marcante Chris D. McIsaac | James M. Norris Thomas M. Rampulla Glenn W. Reed Karin A. Risi |
Chairman Emeritus and Senior Advisor John J. Brennan
Chairman, 1996–2009
Chief Executive Officer and President, 1996–2008
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. | |
© 2017 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q11202 062017 |
Semiannual Report | April 30, 2017
Vanguard Global Minimum Volatility Fund
A new format, unwavering commitment
As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.
Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.
In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.
We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.
At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
Chairman’s Perspective. | 2 |
Advisor’s Report. | 6 |
Fund Profile. | 9 |
Performance Summary. | 11 |
Financial Statements. | 12 |
About Your Fund’s Expenses. | 31 |
Trustees Approve Advisory Arrangement. | 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: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown translated into seven languages, reflecting our expanding global presence.
Your Fund’s Performance at a Glance
• Vanguard Global Minimum Volatility Fund returned just over 10% for the six months ended April 30, 2017, trailing its benchmark by more than 2 percentage points.
• The fund’s objective is to create a portfolio that has broad equity exposure with less volatility than the global equity market. Over the period, the fund produced lower daily volatility but also a lower risk-adjusted return than its benchmark, the FTSE Global All Cap Index (USD Hedged). (We calculate daily volatility and risk-adjusted return using standard deviation, as we discuss in the Advisor’s Report on page 6.)
• Overweight allocations to consumer staples, telecommunication services, and utilities increased exposure to three of the benchmark’s less volatile sectors. Underweight allocations to energy and financials limited exposure to two of the benchmark’s most volatile sectors.
Total Returns: Six Months Ended April 30, 2017 | |||
Total | |||
Returns | |||
Vanguard Global Minimum Volatility Fund | |||
Investor Shares | 10.03% | ||
Admiral™ Shares | 10.05 | ||
FTSE Global All Cap Index (USD Hedged) | 12.55 | ||
Global Funds Average | 11.46 | ||
Global 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. | |||
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
Global Minimum Volatility Fund | 0.25% | 0.17% | 1.24% |
The fund expense ratios shown are from the prospectus dated February 23, 2017, and represent estimated costs for the current fiscal period. For the six months ended April 30, 2017, the fund’s annualized expense ratios were 0.25% for Investor Shares and 0.17% 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 2016.
Peer group: Global Funds.
1
Chairman’s Perspective
Bill McNabb
Chairman and Chief Executive Officer
Dear Shareholder,
“Buy what you know.”
It’s one of the adages of investing, and it has plenty of intuitive appeal. After all, the familiar seems inherently less risky. It’s no wonder that many investors heavily tilt their portfolios toward the stocks and bonds of their home country. This is known in investing parlance as “home bias.”
U.S. investors sometimes think they can get all the global diversification they need by owning shares of U.S.-based multinational companies. And that may seem like the best of both worlds: international diversification without ever leaving the friendly confines of home.
The potential pitfall is that, as Vanguard research has suggested, the performance of a company’s shares tends to be highly correlated to its domestic market, regardless of where that company conducts most of its business.
Americans aren’t alone in being portfolio homebodies. Vanguard has found that in a range of developed countries—Australia, Canada, Japan, and the United Kingdom, as well as the United States—investors held a greater percentage of domestic stocks than would be indicated if they had taken their cues from a globally diversified, market-weighted benchmark. (You can see this tendency in the chart later in this letter.)
2
Why home bias exists
Vanguard’s Investment Strategy Group identified a range of reasons why investors might not embrace global diversification, including concerns about currency risk and an expectation that their home country will deliver outsized returns.
One factor we identified—preference for the familiar—seems particularly relevant. With so much global uncertainty about geopolitics, monetary policy, and the economic outlook, it’s understandable why investors may not want to stray too far from home.
But in their aversion to the unknown, investors can end up increasing, rather than lessening, their risks. That’s
because they’re sacrificing broad global diversification—one of the best ways I know of to help control risk.
In many cases, individual country markets are much less diversified than the global market in total. Global investing, then, can be an answer for investors who want to reduce concentration risk. That can include overconcentration in a particular country, region, or industry.
And the good news is that global investing is easier than ever, thanks to the wide availability of low-cost, internationally diversified stock and bond funds. It’s possible, in a sense, to own the whole world with just a couple of funds.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2017 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.46% | 18.03% | 13.63% |
Russell 2000 Index (Small-caps) | 18.37 | 25.63 | 12.95 |
Russell 3000 Index (Broad U.S. market) | 13.83 | 18.58 | 13.57 |
FTSE All-World ex US Index (International) | 10.55 | 12.98 | 5.60 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -0.67% | 0.83% | 2.27% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | -0.34 | 0.14 | 3.16 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.23 | 0.37 | 0.11 |
CPI | |||
Consumer Price Index | 1.16% | 2.20% | 1.22% |
3
Expanding our opportunities
A key to overcoming home bias is reframing the way we look at investing outside our home countries. Take, for example, automakers or pharmaceutical companies. There are well-regarded firms in both industries located throughout the world. Over the next five years, nobody can know for sure whether a Japanese or U.S. or European company will produce a popular new sedan that outsells the competition or come up with new treatments to combat illness. So why not own them all? And that includes their bonds along with their stocks.
Full global diversification also allows you to capitalize on opportunities in both developed and emerging economies. Betting on which individual country—let alone company—will be the next market darling can be a fool’s errand.
A better choice can be to harness the potential of all markets. In my personal investment account, I have an emerging markets position that complements my developed-market holdings. Not only can global diversification help control risk, but it can also expand our set of opportunities among stocks and bonds.
Home bias shows investors across the world are fixated on the familiar
Investors often own a greater share of their home country’s stocks than would be indicated by the allocations of a globally diversified, market-capitalization-weighted index fund.
Global index weight
Investor holdings in domestic equities
Notes: Data as of December 31, 2014 (the latest available from the International Monetary Fund, or IMF), in U.S. dollars. Domestic investment is calculated by subtracting total foreign investment (as reported by the IMF) in a given country from its market capitalization in the MSCI All Country World Index. Given that the IMF data are voluntary, there may be some discrepancies between the market values in the survey and the MSCI ACWI.
Sources: Vanguard, based on data from the IMF’s Coordinated Portfolio Investment Survey (2014), Bloomberg, Thomson Reuters Datastream, and FactSet.
4
Ultimately, I believe we have the best chance for investment success by giving ourselves more opportunities, not fewer. Own the whole haystack and you never have to worry about finding the needle.
Thank you for entrusting your assets to Vanguard.
F. William McNabb III
Chairman and Chief Executive Officer May 12, 2017
5
Advisor’s Report
For the six months ended April 30, 2017, Vanguard Global Minimum Volatility Fund returned 10.03% for Investor Shares and 10.05% for Admiral Shares, with an annualized daily volatility of 6.21%. Its benchmark, the FTSE Global All Cap Index (USD Hedged), returned 12.55%, with an annualized daily volatility of 6.61%. (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.)
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 6.1% 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 of low volatility, you should expect this fund’s volatility to be much closer to the volatility level of its benchmark.
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 like the one we experienced over the past six months. 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 for the fund over the long term is its 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 view six months to be a relatively short time, but for the semiannual period, the risk-adjusted return was 1.62, compared with 1.91 for the benchmark. Over a longer period—since the fund’s inception on December 12, 2013—its risk-adjusted return was 1.57, compared with 0.85 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 its factors move in relation to one another. This approach allows us to make appropriate risk/diversification trade-offs, while not relying solely on volatility estimates.
6
Our process also approaches 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.
The investment environment
During the period, the Federal Reserve twice increased interest rates—just the second and third times it has done so since the financial crisis—raising the federal funds rate target to 0.75%–1%.
The Fed’s moves came as the U.S. economy posted mostly positive results. Gross domestic product (GDP) growth
was in line with estimates in the fourth quarter of 2016, but it was lackluster in the first quarter of 2017, largely because of a drop-off in consumer spending. The housing and manufacturing sectors reported decent activity, and unemployment in April was down to 4.4%, its lowest level since 2007. Wages ticked up and commodities, especially oil, regained ground during the period, fueling a rise in inflation. Given that backdrop, the Fed signaled that further rate increases could be announced in the near term.
The Fed’s positive outlook on economic expansion carried over to the U.S. stock market, where several indexes reached record highs during the six months. Although the resilient economy played a part in the rally, strong corporate earnings and the prospect of tax reform, increased infrastructure spending, and greater deregulation also contributed to a shift toward riskier assets. That sentiment tapered off toward the end of the period, though, as investors realized that the legislative agenda might take more time to materialize.
Overseas, major central banks kept their monetary policies accommodative. Political uncertainty eased somewhat as voters in the Netherlands and France turned back nationalist candidates who were focused on dismantling the European Union. Stocks rose across Europe and Asia.
7
The fund’s successes and shortfalls
We have cautioned that during periods of low volatility, expectations for the size of the portfolio’s volatility discount relative to the market should be tempered. During the six months, we saw quite low volatility levels for the fund’s benchmark.
It is important to recognize that there will be periods such as this; however, we maintain confidence in our process to deliver lower volatility over the long term. Even with this challenging environment, the fund met its objective of lower volatility than the broader equity market, as measured by daily volatility for the semiannual period. And we have achieved this goal since the fund’s inception.
In addition, the benefits of our strategy become even clearer when you seek to remove some of the noise caused by short-term reversals in daily returns, which can increase volatility levels, and focus on a longer return horizon such as monthly returns. For example, since inception, the fund has delivered a 31.3% reduction in the annualized volatility of monthly returns relative to its benchmark.
Despite a challenging environment over the past six months, our strategy of holding stocks that have lower correlations with one another provided diversification benefits.
On average, we were overweighted in less volatile sectors, such as consumer staples, telecommunication services, and utilities, and underweighted in two of the benchmark’s more volatile industry groups, energy and financials. As for regional allocations, our holdings in North America, Europe, and the Pacific region helped lower volatility, while our positions in the Middle East and emerging markets modestly increased volatility for the fund compared with its benchmark.
We expect our approach to portfolio construction to pay off in reduced volatility over the long run. 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 serving our investors in the future.
Portfolio Managers: Michael R. Roach, CFA Anatoly Shtekhman, CFA
Binbin Guo, Principal, Head of Equity Research and Portfolio Strategies Vanguard Quantitative Equity Group May 9, 2017
8
Global Minimum Volatility Fund
Fund Profile
As of April 30, 2017
Share-Class Characteristics | ||
Investor | Admiral | |
Shares | Shares | |
Ticker Symbol | VMVFX | VMNVX |
Expense Ratio1 | 0.25% | 0.17% |
Sector Diversification (% of equity exposure) | ||
FTSE Global | ||
All Cap Index | ||
Fund (USD Hedged) | ||
Consumer Discretionary | 10.4% | 12.4% |
Consumer Staples | 13.1 | 9.0 |
Energy | 2.2 | 6.2 |
Financials | 13.8 | 17.9 |
Health Care | 15.0 | 10.9 |
Industrials | 12.6 | 11.8 |
Information Technology | 11.1 | 15.9 |
Materials | 3.7 | 5.7 |
Real Estate | 3.6 | 4.0 |
Telecommunication Services | 7.1 | 3.0 |
Utilities | 7.4 | 3.2 |
Volatility Measures | |
FTSE Global | |
All Cap Index | |
(USD Hedged) | |
R-Squared | 0.66 |
Beta | 0.55 |
These measures show the degree and timing of the fund’s fluctuations compared with the index over 36 months.
Ten Largest Holdings (% of total net assets) | ||
HDFC Bank Ltd. | Diversified Banks | 1.5% |
Jack Henry & Associates Data Processing & | ||
Inc. | Outsourced Services | 1.5 |
RenaissanceRe Holdings | ||
Ltd. | Reinsurance | 1.5 |
Waste Management Inc. Environmental & | ||
Facilities Services | 1.4 | |
Johnson & Johnson | Pharmaceuticals | 1.4 |
Expeditors International | Air Freight & | |
of Washington Inc. | Logistics | 1.4 |
GlaxoSmithKline plc | Pharmaceuticals | 1.4 |
Starwood Property Trust | ||
Inc. | Mortgage REITs | 1.3 |
Dollarama Inc. | General Merchandise | |
Stores | 1.3 | |
CLP Holdings Ltd. | Electric Utilities | 1.2 |
Top Ten | 13.9% |
The holdings listed exclude any temporary cash investments and equity index products.
Allocation by Region (% of equity exposure)
1 The expense ratios shown are from the prospectus dated February 23, 2017, and represent estimated costs for the current fiscal period. For the six months ended April 30, 2017, the annualized expense ratios were 0.25% for Investor Shares and 0.17% for Admiral Shares.
9
Portfolio Characteristics | ||
FTSE Global | ||
All Cap Index | ||
Fund | (USD Hedged) | |
Number of Stocks | 390 | 7,727 |
Median Market Cap | $10.1B | $37.0B |
Price/Earnings Ratio | 21.1x | 23.0x |
Price/Book Ratio | 2.7x | 2.1x |
Return on Equity | 30.9% | 20.3% |
Earnings Growth | ||
Rate | 7.8% | 8.3% |
Dividend Yield | 2.6% | 2.3% |
Turnover Rate | ||
(Annualized) | 47% | — |
Short-Term Reserves | 1.2% | — |
Global Minimum Volatility Fund
Market Diversification (% of equity exposure)
FTSE | ||
Global | ||
All Cap | ||
Index | ||
(USD | ||
Fund | Hedged) | |
Europe | ||
Switzerland | 5.5% | 2.8% |
United Kingdom | 4.2 | 6.0 |
Germany | 3.8 | 3.0 |
Sweden | 1.2 | 1.1 |
Other | 2.4 | 8.0 |
Subtotal | 17.1% | 20.9% |
Pacific | ||
Japan | 4.9% | 8.0% |
Australia | 4.8 | 2.4 |
South Korea | 3.2 | 1.7 |
Hong Kong | 3.1 | 1.2 |
Other | 1.0 | 0.6 |
Subtotal | 17.0% | 13.9% |
Emerging Markets | ||
India | 2.3% | 1.2% |
Brazil | 1.6 | 0.8 |
Taiwan | 1.4 | 1.5 |
Other | 2.4 | 5.4 |
Subtotal | 7.7% | 8.9% |
North America | ||
United States | 51.6% | 53.0% |
Canada | 6.2 | 3.1 |
Subtotal | 57.8% | 56.1% |
Middle East | 0.4% | 0.2% |
10
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, 2017
Global Minimum Volatility Fund Investor Shares
FTSE Global All Cap Index (USD Hedged)
Note: For 2017, performance data reflect the six months ended April 30, 2017.
Average Annual Total Returns: Periods Ended March 31, 2017
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 | 11.70% | 11.15% |
Admiral Shares | 12/12/2013 | 11.77 | 11.23 |
See Financial Highlights for dividend and capital gains information.
11
Global Minimum Volatility Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2017
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 (99.3%)1 | ||
Australia (4.8%) | ||
AGL Energy Ltd. | 1,004,495 | 20,111 |
Wesfarmers Ltd. | 367,202 | 11,820 |
Stockland | 2,204,185 | 8,000 |
Cochlear Ltd. | 65,083 | 6,813 |
Transurban Group | 728,039 | 6,651 |
Sonic Healthcare Ltd. | 235,098 | 3,886 |
Aristocrat Leisure Ltd. | 255,310 | 3,752 |
JB Hi-Fi Ltd. | 183,040 | 3,382 |
Caltex Australia Ltd. | 151,102 | 3,373 |
Coca-Cola Amatil Ltd. | 427,117 | 2,993 |
ASX Ltd. | 72,176 | 2,736 |
GPT Group | 514,397 | 2,021 |
Woodside Petroleum Ltd. | 80,065 | 1,927 |
Aurizon Holdings Ltd. | 407,600 | 1,572 |
Crown Resorts Ltd. | 120,123 | 1,123 |
Computershare Ltd. | 97,458 | 1,074 |
Treasury Wine Estates Ltd. | 98,390 | 883 |
BWP Trust | 383,701 | 839 |
Goodman Group | 119,454 | 725 |
Ramsay Health Care Ltd. | 12,064 | 647 |
Charter Hall Retail REIT | 191,055 | 640 |
Super Retail Group Ltd. | 86,439 | 610 |
Challenger Ltd. | 61,804 | 610 |
Charter Hall Group | 105,931 | 450 |
LendLease Group | 24,461 | 294 |
^ Washington H Soul | ||
Pattinson & Co. Ltd. | 20,619 | 291 |
Insurance Australia | ||
Group Ltd. | 47,519 | 221 |
carsales.com Ltd. | 22,427 | 197 |
87,641 | ||
Austria (0.0%) | ||
voestalpine AG | 16,352 | 682 |
Belgium (0.5%) | ||
Colruyt SA | 126,301 | 6,490 |
Elia System Operator SA/NV | 23,212 | 1,231 |
Sofina SA | 6,290 | 903 | |
Cofinimmo SA | 5,474 | 663 | |
Ackermans & van Haaren | |||
NV | 2,298 | 376 | |
9,663 | |||
Brazil (1.6%) | |||
Telefonica Brasil SA ADR | 825,403 | 12,208 | |
2 | Ambev SA ADR | 1,686,366 | 9,663 |
Ultrapar Participacoes | |||
SA ADR | 191,257 | 4,242 | |
* | TIM Participacoes SA ADR | 147,950 | 2,383 |
28,496 | |||
Canada (6.2%) | |||
^ | Dollarama Inc. | 263,618 | 23,078 |
BCE Inc. | 456,370 | 20,778 | |
TELUS Corp. | 444,158 | 14,779 | |
^ | Emera Inc. | 415,106 | 14,368 |
Canadian Tire Corp. Ltd. | |||
Class A | 81,280 | 9,920 | |
^ | Shaw Communications Inc. | ||
Class B | 454,952 | 9,645 | |
Bank of Montreal | 66,693 | 4,723 | |
Pembina Pipeline Corp. | 108,535 | 3,459 | |
Intact Financial Corp. | 50,213 | 3,440 | |
National Bank of Canada | 60,737 | 2,360 | |
^ | Cineplex Inc. | 49,300 | 1,940 |
Metro Inc. | 38,536 | 1,321 | |
TransCanada Corp. | 23,211 | 1,078 | |
^ | Parkland Fuel Corp. | 47,026 | 1,023 |
3 | Hydro One Ltd. | 53,573 | 943 |
* | CGI Group Inc. Class A | 15,863 | 766 |
Fortis Inc. | 19,306 | 628 | |
George Weston Ltd. | 4,111 | 369 | |
114,618 | |||
Chile (0.3%) | |||
Enel Americas SA ADR | 157,624 | 1,562 | |
Sociedad Quimica y | |||
Minera de Chile SA ADR | 38,611 | 1,373 |
12
Global Minimum Volatility Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Enel Chile SA ADR | 152,793 | 834 | |
Cia Cervecerias Unidas | |||
SA ADR | 30,786 | 793 | |
4,562 | |||
China (0.4%) | |||
China Mobile Ltd. ADR | 134,029 | 7,146 | |
Denmark (0.3%) | |||
H Lundbeck A/S | 48,327 | 2,479 | |
ISS A/S | 44,768 | 1,857 | |
William Demant Holding | |||
A/S | 30,782 | 704 | |
GN Store Nord A/S | 19,221 | 500 | |
5,540 | |||
Finland (0.0%) | |||
Orion Oyj Class B | 13,681 | 784 | |
France (0.6%) | |||
Sodexo SA | 25,244 | 3,208 | |
Ipsen SA | 21,163 | 2,464 | |
Sanofi | 25,523 | 2,412 | |
Thales SA | 10,911 | 1,147 | |
BioMerieux | 4,866 | 973 | |
Atos SE | 6,524 | 855 | |
^ | Hermes International | 1,538 | 735 |
11,794 | |||
Germany (3.8%) | |||
Deutsche Post AG | 519,614 | 18,677 | |
Merck KGaA | 95,255 | 11,190 | |
Bayer AG | 67,711 | 8,378 | |
^ | Wirecard AG | 131,158 | 7,755 |
* | MTU Aero Engines AG | 27,951 | 4,009 |
STADA Arzneimittel AG | 55,835 | 3,957 | |
* | Henkel AG & Co. KGaA | ||
Preference Shares | 24,216 | 3,295 | |
Fielmann AG | 39,184 | 2,996 | |
Celesio AG | 61,654 | 1,735 | |
* | Beiersdorf AG | 13,977 | 1,390 |
^ | RHOEN-KLINIKUM AG | 44,814 | 1,281 |
METRO AG | 33,925 | 1,116 | |
adidas AG | 5,021 | 1,007 | |
Rheinmetall AG | 6,494 | 596 | |
Aurubis AG | 8,146 | 569 | |
Freenet AG | 16,718 | 525 | |
* | Axel Springer SE | 8,828 | 495 |
68,971 | |||
Hong Kong (3.0%) | |||
CLP Holdings Ltd. | 2,107,350 | 22,225 | |
AAC Technologies | |||
Holdings Inc. | 509,000 | 7,461 | |
Hang Seng Bank Ltd. | 340,400 | 6,895 | |
Power Assets Holdings | |||
Ltd. | 593,000 | 5,333 | |
Yuexiu REIT | 5,326,000 | 3,134 |
Want Want China | |||
Holdings Ltd. | 3,487,000 | 2,508 | |
Cheung Kong | |||
Infrastructure Holdings | |||
Ltd. | 286,000 | 2,504 | |
Chow Tai Fook Jewellery | |||
Group Ltd. | 1,969,600 | 2,165 | |
MTR Corp. Ltd. | 361,500 | 2,080 | |
China Mengniu Dairy Co. | |||
Ltd. | 804,000 | 1,553 | |
Link REIT | 23,000 | 165 | |
56,023 | |||
India (2.3%) | |||
HDFC Bank Ltd. ADR | 353,809 | 28,167 | |
2 | Dr Reddy’s Laboratories | ||
Ltd. ADR | 213,041 | 8,703 | |
Infosys Ltd. ADR | 317,032 | 4,616 | |
*,3 | Reliance Industries Ltd. | ||
GDR | 13,354 | 578 | |
42,064 | |||
Indonesia (0.5%) | |||
Telekomunikasi Indonesia | |||
Persero Tbk PT ADR | 286,923 | 9,397 | |
Israel (0.4%) | |||
Bank Hapoalim BM | 657,081 | 4,098 | |
Bezeq The Israeli | |||
Telecommunication Corp. | |||
