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: 811-1027
Name of Registrant: Vanguard World Fund
Address of Registrant:
P.O. Box 2600
Valley Forge, PA 19482
Name and address of agent for service:
Heidi Stam, Esquire
P.O. Box 876
Valley Forge, PA 19482
Registrant’s telephone number, including area code: (610) 669-1000
Date of fiscal year end: August 31
Date of reporting period: September 1, 2010 – February 28, 2011
Item 1: Reports to Shareholders
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Vanguard U.S. Growth Fund |
Semiannual Report |
February 28, 2011 |
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> Vanguard U.S. Growth Fund returned more than 32% for the six months ended February 28, 2011, ahead of the results of its comparative standards.
> Growth stocks of all sizes generally outperformed their value-oriented counterparts as the economic outlook brightened—although the recent oil price shock and tragedy in Japan have made investors wary.
> Information technology, the fund’s largest sector by far, contributed the most to its success.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisors’ Report. | 7 |
Fund Profile. | 11 |
Performance Summary. | 12 |
Financial Statements. | 13 |
About Your Fund’s Expenses. | 24 |
Trustees Approve Advisory Agreements. | 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.
Cover photograph: Jean Maher.
Your Fund’s Total Returns
Six Months Ended February 28, 2011 | |
Total | |
Returns | |
Vanguard U.S. Growth Fund | |
Investor Shares | 32.17% |
Admiral™ Shares | 32.36 |
Russell 1000 Growth Index | 31.04 |
Large-Cap Growth Funds Average | 29.55 |
Large-Cap Growth Funds Average: Derived from data provided by Lipper Inc. |
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.
Your Fund’s Performance at a Glance | ||||
August 31, 2010 , Through February 28, 2011 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard U.S. Growth Fund | ||||
Investor Shares | $14.75 | $19.38 | $0.108 | $0.000 |
Admiral Shares | 38.20 | 50.20 | 0.339 | 0.000 |
1
Chairman’s Letter
Dear Shareholder,
As investors became more confident about prospects for the global economy, growth stocks generally outperformed their value-oriented brethren, providing a favorable environment for your fund. For the six months ended February 28, 2011, Vanguard U.S. Growth Fund returned more than 32%, outpacing its large-company growth comparative standards and the broad U.S. stock market—which is diversified across growth and value stocks.
Information technology holdings powered the fund’s performance. IT represented almost 40% of total fund assets at the end of the period, and made a similar contribution to total return.
In October, as we described in the fund’s annual report, we appointed two new advisory firms to Vanguard U.S. Growth Fund. Longtime Vanguard partner Wellington Management Company, llp, and Delaware Management Company—both of which trace their roots to 1929—replaced AllianceBernstein L.P. Also in October, at William Blair & Company, L.L.C., James Golan and Tracy McCormick joined the fund’s management team. John Jostrand transitioned off the team in December, to focus on his other portfolio management responsibilities at William Blair. We thank John for his service since 2004.
Please note that as part of our ongoing efforts to lower the cost of investing for all of our clients, we have broadened the
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availability of our lower-cost Admiral Shares, reducing the Admiral minimums for most of our actively managed funds to $50,000 from $100,000.
A fretful start, an optimistic finish for global stock markets
Stock markets rallied from their midsummer malaise to produce exceptional returns for the six months ended February 28. At the start of the period, the U.S. economy seemed in danger of tipping back into recession. By the end, hopes were high that it had reached escape velocity, propelled by steady job growth and notable strength in the manufacturing sector. Smaller stocks, which are especially sensitive to the rhythms of the business cycle, produced the highest six-month returns.
In Europe, investor optimism subdued sovereign-debt jitters, driving stock prices higher. Developed markets in the Pacific region perked up on signs of recovery in global trade. Australian stocks posted especially strong returns, benefiting from a surge in the prices of metals and other natural resources. Emerging stock markets trailed a few steps behind their developed-market counterparts. Most major currencies appreciated relative to the U.S. dollar, enhancing returns from abroad for U.S.-based investors.
Interest rates rose, depressing bond prices
U.S. interest rates hovered near generational lows early in the period, but then moved higher, putting pressure on bond prices. For the six months, the broad
Market Barometer | |||
Total Returns | |||
Periods Ended February 28, 2011 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 28.65% | 23.54% | 3.17% |
Russell 2000 Index (Small-caps) | 37.55 | 32.60 | 3.80 |
Dow Jones U.S. Total Stock Market Index | 29.24 | 24.45 | 3.59 |
MSCI All Country World Index ex USA (International) | 22.16 | 21.12 | 4.23 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | -0.83% | 4.93% | 5.80% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | -3.51 | 1.72 | 4.07 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.06 | 0.14 | 2.16 |
CPI | |||
Consumer Price Index | 1.37% | 2.11% | 2.18% |
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taxable bond market produced a small negative return. The municipal bond market did worse. Corporate bonds outperformed government debt, as investors stretched for yield beyond government securities, where rates remained low by historical standards.
As it has since December 2008, the Federal Reserve held its target for short-term interest rates near 0%. This stance kept the returns available from money market instruments, such as the 3-month Treasury bill, in the same neighborhood.
Exceptional strength from expected and unexpected sources
As the economy continued to grind into gear—more slowly than we might have liked—Vanguard U.S. Growth Fund earned robust returns in sectors that are keenly sensitive to the rhythms of the business cycle, including materials, industrials, and information technology, where corporate spending usually picks up along with the economy. Led by IT, each of these sectors advanced more than 30% in the six months.
There was widespread strength across information technology, the fund’s largest sector, especially among semiconductor firms, communications equipment makers, and computers. Apple (+45%), still the fund’s largest holding, was also its best contributor—adding nearly 3 percentage points to the fund’s return.
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
U.S. Growth Fund | 0.48% | 0.32% | 1.37% |
The fund expense ratios shown are from the prospectus dated April 8, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.44% for Investor Shares and 0.29% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper Inc. and captures information through year-end 2010.
Peer group: Large-Cap Growth Funds.
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Soaring commodity prices and rising demand—notably from emerging markets such as China—lifted the small materials sector, especially chemical companies and metals and mining firms. At the same time, a wide range of industrial holdings benefited from the more vigorous economy, including makers of machinery and electrical equipment.
It was the energy sector, however, that notched the highest six-month return—more than 50% in both the fund and its benchmark index. Rising crude oil prices and firm demand helped, of course. The Gulf of Mexico oil spill last April also played a key role: The stock prices of many companies that provide equipment, drilling, and other technology and services were hit hard by the oil spill, then soared after BP capped the well. For example, National Oilwell Varco more than doubled over the six months through the end of February, and top-ten holding Schlumberger returned more than 76%.
Relative to the benchmark, the advisors’ selections among communications equipment, internet, and computer companies added almost 2 percentage points to the fund’s performance. Beyond IT, a home to many classic “growth” stocks, the advisors found success in some less expected places. Being highly selective among consumer staples companies helped the fund outperform the index in that sector by almost 1 percentage point. And in health care, the advisors sidestepped the decline in a major pharmaceutical company. Results were held back by some consumer discretionary and financial holdings, and a few opportunities were missed in energy.
For more about the advisors’ strategy and the fund’s positioning during the six months, please see the Advisors’ Report that follows this letter.
Improved performance, but too soon to judge
We are encouraged by the U.S. Growth Fund’s performance in the first six months of the new fiscal year. The addition of two new advisory firms in October limits the relevance of this fund’s long-term record, but the fund’s recent results affirm our confidence that, over time, the fund’s advisors will be able to restore some of the U.S. Growth Fund’s luster after a lengthy period of disappointing performance.
Equity returns in the last six months were exceptional. After stumbling in August, markets gained ground each month thereafter. Consumer confidence was so strong that when Ireland’s budget challenges became front-page news in late 2010, investors responded with more of a hiccup than a gasp—a marked contrast to the response to the Greek crisis last spring. As I write this letter, however, investor confidence is being tested by the dramatic events unfolding daily in the Middle East, spiking oil prices, and the uncertain ramifications of the tragedy
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in Japan. These events serve as reminders of the importance of diversifying your assets among low-cost funds that help you keep more of their returns. Within a balanced portfolio, Vanguard U.S. Growth Fund can provide low-cost exposure to the potential opportunities among high-quality, blue chip growth companies.
As always, thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/usgrowth_q232x8x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 14, 2011
6
Advisors’ Report
For the half-year ended February 28, 2011, Vanguard U.S. Growth Fund returned more than 32%, finishing ahead of its comparative standards. In early October, Wellington Management Company, llp, and Delaware Management Company joined William Blair & Company, L.L.C., replacing AllianceBernstein L.P. The use of multiple independent advisors enhances the fund’s 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 table below presents the advisors, the percentage and amount of fund assets that each manages, and brief descriptions of their investment strategies. Each advisor has also prepared a discussion of the investment environment during the six months and of how the portfolio’s positioning reflects this assessment. These reports were prepared on March 10, 2011.
Vanguard U.S. Growth Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Wellington Management | 35 | 1,419 | Employs proprietary fundamental research and a |
Company, LLP | rigorous valuation discipline in an effort to invest in | ||
high-quality, large-cap, sustainable-growth companies. | |||
The investment approach is based on the belief that | |||
stock prices often overreact to short-term trends, and | |||
that bottom-up, intensive research focused on | |||
longer-term fundamentals can be used to identify | |||
stocks that will outperform the market over time. | |||
Delaware Management Company | 35 | 1,390 | Uses a bottom-up approach, seeking companies that |
have large end-market potential, dominant business | |||
models, and strong free cash flow generation that is | |||
attractively priced compared with the intrinsic value of | |||
the securities. | |||
William Blair & Company, L.L.C. | 28 | 1,108 | Uses a fundamental investment approach in pursuit of |
superior long-term investment results from | |||
growth-oriented companies with leadership positions | |||
and strong market presence. | |||
Cash Investments | 2 | 64 | 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. |
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Wellington Management Company, llp
Portfolio Manager:
Andrew J. Shilling, CFA, Senior Vice President
We seek to provide attractive long-term total returns by using proprietary fundamental research and a rigorous valuation discipline to invest in successful, high-quality, large-cap companies with sustainable growth. We believe that stock prices often overreact to short-term trends, and that our bottom-up, research-intensive approach focused on longer-term fundamentals will enable us to outperform the market over time.
U.S. equities continued their ascent through late 2010 and into 2011, driven by investors’ enthusiasm for additional government debt purchases by the Federal Reserve, the extension of federal tax cuts, strong earnings growth, and generally improving economic data.
Since its inception in October 2010, our portion of the fund has performed well, with strong stock selection in the consumer discretionary sector and several favorable sector allocation decisions—including lower-than-benchmark weights in under-performing health care and consumer staples. An underweighting in the strong energy sector and some other allocation decisions held back performance.
Top contributors to our relative returns included National Oilwell Varco, an equipment and services provider for oil and gas drilling and production operations, and online travel company priceline.com.
National Oilwell rose after reporting better-than-expected results, and is well positioned to benefit from increasing demand for new and replacement high-capability drilling and well-completion equipment. Priceline.com continued to benefit from growing internet-based commerce and travel trends in Europe and across the globe.
Cisco Systems and Dolby Laboratories were among our notable relative detractors. We sold our position in Cisco, a leading supplier of networking equipment and network management services for the internet, after the company released a disappointing revenue and earnings outlook. Dolby Laboratories, a developer of products and technologies used in the entertainment industry, underperformed as investors were concerned that weak PC and television trends may dampen earnings.
Despite equities’ surge, macroeconomic uncertainty remains, with heightened geopolitical risks in North Africa and the Middle East. We continue to focus our analysis at the individual company level, using fundamental research for early identification of companies with sustainable growth and superior business models. We believe the breadth, depth, and strength of our research resources give us an inherent advantage in identifying growth companies with high cash-flow returns on investment, strong balance sheets, experienced and proven management, and the ability to maintain above-average growth.
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Delaware Management Company
Portfolio Managers:
Christopher J. Bonavico, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst
Christopher M. Ericksen, CFA, Vice President, Portfolio Manager, and Equity Analyst
Daniel J. Prislin, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst
Jeffrey S. Van Harte, CFA, Senior Vice President and CIO—Focus Growth Equity
We focus on owning what we consider to be strong long-term growth companies with solid business models and competitive positions that we believe can increase market share and deliver shareholder value in a variety of market environments. From October 2010, when we became an advisor, through February 28, 2011, our portion of the fund had a double-digit gain.
Our largest contributor to performance was Polycom, whose earnings reports beat expectations in many metrics, including revenues, margins, and backlog. We believe the company is participating in a strong long-term growth area of technology innovation in videoconferencing that is resulting in an improved user experience. The quantifiable return on investment from this technology should lead to continued growth.
Another strong contributor was priceline.com, which we have owned since the inception of our Vanguard relationship.
The stock price had declined dramatically in mid-2010 on concerns about the impact on earnings of the Icelandic volcano eruption and the Greek credit crisis. These concerns proved unfounded just a few months later, as the company posted very strong earnings again and said that it anticipated higher future growth.
Visa was one of the largest detractors from our performance. In mid-December, the Federal Reserve’s preliminary interpretation of proposed legislation caused a significant correction in the stocks of the credit card networks. We do not believe the legislation will be enacted as is, and we think the market has substantially overestimated the negative impact on these companies.
If we’re correct, and the outstanding fundamentals of these companies don’t change meaningfully, the market will decrease the cost of capital—which translates to higher multiples and potentially significant price appreciation.
We believe investors are still uncertain about the level of future global economic growth. The lingering effects of the credit crisis could lead to moderate growth, at best, and are likely to continue to result in often conflicting economic data points and a variety of company fundamental outcomes depending on the quality of a company’s business model, competitive position, and management. We believe we own a portfolio of companies with superior quality in these key areas.
9
William Blair & Company, L.L.C.
Portfolio Managers:
James Golan, CFA, Principal
Tracy McCormick, Principal
The stock market took off at the end of August after the Federal Reserve said it was prepared to respond with additional quantitative easing; the Fed’s plans were officially announced in November. Better-than-expected company earnings, positive economic reports, and extension of the Bush-era tax cuts also boosted equities. More recently, although concerns have flared up over conflicts in the Middle East and the potential for rising inflation with increased commodities prices, equity market returns have remained positive.
Our best performer was Schlumberger, helped by solid earnings and rising oil prices. We expect the stock to benefit from the upcoming deepwater drilling cycle. Rockwell Automation also did well as original equipment manufacturers sought its products and services to reduce costs and enhance productivity. The information technology sector was another area of strength. Agilent Technologies gained ground on higher-than-anticipated earnings; we believe the company should benefit from continued margin improvement resulting from restructuring, expansion into Asian economies, and cross-selling opportunities from the recent Varian acquisition. Other notable IT contributors were QUALCOMM and eBay.
One of our largest stock detractors was PepsiCo, one of our top holdings. It reported earnings in line with expectations, but given the strong move by the market overall, this high-quality staple franchise’s flat absolute return resulted in relative underperformance. In terms of sectors, consumer discretionary was challenging. Strong performance from Johnson Controls was overshadowed by positive, but weak, relative returns from Discovery Communications, McDonald’s, and Yum! Brands.
For 2011, the U.S. economy is likely to experience moderate growth amid a stabilized and improving macroeconomic environment. While many risks to economic growth remain, the Federal Reserve continues to be very accommodative in its policy, assisting asset prices, businesses, and wages. Also, U.S. corporations have strong, cash-rich balance sheets; they are likely to increase their capital investment, raise dividend payouts, buy back stock, and pursue acquisitions.
We believe the broadening economic recovery and a more stable growth outlook should favor stock pickers and our quality growth philosophy. At the heart of our process is deep fundamental research, leading us to durable business franchises with strong competitive advantages and growth leadership.
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U.S. Growth Fund
Fund Profile
As of February 28, 2011
Share-Class Characteristics | ||
Investor | Admiral | |
Shares | Shares | |
Ticker Symbol | VWUSX | VWUAX |
Expense Ratio1 | 0.48% | 0.32% |
30-Day SEC Yield | 0.38% | 0.54% |
Portfolio Characteristics | |||
Russell | DJ | ||
1000 | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Number of Stocks | 116 | 626 | 3,845 |
Median Market Cap | $28.4B | $40.1B | $31.4B |
Price/Earnings Ratio | 22.4x | 18.2x | 17.9x |
Price/Book Ratio | 3.4x | 3.8x | 2.3x |
Return on Equity | 22.6% | 25.3% | 19.2% |
Earnings Growth Rate | 11.4% | 10.2% | 5.4% |
Dividend Yield | 0.8% | 1.4% | 1.6% |
Foreign Holdings | 5.2% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 102% | — | — |
Short-Term Reserves | 0.9% | — | — |
Sector Diversification (% of equity exposure) | |||
Russell | DJ | ||
1000 | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 17.2% | 14.3% | 11.8% |
Consumer Staples | 3.7 | 9.1 | 9.1 |
Energy | 8.7 | 11.8 | 11.6 |
Financials | 8.4 | 4.8 | 16.6 |
Health Care | 8.8 | 9.8 | 10.5 |
Industrials | 9.8 | 13.3 | 11.4 |
Information | |||
Technology | 38.1 | 31.0 | 18.9 |
Materials | 3.9 | 5.0 | 4.5 |
Telecommunication | |||
Services | 1.3 | 0.8 | 2.5 |
Utilities | 0.1 | 0.1 | 3.1 |
Volatility Measures | ||
DJ | ||
U.S. Total | ||
Russell 1000 | Market | |
Growth Index | Index | |
R-Squared | 0.98 | 0.96 |
Beta | 0.97 | 0.93 |
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) | ||
Apple Inc. | Computer | |
Hardware | 5.7% | |
QUALCOMM Inc. | Communications | |
Equipment | 4.0 | |
Google Inc. Class A | Internet Software & | |
Services | 2.9 | |
EOG Resources Inc. | Oil & Gas | |
Exploration & | ||
Production | 2.3 | |
priceline.com Inc. | Internet Retail | 2.2 |
eBay Inc. | Internet Software & | |
Services | 2.1 | |
Schlumberger Ltd. | Oil & Gas | |
Equipment & | ||
Services | 2.0 | |
Allergan Inc. | Pharmaceuticals | 1.9 |
NIKE Inc. Class B | Footwear | 1.8 |
CME Group Inc. | Specialized Finance | 1.7 |
Top Ten | 26.6% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/usgrowth_q232x13x1.jpg)
1 The expense ratios shown are from the prospectus dated April 8, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.44% for Investor Shares and 0.29% for Admiral Shares.
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U.S. 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 (%): August 31, 2000, Through February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/usgrowth_q232x14x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
This table presents average annual total 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 | 1/6/1959 | 11.53% | 0.96% | -3.64% |
Admiral Shares | 8/13/2001 | 11.74 | 1.17 | 0.071 |
1 Return since inception. |
See Financial Highlights for dividend and capital gains information.
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U.S. Growth Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
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 (97.8%)1 | |||
Consumer Discretionary (16.9%) | |||
* | priceline.com Inc. | 190,100 | 86,283 |
NIKE Inc. Class B | 795,500 | 70,823 | |
Johnson Controls Inc. | 1,494,930 | 60,993 | |
Lowe’s Cos. Inc. | 2,240,820 | 58,642 | |
* | Apollo Group Inc. Class A | 1,075,300 | 48,668 |
Staples Inc. | 2,260,550 | 48,150 | |
Harley-Davidson Inc. | 957,150 | 39,071 | |
* | Ctrip.com | ||
International Ltd. ADR | 801,400 | 31,070 | |
News Corp. Class A | 1,570,960 | 27,288 | |
Marriott International | |||
Inc. Class A | 604,400 | 23,698 | |
Polo Ralph Lauren Corp. | |||
Class A | 185,770 | 23,539 | |
* | Ford Motor Co. | 1,496,570 | 22,523 |
* | Discovery Communications | ||
Inc. Class A | 515,500 | 22,223 | |
Walt Disney Co. | 499,070 | 21,829 | |
Coach Inc. | 335,830 | 18,444 | |
Scripps Networks | |||
Interactive Inc. Class A | 344,717 | 17,905 | |
Starbucks Corp. | 326,400 | 10,765 | |
* | Las Vegas Sands Corp. | 218,000 | 10,167 |
* | Lululemon Athletica Inc. | 112,900 | 8,760 |
Abercrombie & Fitch Co. | 125,290 | 7,188 | |
* | Sirius XM Radio Inc. | 3,210,440 | 5,811 |
* | Amazon.com Inc. | 24,040 | 4,166 |
* | Fossil Inc. | 36,930 | 2,834 |
670,840 | |||
Consumer Staples (3.6%) | |||
Walgreen Co. | 986,312 | 42,747 | |
Procter & Gamble Co. | 477,100 | 30,081 | |
* | Green Mountain Coffee | ||
Roasters Inc. | 664,300 | 27,090 | |
Mead Johnson | |||
Nutrition Co. | 387,600 | 23,198 | |
PepsiCo Inc. | 283,800 | 17,999 | |
141,115 |
Market | |||
Value | |||
Shares | ($000) | ||
Energy (8.5%) | |||
EOG Resources Inc. | 797,660 | 89,585 | |
Schlumberger Ltd. | 858,000 | 80,154 | |
Occidental Petroleum Corp. | 429,300 | 43,776 | |
National Oilwell Varco Inc. | 548,000 | 43,604 | |
Suncor Energy Inc. | 520,700 | 24,483 | |
Anadarko Petroleum Corp. | 265,210 | 21,702 | |
Consol Energy Inc. | 341,940 | 17,340 | |
Ensco plc ADR | 308,690 | 17,318 | |
337,962 | |||
Exchange-Traded Fund (0.0%) | |||
2 | Vanguard Growth ETF | 3,100 | 199 |
Financials (8.1%) | |||
CME Group Inc. | 215,560 | 67,100 | |
Ameriprise Financial Inc. | 887,000 | 56,165 | |
* | IntercontinentalExchange | ||
Inc. | 348,200 | 44,639 | |
Bank of New York | |||
Mellon Corp. | 1,275,100 | 38,750 | |
American Express Co. | 758,560 | 33,051 | |
BlackRock Inc. | 134,830 | 27,504 | |
Wells Fargo & Co. | 728,810 | 23,511 | |
Hartford Financial | |||
Services Group Inc. | 769,975 | 22,791 | |
Progressive Corp. | 216,300 | 4,506 | |
Goldman Sachs Group Inc. | 26,520 | 4,343 | |
322,360 | |||
Health Care (8.5%) | |||
Allergan Inc. | 1,034,835 | 76,754 | |
* | Medco Health | ||
Solutions Inc. | 1,030,700 | 63,532 | |
* | Agilent Technologies Inc. | 1,283,360 | 54,004 |
* | Novo Nordisk A/S ADR | 361,400 | 45,775 |
Covidien plc | 696,200 | 35,820 | |
Perrigo Co. | 370,400 | 28,310 | |
* | Illumina Inc. | 222,700 | 15,455 |
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U.S. Growth Fund
Market | |||
Value | |||
Shares | ($000) | ||
* | Celgene Corp. | 218,100 | 11,581 |
Teva Pharmaceutical | |||
Industries Ltd. ADR | 162,500 | 8,141 | |
339,372 | |||
Industrials (9.5%) | |||
Expeditors International of | |||
Washington Inc. | 704,800 | 33,689 | |
United Parcel Service Inc. | |||
Class B | 411,700 | 30,383 | |
Rockwell Automation Inc. | 329,200 | 28,881 | |
Danaher Corp. | 535,330 | 27,088 | |
PACCAR Inc. | 508,630 | 25,498 | |
* | Jacobs Engineering | ||
Group Inc. | 425,000 | 21,275 | |
Goodrich Corp. | 245,000 | 21,126 | |
Manpower Inc. | 325,400 | 20,663 | |
Joy Global Inc. | 202,310 | 19,701 | |
Cummins Inc. | 183,300 | 18,535 | |
Illinois Tool Works Inc. | 328,300 | 17,761 | |
* | Stericycle Inc. | 200,000 | 17,284 |
Eaton Corp. | 154,200 | 17,082 | |
Caterpillar Inc. | 162,000 | 16,675 | |
WW Grainger Inc. | 124,200 | 16,545 | |
CH Robinson | |||
Worldwide Inc. | 224,500 | 16,252 | |
Siemens AG ADR | 84,800 | 11,400 | |
AMETEK Inc. | 211,790 | 8,885 | |
Precision Castparts Corp. | 50,600 | 7,173 | |
Boeing Co. | 55,530 | 3,999 | |
379,895 | |||
Information Technology (37.6%) | |||
* | Apple Inc. | 642,590 | 226,969 |
QUALCOMM Inc. | 2,652,275 | 158,023 | |
* | Google Inc. Class A | 185,505 | 113,789 |
* | eBay Inc. | 2,522,310 | 84,510 |
* | EMC Corp. | 2,276,400 | 61,941 |
Microsoft Corp. | 2,293,825 | 60,970 | |
Visa Inc. Class A | 822,100 | 60,054 | |
* | Intuit Inc. | 1,072,900 | 56,413 |
Mastercard Inc. Class A | 224,500 | 54,006 | |
* | Citrix Systems Inc. | 762,800 | 53,518 |
Altera Corp. | 1,228,970 | 51,445 | |
Oracle Corp. | 1,463,900 | 48,162 | |
* | Adobe Systems Inc. | 1,261,600 | 43,525 |
VeriSign Inc. | 1,093,100 | 38,575 | |
Broadcom Corp. Class A | 903,370 | 37,237 | |
* | Polycom Inc. | 711,800 | 34,024 |
Accenture plc Class A | 634,870 | 32,683 | |
* | Teradata Corp. | 640,300 | 30,619 |
* | Juniper Networks Inc. | 673,900 | 29,652 |
* | NetApp Inc. | 481,280 | 24,863 |
Texas Instruments Inc. | 620,700 | 22,103 | |
* | Dolby Laboratories Inc. | ||
Class A | 432,640 | 21,879 | |
* | BMC Software Inc. | 424,600 | 21,018 |
Analog Devices Inc. | 517,400 | 20,634 |
Market | |||
Value | |||
Shares | ($000) | ||
Tyco Electronics Ltd. | 521,800 | 18,806 | |
* | Trimble Navigation Ltd. | 380,300 | 18,692 |
* | Cognizant Technology | ||
Solutions Corp. Class A | 217,800 | 16,742 | |
* | Skyworks Solutions Inc. | 329,930 | 11,858 |
Western Union Co. | 502,250 | 11,044 | |
* | Rovi Corp. | 185,850 | 10,300 |
* | F5 Networks Inc. | 74,290 | 8,767 |
* | VMware Inc. Class A | 79,640 | 6,662 |
* | Alliance Data Systems Corp. | 54,680 | 4,305 |
* | Acme Packet Inc. | 38,720 | 2,913 |
1,496,701 | |||
Materials (3.8%) | |||
Syngenta AG ADR | 807,900 | 54,388 | |
Praxair Inc. | 289,540 | 28,774 | |
Monsanto Co. | 336,280 | 24,175 | |
Mosaic Co. | 228,030 | 19,576 | |
* | Rio Tinto plc ADR | 182,000 | 12,937 |
Freeport-McMoRan | |||
Copper & Gold Inc. | 239,540 | 12,684 | |
152,534 | |||
Telecommunication Services (1.3%) | |||
* | Crown Castle | ||
International Corp. | 1,221,100 | 51,469 | |
Total Common Stocks | |||
(Cost $3,237,649) | 3,892,447 |
14
U.S. Growth Fund
Market | |||
Value | |||
Shares | ($000) | ||
Temporary Cash Investments (2.5%)1 | |||
Money Market Fund (1.5%) | |||
3 | Vanguard Market | ||
Liquidity Fund, | |||
0.213% | 58,670,073 | 58,670 | |
Face | |||
Amount | |||
($000) | |||
Repurchase Agreement (0.4%) | |||
Banc of America | |||
0.200%, 3/1/11 | |||
(Dated 2/28/11, | |||
Repurchase Value | |||
$14,600,000, | |||
collateralized by | |||
Federal National | |||
Mortgage Assn., | |||
4.000%, 7/1/40) | 14,600 | 14,600 | |
U.S. Government and Agency Obligations (0.6%) | |||
4,5 | Freddie Mac | ||
Discount Notes, | |||
0.240%, 3/14/11 | 20,000 | 19,998 | |
4,5 | Freddie Mac | ||
Discount Notes, | |||
0.230%, 5/23/11 | 5,000 | 4,998 | |
24,996 | |||
Total Temporary Cash Investments | |||
(Cost $98,266) | 98,266 | ||
Total Investments (100.3%) | |||
(Cost $3,335,915) | 3,990,713 | ||
Other Assets and Liabilities (-0.3%) | |||
Other Assets | 30,854 | ||
Liabilities | (40,941) | ||
(10,087) | |||
Net Assets (100%) | 3,980,626 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 7,039,156 |
Overdistributed Net Investment Income | (7,495) |
Accumulated Net Realized Losses | (3,709,933) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 654,798 |
Futures Contracts | 4,100 |
Net Assets | 3,980,626 |
Investor Shares—Net Assets | |
Applicable to 162,229,068 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 3,144,805 |
Net Asset Value Per Share— | |
Investor Shares | $19.38 |
Admiral Shares—Net Assets | |
Applicable to 16,651,141 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 835,821 |
Net Asset Value Per Share— | |
Admiral Shares | $50.20 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.4% and 0.9%, 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 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
5 Securities with a value of $22,497,000 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
U.S. Growth Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 21,883 |
Interest1 | 178 |
Security Lending | 6 |
Total Income | 22,067 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 2,901 |
Performance Adjustment | (294) |
The Vanguard Group—Note C | |
Management and Administrative—Investor Shares | 4,262 |
Management and Administrative—Admiral Shares | 545 |
Marketing and Distribution—Investor Shares | 326 |
Marketing and Distribution—Admiral Shares | 91 |
Custodian Fees | 36 |
Shareholders’ Reports—Investor Shares | 30 |
Shareholders’ Reports—Admiral Shares | 9 |
Trustees’ Fees and Expenses | 4 |
Total Expenses | 7,910 |
Expenses Paid Indirectly | (80) |
Net Expenses | 7,830 |
Net Investment Income | 14,237 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | 170,736 |
Futures Contracts | 26,087 |
Realized Net Gain (Loss) | 196,823 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 854,148 |
Futures Contracts | 5,859 |
Change in Unrealized Appreciation (Depreciation) | 860,007 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,071,067 |
1 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $1,000, $147,000, and $0, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
16
U.S. Growth Fund
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 14,237 | 27,278 |
Realized Net Gain (Loss) | 196,823 | 234,414 |
Change in Unrealized Appreciation (Depreciation) | 860,007 | (234,466) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,071,067 | 27,226 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (17,810) | (16,650) |
Admiral Shares | (7,328) | (6,066) |
Realized Capital Gain | ||
Investor Shares | — | — |
Admiral Shares | — | — |
Total Distributions | (25,138) | (22,716) |
Capital Share Transactions | ||
Investor Shares | (469,608) | (159,838) |
Admiral Shares | (129,620) | (104,130) |
Net Increase (Decrease) from Capital Share Transactions | (599,228) | (263,968) |
Total Increase (Decrease) | 446,701 | (259,458) |
Net Assets | ||
Beginning of Period | 3,533,925 | 3,793,383 |
End of Period1 | 3,980,626 | 3,533,925 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($7,495,000) and $3,406,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
U.S. Growth Fund
Financial Highlights
Investor Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $14.75 | $14.83 | $17.89 | $19.44 | $17.06 | $16.77 |
Investment Operations | ||||||
Net Investment Income | .0591 | .105 | .105 | .089 | .113 | .059 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 4.679 | (.099) | (3.049) | (1.523) | 2.354 | .266 |
Total from Investment Operations | 4.738 | .006 | (2.944) | (1.434) | 2.467 | .325 |
Distributions | ||||||
Dividends from Net Investment Income | (.108) | (.086) | (.116) | (.116) | (.087) | (.035) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.108) | (.086) | (.116) | (.116) | (.087) | (.035) |
Net Asset Value, End of Period | $19.38 | $14.75 | $14.83 | $17.89 | $19.44 | $17.06 |
Total Return2 | 32.17% | -0.02% | -16.29% | -7.44% | 14.50% | 1.93% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $3,145 | $2,796 | $2,956 | $3,637 | $4,308 | $4,530 |
Ratio of Total Expenses to | ||||||
Average Net Assets3 | 0.44% | 0.45% | 0.49% | 0.43% | 0.50% | 0.58% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.58%1 | 0.66% | 0.79% | 0.47% | 0.60% | 0.34% |
Portfolio Turnover Rate | 102% | 74% | 101% | 107% | 51% | 48% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Net investment income per share and the ratio of net investment income to average net assets include $.016 and 0.09%, respectively, resulting from a special dividend from VeriSign Inc. in December 2010.
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 (0.02%), (0.03%), (0.03%), (0.03%), (0.01%), and 0.02%.
See accompanying Notes, which are an integral part of the Financial Statements.
18
U.S. Growth Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $38.20 | $38.41 | $46.37 | $50.42 | $44.24 | $43.47 |
Investment Operations | ||||||
Net Investment Income | .1891 | .338 | .335 | .325 | .416 | .271 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 12.150 | (.256) | (7.919) | (3.950) | 6.107 | .677 |
Total from Investment Operations | 12.339 | .082 | (7.584) | (3.625) | 6.523 | .948 |
Distributions | ||||||
Dividends from Net Investment Income | (.339) | (.292) | (.376) | (.425) | (.343) | (.178) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.339) | (.292) | (.376) | (.425) | (.343) | (.178) |
Net Asset Value, End of Period | $50.20 | $38.20 | $38.41 | $46.37 | $50.42 | $44.24 |
Total Return | 32.36% | 0.13% | -16.15% | -7.28% | 14.80% | 2.16% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $836 | $737 | $838 | $1,116 | $1,325 | $1,262 |
Ratio of Total Expenses to | ||||||
Average Net Assets2 | 0.29% | 0.29% | 0.30% | 0.24% | 0.27% | 0.34% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.73%1 | 0.82% | 0.98% | 0.66% | 0.83% | 0.58% |
Portfolio Turnover Rate | 102% | 74% | 101% | 107% | 51% | 48% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Net investment income per share and the ratio of net investment income to average net assets include $.041 and 0.09%, respectively, resulting from a special dividend from VeriSign Inc. in December 2010.
2 Includes performance-based investment advisory fee increases (decreases) of (0.02%), (0.03%), (0.03%), (0.03%), (0.01%), and 0.02%.
See accompanying Notes, which are an integral part of the Financial Statements.
19
U.S. Growth Fund
Notes to Financial Statements
Vanguard U.S. Growth Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. 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. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued at their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
3. Repurchase Agreements: The fund invests in repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings.
4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, 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. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market
20
U.S. Growth Fund
Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. William Blair & Company, L.L.C., and beginning in October 2010, Wellington Management Company, LLP, and Delaware Management Company, 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 for William Blair & Company is subject to quarterly adjustments based on performance for the preceding five years relative to the Russell 1000 Growth Index. In accordance with the advisory contracts entered into with Wellington Management Company, LLP, and Delaware Management Company in October 2010, beginning September 1, 2011, their investment advisory fees will be subject to quarterly adjustments based on performance since November 30, 2010, relative to the Russell 1000 Growth Index. Until October 2010, a portion of the fund was managed by AllianceBernstein L.P. The basic fee paid to AllianceBernstein L.P. was subject to quarterly adjustments based on performance for the preceding three years relative to the Russell 1000 Growth Index.
The Vanguard Group manages the cash reserves of the fund on an at-cost basis.
For the six months ended February 28, 2011, the aggregate investment advisory fee represented an effective annual basic rate of 0.15% of the fund’s average net assets, before a decrease of $294,000 (0.02%) based on performance.
C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $644,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.26% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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 February 28, 2011, these arrangements reduced the fund’s expenses by $80,000 (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.
21
U.S. Growth Fund
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the fund’s investments as of February 28, 2011, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 3,892,447 | — | — |
Temporary Cash Investments | 58,670 | 39,596 | — |
Futures Contracts—Assets1 | 259 | — | — |
Total | 3,951,376 | 39,596 | — |
1 Represents variation margin on the last day of the reporting period. |
F. At February 28, 2011, 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) |
S&P MidCap 400 Index | March 2011 | 73 | 35,255 | 2,639 |
S&P 500 Index | March 2011 | 46 | 15,250 | 1,026 |
E-mini S&P 500 Index | March 2011 | 200 | 13,261 | 435 |
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. For tax purposes, at August 31, 2010, the fund had available capital loss carryforwards totaling $3,907,607,000 to offset future net capital gains of $2,548,333,000 through August 31, 2011, $887,490,000 through August 31, 2012, $123,651,000 through August 31, 2013, $256,306,000 through August 31, 2017, and $91,827,000 through August 31, 2018. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
22
U.S. Growth Fund
At February 28, 2011, the cost of investment securities for tax purposes was $3,335,915,000. Net unrealized appreciation of investment securities for tax purposes was $654,798,000, consisting of unrealized gains of $713,387,000 on securities that had risen in value since their purchase and $58,589,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the six months ended February 28, 2011, the fund purchased $2,633,042,000 of investment securities and sold $3,170,298,000 of investment securities, other than temporary cash investments.
I. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 86,668 | 4,825 | 287,660 | 18,248 |
Issued in Lieu of Cash Distributions | 17,564 | 968 | 16,387 | 988 |
Redeemed | (573,840) | (33,205) | (463,885) | (28,939) |
Net Increase (Decrease)—Investor Shares | (469,608) | (27,412) | (159,838) | (9,703) |
Admiral Shares | ||||
Issued | 189,565 | 4,157 | 114,435 | 2,754 |
Issued in Lieu of Cash Distributions | 7,014 | 149 | 5,753 | 134 |
Redeemed | (326,199) | (6,958) | (224,318) | (5,395) |
Net Increase (Decrease)—Admiral Shares | (129,620) | (2,652) | (104,130) | (2,507) |
J. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential 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 the account service fee described in the prospectus. If such a fee were applied to your account, your costs would be higher. Your fund does not charge transaction fees, such as purchase or redemption fees, nor does it 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 February 28, 2011 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
U.S. Growth Fund | 8/31/2010 | 2/28/2011 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,321.72 | $2.53 |
Admiral Shares | 1,000.00 | 1,323.62 | 1.67 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,022.61 | $2.21 |
Admiral 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 0.44% for Investor Shares and 0.29% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period.
25
Trustees Approve Advisory Agreements
The board of trustees of Vanguard U.S. Growth Fund has approved an amended investment advisory agreement with William Blair & Company, L.L.C. (William Blair), effective December 1, 2010. The performance adjustment schedule was revised to better align the advisor’s compensation with performance. The board determined that retaining William Blair and amending the performance adjustment schedule was in the best interests of the fund and its shareholders. In addition, in October 2010, the board added Delaware Management Company (Delaware Investments) and Wellington Management Company, LLP (Wellington Management), to the fund’s investment management team and removed AllianceBernstein L.P.
The board based its decisions upon an evaluation of each advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the agreements. Rather, it was the totality of the circumstances that drove the board’s decisions.
Nature, extent, and quality of services
The board considered the quality of the fund’s investment management services provided by William Blair and to be provided by Delaware Investments and Wellington Management over both the short and long term, and took into account the organizational depth and stability of each advisor. The board noted the following:
Delaware Investments. Delaware Investments, an indirect subsidiary of Australia-based Macquarie Group, is a Philadelphia-based investment management firm. Delaware Investments’ eight-member investment team averages 18 years of investment experience and ten years with the team. The board noted that Delaware Investments uses deep, bottom-up fundamental research to identify the most attractive long-term investments. Delaware Investments has managed a portion of the fund since 2010.
Wellington Management. Wellington Management, which was founded in 1928, is among the nation’s oldest and most respected institutional managers. Andrew J. Shilling, portfolio manager for the Wellington Management portion of the fund, leads a three-person investment team that averages 13 years of experience. This team is supported by the 47 global industry analysts at Wellington Management. The board noted that Wellington Management employs a traditional, bottom-up, fundamental research investment approach that identifies companies that have demonstrated above-average growth at attractive valuations. Wellington Management has managed a portion of the fund since 2010.
William Blair. Founded in 1935, William Blair is an independently owned, full-service investment firm. The firm uses an investment process that relies on thorough in-depth fundamental analysis. Based on this process, William Blair invests in companies that it believes are of high quality and that have sustainable, above-average growth. In selecting stocks, William Blair considers each company’s leadership position within the market it serves, the quality of products or services it provides, its return on equity, its accounting policies, and the quality of the management team. William Blair has advised a portion of the fund since 2004.
The board concluded that it is in the best interests of the fund and its shareholders to add high-quality managers with a track record of success such as Delaware Investments and Wellington Management. The board noted that adding Delaware Investments and Wellington Management as advisors would allow the fund to retain its character as a diversified large-cap growth equity offering with a mix of differentiated active managers, who each have the opportunity to generate superior returns. The combination provides an attractive blend of proven managers and should benefit fund shareholders over the long term.
26
The board concluded that each advisor’s experience, stability, depth, and performance, among other factors, warranted approval or continuation, as relevant, of the advisory agreements.
Investment performance
The board considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance of a relevant benchmark and peer group. The William Blair sub-portfolio has underperformed its benchmark and the peer group over the last 1-, 3-, and 5-year periods. The board concluded that William Blair has carried out the fund’s investment strategy in a disciplined fashion. The portfolio management team has continued to evolve, and the board believes that the firm remains a stable, research-focused organization that is anchored by an experienced team of analysts and portfolio managers.
The board determined that Delaware Investments’ and Wellington Management’s large-cap growth strategies have provided strong investment returns, have posted competitive results over the short term, and have outperformed relevant benchmarks and competitors over the long term.
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 and will remain below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was and will remain well below its peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
The board did not consider the profitability of the advisors in determining whether to approve the advisory fees, because the advisors are independent of Vanguard, and the advisory fees are the result of arm’s-length negotiations.
The benefit of economies of scale
The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the advisory fee schedules. 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 agreements 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 (in the case of bonds) 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. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Foreign Holdings. The percentage of a fund represented by stocks 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 179 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1 | and President (2006–2008) of Rohm and Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services) and Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing); |
Board. Principal Occupation(s) During the Past Five | Senior Advisor at New Mountain Capital; Trustee |
Years: Chairman of the Board of The Vanguard Group, | of The Conference Board; Member of the Board of |
Inc., and of each of the investment companies served | Managers of Delphi Automotive LLP (automotive |
by The Vanguard Group, since January 2010; Director | components). |
of The Vanguard Group since 2008; Chief Executive | |
Officer and President of The Vanguard Group and of | Amy Gutmann |
each of the investment companies served by The | Born 1949. Trustee Since June 2006. Principal |
Vanguard Group since 2008; Director of Vanguard | Occupation(s) During the Past Five Years: President |
Marketing Corporation; Managing Director of The | of the University of Pennsylvania; Christopher H. |
Vanguard Group (1995–2008). | Browne Distinguished Professor of Political Science |
in the School of Arts and Sciences with secondary | |
appointments at the Annenberg School for Commu- | |
Independent Trustees | nication and the Graduate School of Education |
of the University of Pennsylvania; Director of | |
Emerson U. Fullwood | Carnegie Corporation of New York, Schuylkill River |
Born 1948. Trustee Since January 2008. Principal | Development Corporation, and Greater Philadelphia |
Occupation(s) During the Past Five Years: Executive | Chamber of Commerce; Trustee of the National |
Chief Staff and Marketing Officer for North America | Constitution Center; Chair of the Presidential |
and Corporate Vice President (retired 2008) of Xerox | Commission for the Study of Bioethical Issues. |
Corporation (document management products and | |
services); Executive in Residence and 2010 | JoAnn Heffernan Heisen |
Distinguished Minett Professor at the Rochester | Born 1950. Trustee Since July 1998. Principal |
Institute of Technology; Director of SPX Corporation | Occupation(s) During the Past Five Years: Corporate |
(multi-industry manufacturing), the United Way of | Vice President and Chief Global Diversity Officer |
Rochester, Amerigroup Corporation (managed health | (retired 2008) and Member of the Executive |
care), the University of Rochester Medical Center, | Committee (1997–2008) of Johnson & Johnson |
Monroe Community College Foundation, and North | (pharmaceuticals/consumer products); Director of |
Carolina A&T University. | Skytop Lodge Corporation (hotels), the University |
Medical Center at Princeton, the Robert Wood | |
Rajiv L. Gupta | Johnson Foundation, and the Center for Work Life |
Born 1945. Trustee Since December 2001.2 | Policy; Member of the Advisory Board of the |
Principal Occupation(s) During the Past Five Years: | Maxwell School of Citizenship and Public Affairs |
Chairman and Chief Executive Officer (retired 2009) | at Syracuse University. |
F. Joseph Loughrey | Thomas J. Higgins | |
Born 1949. Trustee Since October 2009. Principal | Born 1957. Chief Financial Officer Since September | |
Occupation(s) During the Past Five Years: President | 2008. Principal Occupation(s) During the Past Five | |
and Chief Operating Officer (retired 2009) and Vice | Years: Principal of The Vanguard Group, Inc.; Chief | |
Chairman of the Board (2008–2009) of Cummins Inc. | Financial Officer of each of the investment companies | |
(industrial machinery); Director of SKF AB (industrial | served by The Vanguard Group since 2008; Treasurer | |
machinery), Hillenbrand, Inc. (specialized consumer | of each of the investment companies served by The | |
services), the Lumina Foundation for Education, and | Vanguard Group (1998–2008). | |
Oxfam America; Chairman of the Advisory Council | ||
for the College of Arts and Letters and Member | Kathryn J. Hyatt | |
of the Advisory Board to the Kellogg Institute for | Born 1955. Treasurer Since November 2008. Principal | |
International Studies at the University of Notre Dame. | Occupation(s) During the Past Five Years: Principal | |
of The Vanguard Group, Inc.; Treasurer of each of | ||
André F. Perold | the investment companies served by The Vanguard | |
Born 1952. Trustee Since December 2004. Principal | Group since 2008; Assistant Treasurer of each of the | |
Occupation(s) During the Past Five Years: George | investment companies served by The Vanguard Group | |
Gund Professor of Finance and Banking at the Harvard | (1988–2008). | |
Business School; Chair of the Investment Committee | ||
of HighVista Strategies LLC (private investment firm). | Heidi Stam | |
Born 1956. Secretary Since July 2005. Principal | ||
Alfred M. Rankin, Jr. | Occupation(s) During the Past Five Years: Managing | |
Born 1941. Trustee Since January 1993. Principal | Director of The Vanguard Group, Inc., since 2006; | |
Occupation(s) During the Past Five Years: Chairman, | General Counsel of The Vanguard Group since 2005; | |
President, and Chief Executive Officer of NACCO | Secretary of The Vanguard Group and of each of the | |
Industries, Inc. (forklift trucks/housewares/lignite); | investment companies served by The Vanguard Group | |
Director of Goodrich Corporation (industrial products/ | since 2005; Director and Senior Vice President of | |
aircraft systems and services) and the National | Vanguard Marketing Corporation since 2005; | |
Association of Manufacturers; Chairman of the | Principal of The Vanguard Group (1997–2006). | |
Federal Reserve Bank of Cleveland; Vice Chairman | ||
of University Hospitals of Cleveland; President of | ||
the Board of The Cleveland Museum of Art. | Vanguard Senior Management Team | |
Peter F. Volanakis | R. Gregory Barton | Michael S. Miller |
Born 1955. Trustee Since July 2009. Principal | Mortimer J. Buckley | James M. Norris |
Occupation(s) During the Past Five Years: President | Kathleen C. Gubanich | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Paul A. Heller | George U. Sauter |
Incorporated (communications equipment); Director of | ||
Corning Incorporated (2000–2010) and Dow Corning | ||
(2001–2010); Overseer of the Amos Tuck School of | Chairman Emeritus and Senior Advisor | |
Business Administration at Dartmouth College. | ||
John J. Brennan | ||
Chairman, 1996–2009 | ||
Executive Officers | Chief Executive Officer and President, 1996–2008 | |
Glenn Booraem | ||
Born 1967. Controller Since July 2010. Principal | Founder | |
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | John C. Bogle | |
the investment companies served by The Vanguard | Chairman and Chief Executive Officer, 1974–1996 | |
Group since 2010; Assistant Controller of each of | ||
the investment companies served by The Vanguard | ||
Group (2001–2010). |
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, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
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P.O. Box 2600 | |
Valley Forge, PA 19482-2600 |
Connect with Vanguard® > vanguard.com
Fund Information > 800-662-7447 | CFA® is a trademark owned by CFA Institute. |
Direct Investor Account Services > 800-662-2739 | |
Institutional Investor Services > 800-523-1036 | |
Text Telephone for People | |
With Hearing Impairment > 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 Inc. 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 e-mail addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2011 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q232 042011 |
![]() |
Vanguard International Growth Fund |
Semiannual Report |
February 28, 2011 |
![]() |
> Vanguard International Growth Fund returned about 23% for the six months ended February 28, 2011, slightly ahead of its benchmark index and in line with peer funds.
> European stocks fared better than those based in the emerging markets.
> Each sector produced positive returns, with materials, industrials, and information technology contributing most to the fund’s return.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisors’ Report. | 7 |
Fund Profile. | 12 |
Performance Summary. | 14 |
Financial Statements. | 15 |
About Your Fund’s Expenses. | 30 |
Trustees Approve Advisory Agreements. | 32 |
Glossary. | 34 |
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.
Cover photograph: Jean Maher.
Your Fund’s Total Returns
Six Months Ended February 28, 2011 | |
Total | |
Returns | |
Vanguard International Growth Fund | |
Investor Shares | 23.34% |
Admiral™ Shares | 23.38 |
MSCI AC World Index ex USA | 22.16 |
International Funds Average | 23.17 |
International Funds Average: Derived from data provided by Lipper Inc. |
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.
Your Fund’s Performance at a Glance | ||||
August 31, 2010 , Through February 28, 2011 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard International Growth Fund | ||||
Investor Shares | $16.27 | $19.75 | $0.305 | $0.000 |
Admiral Shares | 51.81 | 62.84 | 1.041 | 0.000 |
1
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/intlgrowth_q812x4x1.jpg)
Chairman’s Letter
Dear Shareholder,
International markets produced solid gains for the half-year despite continued sovereign-debt problems in Europe and recent unrest in the Middle East. Vanguard International Growth Fund returned about 23% for the six months ended February 28, 2011, slightly ahead of its benchmark index and in line with peer international funds. Still, international markets as a whole lagged the broad U.S. market, which returned about 29% for the six months.
Developed markets in Europe and the Pacific did better than emerging markets. China and other emerging markets faced several hurdles during the six months, including rising inflation. The turmoil in the Middle East and uncertainty about crude oil prices contributed to these challenges.
All ten industry sectors advanced in the fund. The advisors’ selections in the industrials, materials, and information technology sectors were responsible for about half of the fund’s return for the period.
2
Please note that as part of our ongoing efforts to lower the cost of investing for all of our clients, we have broadened the availability of our lower-cost Admiral Shares, reducing the Admiral minimums for most of our actively managed funds to $50,000 from $100,000.
A fretful start, an optimistic finish for global stock markets
Global stock markets rallied from their midsummer malaise to produce exceptional returns for the six months ended February 28. In Europe, investor optimism subdued sovereign-debt jitters, driving stock prices higher. Developed markets in the Pacific region perked up on signs of recovery in global trade. Australian stocks posted especially strong returns, benefiting from a surge in the prices of metals and other natural resources. Emerging stock markets trailed a few steps behind their developed-market counterparts.
The U.S. economy seemed in danger of tipping back into recession at the start of the period. By February, hopes were high that it had reached escape velocity, propelled by steady job growth and notable strength in the manufacturing sector. Smaller stocks, which are especially sensitive to the rhythms of the business cycle, produced the highest six-month returns.
Market Barometer | |||
Total Returns | |||
Periods Ended February 28, 2011 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 28.65% | 23.54% | 3.17% |
Russell 2000 Index (Small-caps) | 37.55 | 32.60 | 3.80 |
Dow Jones U.S. Total Stock Market Index | 29.24 | 24.45 | 3.59 |
MSCI All Country World Index ex USA (International) | 22.16 | 21.12 | 4.23 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | -0.83% | 4.93% | 5.80% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | -3.51 | 1.72 | 4.07 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.06 | 0.14 | 2.16 |
CPI | |||
Consumer Price Index | 1.37% | 2.11% | 2.18% |
3
Interest rates rose, depressing bond prices
U.S. interest rates hovered near generational lows early in the period, but then moved higher, putting pressure on bond prices. For the six-month period, the broad taxable bond market produced a small negative return. The municipal bond market did worse. Corporate bonds outperformed government debt, as investors stretched for yield beyond government securities, where rates remained low by historical standards.
As it has since December 2008, the Federal Reserve held its target for short-term interest rates near 0%. This stance kept the returns available from money market instruments, such as the 3-month Treasury bill, in the same neighborhood.
European stocks trumped the returns of other markets
Vanguard International Growth Fund seeks companies with high growth potential in both developed and emerging markets outside of the United States. During the six months through February, the fund’s holdings succeeded in capitalizing on economic expansion throughout the world.
For U.S.-based investors, the dollar’s six-month decline against most major currencies—following a period of relative strength—enhanced returns from abroad. In Europe’s developed markets, for example, the appreciation of the euro and the British pound added almost 10 percentage points to European returns when translated into U.S. dollars, helping the fund’s European holdings return about 27%.
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
International Growth Fund | 0.51% | 0.35% | 1.42% |
The fund expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.49% for Investor Shares and 0.33% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper Inc. and captures information through year-end 2010.
Peer group: International Funds.
Europe represented slightly more than half of the fund’s assets, on average, and contributed an even greater share of the fund’s total return. Companies in Europe’s larger economies, including the United Kingdom, Germany, and France, were among the fund’s biggest contributors. The United Kingdom, for example, Europe’s largest stock market, gained about 25% for the period thanks in part to mining giant Rio Tinto and leading natural gas firm BG Group. Sweden, a bit more insulated from the recent market turmoil, also gave the fund a boost.
Developed markets in the Pacific region, which represented slightly more than 20% of the fund’s assets at the end of the period, contributed almost the same share of the fund’s return. Japan, the largest country exposure in the region, did best, aided by strong returns from automakers and industrial companies. Australia, the second-largest stock market in the region, was helped by the materials sector as commodities prices climbed.
Emerging markets, which represented about a quarter of the fund’s assets, contributed a bit less to its return. China accounted for about half of the fund’s gains in emerging markets. Baidu (+54%), China’s largest internet search engine, powered much of the country’s stock market return for the period. A handful of countries in emerging markets posted negative returns, notably Turkey, whose performance suffered because of the unrest in the Middle East. Compared with previous years, emerging-market returns were more muted, in part because of growing concern about how these countries will deal with rising inflation.
Relative to the benchmark index, the fund’s most significant gains came from Europe. Standout performers in the region included Swedish mining firm Atlas Copco; Switzerland’s Compagnie Financiere Richemont, a luxury goods maker; and German business software developer SAP These and other companies throughout Europe benefited from particularly strong demand in emerging markets such as China and other countries in the Asia-Pacific region.