Ltd. | 893,813 | 1,502 | |
Paz Oil Co. Ltd. | 5,690 | 929 | |
6,529 | |||
Italy (0.2%) | |||
Moncler SPA | 67,984 | 1,677 | |
Recordati SPA | 23,219 | 860 | |
Brunello Cucinelli SPA | 10,297 | 270 | |
2,807 | |||
Japan (4.8%) | |||
Mitsubishi Tanabe Pharma | |||
Corp. | 477,100 | 9,691 | |
Takeda Pharmaceutical Co. | |||
Ltd. | 196,400 | 9,422 | |
Sawai Pharmaceutical Co. | |||
Ltd. | 136,000 | 7,432 | |
Canon Inc. | 211,500 | 7,019 | |
JXTG Holdings Inc. | 1,512,150 | 6,823 | |
Daiichi Sankyo Co. Ltd. | 283,100 | 6,292 | |
Kagome Co. Ltd. | 221,800 | 6,043 | |
Sumitomo Dainippon | |||
Pharma Co. Ltd. | 298,600 | 4,904 | |
Taisho Pharmaceutical | |||
Holdings Co. Ltd. | 37,700 | 3,102 | |
Japan Tobacco Inc. | 76,000 | 2,529 | |
Nitori Holdings Co. Ltd. | 19,100 | 2,485 | |
Otsuka Holdings Co. Ltd. | 47,200 | 2,174 |
13
Global Minimum Volatility Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
MOS Food Services Inc. | 60,500 | 1,896 |
NH Foods Ltd. | 58,000 | 1,653 |
Skylark Co. Ltd. | 93,400 | 1,413 |
Toho Co. Ltd. | 49,100 | 1,409 |
Sankyo Co. Ltd. | 40,300 | 1,406 |
Toyo Suisan Kaisha Ltd. | 36,000 | 1,352 |
Pigeon Corp. | 37,600 | 1,166 |
Shimamura Co. Ltd. | 8,200 | 1,122 |
Nissin Foods Holdings Co. | ||
Ltd. | 17,800 | 1,019 |
Rohto Pharmaceutical Co. | ||
Ltd. | 51,000 | 952 |
Coca-Cola Bottlers Japan Inc. | 31,700 | 945 |
Hisamitsu Pharmaceutical | ||
Co. Inc. | 17,100 | 875 |
Nisshin Seifun Group Inc. | 49,400 | 759 |
Earth Chemical Co. Ltd. | 13,200 | 715 |
COMSYS Holdings Corp. | 37,400 | 712 |
Nichirei Corp. | 26,800 | 667 |
Kamigumi Co. Ltd. | 72,000 | 654 |
Kura Corp. | 15,800 | 651 |
Studio Alice Co. Ltd. | 28,500 | 604 |
ABC-Mart Inc. | 9,600 | 534 |
Ito En Ltd. | 13,700 | 497 |
Ci:z Holdings Co. Ltd. | 9,400 | 276 |
89,193 | ||
Mexico (0.7%) | ||
Fomento Economico | ||
Mexicano SAB de CV ADR | 127,801 | 11,507 |
Grupo Televisa SAB ADR | 69,038 | 1,678 |
Coca-Cola Femsa SAB de | ||
CV ADR | 4,988 | 363 |
13,548 | ||
New Zealand (0.1%) | ||
Spark New Zealand Ltd. | 791,611 | 2,006 |
Fletcher Building Ltd. | 93,478 | 549 |
2,555 | ||
Norway (0.5%) | ||
* Orkla ASA | 778,339 | 7,062 |
Norsk Hydro ASA | 259,738 | 1,480 |
8,542 | ||
Russia (0.6%) | ||
Novatek PJSC GDR | 50,176 | 6,075 |
MMC Norilsk Nickel PJSC | ||
ADR | 203,582 | 3,127 |
Lukoil PJSC ADR | 23,115 | 1,147 |
10,349 | ||
Singapore (0.9%) | ||
Oversea-Chinese Banking | ||
Corp. Ltd. | 1,025,748 | 7,184 |
United Overseas Bank Ltd. | 325,100 | 5,062 |
Singapore Airlines Ltd. | 350,200 | 2,565 |
Singapore Exchange Ltd. | 121,900 | 646 |
* | CapitaLand Ltd. | 235,700 | 633 |
Singapore Press Holdings | |||
Ltd. | 63,100 | 157 | |
16,247 | |||
South Korea (3.2%) | |||
SK Telecom Co. Ltd. | 80,629 | 17,020 | |
KT Corp. | 510,114 | 14,433 | |
Korea Zinc Co. Ltd. | 19,465 | 7,276 | |
S-Oil Corp. | 43,048 | 3,766 | |
GS Holdings Corp. | 45,783 | 2,383 | |
NAVER Corp. | 2,631 | 1,849 | |
KT&G Corp. | 16,973 | 1,514 | |
Samsung Electronics Co. | |||
Ltd. Preference Shares | 975 | 1,501 | |
SK Innovation Co. Ltd. | 9,265 | 1,390 | |
Kangwon Land Inc. | 42,410 | 1,347 | |
Woori Bank | 91,034 | 1,194 | |
Samsung Fire & Marine | |||
Insurance Co. Ltd. | 3,878 | 913 | |
Macquarie Korea | |||
Infrastructure Fund | 106,880 | 810 | |
Samsung SDS Co. Ltd. | 5,565 | 672 | |
Ahnlab Inc. | 10,261 | 654 | |
Hyundai Department Store | |||
Co. Ltd. | 6,499 | 617 | |
Kakao Corp. | 7,311 | 580 | |
Yuhan Corp. | 2,683 | 547 | |
POSCO | 1,415 | 334 | |
Kolon Life Science Inc. | 2,149 | 266 | |
59,066 | |||
Spain (0.2%) | |||
Endesa SA | 146,794 | 3,457 | |
Viscofan SA | 9,941 | 594 | |
Ebro Foods SA | 17,809 | 398 | |
4,449 | |||
Sweden (1.2%) | |||
Swedish Match AB | 418,420 | 13,798 | |
* | Svenska Cellulosa AB SCA | ||
Class B | 174,354 | 5,772 | |
Tele2 AB | 133,241 | 1,341 | |
* | ICA Gruppen AB | 16,419 | 560 |
* | Saab AB Class B | 10,484 | 520 |
Oriflame Holding AG | 6,800 | 279 | |
22,270 | |||
Switzerland (5.5%) | |||
* | Swisscom AG | 44,723 | 19,503 |
Sonova Holding AG | 113,003 | 16,710 | |
Logitech International SA | 494,372 | 16,523 | |
Kuehne & Nagel | |||
International AG | 108,640 | 16,430 | |
Baloise Holding AG | 54,703 | 8,021 | |
* | Straumann Holding AG | 8,978 | 4,739 |
Partners Group Holding AG | 6,057 | 3,662 | |
dormakaba Holding AG | 3,594 | 3,080 |
14
Global Minimum Volatility Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
* | Swiss Prime Site AG | 35,518 | 3,079 |
* | Flughafen Zuerich AG | 12,226 | 2,694 |
* | Chocoladefabriken Lindt & | ||
Spruengli AG | 311 | 1,749 | |
* | Allreal Holding AG | 9,242 | 1,590 |
* | Siegfried Holding AG | 3,851 | 1,101 |
EMS-Chemie Holding AG | 958 | 600 | |
* | Dufry AG | 3,374 | 553 |
*,3 | VAT Group AG | 3,574 | 459 |
100,493 | |||
Taiwan (1.4%) | |||
2 | Taiwan Semiconductor | ||
Manufacturing Co. | |||
Ltd. ADR | 511,827 | 16,926 | |
Chunghwa Telecom Co. | |||
Ltd. ADR | 217,730 | 7,368 | |
United Microelectronics | |||
Corp. ADR | 649,400 | 1,260 | |
25,554 | |||
United Kingdom (4.1%) | |||
GlaxoSmithKline plc | 1,263,425 | 25,430 | |
Coca-Cola HBC AG | 182,969 | 5,076 | |
Tate & Lyle plc | 511,924 | 5,020 | |
Smith & Nephew plc | 290,479 | 4,772 | |
UBM plc | 386,601 | 3,556 | |
Kingfisher plc | 801,746 | 3,547 | |
3 | Merlin Entertainments plc | 532,359 | 3,484 |
RSA Insurance Group plc | 367,361 | 2,834 | |
Wm Morrison | |||
Supermarkets plc | 786,444 | 2,443 | |
Inchcape plc | 208,142 | 2,303 | |
Reckitt Benckiser Group | |||
plc | 19,275 | 1,776 | |
RPC Group plc | 166,608 | 1,750 | |
Melrose Industries plc | 472,112 | 1,445 | |
SSE plc | 79,867 | 1,439 | |
Croda International plc | 25,289 | 1,233 | |
DCC plc | 12,780 | 1,180 | |
DS Smith plc | 193,018 | 1,079 | |
Ultra Electronics Holdings | |||
plc | 39,692 | 1,074 | |
UK Commercial Property | |||
Trust Ltd. | 899,207 | 1,033 | |
National Grid plc | 70,288 | 910 | |
F&C Commercial Property | |||
Trust Ltd. | 434,498 | 854 | |
Meggitt plc | 126,346 | 757 | |
* | IWG plc | 175,484 | 738 |
Indivior plc | 156,397 | 679 | |
Saga plc | 229,498 | 623 | |
B&M European Value | |||
Retail SA | 140,000 | 611 | |
3 | Worldpay Group plc | 144,058 | 560 |
76,206 |
United States (51.2%) | |||
Consumer Discretionary (5.2%) | |||
* | Yum China Holdings Inc. | 434,157 | 14,813 |
Ross Stores Inc. | 211,605 | 13,754 | |
Pool Corp. | 84,362 | 10,091 | |
Service Corp. International | 271,965 | 8,763 | |
TJX Cos. Inc. | 100,000 | 7,864 | |
McDonald’s Corp. | 50,000 | 6,997 | |
Genuine Parts Co. | 71,939 | 6,620 | |
* | Madison Square Garden Co. | ||
Class A | 23,169 | 4,675 | |
* | Grand Canyon Education Inc. | 49,521 | 3,722 |
Cable One Inc. | 4,132 | 2,817 | |
Churchill Downs Inc. | 16,038 | 2,675 | |
* | Liberty Broadband Corp. | 28,337 | 2,583 |
Aramark | 49,999 | 1,826 | |
* | O’Reilly Automotive Inc. | 7,200 | 1,787 |
Vail Resorts Inc. | 8,163 | 1,613 | |
ILG Inc. | 62,570 | 1,509 | |
* | ServiceMaster Global | ||
Holdings Inc. | 34,612 | 1,319 | |
Choice Hotels International | |||
Inc. | 13,846 | 868 | |
John Wiley & Sons Inc. | |||
Class A | 14,755 | 778 | |
95,074 | |||
Consumer Staples (6.5%) | |||
Clorox Co. | 165,989 | 22,191 | |
Church & Dwight Co. Inc. | 429,082 | 21,252 | |
Altria Group Inc. | 223,245 | 16,025 | |
Vector Group Ltd. | 668,791 | 14,526 | |
^ | Spectrum Brands Holdings | ||
Inc. | 74,923 | 10,769 | |
Colgate-Palmolive Co. | 146,189 | 10,531 | |
Kimberly-Clark Corp. | 66,329 | 8,606 | |
Hershey Co. | 33,995 | 3,678 | |
Philip Morris International Inc. | 31,600 | 3,503 | |
Lancaster Colony Corp. | 26,126 | 3,289 | |
* | HRG Group Inc. | 134,992 | 2,701 |
Energizer Holdings Inc. | 22,230 | 1,317 | |
Sysco Corp. | 11,659 | 616 | |
J&J Snack Foods Corp. | 4,400 | 592 | |
McCormick & Co. Inc. | 5,400 | 540 | |
National Beverage Corp. | 5,257 | 466 | |
120,602 | |||
Energy (0.0%) | |||
Cosan Ltd. | 101,446 | 780 | |
Financials (9.0%) | |||
RenaissanceRe Holdings | |||
Ltd. | 194,300 | 27,624 | |
Starwood Property Trust | |||
Inc. | 1,024,896 | 23,255 | |
Washington Federal Inc. | 431,701 | 14,548 | |
Brown & Brown Inc. | 226,200 | 9,704 |
15
Global Minimum Volatility Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Chimera Investment Corp. | 453,330 | 9,230 | |
ProAssurance Corp. | 132,894 | 8,226 | |
Beneficial Bancorp Inc. | 433,982 | 6,944 | |
Capitol Federal Financial Inc. | 455,900 | 6,670 | |
Arthur J Gallagher & Co. | 107,283 | 5,987 | |
2 | Two Harbors Investment | ||
Corp. | 579,408 | 5,788 | |
* | Essent Group Ltd. | 150,286 | 5,562 |
Blackstone Mortgage Trust | |||
Inc. Class A | 174,653 | 5,393 | |
Marsh & McLennan Cos. | |||
Inc. | 61,079 | 4,528 | |
TFS Financial Corp. | 219,700 | 3,634 | |
* | Arch Capital Group Ltd. | 36,803 | 3,569 |
Oritani Financial Corp. | 206,400 | 3,499 | |
MFA Financial Inc. | 418,444 | 3,477 | |
Torchmark Corp. | 42,665 | 3,273 | |
New Residential | |||
Investment Corp. | 196,110 | 3,269 | |
Capstead Mortgage Corp. | 241,849 | 2,694 | |
American Financial Group | |||
Inc. | 23,331 | 2,270 | |
Northwest Bancshares Inc. | 128,863 | 2,080 | |
Axis Capital Holdings Ltd. | 25,360 | 1,671 | |
Annaly Capital Management | |||
Inc. | 108,600 | 1,283 | |
White Mountains Insurance | |||
Group Ltd. | 1,126 | 967 | |
Safety Insurance Group Inc. | 6,600 | 478 | |
Dime Community | |||
Bancshares Inc. | 9,562 | 186 | |
165,809 | |||
Health Care (6.4%) | |||
Johnson & Johnson | 212,118 | 26,190 | |
Owens & Minor Inc. | 481,544 | 16,686 | |
Quest Diagnostics Inc. | 114,371 | 12,067 | |
* | Masimo Corp. | 107,020 | 10,995 |
Chemed Corp. | 52,377 | 10,548 | |
Pfizer Inc. | 220,000 | 7,462 | |
Zoetis Inc. | 132,790 | 7,451 | |
* | Henry Schein Inc. | 32,476 | 5,644 |
* | WellCare Health Plans Inc. | 22,895 | 3,512 |
Danaher Corp. | 36,900 | 3,075 | |
* | Prestige Brands Holdings | ||
Inc. | 48,327 | 2,774 | |
* | Premier Inc. Class A | 62,174 | 2,102 |
* | Laboratory Corp. of America | ||
Holdings | 14,634 | 2,051 | |
Patterson Cos. Inc. | 44,952 | 2,000 | |
* | Varian Medical Systems Inc. | 20,456 | 1,856 |
West Pharmaceutical | |||
Services Inc. | 14,204 | 1,307 | |
* | Bio-Rad Laboratories Inc. | ||
Class A | 5,785 | 1,263 | |
* | Intuitive Surgical Inc. | 1,242 | 1,038 |
^,* | Taro Pharmaceutical | ||
Industries Ltd. | 3,078 | 360 | |
118,381 | |||
Industrials (8.8%) | |||
Waste Management Inc. | 366,593 | 26,681 | |
Expeditors International of | |||
Washington Inc. | 457,904 | 25,684 | |
Republic Services Inc. | |||
Class A | 244,137 | 15,378 | |
3M Co. | 69,100 | 13,532 | |
L3 Technologies Inc. | 78,471 | 13,479 | |
CH Robinson Worldwide Inc. | 127,208 | 9,248 | |
Carlisle Cos. Inc. | 78,206 | 7,929 | |
Northrop Grumman Corp. | 32,074 | 7,889 | |
Rollins Inc. | 194,918 | 7,569 | |
BWX Technologies Inc. | 137,363 | 6,754 | |
* | Copart Inc. | 164,838 | 5,093 |
General Dynamics Corp. | 20,100 | 3,895 | |
United Parcel Service Inc. | |||
Class B | 36,069 | 3,876 | |
Lockheed Martin Corp. | 11,992 | 3,231 | |
Healthcare Services Group | |||
Inc. | 62,724 | 2,880 | |
Cintas Corp. | 22,330 | 2,735 | |
* | Teledyne Technologies Inc. | 17,400 | 2,346 |
National Presto Industries Inc. | 17,011 | 1,775 | |
UniFirst Corp. | 5,821 | 810 | |
Raytheon Co. | 4,852 | 753 | |
161,537 | |||
Information Technology (7.2%) | |||
Jack Henry & Associates | |||
Inc. | 287,181 | 27,834 | |
Amdocs Ltd. | 329,957 | 20,207 | |
Paychex Inc. | 288,625 | 17,110 | |
Harris Corp. | 108,243 | 12,111 | |
Broadridge Financial | |||
Solutions Inc. | 148,843 | 10,410 | |
Automatic Data Processing | |||
Inc. | 82,766 | 8,648 | |
Amphenol Corp. Class A | 82,408 | 5,959 | |
Motorola Solutions Inc. | 68,600 | 5,898 | |
* | Synopsys Inc. | 67,688 | 4,989 |
* | Yandex NV Class A | 178,635 | 4,870 |
Dolby Laboratories Inc. | |||
Class A | 50,032 | 2,638 | |
* | Check Point Software | ||
Technologies Ltd. | 15,940 | 1,658 | |
FLIR Systems Inc. | 44,302 | 1,627 | |
Science Applications | |||
International Corp. | 20,701 | 1,511 | |
Genpact Ltd. | 60,068 | 1,467 | |
* | CACI International Inc. | ||
Class A | 10,507 | 1,240 | |
* | Euronet Worldwide Inc. | 14,105 | 1,165 |
16
Global Minimum Volatility Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
* | Itron Inc. | 13,161 | 853 |
DST Systems Inc. | 6,080 | 749 | |
InterDigital Inc. | 7,425 | 667 | |
National Instruments Corp. | 19,000 | 663 | |
* | ExlService Holdings Inc. | 10,846 | 517 |
132,791 | |||
Materials (2.6%) | |||
AptarGroup Inc. | 185,036 | 14,858 | |
Kaiser Aluminum Corp. | 160,745 | 13,569 | |
Sonoco Products Co. | 186,390 | 9,750 | |
^ | Compass Minerals | ||
International Inc. | 131,154 | 8,656 | |
Silgan Holdings Inc. | 16,625 | 1,008 | |
47,841 | |||
Real Estate (2.3%) | |||
* | Equity Commonwealth | 311,369 | 9,961 |
Lamar Advertising Co. | |||
Class A | 116,889 | 8,424 | |
Rayonier Inc. | 272,400 | 7,687 | |
PS Business Parks Inc. | 37,590 | 4,569 | |
EastGroup Properties Inc. | 28,937 | 2,264 | |
Apple Hospitality REIT Inc. | 88,150 | 1,651 | |
4 | Hudson Pacific Properties | ||
Inc. | 42,608 | 1,464 | |
Piedmont Office Realty Trust | |||
Inc. Class A | 65,614 | 1,434 | |
Empire State Realty Trust | |||
Inc. | 68,170 | 1,418 | |
Urstadt Biddle Properties Inc. | |||
Class A | 40,998 | 806 | |
Healthcare Trust of America | |||
Inc. Class A | 23,714 | 756 | |
Universal Health Realty | |||
Income Trust | 8,800 | 614 | |
Franklin Street Properties | |||
Corp. | 39,980 | 485 | |
41,533 | |||
Utilities (3.2%) | |||
Vectren Corp. | 213,286 | 12,673 | |
IDACORP Inc. | 147,196 | 12,441 | |
Portland General Electric Co. | 163,848 | 7,429 | |
Southern Co. | 133,667 | 6,657 | |
ALLETE Inc. | 89,988 | 6,291 | |
MDU Resources Group Inc. | 146,470 | 3,940 | |
NorthWestern Corp. | 54,051 | 3,231 | |
Avista Corp. | 77,012 | 3,107 | |
Ameren Corp. | 36,454 | 1,994 | |
OGE Energy Corp. | 28,179 | 980 | |
Hawaiian Electric Industries | |||
Inc. | 24,625 | 825 | |
59,568 | |||
943,916 | |||
Total Common Stocks | |||
(Cost $1,608,015) | 1,829,105 |
Temporary Cash Investments (3.8%)1 | ||
Money Market Fund (3.7%) | ||
5,6 Vanguard Market Liquidity | ||
Fund, 1.034% | 695,086 | 69,523 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.1%) | ||
United States Treasury Bill, | ||
0.571%, 5/4/17 | 200 | 200 |
United States Treasury Bill, | ||
0.638%, 8/24/17 | 1,000 | 997 |
1,197 | ||
Total Temporary Cash Investments | ||
(Cost $70,719) | 70,720 | |
Total Investments (103.1%) | ||
(Cost $1,678,734) | 1,899,825 | |
Other Assets and Liabilities (-3.1%) | ||
Other Assets | 15,835 | |
Liabilities 6 | (73,234) | |
(57,399) | ||
Net Assets (100%) | 1,842,426 | |
Amount | ||
($000) | ||
Statement of Assets and Liabilities | ||
Assets | ||
Investments in Securities, at Value | ||
Unaffiliated Issuers | 1,830,302 | |
Affiliated Vanguard Funds | 69,523 | |
Total Investments in Securities | 1,899,825 | |
Investment in Vanguard | 121 | |
Receivables for Investment Securities Sold | 638 | |
Receivables for Accrued Income | 3,329 | |
Receivables for Capital Shares Issued | 1,913 | |
Other Assets | 9,834 | |
Total Assets | 1,915,660 | |
Liabilities | ||
Payables for Investment Securities | ||
Purchased | 11,772 | |
Collateral for Securities on Loan | 47,679 | |
Payables for Capital Shares Redeemed | 1,272 | |
Payables to Vanguard | 517 | |
Other Liabilities | 11,994 | |
Total Liabilities | 73,234 | |
Net Assets | 1,842,426 |
17
Global Minimum Volatility Fund
At April 30, 2017, net assets consisted of:
Amount | |
($000) | |
Paid-in Capital | 1,625,376 |
Undistributed Net Investment Income | 7,883 |
Accumulated Net Realized Losses | (8,151) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 221,091 |
Futures Contracts | 84 |
Forward Currency Contracts | (3,786) |
Foreign Currencies | (71) |
Net Assets | 1,842,426 |
Investor Shares—Net Assets | |
Applicable to 37,705,705 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 481,568 |
Net Asset Value Per Share— | |
Investor Shares | $12.77 |
Admiral Shares—Net Assets | |
Applicable to 53,280,705 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 1,360,858 |
Net Asset Value Per Share— | |
Admiral Shares | $25.54 |
• 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 $44,314,000.
* 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 99.7% and 3.4%, respectively,
of net assets.
2 Securities with a value of $14,873,000 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, 2017, the aggregate value of these securities was $6,024,000,
representing 0.3% of net assets.
4 Securities with a value of $966,000 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 $47,679,000 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.
18
Global Minimum Volatility Fund | |
Statement of Operations | |
Six Months Ended | |
April 30, 2017 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 20,407 |
Interest2 | 56 |
Securities Lending—Net | 170 |
Total Income | 20,633 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 541 |
Management and Administrative—Investor Shares | 311 |
Management and Administrative—Admiral Shares | 484 |
Marketing and Distribution—Investor Shares | 55 |
Marketing and Distribution—Admiral Shares | 63 |
Custodian Fees | 88 |
Auditing Fees | 2 |
Shareholders’ Reports—Investor Shares | 13 |
Shareholders’ Reports—Admiral Shares | 19 |
Trustees’ Fees and Expenses | 1 |
Total Expenses | 1,577 |
Net Investment Income | 19,056 |
Realized Net Gain (Loss) | |
Investment Securities Sold2 | 5,317 |
Futures Contracts | 1,216 |
Foreign Currencies and Forward Currency Contracts | 6,397 |
Realized Net Gain (Loss) | 12,930 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 138,223 |
Futures Contracts | 25 |
Foreign Currencies and Forward Currency Contracts | (10,309) |
Change in Unrealized Appreciation (Depreciation) | 127,939 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 159,925 |
1 Dividends are net of foreign withholding taxes of $1,200,000.
2 Interest income and realized net gain (loss) from an affiliated company of the fund were $54,000 and $4,000, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
19
Global Minimum Volatility Fund | ||
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
April 30, | October 31, | |
2017 | 2016 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 19,056 | 40,055 |
Realized Net Gain (Loss) | 12,930 | (18,428) |
Change in Unrealized Appreciation (Depreciation) | 127,939 | 48,248 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 159,925 | 69,875 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (11,274) | (8,415) |
Admiral Shares | (32,305) | (15,208) |
Realized Capital Gain1 | ||
Investor Shares | — | (6,527) |
Admiral Shares | — | (11,326) |
Total Distributions | (43,579) | (41,476) |
Capital Share Transactions | ||
Investor Shares | 31,317 | (41,867) |
Admiral Shares | 123,785 | 376,134 |
Net Increase (Decrease) from Capital Share Transactions | 155,102 | 334,267 |
Total Increase (Decrease) | 271,448 | 362,666 |
Net Assets | ||
Beginning of Period | 1,570,978 | 1,208,312 |
End of Period2 | 1,842,426 | 1,570,978 |
1 Includes fiscal 2017 and 2016 short-term gain distributions totaling $0 and $2,919,000, 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 $7,883,000 and $32,307,000.
See accompanying Notes, which are an integral part of the Financial Statements.
20
Global Minimum Volatility Fund | ||||
Financial Highlights | ||||
Investor Shares | ||||
Six Months | Dec. 12, | |||
Year Ended | ||||
Ended | 20131 to | |||
Oct. 31, | ||||
April 30, | Oct. 31, | |||
For a Share Outstanding Throughout Each Period | 2017 | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $11.92 | $11.81 | $11.41 | $10.00 |
Investment Operations | ||||
Net Investment Income | .139 | . 293 | . 288 2 | .262 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.035 | .181 | .795 | 1.172 |
Total from Investment Operations | 1.174 | .474 | 1.083 | 1.434 |
Distributions | ||||
Dividends from Net Investment Income | (. 324) | (. 205) | (. 280) | (. 024) |
Distributions from Realized Capital Gains | — | (.159) | (.403) | — |
Total Distributions | (. 324) | (. 364) | (. 683) | (. 024) |
Net Asset Value, End of Period | $12.77 | $11.92 | $11.81 | $11.41 |
Total Return3 | 10.03% | 4.23% | 9.93% | 14.37% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $482 | $419 | $451 | $360 |
Ratio of Total Expenses to Average Net Assets | 0.25% | 0.25% | 0.27% | 0.30%4 |
Ratio of Net Investment Income to Average Net Assets | 2.22% | 2.63% | 2.52% | 3.18%4 |
Portfolio Turnover Rate | 47% | 58% | 57% | 49% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Calculated based on average shares outstanding. |
3 | Total returns do not include account service fees that may have applied in the 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.
21
Global Minimum Volatility Fund | ||||
Financial Highlights | ||||
Admiral Shares | ||||
Six Months | Dec. 12, | |||
Year Ended | ||||
Ended | 20131 to | |||
Oct. 31, | ||||
April 30, | Oct. 31, | |||
For a Share Outstanding Throughout Each Period | 2017 | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $23.86 | $23.62 | $22.83 | $20.00 |
Investment Operations | ||||
Net Investment Income | . 286 | . 608 | . 605 2 | .546 |
Net Realized and Unrealized Gain (Loss) on Investments | 2.067 | .377 | 1.576 | 2.332 |
Total from Investment Operations | 2.353 | .985 | 2.181 | 2.878 |
Distributions | ||||
Dividends from Net Investment Income | (. 673) | (. 427) | (. 585) | (. 048) |
Distributions from Realized Capital Gains | — | (.318) | (.806) | — |
Total Distributions | (.673) | (.745) | (1.391) | (.048) |
Net Asset Value, End of Period | $25.54 | $23.86 | $23.62 | $22.83 |
Total Return3 | 10.05% | 4.39% | 10.00% | 14.42% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $1,361 | $1,152 | $757 | $115 |
Ratio of Total Expenses to Average Net Assets | 0.17% | 0.17% | 0.21% | 0.20%4 |
Ratio of Net Investment Income to Average Net Assets | 2.30% | 2.71% | 2.58% | 3.28%4 |
Portfolio Turnover Rate | 47% | 58% | 57% | 49% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Calculated based on average shares outstanding. |
3 | Total returns do not include account service fees that may have applied in the 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.
22
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. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and
23
Global Minimum Volatility Fund
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 enters into forward currency contracts to protect the value of securities and related receivables and payables against changes in future foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
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 Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.
During the six months ended April 30, 2017, 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 45% 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, 2014–2016), and for the period ended April 30, 2017, 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.
24
Global Minimum Volatility Fund
6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2017, or at any time during the period then ended.
8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
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Global Minimum Volatility 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 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, 2017, the fund had contributed to Vanguard capital in the amount of $121,000, representing 0.01% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the market value of the fund’s investments as of April 30, 2017, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—International | 244,807 | 638,647 | 1,735 |
Common Stocks—United States | 943,916 | — | — |
Temporary Cash Investments | 69,523 | 1,197 | — |
Futures Contracts—Assets1 | 2 | — | — |
Futures Contracts—Liabilities1 | (29) | — | — |
Forward Currency Contracts—Assets | — | 3,752 | — |
Forward Currency Contracts—Liabilities | — | (7,538) | — |
Total | 1,258,219 | 636,058 | 1,735 |
1 Represents variation margin on the last day of the reporting period. |
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Global Minimum Volatility Fund
D. At April 30, 2017, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Statement of Assets and Liabilities Caption | ($000) | ($000) | ($000) |
Other Assets | 2 | 3,752 | 3,754 |
Other Liabilities | (29) | (7,538) | (7,567) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended April 30, 2017, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | 1,216 | — | 1,216 |
Forward Currency Contracts | — | 6,298 | 6,298 |
Realized Net Gain (Loss) on Derivatives | 1,216 | 6,298 | 7,514 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | 25 | — | 25 |
Forward Currency Contracts | — | (10,273) | (10,273) |
Change in Unrealized Appreciation (Depreciation) on Derivatives | 25 | (10,273) | (10,248) |
At April 30, 2017, 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 2017 | 36 | 4,285 | 15 |
S&P ASX 200 Index | June 2017 | 8 | 884 | 10 |
Topix Index | June 2017 | 5 | 686 | (6) |
FTSE 100 Index | June 2017 | 7 | 649 | (18) |
Dow Jones EURO STOXX 50 Index | June 2017 | 13 | 497 | 83 |
84 |
Unrealized appreciation (depreciation) on open E-mini S&P 500 Index, FTSE 100 Index, and Dow Jones EURO STOXX 50 Index futures contracts is required to be treated as realized gain (loss) for tax purposes.
27
Global Minimum Volatility Fund
At April 30, 2017, the fund had open forward currency contracts to receive and deliver currencies as follows. Unrealized appreciation (depreciation) on open forward currency contracts, except for Hong Kong dollar, Taiwanese dollar, Singapore dollar, Indonesian rupiah, and Danish krone contracts, is treated as realized gain (loss) for tax purposes.
Contract | Appreciation | |||||
Contract Amount (000) | ||||||
Settlement | (Depreciation) | |||||
Counterparty | Date | Receive | Deliver | ($000) | ||
BNP Paribas | 5/15/17 | USD | 114,349 | CAD | 153,185 | 2,106 |
Credit Suisse International | 5/15/17 | USD | 94,709 | CHF | 95,147 | (1,013) |
Deutsche Bank AG | 5/15/17 | USD | 90,209 | EUR | 84,810 | (2,248) |
BNP Paribas | 5/15/17 | USD | 87,749 | AUD | 116,850 | 277 |
Credit Suisse International | 5/15/17 | USD | 87,429 | JPY | 9,671,484 | 621 |
Credit Suisse International | 5/15/17 | USD | 64,594 | GBP | 52,028 | (2,824) |
Deutsche Bank AG | 5/15/17 | USD | 60,780 | HKD | 471,890 | 92 |
Deutsche Bank AG | 5/15/17 | USD | 58,351 | KRW | 66,217,782 | 147 |
Deutsche Bank AG | 5/15/17 | USD | 40,817 | INR | 2,641,260 | (146) |
Goldman Sachs International | 5/15/17 | USD | 27,927 | BRL | 88,001 | 315 |
Deutsche Bank AG | 5/15/17 | USD | 25,494 | TWD | 777,902 | (304) |
Deutsche Bank AG | 5/15/17 | USD | 19,922 | SEK | 180,168 | (436) |
Credit Suisse International | 5/15/17 | USD | 15,251 | SGD | 21,383 | (56) |
BNP Paribas | 5/15/17 | USD | 11,936 | MXN | 224,018 | 69 |
Deutsche Bank AG | 5/15/17 | USD | 11,055 | RUB | 636,004 | (78) |
BNP Paribas | 5/16/17 | USD | 8,852 | IDR | 118,362,591 | (12) |
Goldman Sachs International | 5/15/17 | USD | 8,216 | NOK | 70,903 | (43) |
Deutsche Bank AG | 5/15/17 | USD | 6,841 | GBP | 5,350 | (92) |
BNP Paribas | 5/15/17 | USD | 6,407 | ILS | 23,334 | (39) |
BNP Paribas | 5/15/17 | USD | 4,951 | DKK | 34,620 | (122) |
BNP Paribas | 5/15/17 | USD | 4,680 | CLP | 3,074,848 | 77 |
Goldman Sachs International | 5/15/17 | USD | 4,577 | EUR | 4,212 | (15) |
Goldman Sachs International | 5/15/17 | USD | 2,107 | MXN | 39,531 | 13 |
BNP Paribas | 5/15/17 | USD | 2,084 | GBP | 1,678 | (90) |
Goldman Sachs International | 5/15/17 | USD | 1,566 | JPY | 173,243 | 11 |
Goldman Sachs International | 5/15/17 | USD | 928 | NZD | 1,334 | 12 |
Goldman Sachs International | 5/15/17 | USD | 908 | SGD | 1,272 | (3) |
Goldman Sachs International | 5/15/17 | USD | 742 | SEK | 6,709 | (16) |
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Global Minimum Volatility Fund | ||||||
Contract | Appreciation | |||||
Contract Amount (000) | ||||||
Settlement | (Depreciation) | |||||
Counterparty | Date | Receive | Deliver | ($000) | ||
BNP Paribas | 5/15/17 | USD | 598 | NZD | 860 | 8 |
Deutsche Bank AG | 5/15/17 | USD | 253 | NOK | 2,185 | (1) |
Goldman Sachs International | 5/15/17 | USD | 239 | CAD | 320 | 4 |
(3,786) |
AUD—Australian dollar.
BRL—Brazilian real.
CAD—Canadian dollar.
CHF—Swiss franc.
CLP—Chilean peso.
DKK—Danish krone.
EUR—Euro.
GBP—British pound.
HKD—Hong Kong dollar.
IDR—Indonesian rupiah.
ILS—Israeli shekel.
INR—Indian rupee.
JPY—Japanese yen.
KRW—Korean won.
MXN—Mexican peso.
NOK—Norwegian krone.
NZD—New Zealand dollar.
RUB—Russian ruble.
SEK—Swedish krona.
SGD—Singapore dollar.
TWD—Taiwanese dollar.
USD—U.S. dollar.
At April 30, 2017, the counterparty had deposited in segregated accounts securities with a value of $2,500,000 in connection with open forward currency contracts.
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, 2017, the fund realized net foreign currency gains of $99,000, which increased distributable net income for tax purposes; accordingly, such gains have been reclassified from accumulated net realized losses to undistributed net investment income.
29
Global Minimum Volatility Fund
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, 2016, the fund had available capital losses totaling $14,548,000 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, 2017; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At April 30, 2017, the cost of investment securities for tax purposes was $1,680,802,000. Net unrealized appreciation of investment securities for tax purposes was $219,023,000, consisting of unrealized gains of $241,294,000 on securities that had risen in value since their purchase and $22,271,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended April 30, 2017, the fund purchased $523,164,000 of investment securities and sold $393,209,000 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, 2017 | October 31, 2016 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 90,443 | 7,353 | 214,536 | 18,493 |
Issued in Lieu of Cash Distributions | 10,598 | 886 | 14,502 | 1,302 |
Redeemed | (69,724) | (5,706) | (270,905) | (22,823) |
Net Increase (Decrease)—Investor Shares | 31,317 | 2,533 | (41,867) | (3,028) |
Admiral Shares | ||||
Issued | 293,215 | 11,943 | 705,818 | 30,468 |
Issued in Lieu of Cash Distributions | 28,030 | 1,172 | 23,214 | 1,042 |
Redeemed | (197,460) | (8,094) | (352,898) | (15,309) |
Net Increase (Decrease)—Admiral Shares | 123,785 | 5,021 | 376,134 | 16,201 |
H. Management has determined that no material events or transactions occurred subsequent to April 30, 2017, that would require recognition or disclosure in these financial statements.
30
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
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Six Months Ended April 30, 2017 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Global Minimum Volatility Fund | 10/31/2016 | 4/30/2017 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,100.33 | $1.30 |
Admiral Shares | 1,000.00 | 1,100.54 | 0.89 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,023.55 | $1.25 |
Admiral Shares | 1,000.00 | 1,023.95 | 0.85 |
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 0.25% for Investor Shares and 0.17% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).
32
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. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the 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 compared with a relevant benchmark and peer group. The board concluded that the performance was such that the advisory arrangement should continue. Information about the fund’s 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 expenses were 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.
33
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 fund assets increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
34
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.
35
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 197 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. 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
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years and Other Experience: Chairman of the Board of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group, since January 2010; Director of The Vanguard Group since 2008; Chief Executive Officer and President of The Vanguard Group, and of each of the investment companies served by The Vanguard Group, since 2008; Director of Vanguard Marketing Corporation; Managing Director of The Vanguard Group (1995–2008).
IndependentTrustees
Emerson U. Fullwood
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Executive Chief Staff and Marketing Officer for North America and Corporate Vice President (retired 2008) of Xerox Corporation (document management products and services); Executive in Residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology; Lead Director of SPX FLOW, Inc. (multi-industry manufacturing); Director of the United Way of Rochester, the University of Rochester Medical Center, Monroe Community College Foundation, North Carolina A&T University, and Roberts Wesleyan College.
Rajiv L. Gupta
Born 1945. Trustee Since December 2001.2 Principal Occupation(s) During the Past Five Years and Other Experience: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Arconic Inc. (diversified manufacturer), HP Inc. (printer and personal computer manufacturing), and Delphi Automotive plc (automotive components); Senior Advisor at New Mountain Capital.
Amy Gutmann
Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years and Other Experience: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and Professor of Communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania; Trustee of the National Constitution Center; Chair of the Presidential Commission for the Study of Bioethical Issues.
JoAnn Heffernan Heisen
Born 1950. Trustee Since July 1998. Principal Occupation(s) During the Past Five Years and Other Experience: Corporate Vice President and Member of the Executive Committee (1997–2008), Chief Global Diversity Officer (retired 2008), Vice President and Chief Information Officer (1997–2005), Controller (1995–1997), Treasurer (1991–1995), and Assistant Treasurer (1989–1991) 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
Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2009) of Cummins Inc. (industrial machinery); Chairman of the Board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education; Director of SKF AB (industrial machinery), Hyster-Yale Materials Handling, Inc. (forklift trucks), and the V Foundation for Cancer Research; Member of the Advisory Council for the College of Arts and Letters and Chair of the Advisory
Board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born 1953. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Senior Vice President and Chief Financial Officer (retired 2013) at IBM (information technology services); Fiduciary Member of IBM’s Retirement Plan Committee (2004–2013); Director of the Dow Chemical Company; Member of the Council on Chicago Booth.
Scott C. Malpass
Born 1962. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Chief Investment Officer and Vice President at the University of Notre Dame; Assistant Professor of Finance at the Mendoza College of Business at Notre Dame; Member of the Notre Dame 403(b) Investment Committee, the Board of Advisors for Spruceview Capital Partners, and the Investment Advisory Committee of Major League Baseball; Board Member of TIFF Advisory Services, Inc., and Catholic Investment Services, Inc. (investment advisors); Member of the Board of Superintendence of the Institute for the Works of Religion.
André F. Perold
Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years and Other Experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011); Chief Investment Officer and Co-Managing Partner of HighVista Strategies LLC (private investment firm); Overseer of the Museum of Fine Arts Boston.
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Chairman of the Board of Trustees of Colby-Sawyer College; Member of the Board of Hypertherm, Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born 1967. Investment Stewardship Officer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Treasurer (2015–2017), Controller (2010–2015), and Assistant Controller (2001–2010) of each of the investment companies served by The Vanguard Group.
Thomas J. Higgins
Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).
Peter Mahoney
Born 1974. Controller Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group; Head of International Fund Services at The Vanguard Group (2008–2014).
Anne E. Robinson
Born 1970. Secretary Since September 2016. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; General Counsel of The Vanguard Group; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Director and Senior Vice President of Vanguard Marketing Corporation; Managing Director and General Counsel of Global Cards and Consumer Services at Citigroup (2014–2016); Counsel at American Express (2003–2014).
Michael Rollings
Born 1963. Treasurer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group; Executive Vice President and Chief Financial Officer of MassMutual Financial Group (2006–2016).
Vanguard Senior Management Team
Mortimer J. Buckley John James Martha G. King John T. Marcante Chris D. McIsaac | James M. Norris Thomas M. Rampulla Glenn W. Reed Karin A. Risi |
Chairman Emeritus and Senior Advisor John J. Brennan
Chairman, 1996–2009
Chief Executive Officer and President, 1996–2008
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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This material may be used in conjunction | ||
with the offering of shares of any Vanguard | ||
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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 | ||
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You can review and copy information about your fund at | ||
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find out more about this public service, call the SEC at | ||
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© 2017 The Vanguard Group, Inc. | ||
All rights reserved. | ||
Vanguard Marketing Corporation, Distributor. | ||
Q11942 062017 |
Semiannual Report | April 30, 2017
Vanguard International Dividend Index Funds
Vanguard International Dividend Appreciation Index Fund
Vanguard International High Dividend Yield Index Fund
A new format, unwavering commitment
As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients.
Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period.
In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights.
We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information.
At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
Chairman’s Perspective. | 3 |
International Dividend Appreciation Index Fund. | 7 |
International High Dividend Yield Index Fund. | 27 |
About Your Fund’s Expenses. | 56 |
Trustees Approve Advisory Arrangements. | 58 |
Glossary. | 60 |
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: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown translated into seven languages, reflecting our expanding global presence.
Your Fund’s Performance at a Glance
• Vanguard International Dividend Appreciation Index Fund returned more than 9% for the six months ended April 30, 2017. The fund tracked its benchmark (+9.35%) but lagged the average return of its peers (+10.91%).
• Vanguard International High Dividend Yield Index Fund returned more than 11% over the period. The fund’s performance was in line with its benchmark’s (+11.45%) and better than the average return of its peers (+9.48%).
• By region, Europe posted the strongest return for both funds, thanks in part to outsized contributions from heavyweights France and Switzerland. For the International High Dividend Yield Index Fund, the United Kingdom was also a top contributor.
• By market sector, consumer goods, health care, and industrials contributed most to the International Dividend Appreciation Index Fund’s performance. For the International High Dividend Yield Index Fund, financials, industrials, and consumer goods contributed most.
Total Returns: Six Months Ended April 30, 2017 | |
Total | |
Returns | |
Vanguard International Dividend Appreciation Index Fund | |
Investor Shares | 9.27% |
ETF Shares | |
Market Price | 9.32 |
Net Asset Value | 9.35 |
Admiral™ Shares | 9.35 |
NASDAQ International Dividend Achievers Select Index | 9.35 |
International Large-Cap Core Funds Average | 10.91 |
International Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
1
Total | |
Returns | |
Vanguard International High Dividend Yield Index Fund | |
Investor Shares | 11.30% |
ETF Shares | |
Market Price | 11.45 |
Net Asset Value | 11.37 |
Admiral Shares | 11.38 |
FTSE All-World ex US High Dividend Yield Index | 11.45 |
International Equity Income Funds Average | 9.48 |
International Equity 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.
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% | 1.24% |
International High Dividend Yield Index Fund | 0.42 | 0.32 | 0.32 | 1.30 |
The fund expense ratios shown are from the prospectus dated February 23, 2017, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2017, the funds’ annualized expense ratios were: for the International Dividend Appreciation Index Fund, 0.35% for Investor Shares, 0.25% for ETF Shares, and 0.25% for Admiral Shares; and for the International High Dividend Yield Index Fund, 0.42% for Investor Shares, 0.32% for ETF Shares, and 0.32% 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 2016.
Peer groups: For the International Dividend Appreciation Index Fund, International Large-Cap Core Funds; for the International High Dividend Yield Index Fund, International Equity Income Funds.
2
Chairman’s Perspective
Bill McNabb
Chairman and Chief Executive Officer
Dear Shareholder,
“Buy what you know.”
It’s one of the adages of investing, and it has plenty of intuitive appeal. After all, the familiar seems inherently less risky. It’s no wonder that many investors heavily tilt their portfolios toward the stocks and bonds of their home country. This is known in investing parlance as “home bias.”
U.S. investors sometimes think they can get all the global diversification they need by owning shares of U.S.-based multinational companies. And that may seem like the best of both worlds: international diversification without ever leaving the friendly confines of home.
The potential pitfall is that, as Vanguard research has suggested, the performance of a company’s shares tends to be highly correlated to its domestic market, regardless of where that company conducts most of its business.
Americans aren’t alone in being portfolio homebodies. Vanguard has found that in a range of developed countries—Australia, Canada, Japan, and the United Kingdom, as well as the United States—investors held a greater percentage of domestic stocks than would be indicated if they had taken their cues from a globally diversified, market-weighted benchmark. (You can see this tendency in the chart later in this letter.)
3
Why home bias exists
Vanguard’s Investment Strategy Group identified a range of reasons why investors might not embrace global diversification, including concerns about currency risk and an expectation that their home country will deliver outsized returns.
One factor we identified—preference for the familiar—seems particularly relevant. With so much global uncertainty about geopolitics, monetary policy, and the economic outlook, it’s understandable why investors may not want to stray too far from home.
But in their aversion to the unknown, investors can end up increasing, rather than lessening, their risks. That’s
because they’re sacrificing broad global diversification—one of the best ways I know of to help control risk.
In many cases, individual country markets are much less diversified than the global market in total. Global investing, then, can be an answer for investors who want to reduce concentration risk. That can include overconcentration in a particular country, region, or industry.
And the good news is that global investing is easier than ever, thanks to the wide availability of low-cost, internationally diversified stock and bond funds. It’s possible, in a sense, to own the whole world with just a couple of funds.
Market Barometer | |||
Total Returns | |||
Periods Ended April 30, 2017 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.46% | 18.03% | 13.63% |
Russell 2000 Index (Small-caps) | 18.37 | 25.63 | 12.95 |
Russell 3000 Index (Broad U.S. market) | 13.83 | 18.58 | 13.57 |
FTSE All-World ex US Index (International) | 10.55 | 12.98 | 5.60 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -0.67% | 0.83% | 2.27% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | -0.34 | 0.14 | 3.16 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.23 | 0.37 | 0.11 |
CPI | |||
Consumer Price Index | 1.16% | 2.20% | 1.22% |
4
Expanding our opportunities
A key to overcoming home bias is reframing the way we look at investing outside our home countries. Take, for example, automakers or pharmaceutical companies. There are well-regarded firms in both industries located throughout the world. Over the next five years, nobody can know for sure whether a Japanese or U.S. or European company will produce a popular new sedan that outsells the competition or come up with new treatments to combat illness. So why not own them all? And that includes their bonds along with their stocks.
Full global diversification also allows you to capitalize on opportunities in both developed and emerging economies. Betting on which individual country—let alone company—will be the next market darling can be a fool’s errand.
A better choice can be to harness the potential of all markets. In my personal investment account, I have an emerging markets position that complements my developed-market holdings. Not only can global diversification help control risk, but it can also expand our set of opportunities among stocks and bonds.
Home bias shows investors across the world are fixated on the familiar
Investors often own a greater share of their home country’s stocks than would be indicated by the allocations of a globally diversified, market-capitalization-weighted index fund.
Global index weight
Investor holdings in domestic equities
Notes: Data as of December 31, 2014 (the latest available from the International Monetary Fund, or IMF), in U.S. dollars. Domestic investment is calculated by subtracting total foreign investment (as reported by the IMF) in a given country from its market capitalization in the MSCI All Country World Index. Given that the IMF data are voluntary, there may be some discrepancies between the market values in the survey and the MSCI ACWI.
Sources: Vanguard, based on data from the IMF’s Coordinated Portfolio Investment Survey (2014), Bloomberg, Thomson Reuters Datastream, and FactSet.
5
Ultimately, I believe we have the best chance for investment success by giving ourselves more opportunities, not fewer. Own the whole haystack and you never have to worry about finding the needle.
Thank you for entrusting your assets to Vanguard.
F. William McNabb III
Chairman and Chief Executive Officer May 12, 2017
6
International Dividend Appreciation Index Fund
Fund Profile | |||
As of April 30, 2017 | |||
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 | 244 | 241 | |
Median Market Cap | $50.0B | $50.0B | |
Price/Earnings Ratio | 26.4x | 26.3x | |
Price/Book Ratio | 2.8x | 2.8x | |
Return on Equity | 21.0% | 20.9% | |
Earnings Growth | |||
Rate | 7.9% | 7.8% | |
Dividend Yield | 2.4% | 2.4% | |
Turnover Rate | |||
(Annualized) | 27% | — | |
Short-Term Reserves | -0.5% | — |
Sector Diversification (% of equity exposure)
NASDAQ | ||
International | ||
Dividend | ||
Achievers | ||
Fund | Select Index | |
Basic Materials | 1.4% | 1.3% |
Consumer Goods | 19.6 | 19.7 |
Consumer Services | 9.3 | 9.3 |
Financials | 11.7 | 11.6 |
Health Care | 22.9 | 23.0 |
Industrials | 8.0 | 8.0 |
Oil & Gas | 6.7 | 6.7 |
Technology | 8.7 | 8.7 |
Telecommunications | 8.9 | 9.0 |
Utilities | 2.8 | 2.7 |
Ten Largest Holdings (% of total net assets)
Tencent Holdings Ltd. | Internet | 4.4% |
Roche Holding AG | Pharmaceuticals | 4.0 |
Nestle SA | Food Products | 3.9 |
Novartis AG | Pharmaceuticals | 3.7 |
Sanofi | Pharmaceuticals | 3.3 |
L'Oreal SA | Personal Products | 3.0 |
Unilever | Personal Products | 2.4 |
Nippon Telegraph & | Fixed Line | |
Telephone Corp. | Telecommunications | 2.4 |
Westpac Banking Corp. | Banks | 2.4 |
Naspers Ltd. | Broadcasting & | |
Entertainment | 2.3 | |
Top Ten | 31.8% |
The holdings listed exclude any temporary cash investments and equity index products.
Allocation by Region (% of equity exposure)
1 The expense ratios shown are from the prospectus dated February 23, 2017, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2017, the annualized expense ratios were 0.35% for Investor Shares, 0.25% for ETF Shares, and 0.25% for Admiral Shares.
7
International Dividend Appreciation Index Fund
Market Diversification (% of equity exposure)
NASDAQ | ||
International | ||
Dividend | ||
Achievers | ||
Fund Select Index | ||
Europe | ||
Switzerland | 15.7% | 15.8% |
France | 9.2 | 9.1 |
United Kingdom | 6.3 | 6.3 |
Netherlands | 3.0 | 3.0 |
Denmark | 2.9 | 3.0 |
Germany | 2.6 | 2.4 |
Sweden | 1.9 | 1.9 |
Belgium | 1.1 | 1.1 |
Spain | 1.1 | 1.1 |
Other | 1.6 | 1.7 |
Subtotal | 45.4% | 45.4% |
Pacific | ||
Japan | 11.1% | 11.0% |
Australia | 4.7 | 4.8 |
Hong Kong | 2.0 | 2.0 |
Other | 0.8 | 0.7 |
Subtotal | 18.6% | 18.5% |
Emerging Markets | ||
India | 9.4% | 9.6% |
China | 5.9 | 5.9 |
South Africa | 2.3 | 2.3 |
Mexico | 1.3 | 1.3 |
Other | 2.0 | 1.9 |
Subtotal | 20.9% | 21.0% |
North America | ||
Canada | 13.9% | 14.0% |
Other | 0.3 | 0.2 |
Subtotal | 14.2% | 14.2% |
Middle East | ||
Other | 0.9% | 0.9% |
8
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-Year Total Returns (%): February 25, 2016, Through April 30, 2017
Note: For 2017, performance data reflect the six months ended April 30, 2017.