5
Focus on the long term and what you can control
While international stocks posted strong double-digit returns for the six months, it’s impossible to predict the direction they will take next. There will always be unexpected events, such as the recent unrest in the Middle East and the tragedy in Japan, that result in periodic jolts to stock markets worldwide. While our humanitarian concerns remain with the people and countries involved, we are probably best served as investors by remaining focused on our long-term investment goals.
No matter what the market’s direction in the short term, it is prudent to build a well-balanced, diversified portfolio that includes a mix of stocks, bonds, and short-term investments appropriate for your time horizon, financial objectives, and risk tolerance.
There is no set formula to help you determine how much of your equity portfolio should consist of international stocks. However, Vanguard research has shown that over longer periods, a portfolio that included both U.S. and non-U.S. stocks would have experienced lower average volatility than an all-U.S. portfolio. The Vanguard International Growth Fund can play an important role in such a portfolio by providing you with exposure to growth-oriented companies around the world.
Thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/intlgrowth_q812x8x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 14, 2011
6
Advisors’ Report
For the fiscal half-year ended February 28, 2011, Vanguard International Growth Fund returned about 23%. Your fund is managed by three independent advisors, a strategy that enhances the fund’s 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 percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal half-year and of how the portfolio’s positioning reflects this assessment. These comments were prepared on March 17, 2011.
Baillie Gifford Overseas Ltd.
Portfolio Manager:
James K. Anderson, Chief Investment Officer and Head of Global Equities
The investment environment is somewhat tepid and uncertain at the moment. Investors are concerned that we may be experiencing too much of a good thing. The global economic recovery has been very brisk and has now reached the stage at which people are beginning to worry about inflation and rising interest rates. This is especially true in emerging markets,
Vanguard International Growth Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Baillie Gifford Overseas Ltd. | 46 | 8,593 | The advisor seeks stocks that can generate |
above-average growth in earnings and cash flow, | |||
producing a bottom-up, stock-driven approach to | |||
country and asset allocation. An in-depth view on each | |||
company is measured against the consensus view, | |||
leading to discrepancies and potential opportunities to | |||
add value. | |||
Schroder Investment | 41 | 7,736 | Equity analysts in 11 countries and an international |
Management North America, Inc. | team of global sector and regional specialists help to | ||
identify reasonably priced companies with strong | |||
growth prospects and a sustainable competitive | |||
advantage. | |||
M&G Investment Management | 10 | 1,879 | The advisor constructs a portfolio using a long-term, |
Limited | bottom-up investment approach focusing on identifying | ||
underappreciated companies—particularly those with | |||
scarce assets—with the ability to deliver high returns | |||
and growth potential. | |||
Cash Investments | 3 | 544 | 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. |
7
where the importance of commodity prices has been highlighted by a series of supply shocks ranging from floods in Australia to a drought in China to unrest in the Middle East. Furthermore, credit growth in some important countries (China, Brazil, and India) has become too exuberant and needs to be reined in.
All of this has induced the usual mid-cycle nerves, which has tended to obscure the good news, especially the strength of the European recovery and a marked improvement of tone in America. The corporate sector’s confidence is also improving, and the Western banks are beginning to prepare the ground for raising capital. Stock market activity has mainly involved taking profits in shares that have benefited most from the recovery and rotating into those that have been left behind. We have not had much sympathy for this kind of thing.
Our long-term industrial and technological favorites did well in the early part of the period. As time went on, though, our financial stocks in emerging markets began to suffer from interest rate worries, and a vague concern about growth took the edge off our performance. There was a general desire for comfort and safety, exemplified by the relatively strong performance of Canada.
We remain fairly optimistic and do not feel nimble enough to go “credit cycling,” as Keynes called it: That is, we will not try to anticipate other people’s perceptions of where on the credit cycle we may be.
We are raising our exposure to innovative companies, whose control of their margins will be an increasingly valuable asset, and we are looking at ways to benefit from the surprising resurgence of northern Europe. As usual, these changes are piecemeal and evolutionary.
Schroder Investment Management North America Inc.
Portfolio Managers:
Virginie Maisonneuve, CFA
Head of Global and International Equities
Simon Webber, CFA
Portfolio Manager
Although increasing confidence in the global recovery supported the equity markets overall, volatility during the period was high. On the one hand, stocks responded positively to slowly improving economic news throughout the globe and the second round of quantitative easing by the U.S. Federal Reserve. On the other hand, there was nervousness about a contagion in peripheral Europe as the Irish fiscal and financial issues resurfaced in November, leading to a bailout package.
Emerging markets were also a source of volatility. The “medicine” of liquidity given to the developed world was turning into a mild “poison” for some emerging market economies in the form of inflation, in particular food inflation. As a result, emerging markets lagged during the period. China and several other countries tightened monetary policy in response to inflationary pressures. The combination of
increasing inflation and strong performance during the past two years made emerging markets prime candidates for profit-taking in favor of underperforming sectors in developed markets. Lower-quality European financial stocks in particular benefited.
Events in the Middle East have further fueled investors’ worries about emerging markets and inflationary pressures globally. In particular, the European Central Bank raised the possibility of increasing rates, a development the markets viewed as premature given the underlying low level of nominal inflation in the developed world, high unemployment, and continued pressure in peripheral Europe.
Turning to performance, the largest contributors in the portfolio were concentrated in oil and commodities: BG Group, Rio Tinto, and Suncor Energy. European financials such as ING also had a strong positive impact. Among the largest detractors was Japan’s Unicharm as rising input costs and capital-raising combined to put pressure on the stock. Beijing Enterprises also detracted amid the poor performance of the Chinese market as a whole over the period as domestic rates increased.
Our holdings in the United Kingdom and Canada contributed most to performance, led by energy and materials companies. Emerging markets and the Pacific region excluding Japan detracted most, with financials having the largest impact as investors took profits in holdings such as Brazil’s Itau Unibanco.
Among sectors, materials added the most to performance. Holdings such as Rio Tinto, First Quantum Minerals, and Teck Resources all contributed on the back of strong underlying commodity prices. Utilities and information technology companies, such as GDF Suez and SAP, also added value. GDF Suez, the France-based natural gas and electricity supplier, reported solid results and more recently received conditional approval for an acquisition that will make it the world’s second-largest power producer. Consumer staples and financials were the principal detractors during the period.
Looking forward, continued normalization of monetary policies in the developed world will be key to the performance of markets. While we believe that monetary policies will continue to be accommodative, more governments are likely to contemplate tightening in the wake of rising inflationary pressures. The crucial challenge will be for policymakers to provide an environment in which expansion can take place and support employment while focusing on key financial indicators to manage debt. The impact of the Middle Eastern crisis on the price of oil is important, as is the momentum of inflationary pressures going forward. While output gaps and unemployment remain high in developed nations, the desire by
9
some central banks to increase rates in what could be a premature move could threaten to derail the recovery.
In this environment, focusing on attractively priced companies with strong pricing power and good long-term growth is key. Emerging markets provide a strong source of earnings growth, and selective opportunities are arising after the most recent market movements.
M&G Investment Management Limited
Portfolio Managers:
Graham E. French, Portfolio Manager
Greg Aldridge, Portfolio Manager
Global equities provided a positive return for investors during a six-month period characterized by continued stock market volatility. Early on, risk appetite was supported by strong economic data from the United States and China, better-than-expected corporate results, and the U.S. Federal Reserve’s decision to inject an additional $600 billion into the country’s economy. However, stock market volatility resurfaced toward the end of the review period when rising oil prices added to investors’ concerns that inflationary pressures might threaten the economic recovery.
Against this generally positive backdrop, our positions in Europe provided the biggest boost to performance. Holding a range of companies that benefited from higher discretionary spending by consumers and resurgent demand for technology in the region proved particularly beneficial. Wincor Nixdorf, a German cash machines and payment systems provider; Inchcape, the U.K. automobile distributor; and Wienerberger, an Austrian brick manufacturer, were among those companies that added value. A combination of good stock selection and an underweight position in the financial sector also helped.
In contrast, stock selection was negative in the materials sector, where Symrise, a German flavorings and fragrances firm, was hit by profit-taking following a period of good performance. Given investors’ preference for cyclical stocks, the portfolio’s relatively large exposure to companies in the defensive health care sector was also negative. Sysmex, a Japanese manufacturer of clinical diagnostic devices, was one of the larger detractors in this area.
During the period, we invested in a number of good quality value-creating businesses that we believe can deliver sustainable returns above their cost of capital and grow profitability through suitable reinvestment. These were businesses from both defensive and cyclical areas whose scarce assets differentiate them from their competitors.
10
For example, we initiated positions in Vallourec, a French company that manufactures high-quality seamless steel tubes and connectors, for use primarily in the oil and gas industry, and German-listed Software AG, a recognized leader in the business process software industry. We also added to existing positions in G4S, a global provider of security services, and Novartis, the Swiss pharmaceutical company, among others.
We closed our position in Intertek, a U.K.-based provider of testing services, after the stock reached record highs. We also used the rise in share prices during the period as an opportunity to exit positions in Japanese motorcycle manufacturer Yamaha Motor and German energy company E.ON. Elsewhere, we took profits from the holdings in Techtronic Industries, a Hong Kong-listed household appliances manufacturer, and Sasol, a South African oil company, two of the portfolio’s strongest recent performers.
11
International Growth Fund
Fund Profile
As of February 28, 2011
Share-Class Characteristics | ||
Investor | Admiral | |
Shares | Shares | |
Ticker Symbol | VWIGX | VWILX |
Expense Ratio1 | 0.51% | 0.35% |
Portfolio Characteristics | ||
MSCI AC | ||
World Index | ||
Fund | ex USA | |
Number of Stocks | 189 | 1,865 |
Median Market Cap | $37.9B | $32.6B |
Price/Earnings Ratio | 18.4x | 15.3x |
Price/Book Ratio | 2.2x | 1.7x |
Return on Equity | 20.5% | 17.8% |
Earnings Growth Rate | 10.9% | 2.8% |
Dividend Yield | 1.9% | 2.7% |
Turnover Rate | ||
(Annualized) | 49% | — |
Short-Term Reserves | 1.0% | — |
Sector Diversification (% of equity exposure) | ||
MSCI AC | ||
World Index | ||
Fund | ex USA | |
Consumer Discretionary | 13.9% | 8.9% |
Consumer Staples | 9.0 | 8.3 |
Energy | 8.8 | 11.5 |
Financials | 20.0 | 25.2 |
Health Care | 4.9 | 5.8 |
Industrials | 16.1 | 10.8 |
Information Technology | 13.8 | 6.5 |
Materials | 10.6 | 12.9 |
Telecommunication | ||
Services | 1.5 | 5.7 |
Utilities | 1.4 | 4.4 |
Volatility Measures | ||
Spliced | MSCI AC | |
International | World Index | |
Index | ex USA | |
R-Squared | 0.97 | 0.98 |
Beta | 1.06 | 1.02 |
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) | ||
Baidu Inc. | Internet Software & | |
Services | 2.6% | |
Petroleo Brasileiro SA | Integrated Oil & | |
Gas | 2.3 | |
SAP AG | Application | |
Software | 2.1 | |
BG Group plc | Integrated Oil & | |
Gas | 2.0 | |
Atlas Copco AB Class A | Industrial | |
Machinery | 1.7 | |
Rolls-Royce Group plc | Aerospace & | |
Defense | 1.6 | |
Novartis AG | Pharmaceuticals | 1.6 |
Samsung Electronics Co. | ||
Ltd. | Semiconductors | 1.5 |
BHP Billiton plc | Diversified Metals | |
& Mining | 1.4 | |
Mitsubishi Corp. | Trading Companies | |
& Distributors | 1.4 | |
Top Ten | 18.2% |
The holdings listed exclude any temporary cash investments and equity index products.
Allocation by Region (% of equity exposure)
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/intlgrowth_q812x14x1.jpg)
1 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.49% for Investor Shares and 0.33% for Admiral Shares.
12
International Growth Fund
Market Diversification (% of equity exposure) | ||
MSCI AC | ||
World | ||
Index | ||
Fund | ex USA | |
Europe | ||
United Kingdom | 18.8% | 14.8% |
France | 7.5 | 6.9 |
Germany | 7.3 | 5.8 |
Switzerland | 5.6 | 5.4 |
Sweden | 4.1 | 2.2 |
Spain | 3.0 | 2.5 |
Denmark | 1.6 | 0.7 |
Netherlands | 1.5 | 1.8 |
Norway | 1.3 | 0.6 |
Other | 1.7 | 4.1 |
Subtotal | 52.4% | 44.8% |
Pacific | ||
Japan | 11.8% | 15.2% |
Australia | 3.9 | 5.9 |
Hong Kong | 3.0 | 1.8 |
Other | 0.4 | 1.2 |
Subtotal | 19.1% | 24.1% |
Emerging Markets | ||
China | 7.6% | 3.9% |
Brazil | 6.8 | 3.6 |
South Korea | 3.0 | 3.1 |
India | 1.7 | 1.6 |
Turkey | 1.4 | 0.3 |
Taiwan | 1.0 | 2.5 |
Other | 2.0 | 7.3 |
Subtotal | 23.5% | 22.3% |
North America | ||
Canada | 3.8% | 8.3% |
Middle East | ||
Israel | 1.2% | 0.5% |
13
International 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 (%): August 31, 2000, Through February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/intlgrowth_q812x16x1.jpg)
Spliced International Index: MSCI EAFE Index through May 31, 2010; MSCI All Country World Index ex USA thereafter.
Note: For 2011, performance data reflect the six months ended February 28, 2011.
Average Annual Total Returns: Periods Ended December 31, 2010
This table presents average annual total 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 | 9/30/1981 | 15.66% | 5.67% | 4.91% |
Admiral Shares | 8/13/2001 | 15.81 | 5.86 | 7.501 |
1 Return since inception. |
Vanguard fund returns do not reflect the 2% fee on redemptions of shares held for less than two months.
See Financial Highlights for dividend and capital gains information.
14
International Growth Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
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 (96.6%)1 | |||
Australia (3.5%) | |||
Woolworths Ltd. | 5,214,600 | 143,061 | |
Woodside Petroleum Ltd. | 2,777,000 | 121,101 | |
Brambles Ltd. | 14,934,900 | 108,404 | |
Newcrest Mining Ltd. | 2,718,000 | 105,052 | |
* | Fortescue Metals | ||
Group Ltd. | 13,582,674 | 92,698 | |
James Hardie | |||
Industries SE | 6,196,069 | 42,016 | |
*,^ | Atlas Iron Ltd. | 7,261,000 | 28,792 |
Sims Metal | |||
Management Ltd. | 1,018,568 | 19,613 | |
660,737 | |||
Austria (0.2%) | |||
* | Wienerberger AG | 1,900,000 | 39,315 |
Belgium (0.7%) | |||
Anheuser-Busch InBev NV | 2,268,000 | 126,663 | |
Brazil (6.7%) | |||
Petroleo Brasileiro SA | |||
ADR Type A | 6,669,700 | 234,573 | |
Vale SA Class B Pfd. ADR | 6,013,300 | 180,219 | |
Cia Brasileira de | |||
Distribuicao Grupo Pao | |||
de Acucar ADR | 3,969,000 | 149,671 | |
Petroleo Brasileiro | |||
SA ADR | 3,705,000 | 147,570 | |
Itau Unibanco Holding | |||
SA ADR | 6,596,075 | 146,565 | |
Itau Unibanco Holding | |||
SA Prior Pfd. | 5,149,590 | 113,961 | |
* | OGX Petroleo e Gas | ||
Participacoes SA | 7,117,200 | 82,687 | |
BM&FBovespa SA | 6,351,600 | 42,871 | |
Petroleo Brasileiro SA | |||
Prior Pfd. | 2,420,000 | 41,541 |
Market | |||
Value | |||
Shares | ($000) | ||
Vale SA Prior Pfd. | 1,035,000 | 30,730 | |
Anhanguera Educacional | |||
Participacoes SA | 1,342,496 | 29,613 | |
B2W Cia Global Do Varejo | 1,717,500 | 26,282 | |
Banco do Brasil SA | 1,460,067 | 25,914 | |
* | Fibria Celulose SA | 716,170 | 10,369 |
1,262,566 | |||
Canada (3.8%) | |||
Toronto-Dominion Bank | 2,643,000 | 221,168 | |
Suncor Energy Inc. | 3,452,000 | 162,234 | |
Niko Resources Ltd. | 942,600 | 80,517 | |
Potash Corp. of | |||
Saskatchewan Inc. | 1,290,000 | 79,481 | |
Teck Resources Ltd. | |||
Class B | 1,309,000 | 72,419 | |
First Quantum Minerals | |||
Ltd. | 476,120 | 61,993 | |
Sherritt International Corp. | 2,300,000 | 21,519 | |
* | Harry Winston Diamond | ||
Corp. | 732,000 | 8,936 | |
708,267 | |||
China (7.5%) | |||
* | Baidu Inc. ADR | 4,050,000 | 490,698 |
Tencent Holdings Ltd. | 9,457,000 | 251,473 | |
Ping An Insurance Group | |||
Co. of China Ltd. | 12,899,000 | 133,201 | |
CNOOC Ltd. | 44,035,000 | 100,654 | |
China Merchants Bank | |||
Co. Ltd. | 36,738,500 | 88,429 | |
Beijing Enterprises | |||
Holdings Ltd. | 15,135,000 | 84,345 | |
China Resources | |||
Enterprise Ltd. | 22,770,000 | 83,497 | |
* | Ctrip.com International | ||
Ltd. ADR | 1,671,936 | 64,821 | |
^ | Hengdeli Holdings Ltd. | 94,400,000 | 51,648 |
^ | Dongfang Electric | ||
Corp. Ltd. | 7,718,400 | 29,688 |
15
International Growth Fund
Market | |||
Value | |||
Shares | ($000) | ||
Chaoda Modern | |||
Agriculture Holdings | |||
Ltd. | 23,000,719 | 14,865 | |
Ports Design Ltd. | 4,958,000 | 11,871 | |
Nine Dragons Paper | |||
Holdings Ltd. | 4,729,000 | 5,288 | |
1,410,478 | |||
Denmark (1.5%) | |||
Novo Nordisk A/S Class B | 849,328 | 107,051 | |
Novozymes A/S | 634,400 | 88,670 | |
* | Vestas Wind Systems A/S | 1,653,736 | 56,799 |
AP Moller - Maersk A/S | |||
Class B | 3,750 | 37,177 | |
289,697 | |||
Finland (0.3%) | |||
Metso Oyj | 1,204,000 | 62,281 | |
France (7.1%) | |||
Cie Generale d’Optique | |||
Essilor International SA | 2,730,600 | 195,138 | |
PPR | 1,238,973 | 187,973 | |
GDF Suez | 3,204,000 | 129,957 | |
Vallourec SA | 1,242,015 | 128,943 | |
Schneider Electric SA | 690,000 | 114,287 | |
LVMH Moet Hennessy | |||
Louis Vuitton SA | 686,000 | 108,191 | |
L’Oreal SA | 901,231 | 104,861 | |
AXA SA | 3,596,000 | 75,549 | |
Safran SA | 2,035,000 | 72,433 | |
Publicis Groupe SA | 900,000 | 51,338 | |
* | European Aeronautic | ||
Defence and Space | |||
Co. NV | 1,720,000 | 49,754 | |
Total SA | 670,000 | 41,071 | |
Societe Generale | 550,000 | 38,674 | |
CFAO SA | 757,836 | 28,028 | |
1,326,197 | |||
Germany (7.0%) | |||
SAP AG | 6,621,896 | 400,155 | |
Adidas AG | 2,896,824 | 186,034 | |
GEA Group AG | 3,307,500 | 102,489 | |
Porsche Automobil | |||
Holding SE Prior Pfd. | 994,400 | 79,221 | |
* | TUI AG | 5,787,423 | 76,090 |
Linde AG | 493,000 | 75,346 | |
HeidelbergCement AG | 999,207 | 70,177 | |
Bayerische Motoren | |||
Werke AG | 730,000 | 59,307 | |
^ | Aixtron SE | 1,266,900 | 52,453 |
Wincor Nixdorf AG | 550,000 | 46,092 | |
Siemens AG | 313,000 | 42,319 | |
Symrise AG | 1,495,000 | 39,272 |
Market | |||
Value | |||
Shares | ($000) | ||
Software AG | 230,000 | 37,187 | |
^ | SMA Solar Technology AG | 344,914 | 36,643 |
*,^ | Q-Cells SE | 986,500 | 4,224 |
1,307,009 | |||
Hong Kong (3.0%) | |||
Jardine Matheson | |||
Holdings Ltd. | 2,794,800 | 129,787 | |
Sun Hung Kai | |||
Properties Ltd. | 7,067,000 | 115,033 | |
Swire Pacific Ltd. Class A | 7,810,000 | 109,705 | |
Hong Kong Exchanges | |||
and Clearing Ltd. | 4,514,200 | 98,141 | |
Li & Fung Ltd. | 10,292,000 | 62,884 | |
Techtronic Industries Co. | 19,999,943 | 24,818 | |
Esprit Holdings Ltd. | 3,519,604 | 17,368 | |
557,736 | |||
India (1.7%) | |||
Tata Motors Ltd. | 3,943,000 | 95,031 | |
HDFC Bank Ltd. | 1,954,199 | 88,762 | |
Housing Development | |||
Finance Corp. | 5,380,000 | 75,010 | |
Tata Power Co. Ltd. | 1,987,000 | 50,630 | |
Reliance Capital Ltd. | 1,454,500 | 15,389 | |
324,822 | |||
Indonesia (0.3%) | |||
Telekomunikasi Indonesia | |||
Tbk PT | 57,320,000 | 48,628 | |
Ireland (0.2%) | |||
Kerry Group plc Class A | 925,000 | 33,566 | |
Israel (1.2%) | |||
* | Check Point Software | ||
Technologies Ltd. | 2,817,970 | 140,448 | |
Teva Pharmaceutical | |||
Industries Ltd. ADR | 1,592,900 | 79,804 | |
220,252 | |||
Japan (11.1%) | |||
Mitsubishi Corp. | 9,381,400 | 261,012 | |
Honda Motor Co. Ltd. | 4,979,000 | 217,295 | |
Rakuten Inc. | 199,916 | 177,680 | |
Nintendo Co. Ltd. | 570,100 | 167,658 | |
Canon Inc. | 3,437,800 | 166,250 | |
Unicharm Corp. | 3,664,000 | 141,855 | |
SMC Corp. | 756,400 | 129,837 | |
Japan Tobacco Inc. | 23,355 | 96,610 | |
Yamada Denki Co. Ltd. | 1,023,570 | 78,189 | |
THK Co. Ltd. | 2,924,300 | 77,338 | |
* | Yamaha Motor Co. Ltd. | 3,910,000 | 69,549 |
Sumitomo Mitsui Financial | |||
Group Inc. | 1,781,000 | 67,396 | |
FANUC Corp. | 407,600 | 63,671 |
16
International Growth Fund
Market | ||
Value | ||
Shares | ($000) | |
Hoya Corp. | 2,310,700 | 55,443 |
Sekisui Chemical Co. Ltd. | 6,993,000 | 55,255 |
Toyota Motor Corp. | 990,000 | 46,260 |
Rohm Co. Ltd. | 589,500 | 41,662 |
Seven & I Holdings | ||
Co. Ltd. | 1,403,000 | 39,162 |
Sysmex Corp. | 590,000 | 38,408 |
Kyocera Corp. | 347,900 | 36,319 |
Astellas Pharma Inc. | 900,000 | 35,389 |
Trend Micro Inc. | 444,300 | 13,883 |
2,076,121 | ||
Luxembourg (0.0%) | ||
* Reinet Investments SCA | 542,339 | 8,975 |
Mexico (0.4%) | ||
Wal-Mart de Mexico SAB | ||
de CV | 16,400,000 | 46,913 |
Consorcio ARA SAB | ||
de CV | 35,000,000 | 20,389 |
67,302 | ||
Netherlands (1.4%) | ||
* ING Groep NV | 17,936,000 | 225,000 |
TNT NV | 1,400,000 | 36,743 |
261,743 | ||
Norway (1.3%) | ||
Statoil ASA | 5,119,000 | 135,163 |
DnB NOR ASA | 7,080,776 | 109,591 |
244,754 | ||
Peru (0.3%) | ||
Credicorp Ltd. | 585,600 | 58,824 |
Singapore (0.4%) | ||
Singapore Exchange Ltd. | 6,541,000 | 40,761 |
DBS Group Holdings Ltd. | 2,529,350 | 28,260 |
69,021 | ||
South Africa (0.6%) | ||
Impala Platinum | ||
Holdings Ltd. | 1,778,600 | 52,519 |
Sasol Ltd. | 580,000 | 31,760 |
MTN Group Ltd. | 1,460,000 | 25,785 |
110,064 | ||
South Korea (3.0%) | ||
Samsung Electronics | ||
Co. Ltd. | 347,900 | 285,330 |
Hyundai Motor Co. | 664,000 | 105,124 |
Shinhan Financial Group | ||
Co. Ltd. | 2,503,586 | 104,949 |
Celltrion Inc. | 1,368,991 | 39,072 |
Hankook Tire Co. Ltd. | 1,120,000 | 29,515 |
563,990 |
Market | ||
Value | ||
Shares | ($000) | |
Spain (2.8%) | ||
Banco Santander SA | 20,988,367 | 258,405 |
Inditex SA | 2,477,385 | 179,535 |
Banco Bilbao Vizcaya | ||
Argentaria SA | 7,450,000 | 91,841 |
529,781 | ||
Sweden (4.1%) | ||
Atlas Copco AB Class A | 12,731,679 | 320,109 |
Sandvik AB | 7,223,763 | 138,643 |
Svenska Handelsbanken | ||
AB Class A | 3,672,206 | 124,044 |
Alfa Laval AB | 4,729,586 | 96,623 |
Telefonaktiebolaget LM | ||
Ericsson Class B | 4,050,000 | 52,018 |
Oriflame Cosmetics SA | 575,000 | 33,670 |
765,107 | ||
Switzerland (5.6%) | ||
Novartis AG | 5,189,000 | 291,604 |
Cie Financiere | ||
Richemont SA | 3,635,300 | 208,026 |
Syngenta AG | 399,100 | 134,062 |
Geberit AG | 494,180 | 106,582 |
ABB Ltd. | 2,863,100 | 70,105 |
* GAM Holding AG | 3,090,358 | 55,842 |
Zurich Financial | ||
Services AG | 166,000 | 48,220 |
Nestle SA | 840,000 | 47,560 |
Roche Holding AG | 300,000 | 45,253 |
Holcim Ltd. | 590,000 | 43,348 |
1,050,602 | ||
Taiwan (1.0%) | ||
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. | 37,122,508 | 88,453 |
Chinatrust Financial | ||
Holding Co. Ltd. | 89,652,000 | 70,658 |
Compal Electronics Inc. | 21,403,304 | 25,224 |
184,335 | ||
Thailand (0.4%) | ||
Kasikornbank PCL | 19,719,000 | 76,106 |
Kasikornbank PCL | ||
(Foreign) | 1,762,100 | 7,008 |
83,114 | ||
Turkey (1.4%) | ||
Turkiye Garanti | ||
Bankasi AS | 58,775,981 | 260,457 |
United Kingdom (18.1%) | ||
BG Group plc | 15,140,900 | 368,695 |
Rolls-Royce Group plc | 29,415,616 | 295,251 |
BHP Billiton plc | 6,822,700 | 270,452 |
Standard Chartered plc | 8,080,300 | 213,717 |
17
International Growth Fund
Market | |||
Value | |||
Shares | ($000) | ||
Prudential plc | 17,338,000 | 200,563 | |
Xstrata plc | 8,365,000 | 191,319 | |
Vodafone Group plc | 58,527,000 | 166,166 | |
* | Lloyds Banking | ||
Group plc | 155,413,785 | 156,950 | |
British American | |||
Tobacco plc | 3,903,464 | 156,391 | |
Rio Tinto plc | 2,171,000 | 152,877 | |
Tesco plc | 21,157,300 | 138,969 | |
Kingfisher plc | 32,849,000 | 135,821 | |
SABMiller plc | 3,960,000 | 133,407 | |
* | Autonomy Corp. plc | 3,813,100 | 101,898 |
Diageo plc | 4,966,000 | 97,090 | |
Meggitt plc | 16,409,250 | 90,179 | |
* | Signet Jewelers Ltd. | 1,356,000 | 60,508 |
ARM Holdings plc | 4,935,000 | 49,313 | |
GlaxoSmithKline plc | 2,400,000 | 46,072 | |
G4S plc | 10,700,000 | 45,922 | |
* | Inchcape plc | 7,200,000 | 45,445 |
AMEC plc | 2,195,000 | 41,540 | |
Carnival plc | 900,000 | 40,234 | |
United Utilities Group plc | 4,165,000 | 40,103 | |
Unilever plc | 1,310,000 | 38,840 | |
Ultra Electronics | |||
Holdings plc | 1,370,000 | 38,263 | |
HSBC Holdings plc | 3,255,811 | 35,857 | |
Victrex plc | 1,164,532 | 24,736 | |
Capita Group plc | 1,762,579 | 20,788 | |
3,397,366 | |||
Total Common Stocks | |||
(Cost $14,244,635) | 18,109,770 | ||
Temporary Cash Investments (4.5%)1 | |||
Money Market Fund (4.3%) | |||
2,3 | Vanguard Market | ||
Liquidity Fund, | |||
0.213% | 801,589,686 | 801,590 |
Face | Market | ||
Amount | Value | ||
($000) | ($000) | ||
U.S. Government and Agency Obligations (0.2%) | |||
4,5 | Fannie Mae Discount | ||
Notes, 0.320%, 3/1/11 | 1,000 | 1,000 | |
4,5 | Fannie Mae Discount | ||
Notes, 0.235%, 6/15/11 | 5,000 | 4,997 | |
4,5 | Federal Home Loan Bank | ||
Discount Notes, | |||
0.230%, 5/6/11 | 8,000 | 7,997 | |
4,5 | Federal Home Loan Bank | ||
Discount Notes, | |||
0.150%, 5/18/11 | 10,000 | 9,995 | |
4,5 | Freddie Mac Discount | ||
Notes, 0.200%, 3/28/11 | 3,000 | 3,000 | |
4,5 | Freddie Mac Discount | ||
Notes, 0.295%, 3/31/11 | 5,000 | 4,999 | |
4,5 | Freddie Mac Discount | ||
Notes, 0.210%–0.220%, | |||
5/23/11 | 16,000 | 15,992 | |
47,980 | |||
Total Temporary Cash Investments | |||
(Cost $849,570) | 849,570 | ||
Total Investments (101.1%) | |||
(Cost $15,094,205) | 18,959,340 | ||
Other Assets and Liabilities (-1.1%) | |||
Other Assets | 181,518 | ||
Liabilities3 | (388,900) | ||
(207,382) | |||
Net Assets (100%) | 18,751,958 |
18
International Growth Fund
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 17,543,270 |
Overdistributed Net Investment Income | (54,747) |
Accumulated Net Realized Losses | (2,635,371) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 3,865,135 |
Futures Contracts | 17,607 |
Forward Currency Contracts | 14,894 |
Foreign Currencies | 1,170 |
Net Assets | 18,751,958 |
Investor Shares—Net Assets | |
Applicable to 640,985,659 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 12,657,258 |
Net Asset Value Per Share— | |
Investor Shares | $19.75 |
Admiral Shares—Net Assets | |
Applicable to 96,991,250 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 6,094,700 |
Net Asset Value Per Share— | |
Admiral Shares | $62.84 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $101,880,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.5% and 1.6%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 Includes $108,258,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
5 Securities with a value of $31,088,000 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.
19
International Growth Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 100,430 |
Interest2 | 761 |
Security Lending | 2,350 |
Total Income | 103,541 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 11,973 |
Performance Adjustment | 2,805 |
The Vanguard Group—Note C | |
Management and Administrative—Investor Shares | 17,520 |
Management and Administrative—Admiral Shares | 3,629 |
Marketing and Distribution—Investor Shares | 1,471 |
Marketing and Distribution—Admiral Shares | 582 |
Custodian Fees | 1,591 |
Shareholders’ Reports—Investor Shares | 68 |
Shareholders’ Reports—Admiral Shares | 14 |
Trustees’ Fees and Expenses | 16 |
Total Expenses | 39,669 |
Expenses Paid Indirectly | (119) |
Net Expenses | 39,550 |
Net Investment Income | 63,991 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 518,953 |
Futures Contracts | 46,808 |
Foreign Currencies and Forward Currency Contracts | 16,895 |
Realized Net Gain (Loss) | 582,656 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 2,828,008 |
Futures Contracts | 18,785 |
Foreign Currencies and Forward Currency Contracts | 6,039 |
Change in Unrealized Appreciation (Depreciation) | 2,852,832 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,499,479 |
1 Dividends are net of foreign withholding taxes of $8,941,000.
2 Interest income from an affiliated company of the fund was $705,000.
See accompanying Notes, which are an integral part of the Financial Statements.
20
International Growth Fund
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 63,991 | 273,429 |
Realized Net Gain (Loss) | 582,656 | (38) |
Change in Unrealized Appreciation (Depreciation) | 2,852,832 | 441,576 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,499,479 | 714,967 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (193,553) | (186,646) |
Admiral Shares | (99,917) | (79,427) |
Realized Capital Gain | ||
Investor Shares | — | — |
Admiral Shares | — | — |
Total Distributions | (293,470) | (266,073) |
Capital Share Transactions | ||
Investor Shares | (90,389) | (55,225) |
Admiral Shares | 790,319 | 291,731 |
Net Increase (Decrease) from Capital Share Transactions | 699,930 | 236,506 |
Total Increase (Decrease) | 3,905,939 | 685,400 |
Net Assets | ||
Beginning of Period | 14,846,019 | 14,160,619 |
End of Period1 | 18,751,958 | 14,846,019 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($54,747,000) and $181,439,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
21
International Growth Fund
Financial Highlights
Investor Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $16.27 | $15.73 | $20.43 | $26.13 | $23.97 | $19.83 |
Investment Operations | ||||||
Net Investment Income | .058 | .291 | .3981 | .473 | .594 | .541 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 3.727 | .535 | (3.633) | (3.431) | 4.132 | 4.284 |
Total from Investment Operations | 3.785 | .826 | (3.235) | (2.958) | 4.726 | 4.825 |
Distributions | ||||||
Dividends from Net Investment Income | (.305) | (.286) | (.562) | (.528) | (.530) | (.370) |
Distributions from Realized Capital Gains | — | — | (.903) | (2.214) | (2.036) | (.315) |
Total Distributions | (.305) | (.286) | (1.465) | (2.742) | (2.566) | (.685) |
Net Asset Value, End of Period | $19.75 | $16.27 | $15.73 | $20.43 | $26.13 | $23.97 |
Total Return2 | 23.34% | 5.19% | -13.75% | -12.83% | 20.87% | 24.79% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $12,657 | $10,493 | $10,226 | $11,969 | $13,219 | $10,466 |
Ratio of Total Expenses to | ||||||
Average Net Assets3 | 0.49% | 0.49% | 0.53% | 0.47% | 0.51% | 0.55% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.68% | 1.74% | 2.84%1 | 2.07% | 2.47% | 2.52% |
Portfolio Turnover Rate | 49% | 44% | 51% | 55% | 41% | 45% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Net investment income per share and the ratio of net investment income to average net assets include $.061 and 0.48%, respectively, resulting from income accrued in connection with a spinoff in October 2008 by Reinet Investments SA of British American Tobacco plc.
2 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.
3 Includes performance-based investment advisory fee increases (decreases) of 0.03%, 0.03%, 0.03%, 0.02%, 0.01%, and (0.01%).
See accompanying Notes, which are an integral part of the Financial Statements.
22
International Growth Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $51.81 | $50.08 | $65.09 | $83.26 | $76.36 | $63.15 |
Investment Operations | ||||||
Net Investment Income | .222 | 1.009 | 1.3401 | 1.649 | 2.051 | 1.861 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 11.849 | 1.708 | (11.571) | (10.929) | 13.159 | 13.639 |
Total from Investment Operations | 12.071 | 2.717 | (10.231) | (9.280) | 15.210 | 15.500 |
Distributions | ||||||
Dividends from Net Investment Income | (1.041) | (.987) | (1.909) | (1.845) | (1.832) | (1.288) |
Distributions from Realized Capital Gains | — | — | (2.870) | (7.045) | (6.478) | (1.002) |
Total Distributions | (1.041) | (.987) | (4.779) | (8.890) | (8.310) | (2.290) |
Net Asset Value, End of Period | $62.84 | $51.81 | $50.08 | $65.09 | $83.26 | $76.36 |
Total Return2 | 23.38% | 5.36% | -13.57% | -12.67% | 21.11% | 25.03% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $6,095 | $4,353 | $3,934 | $4,845 | $5,060 | $3,506 |
Ratio of Total Expenses to | ||||||
Average Net Assets3 | 0.33% | 0.33% | 0.34% | 0.28% | 0.31% | 0.35% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.84% | 1.90% | 3.03%1 | 2.26% | 2.67% | 2.72% |
Portfolio Turnover Rate | 49% | 44% | 51% | 55% | 41% | 45% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Net investment income per share and the ratio of net investment income to average net assets include $.194 and 0.48%, respectively, resulting from income accrued in connection with a spinoff in October 2008 by Reinet Investments SA of British American Tobacco plc.
2 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
3 Includes performance-based investment advisory fee increases (decreases) of 0.03%, 0.03%, 0.03%, 0.02%, 0.01%, and (0.01%).
See accompanying Notes, which are an integral part of the Financial Statements.
23
International Growth Fund
Notes to Financial Statements
Vanguard International Growth Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. The fund offers two classes of shares: Investor Shares and Admiral Shares. 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. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
The fund also 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 primary risk associated with the fund’s use of
24
International Growth Fund
these contracts is that a counterparty will fail to fulfill its obligation to pay gains due to the fund under the contracts. Counterparty risk is mitigated by entering into forward currency contracts only with highly rated counterparties, by a master netting arrangement between the fund and the counterparty, and by the posting of collateral by the counterparty. 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 posted. Any securities posted as collateral for open contracts are noted in the Statement of Net Assets.
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 principal 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.
4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, 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. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on redemptions of capital shares 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. Baillie Gifford Overseas Ltd., Schroder Investment Management North America Inc., and M&G Investment Management Ltd. each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fees of Baillie Gifford Overseas Ltd. and Schroder Investment Management North America Inc. are subject to quarterly adjustments based on performance for the preceding three years relative to
25
International Growth Fund
the Morgan Stanley Capital International Europe, Australasia, Far East Index for periods prior to December 1, 2010, and the new benchmark, the MSCI All Country World Index ex USA, beginning December 1, 2010. The benchmark change will be fully phased in by December 2013. The basic fee of M&G Investment Management Ltd. is subject to quarterly adjustments based on the fund’s performance for the preceding three years, relative to the MSCI All Country World Index ex USA. The Vanguard Group manages the cash reserves of the fund on an at-cost basis.
For the six months ended February 28, 2011, the aggregate investment advisory fee represented an effective annual basic rate of 0.14% of the fund’s average net assets, before an increase of $2,805,000 (0.03%) based on performance.
C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $3,057,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 1.22% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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 February 28, 2011, these arrangements reduced the fund’s expenses by $119,000 (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 fund’s investments as of February 28, 2011, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—North and South America | 2,096,959 | — | — |
Common Stocks----Other | 775,769 | 15,237,042 | — |
Temporary Cash Investments | 801,590 | 47,980 | — |
Futures Contracts—Assets1 | 3,750 | — | — |
Forward Currency Contracts—Assets | — | 14,894 | — |
Total | 3,678,068 | 15,299,916 | — |
1 Represents variation margin on the last day of the reporting period. |
26
International Growth Fund
F. At February 28, 2011, the fair values of derivatives were reflected in the Statement of Net Assets as follows:
Foreign | |||
Equity | Exchange | ||
Contracts1 | Contracts | Total | |
Statement of Net Assets Caption | ($000) | ($000) | ($000) |
Other Assets | 3,750 | 14,894 | 18,644 |
Liabilities | — | — | — |
1 Represents variation margin on the last day of the reporting period. |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 28, 2011, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | 46,808 | — | 46,808 |
Forward Currency Contracts | — | 22,219 | 22,219 |
Realized Net Gain (Loss) on Derivatives | 46,808 | 22,219 | 69,027 |
Change in Unrealized Appreciation | |||
(Depreciation) on Derivatives | |||
Futures Contracts | 18,785 | — | 18,785 |
Forward Currency Contracts | — | 4,799 | 4,799 |
Change in Unrealized Appreciation | |||
(Depreciation) on Derivatives | 18,785 | 4,799 | 23,584 |
At February 28, 2011, 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 | March 2011 | 4,850 | 201,835 | 9,602 |
FTSE 100 Index | March 2011 | 1,460 | 141,852 | 1,472 |
Topix Index | March 2011 | 1,131 | 131,280 | 5,301 |
S&P ASX 200 Index | March 2011 | 604 | 74,206 | 1,232 |
Unrealized appreciation (depreciation) on open FTSE 100 Index futures contracts is required to be treated as realized gain (loss) for tax purposes.
27
International Growth Fund
At February 28, 2011, 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) | ||
Brown Brothers Harriman & Co. | 3/23/2011 | EUR | 139,162 | USD | 192,111 | 6,867 |
Brown Brothers Harriman & Co. | 3/23/2011 | GBP | 84,969 | USD | 138,159 | 4,221 |
Brown Brothers Harriman & Co. | 3/16/2011 | JPY | 10,029,700 | USD | 122,517 | 1,837 |
Brown Brothers Harriman & Co. | 3/23/2011 | AUD | 71,599 | USD | 72,681 | 1,969 |
AUD—Australian dollar. | ||||||
EUR—Euro. | ||||||
GBP—British pound. | ||||||
JPY—Japanese yen. | ||||||
USD—U.S. dollar. |
At February 28, 2011, the counterparty had deposited in a segregated account cash with a value sufficient to cover substantially all amounts due to the fund in connection with open forward currency contracts.
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.
During the six months ended February 28, 2011, the fund realized net foreign currency losses of $5,324,000, which decreased distributable net income for tax purposes; accordingly, such losses have been reclassified from accumulated net realized losses to overdistributed net investment income. Certain of the fund’s investments are in securities considered to be “passive foreign investment companies,” for which any unrealized appreciation and/or realized gains are required to be included in distributable net income for tax purposes. Unrealized appreciation through October 31, 2010, on passive foreign investment company holdings at February 28, 2011, was $30,613,000, all of which has been distributed and is reflected in the balance of overdistributed net investment income.
The fund’s realized gains for the six months ended February 28, 2011, were reduced by $1,383,000 of capital gain tax paid on sales of Indian securities. This tax is treated as a decrease in taxable income; accordingly, this amount has been reclassified from accumulated net realized losses to overdistributed net investment income.
28
International Growth Fund
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2010, the fund had available capital loss carryforwards totaling $3,074,326,000 to offset future net capital gains of $1,198,712,000 through August 31, 2017, and $1,875,614,000 through August 31, 2018. In addition, the fund realized losses of $139,102,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $15,124,818,000. Net unrealized appreciation of investment securities for tax purposes was $3,834,522,000, consisting of unrealized gains of $4,418,332,000 on securities that had risen in value since their purchase and $583,810,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the six months ended February 28, 2011, the fund purchased $4,442,732,000 of investment securities and sold $4,127,179,000 of investment securities, other than temporary cash investments.
I. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 1,373,960 | 73,136 | 1,854,437 | 110,882 |
Issued in Lieu of Cash Distributions | 190,030 | 10,017 | 182,857 | 10,852 |
Redeemed1 | (1,654,379) | (86,966) | (2,092,519) | (126,909) |
Net Increase (Decrease)—Investor Shares | (90,389) | (3,813) | (55,225) | (5,175) |
Admiral Shares | ||||
Issued | 1,313,687 | 21,569 | 953,163 | 17,988 |
Issued in Lieu of Cash Distributions | 92,552 | 1,534 | 72,968 | 1,361 |
Redeemed1 | (615,920) | (10,132) | (734,400) | (13,893) |
Net Increase (Decrease)—Admiral Shares | 790,319 | 12,971 | 291,731 | 5,456 |
1 Net of redemption fees for fiscal 2011 and 2010 of $249,000 and $801,000, respectively (fund totals). |
J. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
29
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 the 2% fee on redemptions of shares held for less than two months, nor do they include the account service fee described in the 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.
30
Six Months Ended February 28, 2011 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
International Growth Fund | 8/31/2010 | 2/28/2011 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,233.41 | $2.71 |
Admiral Shares | 1,000.00 | 1,233.81 | 1.83 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,022.36 | $2.46 |
Admiral Shares | 1,000.00 | 1,023.16 | 1.66 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.49% for Investor Shares and 0.33% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period.
31
Trustees Approve Advisory Agreements
The board of trustees of Vanguard International Growth Fund has renewed the fund’s investment advisory agreement with M&G Investment Management Limited, and approved amendments to the fund’s investment advisory agreements with Schroder Investment Management North America Inc. (Schroder Inc.) and Baillie Gifford Overseas Ltd., as well as the sub-advisory agreement with Schroder Investment Management North America Ltd. (Schroder Ltd.). Effective December 1, 2010, the compensation benchmark for Schroder Inc. and Baillie Gifford, the MSCI EAFE Index, was replaced with the MSCI All Country World Index ex USA. The board concluded that the new index is a more suitable index because it better reflects the fund’s investment objective and strategies. The board determined that the retention of the fund’s advisors and amendments to the investment advisory agreements were in the best interests of the fund and its shareholders.
The board based its decision upon an evaluation of each advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the agreements. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board considered the quality of the fund’s investment management over both the short and long term, and took into account the organizational depth and stability of each advisor. The board noted the following:
Schroder Investment Management North America Inc. Schroder Inc. is a subsidiary of Schroders plc., a firm founded more than 200 years ago, with investment management experience dating to 1926. The advisor employs a sound process, selecting attractive growth stocks from developed and emerging markets outside the United States. Stocks are selected using a bottom-up approach, supported by Schroder’s worldwide network of analysts, economists, and strategists. The firm has advised the fund since its inception in 1981.
Baillie Gifford Overseas Ltd. Baillie Gifford, a unit of Baillie Gifford & Co., founded in 1908, is among the largest independently owned investment management firms in the United Kingdom. The advisor employs a sound process, which builds a diversified portfolio of high-quality non-U.S. growth stocks from developed and emerging markets. Stocks are selected using fundamental research conducted by Baillie Gifford’s Edinburgh-based analysts. The firm has advised a portion of the International Growth Fund since 2003.
M&G Investment Management Limited. M&G, founded in 1931, is based in London, England, and specializes in managing equity and fixed income portfolios for both institutional and retail clients worldwide. The advisor employs a sound process, which builds a diversified portfolio of high-quality, non-U.S. growth stocks from developed and emerging markets. The advisor’s global equity team—composed of the portfolio managers, Greg Aldridge and Graham French, and seven other portfolio managers/analysts—conducts intensive fundamental analysis on companies, including regular company visits. The firm has advised a portion of the fund since 2008.
The board concluded that each advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of and amendments to (as applicable) the advisory agreements.
32
Investment performance
The board considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance of a relevant benchmark and peer group. The board concluded that the advisors have carried out the fund’s investment strategy in a disciplined fashion, and the performance results have allowed the fund to remain competitive versus its benchmark and peer funds. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
The board did not consider profitability of the fund’s advisors 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 fund’s advisory fee schedules. The breakpoints reduce the effective rate of the fee as the fund’s assets managed by each advisor increase.
The board will consider whether to renew the advisory agreements again after a one-year period.
33
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. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
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.
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.
34
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 179 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1 | and President (2006–2008) of Rohm and Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services) and Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing); |
Board. Principal Occupation(s) During the Past Five | Senior Advisor at New Mountain Capital; Trustee |
Years: Chairman of the Board of The Vanguard Group, | of The Conference Board; Member of the Board of |
Inc., and of each of the investment companies served | Managers of Delphi Automotive LLP (automotive |
by The Vanguard Group, since January 2010; Director | components). |
of The Vanguard Group since 2008; Chief Executive | |
Officer and President of The Vanguard Group and of | Amy Gutmann |
each of the investment companies served by The | Born 1949. Trustee Since June 2006. Principal |
Vanguard Group since 2008; Director of Vanguard | Occupation(s) During the Past Five Years: President |
Marketing Corporation; Managing Director of The | of the University of Pennsylvania; Christopher H. |
Vanguard Group (1995–2008). | Browne Distinguished Professor of Political Science |
in the School of Arts and Sciences with secondary | |
appointments at the Annenberg School for Commu- | |
Independent Trustees | nication and the Graduate School of Education |
of the University of Pennsylvania; Director of | |
Emerson U. Fullwood | Carnegie Corporation of New York, Schuylkill River |
Born 1948. Trustee Since January 2008. Principal | Development Corporation, and Greater Philadelphia |
Occupation(s) During the Past Five Years: Executive | Chamber of Commerce; Trustee of the National |
Chief Staff and Marketing Officer for North America | Constitution Center; Chair of the Presidential |
and Corporate Vice President (retired 2008) of Xerox | Commission for the Study of Bioethical Issues. |
Corporation (document management products and | |
services); Executive in Residence and 2010 | JoAnn Heffernan Heisen |
Distinguished Minett Professor at the Rochester | Born 1950. Trustee Since July 1998. Principal |
Institute of Technology; Director of SPX Corporation | Occupation(s) During the Past Five Years: Corporate |
(multi-industry manufacturing), the United Way of | Vice President and Chief Global Diversity Officer |
Rochester, Amerigroup Corporation (managed health | (retired 2008) and Member of the Executive |
care), the University of Rochester Medical Center, | Committee (1997–2008) of Johnson & Johnson |
Monroe Community College Foundation, and North | (pharmaceuticals/consumer products); Director of |
Carolina A&T University. | Skytop Lodge Corporation (hotels), the University |
Medical Center at Princeton, the Robert Wood | |
Rajiv L. Gupta | Johnson Foundation, and the Center for Work Life |
Born 1945. Trustee Since December 2001.2 | Policy; Member of the Advisory Board of the |
Principal Occupation(s) During the Past Five Years: | Maxwell School of Citizenship and Public Affairs |
Chairman and Chief Executive Officer (retired 2009) | at Syracuse University. |
F. Joseph Loughrey | Thomas J. Higgins | |
Born 1949. Trustee Since October 2009. Principal | Born 1957. Chief Financial Officer Since September | |
Occupation(s) During the Past Five Years: President | 2008. Principal Occupation(s) During the Past Five | |
and Chief Operating Officer (retired 2009) and Vice | Years: Principal of The Vanguard Group, Inc.; Chief | |
Chairman of the Board (2008–2009) of Cummins Inc. | Financial Officer of each of the investment companies | |
(industrial machinery); Director of SKF AB (industrial | served by The Vanguard Group since 2008; Treasurer | |
machinery), Hillenbrand, Inc. (specialized consumer | of each of the investment companies served by The | |
services), the Lumina Foundation for Education, and | Vanguard Group (1998–2008). | |
Oxfam America; Chairman of the Advisory Council | ||
for the College of Arts and Letters and Member | Kathryn J. Hyatt | |
of the Advisory Board to the Kellogg Institute for | Born 1955. Treasurer Since November 2008. Principal | |
International Studies at the University of Notre Dame. | Occupation(s) During the Past Five Years: Principal | |
of The Vanguard Group, Inc.; Treasurer of each of | ||
André F. Perold | the investment companies served by The Vanguard | |
Born 1952. Trustee Since December 2004. Principal | Group since 2008; Assistant Treasurer of each of the | |
Occupation(s) During the Past Five Years: George | investment companies served by The Vanguard Group | |
Gund Professor of Finance and Banking at the Harvard | (1988–2008). | |
Business School; Chair of the Investment Committee | ||
of HighVista Strategies LLC (private investment firm). | Heidi Stam | |
Born 1956. Secretary Since July 2005. Principal | ||
Alfred M. Rankin, Jr. | Occupation(s) During the Past Five Years: Managing | |
Born 1941. Trustee Since January 1993. Principal | Director of The Vanguard Group, Inc., since 2006; | |
Occupation(s) During the Past Five Years: Chairman, | General Counsel of The Vanguard Group since 2005; | |
President, and Chief Executive Officer of NACCO | Secretary of The Vanguard Group and of each of the | |
Industries, Inc. (forklift trucks/housewares/lignite); | investment companies served by The Vanguard Group | |
Director of Goodrich Corporation (industrial products/ | since 2005; Director and Senior Vice President of | |
aircraft systems and services) and the National | Vanguard Marketing Corporation since 2005; | |
Association of Manufacturers; Chairman of the | Principal of The Vanguard Group (1997–2006). | |
Federal Reserve Bank of Cleveland; Vice Chairman | ||
of University Hospitals of Cleveland; President of | ||
the Board of The Cleveland Museum of Art. | Vanguard Senior Management Team | |
Peter F. Volanakis | R. Gregory Barton | Michael S. Miller |
Born 1955. Trustee Since July 2009. Principal | Mortimer J. Buckley | James M. Norris |
Occupation(s) During the Past Five Years: President | Kathleen C. Gubanich | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Paul A. Heller | George U. Sauter |
Incorporated (communications equipment); Director of | ||
Corning Incorporated (2000–2010) and Dow Corning | ||
(2001–2010); Overseer of the Amos Tuck School of | Chairman Emeritus and Senior Advisor | |
Business Administration at Dartmouth College. | ||
John J. Brennan | ||
Chairman, 1996–2009 | ||
Executive Officers | Chief Executive Officer and President, 1996–2008 | |
Glenn Booraem | ||
Born 1967. Controller Since July 2010. Principal | Founder | |
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | John C. Bogle | |
the investment companies served by The Vanguard | Chairman and Chief Executive Officer, 1974–1996 | |
Group since 2010; Assistant Controller of each of | ||
the investment companies served by The Vanguard | ||
Group (2001–2010). |
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, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
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P.O. Box 2600 | |
Valley Forge, PA 19482-2600 |
Connect with Vanguard® > vanguard.com
Fund Information > 800-662-7447 | CFA® is a trademark owned by CFA Institute. |
Direct Investor Account Services > 800-662-2739 | |
Institutional Investor Services > 800-523-1036 | |
Text Telephone for People | |
With Hearing Impairment > 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 Inc. 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 e-mail addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2011 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q812 042011 |
![]() |
Vanguard FTSE Social Index Fund |
Semiannual Report |
February 28, 2011 |
![]() |
> Vanguard FTSE Social Index Fund returned about 28% for the six months ended February 28, 2011.
> The fund’s return closely tracked that of its index benchmark but was a bit behind the average return of large-capitalization growth funds.
> Each of the fund’s ten sectors posted positive results for the period, with information technology, financial, and health care stocks contributing most to its return.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Fund Profile. | 6 |
Performance Summary. | 7 |
Financial Statements. | 8 |
About Your Fund’s Expenses. | 20 |
Glossary. | 22 |
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.
Cover photograph: Jean Maher.