Average Annual Total Returns: Periods Ended March 31, 2017
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 | 2/25/2016 | 8.33% | 14.79% |
Fee-Adjusted Returns | 7.79 | 14.27 | |
ETF Shares | 2/25/2016 | ||
Market Price | 8.20 | 15.12 | |
Net Asset Value | 8.41 | 14.90 | |
Admiral Shares | 3/2/2016 | 8.40 | 12.10 |
Fee-Adjusted Returns | 7.87 | 11.59 |
Vanguard fund returns are adjusted to reflect the 0.25% fee on purchases and redemptions. The fees do not apply to the ETF Shares. The Fiscal-Year Total Returns chart is not adjusted for fees.
See Financial Highlights for dividend and capital gains information.
9
International Dividend Appreciation Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of April 30, 2017
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 (98.6%)1 | |||
Australia (4.7%) | |||
Westpac Banking Corp. | 377,842 | 9,905 | |
CSL Ltd. | 51,318 | 5,089 | |
Ramsay Health Care Ltd. | 23,248 | 1,247 | |
REA Group Ltd. | 14,897 | 684 | |
Challenger Ltd. | 63,399 | 626 | |
SEEK Ltd. | 39,536 | 504 | |
Domino’s Pizza | |||
Enterprises Ltd. | 10,390 | 475 | |
TPG Telecom Ltd. | 93,884 | 414 | |
^ | Washington H Soul | ||
Pattinson & Co. Ltd. | 28,549 | 402 | |
InvoCare Ltd. | 12,258 | 134 | |
Retail Food Group Ltd. | 14,739 | 60 | |
Credit Corp. Group Ltd. | 3,952 | 54 | |
19,594 | |||
Belgium (1.1%) | |||
^ | Groupe Bruxelles | ||
Lambert SA | 18,033 | 1,730 | |
UCB SA | 21,807 | 1,702 | |
Ackermans & van | |||
Haaren NV | 3,667 | 600 | |
Sofina SA | 3,949 | 567 | |
4,599 | |||
Brazil (0.3%) | |||
Ultrapar Participacoes SA | 60,300 | 1,338 | |
Canada (13.9%) | |||
Enbridge Inc. | 183,670 | 7,613 | |
Canadian National | |||
Railway Co. | 85,712 | 6,196 | |
Suncor Energy Inc. | 187,446 | 5,874 | |
TransCanada Corp. | 96,955 | 4,502 | |
BCE Inc. | 97,550 | 4,441 | |
Canadian Natural | |||
Resources Ltd. | 125,014 | 3,982 | |
^ | Thomson Reuters Corp. | 81,105 | 3,686 |
Imperial Oil Ltd. | 94,888 | 2,760 |
TELUS Corp. | 65,957 | 2,195 | |
Fortis Inc. | 44,965 | 1,463 | |
Saputo Inc. | 43,469 | 1,429 | |
Franco-Nevada Corp. | 20,036 | 1,363 | |
Shaw Communications Inc. | |||
Class B | 54,423 | 1,154 | |
Intact Financial Corp. | 15,329 | 1,050 | |
Metro Inc. | 26,181 | 897 | |
Inter Pipeline Ltd. | 41,896 | 854 | |
CCL Industries Inc. Class B | 3,653 | 846 | |
^ | Emera Inc. | 23,829 | 825 |
SNC-Lavalin Group Inc. | 17,499 | 704 | |
Canadian Utilities Ltd. | |||
Class A | 21,539 | 621 | |
Keyera Corp. | 21,545 | 596 | |
CAE Inc. | 31,745 | 485 | |
Atco Ltd. | 11,250 | 409 | |
Ritchie Bros Auctioneers Inc. | 12,212 | 400 | |
Finning International Inc. | 20,542 | 391 | |
Toromont Industries Ltd. | 9,687 | 345 | |
Empire Co. Ltd. | 18,959 | 292 | |
Cogeco Communications Inc. | 4,786 | 274 | |
Stella-Jones Inc. | 8,638 | 274 | |
Corus Entertainment Inc. | |||
Class B | 24,656 | 242 | |
^ | Canadian Western Bank | 11,213 | 220 |
Laurentian Bank of Canada | 3,823 | 156 | |
Molson Coors Canada Inc. | |||
Class B | 1,538 | 148 | |
Jean Coutu Group PJC Inc. | |||
Class A | 8,209 | 134 | |
Transcontinental Inc. Class A | 6,966 | 124 | |
Richelieu Hardware Ltd. | 5,400 | 120 | |
Enghouse Systems Ltd. | 2,646 | 116 | |
Boyd Group Income Fund | 1,786 | 115 | |
Alaris Royalty Corp. | 3,500 | 56 | |
Gluskin Sheff & | |||
Associates Inc. | 4,206 | 52 | |
Cogeco Inc. | 1,000 | 50 |
10
International Dividend Appreciation Index Fund | ||||
Market | ||||
Value• | ||||
Shares | ($000) | |||
^ | Home Capital Group Inc. | |||
Class B | 6,687 | 39 | ||
High Liner Foods Inc. | 2,720 | 38 | ||
57,531 | ||||
China (5.9%) | ||||
Tencent Holdings Ltd. | 581,604 | 18,224 | ||
China Overseas Land & | ||||
Investment Ltd. | 1,230,000 | 3,568 | ||
China Gas Holdings Ltd. | 549,000 | 861 | ||
China Resources Gas | ||||
Group Ltd. | 250,000 | 842 | ||
China Everbright | ||||
International Ltd. | 522,000 | 705 | ||
Shanghai Lujiazui Finance | ||||
& Trade Zone Development | ||||
Co. Ltd. Class B | 91,740 | 146 | ||
24,346 | ||||
Colombia (0.3%) | ||||
Grupo de Inversiones | ||||
Suramericana SA | 48,619 | 643 | ||
Bancolombia SA ADR | 12,258 | 484 | ||
Bancolombia SA Preference | ||||
Shares | 4,617 | 45 | ||
Grupo de Inversiones | ||||
Suramericana SA | ||||
Preference Shares | 644 | 8 | ||
1,180 | ||||
Denmark (2.9%) | ||||
Novo Nordisk A/S Class B | 226,498 | 8,819 | ||
Coloplast A/S Class B | 22,379 | 1,916 | ||
Novozymes A/S | 28,949 | 1,250 | ||
11,985 | ||||
Finland (0.8%) | ||||
^ | Sampo Oyj Class A | 62,745 | 3,003 | |
Huhtamaki Oyj | 12,264 | 475 | ||
Raisio Oyj | 12,620 | 48 | ||
3,526 | ||||
France (9.0%) | ||||
Sanofi | 145,455 | 13,745 | ||
^ | L’Oreal SA | 62,929 | 12,532 | |
Hermes International | 11,853 | 5,667 | ||
Essilor International SA | 24,573 | 3,184 | ||
SEB SA | 5,860 | 944 | ||
Sartorius Stedim Biotech | 10,260 | 688 | ||
Rubis SCA | 5,159 | 524 | ||
IPSOS | 4,665 | 150 | ||
37,434 | ||||
Germany (2.4%) | ||||
Fresenius SE & Co. KGaA | 62,026 | 5,032 | ||
Fresenius Medical Care AG | ||||
& Co. KGaA | 34,618 | 3,073 | ||
Fielmann AG | 9,810 | 750 | ||
CTS Eventim AG & Co. KGaA | 11,657 | 449 |
Fuchs Petrolub SE | ||
Preference Shares | 8,454 | 436 |
AURELIUS Equity | ||
Opportunities | ||
SE & Co. KGaA | 3,824 | 189 |
BayWa AG | 3,672 | 134 |
Cewe Stiftung & Co. KGaA | 555 | 50 |
10,113 | ||
Hong Kong (1.9%) | ||
MTR Corp. Ltd. | 668,500 | 3,846 |
Hong Kong & China Gas | ||
Co. Ltd. | 1,426,600 | 2,850 |
Techtronic Industries | ||
Co. Ltd. | 208,500 | 895 |
Minth Group Ltd. | 135,000 | 501 |
8,092 | ||
India (9.3%) | ||
Tata Consultancy | ||
Services Ltd. | 218,756 | 7,724 |
HDFC Bank Ltd. ADR | 82,669 | 6,581 |
ITC Ltd. | 1,346,786 | 5,815 |
Housing Development | ||
Finance Corp. Ltd. | 176,136 | 4,205 |
Infosys Ltd. ADR | 238,931 | 3,479 |
Larsen & Toubro Ltd. | 103,601 | 2,817 |
Axis Bank Ltd. | 264,127 | 2,092 |
Asian Paints Ltd. | 105,242 | 1,834 |
IndusInd Bank Ltd. | 66,691 | 1,498 |
* Eicher Motors Ltd. | 3,000 | 1,214 |
LIC Housing Finance Ltd. | 57,234 | 595 |
Exide Industries Ltd. | 95,423 | 341 |
Reliance Infrastructure Ltd. | 30,189 | 280 |
Infosys Ltd. | 16,016 | 229 |
38,704 | ||
Ireland (0.6%) | ||
Kerry Group plc Class A | 19,959 | 1,632 |
Glanbia plc | 34,539 | 675 |
C&C Group plc | 29,559 | 122 |
2,429 | ||
Israel (0.9%) | ||
Teva Pharmaceutical | ||
Industries Ltd. | 115,039 | 3,648 |
Italy (0.1%) | ||
DiaSorin SPA | 6,404 | 480 |
Japan (10.9%) | ||
Nippon Telegraph & | ||
Telephone Corp. | 235,076 | 10,074 |
KDDI Corp. | 294,000 | 7,795 |
Bridgestone Corp. | 91,900 | 3,833 |
Asahi Group Holdings Ltd. | 54,900 | 2,074 |
Nitori Holdings Co. Ltd. | 13,200 | 1,717 |
Unicharm Corp. | 70,500 | 1,715 |
11
International Dividend Appreciation Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
West Japan Railway Co. | 23,000 | 1,537 | |
Sysmex Corp. | 24,500 | 1,492 | |
Daito Trust Construction | |||
Co. Ltd. | 9,700 | 1,427 | |
M3 Inc. | 38,100 | 974 | |
Sekisui Chemical Co. Ltd. | 55,400 | 930 | |
Lawson Inc. | 12,100 | 803 | |
Don Quijote Holdings | |||
Co. Ltd. | 17,500 | 638 | |
Sundrug Co. Ltd. | 16,600 | 582 | |
Otsuka Corp. | 10,600 | 568 | |
Rinnai Corp. | 6,700 | 557 | |
Kobayashi Pharmaceutical | |||
Co. Ltd. | 10,500 | 551 | |
Mitsubishi UFJ Lease & | |||
Finance Co. Ltd. | 104,300 | 545 | |
Shimamura Co. Ltd. | 3,500 | 479 | |
Tsuruha Holdings Inc. | 4,700 | 476 | |
Alfresa Holdings Corp. | 25,300 | 457 | |
Tokyo Century Corp. | 11,000 | 379 | |
Miraca Holdings Inc. | 8,200 | 378 | |
Kakaku.com Inc. | 24,000 | 346 | |
Kurita Water Industries Ltd. | 12,500 | 323 | |
Glory Ltd. | 9,400 | 316 | |
NHK Spring Co. Ltd. | 25,600 | 286 | |
Kaken Pharmaceutical | |||
Co. Ltd. | 4,600 | 273 | |
Relo Group Inc. | 16,400 | 269 | |
Aeon Delight Co. Ltd. | 8,300 | 253 | |
Yaoko Co. Ltd. | 5,900 | 229 | |
OSG Corp. | 10,100 | 208 | |
TS Tech Co. Ltd. | 7,600 | 200 | |
Sawai Pharmaceutical Co. Ltd. | 3,500 | 191 | |
SHO-BOND Holdings Co. Ltd. | 3,742 | 171 | |
Modec Inc. | 7,900 | 166 | |
Kissei Pharmaceutical Co. Ltd. | 6,300 | 164 | |
San-A Co. Ltd. | 3,500 | 159 | |
Fuyo General Lease Co. Ltd. | 3,400 | 159 | |
GMO Payment Gateway Inc. | 3,500 | 157 | |
Ci:z Holdings Co. Ltd. | 4,600 | 135 | |
NEC Networks & System | |||
Integration Corp. | 5,800 | 121 | |
Kobe Bussan Co. Ltd. | 3,200 | 118 | |
Keihin Corp. | 7,100 | 112 | |
Siix Corp. | 2,700 | 108 | |
F@N Communications Inc. | 11,000 | 88 | |
Hiday Hidaka Corp. | 4,000 | 84 | |
Tosho Co. Ltd. | 1,800 | 77 | |
Senko Group Holdings | |||
Co. Ltd. | 11,700 | 76 | |
Ricoh Leasing Co. Ltd. | 2,300 | 75 | |
Fukushima Industries Corp. | 1,900 | 67 | |
Elecom Co. Ltd. | 3,000 | 62 | |
Musashi Seimitsu Industry | |||
Co. Ltd. | 2,500 | 61 |
Hamakyorex Co. Ltd. | 2,700 | 57 |
Fujimori Kogyo Co. Ltd. | 1,200 | 38 |
Yellow Hat Ltd. | 1,500 | 34 |
Meiko Network Japan Co. Ltd. | 2,500 | 33 |
JP-Holdings Inc. | 6,800 | 19 |
Sanoh Industrial Co. Ltd. | 2,300 | 17 |
45,233 | ||
Mexico (1.3%) | ||
America Movil SAB de CV | 4,708,580 | 3,619 |
Grupo Financiero Inbursa | ||
SAB de CV | 757,880 | 1,280 |
Kimberly-Clark de Mexico | ||
SAB de CV Class A | 180,943 | 386 |
5,285 | ||
Morocco (0.2%) | ||
Attijariwafa Bank | 22,607 | 933 |
Netherlands (3.0%) | ||
Unilever NV | 192,896 | 10,105 |
RELX NV | 113,793 | 2,199 |
12,304 | ||
New Zealand (0.2%) | ||
Ryman Healthcare Ltd. | 61,748 | 366 |
* Port of Tauranga Ltd. | 72,042 | 203 |
Mainfreight Ltd. | 9,921 | 150 |
719 | ||
Norway (0.0%) | ||
Tomra Systems ASA | 15,527 | 180 |
Philippines (0.6%) | ||
SM Investments Corp. | 135,905 | 1,980 |
Jollibee Foods Corp. | 123,304 | 518 |
Manila Water Co. Inc. | 215,000 | 138 |
2,636 | ||
Poland (0.0%) | ||
Asseco Poland SA | 8,827 | 124 |
Singapore (0.1%) | ||
ComfortDelGro Corp. Ltd. | 236,800 | 464 |
South Africa (2.3%) | ||
Naspers Ltd. | 49,307 | 9,376 |
EOH Holdings Ltd. | 17,619 | 186 |
9,562 | ||
South Korea (0.4%) | ||
SK Holdings Co. Ltd. | 7,639 | 1,627 |
LEENO Industrial Inc. | 1,281 | 48 |
Eugene Technology Co. Ltd. | 1,872 | 28 |
1,703 | ||
Spain (1.1%) | ||
Abertis Infraestructuras SA | 112,542 | 1,978 |
Red Electrica Corp. SA | 62,164 | 1,212 |
Enagas SA | 27,815 | 731 |
12
International Dividend Appreciation Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Viscofan SA | 5,749 | 344 | |
Vidrala SA | 2,595 | 152 | |
4,417 | |||
Sweden (1.9%) | |||
Svenska Cellulosa AB SCA | |||
Class B | 71,218 | 2,358 | |
Telefonaktiebolaget LM | |||
Ericsson Class B | 345,513 | 2,245 | |
^ | Alfa Laval AB | 46,527 | 953 |
Castellum AB | 32,476 | 445 | |
Hufvudstaden AB Class A | 24,897 | 390 | |
^,* | Intrum Justitia AB | 8,909 | 354 |
AAK AB | 4,515 | 323 | |
Loomis AB Class B | 7,625 | 277 | |
Atrium Ljungberg AB | 14,212 | 235 | |
Modern Times Group MTG | |||
AB Class B | 6,449 | 210 | |
^ | Wihlborgs Fastigheter AB | 8,095 | 158 |
7,948 | |||
Switzerland (15.5%) | |||
Roche Holding AG | 63,384 | 16,585 | |
Nestle SA | 208,414 | 16,052 | |
Novartis AG | 197,964 | 15,240 | |
ABB Ltd. | 249,266 | 6,108 | |
Cie Financiere | |||
Richemont SA | 57,618 | 4,815 | |
Givaudan SA | 1,041 | 2,006 | |
Partners Group Holding AG | 2,999 | 1,813 | |
Galenica AG | 768 | 835 | |
Chocoladefabriken Lindt & | |||
Spruengli AG | 120 | 675 | |
VZ Holding AG | 871 | 242 | |
Implenia AG | 1,725 | 132 | |
64,503 | |||
Taiwan (0.3%) | |||
Foxconn Technology | |||
Co. Ltd. | 152,000 | 463 | |
Eclat Textile Co. Ltd. | 28,000 | 306 | |
Grape King Bio Ltd. | 25,000 | 161 | |
Kenda Rubber Industrial | |||
Co. Ltd. | 97,000 | 156 | |
Kerry TJ Logistics Co. Ltd. | 43,000 | 60 | |
1,146 | |||
Turkey (0.2%) | |||
BIM Birlesik Magazalar AS | 35,144 | 574 | |
* | Brisa Bridgestone Sabanci | ||
Sanayi ve Ticaret AS | 25,230 | 49 | |
623 | |||
United Kingdom (6.3%) | |||
Vodafone Group plc | 2,984,692 | 7,687 | |
Shire plc | 101,688 | 5,995 |
Associated British | |||
Foods plc | 88,677 | 3,229 | |
Experian plc | 106,753 | 2,296 | |
Smith & Nephew plc | 98,425 | 1,617 | |
Mondi plc | 40,226 | 1,041 | |
Micro Focus International plc | 25,240 | 846 | |
Hikma Pharmaceuticals plc | 27,377 | 687 | |
JD Sports Fashion plc | 111,090 | 641 | |
Rightmove plc | 10,809 | 586 | |
Inmarsat plc | 51,032 | 540 | |
John Wood Group plc | 43,971 | 432 | |
Abcam plc | 26,222 | 291 | |
Genus plc | 5,731 | 127 | |
26,015 | |||
United States (0.2%) | |||
* | Autoliv Inc. | 7,843 | 787 |
Total Common Stocks | |||
(Cost $389,413) | 409,581 | ||
Temporary Cash Investments (6.4%)1 | |||
Money Market Fund (6.0%) | |||
2,3 | Vanguard Market Liquidity | ||
Fund, 1.034% | 248,372 | 24,842 | |
Face | |||
Amount | |||
($000) | |||
U.S. Government and Agency Obligations (0.4%) | |||
4 | United States Treasury Bill, | ||
0.566%, 5/4/17 | 200 | 200 | |
4 | United States Treasury Bill, | ||
0.729%, 6/15/17 | 1,400 | 1,399 | |
4 | United States Treasury Bill, | ||
0.602%, 7/13/17 | 150 | 150 | |
4 | United States Treasury Bill, | ||
0.602%, 7/20/17 | 100 | 100 | |
1,849 | |||
Total Temporary Cash Investments | |||
(Cost $26,690) | 26,691 | ||
Total Investments (105.0%) | |||
(Cost $416,103) | 436,272 | ||
Other Assets and Liabilities (-5.0%) | |||
Other Assets | 2,827 | ||
Liabilities 3 | (23,779) | ||
(20,952) | |||
Net Assets (100%) | 415,320 |
13
International Dividend Appreciation Index Fund
Amount | |
($000) | |
Statement of Assets and Liabilities | |
Assets | |
Investments in Securities, at Value | |
Unaffiliated Issuers | 411,430 |
Affiliated Vanguard Funds | 24,842 |
Total Investments in Securities | 436,272 |
Investment in Vanguard | 25 |
Receivables for Accrued Income | 1,267 |
Receivables for Capital Shares Issued | 477 |
Other Assets | 1,058 |
Total Assets | 439,099 |
Liabilities | |
Payables for Investment Securities | |
Purchased | 22 |
Collateral for Securities on Loan | 23,341 |
Payables for Capital Shares Redeemed | 51 |
Payables to Vanguard | 72 |
Other Liabilities | 293 |
Total Liabilities | 23,779 |
Net Assets | 415,320 |
At April 30, 2017, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 394,579 |
Undistributed Net Investment Income | 1,467 |
Accumulated Net Realized Losses | (1,087) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 20,169 |
Futures Contracts | 97 |
Forward Currency Contracts | 90 |
Foreign Currencies | 5 |
Net Assets | 415,320 |
Amount | |
($000) | |
Investor Shares—Net Assets | |
Applicable to 350,630 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 8,287 |
Net Asset Value Per Share— | |
Investor Shares | $23.63 |
ETF Shares—Net Assets | |
Applicable to 5,161,861 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 304,917 |
Net Asset Value Per Share— | |
ETF Shares | $59.07 |
Admiral Shares—Net Assets | |
Applicable to 3,555,444 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 102,116 |
Net Asset Value Per Share— | |
Admiral Shares | $28.72 |
• See Note A in Notes to Financial Statements.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $16,913,000.
* 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 99.9% and 5.1%, respectively, of
net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is
the 7-day yield.
3 Includes $23,341,000 of collateral received for securities on loan.
4 Securities with a value of $370,000 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.
14
International Dividend Appreciation Index Fund | |
Statement of Operations | |
Six Months Ended | |
April 30, 2017 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 3,727 |
Interest2 | 7 |
Securities Lending—Net | 42 |
Total Income | 3,776 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 33 |
Management and Administrative—Investor Shares | 5 |
Management and Administrative—ETF Shares | 170 |
Management and Administrative—Admiral Shares | 71 |
Marketing and Distribution—Investor Shares | 1 |
Marketing and Distribution—ETF Shares | 7 |
Marketing and Distribution—Admiral Shares | 4 |
Custodian Fees | 63 |
Shareholders’ Reports—Investor Shares | 1 |
Shareholders’ Reports—ETF Shares | 4 |
Shareholders’ Reports—Admiral Shares | 4 |
Total Expenses | 363 |
Net Investment Income | 3,413 |
Realized Net Gain (Loss) | |
Investment Securities Sold2 | 4,128 |
Futures Contracts | 401 |
Foreign Currencies and Forward Currency Contracts | 18 |
Realized Net Gain (Loss) | 4,547 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 22,733 |
Futures Contracts | 103 |
Foreign Currencies and Forward Currency Contracts | 29 |
Change in Unrealized Appreciation (Depreciation) | 22,865 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 30,825 |
1 Dividends are net of foreign withholding taxes of $527,000.
2 Interest income and realized net gain (loss) from an affiliated company of the fund were $6,000 and $0, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
15
International Dividend Appreciation Index Fund | ||
Statement of Changes in Net Assets | ||
February 25, | ||
Six Months Ended | 20161 to | |
April 30, | October 31, | |
2017 | 2016 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 3,413 | 1,211 |
Realized Net Gain (Loss) | 4,547 | (533) |
Change in Unrealized Appreciation (Depreciation) | 22,865 | (2,504) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 30,825 | (1,826) |
Distributions | ||
Net Investment Income | ||
Investor Shares | (44) | (15) |
ETF Shares | (1,533) | (610) |
Admiral Shares | (607) | (213) |
Realized Capital Gain | ||
Investor Shares | — | — |
ETF Shares | — | — |
Admiral Shares | — | — |
Total Distributions | (2,184) | (838) |
Capital Share Transactions | ||
Investor Shares | 3,161 | 4,517 |
ETF Shares | 137,596 | 148,546 |
Admiral Shares | 17,360 | 78,163 |
Net Increase (Decrease) from Capital Share Transactions | 158,117 | 231,226 |
Total Increase (Decrease) | 186,758 | 228,562 |
Net Assets | ||
Beginning of Period | 228,562 | — |
End of Period2 | 415,320 | 228,562 |
1 | Inception. |
2 | Net Assets—End of Period includes undistributed (overdistributed) net investment income of $1,467,000 and $227,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
16
International Dividend Appreciation Index Fund | ||
Financial Highlights | ||
Investor Shares | ||
Six Months | Feb. 25, | |
Ended | 20161 to | |
April 30, | Oct. 31, | |
For a Share Outstanding Throughout Each Period | 2017 | 2016 |
Net Asset Value, Beginning of Period | $21.77 | $20.00 |
Investment Operations | ||
Net Investment Income | 0.240 2 | .2442 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.765 | 1.671 |
Total from Investment Operations | 2.005 | 1.915 |
Distributions | ||
Dividends from Net Investment Income | (.145) | (.145) |
Distributions from Realized Capital Gains | — | — |
Total Distributions | (.145) | (.145) |
Net Asset Value, End of Period | $23.63 | $21.77 |
Total Return3 | 9.27% | 9.57% |
Ratios/Supplemental Data | ||
Net Assets, End of Period (Millions) | $8 | $4 |
Ratio of Total Expenses to Average Net Assets | 0.35% | 0.35%4 |
Ratio of Net Investment Income to Average Net Assets | 2.27% | 1.50%4 |
Portfolio Turnover Rate 5 | 27% | 8% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Calculated based on average shares outstanding. |
3 | Total returns do not include 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.