Your Fund’s Total Returns
Six Months Ended February 28, 2011 | |
Total | |
Returns | |
Vanguard FTSE Social Index Fund | |
Investor Shares | 28.13% |
Institutional Shares | 28.30 |
FTSE4Good US Select Index | 28.27 |
Large-Cap Growth Funds Average | 29.55 |
Large-Cap Growth Funds Average: Derived from data provided by Lipper Inc. | |
Institutional Shares are available to certain institutional investors who meet specific administrative, service, and account-size criteria. |
Your Fund’s Performance at a Glance | ||||
August 31, 2010 , Through February 28, 2011 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard FTSE Social Index Fund | ||||
Investor Shares | $6.27 | $7.97 | $0.060 | $0.000 |
Institutional Shares | 6.27 | 7.97 | 0.070 | 0.000 |
1
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ftsesocialindex_q2132x4x1.jpg)
Chairman’s Letter
Dear Shareholder,
For the half-year ended February 28, 2011, Vanguard FTSE Social Index Fund returned about 28%, in line with its benchmark index, the FTSE4Good US Select Index, but trailed the average return of its large-capitalization growth fund peers.
The fund, which tracks companies that meet strict social, environmental, human rights, and labor standards set by the index provider, tends to be heavily weighted in a few sectors: information technology, financials, and health care. These sectors together represented about three-quarters of the fund’s assets in recent periods, and their performances largely determined the fund’s results.
During the six months, the fund—like its target index—benefited from the robust performance of its key sectors. However, the fund lagged the average return of its large-cap peers and the broader U.S. market because it had limited exposure to some even stronger-performing sectors, including energy and industrials.
A fretful start, an optimistic finish for global stock markets
Stock markets rallied from their midsummer malaise to produce exceptional returns for the six months ended February 28. At the start of the period, the U.S. economy seemed in danger of tipping back into recession. By the end, hopes were high that it had
2
reached escape velocity, propelled by steady job growth and notable strength in the manufacturing sector. Smaller stocks, which are especially sensitive to the rhythms of the business cycle, produced the highest six-month returns.
In Europe, investor optimism subdued sovereign-debt jitters, driving stock prices higher. Developed markets in the Pacific region perked up on signs of recovery in global trade. Australian stocks posted especially strong returns, benefiting from a surge in the prices of metals and other natural resources. Emerging stock markets trailed a few steps behind their developed-market counterparts. Most major currencies appreciated relative to the U.S. dollar, enhancing returns from abroad for U.S.-based investors.
Interest rates rose, depressing bond prices
U.S. interest rates hovered near generational lows early in the period but then moved higher, putting pressure on bond prices. For the six-month period, the broad taxable bond market produced a small negative return. The municipal bond market did worse. Corporate bonds outperformed government debt as investors stretched for yield beyond government securities, where rates remained low by historical standards.
As it has since December 2008, the Federal Reserve held its target for short-term interest rates near 0%. This stance kept the returns available from money market instruments such as the 3-month Treasury bill in the same neighborhood.
Market Barometer | |||
Total Returns | |||
Periods Ended February 28, 2011 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 28.65% | 23.54% | 3.17% |
Russell 2000 Index (Small-caps) | 37.55 | 32.60 | 3.80 |
Dow Jones U.S. Total Stock Market Index | 29.24 | 24.45 | 3.59 |
MSCI All Country World Index ex USA (International) | 22.16 | 21.12 | 4.23 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | -0.83% | 4.93% | 5.80% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | -3.51 | 1.72 | 4.07 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.06 | 0.14 | 2.16 |
CPI | |||
Consumer Price Index | 1.37% | 2.11% | 2.18% |
3
Every sector advanced, with energy leading the pack
The FTSE Social Index Fund met its objective of closely tracking its benchmark index for the fiscal half-year. All of the fund’s ten sectors posted positive returns. The information technology, financial, and health care sectors together contributed almost 80% of the fund’s total return.
Information technology—the largest sector in both the fund and its target index, representing nearly one-third of total assets, on average—contributed almost 40% of the fund’s return for the period. As the economy has improved, more companies have been willing to invest in technology to boost their productivity and efficiency. Makers of computer hardware, software, and semiconductors were among the biggest beneficiaries of such investments.
A brighter economic outlook also helped lift financial sector stocks. Commercial banks, diversified financial services, and insurance companies continued to clean up their balance sheets and recover from the recent financial crisis. These three subsectors added more than 5 percentage points to the fund’s return.
The health care sector also posted robust results. Despite uncertainties related to the U.S. government’s implementation of health care reform, several providers of health care products and services recorded strong double-digit gains, led
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Institutional | Peer Group | |
Shares | Shares | Average | |
FTSE Social Index Fund | 0.29% | 0.16% | 1.37% |
The fund expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.29% for Investor Shares and 0.16% for Institutional Shares. The peer-group expense ratio is derived from data provided by Lipper Inc. and captures information through year-end 2010.
Peer group: Large-Cap Growth Funds.
4
by companies in the life sciences. Within the sector, health insurance and medical-equipment makers contributed most to the fund’s return.
Rising commodity prices and increased demand from emerging markets helped advance energy (+44%) and industrial (+37%) stocks. While these sectors notched the biggest returns for the fund, their impact was minimal because together they constituted a mere 4% of the fund’s assets, on average, during the period. The benchmark’s strict environmental guidelines allow for very few energy and industrial companies to be a part of the index—and the fund.
The fund’s disproportionately small weighting in energy and industrials compared with those of some of its large-cap peer funds is a key reason that it trailed the peer-group average return for the period.
Ignore short-term hiccups; focus on the long term
The U.S. stock market produced exceptional results for the six months. While the market’s direction appears promising, it’s impossible to predict its near-term outlook.
There will always be unexpected events—such as the recent unrest in the Middle East and North Africa and the tragedy in Japan—that can affect the market’s short-term performance. However, you should not let that distract you from focusing on your long-term investment strategy.
As always, Vanguard’s investing counsel remains the same: Build a well-balanced, diversified portfolio that includes an asset mix of stocks, bonds, and short-term investments appropriate for your long-term goals, financial objectives, and risk tolerance.
The FTSE Social Index Fund can play an important role in such a portfolio. In particular, this fund allows investors committed to a socially conscious investment strategy to follow their principles while keeping their investment costs in check.
Thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ftsesocialindex_q2132x7x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 14, 2011
FTSE Social Index Fund
Fund Profile
As of February 28, 2011
Share-Class Characteristics | ||
Investor | Institutional | |
Shares | Shares | |
Ticker Symbol | VFTSX | VFTNX |
Expense Ratio1 | 0.29% | 0.16% |
30-Day SEC Yield | 0.89% | 1.02% |
Portfolio Characteristics | |||
FTSE | DJ | ||
4Good | U.S. Total | ||
US Select | Market | ||
Fund | Index | Index | |
Number of Stocks | 300 | 299 | 3,845 |
Median Market Cap $32.2B | $32.2B | $31.4B | |
Price/Earnings Ratio | 18.1x | 18.1x | 17.9x |
Price/Book Ratio | 2.2x | 2.2x | 2.3x |
Return on Equity | 19.0% | 19.0% | 19.2% |
Earnings Growth Rate | 9.0% | 9.0% | 5.4% |
Dividend Yield | 1.2% | 1.2% | 1.6% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 10% | — | — |
Short-Term Reserves | 0.2% | — | — |
Sector Diversification (% of equity exposure) | |||
FTSE | DJ | ||
4Good | U.S. Total | ||
US Select | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 9.1% | 9.1% | 11.8% |
Consumer Staples | 8.0 | 8.0 | 9.1 |
Energy | 1.7 | 1.7 | 11.6 |
Financials | 29.7 | 29.6 | 16.6 |
Health Care | 13.5 | 13.6 | 10.5 |
Industrials | 2.6 | 2.6 | 11.4 |
Information | |||
Technology | 32.1 | 32.0 | 18.9 |
Materials | 1.2 | 1.2 | 4.5 |
Telecommunication | |||
Services | 1.9 | 1.9 | 2.5 |
Utilities | 0.2 | 0.3 | 3.1 |
Volatility Measures | ||
FTSE | DJ | |
4Good | U.S. Total | |
US Select | Market | |
Index | Index | |
R-Squared | 1.00 | 0.98 |
Beta | 1.00 | 1.12 |
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) | ||
Apple Inc. | Computer | |
Hardware | 6.4% | |
JPMorgan Chase & Co. | Diversified Financial | |
Services | 3.6 | |
Procter & Gamble Co. | Household | |
Products | 3.5 | |
Wells Fargo & Co. | Diversified Banks | 3.3 |
Oracle Corp. | Systems Software | 3.2 |
Google Inc. Class A | Internet Software & | |
Services | 2.9 | |
Bank of America Corp. | Diversified Financial | |
Services | 2.8 | |
Intel Corp. | Semiconductors | 2.3 |
Cisco Systems Inc. | Communications | |
Equipment | 2.0 | |
QUALCOMM Inc. | Communications | |
Equipment | 1.9 | |
Top Ten | 31.9% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ftsesocialindex_q2132x8x1.jpg)
1 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.29% for Investor Shares and 0.16% for Institutional Shares.
6
FTSE Social 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 (%): August 31, 2000, Through February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ftsesocialindex_q2132x9x1.jpg)
Note: For 2011, performance data reflect the six months ended February 28, 2011.
Average Annual Total Returns: Periods Ended December 31, 2010
This table presents average annual total 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 | 5/31/2000 | 14.43% | -0.32% | -0.60% |
Institutional Shares | 1/14/2003 | 14.58 | -0.18 | 4.011 |
1 Return since inception. |
See Financial Highlights for dividend and capital gains information.
7
FTSE Social Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (100.1%) | |||
Consumer Discretionary (9.1%) | |||
McDonald’s Corp. | 117,626 | 8,902 | |
* | Amazon.com Inc. | 37,149 | 6,438 |
* | DIRECTV Class A | 92,164 | 4,237 |
Lowe’s Cos. Inc. | 152,243 | 3,984 | |
Coach Inc. | 32,812 | 1,802 | |
Staples Inc. | 80,477 | 1,714 | |
* | Bed Bath & Beyond Inc. | 28,703 | 1,382 |
McGraw-Hill Cos. Inc. | 34,135 | 1,320 | |
Starwood Hotels & Resorts | |||
Worldwide Inc. | 20,963 | 1,281 | |
Gap Inc. | 51,389 | 1,158 | |
Macy’s Inc. | 46,572 | 1,113 | |
Nordstrom Inc. | 24,299 | 1,100 | |
Harley-Davidson Inc. | 26,075 | 1,064 | |
Mattel Inc. | 40,061 | 1,004 | |
Cablevision Systems Corp. | |||
Class A | 27,227 | 1,003 | |
Ross Stores Inc. | 13,261 | 955 | |
Genuine Parts Co. | 17,331 | 913 | |
Tiffany & Co. | 13,965 | 860 | |
* | Sirius XM Radio Inc. | 435,424 | 788 |
* | Royal Caribbean Cruises | ||
Ltd. | 17,591 | 770 | |
* | Apollo Group Inc. Class A | 16,152 | 731 |
Darden Restaurants Inc. | 15,341 | 723 | |
* | Interpublic Group of Cos. | ||
Inc. | 53,245 | 703 | |
* | Dollar Tree Inc. | 13,761 | 692 |
Hasbro Inc. | 14,916 | 670 | |
Wyndham Worldwide Corp. | 19,202 | 601 | |
Scripps Networks Interactive | |||
Inc. Class A | 10,880 | 565 | |
PetSmart Inc. | 13,163 | 538 | |
H&R Block Inc. | 34,007 | 517 | |
Gentex Corp. | 15,321 | 464 | |
* | Mohawk Industries Inc. | 7,570 | 440 |
Gannett Co. Inc. | 26,022 | 430 |
Market | |||
Value | |||
Shares | ($000) | ||
Harman International | |||
Industries Inc. | 7,711 | 375 | |
Foot Locker Inc. | 17,177 | 341 | |
Lennar Corp. Class A | 16,740 | 337 | |
* | GameStop Corp. Class A | 16,735 | 334 |
* | Lamar Advertising Co. | ||
Class A | 8,591 | 333 | |
* | Toll Brothers Inc. | 13,497 | 287 |
Weight Watchers | |||
International Inc. | 4,138 | 253 | |
Wendy’s/Arby’s Group Inc. | |||
Class A | 45,713 | 218 | |
RadioShack Corp. | 12,176 | 180 | |
* | Krispy Kreme Doughnuts | ||
Inc. Warrants Exp. | |||
03/02/2012 | 179 | — | |
51,520 | |||
Consumer Staples (8.0%) | |||
Procter & Gamble Co. | 309,127 | 19,491 | |
CVS Caremark Corp. | 150,330 | 4,970 | |
Costco Wholesale Corp. | 47,802 | 3,575 | |
General Mills Inc. | 70,698 | 2,626 | |
Sysco Corp. | 64,953 | 1,805 | |
HJ Heinz Co. | 35,485 | 1,782 | |
Kellogg Co. | 30,516 | 1,634 | |
Avon Products Inc. | 47,184 | 1,312 | |
Estee Lauder Cos. Inc. | |||
Class A | 13,314 | 1,257 | |
Whole Foods Market Inc. | 19,012 | 1,113 | |
Hershey Co. | 18,453 | 966 | |
Campbell Soup Co. | 27,649 | 931 | |
Dr Pepper Snapple | |||
Group Inc. | 25,190 | 908 | |
Safeway Inc. | 40,898 | 892 | |
McCormick & Co. Inc. | 13,244 | 631 | |
Hormel Foods Corp. | 22,008 | 603 | |
Alberto-Culver Co. Class B | 10,837 | 404 | |
44,900 |
8
FTSE Social Index Fund
Market | ||
Value | ||
Shares | ($000) | |
Energy (1.7%) | ||
Apache Corp. | 42,179 | 5,256 |
Noble Corp. | 27,981 | 1,251 |
* Newfield Exploration Co. | 14,851 | 1,081 |
EQT Corp. | 16,430 | 810 |
QEP Resources Inc. | 19,318 | 764 |
Patterson-UTI Energy Inc. | 17,251 | 472 |
9,634 | ||
Financials (29.7%) | ||
JPMorgan Chase & Co. | 431,779 | 20,160 |
Wells Fargo & Co. | 577,953 | 18,645 |
Bank of America Corp. | 1,113,756 | 15,916 |
US Bancorp | 211,785 | 5,873 |
American Express Co. | 132,672 | 5,781 |
Bank of New York | ||
Mellon Corp. | 137,023 | 4,164 |
MetLife Inc. | 81,505 | 3,860 |
PNC Financial Services | ||
Group Inc. | 57,998 | 3,578 |
Simon Property Group Inc. | 32,300 | 3,554 |
Prudential Financial Inc. | 53,658 | 3,532 |
Aflac Inc. | 51,957 | 3,058 |
Travelers Cos. Inc. | 50,737 | 3,041 |
Capital One Financial Corp. | 50,326 | 2,505 |
Charles Schwab Corp. | 131,354 | 2,492 |
State Street Corp. | 55,532 | 2,483 |
ACE Ltd. | 37,438 | 2,368 |
Franklin Resources Inc. | 18,680 | 2,347 |
CME Group Inc. | 7,439 | 2,316 |
BB&T Corp. | 75,656 | 2,088 |
Chubb Corp. | 33,617 | 2,040 |
Loews Corp. | 45,877 | 1,984 |
T Rowe Price Group Inc. | 28,337 | 1,898 |
Ameriprise Financial Inc. | 27,419 | 1,736 |
Equity Residential | 31,102 | 1,714 |
SunTrust Banks Inc. | 55,067 | 1,661 |
Public Storage | 14,056 | 1,578 |
Annaly Capital | ||
Management Inc. | 87,495 | 1,569 |
HCP Inc. | 40,902 | 1,554 |
Progressive Corp. | 73,255 | 1,526 |
Boston Properties Inc. | 15,548 | 1,491 |
Hartford Financial Services | ||
Group Inc. | 49,104 | 1,453 |
Northern Trust Corp. | 26,634 | 1,374 |
Invesco Ltd. | 51,097 | 1,371 |
Host Hotels & Resorts Inc. | 73,530 | 1,353 |
Discover Financial Services | 59,909 | 1,303 |
Principal Financial Group Inc. | 35,249 | 1,208 |
M&T Bank Corp. | 13,157 | 1,158 |
AvalonBay Communities Inc. | 9,437 | 1,142 |
Lincoln National Corp. | 35,115 | 1,114 |
Regions Financial Corp. | 138,852 | 1,061 |
NYSE Euronext | 28,583 | 1,058 |
Market | |||
Value | |||
Shares | ($000) | ||
* | IntercontinentalExchange | ||
Inc. | 8,089 | 1,037 | |
ProLogis | 62,997 | 1,024 | |
Ventas Inc. | 17,184 | 952 | |
Unum Group | 35,189 | 934 | |
New York Community | |||
Bancorp Inc. | 48,350 | 902 | |
KeyCorp | 97,292 | 889 | |
XL Group plc Class A | 37,551 | 877 | |
Moody’s Corp. | 25,890 | 826 | |
* | SLM Corp. | 53,376 | 791 |
Comerica Inc. | 19,423 | 756 | |
Plum Creek Timber Co. Inc. | 17,942 | 753 | |
Macerich Co. | 14,353 | 727 | |
Willis Group Holdings plc | 18,645 | 725 | |
* | Genworth Financial Inc. | ||
Class A | 54,291 | 718 | |
AMB Property Corp. | 18,604 | 677 | |
Hudson City Bancorp Inc. | 57,992 | 667 | |
PartnerRe Ltd. | 8,258 | 655 | |
Huntington Bancshares Inc. | 94,576 | 647 | |
Cincinnati Financial Corp. | 18,165 | 619 | |
Legg Mason Inc. | 16,917 | 613 | |
Torchmark Corp. | 8,850 | 577 | |
American International | |||
Group Inc. | 15,399 | 571 | |
People’s United Financial Inc. | 41,023 | 541 | |
Axis Capital Holdings Ltd. | 13,646 | 496 | |
WR Berkley Corp. | 16,214 | 486 | |
Assurant Inc. | 11,686 | 475 | |
Zions Bancorporation | 19,776 | 462 | |
Marshall & Ilsley Corp. | 58,367 | 454 | |
* | Markel Corp. | 1,067 | 443 |
Liberty Property Trust | 12,520 | 423 | |
Regency Centers Corp. | 9,037 | 409 | |
RenaissanceRe Holdings Ltd. | 6,058 | 406 | |
Brown & Brown Inc. | 15,476 | 405 | |
Duke Realty Corp. | 27,566 | 388 | |
Commerce Bancshares Inc. | 9,520 | 382 | |
* | Popular Inc. | 113,815 | 370 |
Arthur J Gallagher & Co. | 11,541 | 362 | |
Old Republic | |||
International Corp. | 28,662 | 358 | |
SEI Investments Co. | 15,480 | 356 | |
Transatlantic Holdings Inc. | 6,966 | 355 | |
White Mountains Insurance | |||
Group Ltd. | 915 | 347 | |
City National Corp. | 5,738 | 338 | |
* | First Horizon National Corp. | 29,272 | 337 |
Erie Indemnity Co. Class A | 4,176 | 292 | |
* | Forest City Enterprises Inc. | ||
Class A | 15,037 | 284 | |
Janus Capital Group Inc. | 20,213 | 271 | |
^,* | St. Joe Co. | 10,101 | 270 |
9
FTSE Social Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
Valley National Bancorp | 17,939 | 244 | |
Mercury General Corp. | 2,976 | 122 | |
CNA Financial Corp. | 2,490 | 73 | |
Wesco Financial Corp. | 171 | 67 | |
167,260 | |||
Health Care (13.5%) | |||
* | Amgen Inc. | 104,437 | 5,361 |
UnitedHealth Group Inc. | 121,337 | 5,167 | |
Medtronic Inc. | 119,518 | 4,771 | |
* | Gilead Sciences Inc. | 89,783 | 3,500 |
* | Express Scripts Inc. | 58,016 | 3,262 |
* | WellPoint Inc. | 43,519 | 2,893 |
* | Medco Health Solutions Inc. | 46,907 | 2,891 |
Covidien plc | 54,714 | 2,815 | |
* | Celgene Corp. | 51,974 | 2,760 |
Allergan Inc. | 33,897 | 2,514 | |
* | Genzyme Corp. | 28,190 | 2,127 |
Stryker Corp. | 32,782 | 2,074 | |
Becton Dickinson and Co. | 25,373 | 2,030 | |
* | St. Jude Medical Inc. | 37,847 | 1,812 |
* | Biogen Idec Inc. | 26,301 | 1,799 |
Alcon Inc. | 10,004 | 1,655 | |
Aetna Inc. | 44,178 | 1,650 | |
* | Agilent Technologies Inc. | 38,560 | 1,623 |
Cardinal Health Inc. | 38,797 | 1,615 | |
* | Intuitive Surgical Inc. | 4,352 | 1,427 |
* | Zimmer Holdings Inc. | 21,867 | 1,363 |
CIGNA Corp. | 30,160 | 1,269 | |
* | Humana Inc. | 18,655 | 1,213 |
* | Boston Scientific Corp. | 166,463 | 1,192 |
AmerisourceBergen Corp. | |||
Class A | 30,856 | 1,170 | |
* | Mylan Inc. | 48,199 | 1,102 |
* | Life Technologies Corp. | 20,513 | 1,095 |
Quest Diagnostics Inc. | 18,895 | 1,072 | |
* | Forest Laboratories Inc. | 31,579 | 1,023 |
CR Bard Inc. | 10,459 | 1,022 | |
* | Laboratory Corp. of | ||
America Holdings | 11,166 | 1,006 | |
* | Hospira Inc. | 18,212 | 962 |
* | Varian Medical Systems Inc. | 13,104 | 908 |
* | DaVita Inc. | 10,675 | 847 |
* | Waters Corp. | 10,171 | 845 |
* | Henry Schein Inc. | 10,181 | 702 |
* | CareFusion Corp. | 24,448 | 668 |
* | Watson Pharmaceuticals Inc. | 11,622 | 651 |
Beckman Coulter Inc. | 7,734 | 643 | |
DENTSPLY International Inc. | 15,727 | 588 | |
* | Coventry Health Care Inc. | 16,477 | 498 |
* | Cephalon Inc. | 8,267 | 466 |
Patterson Cos. Inc. | 13,782 | 460 | |
Universal Health Services | |||
Inc. Class B | 9,784 | 447 |
Market | |||
Value | |||
Shares | ($000) | ||
* | Community Health | ||
Systems Inc. | 10,425 | 426 | |
* | Kinetic Concepts Inc. | 7,845 | 384 |
Omnicare Inc. | 12,740 | 365 | |
* | King Pharmaceuticals Inc. | 800 | 11 |
76,144 | |||
Industrials (2.6%) | |||
Deere & Co. | 46,722 | 4,212 | |
PACCAR Inc. | 40,228 | 2,017 | |
Rockwell Automation Inc. | 15,751 | 1,382 | |
WW Grainger Inc. | 7,581 | 1,010 | |
Southwest Airlines Co. | 82,110 | 971 | |
Manpower Inc. | 9,110 | 578 | |
Iron Mountain Inc. | 21,990 | 572 | |
Pitney Bowes Inc. | 22,339 | 562 | |
Robert Half International Inc. | 16,458 | 525 | |
* | Foster Wheeler AG | 13,511 | 489 |
Equifax Inc. | 13,458 | 481 | |
Dun & Bradstreet Corp. | 5,608 | 453 | |
JB Hunt Transport | |||
Services Inc. | 10,171 | 423 | |
Pentair Inc. | 10,973 | 407 | |
* | Terex Corp. | 11,759 | 397 |
14,479 | |||
Information Technology (32.1%) | |||
* | Apple Inc. | 101,306 | 35,782 |
Oracle Corp. | 550,386 | 18,108 | |
* | Google Inc. Class A | 26,344 | 16,159 |
Intel Corp. | 614,243 | 13,188 | |
* | Cisco Systems Inc. | 616,794 | 11,448 |
QUALCOMM Inc. | 177,354 | 10,567 | |
* | EMC Corp. | 227,624 | 6,194 |
* | eBay Inc. | 144,440 | 4,840 |
Visa Inc. Class A | 54,623 | 3,990 | |
* | Dell Inc. | 216,021 | 3,420 |
Mastercard Inc. Class A | 13,514 | 3,251 | |
Automatic Data | |||
Processing Inc. | 54,489 | 2,724 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 33,620 | 2,584 | |
* | Juniper Networks Inc. | 57,508 | 2,530 |
Applied Materials Inc. | 148,434 | 2,439 | |
Broadcom Corp. Class A | 50,269 | 2,072 | |
* | NetApp Inc. | 39,518 | 2,042 |
* | Adobe Systems Inc. | 56,041 | 1,933 |
* | Intuit Inc. | 35,022 | 1,842 |
Western Union Co. | 72,792 | 1,601 | |
* | Symantec Corp. | 85,631 | 1,544 |
* | Citrix Systems Inc. | 20,832 | 1,462 |
Altera Corp. | 34,546 | 1,446 | |
* | NVIDIA Corp. | 63,206 | 1,432 |
Paychex Inc. | 40,240 | 1,353 | |
Analog Devices Inc. | 32,929 | 1,313 |
10
FTSE Social Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
* | Marvell Technology | ||
Group Ltd. | 71,040 | 1,299 | |
* | SanDisk Corp. | 25,767 | 1,278 |
* | Micron Technology Inc. | 109,800 | 1,222 |
* | Check Point Software | ||
Technologies Ltd. | 23,063 | 1,150 | |
* | Autodesk Inc. | 25,195 | 1,059 |
CA Inc. | 42,629 | 1,056 | |
* | Fiserv Inc. | 16,522 | 1,045 |
^,* | First Solar Inc. | 7,070 | 1,042 |
* | BMC Software Inc. | 19,720 | 976 |
Xilinx Inc. | 28,662 | 953 | |
KLA-Tencor Corp. | 18,412 | 899 | |
* | Teradata Corp. | 18,447 | 882 |
Linear Technology Corp. | 24,764 | 856 | |
* | McAfee Inc. | 16,862 | 809 |
Microchip Technology Inc. | 20,749 | 766 | |
* | Lam Research Corp. | 13,612 | 747 |
* | Akamai Technologies Inc. | 19,904 | 747 |
Activision Blizzard Inc. | 66,128 | 735 | |
* | Advanced Micro Devices Inc. | 75,166 | 692 |
* | Electronic Arts Inc. | 36,240 | 681 |
VeriSign Inc. | 18,825 | 664 | |
* | Seagate Technology plc | 51,677 | 656 |
* | Avnet Inc. | 16,527 | 565 |
Jabil Circuit Inc. | 23,756 | 509 | |
* | Arrow Electronics Inc. | 12,903 | 506 |
* | Synopsys Inc. | 16,213 | 449 |
* | LSI Corp. | 67,845 | 427 |
National Semiconductor Corp. | 26,172 | 406 | |
* | Novellus Systems Inc. | 9,858 | 394 |
Total System Services Inc. | 21,245 | 377 | |
Broadridge Financial | |||
Solutions Inc. | 13,600 | 312 | |
* | IAC/InterActiveCorp | 9,821 | 305 |
* | Compuware Corp. | 24,355 | 274 |
DST Systems Inc. | 5,205 | 266 | |
Diebold Inc. | 7,419 | 261 | |
* | CoreLogic Inc. | 12,657 | 236 |
180,765 | |||
Materials (1.2%) | |||
Praxair Inc. | 34,188 | 3,397 | |
Sigma-Aldrich Corp. | 13,458 | 860 | |
Ball Corp. | 19,520 | 705 | |
Vulcan Materials Co. | 14,227 | 652 | |
International Flavors & | |||
Fragrances Inc. | 8,724 | 497 | |
Sealed Air Corp. | 17,550 | 483 | |
6,594 |
Market | |||
Value | |||
Shares | ($000) | ||
Telecommunication Services (1.9%) | |||
* | American Tower Corp. | ||
Class A | 44,337 | 2,392 | |
* | Sprint Nextel Corp. | 324,294 | 1,417 |
CenturyLink Inc. | 33,219 | 1,368 | |
* | Crown Castle International | ||
Corp. | 32,385 | 1,365 | |
Qwest Communications | |||
International Inc. | 192,143 | 1,310 | |
Millicom International | |||
Cellular SA | 11,877 | 1,041 | |
Frontier Communications | |||
Corp. | 109,423 | 929 | |
* | NII Holdings Inc. | 18,504 | 758 |
Telephone & Data | |||
Systems Inc. | 5,373 | 181 | |
10,761 | |||
Utilities (0.3%) | |||
CenterPoint Energy Inc. | 46,250 | 733 | |
TECO Energy Inc. | 23,474 | 425 | |
Questar Corp. | 19,018 | 340 | |
1,498 | |||
Total Common Stocks | |||
(Cost $454,539) | 563,555 | ||
Temporary Cash Investment (0.3%) | |||
Money Market Fund (0.3%) | |||
1,2 | Vanguard Market Liquidity | ||
Fund, 0.213% | |||
(Cost $1,871) | 1,871,063 | 1,871 | |
Total Investments (100.4%) | |||
(Cost $456,410) | 565,426 | ||
Other Assets and Liabilities (-0.4%) | |||
Other Assets | 1,550 | ||
Liabilities2 | (3,711) | ||
(2,161) | |||
Net Assets (100%) | 563,265 |
11
FTSE Social Index Fund
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 579,212 |
Overdistributed Net Investment Income | (231) |
Accumulated Net Realized Losses | (124,732) |
Unrealized Appreciation (Depreciation) | 109,016 |
Net Assets | 563,265 |
Investor Shares—Net Assets | |
Applicable to 48,759,090 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 388,379 |
Net Asset Value Per Share— | |
Investor Shares | $7.97 |
Institutional Shares—Net Assets | |
Applicable to 21,947,437 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 174,886 |
Net Asset Value Per Share— | |
Institutional Shares | $7.97 |
See Note A in Notes to Financial Statements.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $892,000.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $963,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
12
FTSE Social Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 3,362 |
Interest1 | 1 |
Security Lending | 5 |
Total Income | 3,368 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 37 |
Management and Administrative—Investor Shares | 421 |
Management and Administrative—Institutional Shares | 79 |
Marketing and Distribution—Investor Shares | 50 |
Marketing and Distribution—Institutional Shares | 23 |
Custodian Fees | 17 |
Shareholders’ Reports—Investor Shares | 5 |
Shareholders’ Reports—Institutional Shares | 2 |
Total Expenses | 634 |
Net Investment Income | 2,734 |
Realized Net Gain (Loss) on Investment Securities Sold | 1,868 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 117,181 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 121,783 |
1 Interest income from an affiliated company of the fund was $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
13
FTSE Social Index Fund
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 2,734 | 4,228 |
Realized Net Gain (Loss) | 1,868 | (33,928) |
Change in Unrealized Appreciation (Depreciation) | 117,181 | 36,338 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 121,783 | 6,638 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (2,900) | (3,306) |
Institutional Shares | (1,420) | (1,275) |
Realized Capital Gain | ||
Investor Shares | — | — |
Institutional Shares | — | — |
Total Distributions | (4,320) | (4,581) |
Capital Share Transactions | ||
Investor Shares | 16 | (1,269) |
Institutional Shares | 12,505 | 23,724 |
Net Increase (Decrease) from Capital Share Transactions | 12,521 | 22,455 |
Total Increase (Decrease) | 129,984 | 24,512 |
Net Assets | ||
Beginning of Period | 433,281 | 408,769 |
End of Period1 | 563,265 | 433,281 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($231,000) and $1,355,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
14
FTSE Social Index Fund
Financial Highlights
Investor Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $6.27 | $6.20 | $7.76 | $9.30 | $8.51 | $8.03 |
Investment Operations | ||||||
Net Investment Income | .038 | .061 | .080 | .125 | .130 | .110 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 1.722 | .077 | (1.522) | (1.525) | .780 | .470 |
Total from Investment Operations | 1.760 | .138 | (1.442) | (1.400) | .910 | .580 |
Distributions | ||||||
Dividends from Net Investment Income | (.060) | (.068) | (.118) | (.140) | (.120) | (.100) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.060) | (.068) | (.118) | (.140) | (.120) | (.100) |
Net Asset Value, End of Period | $7.97 | $6.27 | $6.20 | $7.76 | $9.30 | $8.51 |
Total Return1 | 28.13% | 2.18% | -18.11% | -15.26% | 10.70% | 7.25% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $388 | $306 | $304 | $395 | $540 | $405 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.29% | 0.29% | 0.29% | 0.24% | 0.24% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.04% | 0.91% | 1.50% | 1.48% | 1.48% | 1.41% |
Portfolio Turnover Rate | 10% | 35% | 30% | 41% | 20% | 51%2 |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.
2 Includes activity related to a change in the fund’s target index.
See accompanying Notes, which are an integral part of the Financial Statements.
15
FTSE Social Index Fund
Financial Highlights
Institutional Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $6.27 | $6.20 | $7.77 | $9.32 | $8.52 | $8.04 |
Investment Operations | ||||||
Net Investment Income | .044 | .070 | .087 | .137 | .152 | .120 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 1.726 | .075 | (1.528) | (1.535) | .780 | .470 |
Total from Investment Operations | 1.770 | .145 | (1.441) | (1.398) | .932 | .590 |
Distributions | ||||||
Dividends from Net Investment Income | (.070) | (.075) | (.129) | (.152) | (.132) | (.110) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.070) | (.075) | (.129) | (.152) | (.132) | (.110) |
Net Asset Value, End of Period | $7.97 | $6.27 | $6.20 | $7.77 | $9.32 | $8.52 |
Total Return | 28.30% | 2.29% | -18.03% | -15.22% | 10.95% | 7.37% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $175 | $128 | $104 | $139 | $111 | $87 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.16% | 0.16% | 0.16% | 0.11% | 0.11% | 0.12% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.17% | 1.04% | 1.63% | 1.61% | 1.61% | 1.54% |
Portfolio Turnover Rate | 10% | 35% | 30% | 41% | 20% | 51%1 |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Includes activity related to a change in the fund’s target index.
See accompanying Notes, which are an integral part of the Financial Statements.
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ftsesocialindex_q2132x18x1.jpg)
FTSE Social Index Fund
Notes to Financial Statements
Vanguard FTSE Social Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Institutional Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. 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. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
17
FTSE Social Index Fund
B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $91,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.04% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
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.
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2010, the fund had available capital loss carryforwards totaling $90,831,000 to offset future net capital gains of $79,000 through August 31, 2012, $985,000 through August 31, 2013, $367,000 through August 31, 2014, $2,136,000 through August 31, 2016, $22,335,000 through August 31, 2017, and $64,929,000 through August 31, 2018. In addition, the fund realized losses of $35,005,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $456,410,000. Net unrealized appreciation of investment securities for tax purposes was $109,016,000, consisting of unrealized gains of $142,535,000 on securities that had risen in value since their purchase and $33,519,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $36,533,000 of investment securities and sold $25,014,000 of investment securities, other than temporary cash investments.
18
FTSE Social Index Fund
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 34,409 | 4,648 | 76,759 | 11,344 |
Issued in Lieu of Cash Distributions | 2,715 | 363 | 3,123 | 477 |
Redeemed | (37,108) | (5,041) | (81,151) | (12,168) |
Net Increase (Decrease)—Investor Shares | 16 | (30) | (1,269) | (347) |
Institutional Shares | ||||
Issued | 19,600 | 2,580 | 48,750 | 7,280 |
Issued in Lieu of Cash Distributions | 957 | 128 | 925 | 141 |
Redeemed | (8,052) | (1,098) | (25,951) | (3,896) |
Net Increase (Decrease)—Institutional Shares | 12,505 | 1,610 | 23,724 | 3,525 |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
19
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 the account service fee described in the prospectus. If such a fee were applied to your account, your costs would be higher. Your fund does not charge transaction fees, such as purchase or redemption fees, nor does it 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.
20
Six Months Ended February 28, 2011 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
FTSE Social Index Fund | 8/31/2010 | 2/28/2011 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,281.34 | $1.64 |
Institutional Shares | 1,000.00 | 1,283.04 | 0.91 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,023.36 | $1.45 |
Institutional Shares | 1,000.00 | 1,024.00 | 0.80 |
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 0.29% for Investor Shares and 0.16% 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.
21
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 (in the case of bonds) 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. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Foreign Holdings. The percentage of a fund represented by stocks 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.
22
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.
23
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 179 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1 | and President (2006–2008) of Rohm and Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services) and Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing); |
Board. Principal Occupation(s) During the Past Five | Senior Advisor at New Mountain Capital; Trustee |
Years: Chairman of the Board of The Vanguard Group, | of The Conference Board; Member of the Board of |
Inc., and of each of the investment companies served | Managers of Delphi Automotive LLP (automotive |
by The Vanguard Group, since January 2010; Director | components). |
of The Vanguard Group since 2008; Chief Executive | |
Officer and President of The Vanguard Group and of | Amy Gutmann |
each of the investment companies served by The | Born 1949. Trustee Since June 2006. Principal |
Vanguard Group since 2008; Director of Vanguard | Occupation(s) During the Past Five Years: President |
Marketing Corporation; Managing Director of The | of the University of Pennsylvania; Christopher H. |
Vanguard Group (1995–2008). | Browne Distinguished Professor of Political Science |
in the School of Arts and Sciences with secondary | |
appointments at the Annenberg School for Commu- | |
Independent Trustees | nication and the Graduate School of Education |
of the University of Pennsylvania; Director of | |
Emerson U. Fullwood | Carnegie Corporation of New York, Schuylkill River |
Born 1948. Trustee Since January 2008. Principal | Development Corporation, and Greater Philadelphia |
Occupation(s) During the Past Five Years: Executive | Chamber of Commerce; Trustee of the National |
Chief Staff and Marketing Officer for North America | Constitution Center; Chair of the Presidential |
and Corporate Vice President (retired 2008) of Xerox | Commission for the Study of Bioethical Issues. |
Corporation (document management products and | |
services); Executive in Residence and 2010 | JoAnn Heffernan Heisen |
Distinguished Minett Professor at the Rochester | Born 1950. Trustee Since July 1998. Principal |
Institute of Technology; Director of SPX Corporation | Occupation(s) During the Past Five Years: Corporate |
(multi-industry manufacturing), the United Way of | Vice President and Chief Global Diversity Officer |
Rochester, Amerigroup Corporation (managed health | (retired 2008) and Member of the Executive |
care), the University of Rochester Medical Center, | Committee (1997–2008) of Johnson & Johnson |
Monroe Community College Foundation, and North | (pharmaceuticals/consumer products); Director of |
Carolina A&T University. | Skytop Lodge Corporation (hotels), the University |
Medical Center at Princeton, the Robert Wood | |
Rajiv L. Gupta | Johnson Foundation, and the Center for Work Life |
Born 1945. Trustee Since December 2001.2 | Policy; Member of the Advisory Board of the |
Principal Occupation(s) During the Past Five Years: | Maxwell School of Citizenship and Public Affairs |
Chairman and Chief Executive Officer (retired 2009) | at Syracuse University. |
F. Joseph Loughrey | Thomas J. Higgins | |
Born 1949. Trustee Since October 2009. Principal | Born 1957. Chief Financial Officer Since September | |
Occupation(s) During the Past Five Years: President | 2008. Principal Occupation(s) During the Past Five | |
and Chief Operating Officer (retired 2009) and Vice | Years: Principal of The Vanguard Group, Inc.; Chief | |
Chairman of the Board (2008–2009) of Cummins Inc. | Financial Officer of each of the investment companies | |
(industrial machinery); Director of SKF AB (industrial | served by The Vanguard Group since 2008; Treasurer | |
machinery), Hillenbrand, Inc. (specialized consumer | of each of the investment companies served by The | |
services), the Lumina Foundation for Education, and | Vanguard Group (1998–2008). | |
Oxfam America; Chairman of the Advisory Council | ||
for the College of Arts and Letters and Member | Kathryn J. Hyatt | |
of the Advisory Board to the Kellogg Institute for | Born 1955. Treasurer Since November 2008. Principal | |
International Studies at the University of Notre Dame. | Occupation(s) During the Past Five Years: Principal | |
of The Vanguard Group, Inc.; Treasurer of each of | ||
André F. Perold | the investment companies served by The Vanguard | |
Born 1952. Trustee Since December 2004. Principal | Group since 2008; Assistant Treasurer of each of the | |
Occupation(s) During the Past Five Years: George | investment companies served by The Vanguard Group | |
Gund Professor of Finance and Banking at the Harvard | (1988–2008). | |
Business School; Chair of the Investment Committee | ||
of HighVista Strategies LLC (private investment firm). | Heidi Stam | |
Born 1956. Secretary Since July 2005. Principal | ||
Alfred M. Rankin, Jr. | Occupation(s) During the Past Five Years: Managing | |
Born 1941. Trustee Since January 1993. Principal | Director of The Vanguard Group, Inc., since 2006; | |
Occupation(s) During the Past Five Years: Chairman, | General Counsel of The Vanguard Group since 2005; | |
President, and Chief Executive Officer of NACCO | Secretary of The Vanguard Group and of each of the | |
Industries, Inc. (forklift trucks/housewares/lignite); | investment companies served by The Vanguard Group | |
Director of Goodrich Corporation (industrial products/ | since 2005; Director and Senior Vice President of | |
aircraft systems and services) and the National | Vanguard Marketing Corporation since 2005; | |
Association of Manufacturers; Chairman of the | Principal of The Vanguard Group (1997–2006). | |
Federal Reserve Bank of Cleveland; Vice Chairman | ||
of University Hospitals of Cleveland; President of | ||
the Board of The Cleveland Museum of Art. | Vanguard Senior Management Team | |
Peter F. Volanakis | R. Gregory Barton | Michael S. Miller |
Born 1955. Trustee Since July 2009. Principal | Mortimer J. Buckley | James M. Norris |
Occupation(s) During the Past Five Years: President | Kathleen C. Gubanich | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Paul A. Heller | George U. Sauter |
Incorporated (communications equipment); Director of | ||
Corning Incorporated (2000–2010) and Dow Corning | ||
(2001–2010); Overseer of the Amos Tuck School of | Chairman Emeritus and Senior Advisor | |
Business Administration at Dartmouth College. | ||
John J. Brennan | ||
Chairman, 1996–2009 | ||
Executive Officers | Chief Executive Officer and President, 1996–2008 | |
Glenn Booraem | ||
Born 1967. Controller Since July 2010. Principal | Founder | |
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | John C. Bogle | |
the investment companies served by The Vanguard | Chairman and Chief Executive Officer, 1974–1996 | |
Group since 2010; Assistant Controller of each of | ||
the investment companies served by The Vanguard | ||
Group (2001–2010). |
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, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
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P.O. Box 2600 | |
Valley Forge, PA 19482-2600 |
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Text Telephone for People | Select Index is calculated by FTSE International |
With Hearing Impairment > 800-749-7273 | Limited. FTSE International Limited does not sponsor, |
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This material may be used in conjunction | connected to it; and does not accept any liability in |
with the offering of shares of any Vanguard | relation to its issue, operation, and trading. |
fund only if preceded or accompanied by | |
the fund’s current prospectus. | |
All comparative mutual fund data are from Lipper Inc. or | |
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You can obtain a free copy of Vanguard’s proxy voting | |
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Q2132 042011 |
![]() | |
Vanguard U.S. Sector Index Funds | |
Semiannual Report | |
February 28, 2011 | |
![]() | |
Vanguard Consumer Discretionary Index Fund | Vanguard Industrials Index Fund |
Vanguard Consumer Staples Index Fund | Vanguard Information Technology Index Fund |
Vanguard Energy Index Fund | Vanguard Materials Index Fund |
Vanguard Financials Index Fund | Vanguard Telecommunication Services |
Vanguard Health Care Index Fund | Index Fund |
Vanguard Utilities Index Fund | |
> The broad U.S. stock market returned about 29% for the six months ended February 28, 2011.
> All ten of the Vanguard U.S. Sector Index Funds posted positive results for the period, with returns ranging from about 9% to about 54%.
> The energy sector posted the strongest gains for the period, while the utilities sector turned in the weakest performance.
Contents | |
Your Fund’s Total Returns | 1 |
Chairman’s Letter | 2 |
Consumer Discretionary Index Fund | 5 |
Consumer Staples Index Fund | 15 |
Energy Index Fund | 24 |
Financials Index Fund | 33 |
Health Care Index Fund | 44 |
Industrials Index Fund | 54 |
Information Technology Index Fund | 64 |
Materials Index Fund | 74 |
Telecommunication Services Index Fund | 83 |
Utilities Index Fund | 91 |
About Your Fund’s Expenses | 99 |
Glossary | 101 |
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x2x1.jpg)
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.
Cover photograph: Jean Maher.
Your Fund’s Total Returns
Six Months Ended February 28, 2011
Admiral™ Shares1 and ETF Shares2 | ||
Ticker | Total | |
Symbol | Returns | |
Vanguard Consumer | ||
Discretionary Index Fund | VCDAX | 33.52% |
Vanguard Consumer | ||
Discretionary ETF | VCR | |
Market Price | 33.73 | |
Net Asset Value | 33.54 | |
MSCI US IMI/Consumer | ||
Discretionary 25/50 | 33.66 | |
Vanguard Consumer Staples | ||
Index Fund | VCSAX | 14.19% |
Vanguard Consumer Staples ETF | VDC | |
Market Price | 14.37 | |
Net Asset Value | 14.20 | |
MSCI US IMI/Consumer Staples 25/50 | 14.32 | |
Vanguard Energy Index Fund | VENAX | 54.26% |
Vanguard Energy ETF | VDE | |
Market Price | 54.58 | |
Net Asset Value | 54.26 | |
MSCI US IMI/Energy 25/50 | 54.41 | |
Vanguard Financials Index Fund | VFAIX | 25.29% |
Vanguard Financials ETF | VFH | |
Market Price | 25.41 | |
Net Asset Value | 25.20 | |
MSCI US IMI/Financials 25/50 | 25.34 | |
Vanguard Health Care Index Fund | VHCIX | 20.02% |
Vanguard Health Care ETF | VHT | |
Market Price | 20.18 | |
Net Asset Value | 20.02 | |
MSCI US IMI/Health Care 25/50 | 20.15 | |
Vanguard Industrials Index Fund | VINAX | 34.99% |
Vanguard Industrials ETF | VIS | |
Market Price | 35.19 | |
Net Asset Value | 34.99 | |
MSCI US IMI/Industrials 25/50 | 35.16 |
Vanguard Information | ||
Technology Index Fund | VITAX | 33.27% |
Vanguard Information | ||
Technology ETF | VGT | |
Market Price | 33.47 | |
Net Asset Value | 33.29 | |
MSCI US IMI/Information | ||
Technology 25/50 | 33.43 | |
Vanguard Materials Index Fund | VMIAX | 33.22% |
Vanguard Materials ETF | VAW | |
Market Price | 33.27 | |
Net Asset Value | 33.20 | |
MSCI US IMI/Materials 25/50 | 33.32 | |
Vanguard Telecommunication | ||
Services Index Fund | VTCAX | 19.06% |
Vanguard Telecommunication | ||
Services ETF | VOX | |
Market Price | 19.04 | |
Net Asset Value | 19.06 | |
MSCI US IMI/Telecommunication | ||
Services 25/50 | 19.24 | |
Vanguard Utilities Index Fund | VUIAX | 8.73% |
Vanguard Utilities ETF | VPU | |
Market Price | 8.78 | |
Net Asset Value | 8.73 | |
MSCI US IMI/Utilities 25/50 | 8.88 | |
MSCI US IMI/2500 | 29.43% |
1 Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.
2 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. No. 6,879,964 B2; 7,337,138.
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.
Note: MSCI US IMI/2500 is the Morgan Stanley Capital International® US Investable Market 2500 Index.
1
Chairman’s Letter
Dear Shareholder,
For the six months ended February 28, 2011, the broad U.S. stock market returned about 29%. All ten Vanguard U.S. Sector Index Funds recorded positive returns for the half-year.
Stocks in the energy sector led the pack for the period, while stocks in industrials, consumer discretionary, information technology, and materials also turned in impressive performances. The five remaining sectors—financials, health care, telecommunication services, consumer staples, and utilities—produced solid returns but lagged the broad market for the six months.
The funds’ switch in February 2010 to the MSCI 25/50 Indexes—which address Internal Revenue Code regulations on what a real-world fund may hold—helped to provide a more reasonable standard for evaluating the funds’ index-tracking success. The performances of all the funds were closely in line with those of their target benchmarks for the period.
A fretful start, an optimistic finish for global stock markets
Stock markets rallied from their midsummer malaise to produce exceptional returns for the six months ended February 28. At the start of the period, the U.S. economy seemed in danger of tipping back into recession. By the end, hopes were high that it had reached escape velocity, propelled by steady job growth and notable strength in the manufacturing sector. Smaller stocks, which are especially sensitive to the rhythms of the business cycle, produced the highest six-month returns.
In Europe, investor optimism subdued sovereign-debt jitters, driving stock prices higher. Developed markets in the Pacific region perked up on signs of recovery in global trade. Australian stocks posted especially strong returns, benefiting from a surge in the prices of metals and other natural resources. Emerging stock markets trailed a few steps behind their developed-market counterparts. Most major currencies appreciated relative to the U.S. dollar, enhancing returns from abroad for U.S.-based investors.
Market Barometer | |||
Total Returns | |||
Periods Ended February 28, 2011 | |||
Six Months | One Year | Five Years1 | |
Stocks | |||
Russell 1000 Index (Large-caps) | 28.65% | 23.54% | 3.17% |
Russell 2000 Index (Small-caps) | 37.55 | 32.60 | 3.80 |
Dow Jones U.S. Total Stock Market Index | 29.24 | 24.45 | 3.59 |
MSCI All Country World Index ex USA (International) | 22.16 | 21.12 | 4.23 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index | |||
(Broad taxable market) | –0.83% | 4.93% | 5.80% |
Barclays Capital Municipal Bond Index | |||
(Broad tax-exempt market) | –3.51 | 1.72 | 4.07 |
Citigroup 3-Month Treasury Bill Index | 0.06 | 0.14 | 2.16 |
CPI | |||
Consumer Price Index | 1.37% | 2.11% | 2.18% |
1 Annualized. |
2
Interest rates rose, depressing bond prices
U.S. interest rates hovered near generational lows early in the period, but then moved higher, putting pressure on bond prices. For the six-month period, the broad taxable bond market produced a small negative return. The municipal bond market did worse. Corporate bonds outperformed government debt, as investors stretched for yield beyond government securities, where rates remained low by historical standards.
As it has since December 2008, the Federal Reserve held its target for short-term interest rates near 0%. This stance kept the returns available from money market instruments, such as the 3-month Treasury bill, in the same neighborhood.
Energy companies trump stocks in all other sectors
For the six months, the broad U.S. stock market posted an impressive double-digit return of about 29%. In this investment environment, all ten sectors of the market recorded positive results, with some turning in much stronger performances than others.
Energy stocks were by far the top performers for the period, with the Energy Index Fund returning more than 54%—significantly higher than any of the other Vanguard U.S. Sector Index Funds. The energy sector benefited from a rise in crude oil prices related to unrest in the Middle East and from strong demand for oil and most other energy sources. A gradual clearing of the clouds that hung over energy stocks after the Gulf oil spill also helped. Big energy conglomerates, such as Exxon Mobil and Chevron, were among the companies that received a lift, along with oil and gas exploration and production companies and energy equipment and service providers.
Industrials gained momentum from the improving economy during the period as increased demand for services and manufacturing boosted stocks within the sector. The Industrials Index Fund finished the period up about 35%.
The Consumer Discretionary Index Fund, the Information Technology Index Fund, and the Materials Index Fund each posted returns between 33% and 34%. Consumer discretionary companies performed well across the board, as consumer spending continued to gain momentum. Within information technology, computers, software, and semiconductors drove returns, although strength was evident within every area of the sector. In materials, chemical companies and metals and mining stocks boosted returns.
The five remaining funds posted returns ranging from about 25% to about 9%. Although returns were mostly positive across financials, health care, telecom, consumer staples, and utilities, they were weaker than the broad market.
The Financials Index Fund returned about 25% for the period, with commercial banks and diversified financial services firms contributing the most to performance. Despite lingering uncertainty surrounding health care reform efforts, the Health Care Index Fund returned about 20%, with health care providers and services leading the pack.
The more defensive sectors had the lowest returns for the six months. Packaged foods and tobacco products led the Consumer Staples Index Fund to its return of about 14%, while integrated telecommunication services companies—including Verizon and AT&T—were mostly responsible for the Telecommunication Services Index Fund’s return of about 19%. The Utilities Index Fund turned in the weakest performance of the ten funds, returning about 9%. Electric companies led the sector for the period.
Focus on future goals despite market performance
In recent years, investors have felt the wrath of the market’s extreme volatility. And while the market’s performance over the past six months is nothing short of impressive, we still can’t be sure what the future holds—especially with the dramatic events unfolding in the Middle East and North Africa, and the uncertain ramifications of the tragedy in Japan.
At Vanguard, we believe that the best way to deal with the market’s unpredictable ups and downs is to block out the short-term noise. Instead, we counsel investors to focus on creating a long-term investment plan—one that includes a mix of stock, bond, and money market funds that is appropriate for your goals and risk tolerance—and to stick with that plan, regardless of the market’s performance.
The U.S. Sector Index Funds, with their low costs and experienced management, can play a supporting role in such a plan. Any one of Vanguard’s U.S. Sector Index Funds may be a potentially risky and volatile investment by itself. But the funds can help to further diversify an already well-balanced investment portfolio.
As always, thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x5x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 14, 2011
3
Your Fund’s Performance at a Glance | ||||
August 31, 2010—February 28, 2011 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Consumer Discretionary Index Fund | ||||
Admiral Shares | $24.76 | $32.73 | $0.317 | $0.000 |
ETF Shares | 47.80 | 63.21 | 0.600 | 0.000 |
Consumer Staples Index Fund | ||||
Admiral Shares | $32.92 | $36.63 | $0.949 | $0.000 |
ETF Shares | 66.72 | 74.27 | 1.906 | 0.000 |
Energy Index Fund | ||||
Admiral Shares | $37.58 | $57.24 | $0.626 | $0.000 |
ETF Shares | 75.20 | 114.55 | 1.247 | 0.000 |
Financials Index Fund | ||||
Admiral Shares | $13.99 | $17.36 | $0.151 | $0.000 |
ETF Shares | 27.92 | 34.63 | 0.298 | 0.000 |
Health Care Index Fund | ||||
Admiral Shares | $24.87 | $29.35 | $0.481 | $0.000 |
ETF Shares | 49.72 | 58.66 | 0.979 | 0.000 |
Industrials Index Fund | ||||
Admiral Shares | $26.57 | $35.40 | $0.439 | $0.000 |
ETF Shares | 51.71 | 68.90 | 0.851 | 0.000 |
Information Technology Index Fund | ||||
Admiral Shares | $25.30 | $33.52 | $0.185 | $0.000 |
ETF Shares | 49.40 | 65.46 | 0.362 | 0.000 |
Materials Index Fund | ||||
Admiral Shares | $33.32 | $43.43 | $0.920 | $0.000 |
ETF Shares | 65.40 | 85.23 | 1.804 | 0.000 |
Telecommunication Services Index Fund | ||||
Admiral Shares | $29.22 | $33.80 | $0.970 | $0.000 |
ETF Shares | 57.34 | 66.33 | 1.905 | 0.000 |
Utilities Index Fund | ||||
Admiral Shares | $32.60 | $34.73 | $0.682 | $0.000 |
ETF Shares | 64.93 | 69.19 | 1.353 | 0.000 |
4
Consumer Discretionary Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 374 | 373 | 2,474 |
Median Market Cap | $20.3B | $20.3B | $32.2B |
Price/Earnings Ratio | 19.1x | 19.2x | 17.7x |
Price/Book Ratio | 2.9x | 2.9x | 2.3x |
Yield3 | 1.2% | 1.7% | |
Admiral Shares | 1.0% | ||
ETF Shares | 1.0% | ||
Return on Equity | 18.3% | 18.3% | 19.1% |
Earnings Growth Rate | 7.3% | 7.3% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 7% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.0% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.89 |
Beta | 1.00 | 1.20 |
Subindustry Diversification | |
(% of equity exposure) | |
Advertising | 1.6% |
Apparel Retail | 5.5 |
Apparel, Accessories & Luxury Goods | 3.5 |
Auto Parts & Equipment | 4.1 |
Automobile Manufacturers | 3.9 |
Automotive Retail | 2.0 |
Broadcasting | 2.2 |
Cable & Satellite | 10.4 |
Casinos & Gaming | 2.7 |
Computer & Electronics Retail | 1.1 |
Department Stores | 2.9 |
Education Services | 1.3 |
Footwear | 2.7 |
General Merchandise Stores | 3.3 |
Home Improvement Retail | 5.9 |
Homebuilding | 1.2 |
Homefurnishing Retail | 1.2 |
Hotels, Resorts & Cruise Lines | 3.6 |
Household Appliances | 1.2 |
Housewares & Specialties | 1.4 |
Internet Retail | 6.0 |
Leisure Products | 1.3 |
Movies & Entertainment | 11.8 |
Publishing | 1.6 |
Restaurants | 9.8 |
Specialized Consumer Services | 1.1 |
Specialty Stores | 2.9 |
Other Consumer Discretionary | 3.8 |
Ten Largest Holdings8 (% of total net assets) | |
McDonald’s Corp. | 4.7% |
Walt Disney Co. | 4.7 |
Comcast Corp. Class A | 4.2 |
Home Depot Inc. | 3.7 |
Amazon.com Inc. | 3.7 |
Ford Motor Co. | 2.7 |
Time Warner Inc. | 2.5 |
News Corp. | 2.4 |
DIRECTV Class A | 2.3 |
Lowe’s Cos. Inc. | 2.1 |
Top Ten | 33.0% |
1 MSCI US IMI/Consumer Discretionary 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Consumer Discretionary 25/50: MSCI US IMI/Consumer Discretionary through February 26, 2010; MSCI US IMI/Consumer Discretionary 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
5
Consumer Discretionary 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 (%): January 26, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x8x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 1/26/2004 | |||
Market Price | 30.62% | 4.10% | 3.83% | |
Net Asset Value | 30.57 | 4.10 | 3.82 | |
Admiral Shares3 | 7/14/2005 | 30.60 | 4.07 | 3.05 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Consumer Discretionary 25/50: MSCI US IMI/Consumer Discretionary through February 26, 2010; MSCI US IMI/Consumer Discretionary 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
6
Consumer Discretionary Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
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%) | |||
Auto Components (4.3%) | |||
Johnson Controls Inc. | 158,669 | 6,474 | |
* | BorgWarner Inc. | 26,685 | 2,071 |
Autoliv Inc. | 20,874 | 1,563 | |
* | TRW Automotive Holdings | ||
Corp. | 24,215 | 1,375 | |
* | Lear Corp. | 11,954 | 1,265 |
Gentex Corp. | 32,746 | 991 | |
* | Goodyear Tire & Rubber Co. | 54,049 | 766 |
* | Dana Holding Corp. | 32,828 | 620 |
* | Tenneco Inc. | 13,968 | 557 |
Cooper Tire & Rubber Co. | 12,961 | 304 | |
* | Exide Technologies | 17,788 | 212 |
* | American Axle & | ||
Manufacturing Holdings | |||
Inc. | 15,096 | 202 | |
* | Modine Manufacturing Co. | 10,351 | 153 |
* | Federal-Mogul Corp. | 6,984 | 147 |
* | Fuel Systems Solutions Inc. | 3,912 | 114 |
* | Dorman Products Inc. | 3,150 | 109 |
Drew Industries Inc. | 4,592 | 106 | |
Superior Industries | |||
International Inc. | 5,267 | 105 | |
Spartan Motors Inc. | 7,211 | 46 | |
* | Wonder Auto Technology Inc. | 4,463 | 31 |
* | China XD Plastics Co. Ltd. | 3,099 | 22 |
* | China Automotive Systems | ||
Inc. | 1,603 | 19 | |
17,252 | |||
Automobiles (4.5%) | |||
* | Ford Motor Co. | 720,345 | 10,841 |
* | General Motors Co. | 123,523 | 4,142 |
Harley-Davidson Inc. | 55,418 | 2,262 | |
Thor Industries Inc. | 9,192 | 306 | |
* | Tesla Motors Inc. | 7,625 | 182 |
* | Winnebago Industries Inc. | 6,759 | 98 |
17,831 | |||
Distributors (0.7%) | |||
Genuine Parts Co. | 36,892 | 1,944 | |
* | LKQ Corp. | 32,282 | 767 |
* | Core-Mark Holding Co. Inc. | 2,260 | 77 |
Weyco Group Inc. | 1,714 | 43 | |
2,831 | |||
Diversified Consumer Services (2.4%) | |||
* | Apollo Group Inc. Class A | 31,198 | 1,412 |
H&R Block Inc. | 72,207 | 1,097 | |
DeVry Inc. | 14,908 | 809 | |
Sotheby’s | 15,662 | 771 | |
Service Corp. International | 57,721 | 629 | |
* | ITT Educational Services Inc. | 7,509 | 570 |
Weight Watchers | |||
International Inc. | 7,951 | 486 | |
* | Career Education Corp. | 19,021 | 459 |
Strayer Education Inc. | 3,247 | 446 | |
Hillenbrand Inc. | 14,599 | 317 | |
* | Coinstar Inc. | 7,275 | 310 |
Market | |||
Value• | |||
Shares | ($000) | ||
Matthews International Corp. | |||
Class A | 6,992 | 260 | |
Regis Corp. | 13,456 | 236 | |
* | Capella Education Co. | 3,539 | 204 |
* | Education Management | ||
Corp. | 9,978 | 193 | |
* | American Public Education | ||
Inc. | 4,342 | 184 | |
* | K12 Inc. | 5,312 | 179 |
* | Steiner Leisure Ltd. | 3,300 | 156 |
Stewart Enterprises Inc. | |||
Class A | 19,807 | 151 | |
* | Corinthian Colleges Inc. | 20,534 | 108 |
* | Pre-Paid Legal Services Inc. | 1,611 | 106 |
Universal Technical Institute | |||
Inc. | 4,840 | 89 | |
* | Bridgepoint Education Inc. | 4,516 | 84 |
* | Grand Canyon Education Inc. | 4,858 | 78 |
Lincoln Educational Services | |||
Corp. | 4,388 | 68 | |
* | ChinaCast Education Corp. | 9,888 | 65 |
* | Archipelago Learning Inc. | 1,513 | 16 |
9,483 | |||
Hotels, Restaurants & Leisure (16.4%) | |||
McDonald’s Corp. | 248,576 | 18,812 | |
Starbucks Corp. | 174,368 | 5,751 | |
Yum! Brands Inc. | 110,250 | 5,549 | |
Carnival Corp. | 107,036 | 4,567 | |
* | Las Vegas Sands Corp. | 80,553 | 3,757 |
Starwood Hotels & Resorts | |||
Worldwide Inc. | 44,857 | 2,741 | |
Marriott International Inc. | |||
Class A | 68,561 | 2,688 | |
Wynn Resorts Ltd. | 18,956 | 2,330 | |
* | Chipotle Mexican Grill Inc. | ||
Class A | 7,275 | 1,782 | |
Darden Restaurants Inc. | 30,775 | 1,450 | |
* | Royal Caribbean Cruises Ltd. | 32,703 | 1,432 |
Wyndham Worldwide Corp. | 41,166 | 1,288 | |
International Game | |||
Technology | 69,747 | 1,148 | |
* | MGM Resorts International | 79,002 | 1,101 |
* | Panera Bread Co. Class A | 6,812 | 795 |
* | Penn National Gaming Inc. | 15,476 | 554 |
* | WMS Industries Inc. | 13,576 | 540 |
Brinker International Inc. | 21,720 | 513 | |
* | Bally Technologies Inc. | 12,610 | 487 |
* | Hyatt Hotels Corp. Class A | 10,272 | 470 |
* | Cheesecake Factory Inc. | 13,227 | 384 |
Wendy’s/Arby’s Group Inc. | |||
Class A | 78,329 | 373 | |
* | Life Time Fitness Inc. | 8,823 | 338 |
* | Vail Resorts Inc. | 6,800 | 332 |
Six Flags Entertainment Corp. | 5,241 | 327 | |
* | Orient-Express Hotels Ltd. | ||
Class A | 23,638 | 298 | |
* | Gaylord Entertainment Co. | 7,742 | 279 |
Market | |||
Value• | |||
Shares | ($000) | ||
Cracker Barrel Old Country | |||
Store Inc. | 5,524 | 275 | |
* | Jack in the Box Inc. | 12,447 | 274 |
Choice Hotels International | |||
Inc. | 6,992 | 270 | |
PF Chang’s China Bistro Inc. | 5,423 | 252 | |
Bob Evans Farms Inc. | 7,171 | 225 | |
* | Buffalo Wild Wings Inc. | 4,038 | 214 |
* | Texas Roadhouse Inc. | ||
Class A | 12,544 | 213 | |
* | DineEquity Inc. | 3,568 | 204 |
* | CEC Entertainment Inc. | 5,014 | 194 |
* | Pinnacle Entertainment Inc. | 14,221 | 187 |
* | BJ’s Restaurants Inc. | 5,093 | 183 |
* | Ruby Tuesday Inc. | 13,651 | 182 |
International Speedway Corp. | |||
Class A | 6,429 | 178 | |
* | Domino’s Pizza Inc. | 9,687 | 163 |
* | Interval Leisure Group Inc. | 9,373 | 159 |
* | Scientific Games Corp. | ||
Class A | 15,969 | 143 | |
* | Papa John’s International Inc. | 4,897 | 143 |
* | Boyd Gaming Corp. | 13,060 | 140 |
* | Peet’s Coffee & Tea Inc. | 2,994 | 128 |
* | Biglari Holdings Inc. | 284 | 122 |
* | Sonic Corp. | 13,605 | 121 |
Churchill Downs Inc. | 2,891 | 121 | |
* | Shuffle Master Inc. | 12,474 | 117 |
Ameristar Casinos Inc. | 6,086 | 102 | |
* | California Pizza Kitchen Inc. | 5,499 | 93 |
* | Denny’s Corp. | 23,362 | 91 |
* | Krispy Kreme Doughnuts Inc. | 14,126 | 89 |
* | AFC Enterprises Inc. | 5,942 | 88 |
* | Red Robin Gourmet Burgers | ||
Inc. | 3,446 | 82 | |
Marcus Corp. | 4,830 | 63 | |
Speedway Motorsports Inc. | 3,454 | 51 | |
* | Isle of Capri Casinos Inc. | 4,915 | 45 |
Ambassadors Group Inc. | 4,201 | 45 | |
* | Monarch Casino & Resort Inc. | 2,204 | 23 |
65,066 | |||
Household Durables (4.9%) | |||
Stanley Black & Decker Inc. | 37,087 | 2,812 | |
Fortune Brands Inc. | 35,900 | 2,221 | |
Whirlpool Corp. | 17,782 | 1,467 | |
Newell Rubbermaid Inc. | 68,303 | 1,321 | |
^,* | Garmin Ltd. | 27,332 | 928 |
* | NVR Inc. | 1,260 | 917 |
DR Horton Inc. | 67,076 | 794 | |
* | Mohawk Industries Inc. | 13,652 | 793 |
Harman International | |||
Industries Inc. | 16,283 | 792 | |
Tupperware Brands Corp. | 14,745 | 791 | |
Leggett & Platt Inc. | 34,291 | 791 | |
Lennar Corp. Class A | 35,988 | 726 | |
* | Tempur-Pedic International | ||
Inc. | 15,236 | 715 | |
Jarden Corp. | 21,411 | 704 |
7
Consumer Discretionary Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Toll Brothers Inc. | 32,941 | 700 |
* | Pulte Group Inc. | 80,490 | 555 |
KB Home | 18,598 | 246 | |
MDC Holdings Inc. | 8,785 | 231 | |
* | Helen of Troy Ltd. | 6,806 | 190 |
American Greetings Corp. | |||
Class A | 8,719 | 189 | |
Ryland Group Inc. | 10,360 | 180 | |
* | Meritage Homes Corp. | 6,785 | 175 |
* | iRobot Corp. | 5,066 | 146 |
Ethan Allen Interiors Inc. | 6,023 | 133 | |
* | La-Z-Boy Inc. | 12,077 | 121 |
* | Standard Pacific Corp. | 25,088 | 100 |
* | Universal Electronics Inc. | 3,135 | 85 |
* | Beazer Homes USA Inc. | 17,507 | 81 |
* | Libbey Inc. | 4,631 | 80 |
* | Hovnanian Enterprises Inc. | ||
Class A | 14,968 | 61 | |
* | M/I Homes Inc. | 4,318 | 58 |
* | Deer Consumer Products Inc. | 4,778 | 53 |
Blyth Inc. | 1,343 | 46 | |
* | Brookfield Homes Corp. | 2,713 | 40 |
* | Furniture Brands | ||
International Inc. | 8,995 | 39 | |
* | Sealy Corp. | 11,181 | 32 |
CSS Industries Inc. | 1,774 | 31 | |
19,344 | |||
Internet & Catalog Retail (6.6%) | |||
* | Amazon.com Inc. | 84,483 | 14,640 |
* | priceline.com Inc. | 11,552 | 5,243 |
* | NetFlix Inc. | 10,414 | 2,152 |
* | Liberty Media Corp. - | ||
Interactive | 133,838 | 2,149 | |
Expedia Inc. | 47,330 | 940 | |
* | HSN Inc. | 9,443 | 307 |
* | Shutterfly Inc. | 5,760 | 246 |
* | Blue Nile Inc. | 3,333 | 191 |
PetMed Express Inc. | 5,336 | 79 | |
Nutrisystem Inc. | 5,655 | 75 | |
* | Overstock.com Inc. | 3,840 | 59 |
* | Vitacost.com Inc. | 3,846 | 22 |
* | Orbitz Worldwide Inc. | 4,636 | 16 |
26,119 | |||
Leisure Equipment & Products (1.4%) | |||
Mattel Inc. | 84,183 | 2,110 | |
Hasbro Inc. | 28,839 | 1,295 | |
Polaris Industries Inc. | 7,576 | 572 | |
Brunswick Corp. | 20,744 | 478 | |
Pool Corp. | 11,622 | 290 | |
* | Eastman Kodak Co. | 62,923 | 214 |
* | Jakks Pacific Inc. | 6,408 | 119 |
Callaway Golf Co. | 15,026 | 116 | |
* | RC2 Corp. | 5,086 | 110 |
Sturm Ruger & Co. Inc. | 4,545 | 82 | |
* | Smith & Wesson Holding | ||
Corp. | 13,926 | 56 | |
* | Leapfrog Enterprises Inc. | 8,334 | 36 |
* | Marine Products Corp. | 2,711 | 20 |
5,498 | |||
Media (27.7%) | |||
Walt Disney Co. | 423,249 | 18,513 | |
Comcast Corp. Class A | 444,465 | 11,449 | |
Time Warner Inc. | 260,997 | 9,970 | |
* | DIRECTV Class A | 196,159 | 9,017 |
News Corp. Class A | 459,020 | 7,973 | |
Time Warner Cable Inc. | 83,698 | 6,041 | |
Viacom Inc. Class B | 130,860 | 5,844 | |
Comcast Corp. Class A | |||
Special Shares | 213,903 | 5,202 |
Market | |||
Value• | |||
Shares | ($000) | ||
Omnicom Group Inc. | 70,877 | 3,608 | |
CBS Corp. Class B | 148,494 | 3,543 | |
McGraw-Hill Cos. Inc. | 72,318 | 2,797 | |
Cablevision Systems Corp. | |||
Class A | 57,807 | 2,130 | |
Virgin Media Inc. | 72,119 | 1,965 | |
* | Sirius XM Radio Inc. | 923,693 | 1,672 |
* | Interpublic Group of Cos. | ||
Inc. | 114,366 | 1,510 | |
* | Discovery Communications | ||
Inc. Class A | 32,255 | 1,391 | |
News Corp. Class B | 74,030 | 1,362 | |
* | Discovery Communications | ||
Inc. | 33,166 | 1,263 | |
* | Liberty Media Corp. - Capital | 16,346 | 1,186 |
* | Liberty Global Inc. Class A | 27,957 | 1,177 |
* | DISH Network Corp. Class A | 48,144 | 1,119 |
Scripps Networks | |||
Interactive Inc. Class A | 21,509 | 1,117 | |
* | Liberty Global Inc. | 25,531 | 1,018 |
Gannett Co. Inc. | 55,843 | 922 | |
* | Liberty Media Corp. - Starz | 11,453 | 804 |
Washington Post Co. Class B | 1,271 | 550 | |
* | Lamar Advertising Co. | ||
Class A | 13,528 | 525 | |
John Wiley & Sons Inc. | |||
Class A | 10,618 | 508 | |
* | DreamWorks Animation | ||
SKG Inc. Class A | 16,311 | 451 | |
* | Madison Square Garden Inc. | ||
Class A | 14,576 | 416 | |
* | Live Nation Entertainment | ||
Inc. | 32,491 | 345 | |
* | Valassis Communications | ||
Inc. | 11,515 | 325 | |
Cinemark Holdings Inc. | 15,959 | 320 | |
* | New York Times Co. Class A | 30,599 | 318 |
Morningstar Inc. | 5,227 | 307 | |
Meredith Corp. | 8,509 | 300 | |
Regal Entertainment Group | |||
Class A | 19,908 | 297 | |
CTC Media Inc. | 12,769 | 269 | |
Arbitron Inc. | 6,277 | 250 | |
National CineMedia Inc. | 12,346 | 233 | |
Scholastic Corp. | 6,498 | 204 | |
* | Belo Corp. Class A | 21,532 | 172 |
* | Clear Channel Outdoor | ||
Holdings Inc. Class A | 9,633 | 142 | |
Sinclair Broadcast Group Inc. | |||
Class A | 10,897 | 141 | |
* | Ascent Media Corp. Class A | 3,152 | 132 |
Harte-Hanks Inc. | 8,862 | 113 | |
* | Knology Inc. | 7,346 | 102 |
* | Lions Gate Entertainment | ||
Corp. | 14,373 | 88 | |
* | Mediacom Communications | ||
Corp. Class A | 9,667 | 85 | |
* | Warner Music Group Corp. | 12,619 | 76 |
World Wrestling | |||
Entertainment Inc. Class A | 5,706 | 74 | |
* | EW Scripps Co. Class A | 7,387 | 71 |
* | Journal Communications Inc. | ||
Class A | 10,137 | 62 | |
* | Dex One Corp. | 8,766 | 46 |
* | LIN TV Corp. Class A | 7,369 | 45 |
* | CKX Inc. | 10,841 | 38 |
^,* | China MediaExpress | ||
Holdings Inc. | 2,300 | 32 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Martha Stewart Living | ||
Omnimedia Class A | 6,461 | 27 | |
* | ReachLocal Inc. | 1,302 | 25 |
Outdoor Channel Holdings | |||
Inc. | 3,012 | 24 | |
109,706 | |||
Multiline Retail (6.2%) | |||
Target Corp. | 158,228 | 8,315 | |
* | Kohl’s Corp. | 68,842 | 3,710 |
Macy’s Inc. | 99,525 | 2,379 | |
Nordstrom Inc. | 40,986 | 1,855 | |
JC Penney Co. Inc. | 50,068 | 1,750 | |
* | Dollar Tree Inc. | 29,462 | 1,483 |
Family Dollar Stores Inc. | 28,137 | 1,409 | |
^,* | Sears Holdings Corp. | 10,365 | 863 |
* | Big Lots Inc. | 17,776 | 729 |
* | Dollar General Corp. | 23,913 | 676 |
Dillard’s Inc. Class A | 10,570 | 448 | |
* | Saks Inc. | 32,035 | 392 |
* | 99 Cents Only Stores | 11,418 | 190 |
Fred’s Inc. Class A | 8,824 | 122 | |
* | Retail Ventures Inc. | 5,679 | 99 |
24,420 | |||
Specialty Retail (18.5%) | |||
Home Depot Inc. | 391,814 | 14,681 | |
Lowe’s Cos. Inc. | 324,689 | 8,497 | |
TJX Cos. Inc. | 93,124 | 4,644 | |
Staples Inc. | 170,154 | 3,624 | |
* | Bed Bath & Beyond Inc. | 60,964 | 2,935 |
Best Buy Co. Inc. | 79,564 | 2,565 | |
Gap Inc. | 101,928 | 2,296 | |
Limited Brands Inc. | 65,035 | 2,082 | |
Ross Stores Inc. | 28,341 | 2,042 | |
* | CarMax Inc. | 52,905 | 1,871 |
Tiffany & Co. | 29,734 | 1,830 | |
* | O’Reilly Automotive Inc. | 32,855 | 1,826 |
* | AutoZone Inc. | 6,299 | 1,625 |
Advance Auto Parts Inc. | 19,715 | 1,236 | |
* | Urban Outfitters Inc. | 31,072 | 1,193 |
Abercrombie & Fitch Co. | 20,632 | 1,184 | |
PetSmart Inc. | 27,723 | 1,133 | |
Tractor Supply Co. | 17,015 | 886 | |
* | Signet Jewelers Ltd. | 20,060 | 880 |
Williams-Sonoma Inc. | 22,478 | 811 | |
* | Dick’s Sporting Goods Inc. | 21,566 | 801 |
Foot Locker Inc. | 36,506 | 725 | |
American Eagle Outfitters | |||
Inc. | 43,517 | 668 | |
* | GameStop Corp. Class A | 33,465 | 668 |
Guess? Inc. | 14,164 | 642 | |
* | J Crew Group Inc. | 14,167 | 611 |
Chico’s FAS Inc. | 41,894 | 576 | |
* | Aeropostale Inc. | 21,862 | 567 |
Rent-A-Center Inc. | 15,097 | 499 | |
* | Ascena Retail Group Inc. | 14,709 | 460 |
Aaron’s Inc. | 18,031 | 424 | |
RadioShack Corp. | 26,781 | 396 | |
* | Jo-Ann Stores Inc. | 6,076 | 369 |
* | Collective Brands Inc. | 15,203 | 347 |
^,* | AutoNation Inc. | 10,297 | 346 |
* | Office Depot Inc. | 64,596 | 343 |
* | AnnTaylor Stores Corp. | 13,827 | 321 |
* | Ulta Salon Cosmetics & | ||
Fragrance Inc. | 7,556 | 315 | |
Men’s Wearhouse Inc. | 11,728 | 313 | |
* | Sally Beauty Holdings Inc. | 23,495 | 305 |
* | JOS A Bank Clothiers Inc. | 6,451 | 297 |
* | Pier 1 Imports Inc. | 27,463 | 277 |
* | OfficeMax Inc. | 19,903 | 274 |
8
Consumer Discretionary Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Childrens Place Retail Stores | ||
Inc. | 5,847 | 267 | |
* | Cabela’s Inc. | 9,529 | 259 |
Buckle Inc. | 6,582 | 257 | |
Group 1 Automotive Inc. | 5,552 | 235 | |
* | Genesco Inc. | 5,649 | 223 |
* | Penske Automotive Group | ||
Inc. | 10,722 | 218 | |
Monro Muffler Brake Inc. | 6,658 | 218 | |
* | Hibbett Sports Inc. | 6,767 | 213 |
Finish Line Inc. Class A | 12,171 | 213 | |
* | Vitamin Shoppe Inc. | 5,583 | 194 |
Cato Corp. Class A | 6,508 | 158 | |
Brown Shoe Co. Inc. | 10,098 | 157 | |
Stage Stores Inc. | 8,902 | 155 | |
PEP Boys-Manny Moe | |||
& Jack | 12,220 | 153 | |
* | Select Comfort Corp. | 12,951 | 144 |
* | DSW Inc. Class A | 3,439 | 140 |
Express Inc. | 7,285 | 131 | |
* | Zumiez Inc. | 4,988 | 130 |
* | Asbury Automotive Group Inc. | 6,843 | 126 |
Sonic Automotive Inc. | |||
Class A | 8,622 | 124 | |
Barnes & Noble Inc. | 9,135 | 122 | |
* | Lumber Liquidators Holdings | ||
Inc. | 5,115 | 119 | |
* | Rue21 Inc. | 3,120 | 109 |
* | Wet Seal Inc. Class A | 23,813 | 95 |
* | Charming Shoppes Inc. | 26,935 | 88 |
* | Citi Trends Inc. | 3,440 | 76 |
* | Pacific Sunwear of California | ||
Inc. | 15,308 | 69 | |
Big 5 Sporting Goods Corp. | 4,905 | 68 | |
* | hhgregg Inc. | 4,576 | 68 |
* | Kirkland’s Inc. | 3,718 | 57 |
* | Talbots Inc. | 9,030 | 56 |
* | America’s Car-Mart Inc. | 2,277 | 56 |
* | Shoe Carnival Inc. | 2,158 | 56 |
HOT Topic Inc. | 10,279 | 55 | |
Haverty Furniture Cos. Inc. | 3,902 | 52 | |
Christopher & Banks Corp. | 8,332 | 51 | |
Stein Mart Inc. | 6,196 | 51 | |
* | Coldwater Creek Inc. | 15,014 | 44 |
* | New York & Co. Inc. | 6,341 | 44 |
Bebe Stores Inc. | 7,028 | 42 | |
* | Systemax Inc. | 2,558 | 35 |
73,513 | |||
Textiles, Apparel & Luxury Goods (6.2%) | |||
NIKE Inc. Class B | 86,698 | 7,719 | |
Coach Inc. | 69,582 | 3,821 | |
VF Corp. | 20,416 | 1,953 |
Market | |||
Value• | |||
Shares | ($000) | ||
Polo Ralph Lauren Corp. | |||
Class A | 15,112 | 1,915 | |
* | Fossil Inc. | 12,243 | 940 |
Phillips-Van Heusen Corp. | 15,513 | 931 | |
* | Lululemon Athletica Inc. | 11,694 | 907 |
* | Deckers Outdoor Corp. | 9,056 | 799 |
* | Warnaco Group Inc. | 10,411 | 611 |
* | Hanesbrands Inc. | 22,358 | 579 |
* | Under Armour Inc. Class A | 8,533 | 565 |
Wolverine World Wide Inc. | 11,424 | 420 | |
* | Carter’s Inc. | 13,522 | 388 |
* | Iconix Brand Group Inc. | 16,937 | 374 |
* | CROCS Inc. | 20,291 | 358 |
* | Timberland Co. Class A | 9,387 | 347 |
Jones Group Inc. | 20,416 | 272 | |
* | Steven Madden Ltd. | 5,803 | 250 |
* | Skechers U.S.A. Inc. Class A | 8,491 | 176 |
Columbia Sportswear Co. | 2,756 | 173 | |
* | G-III Apparel Group Ltd. | 3,802 | 150 |
* | Maidenform Brands Inc. | 5,373 | 146 |
* | True Religion Apparel Inc. | 5,695 | 135 |
* | Quiksilver Inc. | 31,105 | 134 |
* | Liz Claiborne Inc. | 22,036 | 113 |
Oxford Industries Inc. | 3,275 | 79 | |
Volcom Inc. | 3,974 | 71 | |
* | Unifi Inc. | 3,507 | 67 |
* | K-Swiss Inc. Class A | 6,421 | 64 |
* | Movado Group Inc. | 4,180 | 59 |
* | Kenneth Cole Productions | ||
Inc. Class A | 2,300 | 30 | |
* | Fuqi International Inc. | 3,805 | 17 |
24,563 | |||
Total Common Stocks | |||
(Cost $347,719) | 395,626 | ||
Temporary Cash Investment (0.3%) | |||
Money Market Fund (0.3%) | |||
1,2 | Vanguard Market | ||
Liquidity Fund, 0.213% | |||
(Cost $1,145) | 1,144,798 | 1,145 | |
Total Investments (100.1%) | |||
(Cost $348,864) | 396,771 | ||
Other Assets and Liabilities (–0.1%) | |||
Other Assets | 2,497 | ||
Liabilities2 | (2,976) | ||
(479) | |||
Net Assets (100%) | 396,292 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 364,789 |
Undistributed Net Investment Income | 361 |
Accumulated Net Realized Losses | (16,765) |
Unrealized Appreciation (Depreciation) | 47,907 |
Net Assets | 396,292 |
Admiral Shares—Net Assets | |
Applicable to 323,789 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 10,597 |
Net Asset Value Per Share— | |
Admiral Shares | $32.73 |
ETF Shares—Net Assets | |
Applicable to 6,102,208 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 385,695 |
Net Asset Value Per Share— | |
ETF Shares | $63.21 |
• See Note A in Notes to Financial Statements.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $961,000.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $977,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
9
Consumer Discretionary Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 2,520 |
Security Lending | 29 |
Total Income | 2,549 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 23 |
Management and Administrative— | |
Admiral Shares | 8 |
Management and Administrative— | |
ETF Shares | 294 |
Marketing and Distribution— | |
Admiral Shares | — |
Marketing and Distribution— | |
ETF Shares | 45 |
Custodian Fees | 9 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 10 |
Total Expenses | 389 |
Net Investment Income | 2,160 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 7,177 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 75,147 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 84,484 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 2,160 | 2,840 |
Realized Net Gain (Loss) | 7,177 | 10,984 |
Change in Unrealized Appreciation (Depreciation) | 75,147 | 7,411 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 84,484 | 21,235 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (88) | (19) |
ETF Shares | (3,541) | (1,749) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (3,629) | (1,768) |
Capital Share Transactions | ||
Admiral Shares | 3,462 | 4,050 |
ETF Shares | 72,381 | 74,041 |
Net Increase (Decrease) from Capital Share Transactions | 75,843 | 78,091 |
Total Increase (Decrease) | 156,698 | 97,558 |
Net Assets | ||
Beginning of Period | 239,594 | 142,036 |
End of Period1 | 396,292 | 239,594 |
1 Net Assets—End of Period includes undistributed net investment income of $361,000 and $1,830,000.
See accompanying Notes, which are an integral part of the Financial Statements.
10
Consumer Discretionary Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $24.76 | $21.43 | $25.03 | $31.02 | $27.03 | $27.75 |
Investment Operations | ||||||
Net Investment Income | .152 | .307 | .398 | .2851 | .217 | .2451 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 8.135 | 3.251 | (3.603) | (6.075) | 4.015 | (.808) |
Total from Investment Operations | 8.287 | 3.558 | (3.205) | (5.790) | 4.232 | (.563) |
Distributions | ||||||
Dividends from Net Investment Income | (.317) | (.228) | (.395) | (.200) | (.242) | (.157) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.317) | (.228) | (.395) | (.200) | (.242) | (.157) |
Net Asset Value, End of Period | $32.73 | $24.76 | $21.43 | $25.03 | $31.02 | $27.03 |
Total Return2 | 33.52% | 16.62% | –12.34% | –18.74% | 15.64% | –2.03% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $11 | $5.3 | $1.3 | $0.7 | $1.0 | $0.6 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.27% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.33% | 1.28% | 1.58% | 1.11% | 0.84% | 0.89% |
Portfolio Turnover Rate3 | 7% | 7% | 5% | 12% | 8% | 10% |
The expense ratio, net 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 transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
11
Consumer Discretionary Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $47.80 | $41.37 | $48.38 | $60.02 | $52.28 | $53.65 |
Investment Operations | ||||||
Net Investment Income | .293 | .581 | .764 | .5921 | .450 | .4941 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 15.717 | 6.286 | (6.988) | (11.772) | 7.760 | (1.556) |
Total from Investment Operations | 16.010 | 6.867 | (6.224) | (11.180) | 8.210 | (1.062) |
Distributions | ||||||
Dividends from Net Investment Income | (.600) | (.437) | (.786) | (.460) | (.470) | (.308) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.600) | (.437) | (.786) | (.460) | (.470) | (.308) |
Net Asset Value, End of Period | $63.21 | $47.80 | $41.37 | $48.38 | $60.02 | $52.28 |
Total Return | 33.54% | 16.62% | –12.32% | –18.70% | 15.69% | –1.99% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $386 | $234 | $141 | $257 | $114 | $47 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.33% | 1.28% | 1.61% | 1.16% | 0.89% | 0.92% |
Portfolio Turnover Rate2 | 7% | 7% | 5% | 12% | 8% | 10% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
12
Consumer Discretionary Index Fund
Notes to Financial Statements
Vanguard Consumer Discretionary Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. Other: Dividend income is recorded on the ex-dividend date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $62,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
13
Consumer Discretionary 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 February 28, 2011, the fund realized $8,723,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $13,657,000 to offset future net capital gains of $36,000 through August 31, 2013, $86,000 through August 31, 2014, $178,000 through August 31, 2015, $1,526,000 through August 31, 2016, $4,557,000 through August 31, 2017, and $7,274,000 through August 31, 2018. In addition, the fund realized losses of $1,506,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $348,864,000. Net unrealized appreciation of investment securities for tax purposes was $47,907,000, consisting of unrealized gains of $62,091,000 on securities that had risen in value since their purchase and $14,184,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $113,392,000 of investment securities and sold $39,716,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 5,324 | 172 | 4,546 | 173 |
Issued in Lieu of Cash Distributions | 78 | 2 | 16 | 1 |
Redeemed1 | (1,940) | (63) | (512) | (21) |
Net Increase (Decrease)—Admiral Shares | 3,462 | 111 | 4,050 | 153 |
ETF Shares | ||||
Issued | 100,261 | 1,700 | 113,968 | 2,300 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (27,880) | (500) | (39,927) | (800) |
Net Increase (Decrease)—ETF Shares | 72,381 | 1,200 | 74,041 | 1,500 |
1 Net of redemption fees for fiscal 2011 and 2010 of $29,000 and $8,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
14
Consumer Staples Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 109 | 109 | 2,474 |
Median Market Cap | $52.8B | $52.8B | $32.2B |
Price/Earnings Ratio | 15.9x | 16.0x | 17.7x |
Price/Book Ratio | 3.2x | 3.1x | 2.3x |
Yield3 | 2.8% | 1.7% | |
Admiral Shares | 2.6% | ||
ETF Shares | 2.6% | ||
Return on Equity | 23.3% | 23.1% | 19.1% |
Earnings Growth Rate | 7.5% | 7.5% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 10% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.1% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 0.99 | 0.83 |
Beta | 1.01 | 0.59 |
Subindustry Diversification | |
(% of equity exposure) | |
Agricultural Products | 3.3% |
Drug Retail | 6.7 |
Food Distributors | 1.7 |
Food Retail | 3.3 |
Household Products | 19.8 |
Hypermarkets & Super Centers | 10.1 |
Packaged Foods & Meats | 17.7 |
Personal Products | 3.1 |
Soft Drinks | 18.5 |
Tobacco | 14.2 |
Other Consumer Staples | 1.6 |
Ten Largest Holdings8 (% of total net assets) | |
Procter & Gamble Co. | 12.8% |
Coca-Cola Co. | 9.5 |
Philip Morris International Inc. | 8.0 |
Wal-Mart Stores Inc. | 7.3 |
PepsiCo Inc. | 7.0 |
Kraft Foods Inc. | 4.3 |
Altria Group Inc. | 4.1 |
CVS Caremark Corp. | 3.5 |
Walgreen Co. | 3.1 |
Colgate-Palmolive Co. | 2.9 |
Top Ten | 62.5% |
1 MSCI US IMI/Consumer Staples 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Consumer Staples 25/50: MSCI US IMI/Consumer Staples through February 26, 2010; MSCI US IMI/Consumer Staples 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
15
Consumer Staples 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 (%): January 26, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x18x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 1/26/2004 | |||
Market Price | 14.54% | 7.78% | 7.52% | |
Net Asset Value | 14.44 | 7.77 | 7.51 | |
Admiral Shares3 | 1/30/2004 | 14.43 | 7.74 | 7.56 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Consumer Staples 25/50: MSCI US IMI/Consumer Staples through February 26, 2010; MSCI US IMI/Consumer Staples 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
16
Consumer Staples Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (100.0%) | |||
Beverages (20.1%) | |||
Coca-Cola Co. | 982,172 | 62,780 | |
PepsiCo Inc. | 725,177 | 45,991 | |
Coca-Cola Enterprises Inc. | 179,837 | 4,730 | |
Dr Pepper Snapple Group | |||
Inc. | 122,449 | 4,416 | |
Molson Coors Brewing Co. | |||
Class B | 85,376 | 3,904 | |
Brown-Forman Corp. | |||
Class B | 43,975 | 3,041 | |
* | Hansen Natural Corp. | 42,835 | 2,465 |
* | Constellation Brands Inc. | ||
Class A | 108,066 | 2,196 | |
* | Central European | ||
Distribution Corp. | 42,072 | 961 | |
* | Boston Beer Co. Inc. | ||
Class A | 7,479 | 694 | |
* | Heckmann Corp. | 101,453 | 580 |
Coca-Cola Bottling Co. | |||
Consolidated | 6,928 | 400 | |
National Beverage Corp. | 26,522 | 337 | |
132,495 | |||
Food & Staples Retailing (21.9%) | |||
Wal-Mart Stores Inc. | 920,110 | 47,827 | |
CVS Caremark Corp. | 695,876 | 23,006 | |
Walgreen Co. | 475,855 | 20,623 | |
Costco Wholesale Corp. | 222,855 | 16,667 | |
Sysco Corp. | 302,530 | 8,407 | |
Kroger Co. | 315,928 | 7,235 | |
Whole Foods Market Inc. | 78,939 | 4,623 | |
Safeway Inc. | 200,760 | 4,381 | |
* | BJ’s Wholesale Club Inc. | 32,924 | 1,594 |
* | United Natural Foods Inc. | 29,293 | 1,243 |
SUPERVALU Inc. | 128,354 | 1,108 | |
Casey’s General Stores Inc. | 25,319 | 1,040 | |
Ruddick Corp. | 28,054 | 1,030 | |
* | Rite Aid Corp. | 528,088 | 692 |
Andersons Inc. | 14,392 | 691 | |
Pricesmart Inc. | 16,155 | 575 | |
Nash Finch Co. | 12,781 | 516 | |
Weis Markets Inc. | 12,603 | 500 | |
* | Pantry Inc. | 27,246 | 429 |
Spartan Stores Inc. | 28,151 | 424 | |
* | Winn-Dixie Stores Inc. | 56,391 | 394 |
Ingles Markets Inc. Class A | 20,069 | 386 | |
Village Super Market Inc. | |||
Class A | 11,188 | 336 | |
* | Susser Holdings Corp. | 20,811 | 288 |
144,015 | |||
Food Products (21.0%) | |||
Kraft Foods Inc. | 882,033 | 28,084 | |
General Mills Inc. | 331,891 | 12,326 | |
Archer-Daniels-Midland Co. | 329,561 | 12,253 | |
HJ Heinz Co. | 163,876 | 8,230 | |
Kellogg Co. | 135,638 | 7,265 |
Market | |||
Value• | |||
Shares | ($000) | ||
Mead Johnson Nutrition Co. | 106,822 | 6,393 | |
Sara Lee Corp. | 323,324 | 5,535 | |
ConAgra Foods Inc. | 231,735 | 5,367 | |
Bunge Ltd. | 72,200 | 5,211 | |
Hershey Co. | 85,309 | 4,463 | |
JM Smucker Co. | 63,298 | 4,357 | |
Campbell Soup Co. | 109,848 | 3,698 | |
McCormick & Co. Inc. | 66,053 | 3,147 | |
Tyson Foods Inc. Class A | 160,892 | 2,997 | |
* | Green Mountain Coffee | ||
Roasters Inc. | 62,264 | 2,539 | |
Hormel Foods Corp. | 83,712 | 2,294 | |
Del Monte Foods Co. | 112,694 | 2,133 | |
Corn Products | |||
International Inc. | 43,622 | 2,130 | |
* | Ralcorp Holdings Inc. | 31,776 | 2,061 |
* | Smithfield Foods Inc. | 87,203 | 2,019 |
Flowers Foods Inc. | 51,529 | 1,371 | |
* | Dean Foods Co. | 117,893 | 1,245 |
* | TreeHouse Foods Inc. | 22,942 | 1,197 |
* | Darling International Inc. | 77,682 | 1,079 |
* | Hain Celestial Group Inc. | 30,140 | 899 |
Fresh Del Monte Produce | |||
Inc. | 30,588 | 874 | |
Lancaster Colony Corp. | 14,333 | 827 | |
Diamond Foods Inc. | 16,113 | 821 | |
Sanderson Farms Inc. | 16,755 | 693 | |
* | Chiquita Brands | ||
International Inc. | 38,896 | 669 | |
B&G Foods Inc. Class A | 42,423 | 636 | |
J&J Snack Foods Corp. | 13,144 | 578 | |
* | Dole Food Co. Inc. | 37,890 | 559 |
Tootsie Roll Industries Inc. | 19,238 | 550 | |
* | Zhongpin Inc. | 28,405 | 528 |
Snyders-Lance Inc. | 25,659 | 468 | |
* | Pilgrim’s Pride Corp. | 58,562 | 452 |
Cal-Maine Foods Inc. | 15,392 | 444 | |
Calavo Growers Inc. | 16,364 | 380 | |
* | Smart Balance Inc. | 86,135 | 374 |
Alico Inc. | 13,132 | 348 | |
^,* | Feihe International Inc. | 35,477 | 298 |
Farmer Bros Co. | 20,131 | 264 | |
* | AgFeed Industries Inc. | 102,498 | 241 |
138,297 | |||
Household Products (19.7%) | |||
Procter & Gamble Co. | 1,342,420 | 84,640 | |
Colgate-Palmolive Co. | 247,402 | 19,426 | |
Kimberly-Clark Corp. | 209,820 | 13,827 | |
Clorox Co. | 73,391 | 4,973 | |
Church & Dwight Co. Inc. | 39,013 | 2,943 | |
* | Energizer Holdings Inc. | 37,738 | 2,522 |
WD-40 Co. | 14,478 | 589 | |
* | Central Garden and Pet Co. | ||
Class A | 50,450 | 465 | |
* | Central Garden and Pet Co. | 35,861 | 327 |
129,712 |
Market | |||
Value• | |||
Shares | ($000) | ||
Personal Products (3.1%) | |||
Avon Products Inc. | 222,189 | 6,179 | |
Estee Lauder Cos. Inc. | |||
Class A | 60,152 | 5,679 | |
Herbalife Ltd. | 33,670 | 2,640 | |
Alberto-Culver Co. Class B | 52,099 | 1,940 | |
Nu Skin Enterprises Inc. | |||
Class A | 36,284 | 1,158 | |
* | Elizabeth Arden Inc. | 20,895 | 608 |
* | Prestige Brands Holdings | ||
Inc. | 47,449 | 523 | |
* | USANA Health Sciences Inc. | 11,614 | 404 |
Inter Parfums Inc. | 21,934 | 396 | |
* | Revlon Inc. Class A | 23,749 | 355 |
^,* | China-Biotics Inc. | 25,883 | 302 |
* | American Oriental | ||
Bioengineering Inc. | 120,667 | 272 | |
20,456 | |||
Tobacco (14.2%) | |||
Philip Morris International | |||
Inc. | 839,574 | 52,708 | |
Altria Group Inc. | 1,054,220 | 26,746 | |
Reynolds American Inc. | 182,862 | 6,276 | |
Lorillard Inc. | 79,184 | 6,079 | |
Universal Corp. | 17,573 | 735 | |
Vector Group Ltd. | 36,251 | 612 | |
* | Alliance One International | ||
Inc. | 100,305 | 364 | |
93,520 | |||
Total Common Stocks | |||
(Cost $617,891) | 658,495 | ||
Temporary Cash Investment (0.1%) | |||
Money Market Fund (0.1%) | |||
1,2 | Vanguard Market | ||
Liquidity Fund, 0.213% | |||
(Cost $967) | 966,851 | 967 | |
Total Investments (100.1%) | |||
(Cost $618,858) | 659,462 | ||
Other Assets and Liabilities (–0.1%) | |||
Other Assets | 8,520 | ||
Liabilities2 | (9,171) | ||
(651) | |||
Net Assets (100%) | 658,811 |
17
Consumer Staples Index Fund
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 633,594 |
Undistributed Net Investment Income | 1,180 |
Accumulated Net Realized Losses | (16,567) |
Unrealized Appreciation (Depreciation) | 40,604 |
Net Assets | 658,811 |
Admiral Shares—Net Assets | |
Applicable to 1,154,116 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 42,277 |
Net Asset Value Per Share— | |
Admiral Shares | $36.63 |
ETF Shares—Net Assets | |
Applicable to 8,301,572 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 616,534 |
Net Asset Value Per Share—ETF Shares | $74.27 |
• See Note A in Notes to Financial Statements.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $193,000.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $213,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
18
Consumer Staples Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 8,964 |
Interest1 | 1 |
Security Lending | 69 |
Total Income | 9,034 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 47 |
Management and Administrative— | |
Admiral Shares | 35 |
Management and Administrative— | |
ETF Shares | 542 |
Marketing and Distribution— | |
Admiral Shares | 4 |
Marketing and Distribution— | |
ETF Shares | 93 |
Custodian Fees | 10 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 21 |
Total Expenses | 752 |
Net Investment Income | 8,282 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 7,535 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 65,824 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 81,641 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 8,282 | 16,107 |
Realized Net Gain (Loss) | 7,535 | 18,127 |
Change in Unrealized Appreciation (Depreciation) | 65,824 | 23,452 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 81,641 | 57,686 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (952) | (745) |
ETF Shares | (15,636) | (15,294) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (16,588) | (16,039) |
Capital Share Transactions | ||
Admiral Shares | 8,395 | (302) |
ETF Shares | 7,762 | (44,794) |
Net Increase (Decrease) from Capital Share Transactions | 16,157 | (45,096) |
Total Increase (Decrease) | 81,210 | (3,449) |
Net Assets | ||
Beginning of Period | 577,601 | 581,050 |
End of Period2 | 658,811 | 577,601 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed net investment income of $1,180,000 and $9,486,000.
See accompanying Notes, which are an integral part of the Financial Statements.