17
International Dividend Appreciation Index Fund | ||
Financial Highlights | ||
ETF Shares | ||
Six Months | Feb. 25, | |
Ended | 20161 to | |
April 30, | Oct. 31, | |
For a Share Outstanding Throughout Each Period | 2017 | 2016 |
Net Asset Value, Beginning of Period | $54.43 | $50.00 |
Investment Operations | ||
Net Investment Income | 0.6612 | .662 2 |
Net Realized and Unrealized Gain (Loss) on Investments | 4.399 | 4.154 |
Total from Investment Operations | 5.060 | 4.816 |
Distributions | ||
Dividends from Net Investment Income | (.420) | (.386) |
Distributions from Realized Capital Gains | — | — |
Total Distributions | (. 420) | (. 386) |
Net Asset Value, End of Period | $59.07 | $54.43 |
Total Return | 9.35% | 9.64% |
Ratios/Supplemental Data | ||
Net Assets, End of Period (Millions) | $305 | $147 |
Ratio of Total Expenses to Average Net Assets | 0.25% | 0.25%3 |
Ratio of Net Investment Income to Average Net Assets | 2.37% | 1.60%3 |
Portfolio Turnover Rate 4 | 27% | 8% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Calculated based on average shares outstanding. |
3 | 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.
18
International Dividend Appreciation Index Fund | ||
Financial Highlights | ||
Admiral Shares | ||
Six Months | March 2, | |
Ended | 20161 to | |
April 30, | Oct. 31, | |
For a Share Outstanding Throughout Each Period | 2017 | 2016 |
Net Asset Value, Beginning of Period | $26.45 | $25.00 |
Investment Operations | ||
Net Investment Income | 0.293 2 | .2852 |
Net Realized and Unrealized Gain (Loss) on Investments | 2.164 | 1.352 |
Total from Investment Operations | 2.457 | 1.637 |
Distributions | ||
Dividends from Net Investment Income | (.187) | (.187) |
Distributions from Realized Capital Gains | — | — |
Total Distributions | (.187) | (.187) |
Net Asset Value, End of Period | $28.72 | $26.45 |
Total Return3 | 9.35% | 6.54% |
Ratios/Supplemental Data | ||
Net Assets, End of Period (Millions) | $102 | $77 |
Ratio of Total Expenses to Average Net Assets | 0.25% | 0.25%4 |
Ratio of Net Investment Income to Average Net Assets | 2.37% | 1.60%4 |
Portfolio Turnover Rate 5 | 27% | 8% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Calculated based on average shares outstanding. |
3 | Total returns do not include 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.
19
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 NYSE Arca; 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 are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, 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
20
International Dividend Appreciation 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 any open futures contracts. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The aggregate settlement values and notional amounts of the contracts are not recorded in the Statement of Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.
During the six months ended April 30, 2017, 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 4% 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 its open federal income tax year ended October 31, 2016, and for the period ended April 30, 2017, 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.
21
International Dividend Appreciation Index Fund
6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2017, or at any time during the period then ended.
8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. 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.
22
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, 2017, the fund had contributed to Vanguard capital in the amount of $25,000, representing 0.01% of the fund’s net assets and 0.01% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
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, 2017, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—North and South America | 65,334 | 787 | — |
Common Stocks—Other | 10,060 | 333,400 | — |
Temporary Cash Investments | 24,842 | 1,849 | — |
Futures Contracts—Assets1 | 10 | — | — |
Futures Contracts—Liabilities1 | (6) | — | — |
Forward Currency Contracts—Assets | — | 376 | — |
Forward Currency Contracts—Liabilities | — | (286) | — |
Total | 100,240 | 336,126 | — |
1 Represents variation margin on the last day of the reporting period. |
23
International Dividend Appreciation Index Fund
D. At April 30, 2017, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Statement of Assets and Liabilities Caption | ($000) | ($000) | ($000) |
Other Assets | 10 | 376 | 386 |
Other Liabilities | (6) | (286) | (292) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended April 30, 2017, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | 401 | — | 401 |
Forward Currency Contracts | — | (24) | (24) |
Realized Net Gain (Loss) on Derivatives | 401 | (24) | 377 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | 103 | — | 103 |
Forward Currency Contracts | — | 90 | 90 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | 103 | 90 | 193 |
At April 30, 2017, 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 2017 | 63 | 2,407 | 51 |
MSCI Emerging Market Index | June 2017 | 33 | 1,615 | 19 |
Topix Index | June 2017 | 7 | 961 | 27 |
E-mini S&P 500 Index | June 2017 | 4 | 476 | — |
97 |
Unrealized appreciation (depreciation) on open futures contracts, except for Topix Index, is required to be treated as realized gain (loss) for tax purposes.
24
International Dividend Appreciation Index Fund
At April 30, 2017, 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) | ||
Goldman Sachs International | 6/21/17 | EUR | 14,569 | USD | 15,686 | 226 |
Bank of America, N.A. | 6/13/17 | JPY | 794,070 | USD | 7,037 | 99 |
BNP Paribas | 6/21/17 | EUR | 1,299 | USD | 1,401 | 18 |
Goldman Sachs International | 6/13/17 | JPY | 89,055 | USD | 814 | (14) |
Bank of America, N.A. | 6/21/17 | EUR | 435 | USD | 466 | 9 |
BNP Paribas | 6/13/17 | JPY | 45,055 | USD | 410 | (5) |
Barclays Bank plc | 6/21/17 | EUR | 374 | USD | 398 | 11 |
Barclays Bank plc | 6/13/17 | JPY | 44,775 | USD | 394 | 8 |
Goldman Sachs International | 6/21/17 | EUR | 176 | USD | 193 | (1) |
Bank of America, N.A. | 6/13/17 | JPY | 15,175 | USD | 137 | — |
BNP Paribas | 6/13/17 | JPY | 1,484 | USD | 13 | — |
Bank of America, N.A. | 6/21/17 | USD | 14,053 | EUR | 13,024 | (173) |
Goldman Sachs International | 6/13/17 | USD | 7,074 | JPY | 794,070 | (62) |
Barclays Bank plc | 6/21/17 | USD | 1,124 | EUR | 1,038 | (10) |
BNP Paribas | 6/21/17 | USD | 1,095 | EUR | 1,022 | (21) |
Goldman Sachs International | 6/13/17 | USD | 680 | JPY | 75,225 | 4 |
Barclays Bank plc | 6/13/17 | USD | 137 | JPY | 15,150 | 1 |
90 | ||||||
EUR—Euro. | ||||||
JPY—Japanese yen. | ||||||
USD—U.S. dollar. |
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, 2017, the fund realized $5,236,000 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.
25
International Dividend Appreciation Index Fund
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at October 31, 2016, the fund had available capital losses of $393,000 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, 2017; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At April 30, 2017, the cost of investment securities for tax purposes was $416,286,000. Net unrealized appreciation of investment securities for tax purposes was $19,986,000, consisting of unrealized gains of $25,934,000 on securities that had risen in value since their purchase and $5,948,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended April 30, 2017, the fund purchased $225,495,000 of investment securities and sold $69,278,000 of investment securities, other than temporary cash investments. Purchases and sales include $112,293,000 and $30,237,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.
G. Capital share transactions for each class of shares were: | ||||
Six Months Ended | Year Ended | |||
April 30, 2017 | October 31, 2016 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares1 | ||||
Issued 2 | 5,301 | 243 | 6,530 | 295 |
Issued in Lieu of Cash Distributions | 42 | 2 | 14 | 1 |
Redeemed 3 | (2,182) | (100) | (2,027) | (91) |
Net Increase (Decrease)—Investor Shares | 3,161 | 145 | 4,517 | 205 |
ETF Shares1 | ||||
Issued 2 | 172,043 | 3,062 | 148,546 | 2,700 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed 3 | (34,447) | (600) | — | — |
Net Increase (Decrease)—ETF Shares | 137,596 | 2,462 | 148,546 | 2,700 |
Admiral Shares4 | ||||
Issued 2 | 38,670 | 1,463 | 84,631 | 3,156 |
Issued in Lieu of Cash Distributions | 495 | 19 | 163 | 6 |
Redeemed 3 | (21,805) | (842) | (6,631) | (246) |
Net Increase (Decrease)—Admiral Shares | 17,360 | 640 | 78,163 | 2,916 |
1 Inception was February 25, 2016, for Investor Shares and ETF Shares. | ||||
2 Includes purchase fees for fiscal 2017 and 2016 of $66,000 and $0, respectively (fund totals). | ||||
3 Net of redemption fees for fiscal 2017 and 2016 of $8,000 and $0, respectively (fund totals). | ||||
4 Inception was March 2, 2016, for Admiral Shares. |
H. Management has determined that no material events or transactions occurred subsequent to April 30, 2017, that would require recognition or disclosure in these financial statements.
26
International High Dividend Yield Index Fund
Fund Profile | |||
As of April 30, 2017 | |||
Share-Class Characteristics | |||
Investor | ETF | Admiral | |
Shares | Shares | Shares | |
Ticker Symbol | VIHIX | VYMI | VIHAX |
Expense Ratio1 | 0.42% | 0.32% | 0.32% |
Portfolio Characteristics | |||
FTSE | |||
All-World | |||
ex US High | |||
Dividend Yield | |||
Fund | Index | ||
Number of Stocks | 932 | 868 | |
Median Market Cap | $46.9B | $48.3B | |
Price/Earnings Ratio | 17.7x | 17.5x | |
Price/Book Ratio | 1.5x | 1.5x | |
Return on Equity | 13.7% | 13.7% | |
Earnings Growth | |||
Rate | 1.8% | 2.1% | |
Dividend Yield | 4.1% | 4.2% | |
Turnover Rate | |||
(Annualized) | 14% | — | |
Short-Term Reserves | 0.0% | — |
Sector Diversification (% of equity exposure)
FTSE | ||
All-World | ||
ex US High | ||
Dividend Yield | ||
Fund | Index | |
Basic Materials | 5.1% | 5.1% |
Consumer Goods | 12.7 | 12.7 |
Consumer Services | 4.9 | 5.0 |
Financials | 36.6 | 36.7 |
Health Care | 7.8 | 7.8 |
Industrials | 8.6 | 8.5 |
Oil & Gas | 9.5 | 9.5 |
Technology | 3.3 | 3.3 |
Telecommunications | 6.0 | 6.0 |
Utilities | 5.5 | 5.4 |
Ten Largest Holdings (% of total net assets)
Nestle SA | Food Products | 2.5% |
Royal Dutch Shell plc | Integrated Oil & Gas | 2.3 |
Roche Holding AG | Pharmaceuticals | 1.9 |
Novartis AG | Pharmaceuticals | 1.9 |
HSBC Holdings plc | Banks | 1.8 |
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. | Semiconductors | 1.6 |
Toyota Motor Corp. | Automobiles | 1.6 |
British American | ||
Tobacco plc | Tobacco | 1.3 |
Commonwealth Bank of | ||
Australia | Banks | 1.2 |
TOTAL SA | Integrated Oil & Gas | 1.2 |
Top Ten | 17.3% |
The holdings listed exclude any temporary cash investments and equity index products.
Allocation by Region (% of equity exposure)
1 The expense ratios shown are from the prospectus dated February 23, 2017, and represent estimated costs for the current fiscal year. For the six months ended April 30, 2017, the annualized expense ratios were 0.42% for Investor Shares, 0.32% for ETF Shares, and 0.32% 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 | 16.0% | 16.2% |
Switzerland | 9.7 | 9.7 |
France | 6.8 | 6.7 |
Germany | 6.6 | 6.6 |
Spain | 3.9 | 3.9 |
Italy | 2.4 | 2.4 |
Netherlands | 2.2 | 2.2 |
Sweden | 2.1 | 2.1 |
Belgium | 1.5 | 1.5 |
Finland | 1.4 | 1.4 |
Other | 1.4 | 1.4 |
Subtotal | 54.0% | 54.1% |
Pacific | ||
Australia | 8.6% | 8.6% |
Japan | 6.3 | 6.3 |
Hong Kong | 2.1 | 2.1 |
Singapore | 1.4 | 1.4 |
Other | 0.9 | 0.8 |
Subtotal | 19.3% | 19.2% |
Emerging Markets | ||
Taiwan | 5.2% | 5.2% |
China | 4.8 | 4.8 |
Brazil | 2.3 | 2.3 |
Russia | 1.6 | 1.6 |
South Africa | 1.5 | 1.5 |
Other | 3.9 | 3.9 |
Subtotal | 19.3% | 19.3% |
North America | ||
Canada | 6.9% | 6.9% |
Middle East | ||
Other | 0.5% | 0.5% |
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-Year Total Returns (%): February 25, 2016, Through April 30, 2017
Note: For 2017, performance data reflect the six months ended April 30, 2017.
Average Annual Total Returns: Periods Ended March 31, 2017
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 | 2/25/2016 | 15.18% | 22.06% |
Fee-Adjusted Returns | 14.61 | 21.51 | |
ETF Shares | 2/25/2016 | ||
Market Price | 15.33 | 22.70 | |
Net Asset Value | 15.31 | 22.21 | |
Admiral Shares | 3/2/2016 | 15.26 | 18.92 |
Fee-Adjusted Returns | 14.69 | 18.38 |
Vanguard fund returns are adjusted to reflect the 0.25% fee on purchases and redemptions. The fees do not apply to the ETF Shares. The Fiscal-Year Total Returns chart is not adjusted for fees.
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, 2017
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 (99.7%)1 | ||
Australia (8.6%) | ||
Commonwealth Bank of | ||
Australia | 74,353 | 4,856 |
Westpac Banking Corp. | 143,694 | 3,767 |
Australia & New Zealand | ||
Banking Group Ltd. | 125,641 | 3,076 |
National Australia Bank Ltd. | 113,202 | 2,873 |
BHP Billiton Ltd. | 137,976 | 2,457 |
Wesfarmers Ltd. | 48,492 | 1,561 |
Woolworths Ltd. | 55,544 | 1,117 |
Macquarie Group Ltd. | 13,395 | 931 |
Rio Tinto Ltd. | 18,206 | 824 |
Transurban Group | 88,283 | 807 |
Woodside Petroleum Ltd. | 31,643 | 762 |
Amcor Ltd. | 51,147 | 601 |
AGL Energy Ltd. | 29,004 | 581 |
Telstra Corp. Ltd. | 180,388 | 570 |
Suncorp Group Ltd. | 55,165 | 569 |
QBE Insurance Group Ltd. | 58,829 | 565 |
Brambles Ltd. | 66,526 | 515 |
AMP Ltd. | 123,633 | 495 |
South32 Ltd. | 224,481 | 465 |
Insurance Australia | ||
Group Ltd. | 99,841 | 463 |
Aurizon Holdings Ltd. | 83,341 | 321 |
APA Group | 46,740 | 321 |
James Hardie Industries plc | 18,679 | 316 |
ASX Ltd. | 8,180 | 310 |
LendLease Group | 23,973 | 288 |
Sonic Healthcare Ltd. | 17,381 | 287 |
Fortescue Metals Group Ltd. | 67,901 | 269 |
Sydney Airport | 48,855 | 252 |
Medibank Pvt Ltd. | 115,346 | 251 |
DUET Group | 109,902 | 248 |
Caltex Australia Ltd. | 10,897 | 243 |
Challenger Ltd. | 24,206 | 239 |
Boral Ltd. | 49,906 | 230 |
Orica Ltd. | 15,987 | 222 |
Incitec Pivot Ltd. | 74,370 | 211 | |
Tatts Group Ltd. | 57,941 | 186 | |
Bendigo & Adelaide | |||
Bank Ltd. | 19,494 | 179 | |
Bank of Queensland Ltd. | 19,217 | 172 | |
Coca-Cola Amatil Ltd. | 22,872 | 160 | |
Crown Resorts Ltd. | 16,032 | 150 | |
Alumina Ltd. | 105,114 | 144 | |
Tabcorp Holdings Ltd. | 37,814 | 134 | |
Magellan Financial Group Ltd. | 7,084 | 125 | |
Healthscope Ltd. | 73,821 | 122 | |
Qantas Airways Ltd. | 38,447 | 122 | |
Orora Ltd. | 52,959 | 119 | |
Downer EDI Ltd. | 26,868 | 118 | |
CIMIC Group Ltd. | 4,146 | 115 | |
AusNet Services | 85,868 | 113 | |
Adelaide Brighton Ltd. | 22,551 | 100 | |
Perpetual Ltd. | 2,522 | 100 | |
IOOF Holdings Ltd. | 13,112 | 86 | |
Macquarie Atlas Roads | |||
Group | 19,609 | 78 | |
DuluxGroup Ltd. | 14,679 | 74 | |
Fairfax Media Ltd. | 91,151 | 72 | |
CSR Ltd. | 19,554 | 72 | |
Harvey Norman | |||
Holdings Ltd. | 19,616 | 62 | |
* | Metcash Ltd. | 37,792 | 61 |
Sims Metal | |||
Management Ltd. | 6,372 | 59 | |
Vocus Group Ltd. | 22,983 | 58 | |
Flight Centre Travel | |||
Group Ltd. | 2,333 | 55 | |
Platinum Asset | |||
Management Ltd. | 9,395 | 33 | |
Seven West Media Ltd. | 45,570 | 25 | |
Computershare Ltd. | 394 | 4 | |
* | Origin Energy Ltd. | 26 | — |
34,761 |
30
International High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Austria (0.1%) | |||
Erste Group Bank AG | 12,091 | 433 | |
Vienna Insurance Group AG | |||
Wiener Versicherung Gruppe | 2,220 | 57 | |
OMV AG | 103 | 5 | |
495 | |||
Belgium (1.5%) | |||
^ | Anheuser-Busch InBev | ||
SA/NV | 34,346 | 3,873 | |
KBC Group NV | 11,876 | 858 | |
Solvay SA Class A | 2,989 | 380 | |
Ageas | 8,695 | 356 | |
^ | Groupe Bruxelles Lambert SA | 3,271 | 314 |
^ | Proximus SADP | 5,750 | 176 |
* | Telenet Group Holding NV | 2,050 | 125 |
bpost SA | 4,436 | 106 | |
6,188 | |||
Brazil (2.3%) | |||
Itau Unibanco Holding | |||
SA ADR | 92,959 | 1,143 | |
Ambev SA ADR | 142,352 | 816 | |
Banco Bradesco SA | |||
Preference Shares | 62,520 | 658 | |
Itau Unibanco Holding SA | |||
Preference Shares | 48,520 | 600 | |
* | Petroleo Brasileiro SA ADR | 60,773 | 531 |
BM&FBovespa SA - Bolsa | |||
de Valores Mercadorias | |||
e Futuros | 85,100 | 510 | |
Itausa - Investimentos Itau | |||
SA Preference Shares | 162,160 | 505 | |
Banco Bradesco SA | 49,263 | 505 | |
Banco Bradesco SA ADR | 36,241 | 382 | |
Banco do Brasil SA | 36,290 | 376 | |
Ultrapar Participacoes SA | 16,400 | 364 | |
Ambev SA | 62,100 | 357 | |
Kroton Educacional SA | 63,410 | 299 | |
BB Seguridade | |||
Participacoes SA | 24,900 | 234 | |
CCR SA | 41,163 | 230 | |
* | Petroleo Brasileiro SA | 48,200 | 218 |
Telefonica Brasil SA ADR | 12,707 | 188 | |
Banco Santander Brasil SA | 19,200 | 166 | |
Engie Brasil Energia SA | 12,900 | 138 | |
* | Cia de Saneamento Basico | ||
do Estado de Sao Paulo | 14,900 | 137 | |
Klabin SA | 23,400 | 116 | |
^ | CPFL Energia SA ADR | 6,164 | 100 |
BTG Pactual Group | 12,729 | 75 | |
Estacio Participacoes SA | 12,900 | 72 | |
* | Petroleo Brasileiro SA | ||
Preference Shares | 15,600 | 69 | |
Telefonica Brasil SA | |||
Preference Shares | 4,300 | 64 |
Smiles SA | 2,700 | 59 | |
* | Centrais Eletricas Brasileiras | ||
SA ADR | 7,511 | 52 | |
Cosan SA Industria e | |||
Comercio | 4,300 | 50 | |
Transmissora Alianca de | |||
Energia Eletrica SA | 6,800 | 49 | |
Cia Energetica de Minas | |||
Gerais ADR | 17,106 | 47 | |
EDP - Energias do Brasil SA | 10,950 | 46 | |
Braskem SA Preference | |||
Shares | 3,800 | 41 | |
Cia Energetica de Minas | |||
Gerais Preference Shares | 12,700 | 36 | |
Porto Seguro SA | 3,400 | 31 | |
Cia de Transmissao de | |||
Energia Eletrica Paulista | |||
Preference Shares | 1,502 | 29 | |
AES Tiete Energia SA | 6,421 | 27 | |
Multiplus SA | 1,900 | 23 | |
Braskem SA ADR | 990 | 21 | |
Centrais Eletricas Brasileiras | |||
SA Preference Shares | 2,600 | 19 | |
* | Cia Paranaense de Energia | 2,400 | 18 |
* | Cia Paranaense de Energia | ||
Preference Shares | 1,400 | 13 | |
Cia Energetica de | |||
Minas Gerais | 4,400 | 13 | |
Cia de Gas de Sao Paulo | |||
COMGAS Preference Shares | |||
Class A | 702 | 11 | |
CPFL Energia SA | 1,127 | 9 | |
* | Cia Paranaense de | ||
Energia ADR | 996 | 9 | |
* | Centrais Eletricas | ||
Brasileiras SA | 1,400 | 8 | |
Itausa - Investimentos | |||
Itau SA | 2,175 | 7 | |
Natura Cosmeticos SA | 100 | 1 | |
TOTVS SA | 100 | 1 | |
Sul America SA | 115 | 1 | |
JBS SA | 95 | — | |
9,474 | |||
Canada (6.9%) | |||
Royal Bank of Canada | 63,654 | 4,359 | |
Toronto-Dominion Bank | 79,408 | 3,736 | |
Enbridge Inc. | 69,680 | 2,888 | |
^ | Bank of Nova Scotia | 51,881 | 2,884 |
Bank of Montreal | 27,548 | 1,951 | |
TransCanada Corp. | 36,822 | 1,710 | |
Manulife Financial Corp. | 85,031 | 1,491 | |
Canadian Imperial Bank of | |||
Commerce | 17,197 | 1,389 | |
Sun Life Financial Inc. | 26,266 | 928 |
31
International High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Rogers Communications Inc. | |||
Class B | 15,585 | 715 | |
^ | Thomson Reuters Corp. | 13,779 | 626 |
BCE Inc. | 12,912 | 588 | |
National Bank of Canada | 15,108 | 587 | |
Fortis Inc. | 17,438 | 567 | |
Agrium Inc. | 5,962 | 559 | |