19
Consumer Staples Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $32.92 | $30.62 | $34.06 | $33.22 | $30.56 | $27.64 |
Investment Operations | ||||||
Net Investment Income | .469 | .8601 | .7771 | .6341 | .662 | .5471 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 4.190 | 2.290 | (3.648) | .766 | 2.460 | 2.716 |
Total from Investment Operations | 4.659 | 3.150 | (2.871) | 1.400 | 3.122 | 3.263 |
Distributions | ||||||
Dividends from Net Investment Income | (.949) | (.850) | (.569) | (.560) | (.462) | (.343) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.949) | (.850) | (.569) | (.560) | (.462) | (.343) |
Net Asset Value, End of Period | $36.63 | $32.92 | $30.62 | $34.06 | $33.22 | $30.56 |
Total Return2 | 14.19% | 10.34% | –8.26% | 4.15% | 10.30% | 11.92% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $42 | $30 | $29 | $18 | $9 | $6 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.26% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 2.63% | 2.61% | 2.77% | 1.88% | 2.16% | 1.90% |
Portfolio Turnover Rate3 | 10% | 7% | 17% | 13% | 12% | 14% |
The expense ratio, net 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 transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
20
Consumer Staples Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $66.72 | $62.07 | $69.04 | $67.35 | $61.94 | $56.03 |
Investment Operations | ||||||
Net Investment Income | .944 | 1.7531 | 1.6161 | 1.3271 | 1.370 | 1.0901 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 8.512 | 4.635 | (7.413) | 1.522 | 5.000 | 5.523 |
Total from Investment Operations | 9.456 | 6.388 | (5.797) | 2.849 | 6.370 | 6.613 |
Distributions | ||||||
Dividends from Net Investment Income | (1.906) | (1.738) | (1.173) | (1.159) | (.960) | (.703) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.906) | (1.738) | (1.173) | (1.159) | (.960) | (.703) |
Net Asset Value, End of Period | $74.27 | $66.72 | $62.07 | $69.04 | $67.35 | $61.94 |
Total Return | 14.20% | 10.33% | –8.22% | 4.18% | 10.38% | 11.91% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $617 | $547 | $552 | $518 | $310 | $211 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 2.63% | 2.61% | 2.80% | 1.93% | 2.20% | 1.93% |
Portfolio Turnover Rate2 | 10% | 7% | 17% | 13% | 12% | 14% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
21
Consumer Staples Index Fund
Notes to Financial Statements
Vanguard Consumer Staples Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. 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 redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $110,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.04% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
22
Consumer Staples 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 February 28, 2011, the fund realized $5,782,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $16,360,000 to offset future net capital gains of $276,000 through August 31, 2014, $773,000 through August 31, 2015, $2,261,000 through August 31, 2016, $2,671,000 through August 31, 2017, and $10,379,000 through August 31, 2018. In addition, the fund realized losses of $1,689,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $618,858,000. Net unrealized appreciation of investment securities for tax purposes was $40,604,000, consisting of unrealized gains of $65,086,000 on securities that had risen in value since their purchase and $24,482,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $73,567,000 of investment securities and sold $66,537,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 11,861 | 329 | 8,871 | 267 |
Issued in Lieu of Cash Distributions | 853 | 24 | 690 | 21 |
Redeemed1 | (4,319) | (121) | (9,863) | (300) |
Net Increase (Decrease)—Admiral Shares | 8,395 | 232 | (302) | (12) |
ETF Shares | ||||
Issued | 43,684 | 600 | 108,286 | 1,602 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (35,922) | (500) | (153,080) | (2,300) |
Net Increase (Decrease)—ETF Shares | 7,762 | 100 | (44,794) | (698) |
1 Net of redemption fees for fiscal 2011 and 2010 of $14,000 and $18,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
23
Energy Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 160 | 159 | 2,474 |
Median Market Cap | $47.6B | $47.6B | $32.2B |
Price/Earnings Ratio | 18.1x | 18.1x | 17.7x |
Price/Book Ratio | 2.4x | 2.4x | 2.3x |
Yield3 | 1.4% | 1.7% | |
Admiral Shares | 1.1% | ||
ETF Shares | 1.1% | ||
Return on Equity | 21.8% | 21.8% | 19.1% |
Earnings Growth Rate | –3.7% | –3.8% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 11% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.0% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 0.99 | 0.64 |
Beta | 1.05 | 0.98 |
Subindustry Diversification | |
(% of equity exposure) | |
Coal & Consumable Fuels | 3.3% |
Integrated Oil & Gas | 46.2 |
Oil & Gas Drilling | 3.3 |
Oil & Gas Equipment & Services | 19.3 |
Oil & Gas Exploration & Production | 21.9 |
Oil & Gas Refining & Marketing | 2.4 |
Oil & Gas Storage & Transportation | 3.6 |
Ten Largest Holdings8 (% of total net assets) | |
Exxon Mobil Corp. | 21.9% |
Chevron Corp. | 11.4 |
Schlumberger Ltd. | 6.9 |
ConocoPhillips | 4.5 |
Occidental Petroleum Corp. | 4.4 |
Apache Corp. | 2.6 |
Halliburton Co. | 2.4 |
Anadarko Petroleum Corp. | 2.2 |
Devon Energy Corp. | 2.1 |
Marathon Oil Corp. | 1.9 |
Top Ten | 60.3% |
1 MSCI US IMI/Energy 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Energy 25/50: MSCI US IMI/Energy through February 26, 2010; MSCI US IMI/Energy 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
24
Energy 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 (%): September 23, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x27x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 9/23/2004 | |||
Market Price | 21.18% | 8.05% | 13.31% | |
Net Asset Value | 21.09 | 8.05 | 13.30 | |
Admiral Shares3 | 10/7/2004 | 21.10 | 8.02 | 12.35 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Energy 25/50: MSCI US IMI/Energy through February 26, 2010; MSCI US IMI/Energy 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
25
Energy Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (100.0%) | |||
Energy Equipment & Services (22.6%) | |||
Oil & Gas Drilling (3.3%) | |||
Noble Corp. | 343,106 | 15,340 | |
* | Nabors Industries Ltd. | 385,773 | 10,983 |
* | Pride International Inc. | 240,055 | 9,965 |
Helmerich & Payne Inc. | 144,531 | 9,393 | |
Diamond Offshore Drilling | |||
Inc. | 94,677 | 7,407 | |
* | Rowan Cos. Inc. | 160,612 | 6,853 |
Patterson-UTI Energy Inc. | 223,091 | 6,099 | |
* | Atwood Oceanics Inc. | 89,360 | 4,068 |
* | Unit Corp. | 64,082 | 3,813 |
* | Hercules Offshore Inc. | 326,305 | 1,612 |
* | Pioneer Drilling Co. | 140,396 | 1,589 |
* | Parker Drilling Co. | 250,171 | 1,316 |
Oil & Gas Equipment & Services (19.3%) | |||
Schlumberger Ltd. | 1,738,488 | 162,410 | |
Halliburton Co. | 1,180,743 | 55,424 | |
National Oilwell Varco Inc. | 545,167 | 43,379 | |
Baker Hughes Inc. | 564,043 | 40,075 | |
* | Weatherford International | ||
Ltd. | 967,506 | 23,394 | |
* | Cameron International | ||
Corp. | 322,633 | 19,077 | |
* | FMC Technologies Inc. | 162,738 | 15,306 |
* | McDermott International | ||
Inc. | 323,164 | 7,417 | |
* | Oceaneering International | ||
Inc. | 77,805 | 6,507 | |
Core Laboratories NV | 61,670 | 6,374 | |
* | Dresser-Rand Group Inc. | 116,118 | 5,722 |
* | Oil States International Inc. | 73,211 | 5,329 |
Tidewater Inc. | 75,692 | 4,709 | |
* | Superior Energy Services | ||
Inc. | 118,342 | 4,534 | |
Lufkin Industries Inc. | 48,257 | 3,771 | |
CARBO Ceramics Inc. | 30,372 | 3,765 | |
* | Dril-Quip Inc. | 48,264 | 3,702 |
* | ION Geophysical Corp. | 251,483 | 3,224 |
* | Key Energy Services Inc. | 206,917 | 3,207 |
SEACOR Holdings Inc. | 32,223 | 3,054 | |
* | Complete Production | ||
Services Inc. | 102,964 | 2,966 | |
* | Bristow Group Inc. | 55,081 | 2,639 |
* | Helix Energy Solutions | ||
Group Inc. | 170,535 | 2,626 | |
* | Exterran Holdings Inc. | 94,602 | 2,147 |
* | Gulfmark Offshore Inc. | 44,808 | 1,989 |
* | Tetra Technologies Inc. | 143,122 | 1,977 |
* | Global Industries Ltd. | 214,792 | 1,929 |
RPC Inc. | 97,028 | 1,900 | |
* | Hornbeck Offshore | ||
Services Inc. | 54,779 | 1,556 | |
* | Basic Energy Services Inc. | 81,101 | 1,556 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | OYO Geospace Corp. | 14,366 | 1,461 |
* | Tesco Corp. | 76,308 | 1,403 |
* | Cal Dive International Inc. | 200,497 | 1,379 |
Gulf Island Fabrication Inc. | 42,869 | 1,328 | |
* | Dawson Geophysical Co. | 26,270 | 1,311 |
* | Newpark Resources Inc. | 170,747 | 1,192 |
* | Willbros Group Inc. | 103,728 | 1,178 |
* | Matrix Service Co. | 80,949 | 1,130 |
* | PHI Inc. | 42,097 | 905 |
* | Global Geophysical | ||
Services Inc. | 8,231 | 116 | |
531,506 | |||
Oil, Gas & Consumable Fuels (77.4%) | |||
Coal & Consumable Fuels (3.3%) | |||
Peabody Energy Corp. | 352,526 | 23,087 | |
Consol Energy Inc. | 298,079 | 15,116 | |
* | Alpha Natural Resources | ||
Inc. | 164,103 | 8,898 | |
Massey Energy Co. | 137,411 | 8,702 | |
Arch Coal Inc. | 223,653 | 7,499 | |
* | Patriot Coal Corp. | 158,631 | 3,744 |
* | International Coal Group | ||
Inc. | 331,899 | 3,276 | |
* | Cloud Peak Energy Inc. | 118,551 | 2,430 |
^,* | Uranium Energy Corp. | 232,670 | 1,326 |
* | James River Coal Co. | 59,865 | 1,257 |
* | USEC Inc. | 224,950 | 1,197 |
* | L&L Energy Inc. | 12,273 | 92 |
Integrated Oil & Gas (46.2%) | |||
Exxon Mobil Corp. | 6,028,413 | 515,610 | |
Chevron Corp. | 2,573,756 | 267,027 | |
ConocoPhillips | 1,344,619 | 104,706 | |
Occidental Petroleum | |||
Corp. | 1,008,610 | 102,848 | |
Marathon Oil Corp. | 917,383 | 45,502 | |
Hess Corp. | 393,533 | 34,249 | |
Murphy Oil Corp. | 238,926 | 17,568 | |
Oil & Gas Exploration & Production (21.9%) | |||
Apache Corp. | 497,682 | 62,021 | |
Anadarko Petroleum Corp. | 638,924 | 52,283 | |
Devon Energy Corp. | 549,140 | 50,213 | |
EOG Resources Inc. | 326,917 | 36,716 | |
Chesapeake Energy Corp. | 844,503 | 30,073 | |
Noble Energy Inc. | 228,699 | 21,191 | |
* | Southwestern Energy Co. | 451,740 | 17,835 |
Pioneer Natural Resources | |||
Co. | 154,254 | 15,786 | |
Cimarex Energy Co. | 112,375 | 13,050 | |
* | Newfield Exploration Co. | 177,322 | 12,907 |
* | Denbury Resources Inc. | 520,486 | 12,611 |
Range Resources Corp. | 213,861 | 11,613 | |
* | Concho Resources Inc. | 107,103 | 11,409 |
QEP Resources Inc. | 234,073 | 9,258 | |
* | Ultra Petroleum Corp. | 202,984 | 9,205 |
* | Whiting Petroleum Corp. | 139,624 | 9,123 |
Market | |||
Value• | |||
Shares | ($000) | ||
EQT Corp. | 185,020 | 9,121 | |
* | Petrohawk Energy Corp. | 409,198 | 8,839 |
* | Plains Exploration | ||
& Production Co. | 194,640 | 7,624 | |
Cabot Oil & Gas Corp. | 145,693 | 6,652 | |
SM Energy Co. | 90,713 | 6,574 | |
* | Brigham Exploration Co. | 172,028 | 6,293 |
* | SandRidge Energy Inc. | 563,863 | 6,095 |
* | Forest Oil Corp. | 150,883 | 5,355 |
EXCO Resources Inc. | 257,039 | 5,262 | |
* | Rosetta Resources Inc. | 86,670 | 3,931 |
Berry Petroleum Co. | |||
Class A | 75,489 | 3,925 | |
* | Approach Resources Inc. | 120,404 | 3,919 |
* | Energy XXI Bermuda Ltd. | 107,221 | 3,697 |
* | Continental Resources Inc. | 52,943 | 3,681 |
* | Gran Tierra Energy Inc. | 386,740 | 3,589 |
* | Northern Oil and Gas Inc. | 101,932 | 3,238 |
* | Swift Energy Co. | 69,610 | 2,990 |
* | Quicksilver Resources Inc. | 185,457 | 2,873 |
* | Stone Energy Corp. | 90,126 | 2,729 |
* | Carrizo Oil & Gas Inc. | 68,801 | 2,561 |
* | Cobalt International Energy | ||
Inc. | 162,123 | 2,539 | |
* | Gulfport Energy Corp. | 84,141 | 2,490 |
* | Bill Barrett Corp. | 61,499 | 2,391 |
* | McMoRan Exploration Co. | 129,109 | 2,259 |
* | Petroleum Development | ||
Corp. | 47,668 | 2,237 | |
W&T Offshore Inc. | 86,612 | 2,211 | |
* | Comstock Resources Inc. | 78,321 | 2,079 |
* | Clayton Williams Energy Inc. | 18,783 | 1,992 |
* | ATP Oil & Gas Corp. | 90,304 | 1,834 |
^,* | Resolute Energy Corp. | 87,221 | 1,581 |
Contango Oil & Gas Co. | 25,116 | 1,539 | |
* | Harvest Natural Resources | ||
Inc. | 99,666 | 1,485 | |
* | Venoco Inc. | 75,479 | 1,393 |
Penn Virginia Corp. | 85,280 | 1,388 | |
* | Energy Partners Ltd. | 80,021 | 1,310 |
* | Goodrich Petroleum Corp. | 64,051 | 1,303 |
* | BPZ Resources Inc. | 198,595 | 1,291 |
* | Petroquest Energy Inc. | 140,974 | 1,215 |
* | Gastar Exploration Ltd. | 238,794 | 1,182 |
* | Vaalco Energy Inc. | 146,448 | 1,175 |
* | Magnum Hunter Resources | ||
Corp. | 158,309 | 1,133 | |
* | Rex Energy Corp. | 85,556 | 1,078 |
* | Warren Resources Inc. | 213,317 | 1,050 |
* | Endeavour International | ||
Corp. | 71,616 | 968 | |
* | Delta Petroleum Corp. | 799,456 | 935 |
* | Oilsands Quest Inc. | 1,135,275 | 582 |
* | Oasis Petroleum Inc. | 13,783 | 476 |
* | Kodiak Oil & Gas Corp. | 21,520 | 163 |
* | Atlas Energy Inc. Escrow | 108,839 | 11 |
26
Energy Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Oil & Gas Refining & Marketing (2.4%) | |||
Valero Energy Corp. | 740,726 | 20,874 | |
Sunoco Inc. | 164,245 | 6,875 | |
* | Tesoro Corp. | 214,405 | 5,099 |
Holly Corp. | 82,390 | 4,708 | |
* | Frontier Oil Corp. | 167,771 | 4,681 |
World Fuel Services Corp. | 98,266 | 4,072 | |
* | CVR Energy Inc. | 211,029 | 3,988 |
* | Western Refining Inc. | 162,433 | 2,643 |
* | Clean Energy Fuels Corp. | 92,765 | 1,302 |
Alon USA Energy Inc. | 82,403 | 913 | |
Delek US Holdings Inc. | 76,350 | 859 | |
* | China Integrated Energy Inc. | 64,116 | 404 |
Oil & Gas Storage & Transportation (3.6%) | |||
Williams Cos. Inc. | 763,855 | 23,191 | |
Spectra Energy Corp. | 844,952 | 22,602 | |
El Paso Corp. | 929,909 | 17,296 | |
* | Kinder Morgan | ||
Management LLC | 111,936 | 7,344 | |
Southern Union Co. | 159,453 | 4,548 | |
* | Cheniere Energy Inc. | 230,232 | 2,390 |
* | Kinder Morgan Inc. | 64,606 | 1,971 |
* | Enbridge Energy | ||
Management LLC | 26,891 | 1,798 | |
Overseas Shipholding | |||
Group Inc. | 48,749 | 1,646 | |
Crosstex Energy Inc. | 109,250 | 1,123 | |
General Maritime Corp. | 198,380 | 555 | |
* | Atlas Energy LP | 1,150 | 19 |
1,820,567 | |||
Total Common Stocks | |||
(Cost $1,752,084) | 2,352,073 | ||
Temporary Cash Investment (0.0%) | |||
Money Market Fund (0.0%) | |||
1,2 | Vanguard Market | ||
Liquidity Fund, 0.213% | |||
(Cost $261) | 261,301 | 261 | |
Total Investments (100.0%) | |||
(Cost $1,752,345) | 2,352,334 | ||
Other Assets and Liabilities (0.0%) | |||
Other Assets | 19,161 | ||
Liabilities2 | (19,328) | ||
(167) | |||
Net Assets (100%) | 2,352,167 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 1,877,315 |
Undistributed Net Investment Income | 5,660 |
Accumulated Net Realized Losses | (130,797) |
Unrealized Appreciation (Depreciation) | 599,989 |
Net Assets | 2,352,167 |
Admiral Shares—Net Assets | |
Applicable to 4,384,177 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 250,938 |
Net Asset Value Per Share— | |
Admiral Shares | $57.24 |
ETF Shares—Net Assets | |
Applicable to 18,343,489 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 2,101,229 |
Net Asset Value Per Share— | |
ETF Shares | $114.55 |
• See Note A in Notes to Financial Statements.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $249,000.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $261,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
27
Energy Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 14,747 |
Interest1 | 1 |
Security Lending | 31 |
Total Income | 14,779 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 101 |
Management and Administrative— | |
Admiral Shares | 182 |
Management and Administrative— | |
ETF Shares | 1,353 |
Marketing and Distribution— | |
Admiral Shares | 16 |
Marketing and Distribution— | |
ETF Shares | 195 |
Custodian Fees | 16 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 41 |
Trustees’ Fees and Expenses | 1 |
Total Expenses | 1,905 |
Net Investment Income | 12,874 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 11,242 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 665,620 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 689,736 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 12,874 | 20,397 |
Realized Net Gain (Loss) | 11,242 | (9,773) |
Change in Unrealized Appreciation (Depreciation) | 665,620 | (10,417) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 689,736 | 207 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (2,364) | (1,675) |
ETF Shares | (19,009) | (14,832) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (21,373) | (16,507) |
Capital Share Transactions | ||
Admiral Shares | 45,143 | 27,810 |
ETF Shares | 466,231 | 183,909 |
Net Increase (Decrease) from Capital Share Transactions | 511,374 | 211,719 |
Total Increase (Decrease) | 1,179,737 | 195,419 |
Net Assets | ||
Beginning of Period | 1,172,430 | 977,011 |
End of Period2 | 2,352,167 | 1,172,430 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed net investment income of $5,660,000 and $14,159,000.
See accompanying Notes, which are an integral part of the Financial Statements.
28
Energy Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $37.58 | $37.34 | $54.66 | $50.36 | $40.36 | $36.29 |
Investment Operations | ||||||
Net Investment Income | .306 | .654 | .578 | .504 | .5011 | .4601 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 19.980 | .166 | (17.335) | 4.246 | 9.944 | 3.960 |
Total from Investment Operations | 20.286 | .820 | (16.757) | 4.750 | 10.445 | 4.420 |
Distributions | ||||||
Dividends from Net Investment Income | (.626) | (.580) | (.563) | (.450) | (.445) | (.350) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.626) | (.580) | (.563) | (.450) | (.445) | (.350) |
Net Asset Value, End of Period | $57.24 | $37.58 | $37.34 | $54.66 | $50.36 | $40.36 |
Total Return2 | 54.26% | 2.05% | –30.51% | 9.42% | 26.03% | 12.27% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $251 | $131 | $108 | $148 | $115 | $83 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.26% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.61% | 1.71% | 1.81% | 0.99% | 1.16% | 1.20% |
Portfolio Turnover Rate3 | 11% | 16% | 25% | 11% | 15% | 21% |
The expense ratio, net 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 transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
29
Energy Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $75.20 | $74.74 | $109.54 | $100.92 | $80.90 | $72.72 |
Investment Operations | ||||||
Net Investment Income | .616 | 1.312 | 1.191 | 1.059 | 1.0801 | .9661 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 39.981 | .341 | (34.808) | 8.501 | 19.869 | 7.915 |
Total from Investment Operations | 40.597 | 1.653 | (33.617) | 9.560 | 20.949 | 8.881 |
Distributions | ||||||
Dividends from Net Investment Income | (1.247) | (1.193) | (1.183) | (.940) | (.929) | (.701) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.247) | (1.193) | (1.183) | (.940) | (.929) | (.701) |
Net Asset Value, End of Period | $114.55 | $75.20 | $74.74 | $109.54 | $100.92 | $80.90 |
Total Return | 54.26% | 2.05% | –30.49% | 9.47% | 26.09% | 12.31% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $2,101 | $1,041 | $869 | $845 | $656 | $340 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.61% | 1.71% | 1.84% | 1.04% | 1.20% | 1.23% |
Portfolio Turnover Rate2 | 11% | 16% | 25% | 11% | 15% | 21% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
30
Energy Index Fund
Notes to Financial Statements
Vanguard Energy Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. 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 redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $335,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.13% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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 ates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
31
Energy 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 February 28, 2011, the fund realized $16,390,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $91,138,000 to offset future net capital gains of $5,000 through August 31, 2013, $789,000 through August 31, 2014, $461,000 through August 31, 2015, $1,694,000 through August 31, 2016, $21,266,000 through August 31, 2017, and $66,923,000 through August 31, 2018. In addition, the fund realized losses of $32,690,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $1,752,345,000. Net unrealized appreciation of investment securities for tax purposes was $599,989,000, consisting of unrealized gains of $606,490,000 on securities that had risen in value since their purchase and $6,501,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $637,116,000 of investment securities and sold $135,070,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 54,332 | 1,085 | 57,079 | 1,339 |
Issued in Lieu of Cash Distributions | 1,734 | 35 | 1,465 | 35 |
Redeemed1 | (10,923) | (233) | (30,734) | (762) |
Net Increase (Decrease)—Admiral Shares | 45,143 | 887 | 27,810 | 612 |
ETF Shares | ||||
Issued | 511,784 | 5,000 | 274,072 | 3,313 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (45,553) | (500) | (90,163) | (1,100) |
Net Increase (Decrease)—ETF Shares | 466,231 | 4,500 | 183,909 | 2,213 |
1 Net of redemption fees for fiscal 2011 and 2010 of $48,000 and $83,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
32
Financials Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 499 | 498 | 2,474 |
Median Market Cap | $22.7B | $22.7B | $32.2B |
Price/Earnings Ratio | 17.7x | 17.6x | 17.7x |
Price/Book Ratio | 1.2x | 1.2x | 2.3x |
Yield3 | 1.6% | 1.7% | |
Admiral Shares | 1.4% | ||
ETF Shares | 1.4% | ||
Return on Equity | 10.6% | 10.6% | 19.1% |
Earnings Growth Rate | –3.6% | –3.6% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 12% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.1% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.81 |
Beta | 1.00 | 1.37 |
Subindustry Diversification | |
(% of equity exposure) | |
Asset Management & Custody Banks | 8.2% |
Consumer Finance | 3.9 |
Diversified Banks | 9.1 |
Diversified Financial Services | 19.1 |
Diversified REITs | 1.1 |
Insurance Brokers | 1.9 |
Investment Banking & Brokerage | 6.9 |
Life & Health Insurance | 6.2 |
Mortgage REITs | 1.5 |
Multiline Insurance | 2.1 |
Office REITS | 2.3 |
Property & Casualty Insurance | 9.9 |
Regional Banks | 9.3 |
Reinsurance | 1.6 |
Residential REITs | 2.3 |
Retail REITs | 3.7 |
Specialized Finance | 2.4 |
Specialized REITs | 4.9 |
Thrifts & Mortgage Finance | 1.7 |
Other Financials | 1.9 |
Ten Largest Holdings8 (% of total net assets) | |
JPMorgan Chase & Co. | 7.5% |
Wells Fargo & Co. | 6.6 |
Bank of America Corp. | 5.9 |
Citigroup Inc. | 5.6 |
Goldman Sachs Group Inc. | 3.3 |
Berkshire Hathaway Inc. Class B | 3.2 |
US Bancorp | 2.2 |
American Express Co. | 1.9 |
MetLife Inc. | 1.8 |
Morgan Stanley | 1.7 |
Top Ten | 39.7% |
1 MSCI US IMI/Financials 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Financials 25/50: MSCI US IMI/Financials through February 26, 2010; MSCI US IMI/Financials 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
33
Financials 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 (%): January 26, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x36x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 1/26/2004 | |||
Market Price | 14.77% | –7.97% | –3.85% | |
Net Asset Value | 14.74 | –7.96 | –3.86 | |
Admiral Shares3 | 2/4/2004 | 14.79 | –7.99 | –3.66 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Financials 25/50: MSCI US IMI/Financials through February 26, 2010; MSCI US IMI/Financials 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
34
Financials Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (100.1%) | |||
Capital Markets (15.1%) | |||
Goldman Sachs Group Inc. | 153,162 | 25,085 | |
Morgan Stanley | 429,477 | 12,747 | |
Bank of New York Mellon | |||
Corp. | 391,284 | 11,891 | |
State Street Corp. | 158,198 | 7,075 | |
Franklin Resources Inc. | 49,422 | 6,208 | |
Charles Schwab Corp. | 320,034 | 6,071 | |
BlackRock Inc. | 27,781 | 5,667 | |
T Rowe Price Group Inc. | 80,811 | 5,413 | |
Ameriprise Financial Inc. | 78,131 | 4,947 | |
Invesco Ltd. | 145,802 | 3,913 | |
Northern Trust Corp. | 68,719 | 3,544 | |
Legg Mason Inc. | 48,795 | 1,769 | |
* | Affiliated Managers Group | ||
Inc. | 16,089 | 1,718 | |
TD Ameritrade Holding Corp. | 72,620 | 1,583 | |
Raymond James Financial | |||
Inc. | 31,323 | 1,200 | |
Eaton Vance Corp. | 37,258 | 1,166 | |
Ares Capital Corp. | 63,856 | 1,139 | |
* | E*Trade Financial Corp. | 69,612 | 1,112 |
Waddell & Reed Financial | |||
Inc. Class A | 26,941 | 1,088 | |
* | American Capital Ltd. | 107,412 | 1,003 |
SEI Investments Co. | 41,593 | 957 | |
Jefferies Group Inc. | 35,191 | 847 | |
Federated Investors Inc. | |||
Class B | 29,247 | 806 | |
Janus Capital Group Inc. | 57,938 | 778 | |
Apollo Investment Corp. | 61,118 | 756 | |
* | Stifel Financial Corp. | 9,944 | 713 |
Greenhill & Co. Inc. | 7,862 | 565 | |
* | MF Global Holdings Ltd. | 48,953 | 424 |
* | Knight Capital Group Inc. | ||
Class A | 28,199 | 395 | |
Prospect Capital Corp. | 26,369 | 320 | |
Fifth Street Finance Corp. | 20,540 | 283 | |
KBW Inc. | 10,728 | 275 | |
BlackRock Kelso Capital | |||
Corp. | 21,299 | 265 | |
* | Investment Technology | ||
Group Inc. | 13,501 | 259 | |
* | Piper Jaffray Cos. | 6,281 | 258 |
Solar Capital Ltd. | 9,840 | 241 | |
optionsXpress Holdings Inc. | 13,625 | 221 | |
* | Financial Engines Inc. | 8,514 | 208 |
Evercore Partners Inc. | |||
Class A | 5,645 | 195 | |
BGC Partners Inc. Class A | 18,668 | 178 | |
Cohen & Steers Inc. | 5,998 | 175 | |
* | LPL Investment Holdings Inc. | 5,113 | 172 |
* | Internet Capital Group Inc. | 11,566 | 158 |
Artio Global Investors Inc. | |||
Class A | 9,887 | 157 |
Market | |||
Value• | |||
Shares | ($000) | ||
Hercules Technology Growth | |||
Capital Inc. | 13,455 | 149 | |
GFI Group Inc. | 23,038 | 115 | |
Duff & Phelps Corp. Class A | 6,716 | 106 | |
Oppenheimer Holdings Inc. | |||
Class A | 3,207 | 105 | |
MVC Capital Inc. | 7,458 | 105 | |
Calamos Asset Management | |||
Inc. Class A | 6,294 | 104 | |
* | International Assets Holding | ||
Corp. | 4,121 | 100 | |
Capital Southwest Corp. | 949 | 95 | |
* | TradeStation Group Inc. | 11,750 | 79 |
Westwood Holdings Group | |||
Inc. | 1,938 | 73 | |
NGP Capital Resources Co. | 6,891 | 69 | |
Epoch Holding Corp. | 4,357 | 69 | |
GAMCO Investors Inc. | 1,432 | 67 | |
* | FBR Capital Markets Corp. | 17,804 | 66 |
SWS Group Inc. | 9,713 | 52 | |
Golub Capital BDC Inc. | 2,919 | 50 | |
* | Gleacher & Co. Inc. | 24,953 | 48 |
THL Credit Inc. | 3,035 | 41 | |
* | Penson Worldwide Inc. | 6,028 | 40 |
Pzena Investment | |||
Management Inc. Class A | 2,793 | 21 | |
115,499 | |||
Commercial Banks (18.4%) | |||
Wells Fargo & Co. | 1,572,769 | 50,738 | |
US Bancorp | 604,679 | 16,768 | |
PNC Financial Services | |||
Group Inc. | 165,682 | 10,223 | |
BB&T Corp. | 218,501 | 6,031 | |
SunTrust Banks Inc. | 157,619 | 4,755 | |
Fifth Third Bancorp | 289,463 | 4,226 | |
Regions Financial Corp. | 396,075 | 3,026 | |
* | CIT Group Inc. | 59,992 | 2,599 |
KeyCorp | 277,604 | 2,537 | |
M&T Bank Corp. | 26,317 | 2,317 | |
Comerica Inc. | 55,638 | 2,164 | |
Huntington Bancshares Inc. | 272,308 | 1,863 | |
Zions Bancorporation | 56,188 | 1,313 | |
Marshall & Ilsley Corp. | 158,024 | 1,228 | |
* | Popular Inc. | 322,877 | 1,049 |
East West Bancorp Inc. | 44,298 | 1,029 | |
Cullen/Frost Bankers Inc. | 17,222 | 1,009 | |
* | First Horizon National Corp. | 82,383 | 947 |
Commerce Bancshares Inc. | 23,452 | 942 | |
City National Corp. | 14,838 | 874 | |
Associated Banc-Corp | 51,830 | 750 | |
Bank of Hawaii Corp. | 15,247 | 719 | |
* | SVB Financial Group | 13,244 | 718 |
Fulton Financial Corp. | 62,710 | 683 | |
* | Signature Bank | 12,828 | 666 |
Valley National Bancorp | 48,512 | 661 | |
TCF Financial Corp. | 40,509 | 657 | |
CapitalSource Inc. | 81,844 | 620 |
Market | |||
Value• | |||
Shares | ($000) | ||
Synovus Financial Corp. | 235,386 | 600 | |
FirstMerit Corp. | 34,326 | 585 | |
Prosperity Bancshares Inc. | 14,001 | 572 | |
Webster Financial Corp. | 23,383 | 542 | |
Iberiabank Corp. | 8,463 | 485 | |
Westamerica Bancorporation | 9,181 | 474 | |
Trustmark Corp. | 19,112 | 448 | |
BOK Financial Corp. | 8,555 | 439 | |
Whitney Holding Corp. | 30,591 | 434 | |
Cathay General Bancorp | 23,635 | 419 | |
Umpqua Holdings Corp. | 35,955 | 411 | |
UMB Financial Corp. | 10,195 | 407 | |
Susquehanna Bancshares | |||
Inc. | 40,881 | 391 | |
FNB Corp. | 37,986 | 381 | |
BancorpSouth Inc. | 23,837 | 380 | |
United Bankshares Inc. | 13,032 | 373 | |
Wintrust Financial Corp. | 10,944 | 367 | |
Glacier Bancorp Inc. | 22,790 | 356 | |
National Penn Bancshares | |||
Inc. | 43,134 | 342 | |
First Citizens BancShares | |||
Inc. Class A | 1,669 | 337 | |
MB Financial Inc. | 16,288 | 335 | |
Old National Bancorp | 29,845 | 334 | |
International Bancshares | |||
Corp. | 17,188 | 328 | |
Hancock Holding Co. | 9,292 | 322 | |
First Financial Bancorp | 18,380 | 311 | |
First Midwest Bancorp Inc. | 23,234 | 280 | |
* | Texas Capital Bancshares | ||
Inc. | 10,904 | 275 | |
Sterling Bancshares Inc. | 30,396 | 275 | |
PrivateBancorp Inc. Class A | 19,098 | 273 | |
First Financial Bankshares | |||
Inc. | 5,299 | 266 | |
Community Bank System | |||
Inc. | 10,492 | 264 | |
Columbia Banking System | |||
Inc. | 12,408 | 246 | |
NBT Bancorp Inc. | 10,862 | 242 | |
Park National Corp. | 3,579 | 236 | |
CVB Financial Corp. | 26,765 | 224 | |
* | Investors Bancorp Inc. | 16,225 | 220 |
First Commonwealth | |||
Financial Corp. | 32,249 | 211 | |
PacWest Bancorp | 9,569 | 198 | |
S&T Bancorp Inc. | 8,434 | 188 | |
Bank of the Ozarks Inc. | 4,288 | 185 | |
Oriental Financial Group Inc. | 15,346 | 184 | |
* | Western Alliance Bancorp | 21,449 | 174 |
Chemical Financial Corp. | 8,625 | 174 | |
Independent Bank Corp. | 6,300 | 171 | |
City Holding Co. | 4,902 | 168 | |
Home Bancshares Inc. | 7,279 | 164 | |
* | Pinnacle Financial Partners | ||
Inc. | 9,934 | 158 |
35
Financials Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
WesBanco Inc. | 7,482 | 156 | |
Boston Private Financial | |||
Holdings Inc. | 21,581 | 153 | |
Sandy Spring Bancorp Inc. | 7,622 | 145 | |
Danvers Bancorp Inc. | 6,271 | 137 | |
Simmons First National Corp. | |||
Class A | 4,619 | 133 | |
Wilmington Trust Corp. | 29,369 | 132 | |
SCBT Financial Corp. | 3,964 | 128 | |
Renasant Corp. | 7,655 | 123 | |
Community Trust Bancorp | |||
Inc. | 4,186 | 120 | |
* | Nara Bancorp Inc. | 11,212 | 117 |
TowneBank | 7,630 | 114 | |
Tompkins Financial Corp. | 2,762 | 113 | |
Lakeland Financial Corp. | 4,929 | 111 | |
First Financial Corp. | 3,369 | 109 | |
* | Citizens Republic Bancorp | ||
Inc. | 126,566 | 106 | |
StellarOne Corp. | 7,107 | 105 | |
Southside Bancshares Inc. | 4,556 | 104 | |
SY Bancorp Inc. | 4,184 | 104 | |
Washington Trust Bancorp | |||
Inc. | 4,277 | 98 | |
Cardinal Financial Corp. | 8,767 | 98 | |
Bancfirst Corp. | 2,319 | 97 | |
First Busey Corp. | 19,073 | 97 | |
Hudson Valley Holding Corp. | 4,527 | 97 | |
Univest Corp. | |||
of Pennsylvania | 5,060 | 91 | |
1st Source Corp. | 4,571 | 89 | |
Arrow Financial Corp. | 3,419 | 86 | |
* | Southwest Bancorp Inc. | 5,999 | 85 |
Northfield Bancorp Inc. | 6,237 | 84 | |
Sterling Bancorp | 7,778 | 78 | |
Camden National Corp. | 2,273 | 76 | |
First Bancorp | 4,810 | 71 | |
First Merchants Corp. | 7,974 | 71 | |
Lakeland Bancorp Inc. | 7,179 | 69 | |
CoBiz Financial Inc. | 10,558 | 69 | |
First Interstate Bancsystem | |||
Inc. | 4,768 | 68 | |
Trico Bancshares | 4,129 | 67 | |
Union First Market | |||
Bankshares Corp. | 5,626 | 65 | |
Suffolk Bancorp | 3,130 | 64 | |
First Community Bancshares | |||
Inc. | 5,000 | 62 | |
Heartland Financial USA Inc. | 3,592 | 61 | |
MainSource Financial Group | |||
Inc. | 6,071 | 60 | |
Citizens & Northern Corp. | 3,809 | 60 | |
Great Southern Bancorp Inc. | 2,629 | 56 | |
Republic Bancorp Inc. | |||
Class A | 3,273 | 56 | |
Wilshire Bancorp Inc. | 6,025 | 40 | |
Capital City Bank Group Inc. | 3,155 | 40 | |
* | United Community Banks | ||
Inc. | 28,463 | 39 | |
Ames National Corp. | 1,993 | 38 | |
140,603 | |||
Consumer Finance (3.9%) | |||
American Express Co. | 341,511 | 14,879 | |
Capital One Financial Corp. | 144,060 | 7,170 | |
Discover Financial Services | 171,548 | 3,731 | |
* | SLM Corp. | 153,203 | 2,270 |
* | Ezcorp Inc. Class A | 13,920 | 399 |
Cash America International | |||
Inc. | 9,316 | 398 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | World Acceptance Corp. | 4,961 | 297 |
* | First Cash Financial Services | ||
Inc. | 8,057 | 264 | |
* | Dollar Financial Corp. | 11,664 | 249 |
Nelnet Inc. Class A | 9,618 | 215 | |
* | Credit Acceptance Corp. | 3,016 | 213 |
Advance America Cash | |||
Advance Centers Inc. | 13,513 | 73 | |
* | First Marblehead Corp. | 21,740 | 51 |
* | CompuCredit Holdings Corp. | 3,298 | 22 |
* | Student Loan Corp. Escrow | 1,231 | 3 |
30,234 | |||
Diversified Financial Services (21.8%) | |||
JPMorgan Chase & Co. | 1,232,942 | 57,566 | |
Bank of America Corp. | 3,180,977 | 45,456 | |
* | Citigroup Inc. | 9,162,803 | 42,882 |
CME Group Inc. | 21,194 | 6,597 | |
NYSE Euronext | 82,316 | 3,046 | |
* | IntercontinentalExchange | ||
Inc. | 19,518 | 2,502 | |
Leucadia National Corp. | 61,377 | 2,033 | |
Moody’s Corp. | 62,811 | 2,004 | |
* | MSCI Inc. Class A | 35,537 | 1,262 |
* | NASDAQ OMX Group Inc. | 40,469 | 1,158 |
* | Portfolio Recovery | ||
Associates Inc. | 5,367 | 447 | |
* | PHH Corp. | 17,539 | 433 |
Compass Diversified | |||
Holdings | 12,305 | 199 | |
* | Pico Holdings Inc. | 6,383 | 190 |
Interactive Brokers Group | |||
Inc. | 11,884 | 184 | |
MarketAxess Holdings Inc. | 8,566 | 183 | |
CBOE Holdings Inc. | 4,092 | 121 | |
* | NewStar Financial Inc. | 9,793 | 104 |
* | Asset Acceptance Capital | ||
Corp. | 5,179 | 30 | |
Life Partners Holdings Inc. | 3,099 | 26 | |
166,423 | |||
Insurance (21.7%) | |||
* | Berkshire Hathaway Inc. | ||
Class B | 278,233 | 24,284 | |
MetLife Inc. | 295,078 | 13,975 | |
Prudential Financial Inc. | 152,497 | 10,039 | |
Aflac Inc. | 148,428 | 8,736 | |
Travelers Cos. Inc. | 145,208 | 8,702 | |
ACE Ltd. | 106,855 | 6,759 | |
Chubb Corp. | 96,133 | 5,833 | |
Marsh & McLennan Cos. | |||
Inc. | 171,070 | 5,207 | |
Allstate Corp. | 161,197 | 5,123 | |
AON Corp. | 93,455 | 4,919 | |
Loews Corp. | 104,953 | 4,539 | |
Progressive Corp. | 198,779 | 4,141 | |
Hartford Financial Services | |||
Group Inc. | 133,113 | 3,940 | |
Principal Financial Group | |||
Inc. | 100,987 | 3,460 | |
Lincoln National Corp. | 99,855 | 3,167 | |
Unum Group | 100,028 | 2,654 | |
XL Group plc Class A | 101,906 | 2,380 | |
Willis Group Holdings plc | 53,703 | 2,089 | |
* | Genworth Financial Inc. | ||
Class A | 154,336 | 2,042 | |
PartnerRe Ltd. | 22,248 | 1,764 | |
Torchmark Corp. | 25,493 | 1,663 | |
Cincinnati Financial Corp. | 48,732 | 1,659 | |
Everest Re Group Ltd. | 17,297 | 1,533 |
Market | |||
Value• | |||
Shares | ($000) | ||
Reinsurance Group | |||
of America Inc. Class A | 23,079 | 1,394 | |
* | Arch Capital Group Ltd. | 15,369 | 1,391 |
Assurant Inc. | 33,632 | 1,366 | |
Axis Capital Holdings Ltd. | 37,059 | 1,346 | |
American International | |||
Group Inc. | 33,841 | 1,254 | |
WR Berkley Corp. | 41,135 | 1,232 | |
* | Markel Corp. | 2,925 | 1,216 |
RenaissanceRe Holdings | |||
Ltd. | 17,301 | 1,160 | |
HCC Insurance Holdings | |||
Inc. | 36,312 | 1,131 | |
Arthur J Gallagher & Co. | 33,192 | 1,042 | |
Transatlantic Holdings Inc. | 20,135 | 1,025 | |
Brown & Brown Inc. | 38,141 | 997 | |
Old Republic International | |||
Corp. | 77,504 | 969 | |
Fidelity National Financial Inc. | |||
Class A | 68,368 | 947 | |
White Mountains Insurance | |||
Group Ltd. | 2,401 | 912 | |
American Financial Group | |||
Inc. | 23,954 | 830 | |
Protective Life Corp. | 26,974 | 767 | |
Assured Guaranty Ltd. | 49,280 | 716 | |
Aspen Insurance Holdings | |||
Ltd. | 24,181 | 715 | |
* | Allied World Assurance Co. | ||
Holdings Ltd. | 11,241 | 694 | |
Endurance Specialty | |||
Holdings Ltd. | 13,762 | 682 | |
StanCorp Financial Group Inc. | 14,709 | 677 | |
Erie Indemnity Co. Class A | 9,563 | 668 | |
* | Alleghany Corp. | 1,949 | 664 |
Hanover Insurance Group Inc. 14,209 | 660 | ||
Alterra Capital Holdings Ltd. | 30,030 | 650 | |
* | ProAssurance Corp. | 9,519 | 603 |
Validus Holdings Ltd. | 19,167 | 593 | |
* | MBIA Inc. | 50,782 | 569 |
* | CNO Financial Group Inc. | 75,600 | 547 |
Platinum Underwriters | |||
Holdings Ltd. | 12,341 | 515 | |
Delphi Financial Group Inc. | 15,290 | 473 | |
First American Financial Corp. | 29,507 | 465 | |
Unitrin Inc. | 15,703 | 460 | |
Montpelier Re Holdings Ltd. | 20,970 | 423 | |
Argo Group International | |||
Holdings Ltd. | 9,806 | 374 | |
Symetra Financial Corp. | 25,966 | 371 | |
Mercury General Corp. | 8,597 | 354 | |
Tower Group Inc. | 13,012 | 354 | |
Selective Insurance Group | |||
Inc. | 16,798 | 305 | |
RLI Corp. | 5,306 | 305 | |
* | Greenlight Capital Re Ltd. | ||
Class A | 9,474 | 274 | |
Employers Holdings Inc. | 12,954 | 261 | |
* | Navigators Group Inc. | 4,704 | 247 |
Infinity Property & Casualty | |||
Corp. | 4,043 | 245 | |
American National Insurance | |||
Co. | 2,947 | 239 | |
Primerica Inc. | 9,099 | 234 | |
American Equity Investment | |||
Life Holding Co. | 17,514 | 231 | |
Horace Mann Educators | |||
Corp. | 12,362 | 210 | |
* | Enstar Group Ltd. | 2,366 | 198 |
36
Financials Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Safety Insurance Group Inc. | 4,065 | 196 | |
* | National Financial Partners | ||
Corp. | 13,351 | 189 | |
Flagstone Reinsurance | |||
Holdings SA | 14,830 | 169 | |
Amtrust Financial Services | |||
Inc. | 8,544 | 164 | |
Meadowbrook Insurance | |||
Group Inc. | 16,092 | 163 | |
FBL Financial Group Inc. | |||
Class A | 4,770 | 149 | |
United Fire & Casualty Co. | 6,970 | 144 | |
* | CNA Surety Corp. | 5,621 | 142 |
Harleysville Group Inc. | 3,776 | 138 | |
Maiden Holdings Ltd. | 16,835 | 135 | |
National Western Life | |||
Insurance Co. Class A | 759 | 133 | |
* | Hilltop Holdings Inc. | 13,528 | 131 |
* | AMERISAFE Inc. | 6,015 | 120 |
* | FPIC Insurance Group Inc. | 2,920 | 110 |
* | Global Indemnity plc | 4,687 | 105 |
* | Citizens Inc. | 13,962 | 104 |
OneBeacon Insurance | |||
Group Ltd. Class A | 7,380 | 101 | |
* | Phoenix Cos. Inc. | 36,214 | 96 |
* | eHealth Inc. | 7,101 | 89 |
State Auto Financial Corp. | 5,047 | 87 | |
SeaBright Holdings Inc. | 6,987 | 74 | |
Presidential Life Corp. | 6,828 | 68 | |
Stewart Information | |||
Services Corp. | 5,333 | 59 | |
Baldwin & Lyons Inc. | 2,434 | 59 | |
Kansas City Life Insurance | |||
Co. | 1,513 | 52 | |
National Interstate Corp. | 2,105 | 44 | |
EMC Insurance Group Inc. | 1,752 | 43 | |
Donegal Group Inc. Class A | 3,189 | 41 | |
Universal Insurance | |||
Holdings Inc. | 6,046 | 35 | |
165,703 | |||
Real Estate Investment Trusts (16.7%) | |||
Simon Property Group Inc. | 92,335 | 10,161 | |
Public Storage | 45,605 | 5,119 | |
Equity Residential | 89,383 | 4,926 | |
Vornado Realty Trust | 51,695 | 4,825 | |
Annaly Capital | |||
Management Inc. | 250,181 | 4,486 | |
HCP Inc. | 115,052 | 4,372 | |
Boston Properties Inc. | 44,250 | 4,244 | |
Weyerhaeuser Co. | 169,048 | 4,126 | |
Host Hotels & Resorts Inc. | 210,061 | 3,865 | |
AvalonBay Communities Inc. | 26,879 | 3,253 | |
ProLogis | 179,481 | 2,918 | |
Ventas Inc. | 49,581 | 2,748 | |
Kimco Realty Corp. | 127,942 | 2,480 | |
Health Care REIT Inc. | 45,674 | 2,385 | |
General Growth Properties | |||
Inc. | 136,336 | 2,170 | |
Plum Creek Timber Co. Inc. | 50,983 | 2,139 | |
Macerich Co. | 41,076 | 2,080 | |
AMB Property Corp. | 53,047 | 1,930 | |
SL Green Realty Corp. | 24,665 | 1,868 | |
Nationwide Health | |||
Properties Inc. | 39,898 | 1,705 | |
Digital Realty Trust Inc. | 28,573 | 1,681 | |
Federal Realty Investment | |||
Trust | 19,338 | 1,628 | |
Rayonier Inc. | 25,311 | 1,552 |
Market | |||
Value• | |||
Shares | ($000) | ||
Alexandria Real Estate | |||
Equities Inc. | 17,535 | 1,406 | |
UDR Inc. | 57,541 | 1,399 | |
Chimera Investment Corp. | 318,081 | 1,371 | |
Realty Income Corp. | 36,892 | 1,327 | |
Camden Property Trust | 21,725 | 1,285 | |
Essex Property Trust Inc. | 9,981 | 1,235 | |
Liberty Property Trust | 35,859 | 1,211 | |
Regency Centers Corp. | 25,845 | 1,170 | |
Duke Realty Corp. | 79,293 | 1,116 | |
Senior Housing Properties | |||
Trust | 44,168 | 1,084 | |
Developers Diversified | |||
Realty Corp. | 68,728 | 983 | |
BRE Properties Inc. | 20,226 | 961 | |
Taubman Centers Inc. | 17,235 | 956 | |
Apartment Investment | |||
& Management Co. | 36,922 | 947 | |
Weingarten Realty Investors | 36,033 | 932 | |
Mack-Cali Realty Corp. | 27,176 | 922 | |
Hospitality Properties Trust | 38,939 | 896 | |
American Capital Agency | |||
Corp. | 27,796 | 819 | |
Piedmont Office Realty | |||
Trust Inc. Class A | 40,074 | 802 | |
Highwoods Properties Inc. | 22,538 | 765 | |
MFA Financial Inc. | 88,587 | 750 | |
Omega Healthcare | |||
Investors Inc. | 31,122 | 746 | |
Corporate Office Properties | |||
Trust | 20,710 | 743 | |
CBL & Associates Properties | |||
Inc. | 41,537 | 741 | |
BioMed Realty Trust Inc. | 40,520 | 735 | |
Entertainment Properties | |||
Trust | 14,722 | 702 | |
Mid-America Apartment | |||
Communities Inc. | 10,795 | 701 | |
Home Properties Inc. | 11,811 | 696 | |
American Campus | |||
Communities Inc. | 20,529 | 686 | |
Tanger Factory Outlet | |||
Centers | 25,638 | 683 | |
National Retail Properties | |||
Inc. | 26,273 | 675 | |
Douglas Emmett Inc. | 35,013 | 657 | |
CommonWealth REIT | 22,838 | 656 | |
LaSalle Hotel Properties | 23,108 | 652 | |
Kilroy Realty Corp. | 16,440 | 637 | |
Washington Real Estate | |||
Investment Trust | 19,814 | 619 | |
* | DiamondRock Hospitality Co. | 52,377 | 616 |
Post Properties Inc. | 15,284 | 596 | |
Equity Lifestyle Properties | |||
Inc. | 9,209 | 535 | |
Hatteras Financial Corp. | 17,665 | 523 | |
Extra Space Storage Inc. | 26,257 | 519 | |
Brandywine Realty Trust | 41,793 | 514 | |
Starwood Property Trust Inc. | 21,647 | 506 | |
Potlatch Corp. | 12,622 | 485 | |
Healthcare Realty Trust Inc. | 20,134 | 469 | |
Colonial Properties Trust | 23,330 | 460 | |
DuPont Fabros Technology | |||
Inc. | 18,600 | 454 | |
DCT Industrial Trust Inc. | 76,482 | 430 | |
Medical Properties Trust Inc. | 35,072 | 411 | |
* | Sunstone Hotel Investors Inc. | 37,463 | 402 |
Lexington Realty Trust | 41,157 | 390 | |
PS Business Parks Inc. | 6,176 | 389 |
Market | |||
Value• | |||
Shares | ($000) | ||
EastGroup Properties Inc. | 8,484 | 386 | |
Redwood Trust Inc. | 23,497 | 385 | |
National Health Investors Inc. | 7,808 | 371 | |
Invesco Mortgage Capital Inc. | 15,355 | 358 | |
Franklin Street Properties | |||
Corp. | 22,485 | 338 | |
Sovran Self Storage Inc. | 8,665 | 336 | |
Cypress Sharpridge | |||
Investments Inc. | 25,139 | 313 | |
* | Strategic Hotels & Resorts | ||
Inc. | 48,072 | 312 | |
Equity One Inc. | 16,225 | 311 | |
Hersha Hospitality Trust | |||
Class A | 46,806 | 308 | |
* | iStar Financial Inc. | 29,230 | 292 |
Capstead Mortgage Corp. | 22,166 | 291 | |
Alexander’s Inc. | 733 | 290 | |
Glimcher Realty Trust | 30,869 | 284 | |
U-Store-It Trust | 26,427 | 271 | |
Anworth Mortgage Asset | |||
Corp. | 37,413 | 267 | |
Pebblebrook Hotel Trust | 12,029 | 264 | |
Government Properties | |||
Income Trust | 9,205 | 250 | |
Acadia Realty Trust | 12,569 | 249 | |
Cousins Properties Inc. | 29,240 | 248 | |
Getty Realty Corp. | 8,340 | 245 | |
First Potomac Realty Trust | 15,199 | 245 | |
Pennsylvania Real Estate | |||
Investment Trust | 16,562 | 239 | |
* | FelCor Lodging Trust Inc. | 30,495 | 231 |
Inland Real Estate Corp. | 24,167 | 228 | |
Investors Real Estate Trust | 24,247 | 226 | |
LTC Properties Inc. | 7,250 | 212 | |
Associated Estates Realty | |||
Corp. | 12,790 | 208 | |
* | First Industrial Realty Trust | ||
Inc. | 18,254 | 205 | |
Saul Centers Inc. | 4,376 | 201 | |
Sun Communities Inc. | 5,560 | 192 | |
Education Realty Trust Inc. | 22,239 | 184 | |
Walter Investment | |||
Management Corp. | 8,243 | 162 | |
PennyMac Mortgage | |||
Investment Trust | 8,337 | 157 | |
Ramco-Gershenson | |||
Properties Trust | 11,319 | 153 | |
* | Ashford Hospitality Trust Inc. | 14,666 | 151 |
Universal Health Realty | |||
Income Trust | 3,662 | 146 | |
NorthStar Realty Finance | |||
Corp. | 24,240 | 145 | |
Retail Opportunity | |||
Investments Corp. | 13,073 | 144 | |
* | Sabra Healthcare REIT Inc. | 7,350 | 135 |
Two Harbors Investment | |||
Corp. | 12,250 | 135 | |
Urstadt Biddle Properties Inc. | |||
Class A | 6,490 | 126 | |
Kite Realty Group Trust | 20,155 | 114 | |
Cedar Shopping Centers Inc. | 18,552 | 112 | |
Parkway Properties Inc. | 6,856 | 111 | |
Chesapeake Lodging Trust | 5,539 | 103 | |
Colony Financial Inc. | 4,663 | 99 | |
CapLease Inc. | 18,267 | 98 | |
Winthrop Realty Trust | 7,654 | 93 | |
Hudson Pacific Properties Inc. | 4,962 | 75 | |
CreXus Investment Corp. | 4,297 | 57 | |
128,082 |
37
Financials Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Real Estate Management & Development (0.8%) | |||
* | CB Richard Ellis Group Inc. | ||
Class A | 91,316 | 2,287 | |
Jones Lang LaSalle Inc. | 13,425 | 1,321 | |
* | St. Joe Co. | 29,321 | 785 |
* | Forest City Enterprises Inc. | ||
Class A | 38,574 | 729 | |
* | Forestar Group Inc. | 10,792 | 208 |
* | Altisource Portfolio Solutions | ||
SA | 5,511 | 166 | |
* | Tejon Ranch Co. | 4,339 | 114 |
* | Kennedy-Wilson Holdings Inc. | 7,231 | 80 |
* | Avatar Holdings Inc. | 2,695 | 57 |
Consolidated-Tomoka Land | |||
Co. | 1,659 | 57 | |
5,804 | |||
Thrifts & Mortgage Finance (1.7%) | |||
New York Community | |||
Bancorp Inc. | 130,480 | 2,435 | |
Hudson City Bancorp Inc. | 149,480 | 1,719 | |
People’s United Financial | |||
Inc. | 117,025 | 1,542 | |
First Niagara Financial Group | |||
Inc. | 65,917 | 955 | |
Capitol Federal Financial Inc. | 52,819 | 668 | |
Washington Federal Inc. | 35,575 | 632 | |
* | MGIC Investment Corp. | 57,160 | 491 |
NewAlliance Bancshares Inc. | 29,961 | 469 | |
Northwest Bancshares Inc. | 35,103 | 426 | |
Astoria Financial Corp. | 27,898 | 391 | |
TFS Financial Corp. | 29,247 | 304 | |
Radian Group Inc. | 42,087 | 297 | |
Provident Financial Services | |||
Inc. | 17,121 | 254 | |
* | Ocwen Financial Corp. | 23,591 | 250 |
Oritani Financial Corp. | 17,586 | 226 | |
Brookline Bancorp Inc. | 18,580 | 193 | |
Trustco Bank Corp. NY | 24,599 | 148 | |
* | PMI Group Inc. | 47,948 | 142 |
Dime Community | |||
Bancshares Inc. | 9,112 | 141 |
Market | |||
Value• | |||
Shares | ($000) | ||
ViewPoint Financial Group | 10,616 | 141 | |
Flushing Financial Corp. | 9,521 | 136 | |
Provident New York Bancorp | 10,853 | 103 | |
Berkshire Hills Bancorp Inc. | 4,532 | 102 | |
WSFS Financial Corp. | 2,085 | 98 | |
* | Beneficial Mutual Bancorp | ||
Inc. | 10,549 | 95 | |
* | Flagstar Bancorp Inc. | 51,091 | 89 |
Territorial Bancorp Inc. | 3,892 | 77 | |
Westfield Financial Inc. | 8,477 | 77 | |
United Financial Bancorp Inc. | 4,554 | 71 | |
Abington Bancorp Inc. | 5,311 | 66 | |
Bank Mutual Corp. | 13,893 | 64 | |
First Financial Holdings Inc. | 5,406 | 58 | |
Home Federal Bancorp Inc. | 4,846 | 54 | |
BankFinancial Corp. | 5,721 | 50 | |
* | Doral Financial Corp. | 34,311 | 45 |
* | Meridian Interstate Bancorp | ||
Inc. | 3,428 | 45 | |
ESSA Bancorp Inc. | 3,385 | 44 | |
Rockville Financial Inc. | 2,644 | 43 | |
Roma Financial Corp. | 2,582 | 27 | |
13,168 | |||
Total Common Stocks | |||
(Cost $862,440) | 765,516 | ||
Temporary Cash Investment (0.1%) | |||
Money Market Fund (0.1%) | |||
1 | Vanguard Market | ||
Liquidity Fund, 0.213% | |||
(Cost $703) | 702,809 | 703 | |
Total Investments (100.2%) | |||
(Cost $863,143) | 766,219 | ||
Other Assets and Liabilities (–0.2%) | |||
Other Assets | 3,027 | ||
Liabilities | (4,921) | ||
(1,894) | |||
Net Assets (100%) | 764,325 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 1,096,688 |
Overdistributed Net Investment Income | (723) |
Accumulated Net Realized Losses | (234,716) |
Unrealized Appreciation (Depreciation) | (96,924) |
Net Assets | 764,325 |
Admiral Shares—Net Assets | |
Applicable to 4,837,424 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 83,964 |
Net Asset Value Per Share— | |
Admiral Shares | $17.36 |
ETF Shares—Net Assets | |
Applicable to 19,643,974 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 680,361 |
Net Asset Value Per Share— | |
ETF Shares | $34.63 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.
38
Financials Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 4,900 |
Interest1 | 1 |
Security Lending | 2 |
Total Income | 4,903 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 45 |
Management and Administrative— | |
Admiral Shares | 74 |
Management and Administrative— | |
ETF Shares | 505 |
Marketing and Distribution— | |
Admiral Shares | 8 |
Marketing and Distribution— | |
ETF Shares | 85 |
Custodian Fees | 20 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 21 |
Total Expenses | 758 |
Net Investment Income | 4,145 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | (9,445) |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 143,270 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 137,970 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 4,145 | 8,182 |
Realized Net Gain (Loss) | (9,445) | (35,200) |
Change in Unrealized Appreciation (Depreciation) | 143,270 | 1,899 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 137,970 | (25,119) |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (702) | (1,074) |
ETF Shares | (5,169) | (8,041) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (5,871) | (9,115) |
Capital Share Transactions | ||
Admiral Shares | 3,420 | (5,323) |
ETF Shares | 99,540 | (84,711) |
Net Increase (Decrease) from Capital Share Transactions | 102,960 | (90,034) |
Total Increase (Decrease) | 235,059 | (124,268) |
Net Assets | ||
Beginning of Period | 529,266 | 653,534 |
End of Period2 | 764,325 | 529,266 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($723,000) and $1,003,000.
See accompanying Notes, which are an integral part of the Financial Statements.
39
Financials Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $13.99 | $14.72 | $20.38 | $30.10 | $29.86 | $26.36 |
Investment Operations | ||||||
Net Investment Income | .106 | .209 | .389 | .7001 | .7701 | .7161 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | 3.415 | (.715) | (5.596) | (9.699) | .145 | 3.392 |
Total from Investment Operations | 3.521 | (.506) | (5.207) | (8.999) | .915 | 4.108 |
Distributions | ||||||
Dividends from Net Investment Income | (.151) | (.224) | (.453) | (.721) | (.675) | (.608) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.151) | (.224) | (.453) | (.721) | (.675) | (.608) |
Net Asset Value, End of Period | $17.36 | $13.99 | $14.72 | $20.38 | $30.10 | $29.86 |
Total Return3 | 25.29% | –3.52% | –25.35% | –30.36% | 2.95% | 15.76% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $84 | $65 | $74 | $81 | $19 | $8 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.26% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.51% | 1.36% | 2.97% | 3.06% | 2.37% | 2.49% |
Portfolio Turnover Rate4 | 12% | 11% | 17% | 10% | 12% | 6% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Includes increases from redemption fees of $.00, $.00, $.01, $.00, $.00, and $.01.