Pembina Pipeline Corp. | 16,910 | 539 | |
Shaw Communications Inc. | |||
Class B | 17,724 | 376 | |
Power Corp. of Canada | 15,786 | 366 | |
Great-West Lifeco Inc. | 12,438 | 335 | |
Inter Pipeline Ltd. | 15,711 | 320 | |
TELUS Corp. | 8,362 | 278 | |
Power Financial Corp. | 9,924 | 252 | |
Canadian Utilities Ltd. | |||
Class A | 7,981 | 230 | |
CI Financial Corp. | 9,518 | 186 | |
2 | Hydro One Ltd. | 7,500 | 132 |
IGM Financial Inc. | 4,085 | 123 | |
28,115 | |||
Chile (0.2%) | |||
Enel Americas SA ADR | 21,000 | 208 | |
Banco Santander Chile | |||
ADR | 6,717 | 159 | |
Banco de Chile | 1,053,281 | 127 | |
Enel Generacion Chile | |||
SA ADR | 4,948 | 114 | |
Enel Chile SA | 762,235 | 84 | |
Aguas Andinas SA Class A | 118,665 | 67 | |
Colbun SA | 272,287 | 60 | |
Enel Americas SA | 207,067 | 41 | |
AES Gener SA | 97,544 | 37 | |
Sociedad Quimica y Minera | |||
de Chile SA Preference | |||
Shares Class B | 3 | — | |
Banco de Credito e Inversiones 1 | — | ||
897 | |||
China (4.8%) | |||
China Construction Bank | |||
Corp. | 3,918,000 | 3,180 | |
China Mobile Ltd. | 229,000 | 2,438 | |
Industrial & Commercial | |||
Bank of China Ltd. | 3,145,000 | 2,050 | |
Bank of China Ltd. | 3,219,000 | 1,557 | |
China Petroleum & | |||
Chemical Corp. | 1,094,000 | 888 | |
CNOOC Ltd. | 712,000 | 831 | |
Agricultural Bank of | |||
China Ltd. | 1,186,000 | 547 | |
China Overseas Land & | |||
Investment Ltd. | 166,000 | 481 | |
China Merchants Bank | |||
Co. Ltd. | 160,500 | 416 |
China Shenhua Energy | |||
Co. Ltd. | 144,500 | 336 | |
PICC Property & Casualty | |||
Co. Ltd. | 200,000 | 322 | |
China Resources Land Ltd. | 114,000 | 316 | |
Country Garden Holdings | |||
Co. Ltd. | 292,000 | 278 | |
China Minsheng Banking | |||
Corp. Ltd. | 275,000 | 271 | |
Bank of Communications | |||
Co. Ltd. | 338,000 | 260 | |
Hengan International Group | |||
Co. Ltd. | 30,974 | 231 | |
China CITIC Bank Corp. Ltd. | 364,320 | 231 | |
Lenovo Group Ltd. | 296,000 | 189 | |
Guangdong Investment Ltd. | 120,000 | 186 | |
Belle International | |||
Holdings Ltd. | 260,000 | 176 | |
Shenzhou International | |||
Group Holdings Ltd. | 26,000 | 171 | |
China Evergrande Group | 159,000 | 170 | |
China Merchants Port | |||
Holdings Co. Ltd. | 56,000 | 160 | |
China Cinda Asset | |||
Management Co. Ltd. | 417,000 | 159 | |
Guangzhou Automobile | |||
Group Co. Ltd. | 98,000 | 152 | |
China Resources Power | |||
Holdings Co. Ltd. | 84,000 | 151 | |
Great Wall Motor Co. Ltd. | 137,000 | 148 | |
China Vanke Co. Ltd. | 55,000 | 139 | |
Huaneng Power | |||
International Inc. | 184,000 | 127 | |
*,2 | China Huarong Asset | ||
Management Co. Ltd. | 272,000 | 114 | |
ANTA Sports Products Ltd. | 40,000 | 112 | |
Beijing Enterprises | |||
Holdings Ltd. | 22,500 | 110 | |
Longfor Properties Co. Ltd. | 59,500 | 103 | |
Kingboard Chemical | |||
Holdings Ltd. | 28,500 | 103 | |
China Everbright Ltd. | 42,000 | 96 | |
Chongqing Rural Commercial | |||
Bank Co. Ltd. | 131,000 | 90 | |
COSCO SHIPPING Ports Ltd. | 80,000 | 88 | |
Sinopec Shanghai | |||
Petrochemical Co. Ltd. | 156,000 | 87 | |
Jiangsu Expressway Co. Ltd. | 58,000 | 86 | |
Far East Horizon Ltd. | 92,000 | 85 | |
Shimao Property | |||
Holdings Ltd. | 47,500 | 76 | |
Zhejiang Expressway | |||
Co. Ltd. | 58,000 | 72 | |
2 | Fuyao Glass Industry Group | ||
Co. Ltd. | 19,600 | 69 |
32
International High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Guangzhou R&F Properties | |||
Co. Ltd. | 37,600 | 63 | |
China Jinmao Holdings | |||
Group Ltd. | 194,000 | 63 | |
Shanghai Industrial | |||
Holdings Ltd. | 19,000 | 60 | |
China Everbright Bank | |||
Co. Ltd. | 128,000 | 60 | |
Chongqing Changan | |||
Automobile Co. Ltd. | |||
Class B | 44,900 | 59 | |
Sino-Ocean Group | |||
Holding Ltd. | 114,000 | 56 | |
2 | Sinopec Engineering | ||
Group Co. Ltd. | 56,500 | 55 | |
Shenzhen International | |||
Holdings Ltd. | 32,000 | 54 | |
Shenzhen Investment Ltd. | 118,000 | 53 | |
Kingboard Laminates | |||
Holdings Ltd. | 43,500 | 52 | |
2 | BAIC Motor Corp. Ltd. | 51,500 | 50 |
KWG Property Holding Ltd. | 64,500 | 49 | |
Agile Group Holdings Ltd. | 54,000 | 48 | |
China Power International | |||
Development Ltd. | 127,000 | 47 | |
2 | Dali Foods Group Co. Ltd. | 79,500 | 47 |
Sinotrans Ltd. | 98,000 | 44 | |
Huadian Fuxin Energy | |||
Corp. Ltd. | 190,000 | 44 | |
China Resources Cement | |||
Holdings Ltd. | 76,000 | 42 | |
Lee & Man Paper | |||
Manufacturing Ltd. | 53,000 | 42 | |
Yuexiu Property Co. Ltd. | 244,000 | 41 | |
China Hongqiao Group Ltd. | 45,000 | 41 | |
SOHO China Ltd. | 68,000 | 37 | |
Datang International Power | |||
Generation Co. Ltd. | 110,000 | 33 | |
Lao Feng Xiang Co. Ltd. | |||
Class B | 7,900 | 29 | |
China Dongxiang Group | |||
Co. Ltd. | 145,000 | 28 | |
Shenzhen Expressway | |||
Co. Ltd. | 28,000 | 26 | |
China Machinery | |||
Engineering Corp. | 33,000 | 25 | |
Huadian Power International | |||
Corp. Ltd. | 52,000 | 22 | |
CSG Holding Co. Ltd. | |||
Class B | 30,400 | 22 | |
China Zhongwang | |||
Holdings Ltd. | 46,800 | 21 |
Xinjiang Goldwind Science | |||
& Technology Co. Ltd. | 14,400 | 21 | |
Shandong Chenming Paper | |||
Holdings Ltd. Class B | 18,200 | 21 | |
Yantai Changyu Pioneer | |||
Wine Co. Ltd. Class B | 8,300 | 20 | |
Bosideng International | |||
Holdings Ltd. | 240,000 | 19 | |
2 | Red Star Macalline Group | ||
Corp. Ltd. | 17,400 | 19 | |
Beijing Jingneng Clean | |||
Energy Co. Ltd. | 60,000 | 18 | |
Xinhua Winshare Publishing | |||
and Media Co. Ltd. | 17,000 | 15 | |
Anhui Expressway Co. Ltd. | 18,000 | 14 | |
Guangdong Electric Power | |||
Development Co. Ltd. | |||
Class B | 31,400 | 14 | |
Weifu High-Technology | |||
Group Co. Ltd. Class B | 5,500 | 13 | |
China South City | |||
Holdings Ltd. | 58,000 | 11 | |
Jiangling Motors Corp. Ltd. | |||
Class B | 4,000 | 8 | |
Inner Mongolia Yitai Coal | |||
Co. Ltd. Class B | 100 | — | |
Haitong Securities Co. Ltd. | 1 | — | |
19,358 | |||
Colombia (0.1%) | |||
Bancolombia SA ADR | 4,327 | 171 | |
* | Ecopetrol SA ADR | 16,883 | 154 |
Interconexion Electrica | |||
SA ESP | 13,040 | 52 | |
Almacenes Exito SA | 8,813 | 46 | |
Grupo Aval Acciones y | |||
Valores Preference Shares | 72,995 | 29 | |
Grupo Aval Acciones y | |||
Valores SA ADR | 3,552 | 28 | |
* | Ecopetrol SA | 19,170 | 9 |
Bancolombia SA Preference | |||
Shares | 306 | 3 | |
492 | |||
Czech Republic (0.1%) | |||
Komercni banka as | 3,328 | 129 | |
CEZ AS | 6,969 | 122 | |
2 | Moneta Money Bank AS | 19,772 | 64 |
* | O2 Czech Republic AS | 1,912 | 22 |
337 | |||
Denmark (0.3%) | |||
Danske Bank A/S | 31,383 | 1,141 | |
Tryg A/S | 4,362 | 84 | |
TDC A/S | 6 | — | |
1,225 |
33
International High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Egypt (0.0%) | |||
* | Egyptian Financial | ||
Group-Hermes Holding Co. | 21,208 | 29 | |
ElSewedy Electric Co. | 4,115 | 18 | |
47 | |||
Finland (1.4%) | |||
Nokia Oyj | 245,428 | 1,403 | |
^ | Sampo Oyj Class A | 20,301 | 972 |
Kone Oyj Class B | 16,354 | 749 | |
UPM-Kymmene Oyj | 23,173 | 610 | |
^ | Stora Enso Oyj | 24,447 | 290 |
Fortum Oyj | 18,768 | 273 | |
Orion Oyj Class B | 4,302 | 247 | |
Nokian Renkaat Oyj | 5,646 | 243 | |
Elisa Oyj | 7,058 | 240 | |
Neste Oyj | 5,701 | 232 | |
Metso Oyj | 5,530 | 198 | |
Kesko Oyj Class B | 2,718 | 127 | |
5,584 | |||
France (6.7%) | |||
TOTAL SA | 94,197 | 4,835 | |
Sanofi | 47,918 | 4,528 | |
BNP Paribas SA | 41,816 | 2,951 | |
AXA SA | 82,595 | 2,204 | |
Schneider Electric SE | 23,175 | 1,836 | |
Societe Generale SA | 31,642 | 1,735 | |
Orange SA | 81,480 | 1,261 | |
Cie Generale des | |||
Etablissements Michelin | 7,823 | 1,023 | |
Engie SA | 67,056 | 946 | |
*,^ | Vivendi SA | 46,571 | 924 |
Credit Agricole SA | 49,355 | 734 | |
Renault SA | 7,516 | 701 | |
Carrefour SA | 23,509 | 554 | |
^ | Veolia Environnement SA | 21,412 | 407 |
*,^ | Bouygues SA | 8,397 | 353 |
SES SA Class A | 15,090 | 330 | |
Natixis SA | 39,948 | 278 | |
* | SCOR SE | 6,777 | 268 |
Edenred | 10,190 | 261 | |
Suez | 14,455 | 237 | |
Eutelsat Communications SA | 7,190 | 170 | |
Lagardere SCA | 5,129 | 157 | |
Electricite de France SA | 17,626 | 147 | |
Casino Guichard | |||
Perrachon SA | 2,435 | 147 | |
^ | CNP Assurances | 6,735 | 141 |
2 | Amundi SA | 2,129 | 140 |
Euler Hermes Group | 598 | 58 | |
STMicroelectronics NV | 11 | — | |
* | TechnipFMC plc | 2 | — |
27,326 |
Germany (6.6%) | |||
Siemens AG | 32,696 | 4,690 | |
BASF SE | 39,758 | 3,873 | |
Allianz SE | 19,620 | 3,735 | |
Daimler AG | 44,044 | 3,282 | |
Deutsche Telekom AG | 138,291 | 2,426 | |
Deutsche Post AG | 41,276 | 1,484 | |
Bayerische Motoren | |||
Werke AG | 13,868 | 1,325 | |
Muenchener | |||
Rueckversicherungs- | |||
Gesellschaft AG in | |||
Muenchen | 6,099 | 1,169 | |
Vonovia SE | 20,023 | 725 | |
E.ON SE | 89,223 | 695 | |
ProSiebenSat.1 Media SE | 9,636 | 409 | |
Porsche Automobil Holding | |||
SE Preference Shares | 6,494 | 380 | |
Hannover Rueck SE | 2,536 | 304 | |
METRO AG | 7,000 | 230 | |
Evonik Industries AG | 6,867 | 229 | |
LEG Immobilien AG | 2,662 | 229 | |
Bayerische Motoren Werke | |||
AG Preference Shares | 2,634 | 217 | |
HUGO BOSS AG | 2,713 | 206 | |
2 | Innogy SE | 5,413 | 199 |
* | Deutsche Lufthansa AG | 10,488 | 181 |
MAN SE | 1,548 | 163 | |
Telefonica Deutschland | |||
Holding AG | 29,871 | 145 | |
* | Uniper SE | 8,393 | 138 |
RTL Group SA | 1,622 | 126 | |
Axel Springer SE | 1,958 | 110 | |
Talanx AG | 1,453 | 52 | |
* | Commerzbank AG | 6 | — |
26,722 | |||
Greece (0.0%) | |||
OPAP SA | 9,774 | 97 | |
Motor Oil Hellas Corinth | |||
Refineries SA | 2,149 | 36 | |
* | Hellenic Petroleum SA | 1,863 | 11 |
144 | |||
Hong Kong (2.1%) | |||
Sun Hung Kai Properties Ltd. | 60,000 | 899 | |
Cheung Kong Property | |||
Holdings Ltd. | 120,000 | 859 | |
CLP Holdings Ltd. | 67,000 | 707 | |
Hang Seng Bank Ltd. | 32,100 | 650 | |
BOC Hong Kong | |||
Holdings Ltd. | 152,000 | 625 | |
Power Assets Holdings Ltd. | 56,474 | 508 | |
Sands China Ltd. | 104,400 | 473 | |
Wharf Holdings Ltd. | 53,000 | 452 |
34
International High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
MTR Corp. Ltd. | 59,500 | 342 | |
2 | WH Group Ltd. | 317,000 | 283 |
New World Development | |||
Co. Ltd. | 226,000 | 281 | |
Cheung Kong Infrastructure | |||
Holdings Ltd. | 28,000 | 245 | |
Swire Pacific Ltd. Class A | 25,000 | 241 | |
Hang Lung Properties Ltd. | 88,000 | 230 | |
Sino Land Co. Ltd. | 132,000 | 223 | |
Want Want China | |||
Holdings Ltd. | 256,974 | 185 | |
* | Wynn Macau Ltd. | 62,400 | 137 |
Hysan Development Co. Ltd. | 29,000 | 137 | |
Yue Yuen Industrial | |||
Holdings Ltd. | 29,000 | 115 | |
NWS Holdings Ltd. | 56,000 | 105 | |
Li & Fung Ltd. | 236,000 | 99 | |
PCCW Ltd. | 168,000 | 95 | |
Hopewell Holdings Ltd. | 24,500 | 93 | |
Minth Group Ltd. | 24,000 | 89 | |
Kerry Properties Ltd. | 23,500 | 88 | |
VTech Holdings Ltd. | 5,900 | 75 | |
Xinyi Glass Holdings Ltd. | 72,000 | 64 | |
Cafe de Coral Holdings Ltd. | 16,000 | 52 | |
Television Broadcasts Ltd. | 12,300 | 47 | |
2 | BOC Aviation Ltd. | 8,100 | 43 |
Lifestyle International | |||
Holdings Ltd. | 25,000 | 36 | |
Xinyi Solar Holdings Ltd. | 108,000 | 34 | |
Hopewell Highway | |||
Infrastructure Ltd. | 31,500 | 18 | |
SA Sa International | |||
Holdings Ltd. | 30,000 | 13 | |
Hutchison | |||
Telecommunications | |||
Hong Kong Holdings Ltd. | 32,000 | 9 | |
Texwinca Holdings Ltd. | 14,000 | 9 | |
ASM Pacific Technology Ltd. | 2 | — | |
8,561 | |||
Hungary (0.1%) | |||
MOL Hungarian | |||
Oil & Gas plc | 2,494 | 187 | |
Magyar Telekom | |||
Telecommunications plc | 13,006 | 22 | |
209 | |||
India (0.5%) | |||
Oil & Natural Gas Corp. Ltd. | 129,145 | 374 | |
Indian Oil Corp. Ltd. | 48,406 | 331 | |
Coal India Ltd. | 54,336 | 234 | |
Indiabulls Housing | |||
Finance Ltd. | 14,290 | 226 | |
Hindustan Petroleum | |||
Corp. Ltd. | 17,578 | 146 | |
Bharti Infratel Ltd. | 23,124 | 128 |
Rural Electrification | |||
Corp. Ltd. | 26,795 | 84 | |
Power Finance Corp. Ltd. | 30,614 | 76 | |
NMDC Ltd. | 29,421 | 58 | |
NHPC Ltd. | 90,665 | 45 | |
Mphasis Ltd. | 5,165 | 43 | |
2 | InterGlobe Aviation Ltd. | 1,863 | 32 |
Oil India Ltd. | 6,237 | 32 | |
Great Eastern Shipping | |||
Co. Ltd. | 1,629 | 11 | |
Cairn India Ltd. | 25 | — | |
Vedanta Ltd. | 3 | — | |
NTPC Ltd. | 4 | — | |
* | Bank of Baroda | 2 | — |
1,820 | |||
Indonesia (0.3%) | |||
Telekomunikasi Indonesia | |||
Persero Tbk PT | 2,137,500 | 705 | |
Matahari Department | |||
Store Tbk PT | 100,000 | 109 | |
* | Perusahaan Gas Negara | ||
Persero Tbk | 499,300 | 91 | |
Indocement Tunggal | |||
Prakarsa Tbk PT | 51,299 | 65 | |
* | Tambang Batubara Bukit | ||
Asam Persero Tbk PT | 36,100 | 34 | |
Media Nusantara Citra | |||
Tbk PT | 193,600 | 27 | |
United Tractors Tbk PT | 1 | — | |
1,031 | |||
Ireland (0.1%) | |||
* | Bank of Ireland | 1,160,870 | 292 |
Israel (0.5%) | |||
Teva Pharmaceutical | |||
Industries Ltd. | 38,919 | 1,234 | |
Bank Hapoalim BM | 42,614 | 266 | |
Bezeq The Israeli | |||
Telecommunication | |||
Corp. Ltd. | 89,270 | 150 | |
Mizrahi Tefahot Bank Ltd. | 5,237 | 84 | |
Israel Chemicals Ltd. | 17,330 | 75 | |
Amot Investments Ltd. | 9,905 | 47 | |
Delek Group Ltd. | 186 | 42 | |
Gazit-Globe Ltd. | 3,268 | 33 | |
Paz Oil Co. Ltd. | 195 | 32 | |
First International Bank Of | |||
Israel Ltd. | 1,666 | 27 | |
Shikun & Binui Ltd. | 7,642 | 20 | |
Harel Insurance Investments | |||
& Financial Services Ltd. | 3,682 | 20 | |
Delek Automotive Systems Ltd. 857 | 8 | ||
2,038 |
35
International High Dividend Yield Index Fund | ||||
Market | ||||
Value• | ||||
Shares | ($000) | |||
Italy (2.4%) | ||||
Eni SPA | 106,334 | 1,649 | ||
Enel SPA | 325,085 | 1,546 | ||
Intesa Sanpaolo SPA | ||||
(Registered) | 511,368 | 1,493 | ||
*,^ | UniCredit SPA | 89,216 | 1,453 | |
Assicurazioni Generali SPA | 54,323 | 860 | ||
Atlantia SPA | 23,374 | 593 | ||
Snam SPA | 103,877 | 459 | ||
Terna Rete Elettrica | ||||
Nazionale SPA | 60,231 | 304 | ||
Mediobanca SPA | 23,509 | 226 | ||
Telecom Italia SPA (Bearer) | 258,532 | 184 | ||
Unione di Banche Italiane | ||||
SPA | 35,311 | 149 | ||
Intesa Sanpaolo SPA | 49,701 | 136 | ||
2 | Poste Italiane SPA | 19,374 | 133 | |
FinecoBank Banca Fineco | ||||
SPA | 15,929 | 113 | ||
UnipolSai Assicurazioni SPA | 43,930 | 101 | ||
* | Italgas SPA | 19,324 | 87 | |
Banca Mediolanum SPA | 9,950 | 76 | ||
Tenaris SA | 17 | — | ||
9,562 | ||||
Japan (6.3%) | ||||
Toyota Motor Corp. | 117,400 | 6,354 | ||
Sumitomo Mitsui Financial | ||||
Group Inc. | 55,900 | 2,076 | ||
Mizuho Financial | ||||
Group Inc. | 1,093,100 | 1,998 | ||
Japan Tobacco Inc. | 51,200 | 1,704 | ||
Takeda Pharmaceutical | ||||
Co. Ltd. | 32,800 | 1,574 | ||
Canon Inc. | 44,700 | 1,483 | ||
Mitsui & Co. Ltd. | 72,200 | 1,019 | ||
Subaru Corp. | 26,300 | 997 | ||
ITOCHU Corp. | 62,900 | 890 | ||
ORIX Corp. | 56,500 | 863 | ||
Nissan Motor Co. Ltd. | 84,400 | 804 | ||
Sumitomo Corp. | 47,600 | 636 | ||
JXTG Holdings Inc. | 136,705 | 617 | ||
Sumitomo Mitsui Trust | ||||
Holdings Inc. | 16,200 | 555 | ||
Resona Holdings Inc. | 95,800 | 533 | ||
Daito Trust Construction | ||||
Co. Ltd. | 3,100 | 456 | ||
Daiwa Securities Group Inc. | 74,000 | 450 | ||
Marubeni Corp. | 66,500 | 410 | ||
Sekisui House Ltd. | 24,474 | 407 | ||
Ricoh Co. Ltd. | 28,900 | 241 | ||
Japan Post Holdings Co. Ltd. | 19,100 | 237 | ||
Japan Post Bank Co. Ltd. | 18,800 | 234 | ||
Aozora Bank Ltd. | 50,000 | 182 | ||
Chugoku Electric Power | ||||
Co. Inc. | 12,574 | 137 |
Sojitz Corp. | 53,700 | 137 | |
Showa Shell Sekiyu KK | 9,000 | 87 | |
Sankyo Co. Ltd. | 2,400 | 84 | |
Aoyama Trading Co. Ltd. | 1,800 | 64 | |
Hokuriku Electric Power Co. | 6,600 | 61 | |
Japan Airlines Co. Ltd. | 1,900 | 60 | |
Matsui Securities Co. Ltd. | 6,800 | 55 | |
Leopalace21 Corp. | 9,500 | 50 | |
Senshu Ikeda Holdings Inc. | 11,300 | 48 | |
Tokai Tokyo Financial | |||
Holdings Inc. | 8,200 | 42 | |
Sanrio Co. Ltd. | 2,200 | 40 | |
Hitachi Capital Corp. | 1,500 | 37 | |
Autobacs Seven Co. Ltd. | 2,400 | 36 | |
Honda Motor Co. Ltd. | 1 | — | |
Mitsubishi UFJ Financial | |||
Group Inc. | 2 | — | |
25,658 | |||
Malaysia (0.6%) | |||
Malayan Banking Bhd. | 243,300 | 537 | |
Tenaga Nasional Bhd. | 151,600 | 487 | |
CIMB Group Holdings Bhd. | 242,700 | 321 | |
Axiata Group Bhd. | 191,900 | 228 | |
DiGi.Com Bhd. | 161,300 | 191 | |
Maxis Bhd. | 115,400 | 169 | |
AMMB Holdings Bhd. | 90,400 | 114 | |
YTL Corp. Bhd. | 225,800 | 76 | |
Telekom Malaysia Bhd. | 50,000 | 74 | |
British American Tobacco | |||
Malaysia Bhd. | 5,500 | 58 | |
2 | Astro Malaysia Holdings Bhd. | 73,100 | 45 |
Alliance Financial Group Bhd. | 43,100 | 41 | |
KLCCP Stapled Group | 22,600 | 41 | |
Westports Holdings Bhd. | 41,000 | 38 | |
HAP Seng Consolidated Bhd. | 18,300 | 37 | |
YTL Power International Bhd. 106,900 | 37 | ||
Berjaya Sports Toto Bhd. | 38,300 | 25 | |
2,519 | |||
Mexico (0.3%) | |||
Wal-Mart de Mexico | |||
SAB de CV | 237,500 | 536 | |
Grupo Aeroportuario del | |||
Pacifico SAB de CV Class B | 14,700 | 151 | |
Grupo Financiero Santander | |||
Mexico SAB de CV Class B | 61,600 | 112 | |
Infraestructura Energetica | |||
Nova SAB de CV | 22,600 | 106 | |
Gentera SAB de CV | 43,200 | 72 | |
Kimberly-Clark de Mexico | |||
SAB de CV Class A | 33,300 | 71 | |
* | Grupo Aeroportuario del | ||
Centro Norte SAB de CV | |||
Class B | 7,800 | 43 | |
Alpek SAB de CV | 13,200 | 16 | |
1,107 |
36
International High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Netherlands (2.1%) | |||
Unilever NV | 66,946 | 3,507 | |
ING Groep NV | 165,476 | 2,697 | |
Koninklijke DSM NV | 7,836 | 561 | |
NN Group NV | 14,183 | 470 | |
Koninklijke KPN NV | 134,231 | 388 | |
Aegon NV | 73,455 | 375 | |
2 | ABN AMRO Group NV | 11,875 | 312 |
Randstad Holding NV | 4,636 | 276 | |
Boskalis Westminster | 3,710 | 137 | |
* | ArcelorMittal | 6 | — |
8,723 | |||
New Zealand (0.2%) | |||
Spark New Zealand Ltd. | 76,464 | 194 | |
Fletcher Building Ltd. | 28,746 | 169 | |
Contact Energy Ltd. | 31,652 | 113 | |
Meridian Energy Ltd. | 58,650 | 112 | |
SKYCITY Entertainment | |||
Group Ltd. | 25,531 | 76 | |
Mercury NZ Ltd. | 27,191 | 60 | |
Air New Zealand Ltd. | 26,566 | 47 | |
SKY Network Television Ltd. | 13,004 | 34 | |
Vector Ltd. | 6,960 | 15 | |
820 | |||
Norway (0.7%) | |||
^ | DNB ASA | 46,398 | 724 |
Statoil ASA | 42,148 | 694 | |
Telenor ASA | 30,367 | 491 | |
Orkla ASA | 32,985 | 299 | |
Yara International ASA | 7,325 | 272 | |
Marine Harvest ASA | 15,709 | 261 | |
Gjensidige Forsikring ASA | 7,016 | 108 | |
Aker BP ASA | 3,931 | 67 | |
2,916 | |||
Other (0.0%)3 | |||
* | Siam City Cement PCL Rights | ||
Exp. 05/15/2017 | 532 | — | |
* | Cia de Gas de Sao Paulo | ||
COMGAS Preference Shares | |||
Class A Rights Exp. 05/26/2017 | 15 | — | |
* | Bank of Communications Co. | ||
Ltd. Rights Exp. 05/10/2017 | 664 | — | |
— | |||
Pakistan (0.1%) | |||
Habib Bank Ltd. | 30,075 | 79 | |
Oil & Gas Development | |||
Co. Ltd. | 27,800 | 41 | |
Pakistan Petroleum Ltd. | 22,400 | 34 | |
Fauji Fertilizer Co. Ltd. | 25,700 | 24 | |
National Bank of Pakistan | 28,500 | 17 | |
195 | |||
Philippines (0.1%) | |||
PLDT Inc. | 2,090 | 74 | |
Aboitiz Power Corp. | 78,900 | 67 |
Manila Electric Co. | 8,330 | 47 |
DMCI Holdings Inc. | 159,500 | 41 |
Energy Development Corp. | 290,000 | 35 |
Semirara Mining & Power | ||
Corp. Class A | 11,660 | 35 |
Globe Telecom Inc. | 470 | 19 |
318 | ||
Poland (0.2%) | ||
Powszechny Zaklad | ||
Ubezpieczen SA | 23,868 | 263 |
Bank Pekao SA | 6,763 | 245 |
Polskie Gornictwo Naftowe | ||
i Gazownictwo SA | 76,437 | 130 |
Asseco Poland SA | 2,764 | 39 |
Budimex SA | 461 | 33 |
Synthos SA | 18,447 | 26 |
Bank Handlowy w | ||
Warszawie SA | 1,111 | 21 |
Ciech SA | 995 | 20 |
Orange Polska SA | 65 | — |
777 | ||
Portugal (0.2%) | ||
EDP - Energias de | ||
Portugal SA | 106,160 | 350 |
Galp Energia SGPS SA | 21,869 | 340 |
690 | ||
Qatar (0.2%) | ||
Industries Qatar QSC | 6,555 | 188 |
Masraf Al Rayan QSC | 16,192 | 186 |
Ooredoo QSC | 4,774 | 136 |
Qatar Islamic Bank SAQ | 2,769 | 77 |
* Commercial Bank QSC | 7,699 | 64 |
Doha Bank QSC | 7,342 | 63 |
Qatar Electricity & Water Co. | ||
QSC | 1,067 | 61 |
Qatar Gas Transport Co. Ltd. | 10,548 | 58 |
Qatar Navigation QSC | 2,174 | 42 |
United Development Co. QSC | 6,727 | 35 |
Barwa Real Estate Co. | 3,775 | 35 |
Qatar International Islamic | ||
Bank QSC | 1,463 | 25 |
Gulf International Services | ||
QSC | 1,805 | 13 |
983 | ||
Russia (1.6%) | ||
Sberbank of Russia PJSC | 457,470 | 1,329 |
Gazprom PJSC ADR | 164,176 | 779 |
Lukoil PJSC ADR | 15,172 | 753 |
Magnit PJSC GDR | 12,126 | 424 |
Tatneft PJSC ADR | 10,437 | 409 |
Rosneft Oil Co. PJSC GDR | 56,663 | 314 |
MMC Norilsk Nickel PJSC | ||
ADR | 20,330 | 312 |
Gazprom PJSC | 121,665 | 292 |
Lukoil PJSC | 4,695 | 233 |
37
International High Dividend Yield Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Mobile TeleSystems PJSC | |||
ADR | 21,288 | 220 | |
Alrosa PJSC | 108,600 | 187 | |
Surgutneftegas OAO | |||
Preference Shares | 326,220 | 175 | |
Federal Grid Co. Unified | |||
Energy System JSC | 39,900,000 | 138 | |
Moscow Exchange | |||
MICEX-RTS PJSC | 59,010 | 119 | |
Severstal PJSC GDR | 7,942 | 109 | |
Inter RAO UES PJSC | 1,060,000 | 75 | |
Rosseti PJSC | 4,138,653 | 70 | |
Novolipetsk Steel PJSC | 34,850 | 66 | |
RusHydro PJSC | 3,705,000 | 58 | |
PhosAgro PJSC GDR | 3,917 | 58 | |
Rostelecom PJSC ADR | 7,115 | 56 | |
Sistema PJSC FC GDR | 5,997 | 50 | |
* | Aeroflot PJSC | 16,200 | 50 |
Magnitogorsk Iron & Steel | |||
OJSC | 76,400 | 46 | |
Bashneft PJSC | 742 | 41 | |
MegaFon PJSC GDR | 3,499 | 37 | |
* | LSR Group PJSC GDR | 6,084 | 20 |
Mosenergo PJSC | 490,000 | 20 | |
Tatneft PAO Preference | |||
Shares | 4,340 | 18 | |
E.ON Russia JSC | 369,000 | 16 | |
Acron PJSC | 266 | 16 | |
Bashneft PAO Preference | |||
Shares | 590 | 13 | |
Rostelecom PJSC | 2,810 | 4 | |
6,507 | |||
Singapore (1.4%) | |||
DBS Group Holdings Ltd. | 77,400 | 1,069 | |
Oversea-Chinese Banking | |||
Corp. Ltd. | 142,200 | 996 | |
Singapore | |||
Telecommunications Ltd. | 329,900 | 883 | |
United Overseas Bank Ltd. | 52,800 | 822 | |
Keppel Corp. Ltd. | 61,000 | 284 | |
Singapore Exchange Ltd. | 35,874 | 190 | |
Singapore Technologies | |||
Engineering Ltd. | 68,600 | 186 | |
Singapore Press | |||
Holdings Ltd. | 72,900 | 181 | |
ComfortDelGro Corp. Ltd. | 87,400 | 171 | |
Singapore Airlines Ltd. | 21,800 | 160 | |
Venture Corp. Ltd. | 10,900 | 95 | |
SATS Ltd. | 25,200 | 92 | |
Hutchison Port Holdings | |||
Trust | 197,500 | 80 | |
Golden Agri-Resources Ltd. | 301,300 | 78 | |
Singapore Post Ltd. | 73,900 | 73 | |
Yangzijiang Shipbuilding | |||
Holdings Ltd. | 80,600 | 66 |
StarHub Ltd. | 22,200 | 44 | |
SIA Engineering Co. Ltd. | 7,500 | 20 | |
M1 Ltd. | 7,800 | 12 | |
Sembcorp Marine Ltd. | 1 | — | |
5,502 | |||
South Africa (1.5%) | |||
MTN Group Ltd. | 77,696 | 735 | |
Sasol Ltd. | 23,972 | 735 | |
Standard Bank Group Ltd. | 52,460 | 582 | |
FirstRand Ltd. | 131,736 | 491 | |
Sanlam Ltd. | 74,178 | 394 | |
Vodacom Group Ltd. | 21,027 | 238 | |
Woolworths Holdings Ltd. | 39,776 | 216 | |
Barclays Africa Group Ltd. | 19,002 | 209 | |
Bidvest Group Ltd. | 14,496 | 173 | |
Nedbank Group Ltd. | 9,058 | 153 | |
RMB Holdings Ltd. | 30,727 | 141 | |
Life Healthcare Group | |||
Holdings Ltd. | 59,025 | 127 | |
Netcare Ltd. | 62,249 | 123 | |
Truworths International Ltd. | 19,069 | 123 | |
Mr Price Group Ltd. | 10,467 | 123 | |
SPAR Group Ltd. | 8,612 | 116 | |
New Europe Property | |||
Investments plc | 10,099 | 111 | |
AVI Ltd. | 15,125 | 111 | |
Foschini Group Ltd. | 8,701 | 104 | |
Rand Merchant Investment | |||
Holdings Ltd. | 30,365 | 95 | |
Imperial Holdings Ltd. | 7,288 | 92 | |
Barloworld Ltd. | 9,964 | 90 | |
MMI Holdings Ltd. | 49,061 | 86 | |
Investec Ltd. | 10,860 | 81 | |
Telkom SA SOC Ltd. | 12,040 | 67 | |
Sibanye Gold Ltd. | 28,298 | 57 | |
Exxaro Resources Ltd. | 6,340 | 54 | |
Tongaat Hulett Ltd. | 5,720 | 52 | |
Coronation Fund | |||
Managers Ltd. | 10,721 | 51 | |
Liberty Holdings Ltd. | 5,063 | 41 | |
Tsogo Sun Holdings Ltd. | 19,913 | 37 | |
JSE Ltd. | 3,366 | 36 | |
Santam Ltd. | 1,857 | 34 | |
AECI Ltd. | 3,960 | 34 | |
Reunert Ltd. | 6,167 | 33 | |
* | Kumba Iron Ore Ltd. | 2,237 | 29 |
Omnia Holdings Ltd. | 2,208 | 26 | |
* | Rockcastle Global Real Estate | ||
Co. Ltd. | 10,585 | 26 | |
African Rainbow Minerals Ltd. 3,890 | 25 | ||
Assore Ltd. | 1,300 | 21 | |
Sun International Ltd. | 2,486 | 14 | |
Oceana Group Ltd. | 956 | 7 | |
Tiger Brands Ltd. | 127 | 4 | |
6,097 |
38
International High Dividend Yield Index Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
South Korea (0.6%) | ||
KT&G Corp. | 4,699 | 419 |
Korea Electric Power Corp. | 9,929 | 396 |
Woori Bank | 21,687 | 284 |
SK Telecom Co. Ltd. ADR | 8,768 | 207 |
Coway Co. Ltd. | 2,303 | 203 |
S-Oil Corp. | 1,776 | 155 |
Industrial Bank of Korea | 11,349 | 125 |
Dongbu Insurance Co. Ltd. | 2,031 | 121 |
Hyundai Motor Co. 2nd | ||
Preference Shares | 1,291 | 113 |
Hyundai Motor Co. | ||
Preference Shares | 1,246 | 101 |
DGB Financial Group Inc. | 7,271 | 74 |
Hyundai Marine & Fire | ||
Insurance Co. Ltd. | 2,283 | 74 |
Doosan Heavy Industries & | ||
Construction Co. Ltd. | 2,998 | 61 |
Samsung Card Co. Ltd. | 1,708 | 60 |
NH Investment & Securities | ||
Co. Ltd. | 5,017 | 58 |
Hanwha Life Insurance | ||
Co. Ltd. | 9,323 | 50 |
Korea Electric Power Corp. | ||
ADR | 1,820 | 36 |
Doosan Corp. | 377 | 32 |
Hite Jinro Co. Ltd. | 1,211 | 22 |
Samsung Fire & Marine | ||
Insurance Co. Ltd. | ||
Preference Shares | 104 | 17 |
KB Financial Group Inc. | 1 | — |
2,608 | ||
Spain (3.8%) | ||
Banco Santander SA | 617,028 | 4,021 |
Banco Bilbao Vizcaya | ||
Argentaria SA | 284,786 | 2,282 |
Telefonica SA | 185,438 | 2,051 |
Iberdrola SA | 241,065 | 1,733 |
Repsol SA | 48,722 | 769 |
CaixaBank SA | 156,009 | 708 |
Abertis Infraestructuras SA | 27,711 | 487 |
Ferrovial SA | 20,843 | 443 |
Banco de Sabadell SA | 219,184 | 422 |
Red Electrica Corp. SA | 18,450 | 360 |
Endesa SA | 13,179 | 310 |
Gas Natural SDG SA | 12,901 | 292 |
ACS Actividades de | ||
Construccion y Servicios SA | 7,798 | 289 |
Bankinter SA | 30,358 | 267 |
Enagas SA | 9,525 | 250 |
Bankia SA | 195,566 | 237 |
Distribuidora Internacional | ||
de Alimentacion SA | 26,172 | 156 |
Mapfre SA | 43,005 | 150 |
* Mediaset Espana | ||
Comunicacion SA | 7,535 | 104 |
Acerinox SA | 6,508 | 91 | |
Acciona SA | 999 | 82 | |
Zardoya Otis SA | 7,340 | 68 | |
Banco Popular Espanol SA | 12 | — | |
15,572 | |||
Sweden (2.1%) | |||
Nordea Bank AB | 136,263 | 1,676 | |
Swedbank AB Class A | 45,710 | 1,083 | |
Hennes & Mauritz AB | |||
Class B | 41,070 | 1,017 | |
Investor AB Class B | 19,464 | 889 | |
Svenska Handelsbanken AB | |||
Class A | 61,858 | 878 | |
Skandinaviska Enskilda | |||
Banken AB Class A | 60,401 | 695 | |
Telia Co. AB | 113,204 | 461 | |
Skanska AB Class B | 15,778 | 377 | |
SKF AB | 15,160 | 333 | |
Industrivarden AB Class A | 11,516 | 287 | |
Swedish Match AB | 7,972 | 263 | |
Kinnevik AB | 8,617 | 230 | |
Tele2 AB | 14,919 | 150 | |
ICA Gruppen AB | 4,171 | 142 | |
Industrivarden AB | 4,118 | 96 | |
Svenska Handelsbanken AB | |||
Class B | 2,289 | 32 | |
Skandinaviska Enskilda | |||
Banken AB | 1,624 | 19 | |
SKF AB Class A | 821 | 18 | |
Telefonaktiebolaget LM | |||
Ericsson Class B | 2 | — | |
8,646 | |||
Switzerland (9.7%) | |||
Nestle SA | 132,358 | 10,194 | |
Roche Holding AG | 30,186 | 7,899 | |
Novartis AG | 101,514 | 7,815 | |
UBS Group AG | 149,248 | 2,548 | |
ABB Ltd. | 81,745 | 2,003 | |
Zurich Insurance Group AG | 6,350 | 1,757 | |
Credit Suisse Group AG | 88,916 | 1,356 | |
Swiss Re AG | 14,008 | 1,219 | |
LafargeHolcim Ltd. | 20,889 | 1,185 | |
Adecco Group AG | 7,037 | 523 | |
SGS SA | 215 | 484 | |
Swiss Life Holding AG | 1,354 | 441 | |
Swisscom AG | 999 | 436 | |
Kuehne & Nagel | |||
International AG | 2,203 | 333 | |
Baloise Holding AG | 1,969 | 289 | |
Swiss Prime Site AG | 2,755 | 239 | |
PSP Swiss Property AG | 1,721 | 154 | |
* | Helvetia Holding AG | 269 | 149 |
Pargesa Holding SA | 1,757 | 131 | |
* | Banque Cantonale Vaudoise | 119 | 86 |
39,241 |
39
International High Dividend Yield Index Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
Taiwan (5.1%) | ||
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. | 1,000,000 | 6,442 |
Hon Hai Precision Industry | ||
Co. Ltd. | 642,000 | 2,101 |
Formosa Plastics Corp. | 213,000 | 640 |
Nan Ya Plastics Corp. | 242,000 | 583 |
Formosa Chemicals & | ||
Fibre Corp. | 186,000 | 572 |
Cathay Financial Holding | ||
Co. Ltd. | 346,000 | 554 |
Delta Electronics Inc. | 92,600 | 521 |
Fubon Financial Holding | ||
Co. Ltd. | 314,000 | 492 |
CTBC Financial Holding | ||
Co. Ltd. | 786,120 | 491 |
MediaTek Inc. | 65,000 | 467 |
Chunghwa Telecom | ||
Co. Ltd. ADR | 11,247 | 381 |
Uni-President Enterprises | ||
Corp. | 202,000 | 373 |
Mega Financial Holding | ||
Co. Ltd. | 452,000 | 363 |
Catcher Technology Co. Ltd. | 33,000 | 339 |
Asustek Computer Inc. | 30,996 | 304 |
First Financial Holding | ||
Co. Ltd. | 421,425 | 257 |
Taiwan Mobile Co. Ltd. | 66,000 | 244 |
Advanced Semiconductor | ||
Engineering Inc. ADR | 37,787 | 237 |
Quanta Computer Inc. | 113,000 | 234 |
Pegatron Corp. | 79,000 | 233 |
President Chain Store Corp. | 26,000 | 226 |
Hotai Motor Co. Ltd. | 19,000 | 219 |
Formosa Petrochemical | ||
Corp. | 60,000 | 210 |
Yuanta Financial Holding | ||
Co. Ltd. | 479,000 | 205 |
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. ADR | 6,160 | 204 |
Hua Nan Financial Holdings | ||
Co. Ltd. | 330,928 | 185 |
Lite-On Technology Corp. | 98,194 | 171 |
Far EasTone | ||
Telecommunications | ||
Co. Ltd. | 69,000 | 170 |
Taiwan Cement Corp. | 141,000 | 164 |
China Development | ||
Financial Holding Corp. | 586,000 | 162 |
United Microelectronics | ||
Corp. ADR | 83,322 | 162 |
Cheng Shin Rubber Industry | ||
Co. Ltd. | 76,997 | 159 |
Chunghwa Telecom Co. Ltd. | 46,000 | 156 |
AU Optronics Corp. ADR | 37,900 | 153 |
Taishin Financial Holding | ||
Co. Ltd. | 371,275 | 153 |
Pou Chen Corp. | 109,000 | 153 |
Foxconn Technology Co. Ltd. | 49,190 | 150 |
Siliconware Precision | ||
Industries Co. Ltd. ADR | 17,663 | 142 |
Far Eastern New Century | ||
Corp. | 165,000 | 139 |
Compal Electronics Inc. | 198,000 | 133 |
SinoPac Financial Holdings | ||
Co. Ltd. | 424,400 | 130 |
Advanced Semiconductor | ||
Engineering Inc. | 91,342 | 114 |
Wistron Corp. | 113,256 | 107 |
Novatek Microelectronics | ||
Corp. | 27,000 | 104 |
Asia Cement Corp. | 105,000 | 104 |
Inventec Corp. | 130,999 | 97 |
Eclat Textile Co. Ltd. | 8,000 | 87 |
Teco Electric and Machinery | ||
Co. Ltd. | 81,000 | 80 |
Vanguard International | ||
Semiconductor Corp. | 40,000 | 76 |
Chicony Electronics Co. Ltd. | 28,020 | 74 |
Realtek Semiconductor Corp. | 18,000 | 61 |
Synnex Technology | ||
International Corp. | 53,000 | 57 |
Feng TAY Enterprise Co. Ltd. | 13,000 | 50 |
Taiwan Secom Co. Ltd. | 16,000 | 47 |
Nanya Technology Corp. | 27,000 | 43 |
Taiwan Fertilizer Co. Ltd. | 29,000 | 39 |
Feng Hsin Steel Co. Ltd. | 23,000 | 39 |
Formosa Taffeta Co. Ltd. | 35,000 | 36 |
United Microelectronics | ||
Corp. | 91,000 | 36 |
Eternal Materials Co. Ltd. | 32,320 | 35 |
China Airlines Ltd. | 101,000 | 31 |
Transcend Information Inc. | 9,000 | 31 |
Capital Securities Corp. | 76,000 | 25 |
China Motor Corp. | 27,000 | 25 |
U-Ming Marine Transport | ||
Corp. | 24,000 | 24 |
Far Eastern International | ||
Bank | 64,260 | 20 |
Wan Hai Lines Ltd. | 36,000 | 20 |
Cathay Real Estate | ||
Development Co. Ltd. | 25,900 | 17 |
Cheng Uei Precision | ||
Industry Co. Ltd. | 11,000 | 15 |
Siliconware Precision | ||
Industries Co. Ltd. | 8,000 | 13 |
20,881 |
40
International High Dividend Yield Index Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
Thailand (0.8%) | ||
PTT PCL | 60,200 | 676 |
Siam Cement PCL NVDR | 28,300 | 438 |
Siam Commercial Bank PCL | ||
(Local) | 71,200 | 321 |
Advanced Info Service PCL | ||
(Local) | 49,104 | 248 |
PTT Global Chemical PCL | 88,099 | 191 |
Krung Thai Bank PCL | 280,100 | 160 |
Siam Commercial Bank PCL | 30,700 | 138 |
Charoen Pokphand Foods | ||
PCL | 177,000 | 137 |
Bangkok Bank PCL (Foreign) | 22,100 | 119 |
Siam Cement PCL (Foreign) | 7,550 | 117 |
Intouch Holdings PCL (Local) | 69,100 | 107 |
Banpu PCL (Local) | 187,050 | 104 |
Thai Oil PCL | 38,900 | 88 |
Thai Union Group PCL | 135,900 | 84 |
IRPC PCL | 496,100 | 80 |
Electricity Generating PCL | 12,297 | 78 |
Land & Houses PCL | 244,900 | 73 |
Delta Electronics Thailand | ||
PCL | 21,200 | 56 |
Ratchaburi Electricity | ||
Generating Holding PCL | ||
(Local) | 29,000 | 42 |
Glow Energy PCL | 16,500 | 39 |
Siam City Cement PCL (Local) | 4,200 | 34 |
Intouch Holdings PCL NVDR | 18,400 | 28 |
BEC World PCL | 39,200 | 21 |
Banpu PCL | 1,450 | 1 |
Total Access Communication | ||
PCL (Local) | 100 | — |
3,380 | ||
Turkey (0.2%) | ||
Tupras Turkiye Petrol | ||
Rafinerileri AS | 5,465 | 138 |
* Turkcell Iletisim Hizmetleri | ||
AS | 35,076 | 123 |
Eregli Demir ve Celik | ||
Fabrikalari TAS | 59,865 | 110 |
Arcelik AS | 8,783 | 58 |
Tofas Turk Otomobil | ||
Fabrikasi AS | 5,298 | 44 |
Turk Telekomunikasyon AS | 20,471 | 37 |
Enka Insaat ve Sanayi AS | 23,203 | 36 |
Petkim Petrokimya | ||
Holding AS | 22,716 | 31 |
Ford Otomotiv Sanayi AS | 2,713 | 30 |
TAV Havalimanlari Holding AS 5,786 | 24 | |
Turk Traktor ve Ziraat | ||
Makineleri AS | 513 | 11 |
Aygaz AS | 2,512 | 10 |
Akcansa Cimento AS | 1,501 | 5 |
657 |
United Arab Emirates (0.2%) | ||
Emirates Telecommunications | ||
Group Co. PJSC | 73,617 | 350 |
Abu Dhabi Commercial Bank | ||
PJSC | 80,191 | 151 |
Dubai Islamic Bank PJSC | 54,655 | 87 |
Aldar Properties PJSC | 139,322 | 81 |
Emaar Malls PJSC | 96,722 | 68 |
Union National Bank PJSC | 45,237 | 62 |
DAMAC Properties Dubai | ||
Co. PJSC | 69,007 | 48 |
Dubai Investments PJSC | 52,278 | 30 |
Air Arabia PJSC | 88,555 | 25 |
* Dubai Financial Market PJSC | 61,957 | 19 |
Al Waha Capital PJSC | 33,830 | 17 |
Union Properties PJSC | 24,088 | 7 |
National Bank of Abu Dhabi | ||
PJSC | 2,184 | 7 |
952 | ||
United Kingdom (16.1%) | ||
HSBC Holdings plc | 862,324 | 7,111 |
British American | ||
Tobacco plc | 80,214 | 5,419 |
Royal Dutch Shell plc | ||
Class A | 186,920 | 4,854 |
BP plc | 819,772 | 4,693 |
Royal Dutch Shell plc | ||
Class B | 164,340 | 4,373 |
GlaxoSmithKline plc | 211,956 | 4,266 |
AstraZeneca plc | 54,400 | 3,258 |
Vodafone Group plc | 1,146,474 | 2,953 |
Lloyds Banking Group plc | 2,891,581 | 2,598 |
National Grid plc | 161,009 | 2,085 |
Rio Tinto plc | 51,944 | 2,049 |
Imperial Brands plc | 41,337 | 2,024 |
BT Group plc | 361,714 | 1,427 |
BHP Billiton plc | 90,173 | 1,375 |
Aviva plc | 172,761 | 1,175 |
WPP plc | 54,664 | 1,171 |
BAE Systems plc | 135,753 | 1,103 |
Legal & General Group plc | 253,021 | 806 |
SSE plc | 43,070 | 776 |
Centrica plc | 237,187 | 608 |
Sky plc | 45,575 | 585 |
Old Mutual plc | 212,602 | 534 |
ITV plc | 157,683 | 429 |
Kingfisher plc | 94,988 | 420 |
Persimmon plc | 13,338 | 402 |
Standard Life plc | 83,169 | 391 |
United Utilities Group plc | 28,773 | 363 |
Taylor Wimpey plc | 137,690 | 357 |
Next plc | 6,192 | 345 |
RSA Insurance Group plc | 43,387 | 335 |
Barratt Developments plc | 43,761 | 328 |
41
International High Dividend Yield Index Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
International Consolidated | ||
Airlines Group SA | ||
(London Shares) | 44,642 | 324 |
St. James’s Place plc | 21,657 | 322 |
Marks & Spencer Group plc | 67,292 | 319 |
Severn Trent plc | 10,284 | 310 |
TUI AG | 19,817 | 288 |
Pearson plc | 34,661 | 286 |
Provident Financial plc | 6,412 | 266 |
G4S plc | 66,509 | 263 |
Direct Line Insurance | ||
Group plc | 57,551 | 260 |
J Sainsbury plc | 69,114 | 246 |
DS Smith plc | 43,402 | 243 |
Berkeley Group Holdings plc | 5,627 | 237 |
Admiral Group plc | 8,652 | 225 |
Meggitt plc | 34,485 | 206 |
Bellway plc | 5,532 | 204 |
Royal Mail plc | 38,917 | 203 |
IMI plc | 12,233 | 203 |
Tate & Lyle plc | 20,656 | 203 |
Capita plc | 27,907 | 201 |
Inmarsat plc | 18,911 | 200 |
Investec plc | 26,968 | 200 |
Inchcape plc | 17,868 | 198 |
Pennon Group plc | 17,182 | 191 |
Dixons Carphone plc | 42,087 | 183 |
Booker Group plc | 69,355 | 174 |
John Wood Group plc | 15,699 | 154 |
Polymetal International plc | 11,407 | 150 |
Aberdeen Asset | ||
Management plc | 40,540 | 146 |
William Hill plc | 36,547 | 139 |
easyJet plc | 9,011 | 136 |
Henderson Group plc | 43,387 | 130 |
Petrofac Ltd. | 10,888 | 115 |
Ashmore Group plc | 14,790 | 67 |
TalkTalk Telecom Group plc | 14 | — |
* Standard Chartered plc | 3 | — |
65,605 | ||
Total Common Stocks | ||
(Cost $378,267) | 405,032 |
Temporary Cash Investment (2.9%)1 | ||
Money Market Fund (2.9%) | ||
4,5 Vanguard Market Liquidity | ||
Fund, 1.034% | ||
(Cost $12,011) | 120,095 | 12,012 |
Total Investments (102.6%) | ||
(Cost $390,278) | 417,044 | |
Other Assets and Liabilities (-2.6%) | ||
Other Assets | ||
Investment in Vanguard | 27 | |
Receivables for Accrued Income | 1,329 | |
Receivables for Capital Shares Issued | 206 | |
Other Assets 6 | 1,403 | |
Total Other Assets | 2,965 | |
Liabilities | ||
Payables for Investment Securities | ||
Purchased | (2,449) | |
Collateral for Securities on Loan | (10,875) | |
Payables for Capital Shares Redeemed | (8) | |
Payables to Vanguard | (84) | |
Other Liabilities | (300) | |
Total Liabilities | (13,716) | |
Net Assets (100%) | 406,293 | |
At April 30, 2017, net assets consisted of: | ||
Amount | ||
($000) | ||
Paid-in Capital | 376,294 | |
Undistributed Net Investment Income | 2,171 | |
Accumulated Net Realized Gains | 999 | |
Unrealized Appreciation (Depreciation) | ||
Investment Securities | 26,766 | |
Futures Contracts | 16 | |
Forward Currency Contracts | 35 | |
Foreign Currencies | 12 | |
Net Assets | 406,293 |
42
International High Dividend Yield Index Fund
Amount | |
($000) | |
Investor Shares—Net Assets | |
Applicable to 417,360 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 10,218 |
Net Asset Value Per Share— | |
Investor Shares | $24.48 |
ETF Shares—Net Assets | |
Applicable to 4,594,793 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 281,163 |
Net Asset Value Per Share— | |
ETF Shares | $61.19 |
Admiral Shares—Net Assets | |
Applicable to 3,875,853 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 114,912 |
Net Asset Value Per Share— | |
Admiral Shares | $29.65 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $10,140,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 2.6%, 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, 2017, the aggregate value of these securities was $1,737,000,
representing 0.4% of net assets.