3 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
40
Financials Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $27.92 | $29.38 | $40.66 | $60.04 | $59.57 | $52.57 |
Investment Operations | ||||||
Net Investment Income | .213 | .417 | .784 | 1.4491 | 1.5571 | 1.4301 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | 6.795 | (1.425) | (11.150) | (19.368) | .282 | 6.800 |
Total from Investment Operations | 7.008 | (1.008) | (10.366) | (17.919) | 1.839 | 8.230 |
Distributions | ||||||
Dividends from Net Investment Income | (.298) | (.452) | (.914) | (1.461) | (1.369) | (1.230) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.298) | (.452) | (.914) | (1.461) | (1.369) | (1.230) |
Net Asset Value, End of Period | $34.63 | $27.92 | $29.38 | $40.66 | $60.04 | $59.57 |
Total Return | 25.20% | –3.51% | –25.31% | –30.30% | 2.97% | 15.82% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $680 | $464 | $580 | $651 | $282 | $125 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.51% | 1.36% | 3.00% | 3.11% | 2.41% | 2.52% |
Portfolio Turnover Rate3 | 12% | 11% | 17% | 10% | 12% | 6% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Includes increases from redemption fees of $.00, $.01, $.02, $.01, $.01, and $.01.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
41
Financials Index Fund
Notes to Financial Statements
Vanguard Financials Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. 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 redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $124,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
42
Financials 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 February 28, 2011, the fund realized $5,177,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $159,472,000 to offset future net capital gains of $85,000 through August 31, 2014, $11,000 through August 31, 2015, $1,313,000 through August 31, 2016, $28,618,000 through August 31, 2017, and $129,445,000 through August 31, 2018. In addition, the fund realized losses of $59,815,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $863,143,000. Net unrealized depreciation of investment securities for tax purposes was $96,924,000, consisting of unrealized gains of $39,775,000 on securities that had risen in value since their purchase and $136,699,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $165,543,000 of investment securities and sold $66,873,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 16,737 | 1,033 | 15,750 | 1,024 |
Issued in Lieu of Cash Distributions | 630 | 40 | 972 | 65 |
Redeemed1 | (13,947) | (869) | (22,045) | (1,476) |
Net Increase (Decrease)—Admiral Shares | 3,420 | 204 | (5,323) | (387) |
ETF Shares | ||||
Issued | 128,491 | 3,908 | 100,712 | 3,207 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (28,951) | (900) | (185,423) | (6,300) |
Net Increase (Decrease)—ETF Shares | 99,540 | 3,008 | (84,711) | (3,093) |
1 Net of redemption fees for fiscal 2011 and 2010 of $32,000 and $144,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
43
Health Care Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 292 | 291 | 2,474 |
Median Market Cap | $26.7B | $26.7B | $32.2B |
Price/Earnings Ratio | 18.5x | 18.5x | 17.7x |
Price/Book Ratio | 2.6x | 2.6x | 2.3x |
Yield3 | 1.8% | 1.7% | |
Admiral Shares | 1.6% | ||
ETF Shares | 1.6% | ||
Return on Equity | 18.6% | 18.6% | 19.1% |
Earnings Growth Rate | 7.9% | 8.0% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 9% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.1% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.69 |
Beta | 1.00 | 0.68 |
Subindustry Diversification | |
(% of equity exposure) | |
Biotechnology | 13.6% |
Health Care Distributors | 3.7 |
Health Care Equipment | 17.4 |
Health Care Facilities | 1.8 |
Health Care Services | 6.5 |
Health Care Supplies | 1.3 |
Health Care Technology | 1.0 |
Life Sciences Tools & Services | 5.7 |
Managed Health Care | 8.0 |
Pharmaceuticals | 41.0 |
Ten Largest Holdings8 (% of total net assets) | |
Johnson & Johnson | 10.4% |
Pfizer Inc. | 9.5 |
Merck & Co. Inc. | 6.2 |
Abbott Laboratories | 4.6 |
Amgen Inc. | 3.0 |
UnitedHealth Group Inc. | 2.9 |
Bristol-Myers Squibb Co. | 2.7 |
Medtronic Inc. | 2.7 |
Eli Lilly & Co. | 2.2 |
Gilead Sciences Inc. | 2.0 |
Top Ten | 46.2% |
1 MSCI US IMI/Health Care 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Health Care 25/50: MSCI US IMI/Health Care through February 26, 2010; MSCI US IMI/Health Care 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
44
Health Care 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 (%): January 26, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x47x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 1/26/2004 | |||
Market Price | 5.80% | 2.56% | 2.97% | |
Net Asset Value | 5.75 | 2.56 | 2.96 | |
Admiral Shares3 | 2/5/2004 | 5.75 | 2.53 | 2.93 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Health Care 25/50: MSCI US IMI/Health Care through February 26, 2010; MSCI US IMI/Health Care 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
45
Health Care Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
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 (99.9%) | |||
Biotechnology (13.6%) | |||
* | Amgen Inc. | 427,228 | 21,930 |
* | Gilead Sciences Inc. | 367,049 | 14,308 |
* | Celgene Corp. | 212,916 | 11,306 |
* | Genzyme Corp. | 117,173 | 8,841 |
* | Biogen Idec Inc. | 107,734 | 7,369 |
* | Vertex Pharmaceuticals Inc. | 91,409 | 4,266 |
* | Alexion Pharmaceuticals Inc. | 40,540 | 3,903 |
* | Dendreon Corp. | 64,798 | 2,177 |
* | Human Genome Sciences | ||
Inc. | 84,633 | 2,118 | |
* | Cephalon Inc. | 33,851 | 1,906 |
* | United Therapeutics Corp. | 24,076 | 1,624 |
* | BioMarin Pharmaceutical Inc. | 45,751 | 1,119 |
* | Regeneron Pharmaceuticals | ||
Inc. | 28,906 | 1,048 | |
* | Onyx Pharmaceuticals Inc. | 28,320 | 998 |
* | Amylin Pharmaceuticals Inc. | 64,798 | 991 |
* | InterMune Inc. | 22,755 | 833 |
* | Pharmasset Inc. | 16,536 | 827 |
* | Myriad Genetics Inc. | 42,300 | 783 |
* | Incyte Corp. Ltd. | 54,969 | 752 |
* | Cepheid Inc. | 26,871 | 712 |
* | Talecris Biotherapeutics | ||
Holdings Corp. | 27,830 | 694 | |
* | Seattle Genetics Inc. | 42,435 | 630 |
* | Theravance Inc. | 27,562 | 628 |
* | Alkermes Inc. | 42,836 | 614 |
* | Exelixis Inc. | 48,783 | 607 |
* | Cubist Pharmaceuticals Inc. | 26,444 | 580 |
* | Isis Pharmaceuticals Inc. | 42,362 | 386 |
* | Acorda Therapeutics Inc. | 17,443 | 366 |
* | Ariad Pharmaceuticals Inc. | 56,464 | 339 |
PDL BioPharma Inc. | 53,926 | 299 | |
* | Targacept Inc. | 10,432 | 299 |
* | Savient Pharmaceuticals Inc. | 30,380 | 293 |
* | Immunogen Inc. | 30,115 | 271 |
* | Geron Corp. | 54,272 | 269 |
* | Clinical Data Inc. | 8,827 | 268 |
* | Momenta Pharmaceuticals | ||
Inc. | 19,043 | 264 | |
* | Medivation Inc. | 14,608 | 252 |
* | Halozyme Therapeutics Inc. | 36,187 | 250 |
* | Celera Corp. | 37,169 | 236 |
* | Enzon Pharmaceuticals Inc. | 21,895 | 234 |
* | NPS Pharmaceuticals Inc. | 29,640 | 229 |
* | Ironwood Pharmaceuticals | ||
Inc. | 18,356 | 225 | |
* | Opko Health Inc. | 46,025 | 222 |
* | SIGA Technologies Inc. | 16,551 | 222 |
* | Micromet Inc. | 32,905 | 205 |
* | Emergent Biosolutions Inc. | 9,476 | 199 |
* | Alnylam Pharmaceuticals Inc. | 16,041 | 176 |
* | AMAG Pharmaceuticals Inc. | 9,374 | 173 |
* | Genomic Health Inc. | 6,552 | 165 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Rigel Pharmaceuticals Inc. | 23,212 | 162 |
* | Sangamo Biosciences Inc. | 18,010 | 149 |
* | Lexicon Pharmaceuticals Inc. | 76,747 | 149 |
* | Arqule Inc. | 22,079 | 141 |
* | Protalix BioTherapeutics Inc. | 19,947 | 141 |
* | MannKind Corp. | 35,873 | 134 |
* | Allos Therapeutics Inc. | 35,585 | 119 |
* | Metabolix Inc. | 11,508 | 105 |
* | Codexis Inc. | 8,579 | 92 |
* | Cell Therapeutics Inc. | 325,914 | 91 |
* | PROLOR Biotech Inc. | 15,378 | 88 |
* | Ligand Pharmaceuticals Inc. | ||
Class B | 7,835 | 85 | |
* | Progenics Pharmaceuticals | ||
Inc. | 14,939 | 84 | |
* | Nabi Biopharmaceuticals | 14,614 | 83 |
* | Arena Pharmaceuticals Inc. | 50,881 | 82 |
* | Dyax Corp. | 41,809 | 72 |
* | Biotime Inc. | 10,249 | 71 |
^,* | China Biologic Products Inc. | 4,163 | 70 |
* | Idenix Pharmaceuticals Inc. | 16,381 | 55 |
* | Biospecifics Technologies | ||
Corp. | 1,988 | 54 | |
* | Orexigen Therapeutics Inc. | 15,664 | 51 |
* | Osiris Therapeutics Inc. | 7,235 | 48 |
99,532 | |||
Health Care Equipment & Supplies (18.7%) | |||
Medtronic Inc. | 487,808 | 19,473 | |
Baxter International Inc. | 263,250 | 13,992 | |
Covidien plc | 223,879 | 11,519 | |
Stryker Corp. | 134,107 | 8,484 | |
Becton Dickinson and Co. | 103,899 | 8,312 | |
* | St. Jude Medical Inc. | 155,064 | 7,424 |
* | Intuitive Surgical Inc. | 17,727 | 5,814 |
* | Zimmer Holdings Inc. | 89,219 | 5,562 |
* | Boston Scientific Corp. | 683,324 | 4,893 |
* | Edwards Lifesciences Corp. | 51,730 | 4,399 |
CR Bard Inc. | 42,208 | 4,126 | |
* | Varian Medical Systems Inc. | 53,712 | 3,721 |
* | CareFusion Corp. | 99,985 | 2,732 |
Beckman Coulter Inc. | 31,256 | 2,598 | |
* | Hologic Inc. | 116,542 | 2,352 |
DENTSPLY International Inc. | 61,042 | 2,281 | |
* | ResMed Inc. | 68,050 | 2,150 |
* | IDEXX Laboratories Inc. | 25,995 | 2,020 |
* | Kinetic Concepts Inc. | 29,143 | 1,427 |
* | Alere Inc. | 36,144 | 1,397 |
* | Gen-Probe Inc. | 21,937 | 1,379 |
Cooper Cos. Inc. | 20,939 | 1,294 | |
Hill-Rom Holdings Inc. | 28,549 | 1,087 | |
Teleflex Inc. | 17,949 | 1,048 | |
* | Sirona Dental Systems Inc. | 18,674 | 942 |
STERIS Corp. | 26,700 | 904 | |
* | American Medical Systems | ||
Holdings Inc. | 34,074 | 747 | |
Masimo Corp. | 23,847 | 719 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Thoratec Corp. | 25,008 | 697 |
* | Haemonetics Corp. | 11,185 | 690 |
West Pharmaceutical | |||
Services Inc. | 14,986 | 616 | |
* | Immucor Inc. | 31,456 | 612 |
* | Volcano Corp. | 20,404 | 535 |
* | Align Technology Inc. | 25,581 | 533 |
* | Integra LifeSciences | ||
Holdings Corp. | 9,816 | 492 | |
* | NuVasive Inc. | 17,670 | 472 |
* | Zoll Medical Corp. | 9,710 | 449 |
* | Cyberonics Inc. | 12,613 | 417 |
* | Arthrocare Corp. | 12,021 | 415 |
* | DexCom Inc. | 27,455 | 402 |
Invacare Corp. | 13,234 | 391 | |
Meridian Bioscience Inc. | 18,066 | 390 | |
* | Neogen Corp. | 9,719 | 363 |
* | HeartWare International Inc. | 4,282 | 360 |
* | Insulet Corp. | 19,345 | 342 |
* | CONMED Corp. | 12,800 | 339 |
Analogic Corp. | 5,826 | 316 | |
* | Wright Medical Group Inc. | 17,523 | 277 |
* | Abaxis Inc. | 10,018 | 266 |
* | Greatbatch Inc. | 10,403 | 259 |
* | Orthofix International NV | 8,007 | 253 |
* | NxStage Medical Inc. | 12,028 | 248 |
* | MAKO Surgical Corp. | 11,640 | 240 |
* | ICU Medical Inc. | 5,424 | 228 |
* | Accuray Inc. | 22,327 | 221 |
* | SonoSite Inc. | 6,146 | 221 |
* | Merit Medical Systems Inc. | 12,209 | 209 |
* | Natus Medical Inc. | 12,732 | 202 |
* | Angiodynamics Inc. | 11,167 | 188 |
* | Conceptus Inc. | 13,324 | 187 |
* | ABIOMED Inc. | 14,209 | 177 |
* | Quidel Corp. | 13,130 | 173 |
* | Symmetry Medical Inc. | 15,985 | 144 |
Cantel Medical Corp. | 6,521 | 142 | |
* | OraSure Technologies Inc. | 20,423 | 142 |
Atrion Corp. | 765 | 135 | |
* | Palomar Medical | ||
Technologies Inc. | 7,925 | 127 | |
* | Unilife Corp. | 23,891 | 113 |
* | Kensey Nash Corp. | 4,001 | 105 |
* | Synovis Life Technologies | ||
Inc. | 5,072 | 100 | |
* | SurModics Inc. | 7,018 | 92 |
* | IRIS International Inc. | 8,302 | 84 |
* | Stereotaxis Inc. | 21,000 | 83 |
* | Orthovita Inc. | 30,731 | 73 |
* | Exactech Inc. | 3,775 | 72 |
* | TomoTherapy Inc. | 19,166 | 68 |
* | RTI Biologics Inc. | 24,301 | 65 |
* | CryoLife Inc. | 12,005 | 65 |
* | Alimera Sciences Inc. | 3,604 | 29 |
* | MELA Sciences Inc. | 10,808 | 28 |
136,643 |
46
Health Care Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Health Care Providers & Services (19.9%) | |||
UnitedHealth Group Inc. | 497,347 | 21,177 | |
* | Express Scripts Inc. | 226,009 | 12,706 |
* | WellPoint Inc. | 177,943 | 11,828 |
* | Medco Health Solutions Inc. | 191,864 | 11,826 |
McKesson Corp. | 114,386 | 9,069 | |
Aetna Inc. | 180,913 | 6,759 | |
Cardinal Health Inc. | 158,253 | 6,590 | |
CIGNA Corp. | 122,501 | 5,154 | |
* | Humana Inc. | 76,149 | 4,950 |
AmerisourceBergen Corp. | |||
Class A | 125,680 | 4,765 | |
* | Laboratory Corp. | ||
of America Holdings | 46,347 | 4,177 | |
Quest Diagnostics Inc. | 73,000 | 4,143 | |
* | DaVita Inc. | 43,861 | 3,481 |
* | Henry Schein Inc. | 41,228 | 2,844 |
* | Coventry Health Care Inc. | 66,770 | 2,016 |
Universal Health Services | �� | ||
Inc. Class B | 40,402 | 1,847 | |
* | Community Health | ||
Systems Inc. | 42,553 | 1,739 | |
* | Tenet Healthcare Corp. | 218,621 | 1,570 |
Omnicare Inc. | 53,255 | 1,525 | |
Patterson Cos. Inc. | 41,898 | 1,399 | |
* | Mednax Inc. | 21,387 | 1,389 |
* | AMERIGROUP Corp. | 22,928 | 1,315 |
Lincare Holdings Inc. | 44,228 | 1,298 | |
* | Health Net Inc. | 43,892 | 1,291 |
* | Brookdale Senior Living Inc. | ||
Class A | 46,162 | 1,241 | |
* | Health Management | ||
Associates Inc. Class A | 112,956 | 1,130 | |
* | Healthsouth Corp. | 42,068 | 1,018 |
* | LifePoint Hospitals Inc. | 24,451 | 953 |
* | HMS Holdings Corp. | 12,252 | 926 |
* | VCA Antech Inc. | 36,811 | 922 |
Owens & Minor Inc. | 28,360 | 885 | |
* | Emergency Medical | ||
Services Corp. Class A | 13,680 | 864 | |
* | Healthspring Inc. | 21,955 | 826 |
* | Catalyst Health Solutions Inc. | 17,099 | 773 |
* | Magellan Health Services Inc. | 15,019 | 721 |
* | WellCare Health Plans Inc. | 19,107 | 717 |
* | Centene Corp. | 23,272 | 709 |
Chemed Corp. | 10,340 | 677 | |
* | PSS World Medical Inc. | 25,453 | 662 |
* | Amedisys Inc. | 12,924 | 464 |
* | Kindred Healthcare Inc. | 17,762 | 443 |
* | RehabCare Group Inc. | 11,235 | 417 |
* | MWI Veterinary Supply Inc. | 5,283 | 366 |
* | Gentiva Health Services Inc. | 12,719 | 359 |
* | Hanger Orthopedic Group | ||
Inc. | 13,262 | 357 | |
* | Amsurg Corp. Class A | 13,713 | 324 |
Universal American Corp. | 15,343 | 316 | |
* | Emeritus Corp. | 12,809 | 301 |
* | IPC The Hospitalist Co. Inc. | 7,315 | 298 |
* | Air Methods Corp. | 5,095 | 296 |
Landauer Inc. | 4,214 | 265 | |
* | Sunrise Senior Living Inc. | 22,508 | 256 |
* | Molina Healthcare Inc. | 6,707 | 235 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Bio-Reference Labs Inc. | 11,174 | 234 |
* | Healthways Inc. | 15,462 | 216 |
* | LHC Group Inc. | 7,218 | 216 |
* | Accretive Health Inc. | 10,422 | 212 |
* | Select Medical Holdings | ||
Corp. | 25,184 | 196 | |
* | Triple-S Management Corp. | ||
Class B | 9,280 | 183 | |
National Healthcare Corp. | 3,400 | 162 | |
* | PharMerica Corp. | 13,695 | 161 |
* | Corvel Corp. | 3,229 | 160 |
Ensign Group Inc. | 5,172 | 157 | |
* | Sun Healthcare Group Inc. | 10,580 | 156 |
* | Assisted Living Concepts Inc. | ||
Class A | 4,294 | 154 | |
* | Almost Family Inc. | 3,747 | 146 |
* | Team Health Holdings Inc. | 7,366 | 136 |
* | Skilled Healthcare Group Inc. | 9,069 | 124 |
* | AMN Healthcare Services | ||
Inc. | 14,571 | 109 | |
* | Medcath Corp. | 7,542 | 107 |
* | Cross Country Healthcare | ||
Inc. | 12,427 | 103 | |
* | Alliance HealthCare | ||
Services Inc. | 12,879 | 53 | |
145,564 | |||
Health Care Technology (1.0%) | |||
* | Cerner Corp. | 31,590 | 3,173 |
* | Allscripts Healthcare | ||
Solutions Inc. | 80,100 | 1,710 | |
Quality Systems Inc. | 9,155 | 731 | |
* | athenahealth Inc. | 14,686 | 666 |
* | MedAssets Inc. | 19,322 | 274 |
Computer Programs | |||
& Systems Inc. | 4,482 | 242 | |
* | Emdeon Inc. Class A | 14,306 | 225 |
* | Medidata Solutions Inc. | 7,910 | 205 |
* | Omnicell Inc. | 14,653 | 197 |
* | Vital Images Inc. | 6,225 | 93 |
7,516 | |||
Life Sciences Tools & Services (5.7%) | |||
* | Thermo Fisher Scientific | ||
Inc. | 179,688 | 10,030 | |
* | Agilent Technologies Inc. | 156,814 | 6,599 |
* | Life Technologies Corp. | 84,500 | 4,510 |
* | Illumina Inc. | 55,985 | 3,885 |
* | Waters Corp. | 41,421 | 3,440 |
* | Mettler-Toledo International | ||
Inc. | 14,751 | 2,528 | |
* | Covance Inc. | 29,254 | 1,651 |
PerkinElmer Inc. | 52,918 | 1,402 | |
Pharmaceutical Product | |||
Development Inc. | 50,869 | 1,397 | |
Techne Corp. | 15,808 | 1,133 | |
* | Bio-Rad Laboratories Inc. | ||
Class A | 8,617 | 984 | |
* | Dionex Corp. | 7,861 | 926 |
* | Charles River Laboratories | ||
International Inc. | 22,163 | 808 | |
* | Parexel International Corp. | 26,381 | 619 |
* | Bruker Corp. | 29,729 | 571 |
* | Luminex Corp. | 17,085 | 322 |
Market | ||||
Value• | ||||
Shares | ($000) | |||
* | Sequenom Inc. | 40,831 | 251 | |
* | Affymetrix Inc. | 31,866 | 156 | |
* | eResearchTechnology Inc. | 21,990 | 140 | |
* | Enzo Biochem Inc. | 15,257 | 66 | |
* | Albany Molecular Research | |||
Inc. | 9,820 | 44 | ||
41,462 | ||||
Pharmaceuticals (41.0%) | ||||
Johnson & Johnson | 1,242,014 | 76,309 | ||
Pfizer Inc. | 3,620,578 | 69,660 | ||
Merck & Co. Inc. | 1,393,323 | 45,381 | ||
Abbott Laboratories | 699,151 | 33,629 | ||
Bristol-Myers Squibb Co. | 772,396 | 19,936 | ||
Eli Lilly & Co. | 469,375 | 16,222 | ||
Allergan Inc. | 138,575 | 10,278 | ||
* | Mylan Inc. | 196,836 | 4,502 | |
* | Forest Laboratories Inc. | 128,627 | 4,167 | |
* | Hospira Inc. | 75,443 | 3,987 | |
* | Watson Pharmaceuticals | |||
Inc. | 59,728 | 3,344 | ||
Perrigo Co. | 37,176 | 2,841 | ||
* | Endo Pharmaceuticals | |||
Holdings Inc. | 51,888 | 1,843 | ||
Warner Chilcott plc Class A | 51,178 | 1,212 | ||
* | Salix Pharmaceuticals Ltd. | 26,051 | 869 | |
Medicis Pharmaceutical | ||||
Corp. Class A | 27,063 | 868 | ||
* | Viropharma Inc. | 35,088 | 629 | |
* | Impax Laboratories Inc. | 24,378 | 502 | |
* | Par Pharmaceutical Cos. | |||
Inc. | 15,895 | 491 | ||
* | Nektar Therapeutics | 50,660 | 486 | |
* | Auxilium Pharmaceuticals | |||
Inc. | 21,330 | 479 | ||
* | Medicines Co. | 24,025 | 418 | |
* | Questcor Pharmaceuticals | |||
Inc. | 26,640 | 345 | ||
* | Ardea Biosciences Inc. | 10,527 | 279 | |
* | Vivus Inc. | 36,255 | 276 | |
* | MAP Pharmaceuticals Inc. | 8,782 | 142 | |
* | Akorn Inc. | 25,019 | 140 | |
* | BioMimetic Therapeutics | |||
Inc. | 9,538 | 129 | ||
* | Cadence Pharmaceuticals | |||
Inc. | 16,916 | 127 | ||
* | Inspire Pharmaceuticals Inc. | 28,238 | 113 | |
* | Durect Corp. | 34,853 | 113 | |
Pain Therapeutics Inc. | 16,323 | 112 | ||
* | XenoPort Inc. | 14,098 | 102 | |
* | Obagi Medical Products Inc. | 8,404 | 96 | |
* | Pozen Inc. | 10,612 | 55 | |
* | Caraco Pharmaceutical | |||
Laboratories Ltd. | 5,062 | 26 | ||
* | Sucampo Pharmaceuticals | |||
Inc. Class A | 3,685 | 16 | ||
* | King Pharmaceuticals Inc. | 700 | 10 | |
300,134 | ||||
Total Common Stocks | ||||
(Cost $732,266) | 730,851 |
47
Health Care Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Temporary Cash Investment (0.1%) | ||
Money Market Fund (0.1%) | ||
1,2 Vanguard Market | ||
Liquidity Fund, 0.213% | ||
(Cost $586) | 585,726 | 586 |
Total Investments (100.0%) | ||
(Cost $732,852) | 731,437 | |
Other Assets and Liabilities (0.0%) | ||
Other Assets | 5,840 | |
Liabilities2 | (5,568) | |
272 | ||
Net Assets (100%) | 731,709 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 779,267 |
Undistributed Net Investment Income | 1,100 |
Accumulated Net Realized Losses | (47,243) |
Unrealized Appreciation (Depreciation) | (1,415) |
Net Assets | 731,709 |
Admiral Shares—Net Assets | |
Applicable to 2,316,668 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 67,993 |
Net Asset Value Per Share— | |
Admiral Shares | $29.35 |
ETF Shares—Net Assets | |
Applicable to 11,314,919 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 663,716 |
Net Asset Value Per Share— | |
ETF Shares | $58.66 |
• See Note A in Notes to Financial Statements.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $34,000.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $36,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
48
Health Care Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 6,811 |
Interest1 | 1 |
Security Lending | 15 |
Total Income | 6,827 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 50 |
Management and Administrative— | |
Admiral Shares | 62 |
Management and Administrative— | |
ETF Shares | 561 |
Marketing and Distribution— | |
Admiral Shares | 6 |
Marketing and Distribution— | |
ETF Shares | 92 |
Custodian Fees | 8 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 27 |
Total Expenses | 806 |
Net Investment Income | 6,021 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 2,438 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 112,724 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 121,183 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 6,021 | 18,873 |
Realized Net Gain (Loss) | 2,438 | (11,505) |
Change in Unrealized Appreciation (Depreciation) | 112,724 | 5,094 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 121,183 | 12,462 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (1,048) | (3,211) |
ETF Shares | (10,588) | (16,212) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (11,636) | (19,423) |
Capital Share Transactions | ||
Admiral Shares | 4,540 | (60,866) |
ETF Shares | 6,356 | 14,020 |
Net Increase (Decrease) from Capital Share Transactions | 10,896 | (46,846) |
Total Increase (Decrease) | 120,443 | (53,807) |
Net Assets | ||
Beginning of Period | 611,266 | 665,073 |
End of Period2 | 731,709 | 611,266 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed net investment income of $1,100,000 and $6,715,000.
See accompanying Notes, which are an integral part of the Financial Statements.
49
Health Care Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $24.87 | $25.19 | $28.68 | $29.82 | $27.99 | $26.92 |
Investment Operations | ||||||
Net Investment Income | .262 | .7291 | .398 | .345 | .392 | .3042 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 4.699 | (.312) | (3.524) | (1.090) | 1.736 | .951 |
Total from Investment Operations | 4.961 | .417 | (3.126) | (.745) | 2.128 | 1.255 |
Distributions | ||||||
Dividends from Net Investment Income | (.481) | (.737) | (.364) | (.395) | (.298) | (.185) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.481) | (.737) | (.364) | (.395) | (.298) | (.185) |
Net Asset Value, End of Period | $29.35 | $24.87 | $25.19 | $28.68 | $29.82 | $27.99 |
Total Return3 | 20.02% | 1.41% | –10.74% | –2.59% | 7.65% | 4.68% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $68 | $54 | $111 | $136 | $132 | $108 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.26% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.78% | 2.74%1 | 1.75% | 1.36% | 1.42% | 1.12% |
Portfolio Turnover Rate4 | 9% | 10% | 6% | 8% | 10% | 11% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Net investment income per share and the ratio of net investment income to average net assets include $.30 and 1.17%, respectively, resulting from a cash payment received in connection with the merger of Schering-Plough Corp. and Merck & Co., Inc., in November 2009.
2 Calculated based on average shares outstanding.
3 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
50
Health Care Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $49.72 | $50.37 | $57.36 | $59.65 | $55.99 | $53.85 |
Investment Operations | ||||||
Net Investment Income | .519 | 1.4831 | .809 | .720 | .809 | .6222 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 9.400 | (.646) | (7.045) | (2.190) | 3.466 | 1.905 |
Total from Investment Operations | 9.919 | .837 | (6.236) | (1.470) | 4.275 | 2.527 |
Distributions | ||||||
Dividends from Net Investment Income | (.979) | (1.487) | (.754) | (.820) | (.615) | (.387) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.979) | (1.487) | (.754) | (.820) | (.615) | (.387) |
Net Asset Value, End of Period | $58.66 | $49.72 | $50.37 | $57.36 | $59.65 | $55.99 |
Total Return | 20.02% | 1.40% | –10.70% | –2.55% | 7.69% | 4.71% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $664 | $558 | $554 | $614 | $477 | $364 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.78% | 2.74%1 | 1.78% | 1.41% | 1.46% | 1.15% |
Portfolio Turnover Rate3 | 9% | 10% | 6% | 8% | 10% | 11% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Net investment income per share and the ratio of net investment income to average net assets include $.62 and 1.17%, respectively, resulting from a cash payment received in connection with the merger of Schering-Plough Corp. and Merck & Co., Inc., in November 2009.
2 Calculated based on average shares outstanding.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
51
Health Care Index Fund
Notes to Financial Statements
Vanguard Health Care Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. 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 redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $117,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
52
Health Care 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 February 28, 2011, the fund realized $4,825,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $20,852,000 to offset future net capital gains of $207,000 through August 31, 2014, $343,000 through August 31, 2015, $3,126,000 through August 31, 2016, $7,261,000 through August 31, 2017, and $9,915,000 through August 31, 2018. In addition, the fund realized losses of $23,043,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $732,852,000. Net unrealized depreciation of investment securities for tax purposes was $1,415,000, consisting of unrealized gains of $72,952,000 on securities that had risen in value since their purchase and $74,367,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $65,733,000 of investment securities and sold $59,783,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 10,753 | 380 | 13,125 | 486 |
Issued in Lieu of Cash Distributions | 911 | 32 | 1,377 | 51 |
Redeemed1 | (7,124) | (254) | (75,368) | (2,777) |
Net Increase (Decrease)—Admiral Shares | 4,540 | 158 | (60,866) | (2,240) |
ETF Shares | ||||
Issued | 34,528 | 600 | 92,508 | 1,712 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (28,172) | (500) | (78,488) | (1,500) |
Net Increase (Decrease)—ETF Shares | 6,356 | 100 | 14,020 | 212 |
1 Net of redemption fees for fiscal 2011 and 2010 of $16,000 and $22,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
53
Industrials Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 367 | 367 | 2,474 |
Median Market Cap | $27.2B | $27.2B | $32.2B |
Price/Earnings Ratio | 19.3x | 19.3x | 17.7x |
Price/Book Ratio | 2.8x | 2.8x | 2.3x |
Yield3 | 1.7% | 1.7% | |
Admiral Shares | 1.4% | ||
ETF Shares | 1.4% | ||
Return on Equity | 19.6% | 19.6% | 19.1% |
Earnings Growth Rate | 1.6% | 1.7% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 5% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.0% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.94 |
Beta | 1.00 | 1.27 |
Subindustry Diversification | |
(% of equity exposure) | |
Aerospace & Defense | 20.3% |
Air Freight & Logistics | 6.4 |
Airlines | 2.1 |
Building Products | 1.2 |
Construction & Engineering | 3.1 |
Construction & Farm Machinery | |
& Heavy Trucks | 11.3 |
Diversified Support Services | 1.0 |
Electrical Components & Equipment | 6.9 |
Environmental & Facilities Services | 2.8 |
Human Resource & Employment Services | 1.0 |
Industrial Conglomerates | 18.7 |
Industrial Machinery | 11.4 |
Office Services & Supplies | 1.1 |
Railroads | 6.2 |
Research & Consulting Services | 1.7 |
Trading Companies & Distributors | 2.0 |
Trucking | 1.4 |
Other Industrials | 1.4 |
Ten Largest Holdings8 (% of total net assets) | |
General Electric Co. | 13.0% |
United Technologies Corp. | 4.3 |
Caterpillar Inc. | 3.9 |
3M Co. | 3.7 |
United Parcel Service Inc. Class B | 3.2 |
Boeing Co. | 2.9 |
Union Pacific Corp. | 2.7 |
Emerson Electric Co. | 2.6 |
Honeywell International Inc. | 2.5 |
Deere & Co. | 2.2 |
Top Ten | 41.0% |
1 MSCI US IMI/Industrials 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Industrials 25/50: MSCI US IMI/Industrials through February 26, 2010; MSCI US IMI/Industrials 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
54
Industrials 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 (%): September 23, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x57x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 9/23/2004 | |||
Market Price | 27.22% | 4.07% | 6.17% | |
Net Asset Value | 27.09 | 4.05 | 6.15 | |
Admiral Shares3 | 5/8/2006 | 27.12 | — | 1.11 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Industrials 25/50: MSCI US IMI/Industrials through February 26, 2010; MSCI US IMI/Industrials 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
55
Industrials Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (100.2%) | |||
Aerospace & Defense (20.3%) | |||
United Technologies Corp. | 294,414 | 24,595 | |
Boeing Co. | 234,994 | 16,922 | |
Honeywell International Inc. | 251,691 | 14,575 | |
General Dynamics Corp. | 107,745 | 8,201 | |
Lockheed Martin Corp. | 102,720 | 8,131 | |
Precision Castparts Corp. | 48,092 | 6,817 | |
Raytheon Co. | 122,358 | 6,266 | |
Northrop Grumman Corp. | 93,084 | 6,207 | |
Goodrich Corp. | 42,078 | 3,628 | |
Rockwell Collins Inc. | 52,633 | 3,392 | |
ITT Corp. | 58,538 | 3,391 | |
L-3 Communications | |||
Holdings Inc. | 37,983 | 3,012 | |
* | TransDigm Group Inc. | 15,766 | 1,267 |
* | BE Aerospace Inc. | 32,551 | 1,098 |
* | Spirit Aerosystems | ||
Holdings Inc. Class A | 35,959 | 935 | |
Alliant Techsystems Inc. | 11,177 | 807 | |
* | Esterline Technologies Corp. | 10,095 | 722 |
* | Teledyne Technologies Inc. | 12,183 | 638 |
* | Hexcel Corp. | 32,641 | 605 |
* | Moog Inc. Class A | 13,119 | 596 |
Curtiss-Wright Corp. | 15,426 | 569 | |
Triumph Group Inc. | 6,481 | 561 | |
* | DigitalGlobe Inc. | 11,518 | 372 |
* | AAR Corp. | 13,228 | 361 |
* | Orbital Sciences Corp. | 19,369 | 345 |
* | GeoEye Inc. | 7,422 | 331 |
* | Ceradyne Inc. | 8,093 | 309 |
American Science | |||
& Engineering Inc. | 3,032 | 285 | |
* | Ladish Co. Inc. | 4,987 | 270 |
Cubic Corp. | 5,352 | 269 | |
HEICO Corp. Class A | 5,954 | 233 | |
National Presto Industries | |||
Inc. | 1,613 | 204 | |
HEICO Corp. | 2,849 | 158 | |
* | Aerovironment Inc. | 5,133 | 149 |
* | GenCorp Inc. | 16,516 | 86 |
* | Taser International Inc. | 20,059 | 76 |
Ducommun Inc. | 3,300 | 74 | |
116,457 | |||
Air Freight & Logistics (6.4%) | |||
United Parcel Service Inc. | |||
Class B | 246,448 | 18,188 | |
FedEx Corp. | 100,553 | 9,052 | |
CH Robinson Worldwide Inc. | 55,890 | 4,046 | |
Expeditors International | |||
of Washington Inc. | 71,270 | 3,407 | |
UTi Worldwide Inc. | 34,162 | 680 | |
* | Atlas Air Worldwide | ||
Holdings Inc. | 8,689 | 593 | |
* | HUB Group Inc. Class A | 12,391 | 433 |
Forward Air Corp. | 9,740 | 288 | |
* | Pacer International Inc. | 11,531 | 63 |
36,750 |
Market | |||
Value• | |||
Shares | ($000) | ||
Airlines (2.1%) | |||
* | Delta Air Lines Inc. | 264,773 | 2,976 |
Southwest Airlines Co. | 250,736 | 2,966 | |
* | United Continental | ||
Holdings Inc. | 106,971 | 2,572 | |
* | AMR Corp. | 111,856 | 754 |
* | Alaska Air Group Inc. | 12,502 | 743 |
* | JetBlue Airways Corp. | 83,568 | 476 |
* | US Airways Group Inc. | 54,026 | 465 |
* | AirTran Holdings Inc. | 43,108 | 315 |
Skywest Inc. | 18,824 | 311 | |
Allegiant Travel Co. Class A | 4,608 | 190 | |
* | Hawaiian Holdings Inc. | 17,331 | 115 |
* | Republic Airways Holdings | ||
Inc. | 14,826 | 94 | |
11,977 | |||
Building Products (1.2%) | |||
Masco Corp. | 120,788 | 1,641 | |
* | Owens Corning | 37,658 | 1,346 |
Lennox International Inc. | 15,245 | 739 | |
AO Smith Corp. | 12,816 | 518 | |
* | USG Corp. | 24,448 | 419 |
Simpson Manufacturing Co. | |||
Inc. | 13,244 | 383 | |
Armstrong World Industries | |||
Inc. | 6,773 | 282 | |
* | Griffon Corp. | 19,805 | 239 |
Quanex Building Products | |||
Corp. | 12,564 | 237 | |
Ameron International Corp. | 2,935 | 207 | |
Universal Forest Products | |||
Inc. | 5,802 | 198 | |
* | Trex Co. Inc. | 4,362 | 131 |
Apogee Enterprises Inc. | 9,405 | 129 | |
AAON Inc. | 4,127 | 127 | |
* | Gibraltar Industries Inc. | 9,036 | 98 |
American Woodmark Corp. | 3,076 | 61 | |
6,755 | |||
Commercial Services & Supplies (5.7%) | |||
Waste Management Inc. | 151,861 | 5,628 | |
Republic Services Inc. | |||
Class A | 129,651 | 3,839 | |
* | Stericycle Inc. | 27,270 | 2,357 |
Pitney Bowes Inc. | 68,247 | 1,718 | |
Iron Mountain Inc. | 60,740 | 1,579 | |
Avery Dennison Corp. | 33,110 | 1,322 | |
RR Donnelley & Sons Co. | 69,238 | 1,289 | |
Cintas Corp. | 43,905 | 1,235 | |
Waste Connections Inc. | 36,899 | 1,070 | |
* | Corrections Corp. of America | 36,983 | 919 |
* | Copart Inc. | 19,944 | 838 |
Covanta Holding Corp. | 44,285 | 749 | |
* | Clean Harbors Inc. | 7,941 | 730 |
* | Geo Group Inc. | 21,640 | 550 |
* | United Stationers Inc. | 7,829 | 528 |
Herman Miller Inc. | 18,177 | 490 | |
* | Tetra Tech Inc. | 20,681 | 486 |
Brink’s Co. | 15,704 | 485 |
Market | |||
Value• | |||
Shares | ($000) | ||
HNI Corp. | 15,052 | 477 | |
Deluxe Corp. | 17,226 | 440 | |
Rollins Inc. | 22,323 | 438 | |
Mine Safety Appliances Co. | 11,546 | 417 | |
ABM Industries Inc. | 14,820 | 395 | |
Healthcare Services | |||
Group Inc. | 20,934 | 372 | |
Knoll Inc. | 15,697 | 324 | |
Unifirst Corp. | 4,976 | 281 | |
* | Mobile Mini Inc. | 12,228 | 278 |
Interface Inc. Class A | 16,235 | 271 | |
Steelcase Inc. Class A | 27,202 | 264 | |
* | SYKES Enterprises Inc. | 13,539 | 252 |
McGrath Rentcorp | 7,601 | 209 | |
G&K Services Inc. Class A | 6,272 | 203 | |
* | Consolidated Graphics Inc. | 3,667 | 200 |
* | Higher One Holdings Inc. | 9,309 | 175 |
EnergySolutions Inc. | 25,198 | 167 | |
Viad Corp. | 6,879 | 158 | |
* | ACCO Brands Corp. | 18,340 | 157 |
* | Team Inc. | 6,047 | 157 |
Ennis Inc. | 8,672 | 141 | |
* | KAR Auction Services Inc. | 9,037 | 127 |
* | EnerNOC Inc. | 5,777 | 111 |
* | American Reprographics Co. | 12,192 | 108 |
* | Cenveo Inc. | 18,615 | 104 |
US Ecology Inc. | 5,877 | 99 | |
* | M&F Worldwide Corp. | 3,886 | 96 |
Schawk Inc. Class A | 5,081 | 92 | |
* | Standard Parking Corp. | 4,765 | 86 |
* | Metalico Inc. | 13,059 | 83 |
* | Innerworkings Inc. | 9,167 | 75 |
Kimball International Inc. | |||
Class B | 8,516 | 61 | |
* | APAC Customer Services Inc. | 8,856 | 52 |
Courier Corp. | 3,403 | 48 | |
* | Fuel Tech Inc. | 5,595 | 42 |
32,772 | |||
Construction & Engineering (3.1%) | |||
Fluor Corp. | 60,006 | 4,246 | |
* | Jacobs Engineering Group | ||
Inc. | 42,322 | 2,119 | |
KBR Inc. | 50,675 | 1,662 | |
* | Quanta Services Inc. | 70,872 | 1,617 |
* | Foster Wheeler AG | 41,362 | 1,496 |
* | URS Corp. | 27,768 | 1,292 |
* | Shaw Group Inc. | 28,515 | 1,133 |
* | Aecom Technology Corp. | 32,200 | 922 |
* | EMCOR Group Inc. | 22,240 | 709 |
* | Insituform Technologies Inc. | ||
Class A | 13,130 | 339 | |
Granite Construction Inc. | 11,701 | 333 | |
* | MasTec Inc. | 15,326 | 285 |
Tutor Perini Corp. | 10,222 | 243 | |
* | Layne Christensen Co. | 6,557 | 219 |
* | Dycom Industries Inc. | 11,802 | 204 |
Comfort Systems USA Inc. | 12,757 | 169 | |
* | MYR Group Inc. | 6,686 | 151 |
56
Industrials Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Great Lakes Dredge | |||
& Dock Corp. | 18,685 | 147 | |
* | Orion Marine Group Inc. | 9,080 | 112 |
* | Furmanite Corp. | 12,920 | 94 |
* | Michael Baker Corp. | 2,792 | 88 |
* | Northwest Pipe Co. | 3,062 | 73 |
* | Sterling Construction Co. Inc. | 5,152 | 67 |
* | Pike Electric Corp. | 6,073 | 59 |
17,779 | |||
Electrical Equipment (7.2%) | |||
Emerson Electric Co. | 253,233 | 15,108 | |
Rockwell Automation Inc. | 47,587 | 4,175 | |
Cooper Industries plc | 54,609 | 3,514 | |
Roper Industries Inc. | 32,000 | 2,692 | |
AMETEK Inc. | 53,716 | 2,253 | |
* | Babcock & Wilcox Co. | 39,174 | 1,323 |
Hubbell Inc. Class B | 17,740 | 1,198 | |
* | Sensata Technologies | ||
Holding NV | 29,269 | 969 | |
* | Thomas & Betts Corp. | 17,483 | 968 |
Regal-Beloit Corp. | 12,955 | 945 | |
Acuity Brands Inc. | 14,595 | 825 | |
* | GrafTech International Ltd. | 40,632 | 813 |
* | General Cable Corp. | 17,470 | 758 |
Woodward Inc. | 19,662 | 647 | |
* | EnerSys | 16,744 | 594 |
Brady Corp. Class A | 16,396 | 586 | |
Belden Inc. | 15,754 | 577 | |
* | Polypore International Inc. | 9,714 | 568 |
* | II-VI Inc. | 8,835 | 452 |
* | American Superconductor | ||
Corp. | 16,141 | 428 | |
Franklin Electric Co. Inc. | 6,631 | 282 | |
* | A123 Systems Inc. | 22,864 | 217 |
AZZ Inc. | 4,188 | 179 | |
* | Generac Holdings Inc. | 9,013 | 165 |
Encore Wire Corp. | 6,212 | 146 | |
* | Harbin Electric Inc. | 6,772 | 128 |
* | Capstone Turbine Corp. | 81,940 | 125 |
Vicor Corp. | 7,058 | 107 | |
* | Powell Industries Inc. | 2,718 | 102 |
* | Ener1 Inc. | 27,257 | 101 |
* | Fushi Copperweld Inc. | 8,750 | 85 |
* | Advanced Battery | ||
Technologies Inc. | 20,598 | 80 | |
* | Lihua International Inc. | 5,395 | 58 |
Preformed Line Products | |||
Co. | 781 | 55 | |
* | Valence Technology Inc. | 24,268 | 37 |
* | Broadwind Energy Inc. | 17,557 | 28 |
41,288 | |||
Industrial Conglomerates (18.7%) | |||
General Electric Co. | 3,575,874 | 74,807 | |
3M Co. | 228,958 | 21,117 | |
Tyco International Ltd. | 164,262 | 7,448 | |
Textron Inc. | 92,261 | 2,499 | |
Carlisle Cos. Inc. | 20,468 | 880 | |
Raven Industries Inc. | 5,418 | 294 | |
Seaboard Corp. | 123 | 285 | |
Tredegar Corp. | 7,973 | 156 | |
Standex International Corp. | 4,188 | 144 | |
107,630 | |||
Machinery (22.8%) | |||
Caterpillar Inc. | 214,877 | 22,117 | |
Deere & Co. | 142,563 | 12,852 | |
Danaher Corp. | 187,333 | 9,479 | |
Illinois Tool Works Inc. | 141,470 | 7,653 | |
Cummins Inc. | 63,058 | 6,376 | |
Eaton Corp. | 53,934 | 5,975 |
Market | |||
Value• | |||
Shares | ($000) | ||
PACCAR Inc. | 110,448 | 5,537 | |
Ingersoll-Rand plc | 109,373 | 4,955 | |
Parker Hannifin Corp. | 54,315 | 4,844 | |
Dover Corp. | 62,869 | 4,039 | |
Joy Global Inc. | 34,662 | 3,375 | |
Bucyrus International Inc. | |||
Class A | 25,830 | 2,352 | |
Flowserve Corp. | 18,729 | 2,340 | |
Pall Corp. | 38,654 | 2,101 | |
* | AGCO Corp. | 31,228 | 1,711 |
Donaldson Co. Inc. | 24,391 | 1,373 | |
Timken Co. | 27,699 | 1,349 | |
SPX Corp. | 16,849 | 1,344 | |
* | Navistar International Corp. | 21,658 | 1,342 |
Gardner Denver Inc. | 17,614 | 1,288 | |
* | WABCO Holdings Inc. | 21,687 | 1,267 |
* | Terex Corp. | 36,549 | 1,233 |
Pentair Inc. | 33,123 | 1,228 | |
IDEX Corp. | 27,482 | 1,133 | |
Snap-On Inc. | 19,519 | 1,121 | |
Nordson Corp. | 10,257 | 1,117 | |
* | Oshkosh Corp. | 30,447 | 1,086 |
Kennametal Inc. | 27,552 | 1,060 | |
Lincoln Electric Holdings Inc. | 14,201 | 1,014 | |
Harsco Corp. | 26,970 | 922 | |
Wabtec Corp. | 16,091 | 913 | |
Manitowoc Co. Inc. | 43,998 | 872 | |
Trinity Industries Inc. | 26,766 | 834 | |
Graco Inc. | 20,152 | 820 | |
Crane Co. | 16,766 | 792 | |
Valmont Industries Inc. | 7,056 | 720 | |
CLARCOR Inc. | 16,943 | 697 | |
Toro Co. | 10,510 | 656 | |
Actuant Corp. Class A | 22,876 | 647 | |
Robbins & Myers Inc. | 13,531 | 577 | |
* | ArvinMeritor Inc. | 29,914 | 536 |
* | Middleby Corp. | 5,900 | 529 |
Kaydon Corp. | 11,220 | 440 | |
* | Chart Industries Inc. | 9,611 | 436 |
Mueller Industries Inc. | 12,644 | 430 | |
Watts Water Technologies | |||
Inc. Class A | 10,095 | 395 | |
ESCO Technologies Inc. | 8,872 | 340 | |
Briggs & Stratton Corp. | 16,873 | 340 | |
Barnes Group Inc. | 15,645 | 333 | |
* | 3D Systems Corp. | 6,248 | 306 |
Lindsay Corp. | 4,195 | 296 | |
* | EnPro Industries Inc. | 6,912 | 274 |
Titan International Inc. | 11,230 | 270 | |
* | RBC Bearings Inc. | 7,370 | 267 |
* | Wabash National Corp. | 22,791 | 237 |
Tennant Co. | 5,740 | 233 | |
Albany International Corp. | 9,311 | 227 | |
CIRCOR International Inc. | 5,712 | 226 | |
* | Astec Industries Inc. | 6,433 | 221 |
NACCO Industries Inc. | |||
Class A | 1,695 | 211 | |
Mueller Water Products Inc. | |||
Class A | 51,990 | 211 | |
* | Blount International Inc. | 13,730 | 209 |
* | Greenbrier Cos. Inc. | 7,912 | 198 |
Badger Meter Inc. | 4,772 | 188 | |
Gorman-Rupp Co. | 5,025 | 188 | |
John Bean Technologies | |||
Corp. | 9,476 | 180 | |
* | Colfax Corp. | 8,010 | 178 |
Sun Hydraulics Corp. | 4,276 | 154 | |
Cascade Corp. | 3,124 | 153 | |
* | LB Foster Co. Class A | 3,451 | 145 |
Market | |||
Value• | |||
Shares | ($000) | ||
Federal Signal Corp. | 20,790 | 134 | |
* | Sauer-Danfoss Inc. | 4,083 | 125 |
* | Force Protection Inc. | 23,331 | 118 |
* | Trimas Corp. | 5,675 | 117 |
Dynamic Materials Corp. | 4,379 | 116 | |
FreightCar America Inc. | 4,009 | 113 | |
* | Kadant Inc. | 4,180 | 109 |
* | Columbus McKinnon Corp. | 6,026 | 104 |
Ampco-Pittsburgh Corp. | 2,878 | 76 | |
* | American Railcar Industries | ||
Inc. | 3,248 | 66 | |
Douglas Dynamics Inc. | 3,928 | 63 | |
* | Tecumseh Products Co. | ||
Class A | 4,571 | 55 | |
* | China Valves Technology Inc. | 7,332 | 45 |
* | SmartHeat Inc. | 8,109 | 37 |
* | Energy Recovery Inc. | 10,369 | 35 |
* | China Fire & Security Group | ||
Inc. | 2,737 | 16 | |
130,791 | |||
Marine (0.3%) | |||
* | Kirby Corp. | 17,142 | 949 |
Alexander & Baldwin Inc. | 13,851 | 581 | |
* | Genco Shipping | ||
& Trading Ltd. | 10,634 | 129 | |
* | Eagle Bulk Shipping Inc. | 20,912 | 86 |
Baltic Trading Ltd. | 5,594 | 53 | |
* | TBS International plc Class A | 4,524 | 17 |
1,815 | |||
Professional Services (2.7%) | |||
Manpower Inc. | 27,534 | 1,748 | |
Robert Half International Inc. | 46,971 | 1,498 | |
Equifax Inc. | 41,413 | 1,480 | |
Dun & Bradstreet Corp. | 16,760 | 1,354 | |
* | Verisk Analytics Inc. Class A | 41,710 | 1,349 |
* | IHS Inc. Class A | 14,005 | 1,172 |
Towers Watson & Co. | |||
Class A | 17,709 | 1,041 | |
* | Nielsen Holdings NV | 29,115 | 774 |
* | FTI Consulting Inc. | 15,667 | 517 |
Corporate Executive Board | |||
Co. | 11,469 | 460 | |
* | CoStar Group Inc. | 6,588 | 373 |
* | Korn/Ferry International | 15,561 | 356 |
* | Acacia Research - | ||
Acacia Technologies | 11,113 | 326 | |
Resources Connection Inc. | 15,592 | 301 | |
* | Advisory Board Co. | 5,287 | 270 |
* | SFN Group Inc. | 17,624 | 244 |
* | TrueBlue Inc. | 14,684 | 237 |
Administaff Inc. | 7,872 | 236 | |
* | Kforce Inc. | 11,285 | 202 |
* | Kelly Services Inc. Class A | 9,440 | 198 |
* | Huron Consulting Group Inc. | 7,036 | 196 |
* | Exponent Inc. | 4,667 | 184 |
Heidrick & Struggles | |||
International Inc. | 5,906 | 161 | |
* | Navigant Consulting Inc. | 16,794 | 158 |
* | ICF International Inc. | 5,803 | 132 |
* | Dolan Co. | 9,615 | 120 |
* | School Specialty Inc. | 6,309 | 97 |
* | CRA International Inc. | 3,643 | 94 |
* | CBIZ Inc. | 10,844 | 77 |
CDI Corp. | 4,438 | 66 | |
* | Mistras Group Inc. | 3,953 | 60 |
* | Hill International Inc. | 8,420 | 45 |
15,526 |
57
Industrials Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Road & Rail (7.6%) | |||
Union Pacific Corp. | 165,490 | 15,789 | |
CSX Corp. | 125,577 | 9,376 | |
Norfolk Southern Corp. | 121,948 | 7,997 | |
* | Kansas City Southern | 34,438 | 1,854 |
JB Hunt Transport Services | |||
Inc. | 31,029 | 1,291 | |
* | Hertz Global Holdings Inc. | 76,146 | 1,158 |
Ryder System Inc. | 17,569 | 840 | |
Landstar System Inc. | 16,668 | 741 | |
* | Genesee & Wyoming Inc. | ||
Class A | 13,092 | 682 | |
Con-way Inc. | 18,380 | 598 | |
* | Avis Budget Group Inc. | 34,453 | 528 |
* | Dollar Thrifty Automotive | ||
Group Inc. | 8,681 | 461 | |
* | Old Dominion Freight Line | ||
Inc. | 14,013 | 431 | |
Knight Transportation Inc. | 20,985 | 391 | |
Werner Enterprises Inc. | 15,811 | 372 | |
Heartland Express Inc. | 18,250 | 303 | |
* | Amerco Inc. | 2,299 | 222 |
Arkansas Best Corp. | 8,011 | 190 | |
* | RailAmerica Inc. | 8,295 | 124 |
Marten Transport Ltd. | 5,495 | 117 | |
* | Celadon Group Inc. | 7,088 | 104 |
* | Saia Inc. | 5,253 | 79 |
* | Roadrunner Transportation | ||
Systems Inc. | 4,012 | 57 | |
* | Patriot Transportation | ||
Holding Inc. | 1,855 | 47 | |
* | YRC Worldwide Inc. | 15,803 | 43 |
* | Universal Truckload Services | ||
Inc. | 2,208 | 36 | |
43,831 |
Market | |||
Value• | |||
Shares | ($000) | ||
Trading Companies & Distributors (2.0%) | |||
Fastenal Co. | 44,532 | 2,767 | |
WW Grainger Inc. | 19,703 | 2,625 | |
MSC Industrial Direct Co. | |||
Class A | 15,049 | 951 | |
* | WESCO International Inc. | 14,258 | 830 |
* | United Rentals Inc. | 20,259 | 628 |
Watsco Inc. | 8,454 | 546 | |
GATX Corp. | 15,501 | 538 | |
Applied Industrial | |||
Technologies Inc. | 12,817 | 411 | |
* | Beacon Roofing Supply Inc. | 15,309 | 325 |
Kaman Corp. | 8,706 | 277 | |
* | Interline Brands Inc. | 11,023 | 241 |
* | RSC Holdings Inc. | 17,254 | 235 |
Aircastle Ltd. | 18,670 | 225 | |
TAL International Group Inc. | 5,150 | 180 | |
* | Rush Enterprises Inc. Class A | 8,922 | 167 |
* | H&E Equipment Services Inc. | 9,446 | 148 |
* | Titan Machinery Inc. | 4,466 | 115 |
Houston Wire & Cable Co. | 5,592 | 75 | |
Aceto Corp. | 8,417 | 67 | |
* | Rush Enterprises Inc. Class B | 2,321 | 37 |
11,388 | |||
Transportation Infrastructure (0.1%) | |||
* | Macquarie Infrastructure | ||
Co. LLC | 14,556 | 348 | |
Total Investments (100.2%) | |||
(Cost $551,852) | 575,107 | ||
Other Assets and Liabilities (–0.2%) | |||
Other Assets | 3,389 | ||
Liabilities | (4,274) | ||
(885) | |||
Net Assets (100%) | 574,222 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 574,597 |
Undistributed Net Investment Income | 1,326 |
Accumulated Net Realized Losses | (24,956) |
Unrealized Appreciation (Depreciation) | 23,255 |
Net Assets | 574,222 |
Admiral Shares—Net Assets | |
Applicable to 447,900 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 15,857 |
Net Asset Value Per Share— | |
Admiral Shares | $35.40 |
ETF Shares—Net Assets | |
Applicable to 8,103,483 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 558,365 |
Net Asset Value Per Share— | |
ETF Shares | $68.90 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
See accompanying Notes, which are an integral part of the Financial Statements.