3 “Other” represents securities that are not classified by the fund’s benchmark index.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is
the 7-day yield.
5 Includes $10,875,000 of collateral received for securities on loan.
6 Cash of $399,000 has been segregated as initial margin for open futures contracts.
ADR—American Depositary Receipt.
GDR—Global Depositary Receipt.
NVDR—Non-Voting Depository Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
43
International High Dividend Yield Index Fund | |
Statement of Operations | |
Six Months Ended | |
April 30, 2017 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 5,515 |
Interest2 | 8 |
Securities Lending—Net | 77 |
Total Income | 5,600 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 36 |
Management and Administrative—Investor Shares | 5 |
Management and Administrative—ETF Shares | 205 |
Management and Administrative—Admiral Shares | 91 |
Marketing and Distribution—Investor Shares | 1 |
Marketing and Distribution—ETF Shares | 7 |
Marketing and Distribution—Admiral Shares | 4 |
Custodian Fees | 94 |
Shareholders’ Reports—Investor Shares | 6 |
Shareholders’ Reports—ETF Shares | 14 |
Shareholders’ Reports—Admiral Shares | 14 |
Total Expenses | 477 |
Net Investment Income | 5,123 |
Realized Net Gain (Loss) | |
Investment Securities Sold2 | 4,335 |
Futures Contracts | 275 |
Foreign Currencies and Forward Currency Contracts | (2) |
Realized Net Gain (Loss) | 4,608 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 22,029 |
Futures Contracts | 20 |
Foreign Currencies and Forward Currency Contracts | (19) |
Change in Unrealized Appreciation (Depreciation) | 22,030 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 31,761 |
1 Dividends are net of foreign withholding taxes of $551,000.
2 Interest income and realized net gain (loss) from an affiliated company of the fund were $7,000 and $0, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
44
International High Dividend Yield Index Fund | ||
Statement of Changes in Net Assets | ||
February 25, | ||
Six Months Ended | 20161 to | |
April 30, | October 31, | |
2017 | 2016 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 5,123 | 2,346 |
Realized Net Gain (Loss) | 4,608 | (227) |
Change in Unrealized Appreciation (Depreciation) | 22,030 | 4,799 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 31,761 | 6,918 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (71) | (32) |
ETF Shares | (2,398) | (1,192) |
Admiral Shares | (1,039) | (563) |
Realized Capital Gain | ||
Investor Shares | — | — |
ETF Shares | — | — |
Admiral Shares | — | — |
Total Distributions | (3,508) | (1,787) |
Capital Share Transactions | ||
Investor Shares | 6,626 | 2,884 |
ETF Shares | 146,141 | 112,659 |
Admiral Shares | 21,680 | 82,919 |
Net Increase (Decrease) from Capital Share Transactions | 174,447 | 198,462 |
Total Increase (Decrease) | 202,700 | 203,593 |
Net Assets | ||
Beginning of Period | 203,593 | |
End of Period2 | 406,293 | 203,593 |
1 | Inception. |
2 | Net Assets—End of Period includes undistributed (overdistributed) net investment income of $2,171,000 and $555,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
45
International High Dividend Yield Index Fund | ||
Financial Highlights | ||
Investor Shares | ||
Six Months | Feb. 25, | |
Ended | 20161 to | |
April 30, | Oct. 31, | |
For a Share Outstanding Throughout Each Period | 2017 | 2016 |
Net Asset Value, Beginning of Period | $22.24 | $20.00 |
Investment Operations | ||
Net Investment Income | . 416 2 | .578 2 |
Net Realized and Unrealized Gain (Loss) on Investments | 2.083 | 2.059 |
Total from Investment Operations | 2.499 | 2.637 |
Distributions | ||
Dividends from Net Investment Income | (.259) | (.397) |
Distributions from Realized Capital Gains | — | — |
Total Distributions | (. 259) | (. 397) |
Net Asset Value, End of Period | $24.48 | $22.24 |
Total Return3 | 11.30% | 13.26% |
Ratios/Supplemental Data | ||
Net Assets, End of Period (Millions) | $10 | $3 |
Ratio of Total Expenses to Average Net Assets | 0.42% | 0.42%4,5 |
Ratio of Net Investment Income to Average Net Assets | 3.36% | 3.55%4 |
Portfolio Turnover Rate 6 | 14% | 6% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Calculated based on average shares outstanding. |
3 | Total returns do not include 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 | The ratio of total expenses to average net assets before an expense reimbursement of 0.31% was 0.73%. See Note B in the Notes to Financial Statements. |
6 | 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 | ||
ETF Shares | ||
Six Months | Feb. 25, | |
Ended | 20161 to | |
April 30, | Oct. 31, | |
For a Share Outstanding Throughout Each Period | 2017 | 2016 |
Net Asset Value, Beginning of Period | $55.61 | $50.00 |
Investment Operations | ||
Net Investment Income | 1.026 2 | 1.3232 |
Net Realized and Unrealized Gain (Loss) on Investments | 5.257 | 5.305 |
Total from Investment Operations | 6.283 | 6.628 |
Distributions | ||
Dividends from Net Investment Income | (.703) | (1.018) |
Distributions from Realized Capital Gains | — | — |
Total Distributions | (.703) | (1.018) |
Net Asset Value, End of Period | $61.19 | $55.61 |
Total Return | 11.37% | 13.37% |
Ratios/Supplemental Data | ||
Net Assets, End of Period (Millions) | $281 | $117 |
Ratio of Total Expenses to Average Net Assets | 0.32% | 0.32%3,4 |
Ratio of Net Investment Income to Average Net Assets | 3.46% | 3.65%3 |
Portfolio Turnover Rate 5 | 14% | 6% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Calculated based on average shares outstanding. |
3 | Annualized. |
4 | The ratio of total expenses to average net assets before an expense reimbursement of 0.31% was 0.63%. See Note B in the Notes to Financial Statements. |
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.
47
International High Dividend Yield Index Fund | ||
Financial Highlights | ||
Admiral Shares | ||
Six Months | March 2, | |
Ended | 20161 to | |
April 30, | Oct. 31, | |
For a Share Outstanding Throughout Each Period | 2017 | 2016 |
Net Asset Value, Beginning of Period | $26.92 | $25.00 |
Investment Operations | ||
Net Investment Income | . 459 2 | .5972 |
Net Realized and Unrealized Gain (Loss) on Investments | 2.586 | 1.817 |
Total from Investment Operations | 3.045 | 2.414 |
Distributions | ||
Dividends from Net Investment Income | (.315) | (.494) |
Distributions from Realized Capital Gains | — | — |
Total Distributions | (. 315) | (. 494) |
Net Asset Value, End of Period | $29.65 | $26.92 |
Total Return3 | 11.38% | 9.73% |
Ratios/Supplemental Data | ||
Net Assets, End of Period (Millions) | $115 | $84 |
Ratio of Total Expenses to Average Net Assets | 0.32% | 0.32%4,5 |
Ratio of Net Investment Income to Average Net Assets | 3.46% | 3.65%4 |
Portfolio Turnover Rate 6 | 14% | 6% |
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Inception. |
2 | Calculated based on average shares outstanding. |
3 | Total returns do not include 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 | The ratio of total expenses to average net assets before an expense reimbursement of 0.31% was 0.63%. See Note B in the Notes to Financial Statements. |
6 | 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.
48
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 NYSE Arca; 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 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
49
International High Dividend Yield Index Fund
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 any open futures contracts. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The 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, 2017, 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 3% 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 its open federal income tax year ended October 31, 2016, and for the period ended April 30, 2017, 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.
50
International High Dividend Yield Index Fund
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 event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at April 30, 2017, 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. 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
51
International High Dividend Yield Index Fund
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, 2017, the fund had contributed to Vanguard capital in the amount of $27,000, representing 0.01% of the fund’s net assets and 0.01% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
During the period ended October 31, 2016, the fund incurred higher than anticipated custody costs because of a higher volume of securities transactions, which included transactions from a rebalance of the benchmark index shortly after the fund’s inception. Because of these factors, Vanguard has agreed to reimburse the fund for the unanticipated custody costs, in the amount of $294,000 (an effective annual rate of 0.31% of the fund’s average net assets); the fund is not obligated to repay this amount to 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, 2017, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—North and South America | 40,085 | — | — |
Common Stocks—Other | 1,742 | 362,981 | 224 |
Temporary Cash Investments | 12,012 | — | — |
Futures Contracts—Assets1 | 3 | — | — |
Forward Currency Contracts—Assets | — | 334 | — |
Forward Currency Contracts—Liabilities | — | (299) | — |
Total | 53,842 | 363,016 | 224 |
1 Represents variation margin on the last day of the reporting period. |
Securities in certain countries may transfer between Level 1 and Level 2 because of differences in stock market closure times that may result from transitions between standard and daylight saving time in those countries and the United States. Based on values on the date of transfer, securities valued at $5,545,000 based on Level 1 inputs were transferred from Level 2 during the fiscal period.
52
International High Dividend Yield Index Fund
D. At April 30, 2017, 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 | 3 | 334 | 337 |
Other Liabilities | — | (299) | (299) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended April 30, 2017, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | 275 | — | 275 |
Forward Currency Contracts | — | (18) | (18) |
Realized Net Gain (Loss) on Derivatives | 275 | (18) | 257 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | 20 | — | 20 |
Forward Currency Contracts | — | 35 | 35 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | 20 | 35 | 55 |
At April 30, 2017, 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 2017 | 19 | 726 | 5 |
MSCI Emerging Market Index | June 2017 | 9 | 441 | 11 |
S&P ASX 200 Index | June 2017 | 1 | 111 | — |
16 |
Unrealized appreciation (depreciation) on open futures contracts, except for S&P ASX 200 Index, is required to be treated as realized gain (loss) for tax purposes.
53
International High Dividend Yield Index Fund
At April 30, 2017, 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) | ||
Goldman Sachs International | 06/21/17 | EUR | 13,618 | USD | 14,656 | 219 |
Bank of America, N.A. | 06/20/17 | AUD | 3,893 | USD | 2,994 | (82) |
BNP Paribas | 06/21/17 | EUR | 1,364 | USD | 1,471 | 18 |
Goldman Sachs International | 06/20/17 | AUD | 440 | USD | 333 | (4) |
Barclays Bank plc | 06/21/17 | EUR | 270 | USD | 291 | 4 |
Bank of America, N.A. | 06/21/17 | EUR | 263 | USD | 282 | 5 |
BNP Paribas | 06/20/17 | AUD | 287 | USD | 220 | (5) |
Barclays Bank plc | 06/20/17 | AUD | 288 | USD | 217 | (2) |
BNP Paribas | 06/21/17 | USD | 11,260 | EUR | 10,436 | (138) |
Goldman Sachs International | 06/20/17 | USD | 3,223 | AUD | 4,201 | 80 |
Goldman Sachs International | 06/21/17 | USD | 3,124 | EUR | 2,902 | (46) |
Barclays Bank plc | 06/21/17 | USD | 974 | EUR | 912 | (22) |
BNP Paribas | 06/21/17 | USD | 731 | EUR | 669 | 1 |
Bank of America, N.A. | 06/20/17 | USD | 222 | AUD | 289 | 6 |
Barclays Bank plc | 06/20/17 | USD | 219 | AUD | 291 | 1 |
35 | ||||||
AUD—Australian dollar. | ||||||
EUR—Euro. | ||||||
USD—U.S. dollar. |
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, 2017, the fund realized $3,385,000 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 gains to paid-in capital.
54
International High Dividend Yield Index Fund
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at October 31, 2016, the fund had available capital losses of $227,000 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, 2017; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At April 30, 2017, the cost of investment securities for tax purposes was $390,305,000. Net unrealized appreciation of investment securities for tax purposes was $26,739,000, consisting of unrealized gains of $30,336,000 on securities that had risen in value since their purchase and $3,597,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended April 30, 2017, the fund purchased $214,316,000 of investment securities and sold $37,215,000 of investment securities, other than temporary cash investments. Purchases and sales include $123,885,000 and $16,744,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.
G. Capital share transactions for each class of shares were: | ||||
Six Months Ended | Year Ended | |||
April 30, 2017 | October 31, 2016 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares1 | ||||
Issued 2 | 8,807 | 378 | 4,632 | 214 |
Issued in Lieu of Cash Distributions | 67 | 3 | 29 | 1 |
Redeemed 3 | (2,248) | (97) | (1,777) | (82) |
Net Increase (Decrease)—Investor Shares | 6,626 | 284 | 2,884 | 133 |
ETF Shares1 | ||||
Issued 2 | 164,366 | 2,795 | 112,659 | 2,100 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed 3 | (18,225) | (300) | — | — |
Net Increase (Decrease)—ETF Shares | 146,141 | 2,495 | 112,659 | 2,100 |
Admiral Shares4 | ||||
Issued 2 | 43,394 | 1,543 | 90,853 | 3,415 |
Issued in Lieu of Cash Distributions | 911 | 32 | 352 | 13 |
Redeemed 3 | (22,625) | (814) | (8,286) | (313) |
Net Increase (Decrease)—Admiral Shares | 21,680 | 761 | 82,919 | 3,115 |
1 Inception was February 25, 2016, for Investor Shares and ETF Shares. | ||||
2 Includes purchase fees for fiscal 2017 and 2016 of $71,000 and $0, respectively (fund totals). | ||||
3 Net of redemption fees for fiscal 2017 and 2016 of $7,000 and $0, respectively (fund totals). | ||||
4 Inception was March 2, 2016, for Admiral Shares. |
H. Management has determined that no material events or transactions occurred subsequent to April 30, 2017, that would require recognition or disclosure in these financial statements.
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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, 2017 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
10/31/2016 | 4/30/2017 | Period | |
Based on Actual Fund Return | |||
International Dividend Appreciation Index Fund | |||
Investor Shares | $1,000.00 | $1,092.65 | $1.82 |
ETF Shares | 1,000.00 | 1,093.55 | 1.30 |
Admiral Shares | 1,000.00 | 1,093.48 | 1.30 |
International High Dividend Yield Index Fund | |||
Investor Shares | $1,000.00 | $1,113.01 | $2.20 |
ETF Shares | 1,000.00 | 1,113.69 | 1.68 |
Admiral Shares | 1,000.00 | 1,113.76 | 1.68 |
Based on Hypothetical 5% Yearly Return | |||
International Dividend Appreciation Index Fund | |||
Investor Shares | $1,000.00 | $1,023.06 | $1.76 |
ETF Shares | 1,000.00 | 1,023.55 | 1.25 |
Admiral Shares | 1,000.00 | 1,023.55 | 1.25 |
International High Dividend Yield Index Fund | |||
Investor Shares | $1,000.00 | $1,022.71 | $2.11 |
ETF Shares | 1,000.00 | 1,023.21 | 1.61 |
Admiral Shares | 1,000.00 | 1,023.21 | 1.61 |
The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the International Dividend Appreciation Index Fund, 0.35% for Investor Shares, 0.25% for ETF Shares, and 0.25% for Admiral Shares; and for the International High Dividend Yield Index Fund, 0.42% for Investor Shares, 0.32% for ETF Shares, and 0.32% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the six-month period, then divided by the number of days in the most recent 12-month period (181/365).
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Trustees Approve Advisory Arrangements
The board of trustees of Vanguard International Dividend Appreciation Index Fund and Vanguard International High Dividend Yield Index Fund has renewed the funds’ investment advisory arrangements with The Vanguard Group, Inc. (Vanguard)—through its Equity Index Group. The board determined that continuing each 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. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the 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 provided to the funds since their inceptions in 2016 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 arrangements.
Investment performance
The board considered each fund’s performance since its inception in 2016, including any periods of outperformance or underperformance compared with its target index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about each fund’s performance since inception can be found in the Performance Summary section of this report.
Cost
The board concluded that the funds’ expense ratios were well below the average expense ratios charged by funds in their peer groups and that the funds’ advisory expenses were also well below their peer-group averages. Information about the funds’ expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements sections.
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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 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 again after a one-year period.
59
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.
Fair-Value Pricing. Fair-value 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.
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.
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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 197 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. 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
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years and Other Experience: Chairman of the Board of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group, since January 2010; Director of The Vanguard Group since 2008; Chief Executive Officer and President of The Vanguard Group, and of each of the investment companies served by The Vanguard Group, since 2008; Director of Vanguard Marketing Corporation; Managing Director of The Vanguard Group (1995–2008).
IndependentTrustees
Emerson U. Fullwood
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Executive Chief Staff and Marketing Officer for North America and Corporate Vice President (retired 2008) of Xerox Corporation (document management products and services); Executive in Residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology; Lead Director of SPX FLOW, Inc. (multi-industry manufacturing); Director of the United Way of Rochester, the University of Rochester Medical Center, Monroe Community College Foundation, North Carolina A&T University, and Roberts Wesleyan College.
Rajiv L. Gupta
Born 1945. Trustee Since December 2001.2 Principal Occupation(s) During the Past Five Years and Other Experience: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Arconic Inc. (diversified manufacturer), HP Inc. (printer and personal computer manufacturing), and Delphi Automotive plc (automotive components); Senior Advisor at New Mountain Capital.
Amy Gutmann
Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years and Other Experience: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and Professor of Communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania; Trustee of the National Constitution Center; Chair of the Presidential Commission for the Study of Bioethical Issues.
JoAnn Heffernan Heisen
Born 1950. Trustee Since July 1998. Principal Occupation(s) During the Past Five Years and Other Experience: Corporate Vice President and Member of the Executive Committee (1997–2008), Chief Global Diversity Officer (retired 2008), Vice President and Chief Information Officer (1997–2005), Controller (1995–1997), Treasurer (1991–1995), and Assistant Treasurer (1989–1991) 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
Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2009) of Cummins Inc. (industrial machinery); Chairman of the Board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education; Director of SKF AB (industrial machinery), Hyster-Yale Materials Handling, Inc. (forklift trucks), and the V Foundation for Cancer Research; Member of the Advisory Council for the College of Arts and Letters and Chair of the Advisory
Board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born 1953. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Senior Vice President and Chief Financial Officer (retired 2013) at IBM (information technology services); Fiduciary Member of IBM’s Retirement Plan Committee (2004–2013); Director of the Dow Chemical Company; Member of the Council on Chicago Booth.
Scott C. Malpass
Born 1962. Trustee Since March 2012. Principal Occupation(s) During the Past Five Years and Other Experience: Chief Investment Officer and Vice President at the University of Notre Dame; Assistant Professor of Finance at the Mendoza College of Business at Notre Dame; Member of the Notre Dame 403(b) Investment Committee, the Board of Advisors for Spruceview Capital Partners, and the Investment Advisory Committee of Major League Baseball; Board Member of TIFF Advisory Services, Inc., and Catholic Investment Services, Inc. (investment advisors); Member of the Board of Superintendence of the Institute for the Works of Religion.
André F. Perold
Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years and Other Experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011); Chief Investment Officer and Co-Managing Partner of HighVista Strategies LLC (private investment firm); Overseer of the Museum of Fine Arts Boston.
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years and Other Experience: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Chairman of the Board of Trustees of Colby-Sawyer College; Member of the Board of Hypertherm, Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born 1967. Investment Stewardship Officer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Treasurer (2015–2017), Controller (2010–2015), and Assistant Controller (2001–2010) of each of the investment companies served by The Vanguard Group.
Thomas J. Higgins
Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).
Peter Mahoney
Born 1974. Controller Since May 2015. Principal Occupation(s) During the Past Five Years and Other Experience: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group; Head of International Fund Services at The Vanguard Group (2008–2014).
Anne E. Robinson
Born 1970. Secretary Since September 2016. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; General Counsel of The Vanguard Group; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group; Director and Senior Vice President of Vanguard Marketing Corporation; Managing Director and General Counsel of Global Cards and Consumer Services at Citigroup (2014–2016); Counsel at American Express (2003–2014).
Michael Rollings
Born 1963. Treasurer Since February 2017. Principal Occupation(s) During the Past Five Years and Other Experience: Managing Director of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group; Executive Vice President and Chief Financial Officer of MassMutual Financial Group (2006–2016).
Vanguard Senior Management Team
Mortimer J. Buckley John James Martha G. King John T. Marcante Chris D. McIsaac | James M. Norris Thomas M. Rampulla Glenn W. Reed Karin A. Risi |
Chairman Emeritus and Senior Advisor John J. Brennan
Chairman, 1996–2009
Chief Executive Officer and President, 1996–2008
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 |
“NASDAQ OMX”), and has been licensed for use by The | |
Institutional Investor Services > 800-523-1036 | Vanguard Group, Inc. Vanguard mutual funds are not |
Text Telephone for People | sponsored, endorsed, sold, or promoted by NASDAQ |
Who Are Deaf or Hard of Hearing> 800-749-7273 | OMX and NASDAQ OMX makes no representation |
regarding the advisability of investing in the funds. | |
This material may be used in conjunction | NASDAQ OMX makes no warranties and bears no |
with the offering of shares of any Vanguard | liability with respect to the Vanguard mutual funds. |
fund only if preceded or accompanied by | London Stock Exchange Group companies include FTSE |
the fund’s current prospectus. | International Limited (”FTSE”), Frank Russell Company |
(”Russell”), MTS Next Limited (”MTS”), and FTSE TMX | |
All comparative mutual fund data are from Lipper, a | Global Debt Capital Markets Inc. (”FTSE TMX”). All |
Thomson Reuters Company, or Morningstar, Inc., unless | rights reserved. ”FTSE®”, ”Russell®”, ”MTS®”, ”FTSE |
otherwise noted. | 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. | |
© 2017 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q20152 062017 |
(Insert semi-annual report(s) here)
Item 2: Code of Ethics. The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.
Item 3: Audit Committee Financial Expert.
Not Applicable.
0448435, v0.57
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.
0448435, v0.57
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, 2017
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, 2017 |
VANGUARD WHITEHALL FUNDS |
BY: | /s/ THOMAS J. HIGGINS* THOMAS J. HIGGINS CHIEF FINANCIAL OFFICER |
Date: June 15, 2017
* By: /s/ Anne E. Robinson
Anne E. Robinson, pursuant to a Power of Attorney filed on October 4, 2016 see file Number 33-32548, Incorporated by Reference.
0448435, v0.57