58
Industrials Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 4,418 |
Interest1 | 1 |
Security Lending | 3 |
Total Income | 4,422 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 28 |
Management and Administrative— | |
Admiral Shares | 11 |
Management and Administrative— | |
ETF Shares | 366 |
Marketing and Distribution— | |
Admiral Shares | — |
Marketing and Distribution— | |
ETF Shares | 56 |
Custodian Fees | 19 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 12 |
Total Expenses | 492 |
Net Investment Income | 3,930 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 1,927 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 107,155 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 113,012 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 3,930 | 5,223 |
Realized Net Gain (Loss) | 1,927 | 4,360 |
Change in Unrealized Appreciation (Depreciation) | 107,155 | 19,208 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 113,012 | 28,791 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (137) | (80) |
ETF Shares | (5,705) | (4,648) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (5,842) | (4,728) |
Capital Share Transactions | ||
Admiral Shares | 6,709 | 102 |
ETF Shares | 158,770 | 85,531 |
Net Increase (Decrease) from Capital Share Transactions | 165,479 | 85,633 |
Total Increase (Decrease) | 272,649 | 109,696 |
Net Assets | ||
Beginning of Period | 301,573 | 191,877 |
End of Period2 | 574,222 | 301,573 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed net investment income of $1,326,000 and $3,238,000.
See accompanying Notes, which are an integral part of the Financial Statements.
59
Industrials Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | May 8, | |||||
Ended | 20061 to | |||||
For a Share Outstanding | February 28, | Year Ended August 31, | Aug. 31, | |||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $26.57 | $23.85 | $34.20 | $37.94 | $30.72 | $34.10 |
Investment Operations | ||||||
Net Investment Income | .3112 | .4462 | .635 | .5762 | .5102 | .1642 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 8.958 | 2.619 | (10.428) | (3.816) | 7.090 | (3.544) |
Total from Investment Operations | 9.269 | 3.065 | (9.793) | (3.240) | 7.600 | (3.380) |
Distributions | ||||||
Dividends from Net Investment Income | (.439) | (.345) | (.557) | (.500) | (.380) | — |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.439) | (.345) | (.557) | (.500) | (.380) | — |
Net Asset Value, End of Period | $35.40 | $26.57 | $23.85 | $34.20 | $37.94 | $30.72 |
Total Return3 | 34.99% | 12.85% | –28.44% | –8.67% | 24.90% | –9.91% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $16 | $7 | $6 | $11 | $4 | $0.2 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.26% | 0.28%4 |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.91% | 1.69% | 2.71% | 1.63% | 1.46% | 1.35%4 |
Portfolio Turnover Rate5 | 5% | 10% | 8% | 7% | 13% | 9% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction 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.
60
Industrials Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $51.71 | $46.45 | $66.65 | $73.94 | $59.85 | $54.30 |
Investment Operations | ||||||
Net Investment Income | .5931 | .9101 | 1.253 | 1.1571 | 1.0261 | .8421 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 17.448 | 5.065 | (20.342) | (7.466) | 13.808 | 5.160 |
Total from Investment Operations | 18.041 | 5.975 | (19.089) | (6.309) | 14.834 | 6.002 |
Distributions | ||||||
Dividends from Net Investment Income | (.851) | (.715) | (1.111) | (.981) | (.744) | (.452) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.851) | (.715) | (1.111) | (.981) | (.744) | (.452) |
Net Asset Value, End of Period | $68.90 | $51.71 | $46.45 | $66.65 | $73.94 | $59.85 |
Total Return | 34.99% | 12.85% | –28.41% | –8.65% | 24.95% | 11.08% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $558 | $295 | $186 | $347 | $229 | $120 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.91% | 1.69% | 2.74% | 1.68% | 1.50% | 1.38% |
Portfolio Turnover Rate2 | 5% | 10% | 8% | 7% | 13% | 9% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
61
Industrials Index Fund
Notes to Financial Statements
Vanguard Industrials Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. 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 redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $84,000 to Vanguard (included in Other Assets), 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 officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
62
Industrials 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 February 28, 2011, the fund realized $2,611,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $18,693,000 to offset future net capital gains of $18,000 through August 31, 2014, $283,000 through August 31, 2015, $552,000 through August 31, 2016, $4,696,000 through August 31, 2017, and $13,144,000 through August 31, 2018. In addition, the fund realized losses of $5,174,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $551,852,000. Net unrealized appreciation of investment securities for tax purposes was $23,255,000, consisting of unrealized gains of $56,092,000 on securities that had risen in value since their purchase and $32,837,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $187,001,000 of investment securities and sold $22,338,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 7,354 | 219 | 2,823 | 97 |
Issued in Lieu of Cash Distributions | 106 | 3 | 54 | 2 |
Redeemed1 | (751) | (23) | (2,775) | (102) |
Net Increase (Decrease)—Admiral Shares | 6,709 | 199 | 102 | (3) |
ETF Shares | ||||
Issued | 171,306 | 2,600 | 187,471 | 3,602 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (12,536) | (200) | (101,940) | (1,900) |
Net Increase (Decrease)—ETF Shares | 158,770 | 2,400 | 85,531 | 1,702 |
1 Net of redemption fees for fiscal 2011 and 2010 of $2,000 and $22,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
63
Information Technology Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 419 | 418 | 2,474 |
Median Market Cap | $95.6B | $95.6B | $32.2B |
Price/Earnings Ratio | 17.4x | 17.3x | 17.7x |
Price/Book Ratio | 3.5x | 3.5x | 2.3x |
Yield3 | 0.8% | 1.7% | |
Admiral Shares | 0.6% | ||
ETF Shares | 0.6% | ||
Return on Equity | 25.7% | 25.8% | 19.1% |
Earnings Growth Rate | 18.2% | 18.1% | 5.3% |
Foreign Holdings | 0.1% | 0.0% | 0.0% |
Turnover Rate4 | 7% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.0% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.90 |
Beta | 1.00 | 1.07 |
Subindustry Diversification | |
(% of equity exposure) | |
Application Software | 5.2% |
Communications Equipment | 11.3 |
Computer Hardware | 16.5 |
Computer Storage & Peripherals | 3.9 |
Data Processing & Outsourced Services | 6.4 |
Electronic Components | 2.0 |
Electronic Manufacturing Services | 1.7 |
Internet Software & Services | 9.6 |
IT Consulting & Other Services | 10.2 |
Semiconductor Equipment | 2.4 |
Semiconductors | 13.3 |
Systems Software | 14.9 |
Other Information Technology | 2.6 |
Ten Largest Holdings8 (% of total net assets) | |
Apple Inc. | 11.7% |
Microsoft Corp. | 7.4 |
International Business Machines Corp. | 7.3 |
Google Inc. Class A | 5.5 |
Oracle Corp. | 4.8 |
Intel Corp. | 4.3 |
Cisco Systems Inc. | 3.7 |
Hewlett-Packard Co. | 3.6 |
QUALCOMM Inc. | 3.5 |
EMC Corp. | 2.0 |
Top Ten | 53.8% |
1 MSCI US IMI/Information Technology 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Information Technology 25/50: MSCI US IMI/Information Technology through February 26, 2010; MSCI US IMI/Information Technology 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
64
Information Technology 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 (%): January 26, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x67x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 1/26/2004 | |||
Market Price | 12.67% | 5.50% | 3.38% | |
Net Asset Value | 12.74 | 5.49 | 3.37 | |
Admiral Shares3 | 3/25/2004 | 12.72 | 5.46 | 5.09 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Information Technology 25/50: MSCI US IMI/Information Technology through February 26, 2010; MSCI US IMI/Information Technology 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
65
Information Technology Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | ||||
Value• | ||||
Shares | ($000) | |||
Common Stocks (100.5%) | ||||
Communications Equipment (11.4%) | ||||
* | Cisco Systems Inc. | 3,779,867 | 70,154 | |
QUALCOMM Inc. | 1,103,197 | 65,729 | ||
* | Juniper Networks Inc. | 356,830 | 15,701 | |
* | Motorola Solutions Inc. | 217,480 | 8,403 | |
* | F5 Networks Inc. | 55,149 | 6,508 | |
* | Motorola Mobility | |||
Holdings Inc. | 189,059 | 5,710 | ||
Harris Corp. | 87,309 | 4,074 | ||
* | Riverbed Technology Inc. | 95,277 | 3,934 | |
* | JDS Uniphase Corp. | 151,911 | 3,748 | |
* | Polycom Inc. | 58,097 | 2,777 | |
* | Brocade Communications | |||
Systems Inc. | 308,456 | 1,965 | ||
* | Finisar Corp. | 47,167 | 1,935 | |
* | Ciena Corp. | 63,878 | 1,761 | |
ADTRAN Inc. | 38,630 | 1,757 | ||
* | Acme Packet Inc. | 21,604 | 1,626 | |
* | Aruba Networks Inc. | 53,115 | 1,617 | |
InterDigital Inc. | 30,261 | 1,443 | ||
Tellabs Inc. | 245,227 | 1,322 | ||
Plantronics Inc. | 32,538 | 1,135 | ||
* | Arris Group Inc. | 84,749 | 1,119 | |
* | Viasat Inc. | 25,245 | 1,050 | |
* | Blue Coat Systems Inc. | 29,520 | 831 | |
* | Netgear Inc. | 24,496 | 804 | |
* | EchoStar Corp. Class A | 22,849 | 793 | |
* | Harmonic Inc. | 76,155 | 732 | |
* | Emulex Corp. | 59,096 | 650 | |
* | Oclaro Inc. | 33,531 | 591 | |
* | Loral Space & | |||
Communications Inc. | 7,723 | 584 | ||
* | DG FastChannel Inc. | 17,287 | 572 | |
Comtech | ||||
Telecommunications Corp. | 19,151 | 518 | ||
* | Infinera Corp. | 62,363 | 500 | |
Black Box Corp. | 11,863 | 453 | ||
* | Ixia | 25,058 | 440 | |
* | Sonus Networks Inc. | 139,403 | 422 | |
* | Oplink Communications | |||
Inc. | 14,239 | 387 | ||
* | Powerwave Technologies | |||
Inc. | 90,054 | 332 | ||
* | Tekelec | 41,495 | 318 | |
* | Sycamore Networks Inc. | 13,459 | 287 | |
* | Calix Inc. | 14,738 | 262 | |
* | Aviat Networks Inc. | 40,100 | 245 | |
* | Extreme Networks | 58,692 | 230 | |
* | ShoreTel Inc. | 30,238 | 205 | |
* | EMS Technologies Inc. | 10,293 | 200 | |
* | Anaren Inc. | 9,398 | 199 | |
* | Seachange International Inc. | 19,276 | 182 | |
* | UTStarcom Inc. | 87,137 | 179 | |
* | Digi International Inc. | 15,922 | 176 | |
* | Symmetricom Inc. | 29,474 | 167 | |
* | Cogo Group Inc. | 16,843 | 136 |
Market | |||
Value• | |||
Shares | ($000) | ||
Bel Fuse Inc. Class B | 5,726 | 125 | |
* | Meru Networks Inc. | 5,387 | 115 |
* | BigBand Networks Inc. | 29,596 | 77 |
* | Mitel Networks Corp. | 8,920 | 51 |
Bel Fuse Inc. Class A | 1,184 | 29 | |
215,260 | |||
Computers & Peripherals (20.4%) | |||
* | Apple Inc. | 625,544 | 220,948 |
Hewlett-Packard Co. | 1,546,482 | 67,473 | |
* | EMC Corp. | 1,405,113 | 38,233 |
* | Dell Inc. | 1,193,661 | 18,896 |
* | NetApp Inc. | 243,541 | 12,581 |
* | SanDisk Corp. | 159,952 | 7,934 |
* | Western Digital Corp. | 156,768 | 4,794 |
* | Seagate Technology plc | 322,556 | 4,097 |
* | NCR Corp. | 108,435 | 2,071 |
* | Lexmark International Inc. | ||
Class A | 53,626 | 2,013 | |
Diebold Inc. | 44,845 | 1,577 | |
* | QLogic Corp. | 73,963 | 1,336 |
* | Synaptics Inc. | 23,377 | 690 |
* | Stratasys Inc. | 13,425 | 609 |
* | Avid Technology Inc. | 25,810 | 569 |
* | Electronics for Imaging Inc. | 31,527 | 487 |
* | STEC Inc. | 22,373 | 457 |
* | Intermec Inc. | 33,420 | 375 |
* | Quantum Corp. | 140,578 | 364 |
* | Silicon Graphics | ||
International Corp. | 19,569 | 304 | |
* | Super Micro Computer Inc. | 18,005 | 269 |
* | Imation Corp. | 21,095 | 242 |
* | Intevac Inc. | 15,295 | 195 |
* | Cray Inc. | 21,869 | 161 |
* | Novatel Wireless Inc. | 21,149 | 125 |
386,800 | |||
Electronic Equipment, Instruments | |||
& Components (5.2%) | |||
Corning Inc. | 1,065,856 | 24,579 | |
Tyco Electronics Ltd. | 302,412 | 10,899 | |
Amphenol Corp. Class A | 119,106 | 6,846 | |
* | Flextronics International | ||
Ltd. | 522,726 | 4,229 | |
* | Trimble Navigation Ltd. | 81,930 | 4,027 |
* | Avnet Inc. | 103,381 | 3,537 |
FLIR Systems Inc. | 107,893 | 3,485 | |
* | Arrow Electronics Inc. | 79,720 | 3,125 |
Jabil Circuit Inc. | 133,367 | 2,858 | |
* | Ingram Micro Inc. | 107,021 | 2,133 |
National Instruments Corp. | 60,057 | 1,870 | |
* | Dolby Laboratories Inc. | ||
Class A | 35,956 | 1,818 | |
* | Vishay Intertechnology Inc. | 102,436 | 1,788 |
* | Tech Data Corp. | 31,707 | 1,572 |
* | Itron Inc. | 27,587 | 1,564 |
Anixter International Inc. | 19,701 | 1,411 | |
Molex Inc. | 42,426 | 1,185 | |
Molex Inc. Class A | 51,140 | 1,177 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Coherent Inc. | 16,837 | 1,040 |
* | IPG Photonics Corp. | 17,570 | 1,000 |
* | Universal Display Corp. | 22,375 | 942 |
* | Plexus Corp. | 27,393 | 861 |
* | Sanmina-SCI Corp. | 54,550 | 852 |
Littelfuse Inc. | 15,191 | 803 | |
* | Benchmark Electronics Inc. | 42,164 | 795 |
* | Rofin-Sinar Technologies Inc. | 19,415 | 753 |
Cognex Corp. | 26,004 | 726 | |
* | L-1 Identity Solutions Inc. | 57,586 | 686 |
* | TTM Technologies Inc. | 37,836 | 664 |
* | Scansource Inc. | 18,049 | 659 |
* | Checkpoint Systems Inc. | 26,712 | 582 |
* | Insight Enterprises Inc. | 31,365 | 574 |
* | SYNNEX Corp. | 15,656 | 552 |
AVX Corp. | 34,548 | 551 | |
* | Brightpoint Inc. | 42,655 | 537 |
* | Power-One Inc. | 64,890 | 534 |
* | DTS Inc. | 11,630 | 527 |
MTS Systems Corp. | 10,997 | 509 | |
* | Rogers Corp. | 10,673 | 503 |
* | OSI Systems Inc. | 11,504 | 433 |
Park Electrochemical Corp. | 13,319 | 424 | |
* | Newport Corp. | 24,795 | 413 |
* | FARO Technologies Inc. | 10,430 | 372 |
* | Mercury Computer Systems | ||
Inc. | 18,975 | 360 | |
* | Maxwell Technologies Inc. | 16,205 | 294 |
Methode Electronics Inc. | 24,967 | 292 | |
* | Electro Scientific Industries | ||
Inc. | 18,985 | 289 | |
* | Kemet Corp. | 20,544 | 286 |
CTS Corp. | 23,285 | 276 | |
Daktronics Inc. | 23,672 | 271 | |
* | SMART Modular | ||
Technologies WWH Inc. | 32,029 | 222 | |
* | China Security & Surveillance | ||
Technology Inc. | 46,902 | 218 | |
* | Fabrinet | 6,850 | 200 |
* | Multi-Fineline Electronix Inc. | 6,786 | 194 |
* | Echelon Corp. | 20,826 | 182 |
Electro Rent Corp. | 11,253 | 180 | |
Pulse Electronics Corp. | 26,338 | 159 | |
* | Comverge Inc. | 15,998 | 81 |
* | Agilysys Inc. | 15,515 | 78 |
97,977 | |||
Internet Software & Services (9.7%) | |||
* | Google Inc. Class A | 169,400 | 103,910 |
* | eBay Inc. | 800,208 | 26,811 |
* | Yahoo! Inc. | 844,564 | 13,851 |
* | Akamai Technologies Inc. | 124,392 | 4,668 |
VeriSign Inc. | 117,766 | 4,156 | |
* | Equinix Inc. | 31,290 | 2,705 |
* | Rackspace Hosting Inc. | 64,350 | 2,375 |
* | WebMD Health Corp. | 37,750 | 2,190 |
* | IAC/InterActiveCorp | 59,582 | 1,851 |
* | Sohu.com Inc. | 20,719 | 1,690 |
* | VistaPrint NV | 30,031 | 1,538 |
66
Information Technology Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | AOL Inc. | 72,881 | 1,521 |
* | Monster Worldwide Inc. | 84,350 | 1,447 |
* | MercadoLibre Inc. | 18,085 | 1,190 |
* | Digital River Inc. | 26,828 | 901 |
* | j2 Global Communications | ||
Inc. | 30,804 | 896 | |
* | GSI Commerce Inc. | 40,545 | 843 |
* | OpenTable Inc. | 9,439 | 839 |
* | ValueClick Inc. | 55,268 | 825 |
* | SAVVIS Inc. | 24,932 | 810 |
Earthlink Inc. | 73,158 | 602 | |
* | Ancestry.com Inc. | 16,997 | 559 |
* | Terremark Worldwide Inc. | 28,931 | 549 |
* | Constant Contact Inc. | 18,642 | 539 |
* | DealerTrack Holdings Inc. | 25,975 | 524 |
* | RightNow Technologies Inc. | 16,611 | 443 |
* | comScore Inc. | 14,720 | 405 |
NIC Inc. | 36,560 | 371 | |
* | QuinStreet Inc. | 16,846 | 367 |
United Online Inc. | 58,926 | 354 | |
* | LogMeIn Inc. | 9,495 | 341 |
* | Dice Holdings Inc. | 24,535 | 337 |
* | Limelight Networks Inc. | 44,927 | 312 |
* | Vocus Inc. | 12,479 | 303 |
* | Perficient Inc. | 19,434 | 242 |
* | RealNetworks Inc. | 60,079 | 231 |
* | Move Inc. | 106,508 | 226 |
* | LoopNet Inc. | 18,376 | 219 |
* | Internap Network Services | ||
Corp. | 31,335 | 213 | |
* | ModusLink Global Solutions | ||
Inc. | 29,731 | 205 | |
* | Knot Inc. | 19,780 | 198 |
* | Infospace Inc. | 24,594 | 198 |
* | Liquidity Services Inc. | 9,979 | 160 |
Marchex Inc. Class B | 12,722 | 114 | |
Stamps.com Inc. | 7,196 | 97 | |
* | TechTarget Inc. | 6,439 | 56 |
183,182 | |||
IT Services (16.7%) | |||
International Business | |||
Machines Corp. | 847,213 | 137,147 | |
Visa Inc. Class A | 338,715 | 24,743 | |
Accenture plc Class A | 432,328 | 22,256 | |
Mastercard Inc. Class A | 75,210 | 18,093 | |
Automatic Data Processing | |||
Inc. | 336,373 | 16,819 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 206,979 | 15,910 | |
Western Union Co. | 447,341 | 9,837 | |
Paychex Inc. | 222,027 | 7,467 | |
* | Fiserv Inc. | 101,543 | 6,425 |
Fidelity National Information | |||
Services Inc. | 174,508 | 5,652 | |
* | Teradata Corp. | 114,262 | 5,464 |
Computer Sciences Corp. | 105,387 | 5,072 | |
* | SAIC Inc. | 202,289 | 3,305 |
* | Alliance Data Systems Corp. | 35,564 | 2,800 |
* | VeriFone Systems Inc. | 59,133 | 2,687 |
Global Payments Inc. | 54,374 | 2,609 | |
* | Gartner Inc. | 58,964 | 2,224 |
Lender Processing Services | |||
Inc. | 62,913 | 2,143 | |
Total System Services Inc. | 113,415 | 2,013 | |
Broadridge Financial | |||
Solutions Inc. | 85,777 | 1,966 | |
Jack Henry & Associates Inc. | 55,530 | 1,772 | |
DST Systems Inc. | 25,285 | 1,290 | |
* | NeuStar Inc. Class A | 50,752 | 1,282 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Wright Express Corp. | 24,840 | 1,267 |
* | CACI International Inc. | ||
Class A | 20,710 | 1,229 | |
* | Convergys Corp. | 83,825 | 1,179 |
* | CoreLogic Inc. | 59,458 | 1,109 |
* | Unisys Corp. | 29,118 | 1,082 |
* | Genpact Ltd. | 67,842 | 946 |
* | Acxiom Corp. | 52,074 | 893 |
Sapient Corp. | 74,616 | 884 | |
MAXIMUS Inc. | 11,741 | 869 | |
* | SRA International Inc. | ||
Class A | 30,249 | 824 | |
* | Mantech International Corp. | ||
Class A | 15,597 | 674 | |
Syntel Inc. | 11,281 | 594 | |
* | Euronet Worldwide Inc. | 31,043 | 561 |
Heartland Payment Systems | |||
Inc. | 25,827 | 506 | |
* | TeleTech Holdings Inc. | 20,434 | 465 |
* | CSG Systems International | ||
Inc. | 23,098 | 452 | |
* | Cardtronics Inc. | 22,708 | 430 |
Forrester Research Inc. | 10,689 | 387 | |
iGate Corp. | 20,732 | 375 | |
* | TNS Inc. | 17,666 | 333 |
* | ExlService Holdings Inc. | 9,794 | 218 |
* | Ciber Inc. | 44,183 | 206 |
Cass Information Systems | |||
Inc. | 5,071 | 198 | |
* | Virtusa Corp. | 9,793 | 165 |
* | Ness Technologies Inc. | 25,681 | 152 |
* | Integral Systems Inc. | 11,764 | 144 |
* | Global Cash Access | ||
Holdings Inc. | 36,780 | 127 | |
* | NCI Inc. Class A | 5,104 | 117 |
* | China Information | ||
Technology Inc. | 20,898 | 101 | |
* | Echo Global Logistics Inc. | 7,345 | 87 |
315,550 | |||
Office Electronics (0.6%) | |||
Xerox Corp. | 946,145 | 10,171 | |
* | Zebra Technologies Corp. | 38,375 | 1,432 |
11,603 | |||
Semiconductors & Semiconductor | |||
Equipment (15.8%) | |||
Intel Corp. | 3,803,882 | 81,669 | |
Texas Instruments Inc. | 800,745 | 28,515 | |
Applied Materials Inc. | 911,220 | 14,971 | |
Broadcom Corp. Class A | 311,346 | 12,834 | |
Altera Corp. | 213,190 | 8,924 | |
* | NVIDIA Corp. | 391,508 | 8,872 |
Analog Devices Inc. | 203,707 | 8,124 | |
* | Marvell Technology Group | ||
Ltd. | 377,156 | 6,894 | |
* | Micron Technology Inc. | 611,596 | 6,807 |
Xilinx Inc. | 176,755 | 5,877 | |
^,* | First Solar Inc. | 38,008 | 5,602 |
Maxim Integrated Products | |||
Inc. | 201,831 | 5,567 | |
KLA-Tencor Corp. | 113,964 | 5,564 | |
Linear Technology Corp. | 153,765 | 5,314 | |
Microchip Technology Inc. | 127,452 | 4,704 | |
* | Lam Research Corp. | 84,015 | 4,612 |
* | Atmel Corp. | 312,261 | 4,584 |
* | Skyworks Solutions Inc. | 125,042 | 4,494 |
* | Cree Inc. | 70,301 | 3,703 |
* | Advanced Micro Devices | ||
Inc. | 395,379 | 3,641 | |
Avago Technologies Ltd. | 106,423 | 3,617 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | ON Semiconductor Corp. | 294,336 | 3,282 |
* | LSI Corp. | 419,440 | 2,638 |
National Semiconductor | |||
Corp. | 163,488 | 2,534 | |
* | Novellus Systems Inc. | 62,099 | 2,481 |
* | Varian Semiconductor | ||
Equipment Associates Inc. | 50,595 | 2,414 | |
* | Teradyne Inc. | 123,803 | 2,306 |
* | Cypress Semiconductor | ||
Corp. | 107,190 | 2,247 | |
* | Atheros Communications | ||
Inc. | 48,700 | 2,182 | |
* | MEMC Electronic Materials | ||
Inc. | 155,219 | 2,106 | |
* | Netlogic Microsystems Inc. | 39,242 | 1,624 |
* | Rambus Inc. | 75,784 | 1,557 |
* | TriQuint Semiconductor Inc. | 108,215 | 1,542 |
* | International Rectifier Corp. | 47,544 | 1,528 |
* | Fairchild Semiconductor | ||
International Inc. Class A | 84,331 | 1,485 | |
* | RF Micro Devices Inc. | 178,296 | 1,337 |
* | Veeco Instruments Inc. | 27,660 | 1,316 |
* | Silicon Laboratories Inc. | 28,686 | 1,302 |
* | Microsemi Corp. | 57,052 | 1,257 |
* | PMC - Sierra Inc. | 158,014 | 1,248 |
* | Omnivision Technologies | ||
Inc. | 37,222 | 1,140 | |
Intersil Corp. Class A | 84,946 | 1,086 | |
* | Cavium Networks Inc. | 24,648 | 1,064 |
* | Cirrus Logic Inc. | 44,678 | 1,043 |
* | Hittite Microwave Corp. | 16,840 | 1,034 |
* | Semtech Corp. | 42,608 | 1,009 |
MKS Instruments Inc. | 32,673 | 981 | |
* | Cymer Inc. | 19,023 | 963 |
* | Spansion Inc. Class A | 42,390 | 893 |
* | FEI Co. | 26,126 | 876 |
* | Integrated Device | ||
Technology Inc. | 107,422 | 833 | |
* | Entegris Inc. | 89,221 | 778 |
* | Cabot Microelectronics | ||
Corp. | 15,796 | 771 | |
Power Integrations Inc. | 18,847 | 751 | |
* | Diodes Inc. | 23,998 | 695 |
* | GT Solar International Inc. | 60,990 | 652 |
* | SunPower Corp. Class A | 37,695 | 643 |
* | Tessera Technologies Inc. | 33,960 | 591 |
* | Brooks Automation Inc. | 44,427 | 558 |
* | Amkor Technology Inc. | 74,177 | 547 |
* | Lattice Semiconductor Corp. | 79,283 | 526 |
* | Verigy Ltd. | 40,562 | 526 |
* | SunPower Corp. Class B | 28,410 | 480 |
* | Entropic Communications | ||
Inc. | 51,776 | 479 | |
* | Applied Micro Circuits Corp. | 45,192 | 475 |
* | Volterra Semiconductor Corp. | 18,151 | 458 |
* | Kulicke & Soffa Industries | ||
Inc. | 45,318 | 435 | |
* | Silicon Image Inc. | 51,964 | 418 |
* | Standard Microsystems | ||
Corp. | 15,217 | 404 | |
* | Advanced Energy Industries | ||
Inc. | 24,920 | 402 | |
Micrel Inc. | 29,598 | 398 | |
* | ATMI Inc. | 21,306 | 389 |
* | Zoran Corp. | 34,418 | 386 |
* | Ultratech Inc. | 15,575 | 385 |
* | Monolithic Power Systems | ||
Inc. | 23,568 | 364 | |
* | Ceva Inc. | 15,086 | 344 |
67
Information Technology Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | FormFactor Inc. | 32,241 | 317 |
* | Rubicon Technology Inc. | 12,402 | 283 |
* | Sigma Designs Inc. | 17,775 | 243 |
* | Anadigics Inc. | 44,130 | 240 |
Cohu Inc. | 15,333 | 226 | |
* | Rudolph Technologies Inc. | 20,264 | 225 |
* | Kopin Corp. | 44,747 | 196 |
* | IXYS Corp. | 15,788 | 196 |
* | Pericom Semiconductor | ||
Corp. | 16,979 | 171 | |
* | Supertex Inc. | 7,401 | 169 |
* | Exar Corp. | 25,718 | 166 |
* | Energy Conversion Devices | ||
Inc. | 33,079 | 130 | |
* | Conexant Systems Inc. | 54,557 | 129 |
* | DSP Group Inc. | 15,587 | 123 |
* | Advanced Analogic | ||
Technologies Inc. | 27,362 | 116 | |
* | MaxLinear Inc. | 7,325 | 77 |
* | Trident Microsystems Inc. | 47,348 | 64 |
* | Evergreen Solar Inc. | 21,938 | 49 |
298,172 | |||
Software (20.7%) | |||
Microsoft Corp. | 5,250,899 | 139,569 | |
Oracle Corp. | 2,742,563 | 90,230 | |
* | Adobe Systems Inc. | 346,964 | 11,970 |
* | Salesforce.com Inc. | 80,658 | 10,669 |
* | Intuit Inc. | 202,847 | 10,666 |
* | Symantec Corp. | 529,454 | 9,546 |
* | Citrix Systems Inc. | 128,075 | 8,986 |
CA Inc. | 279,313 | 6,921 | |
* | Autodesk Inc. | 154,911 | 6,514 |
* | BMC Software Inc. | 121,199 | 5,999 |
* | Red Hat Inc. | 130,009 | 5,367 |
* | McAfee Inc. | 102,181 | 4,900 |
* | Electronic Arts Inc. | 226,386 | 4,256 |
* | VMware Inc. Class A | 50,728 | 4,243 |
* | Rovi Corp. | 76,128 | 4,219 |
Activision Blizzard Inc. | 372,388 | 4,141 | |
* | ANSYS Inc. | 61,907 | 3,487 |
Factset Research Systems | |||
Inc. | 29,966 | 3,143 | |
* | Nuance Communications | ||
Inc. | 162,291 | 3,028 | |
* | Informatica Corp. | 63,843 | 3,001 |
* | Synopsys Inc. | 101,069 | 2,802 |
* | TIBCO Software Inc. | 113,593 | 2,797 |
* | MICROS Systems Inc. | 54,820 | 2,612 |
Solera Holdings Inc. | 47,790 | 2,441 | |
* | Ariba Inc. | 63,908 | 1,978 |
* | Parametric Technology | ||
Corp. | 80,177 | 1,900 | |
* | Cadence Design Systems | ||
Inc. | 182,410 | 1,815 | |
* | Compuware Corp. | 151,007 | 1,700 |
* | Concur Technologies Inc. | 30,305 | 1,577 |
* | Novell Inc. | 240,070 | 1,412 |
* | Progress Software Corp. | 44,343 | 1,302 |
* | SuccessFactors Inc. | 33,587 | 1,206 |
* | Mentor Graphics Corp. | 74,370 | 1,182 |
* | Quest Software Inc. | 42,800 | 1,147 |
* | Fortinet Inc. | 27,575 | 1,126 |
* | CommVault Systems Inc. | 27,711 | 1,012 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Lawson Software Inc. | 94,699 | 960 |
* | Take-Two Interactive | ||
Software Inc. | 58,065 | 933 | |
* | Aspen Technology Inc. | 59,761 | 910 |
* | Ultimate Software Group Inc. | 16,424 | 878 |
* | JDA Software Group Inc. | 28,286 | 834 |
* | TiVo Inc. | 78,338 | 805 |
* | Taleo Corp. Class A | 24,895 | 804 |
Blackbaud Inc. | 29,686 | 790 | |
Fair Isaac Corp. | 28,207 | 788 | |
* | Blackboard Inc. | 22,337 | 782 |
* | AsiaInfo-Linkage Inc. | 35,838 | 729 |
* | ACI Worldwide Inc. | 22,630 | 709 |
* | MicroStrategy Inc. Class A | 5,908 | 702 |
* | Ebix Inc. | 26,138 | 688 |
* | Advent Software Inc. | 22,910 | 664 |
* | Websense Inc. | 28,808 | 617 |
* | Synchronoss Technologies | ||
Inc. | 16,915 | 580 | |
* | BroadSoft Inc. | 14,590 | 515 |
* | Netscout Systems Inc. | 19,776 | 494 |
* | Sourcefire Inc. | 17,885 | 485 |
* | SolarWinds Inc. | 21,526 | 483 |
* | Manhattan Associates Inc. | 14,889 | 479 |
* | Bottomline Technologies Inc. | 21,011 | 465 |
Pegasystems Inc. | 11,253 | 453 | |
* | Tyler Technologies Inc. | 19,983 | 442 |
* | Radiant Systems Inc. | 25,373 | 435 |
* | Verint Systems Inc. | 12,401 | 426 |
* | Epicor Software Corp. | 38,475 | 396 |
* | NetSuite Inc. | 12,895 | 387 |
* | SS&C Technologies Holdings | ||
Inc. | 17,762 | 348 | |
* | Accelrys Inc. | 37,884 | 328 |
Opnet Technologies Inc. | 9,493 | 324 | |
* | Interactive Intelligence Inc. | 8,924 | 307 |
* | Kenexa Corp. | 13,072 | 303 |
EPIQ Systems Inc. | 21,865 | 302 | |
VirnetX Holding Corp. | 25,130 | 302 | |
* | Net 1 UEPS Technologies | ||
Inc. | 26,137 | 267 | |
* | DemandTec Inc. | 20,427 | 266 |
* | THQ Inc. | 46,098 | 266 |
* | S1 Corp. | 36,174 | 236 |
* | Monotype Imaging Holdings | ||
Inc. | 15,260 | 204 | |
* | Smith Micro Software Inc. | 20,905 | 196 |
* | VASCO Data Security | ||
International Inc. | 20,209 | 181 | |
* | PROS Holdings Inc. | 13,126 | 150 |
* | Actuate Corp. | 28,578 | 136 |
* | TeleCommunication Systems | ||
Inc. Class A | 31,559 | 135 | |
* | Rosetta Stone Inc. | 7,728 | 116 |
* | Deltek Inc. | 11,317 | 83 |
Renaissance Learning Inc. | 6,869 | 74 | |
* | China TransInfo Technology | ||
Corp. | 6,780 | 32 | |
392,053 | |||
Total Common Stocks | |||
(Cost $1,593,497) | 1,900,597 |
Market | ||
Value• | ||
Shares | ($000) | |
Temporary Cash Investment (0.1%) | ||
Money Market Fund (0.1%) | ||
1,2 Vanguard Market | ||
Liquidity Fund, 0.213% | ||
(Cost $779) | 779,102 | 779 |
Total Investments (100.6%) | ||
(Cost $1,594,276) | 1,901,376 | |
Other Assets and Liabilities (–0.6%) | ||
Other Assets | 11,132 | |
Liabilities2 | (21,548) | |
(10,416) | ||
Net Assets (100%) | 1,890,960 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 1,639,444 |
Undistributed Net Investment Income | 1,350 |
Accumulated Net Realized Losses | (56,934) |
Unrealized Appreciation (Depreciation) | 307,100 |
Net Assets | 1,890,960 |
Admiral Shares—Net Assets | |
Applicable to 1,865,744 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 62,534 |
Net Asset Value Per Share— | |
Admiral Shares | $33.52 |
ETF Shares—Net Assets | |
Applicable to 27,933,595 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 1,828,426 |
Net Asset Value Per Share— | |
ETF Shares | $65.46 |
• See Note A in Notes to Financial Statements.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $722,000.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $779,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
68
Information Technology Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 7,007 |
Interest1 | 1 |
Security Lending | 15 |
Total Income | 7,023 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 101 |
Management and Administrative— | |
Admiral Shares | 56 |
Management and Administrative— | |
ETF Shares | 1,351 |
Marketing and Distribution— | |
Admiral Shares | 6 |
Marketing and Distribution— | |
ETF Shares | 210 |
Custodian Fees | 23 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 54 |
Trustees’ Fees and Expenses | 1 |
Total Expenses | 1,802 |
Net Investment Income | 5,221 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 5,440 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 390,236 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 400,897 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 5,221 | 7,251 |
Realized Net Gain (Loss) | 5,440 | 15,125 |
Change in Unrealized Appreciation (Depreciation) | 390,236 | (37,393) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 400,897 | (15,017) |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (352) | (165) |
ETF Shares | (8,695) | (4,304) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (9,047) | (4,469) |
Capital Share Transactions | ||
Admiral Shares | 1,280 | 13,740 |
ETF Shares | 314,580 | 517,008 |
Net Increase (Decrease) from Capital Share Transactions | 315,860 | 530,748 |
Total Increase (Decrease) | 707,710 | 511,262 |
Net Assets | ||
Beginning of Period | 1,183,250 | 671,988 |
End of Period2 | 1,890,960 | 1,183,250 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed net investment income of $1,350,000 and $5,176,000.
See accompanying Notes, which are an integral part of the Financial Statements.
69
Information Technology Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $25.30 | $24.39 | $27.28 | $29.95 | $24.40 | $23.93 |
Investment Operations | ||||||
Net Investment Income | .097 | .146 | .1631 | .121 | .1101 | .0841 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 8.308 | .882 | (2.897) | (2.706) | 5.500 | .424 |
Total from Investment Operations | 8.405 | 1.028 | (2.734) | (2.585) | 5.610 | .508 |
Distributions | ||||||
Dividends from Net Investment Income | (.185) | (.118) | (.156) | (.085) | (.060) | (.038) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.185) | (.118) | (.156) | (.085) | (.060) | (.038) |
Net Asset Value, End of Period | $33.52 | $25.30 | $24.39 | $27.28 | $29.95 | $24.40 |
Total Return2 | 33.27% | 4.17% | –9.79% | –8.67% | 23.02% | 2.12% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $63 | $46 | $33 | $26 | $12 | $5 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.26% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.69% | 0.69% | 0.82% | 0.46% | 0.38% | 0.33% |
Portfolio Turnover Rate3 | 7% | 9% | 12% | 11% | 8% | 8% |
The expense ratio, net 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 transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
70
Information Technology Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $49.40 | $47.64 | $53.32 | $58.52 | $47.66 | $46.76 |
Investment Operations | ||||||
Net Investment Income | .193 | .296 | .3311 | .249 | .2311 | .1751 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 16.229 | 1.714 | (5.685) | (5.274) | 10.765 | .816 |
Total from Investment Operations | 16.422 | 2.010 | (5.354) | (5.025) | 10.996 | .991 |
Distributions | ||||||
Dividends from Net Investment Income | (.362) | (.250) | (.326) | (.175) | (.136) | (.091) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.362) | (.250) | (.326) | (.175) | (.136) | (.091) |
Net Asset Value, End of Period | $65.46 | $49.40 | $47.64 | $53.32 | $58.52 | $47.66 |
Total Return | 33.29% | 4.17% | –9.78% | –8.62% | 23.10% | 2.11% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $1,828 | $1,137 | $639 | $497 | $439 | $172 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.69% | 0.69% | 0.85% | 0.51% | 0.42% | 0.36% |
Portfolio Turnover Rate2 | 7% | 9% | 12% | 11% | 8% | 8% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
71
Information Technology Index Fund
Notes to Financial Statements
Vanguard Information Technology Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. 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 redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $288,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.12% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
72
Information Technology 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 February 28, 2011, the fund realized $4,879,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $35,142,000 to offset future net capital gains of $63,000 through August 31, 2013, $188,000 through August 31, 2014, $612,000 through August 31, 2015, $218,000 through August 31, 2016, $14,013,000 through August 31, 2017, and $20,048,000 through August 31, 2018. In addition, the fund realized losses of $21,593,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $1,594,276,000. Net unrealized appreciation of investment securities for tax purposes was $307,100,000, consisting of unrealized gains of $352,734,000 on securities that had risen in value since their purchase and $45,634,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $387,953,000 of investment securities and sold $66,877,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 15,122 | 471 | 21,910 | 790 |
Issued in Lieu of Cash Distributions | 330 | 10 | 152 | 5 |
Redeemed1 | (14,172) | (443) | (8,322) | (312) |
Net Increase (Decrease)—Admiral Shares | 1,280 | 38 | 13,740 | 483 |
ETF Shares | ||||
Issued | 330,759 | 5,217 | 625,414 | 11,700 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (16,179) | (300) | (108,406) | (2,100) |
Net Increase (Decrease)—ETF Shares | 314,580 | 4,917 | 517,008 | 9,600 |
1 Net of redemption fees for fiscal 2011 and 2010 of $23,000 and $51,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
73
Materials Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 135 | 135 | 2,474 |
Median Market Cap | $14.7B | $13.1B | $32.2B |
Price/Earnings Ratio | 20.1x | 20.7x | 17.7x |
Price/Book Ratio | 2.8x | 2.8x | 2.3x |
Yield3 | 1.6% | 1.7% | |
Admiral Shares | 1.3% | ||
ETF Shares | 1.3% | ||
Return on Equity | 20.4% | 19.2% | 19.1% |
Earnings Growth Rate | 4.0% | 4.0% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 12% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.0% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.90 |
Beta | 1.00 | 1.31 |
Subindustry Diversification | |
(% of equity exposure) | |
Aluminum | 3.1% |
Commodity Chemicals | 1.9 |
Construction Materials | 2.1 |
Diversified Chemicals | 21.9 |
Diversified Metals & Mining | 10.7 |
Fertilizers & Agricultural Chemicals | 10.9 |
Gold | 5.4 |
Industrial Gases | 8.9 |
Metal & Glass Containers | 4.0 |
Paper Packaging | 3.3 |
Paper Products | 4.0 |
Precious Metals & Minerals | 1.3 |
Specialty Chemicals | 12.5 |
Steel | 9.7 |
Other Materials | 0.3 |
Ten Largest Holdings8 (% of total net assets) | |
EI du Pont de Nemours & Co. | 8.1% |
Freeport-McMoRan Copper & Gold Inc. | 8.1 |
Dow Chemical Co. | 7.0 |
Monsanto Co. | 6.3 |
Praxair Inc. | 4.9 |
Newmont Mining Corp. | 4.4 |
Air Products & Chemicals Inc. | 3.2 |
Alcoa Inc. | 2.8 |
Nucor Corp. | 2.5 |
PPG Industries Inc. | 2.3 |
Top Ten | 49.6% |
1 MSCI US IMI/Materials 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Materials 25/50: MSCI US IMI/Materials through February 26, 2010; MSCI US IMI/Materials 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
74
Materials 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 (%): January 26, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x77x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 1/26/2004 | |||
Market Price | 24.39% | 8.79% | 9.78% | |
Net Asset Value | 24.33 | 8.77 | 9.77 | |
Admiral Shares3 | 2/11/2004 | 24.37 | 8.74 | 9.22 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Materials 25/50: MSCI US IMI/Materials through February 26, 2010; MSCI US IMI/Materials 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
75
Materials Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (100.0%) | |||
Chemicals (56.1%) | |||
EI du Pont de Nemours | |||
& Co. | 1,243,137 | 68,211 | |
Dow Chemical Co. | 1,580,579 | 58,734 | |
Monsanto Co. | 730,491 | 52,515 | |
Praxair Inc. | 417,274 | 41,469 | |
Air Products & Chemicals | |||
Inc. | 291,849 | 26,850 | |
PPG Industries Inc. | 221,930 | 19,614 | |
Mosaic Co. | 212,437 | 18,238 | |
Ecolab Inc. | 316,031 | 15,372 | |
CF Industries Holdings Inc. | 96,897 | 13,690 | |
Sigma-Aldrich Corp. | 165,049 | 10,545 | |
Sherwin-Williams Co. | 124,860 | 10,254 | |
Lubrizol Corp. | 89,309 | 9,723 | |
Eastman Chemical Co. | 98,285 | 9,181 | |
Celanese Corp. Class A | 212,285 | 8,799 | |
FMC Corp. | 93,870 | 7,269 | |
Airgas Inc. | 108,805 | 6,809 | |
Albemarle Corp. | 112,252 | 6,461 | |
International Flavors | |||
& Fragrances Inc. | 108,904 | 6,202 | |
Ashland Inc. | 102,034 | 5,745 | |
Valspar Corp. | 127,346 | 4,842 | |
Nalco Holding Co. | 188,122 | 4,810 | |
Huntsman Corp. | 260,168 | 4,592 | |
* | Rockwood Holdings Inc. | 87,634 | 4,079 |
RPM International Inc. | 176,822 | 4,062 | |
* | Solutia Inc. | 165,908 | 3,851 |
Cytec Industries Inc. | 67,261 | 3,822 | |
* | WR Grace & Co. | 99,565 | 3,787 |
Cabot Corp. | 84,425 | 3,652 | |
Scotts Miracle-Gro Co. | |||
Class A | 63,807 | 3,584 | |
* | Intrepid Potash Inc. | 61,352 | 2,368 |
Sensient Technologies | |||
Corp. | 67,528 | 2,254 | |
NewMarket Corp. | 16,636 | 2,131 | |
Olin Corp. | 107,813 | 2,006 | |
* | Ferro Corp. | 117,219 | 1,866 |
* | PolyOne Corp. | 126,654 | 1,758 |
Minerals Technologies Inc. | 25,347 | 1,645 | |
* | OM Group Inc. | 42,004 | 1,478 |
* | Georgia Gulf Corp. | 46,258 | 1,477 |
HB Fuller Co. | 66,627 | 1,436 | |
Balchem Corp. | 38,839 | 1,398 | |
Westlake Chemical Corp. | 27,051 | 1,293 | |
Innophos Holdings Inc. | 29,111 | 1,247 | |
Arch Chemicals Inc. | 34,272 | 1,232 | |
Koppers Holdings Inc. | 27,982 | 1,131 | |
* | Calgon Carbon Corp. | 76,498 | 1,074 |
* | Kraton Performance | ||
Polymers Inc. | 29,702 | 1,019 | |
A Schulman Inc. | 42,848 | 954 | |
* | Innospec Inc. | 32,282 | 866 |
Stepan Co. | 10,956 | 769 |
Market | ||||
Value• | ||||
Shares | ($000) | |||
* | LSB Industries Inc. | 22,859 | 692 | |
* | STR Holdings Inc. | 33,672 | 610 | |
* | Zoltek Cos. Inc. | 39,908 | 584 | |
* | TPC Group Inc. | 16,401 | 476 | |
Zep Inc. | 29,497 | 463 | ||
Hawkins Inc. | 11,872 | 454 | ||
^,* | Yongye International Inc. | 52,489 | 397 | |
* | Spartech Corp. | 41,791 | 354 | |
American Vanguard Corp. | 29,631 | 244 | ||
* | Landec Corp. | 34,180 | 210 | |
* | ShengdaTech Inc. | 40,640 | 169 | |
^,* | China Green Agriculture Inc. | 19,859 | 156 | |
^,* | China Agritech Inc. | 12,514 | 105 | |
471,078 | ||||
Construction Materials (2.0%) | ||||
Vulcan Materials Co. | 174,831 | 8,016 | ||
Martin Marietta Materials | ||||
Inc. | 61,979 | 5,507 | ||
Eagle Materials Inc. | 57,121 | 1,846 | ||
Texas Industries Inc. | 32,203 | 1,313 | ||
* | Headwaters Inc. | 81,982 | 416 | |
* | United States Lime | |||
& Minerals Inc. | 3,137 | 127 | ||
17,225 | ||||
Containers & Packaging (7.3%) | ||||
* | Crown Holdings Inc. | 216,897 | 8,346 | |
Ball Corp. | 228,422 | 8,246 | ||
* | Owens-Illinois Inc. | 222,861 | 6,795 | |
Sealed Air Corp. | 217,532 | 5,987 | ||
Sonoco Products Co. | 140,198 | 5,058 | ||
Bemis Co. Inc. | 147,261 | 4,838 | ||
Aptargroup Inc. | 91,765 | 4,420 | ||
Packaging Corp. of America | 139,575 | 4,018 | ||
Rock-Tenn Co. Class A | 50,403 | 3,460 | ||
Temple-Inland Inc. | 139,239 | 3,257 | ||
Silgan Holdings Inc. | 68,371 | 2,494 | ||
Greif Inc. Class A | 33,586 | 2,172 | ||
Boise Inc. | 80,389 | 722 | ||
* | Graphic Packaging | |||
Holding Co. | 117,125 | 609 | ||
* | Graham Packaging Co. Inc. | 25,427 | 432 | |
Myers Industries Inc. | 40,996 | 415 | ||
61,269 | ||||
Metals & Mining (30.2%) | ||||
Freeport-McMoRan Copper | ||||
& Gold Inc. | 1,282,474 | 67,907 | ||
Newmont Mining Corp. | 671,438 | 37,110 | ||
Alcoa Inc. | 1,390,970 | 23,438 | ||
Nucor Corp. | 429,960 | 20,621 | ||
Cliffs Natural Resources | ||||
Inc. | 184,540 | 17,913 | ||
United States Steel Corp. | 195,649 | 11,248 | ||
Walter Energy Inc. | 71,987 | 8,711 | ||
Allegheny Technologies | ||||
Inc. | 120,684 | 8,096 | ||
Reliance Steel | ||||
& Aluminum Co. | 96,569 | 5,343 |
Market | |||
Value• | |||
Shares | ($000) | ||
Steel Dynamics Inc. | 280,825 | 5,184 | |
Compass Minerals | |||
International Inc. | 44,617 | 4,170 | |
* | Coeur d’Alene Mines Corp. | 121,507 | 3,829 |
* | Hecla Mining Co. | 348,228 | 3,535 |
Royal Gold Inc. | 69,387 | 3,443 | |
* | Allied Nevada Gold Corp. | 109,067 | 3,309 |
* | Stillwater Mining Co. | 124,555 | 2,973 |
Commercial Metals Co. | 155,447 | 2,591 | |
Carpenter Technology Corp. | 59,792 | 2,486 | |
AK Steel Holding Corp. | 149,584 | 2,390 | |
* | Titanium Metals Corp. | 122,555 | 2,327 |
Globe Specialty Metals Inc. | 87,015 | 2,027 | |
Schnitzer Steel Industries | |||
Inc. | 31,336 | 2,012 | |
Worthington Industries Inc. | 80,586 | 1,560 | |
* | Century Aluminum Co. | 82,001 | 1,390 |
* | Brush Engineered Materials | ||
Inc. | 27,760 | 1,215 | |
* | RTI International Metals Inc. | 40,987 | 1,168 |
* | US Gold Corp. | 153,545 | 1,115 |
Kaiser Aluminum Corp. | 19,661 | 993 | |
* | Horsehead Holding Corp. | 58,990 | 976 |
AMCOL International Corp. | 29,591 | 924 | |
Haynes International Inc. | 16,475 | 854 | |
* | Noranda Aluminum Holding | ||
Corp. | 31,026 | 489 | |
* | Capital Gold Corp. | 82,873 | 451 |
* | General Moly Inc. | 83,316 | 437 |
* | AM Castle & Co. | 23,381 | 403 |
* | Golden Minerals Co. | 16,574 | 349 |
Olympic Steel Inc. | 12,644 | 340 | |
* | Metals USA Holdings Corp. | 17,590 | 263 |
* | Gulf Resources Inc. | 28,126 | 252 |
253,842 | |||
Paper & Forest Products (4.4%) | |||
International Paper Co. | 565,956 | 15,722 | |
MeadWestvaco Corp. | 229,017 | 6,722 | |
Domtar Corp. | 57,694 | 5,042 | |
* | Louisiana-Pacific Corp. | 179,723 | 1,855 |
Buckeye Technologies Inc. | 53,480 | 1,401 | |
Schweitzer-Mauduit | |||
International Inc. | 24,922 | 1,366 | |
* | Clearwater Paper Corp. | 15,626 | 1,239 |
Deltic Timber Corp. | 15,265 | 928 | |
* | KapStone Paper and | ||
Packaging Corp. | 46,976 | 806 | |
PH Glatfelter Co. | 62,016 | 763 | |
Wausau Paper Corp. | 63,450 | 510 | |
Neenah Paper Inc. | 20,144 | 392 | |
36,746 | |||
Total Common Stocks | |||
(Cost $745,181) | 840,160 |
76
Materials Index Fund
Market | ||
Value• | ||
Shares | ($000) | |
Temporary Cash Investment (0.0%) | ||
Money Market Fund (0.0%) | ||
1,2 Vanguard Market | ||
Liquidity Fund, 0.213% | ||
(Cost $227) | 227,301 | 227 |
Total Investments (100.0%) | ||
(Cost $745,408) | 840,387 | |
Other Assets and Liabilities (0.0%) | ||
Other Assets | 4,101 | |
Liabilities2 | (4,362) | |
(261) | ||
Net Assets (100%) | 840,126 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 805,004 |
Undistributed Net Investment Income | 643 |
Accumulated Net Realized Losses | (60,500) |
Unrealized Appreciation (Depreciation) | 94,979 |
Net Assets | 840,126 |
Admiral Shares—Net Assets | |
Applicable to 3,550,723 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 154,194 |
Net Asset Value Per Share— | |
Admiral Shares | $43.43 |
ETF Shares—Net Assets | |
Applicable to 8,048,112 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 685,932 |
Net Asset Value Per Share— | |
ETF Shares | $85.23 |
• See Note A in Notes to Financial Statements.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $209,000.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $227,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
77
Materials Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 5,907 |
Interest1 | 1 |
Security Lending | 32 |
Total Income | 5,940 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 47 |
Management and Administrative— | |
Admiral Shares | 125 |
Management and Administrative— | |
ETF Shares | 514 |
Marketing and Distribution— | |
Admiral Shares | 13 |
Marketing and Distribution— | |
ETF Shares | 79 |
Custodian Fees | 12 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 15 |
Total Expenses | 805 |
Net Investment Income | 5,135 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | (504) |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 174,465 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 179,096 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 5,135 | 15,851 |
Realized Net Gain (Loss) | (504) | 17,399 |
Change in Unrealized Appreciation (Depreciation) | 174,465 | 12,576 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 179,096 | 45,826 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (2,903) | (1,398) |
ETF Shares | (13,250) | (6,674) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (16,153) | (8,072) |
Capital Share Transactions | ||
Admiral Shares | 26,867 | (521) |
ETF Shares | 138,765 | 9,040 |
Net Increase (Decrease) from Capital Share Transactions | 165,632 | 8,519 |
Total Increase (Decrease) | 328,575 | 46,273 |
Net Assets | ||
Beginning of Period | 511,551 | 465,278 |
End of Period2 | 840,126 | 511,551 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed net investment income of $643,000 and $11,661,000.
See accompanying Notes, which are an integral part of the Financial Statements.
78
Materials Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $33.32 | $30.68 | $42.85 | $41.75 | $32.37 | $28.34 |
Investment Operations | ||||||
Net Investment Income | .3012 | .9711 | .622 | .732 | .7002 | .6722 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments3 | 10.729 | 2.128 | (11.996) | 1.008 | 9.250 | 3.853 |
Total from Investment Operations | 11.030 | 3.099 | (11.374) | 1.740 | 9.950 | 4.525 |
Distributions | ||||||
Dividends from Net Investment Income | (.920) | (.459) | (.796) | (.640) | (.570) | (.495) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.920) | (.459) | (.796) | (.640) | (.570) | (.495) |
Net Asset Value, End of Period | $43.43 | $33.32 | $30.68 | $42.85 | $41.75 | $32.37 |
Total Return4 | 33.22% | 10.07% | –25.91% | 4.09% | 31.00% | 16.08% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $154 | $97 | $90 | $107 | $57 | $12 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.26% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.52% | 2.81%1 | 2.23% | 1.74% | 1.80% | 2.13% |
Portfolio Turnover Rate5 | 12% | 10% | 12% | 10% | 6% | 13% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Net investment income per share and the ratio of net investment income to average net assets include $.417 and 1.14%, respectively, resulting from a special dividend from Weyerhaeuser Co. in July 2010.
2 Calculated based on average shares outstanding.
3 Includes increases from redemption fees of $.00, $.01, $.02, $.02, $.01, and $.00.
4 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
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.
79
Materials Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $65.40 | $60.23 | $84.27 | $82.10 | $63.65 | $55.70 |
Investment Operations | ||||||
Net Investment Income | .5952 | 1.9071 | 1.242 | 1.470 | 1.4182 | 1.3362 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments3 | 21.039 | 4.186 | (23.683) | 1.977 | 18.168 | 7.582 |
Total from Investment Operations | 21.634 | 6.093 | (22.441) | 3.447 | 19.586 | 8.918 |
Distributions | ||||||
Dividends from Net Investment Income | (1.804) | (.923) | (1.599) | (1.277) | (1.136) | (.968) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.804) | (.923) | (1.599) | (1.277) | (1.136) | (.968) |
Net Asset Value, End of Period | $85.23 | $65.40 | $60.23 | $84.27 | $82.10 | $63.65 |
Total Return | 33.20% | 10.07% | –25.88% | 4.15% | 31.06% | 16.11% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $686 | $415 | $375 | $365 | $312 | $95 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.52% | 2.81%1 | 2.26% | 1.79% | 1.84% | 2.16% |
Portfolio Turnover Rate4 | 12% | 10% | 12% | 10% | 6% | 13% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Net investment income per share and the ratio of net investment income to average net assets include $.819 and 1.14%, respectively, resulting from a special dividend from Weyerhaeuser Co. in July 2010.
2 Calculated based on average shares outstanding.
3 Includes increases from redemption fees of $.00, $.01, $.03, $.04, $.02, and $.00.
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.
80
Materials Index Fund
Notes to Financial Statements
Vanguard Materials Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. 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 redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $133,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
81
Materials 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 February 28, 2011, the fund realized $5,739,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $35,358,000 to offset future net capital gains of $6,000 through August 31, 2014, $698,000 through August 31, 2015, $1,458,000 through August 31, 2016, $12,836,000 through August 31, 2017, and $20,360,000 through August 31, 2018. In addition, the fund realized losses of $15,447,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $745,408,000. Net unrealized appreciation of investment securities for tax purposes was $94,979,000, consisting of unrealized gains of $127,931,000 on securities that had risen in value since their purchase and $32,952,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $215,455,000 of investment securities and sold $55,208,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 33,169 | 803 | 22,219 | 654 |
Issued in Lieu of Cash Distributions | 2,684 | 64 | 1,301 | 38 |
Redeemed1 | (8,986) | (221) | (24,041) | (720) |
Net Increase (Decrease)—Admiral Shares | 26,867 | 646 | (521) | (28) |
ETF Shares | ||||
Issued | 154,458 | 1,906 | 127,810 | 1,911 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (15,693) | (200) | (118,770) | (1,800) |
Net Increase (Decrease)—ETF Shares | 138,765 | 1,706 | 9,040 | 111 |
1 Net of redemption fees for fiscal 2011 and 2010 of $26,000 and $92,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
82
Telecommunication Services Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 38 | 38 | 2,474 |
Median Market Cap | $13.0B | $21.8B | $32.2B |
Price/Earnings Ratio | 22.0x | 22.3x | 17.7x |
Price/Book Ratio | 2.3x | 2.3x | 2.3x |
Yield3 | 3.7% | 1.7% | |
Admiral Shares | 3.6% | ||
ETF Shares | 3.6% | ||
Return on Equity | 9.7% | 9.8% | 19.1% |
Earnings Growth Rate | –7.1% | –8.0% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 16% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.1% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 0.90 | 0.74 |
Beta | 1.02 | 0.82 |
Subindustry Diversification | |
(% of equity exposure) | |
Alternative Carriers | 10.8% |
Integrated Telecommunication Services | 62.3 |
Wireless Telecommunication Services | 26.9 |
Ten Largest Holdings8 (% of total net assets) | |
Verizon Communications Inc. | 22.7% |
AT&T Inc. | 22.3 |
American Tower Corp. Class A | 4.5 |
Sprint Nextel Corp. | 3.9 |
Crown Castle International Corp. | 3.9 |
CenturyLink Inc. | 3.8 |
Qwest Communications International Inc. | 3.5 |
Frontier Communications Corp. | 2.9 |
NII Holdings Inc. | 2.5 |
Windstream Corp. | 2.3 |
Top Ten | 72.3% |
1 MSCI US IMI/Telecommunication Services 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI/Telecommunication Services 25/50: MSCI US IMI/Telecommunication Services through February 26, 2010; MSCI US IMI/Telecommunication Services 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
83
Telecommunication Services 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 (%): September 23, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x86x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 9/23/2004 | |||
Market Price | 19.66% | 6.47% | 7.33% | |
Net Asset Value | 19.65 | 6.46 | 7.33 | |
Admiral Shares3 | 3/11/2005 | 19.67 | 6.43 | 6.67 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Telecommunication Services 25/50: MSCI US IMI/Telecommunication Services through February 26, 2010; MSCI US IMI/Telecommunication Services 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
84
Telecommunication Services Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (100.0%) | |||
Diversified Telecommunication Services (73.1%) | |||
Alternative Carriers (10.8%) | |||
* | tw telecom inc Class A | 279,238 | 5,194 |
* | Vonage Holdings Corp. | 1,119,396 | 4,948 |
* | Level 3 Communications | ||
Inc. | 3,044,848 | 4,263 | |
* | Cogent Communications | ||
Group Inc. | 244,184 | 3,599 | |
* | Global Crossing Ltd. | 199,272 | 3,139 |
AboveNet Inc. | 47,047 | 3,053 | |
* | Neutral Tandem Inc. | 169,616 | 2,917 |
* | PAETEC Holding Corp. | 729,910 | 2,774 |
* | Hughes Communications | ||
Inc. | 42,542 | 2,548 | |
* | Iridium Communications | ||
Inc. | 262,153 | 2,464 | |
* | Premiere Global Services | ||
Inc. | 367,172 | 2,464 | |
Integrated Telecommunication Services (62.3%) | |||
Verizon Communications | |||
Inc. | 2,125,760 | 78,483 | |
AT&T Inc. | 2,713,737 | 77,016 | |
CenturyLink Inc. | 316,873 | 13,049 | |
Qwest Communications | |||
International Inc. | 1,765,453 | 12,040 | |
Frontier Communications | |||
Corp. | 1,167,322 | 9,911 | |
Windstream Corp. | 628,875 | 7,886 | |
* | General Communication | ||
Inc. Class A | 268,340 | 3,244 | |
Alaska Communications | |||
Systems Group Inc. | 295,472 | 3,011 | |
Consolidated | |||
Communications | |||
Holdings Inc. | 163,454 | 2,990 | |
* | Cincinnati Bell Inc. | 966,815 | 2,552 |
Atlantic Tele-Network Inc. | 61,576 | 2,401 | |
* | Cbeyond Inc. | 166,063 | 2,321 |
252,267 |
Market | |||
Value• | |||
Shares | ($000) | ||
Wireless Telecommunication Services (26.9%) | |||
* | American Tower Corp. | ||
Class A | 288,883 | 15,588 | |
* | Sprint Nextel Corp. | 3,069,067 | 13,412 |
* | Crown Castle | ||
International Corp. | 316,527 | 13,342 | |
* | NII Holdings Inc. | 208,151 | 8,526 |
* | SBA Communications | ||
Corp. Class A | 162,627 | 6,845 | |
* | MetroPCS | ||
Communications Inc. | 436,159 | 6,281 | |
* | ICO Global | ||
Communications | |||
Holdings Ltd. | 1,767,045 | 4,046 | |
Telephone & Data | |||
Systems Inc. | 117,010 | 3,937 | |
* | United States Cellular Corp. | 73,641 | 3,681 |
Telephone & Data Systems | |||
Inc. | 123,857 | 3,670 | |
NTELOS Holdings Corp. | 159,739 | 3,102 | |
USA Mobility Inc. | 178,694 | 2,666 | |
* | Clearwire Corp. Class A | 511,907 | 2,575 |
* | Leap Wireless International | ||
Inc. | 209,265 | 2,557 | |
Shenandoah | |||
Telecommunications Co. | 143,446 | 2,510 | |
92,738 | |||
Total Common Stocks | |||
(Cost $332,043) | 345,005 | ||
Temporary Cash Investment (0.1%) | |||
Money Market Fund (0.1%) | |||
1 | Vanguard Market | ||
Liquidity Fund, 0.213% | |||
(Cost $333) | 333,380 | 333 | |
Total Investments (100.1%) | |||
(Cost $332,376) | 345,338 | ||
Other Assets and Liabilities (–0.1%) | |||
Other Assets | 6,484 | ||
Liabilities | (6,826) | ||
(342) | |||
Net Assets (100%) | 344,996 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 397,925 |
Undistributed Net Investment Income | 2,231 |
Accumulated Net Realized Losses | (68,122) |
Unrealized Appreciation (Depreciation) | 12,962 |
Net Assets | 344,996 |
Admiral Shares—Net Assets | |
Applicable to 586,244 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 19,815 |
Net Asset Value Per Share— | |
Admiral Shares | $33.80 |
ETF Shares—Net Assets | |
Applicable to 4,902,158 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 325,181 |
Net Asset Value Per Share— | |
ETF Shares | $66.33 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.
85
Telecommunication Services Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 6,986 |
Interest1 | 1 |
Total Income | 6,987 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 24 |
Management and Administrative— | |
Admiral Shares | 18 |
Management and Administrative— | |
ETF Shares | 279 |
Marketing and Distribution— | |
Admiral Shares | 2 |
Marketing and Distribution— | |
ETF Shares | 45 |
Custodian Fees | 3 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 22 |
Total Expenses | 393 |
Net Investment Income | 6,594 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 32,893 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 15,703 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 55,190 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 6,594 | 7,624 |
Realized Net Gain (Loss) | 32,893 | (20,124) |
Change in Unrealized Appreciation (Depreciation) | 15,703 | 42,804 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 55,190 | 30,304 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (509) | (346) |
ETF Shares | (9,148) | (5,141) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (9,657) | (5,487) |
Capital Share Transactions | ||
Admiral Shares | 3,281 | 673 |
ETF Shares | 40,983 | 70,937 |
Net Increase (Decrease) from Capital Share Transactions | 44,264 | 71,610 |
Total Increase (Decrease) | 89,797 | 96,427 |
Net Assets | ||
Beginning of Period | 255,199 | 158,772 |
End of Period2 | 344,996 | 255,199 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed net investment income of $2,231,000 and $5,294,000.
See accompanying Notes, which are an integral part of the Financial Statements.
86
Telecommunication Services Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $29.22 | $25.77 | $31.58 | $41.01 | $33.29 | $28.18 |
Investment Operations | ||||||
Net Investment Income | .583 | 1.0241 | .8401 | .9081 | .8881 | .8611,2 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments3 | 4.967 | 3.183 | (5.977) | (9.338) | 7.308 | 5.041 |
Total from Investment Operations | 5.550 | 4.207 | (5.137) | (8.430) | 8.196 | 5.902 |
Distributions | ||||||
Dividends from Net Investment Income | (.970) | (.757) | (.673) | (1.000) | (.476) | (.792) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.970) | (.757) | (.673) | (1.000) | (.476) | (.792) |
Net Asset Value, End of Period | $33.80 | $29.22 | $25.77 | $31.58 | $41.01 | $33.29 |
Total Return4 | 19.06% | 16.40% | –15.90% | –20.98% | 24.77% | 21.47% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $20 | $14 | $12 | $19 | $51 | $6 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.27% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 4.01% | 3.60% | 3.39% | 2.50% | 2.17% | 3.28%2 |
Portfolio Turnover Rate5 | 16% | 23% | 25% | 28% | 17% | 32% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Net investment income per share and the ratio of net investment income to average net assets include $.112 and 0.38%, respectively, resulting from a special dividend from MCI in December 2005.
3 Includes increases from redemption fees of $.00, $.00, $.00, $.05, $.01, and $.00.
4 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
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.
87
Telecommunication Services Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $57.34 | $50.58 | $62.05 | $80.60 | $65.40 | $55.35 |
Investment Operations | ||||||
Net Investment Income | 1.144 | 1.9811 | 1.6021 | 1.7641 | 1.7411 | 2.0401,2 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments3 | 9.751 | 6.290 | (11.699) | (18.316) | 14.386 | 9.567 |
Total from Investment Operations | 10.895 | 8.271 | (10.097) | (16.552) | 16.127 | 11.607 |
Distributions | ||||||
Dividends from Net Investment Income | (1.905) | (1.511) | (1.373) | (1.998) | (.927) | (1.557) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.905) | (1.511) | (1.373) | (1.998) | (.927) | (1.557) |
Net Asset Value, End of Period | $66.33 | $57.34 | $50.58 | $62.05 | $80.60 | $65.40 |
Total Return | 19.06% | 16.39% | –15.88% | –20.94% | 24.81% | 21.49% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $325 | $241 | $147 | $143 | $266 | $72 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.23% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 4.01% | 3.60% | 3.42% | 2.55% | 2.21% | 3.31%2 |
Portfolio Turnover Rate4 | 16% | 23% | 25% | 28% | 17% | 32% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Net investment income per share and the ratio of net investment income to average net assets include $.219 and 0.38%, respectively, resulting from a special dividend from MCI in December 2005.
3 Includes increases from redemption fees of $.00, $.00, $.00, $.08, $.03, and $.00.
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.
88
Telecommunication Services Index Fund
Notes to Financial Statements
Vanguard Telecommunication Services Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. 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 redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $56,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
89
Telecommunication Services 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 February 28, 2011, the fund realized $31,398,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $50,032,000 to offset future net capital gains of $29,000 through August 31, 2014, $818,000 through August 31, 2015, $4,154,000 through August 31, 2016, $18,696,000 through August 31, 2017, and $26,335,000 through August 31, 2018. In addition, the fund realized losses of $19,425,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $332,376,000. Net unrealized appreciation of investment securities for tax purposes was $12,962,000, consisting of unrealized gains of $25,377,000 on securities that had risen in value since their purchase and $12,415,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $226,263,000 of investment securities and sold $184,602,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 4,167 | 126 | 3,194 | 112 |
Issued in Lieu of Cash Distributions | 449 | 14 | 304 | 11 |
Redeemed1 | (1,335) | (41) | (2,825) | (100) |
Net Increase (Decrease)—Admiral Shares | 3,281 | 99 | 673 | 23 |
ETF Shares | ||||
Issued | 199,717 | 3,300 | 86,865 | 1,600 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (158,734) | (2,600) | (15,928) | (300) |
Net Increase (Decrease)—ETF Shares | 40,983 | 700 | 70,937 | 1,300 |
1 Net of redemption fees for fiscal 2011 and 2010 of $2,000 and $3,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
90
Utilities Index Fund
Fund Profile
As of February 28, 2011
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 86 | 86 | 2,474 |
Median Market Cap | $13.1B | $13.1B | $32.2B |
Price/Earnings Ratio | 15.4x | 15.4x | 17.7x |
Price/Book Ratio | 1.5x | 1.5x | 2.3x |
Yield3 | 4.2% | 1.7% | |
Admiral Shares | 3.9% | ||
ETF Shares | 3.9% | ||
Return on Equity | 13.1% | 13.2% | 19.1% |
Earnings Growth Rate | 5.0% | 5.0% | 5.3% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 5% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.24% | ||
ETF Shares | 0.24% | ||
Short-Term Reserves | 0.0% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.55 |
Beta | 1.00 | 0.55 |
Subindustry Diversification | |
(% of equity exposure) | |
Electric | 48.0% |
Gas Utilities | 8.7 |
Independent Power Producers | |
& Energy Traders | 5.9 |
Multi-Utilities | 35.3 |
Water Utilities | 2.1 |
Ten Largest Holdings8 (% of total net assets) | |
Southern Co. | 6.4% |
Exelon Corp. | 5.6 |
Dominion Resources Inc. | 5.4 |
Duke Energy Corp. | 4.9 |
NextEra Energy Inc. | 4.5 |
PG&E Corp. | 3.7 |
American Electric Power Co. Inc. | 3.5 |
Public Service Enterprise Group Inc. | 3.4 |
FirstEnergy Corp. | 3.3 |
Consolidated Edison Inc. | 3.0 |
Top Ten | 43.7% |
1 MSCI US IMI/Utilities 25/50.
2 MSCI US IMI/2500.
3 30-day SEC yield for the fund; annualized dividend yield for the indexes. See the Glossary.
4 Annualized.
5 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.24% for the Admiral Shares and 0.24% for the ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced MSCI US IMI Utilities 25/50: MSCI US IMI Utilities through February 26, 2010; MSCI US IMI Utilities 25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
91
Utilities 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 (%): January 26, 2004—February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/ussectorindex_q4832x94x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
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 Date | One Year | Five Years | Inception | |
ETF Shares | 1/26/2004 | |||
Market Price | 7.02% | 4.09% | 7.91% | |
Net Asset Value | 6.95 | 4.08 | 7.90 | |
Admiral Shares3 | 4/28/2004 | 6.95 | 4.05 | 8.13 |
1 Six months ended February 28, 2011.
2 Spliced MSCI US IMI/Utilities 25/50: MSCI US IMI/Utilities through February 26, 2010; MSCI US IMI/Utilities 25/50 thereafter.
3 Total returns do not reflect the 2% fee assessed on redemptions of shares held for less than one year.
See Financial Highlights for dividend and capital gains information.
92
Utilities Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (100.0%) | |||
Electric Utilities (48.1%) | |||
Southern Co. | 1,474,252 | 56,184 | |
Exelon Corp. | 1,173,828 | 49,019 | |
Duke Energy Corp. | 2,350,746 | 42,290 | |
NextEra Energy Inc. | 701,145 | 38,892 | |
American Electric Power | |||
Co. Inc. | 852,373 | 30,498 | |
FirstEnergy Corp. | 741,656 | 28,405 | |
Progress Energy Inc. | 519,886 | 23,764 | |
Entergy Corp. | 321,132 | 22,865 | |
PPL Corp. | 857,792 | 21,814 | |
Edison International | 549,380 | 20,393 | |
Northeast Utilities | 312,796 | 10,648 | |
Pinnacle West Capital | |||
Corp. | 192,941 | 8,148 | |
Pepco Holdings Inc. | 398,315 | 7,460 | |
ITC Holdings Corp. | 89,947 | 6,166 | |
NV Energy Inc. | 417,402 | 6,132 | |
DPL Inc. | 210,962 | 5,489 | |
Westar Energy Inc. | 209,915 | 5,458 | |
Great Plains Energy Inc. | 240,828 | 4,624 | |
Hawaiian Electric Industries | |||
Inc. | 167,040 | 4,034 | |
Cleco Corp. | 107,728 | 3,485 | |
IDACORP Inc. | 87,227 | 3,292 | |
Portland General Electric | |||
Co. | 133,542 | 3,127 | |
UIL Holdings Corp. | 89,492 | 2,751 | |
Unisource Energy Corp. | 64,741 | 2,360 | |
Allete Inc. | 57,184 | 2,161 | |
* | El Paso Electric Co. | 75,538 | 2,123 |
PNM Resources Inc. | 153,709 | 2,046 | |
MGE Energy Inc. | 40,998 | 1,680 | |
Empire District Electric Co. | 73,462 | 1,589 | |
Otter Tail Corp. | 63,755 | 1,436 | |
Central Vermont Public | |||
Service Corp. | 22,132 | 470 | |
Unitil Corp. | 19,359 | 442 | |
419,245 | |||
Gas Utilities (8.7%) | |||
Oneok Inc. | 179,473 | 11,589 | |
National Fuel Gas Co. | 123,940 | 9,035 | |
Energen Corp. | 121,226 | 7,407 | |
UGI Corp. | 195,967 | 6,249 | |
Questar Corp. | 311,278 | 5,563 | |
Atmos Energy Corp. | 160,474 | 5,427 | |
AGL Resources Inc. | 138,541 | 5,266 | |
Nicor Inc. | 80,756 | 4,259 |
Market | |||
Value• | |||
Shares | ($000) | ||
Piedmont Natural Gas Co. | |||
Inc. | 127,955 | 3,749 | |
WGL Holdings Inc. | 90,693 | 3,446 | |
Southwest Gas Corp. | 80,918 | 3,145 | |
New Jersey Resources | |||
Corp. | 73,134 | 3,059 | |
South Jersey Industries Inc. | 53,003 | 2,908 | |
Northwest Natural Gas Co. | 47,162 | 2,217 | |
Laclede Group Inc. | 37,648 | 1,464 | |
Chesapeake Utilities Corp. | 16,066 | 656 | |
75,439 | |||
Independent Power Producers | |||
& Energy Traders (5.8%) | |||
* | AES Corp. | 1,188,901 | 14,707 |
Constellation Energy | |||
Group Inc. | 336,679 | 10,461 | |
* | Calpine Corp. | 631,191 | 9,550 |
* | NRG Energy Inc. | 438,450 | 8,764 |
* | GenOn Energy Inc. | 1,358,607 | 5,502 |
* | Dynegy Inc. Class A | 182,062 | 1,054 |
Ormat Technologies Inc. | 36,293 | 909 | |
50,947 | |||
Multi-Utilities (35.3%) | |||
Dominion Resources Inc. | 1,030,259 | 47,011 | |
PG&E Corp. | 695,861 | 32,051 | |
Public Service Enterprise | |||
Group Inc. | 897,891 | 29,361 | |
Consolidated Edison Inc. | 515,503 | 25,765 | |
Sempra Energy | 404,755 | 21,545 | |
Xcel Energy Inc. | 816,629 | 19,550 | |
DTE Energy Co. | 300,102 | 14,129 | |
Wisconsin Energy Corp. | 207,547 | 12,287 | |
Ameren Corp. | 425,520 | 11,897 | |
CenterPoint Energy Inc. | 713,280 | 11,313 | |
NiSource Inc. | 493,741 | 9,460 | |
SCANA Corp. | 214,506 | 8,683 | |
CMS Energy Corp. | 433,912 | 8,357 | |
OGE Energy Corp. | 172,940 | 8,318 | |
NSTAR | 183,751 | 8,296 | |
Alliant Energy Corp. | 196,758 | 7,748 | |
MDU Resources Group Inc. | 317,462 | 6,816 | |
Integrys Energy Group Inc. | 137,657 | 6,741 | |
TECO Energy Inc. | 362,103 | 6,558 | |
Vectren Corp. | 137,608 | 3,622 | |
Avista Corp. | 100,432 | 2,242 | |
Black Hills Corp. | 66,116 | 2,038 | |
NorthWestern Corp. | 64,263 | 1,909 | |
CH Energy Group Inc. | 28,122 | 1,380 | |
307,077 |
Market | ||
Value• | ||
Shares | ($000) | |
Water Utilities (2.1%) | ||
American Water Works | ||
Co. Inc. | 310,315 | 8,608 |
Aqua America Inc. | 244,087 | 5,497 |
California Water Service | ||
Group | 35,121 | 1,239 |
American States Water Co. | 33,068 | 1,109 |
SJW Corp. | 24,820 | 616 |
Middlesex Water Co. | 27,352 | 514 |
Connecticut Water Service | ||
Inc. | 15,423 | 393 |
17,976 | ||
Total Investments (100.0%) | ||
(Cost $901,327) | 870,684 | |
Other Assets and Liabilities (0.0%) | ||
Other Assets | 7,785 | |
Liabilities | (7,393) | |
392 | ||
Net Assets (100%) | 871,076 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 921,042 |
Undistributed Net Investment Income | 4,469 |
Accumulated Net Realized Losses | (23,792) |
Unrealized Appreciation (Depreciation) | (30,643) |
Net Assets | 871,076 |
Admiral Shares—Net Assets | |
Applicable to 5,457,126 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 189,515 |
Net Asset Value Per Share— | |
Admiral Shares | $34.73 |
ETF Shares—Net Assets | |
Applicable to 9,850,225 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 681,561 |
Net Asset Value Per Share— | |
ETF Shares | $69.19 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
See accompanying Notes, which are an integral part of the Financial Statements.
93
Utilities Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 16,148 |
Security Lending | 5 |
Total Income | 16,153 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 59 |
Management and Administrative— | |
Admiral Shares | 165 |
Management and Administrative— | |
ETF Shares | 575 |
Marketing and Distribution— | |
Admiral Shares | 18 |
Marketing and Distribution— | |
ETF Shares | 99 |
Custodian Fees | 18 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 22 |
Total Expenses | 956 |
Net Investment Income | 15,197 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | (571) |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 51,990 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 66,616 |
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 15,197 | 23,844 |
Realized Net Gain (Loss) | (571) | 4,109 |
Change in Unrealized Appreciation (Depreciation) | 51,990 | 23,581 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 66,616 | 51,534 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (3,309) | (4,081) |
ETF Shares | (12,665) | (17,757) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (15,974) | (21,838) |
Capital Share Transactions | ||
Admiral Shares | 26,061 | 66,315 |
ETF Shares | 60,486 | 193,359 |
Net Increase (Decrease) from Capital Share Transactions | 86,547 | 259,674 |
Total Increase (Decrease) | 137,189 | 289,370 |
Net Assets | ||
Beginning of Period | 733,887 | 444,517 |
End of Period1 | 871,076 | 733,887 |
1 Net Assets—End of Period includes undistributed net investment income of $4,469,000 and $5,246,000.
See accompanying Notes, which are an integral part of the Financial Statements.
94
Utilities Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $32.60 | $30.73 | $39.26 | $40.60 | $36.47 | $34.03 |
Investment Operations | ||||||
Net Investment Income | .625 | 1.2931 | 1.251 | 1.126 | 1.080 | 1.0801 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | 2.187 | 1.782 | (8.530) | (1.340) | 4.089 | 2.378 |
Total from Investment Operations | 2.812 | 3.075 | (7.279) | (.214) | 5.169 | 3.458 |
Distributions | ||||||
Dividends from Net Investment Income | (.682) | (1.205) | (1.251) | (1.126) | (1.039) | (1.018) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.682) | (1.205) | (1.251) | (1.126) | (1.039) | (1.018) |
Net Asset Value, End of Period | $34.73 | $32.60 | $30.73 | $39.26 | $40.60 | $36.47 |
Total Return3 | 8.73% | 10.20% | –18.39% | –0.69% | 14.33% | 10.48% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $190 | $153 | $81 | $109 | $108 | $52 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.28% | 0.25% | 0.26% | 0.28% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.80% | 4.07% | 4.28% | 2.75% | 2.70% | 3.26% |
Portfolio Turnover Rate4 | 5% | 8% | 10% | 18% | 12% | 9% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Includes increases from redemption fees of $.00, $.00, $.01, $.02, $.02, and $.04.
3 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
4 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
95
Utilities Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 28, | Year Ended August 31, | ||||
Throughout Each Period | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $64.93 | $61.24 | $78.22 | $80.92 | $72.68 | $67.80 |
Investment Operations | ||||||
Net Investment Income | 1.245 | 2.5541 | 2.512 | 2.285 | 2.180 | 2.2141 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | 4.368 | 3.550 | (16.978) | (2.695) | 8.156 | 4.704 |
Total from Investment Operations | 5.613 | 6.104 | (14.466) | (.410) | 10.336 | 6.918 |
Distributions | ||||||
Dividends from Net Investment Income | (1.353) | (2.414) | (2.514) | (2.290) | (2.096) | (2.038) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.353) | (2.414) | (2.514) | (2.290) | (2.096) | (2.038) |
Net Asset Value, End of Period | $69.19 | $64.93 | $61.24 | $78.22 | $80.92 | $72.68 |
Total Return | 8.73% | 10.18% | –18.34% | –0.66% | 14.37% | 10.52% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $682 | $581 | $364 | $371 | $285 | $183 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.24% | 0.24% | 0.25% | 0.20% | 0.22% | 0.25% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.80% | 4.07% | 4.31% | 2.80% | 2.74% | 3.29% |
Portfolio Turnover Rate3 | 5% | 8% | 10% | 18% | 12% | 9% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
2 Includes increases from redemption fees of $.00, $.01, $.02, $.04, $.03, and $.06.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
96
Utilities Index Fund
Notes to Financial Statements
Vanguard Utilities Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Admiral Shares and ETF Shares. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2007–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. Other: Dividend income is recorded on the ex-dividend date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold. Fees assessed on redemptions of capital shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $143,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.06% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
97
Utilities 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 February 28, 2011, the fund realized $1,426,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $18,385,000 to offset future net capital gains of $515,000 through August 31, 2015, $2,910,000 through August 31, 2017, and $14,960,000 through August 31, 2018. In addition, the fund realized losses of $3,314,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $901,327,000. Net unrealized depreciation of investment securities for tax purposes was $30,643,000, consisting of unrealized gains of $50,606,000 on securities that had risen in value since their purchase and $81,249,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $113,247,000 of investment securities and sold $27,857,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 34,425 | 1,013 | 88,042 | 2,749 |
Issued in Lieu of Cash Distributions | 2,193 | 66 | 3,417 | 109 |
Redeemed1 | (10,557) | (311) | (25,144) | (800) |
Net Increase (Decrease)—Admiral Shares | 26,061 | 768 | 66,315 | 2,058 |
ETF Shares | ||||
Issued | 67,368 | 1,001 | 243,210 | 3,810 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (6,882) | (100) | (49,851) | (800) |
Net Increase (Decrease)—ETF Shares | 60,486 | 901 | 193,359 | 3,010 |
1 Net of redemption fees for fiscal 2011 and 2010 of $11,000 and $70,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential 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 examples on this page 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 the 2% fee on redemptions of Admiral Shares held for less than one year. If this fee were applied to your account, your costs would be higher. Your fund does not carry a “sales load.” The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
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Six Months Ended February 28, 2011 | ||||
Beginning | Ending | Expenses | ||
Account Value | Account Value | Paid During | ||
Index Fund | Share Class | 8/31/2010 | 2/28/2011 | Period1 |
Based on Actual Fund Return | ||||
Consumer Discretionary | Admiral | $1,000.00 | $1,335.18 | $1.39 |
ETF | 1,000.00 | 1,335.41 | 1.39 | |
Consumer Staples | Admiral | $1,000.00 | $1,141.93 | $1.27 |
ETF | 1,000.00 | 1,142.02 | 1.27 | |
Energy | Admiral | $1,000.00 | $1,542.59 | $1.51 |
ETF | 1,000.00 | 1,542.57 | 1.51 | |
Financials | Admiral | $1,000.00 | $1,252.87 | $1.34 |
ETF | 1,000.00 | 1,251.97 | 1.34 | |
Health Care | Admiral | $1,000.00 | $1,200.19 | $1.31 |
ETF | 1,000.00 | 1,200.19 | 1.31 | |
Industrials | Admiral | $1,000.00 | $1,349.93 | $1.40 |
ETF | 1,000.00 | 1,349.91 | 1.40 | |
Information Technology | Admiral | $1,000.00 | $1,332.66 | $1.39 |
ETF | 1,000.00 | 1,332.88 | 1.39 | |
Materials | Admiral | $1,000.00 | $1,332.20 | $1.39 |
ETF | 1,000.00 | 1,331.97 | 1.39 | |
Telecommunication Services | Admiral | $1,000.00 | $1,190.58 | $1.30 |
ETF | 1,000.00 | 1,190.57 | 1.30 | |
Utilities | Admiral | $1,000.00 | $1,087.33 | $1.24 |
ETF | 1,000.00 | 1,087.29 | 1.24 | |
Based on Hypothetical 5% Yearly Return | ||||
Consumer Discretionary | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Consumer Staples | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Energy | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Financials | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Health Care | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Industrials | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Information Technology | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Materials | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Telecommunication Services | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 | |
Utilities | Admiral | $1,000.00 | $1,023.60 | $1.20 |
ETF | 1,000.00 | 1,023.60 | 1.20 |
1 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 0.24% for the Consumer Discretionary Index Fund Admiral Shares and 0.24% for the ETF Shares; 0.24% for the Consumer Staples Index Fund Admiral Shares and 0.24% for the ETF Shares; 0.24% for the Energy Index Fund Admiral Shares and 0.24% for the ETF Shares; 0.24% for the Financials Index Fund Admiral Shares and 0.24% for the ETF Shares; 0.24% for the Health Care Index Fund Admiral Shares and 0.24% for the ETF Shares; 0.24% for the Industrials Index Fund Admiral Shares and 0.24% for the ETF Shares; 0.24% for the Information Technology Index Fund Admiral Shares and 0.24% for the ETF Shares; 0.24% for the Materials Index Fund Admiral Shares and 0.24% for the ETF
Shares; 0.24% for the Telecommunication Services Index Fund Admiral Shares and 0.24% for the ETF Shares; 0.24% for the Utilities Index Fund Admiral Shares and 0.24% for the 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.
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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 below). 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.
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. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Foreign Holdings. The percentage of a fund represented by stocks 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.
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.
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 (in the case of bonds) 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.
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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 179 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the Board. Principal Occupation(s) During the Past Five Years: 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).
Independent Trustees
Emerson U. Fullwood
Born 1948. Trustee Since January 2008. Principal Occupation(s) During the Past Five Years: 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 2010 Distinguished Minett Professor at the Rochester Institute of Technology; Director of SPX Corporation (multi-industry manufacturing), the United Way of Rochester, Amerigroup Corporation (managed health care), the University of Rochester Medical Center, Monroe Community College Foundation, and North Carolina A&T University.
Rajiv L. Gupta
Born 1945. Trustee Since December 2001.2 Principal Occupation(s) During the Past Five Years: Chairman and Chief Executive Officer (retired 2009) and President (2006–2008) of Rohm and Haas Co. (chemicals); Director of Tyco International, Ltd. (diversified manufacturing and services) and Hewlett-Packard Co. (electronic computer manufacturing); Senior Advisor at New Mountain Capital; Trustee of The Conference Board; Member of the Board of Managers of Delphi Automotive LLP (automotive components).
Amy Gutmann
Born 1949. Trustee Since June 2006. Principal Occupation(s) During the Past Five Years: President of the University of Pennsylvania; Christopher H. Browne Distinguished Professor of Political Science in the School of Arts and Sciences with secondary appointments at the Annenberg School for Communication and the Graduate School of Education of the University of Pennsylvania; Director of Carnegie Corporation of New York, Schuylkill River Development Corporation, and Greater Philadelphia Chamber of Commerce; 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: Corporate Vice President and Chief Global Diversity Officer (retired 2008) and Member of the Executive Committee (1997–2008) of Johnson & Johnson (pharmaceuticals/consumer products); Director of Skytop Lodge Corporation (hotels), the University Medical Center at Princeton, the Robert Wood Johnson Foundation, and the Center for Work Life Policy; Member of the Advisory Board of the Maxwell School of Citizenship and Public Affairs at Syracuse University.
F. Joseph Loughrey
Born 1949. Trustee Since October 2009. Principal Occupation(s) During the Past Five Years: President and Chief Operating Officer (retired 2009) and Vice Chairman of the Board (2008–2009) of Cummins Inc. (industrial machinery); Director of SKF AB (industrial machinery), Hillenbrand, Inc. (specialized consumer services), the Lumina Foundation for Education, and Oxfam America; Chairman of the Advisory Council for the College of Arts and Letters and Member of the Advisory Board to the Kellogg Institute for International Studies at the University of Notre Dame
André F. Perold
Born 1952. Trustee Since December 2004. Principal Occupation(s) During the Past Five Years: George Gund Professor of Finance and Banking at the Harvard Business School; Chair of the Investment Committee of HighVista Strategies LLC (private investment firm).
Alfred M. Rankin, Jr.
Born 1941. Trustee Since January 1993. Principal Occupation(s) During the Past Five Years: Chairman, President, and Chief Executive Officer of NACCO Industries, Inc. (forklift trucks/housewares/lignite); Director of Goodrich Corporation (industrial products/aircraft systems and services) and the National Association of Manufacturers; Chairman of the Federal Reserve Bank of Cleveland; Vice Chairman of University Hospitals of Cleveland; President of the Board of The Cleveland Museum of Art.
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal Occupation(s) During the Past Five Years: President and Chief Operating Officer (retired 2010) of Corning Incorporated (communications equipment); Director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010); Overseer of the Amos Tuck School of Business Administration at Dartmouth College.
Executive Officers
Glenn Booraem
Born 1967. Controller Since July 2010. Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group, Inc.; Controller of each of the investment companies served by The Vanguard Group since 2010; Assistant Controller of each of the investment companies served by The Vanguard Group (2001–2010).
Thomas J. Higgins
Born 1957. Chief Financial Officer Since September 2008. Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group, Inc.; Chief Financial Officer of each of the investment companies served by The Vanguard Group since 2008; Treasurer of each of the investment companies served by The Vanguard Group (1998–2008).
Kathryn J. Hyatt
Born 1955. Treasurer Since November 2008. Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group since 2008; Assistant Treasurer of each of the investment companies served by The Vanguard Group (1988–2008).
Heidi Stam
Born 1956. Secretary Since July 2005. Principal Occupation(s) During the Past Five Years: Managing Director of The Vanguard Group, Inc., since 2006; General Counsel of The Vanguard Group since 2005; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group since 2005; Director and Senior Vice President of Vanguard Marketing Corporation since 2005; Principal of The Vanguard Group (1997–2006).
Vanguard Senior Management Team | |
R. Gregory Barton | Michael S. Miller |
Mortimer J. Buckley | James M. Norris |
Kathleen C. Gubanich | Glenn W. Reed |
Paul A. Heller | George U. Sauter |
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, Vanguard Growth Equity 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 | All comparative mutual fund data are from Lipper Inc. |
Direct Investor Account Services > 800-662-2739 | or Morningstar, Inc., unless otherwise noted. |
Institutional Investor Services > 800-523-1036 | You can obtain a free copy of Vanguard’s proxy voting |
Text Telephone for People | guidelines by visiting vanguard.com/proxyreporting or |
With Hearing Impairment > 800-749-7273 | 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 | |
This material may be used in conjunction | either vanguard.com/proxyreporting or sec.gov. |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by the | You can review and copy information about your fund |
fund’s current prospectus. | at the SEC’s Public Reference Room in Washington, D.C. |
To find out more about this public service, call the SEC | |
The funds or securities referred to herein are not | at 202-551-8090. Information about your fund is also |
sponsored, endorsed, or promoted by MSCI, and | available on the SEC’s website, and you can receive |
MSCI bears no liability with respect to any such funds or | copies of this information, for a fee, by sending a |
securities. For any such funds or securities, the prospectus | request in either of two ways: via e-mail addressed to |
or the Statement of Additional Information contains a more | publicinfo@sec.gov or via regular mail addressed to the |
detailed description of the limited relationship MSCI has | Public Reference Section, Securities and Exchange |
with The Vanguard Group and any related funds. | Commission, Washington, DC 20549-1520. |
© 2011 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q4832-042011 |
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Vanguard Extended Duration Treasury |
Index Fund Semiannual Report |
February 28, 2011 |
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> For the six months ended February 28, 2011, Vanguard Extended Duration Treasury Index Fund returned about –21%.
> The fund’s performance reflected investor concern about the potential for higher inflation, which boosted the yields and reduced prices of long-term U.S. Treasury securities.
> The bond market’s expectations for the 10-year average annual inflation rate rose during the period from 1.55% to 2.41%.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Fund Profile. | 6 |
Performance Summary. | 7 |
Financial Statements. | 8 |
About Your Fund’s Expenses. | 17 |
Glossary. | 19 |
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.
Cover photograph: Jean Maher.
Your Fund’s Total Returns
Six Months Ended February 28, 2011 | ||||
30-Day SEC | Income | Capital | Total | |
Yields | Returns | Returns | Returns | |
Vanguard Extended Duration Treasury Index Fund | ||||
Institutional Shares | 4.73% | 1.77% | -22.82% | -21.05% |
ETF Shares | 4.71 | |||
Market Price | -21.32 | |||
Net Asset Value | -21.04 | |||
Barclays Capital U.S. Treasury STRIPS 20–30 Year | ||||
Equal Par Bond Index | -21.08 | |||
General U.S. Treasury Funds Average | -7.06 | |||
General U.S. Treasury Funds Average: Derived from data provided by Lipper Inc. |
Institutional Shares are available to certain institutional investors who meet specific administrative, service, and account-size criteria. 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. No. 6,879,964 B2; 7,337,138.
For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares' market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares' market price was above or below the NAV.
Your Fund’s Performance at a Glance | ||||
August 31, 2010 , Through February 28, 2011 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Extended Duration Treasury Index | ||||
Fund | ||||
Institutional Shares | $31.18 | $24.01 | $0.589 | $0.068 |
ETF Shares | 103.39 | 79.61 | 1.941 | 0.225 |
1
Chairman’s Letter
Dear Shareholder,
Vanguard Extended Duration Treasury Index Fund returned about –21% for the six months ended February 28, 2011, a result that was in line with its benchmark index.
The outsized decline is consistent with the volatility to be expected from a long-duration fund (the fund’s duration, a measure of interest rate sensitivity, was about 28 years as of February 28). The fund’s duration makes it extremely sensitive to changing interest rates, which in this period rose because of higher inflation expectations. For example, its most recent return of –21% was preceded by a return of almost 32% for the six months ended August 31, 2010, and of about –8% for the six months before that.
The inflationary expectations during this latest reporting period arose from a confluence of factors, including an extraordinary Federal Reserve bond-buying program, a strengthening economy, extensions of federal tax cuts, and concerns about burgeoning U.S. deficits.
Interest rates rose, depressing bond prices
U.S. interest rates hovered near generational lows early in the period, but then moved higher, putting pressure on bond prices. For the six months, the broad taxable bond market produced a small negative return. The municipal bond market did worse. Corporate bonds outperformed government debt, as
2
investors stretched for yield beyond government securities, where rates remained low by historical standards.
As it has since December 2008, the Federal Reserve held its target for short-term interest rates near 0%. This stance kept the returns available from money market instruments, such as the 3-month Treasury bill, in the same neighborhood. In November, the Fed began a program aimed at lowering long-term interest rates.
A fretful start, an optimistic finish for global stock markets
Stock markets rallied from their midsummer malaise to produce exceptional returns for the six months. At the start of the period, the U.S. economy seemed in danger of tipping back into recession. By the end, hopes were high that it had reached escape velocity, propelled by steady job growth and notable strength in the manufacturing sector. Smaller stocks, which are especially sensitive to the rhythms of the business cycle, produced the highest six-month returns.
In Europe, investor optimism subdued sovereign-debt jitters, driving stock prices higher. Developed markets in the Pacific region perked up on signs of recovery in global trade. Australian stocks posted especially strong returns, benefiting from a surge in the prices of metals and other natural resources. Emerging stock markets trailed a few steps behind their developed-market counterparts. Most major
Market Barometer | |||
Total Returns | |||
Periods Ended February 28, 2011 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | -0.83% | 4.93% | 5.80% |
Barclays Capital Municipal Bond Index (Broad tax-exempt | |||
market) | -3.51 | 1.72 | 4.07 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.06 | 0.14 | 2.16 |
Stocks | |||
Russell 1000 Index (Large-caps) | 28.65% | 23.54% | 3.17% |
Russell 2000 Index (Small-caps) | 37.55 | 32.60 | 3.80 |
Dow Jones U.S. Total Stock Market Index | 29.24 | 24.45 | 3.59 |
MSCI All Country World Index ex USA (International) | 22.16 | 21.12 | 4.23 |
CPI | |||
Consumer Price Index | 1.37% | 2.11% | 2.18% |
3
currencies appreciated relative to the U.S. dollar, enhancing returns from abroad for U.S.-based investors.
The fund’s returns slid for most of the period
To put the most recent six months into perspective, it may be helpful to step back a bit.
For some months before the start of this reporting period, the fund’s yield (and Treasury yields in general) had been declining as investors grew concerned about the possibility that some financially stretched European nations would default on their debt payments, the snail’s pace of the economic recovery in the United States, and the prospect of deflation.
As European officials worked through their immediate problems, Federal Reserve officials began suggesting that they would take steps to stimulate the U.S. economy through a massive bond-buying program aimed at lowering longer-term interest rates. The Fed’s program was made official in the fall as Congress extended federal tax cuts, politicians’ concerns about the U.S. budget deficits filled the headlines, and the U.S. economy showed signs of strengthening.
Because of all these potentially stimulative forces, investors raised their expectations for inflation, as evidenced by changes in the “break-even” inflation rate, a bond-market gauge that compares the yields of conventional and inflation-protected
Expense Ratios | ||
Institutional | ETF | |
Shares | Shares | |
Extended Duration Treasury Index Fund | 0.11% | 0.13% |
The fund expense ratios shown are from the prospectuses dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.11% for Institutional Shares and 0.13% for ETF Shares.
4
Treasuries. At the start of the reporting period, the break-even rate showed that investors expected inflation over ten years to average 1.55% annually. By the end of the period, the break-even inflation rate had risen to 2.41%.
Long-term Treasury yields began to move higher at the Fed’s first hint of the bond-buying program, and—because of the inverse relationship between bond prices and yields—bond returns declined. For the Extended Duration Treasury Index Fund, the rising yields produced a double-digit negative return for the period as a whole, despite an uptick as the six months drew to a close.
A mutual fund that has the right kind of volatility
As we’ve noted, the Extended Duration Treasury Index Fund is volatile, a quality that’s just fine given the fund’s primary intended use—to help managers of defined benefit pension plans limit volatility in the ratio of a plan’s assets to its liabilities. When the fund is used in this way, the value of its assets should move in the same direction as the value of the pension plan’s future liabilities, because these values react similarly to changes in interest rates.
The fund, in essence, has the kind of volatility that matches the task at hand. Moreover, the Extended Duration Treasury Index Fund offers pension-plan sponsors the benefits of a cost structure that is among the lowest in the industry.
Thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/extendedduration_q12752x7x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 19, 2011
5
Extended Duration Treasury Index Fund
Fund Profile
As of February 28, 2011
Share-Class Characteristics | ||
Institutional | ETF | |
Shares | Shares | |
Ticker Symbol | VEDTX | EDV |
Expense Ratio1 | 0.11% | 0.13% |
30-Day SEC Yield | 4.73% | 4.71% |
Financial Attributes | ||
Barclays | ||
Treasury | ||
STRIPS | ||
20–30 Year | ||
Fund | Index | |
Number of Bonds | 53 | 54 |
Yield to Maturity | ||
(before expenses) | 4.8% | 4.8% |
Average Coupon | 0.0% | 0.0% |
Average Duration | 27.5 years | 27.1 years |
Average Effective | ||
Maturity | 25.4 years | 25.0 years |
Short-Term | ||
Reserves | 0.0% | — |
Sector Diversification (% of portfolio) | |
Treasury/Agency | 100.0% |
The agency and mortgage-backed securities sectors may include issues from government-sponsored enterprises; such issues are not backed by the full faith and credit of the U.S. government.
Volatility Measures | |
Barclays | |
Treasury | |
STRIPS | |
20–30 Year | |
Index | |
R-Squared | 1.00 |
Beta | 0.99 |
These measures show the degree and timing of the fund’s fluctuations compared with the index over 36 months.
Distribution by Maturity (% of portfolio) | |
20 - 30 Years | 100.0% |
Distribution by Credit Quality (% of portfolio) | |
Aaa | 100.0% |
For information about these ratings, see the Glossary entry for Credit Quality.
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/extendedduration_q12752x8x1.jpg)
1 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.11% for Institutional Shares and 0.13% for ETF Shares.
6
Extended Duration Treasury 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 (%): December 6, 2007, Through February 28, 2011 | ||
Barclays | ||
Treasury | ||
STRIPS | ||
20–30 Year | ||
ETF Shares Net Asset Value | Index | |
Fiscal Year | Total Returns | Total Returns |
2008 | 2.29% | 3.16% |
2009 | 7.98 | 8.39 |
2010 | 20.80 | 21.48 |
2011 | -21.04 | -21.08 |
Note: For 2011, performance data reflect the six months ended February 28, 2011. |
Average Annual Total Returns: Periods Ended December 31, 2010
This table presents average annual total 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 | |
Institutional Shares | 11/28/2007 | 10.28% | 3.98% | -1.70% | 2.28% |
ETF Shares | 12/6/2007 | ||||
Market Price | 9.93 | 2.87 | |||
Net Asset Value | 10.27 | 2.90 |
Except for the ETF Shares, Vanguard fund returns are adjusted to reflect the 0.25% fee on purchases of fund shares. The fee does not apply to the ETF Shares.
See Financial Highlights for dividend and capital gains information.
7
Extended Duration Treasury Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
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) | |
U.S. Government and Agency Obligations (100.1%) | ||||
U.S. Government Securities (100.1%) | ||||
United States Treasury Strip Coupon | 0.000% | 5/15/31 | 27,360 | 10,549 |
United States Treasury Strip Coupon | 0.000% | 8/15/31 | 28,133 | 10,702 |
United States Treasury Strip Coupon | 0.000% | 11/15/31 | 24,935 | 9,376 |
United States Treasury Strip Coupon | 0.000% | 2/15/32 | 26,345 | 9,778 |
United States Treasury Strip Coupon | 0.000% | 5/15/32 | 27,420 | 10,051 |
United States Treasury Strip Coupon | 0.000% | 8/15/32 | 27,060 | 9,773 |
United States Treasury Strip Coupon | 0.000% | 11/15/32 | 24,915 | 8,892 |
United States Treasury Strip Coupon | 0.000% | 2/15/33 | 26,760 | 9,416 |
United States Treasury Strip Coupon | 0.000% | 5/15/33 | 26,470 | 9,180 |
United States Treasury Strip Coupon | 0.000% | 8/15/33 | 25,640 | 8,778 |
United States Treasury Strip Coupon | 0.000% | 11/15/33 | 27,480 | 9,294 |
United States Treasury Strip Coupon | 0.000% | 2/15/34 | 27,155 | 9,052 |
United States Treasury Strip Coupon | 0.000% | 5/15/34 | 25,705 | 8,479 |
United States Treasury Strip Coupon | 0.000% | 8/15/34 | 26,950 | 8,769 |
United States Treasury Strip Coupon | 0.000% | 11/15/34 | 27,050 | 8,692 |
United States Treasury Strip Coupon | 0.000% | 2/15/35 | 27,345 | 8,667 |
United States Treasury Strip Coupon | 0.000% | 5/15/35 | 26,015 | 8,138 |
United States Treasury Strip Coupon | 0.000% | 8/15/35 | 26,380 | 8,137 |
United States Treasury Strip Coupon | 0.000% | 11/15/35 | 29,025 | 8,841 |
United States Treasury Strip Coupon | 0.000% | 2/15/36 | 34,275 | 10,315 |
United States Treasury Strip Coupon | 0.000% | 5/15/36 | 26,820 | 7,975 |
United States Treasury Strip Coupon | 0.000% | 8/15/36 | 29,750 | 8,727 |
United States Treasury Strip Coupon | 0.000% | 11/15/36 | 27,070 | 7,848 |
United States Treasury Strip Coupon | 0.000% | 2/15/37 | 33,340 | 9,538 |
United States Treasury Strip Coupon | 0.000% | 5/15/37 | 26,000 | 7,349 |
United States Treasury Strip Coupon | 0.000% | 8/15/37 | 26,885 | 7,496 |
United States Treasury Strip Coupon | 0.000% | 11/15/37 | 24,620 | 6,786 |
United States Treasury Strip Coupon | 0.000% | 2/15/38 | 28,150 | 7,655 |
United States Treasury Strip Coupon | 0.000% | 5/15/38 | 35,485 | 9,526 |
United States Treasury Strip Coupon | 0.000% | 8/15/38 | 24,925 | 6,601 |
United States Treasury Strip Coupon | 0.000% | 11/15/38 | 26,450 | 6,916 |
United States Treasury Strip Coupon | 0.000% | 2/15/39 | 24,000 | 6,195 |
United States Treasury Strip Coupon | 0.000% | 5/15/39 | 22,500 | 5,748 |
United States Treasury Strip Coupon | 0.000% | 8/15/39 | 25,470 | 6,423 |
United States Treasury Strip Coupon | 0.000% | 11/15/39 | 29,895 | 7,448 |
United States Treasury Strip Coupon | 0.000% | 2/15/40 | 16,600 | 4,089 |
United States Treasury Strip Coupon | 0.000% | 5/15/40 | 12,445 | 3,021 |
United States Treasury Strip Coupon | 0.000% | 8/15/40 | 8,100 | 1,947 |
United States Treasury Strip Coupon | 0.000% | 11/15/40 | 16,000 | 3,800 |
8
Extended Duration Treasury Index Fund
Face | Market | |||
Maturity | Amount | Value | ||
Coupon | Date | ($000) | ($000) | |
United States Treasury Strip Principal | 0.000% | 2/15/36 | 17,570 | 5,465 |
United States Treasury Strip Principal | 0.000% | 2/15/37 | 20,450 | 6,052 |
United States Treasury Strip Principal | 0.000% | 5/15/37 | 28,520 | 8,342 |
United States Treasury Strip Principal | 0.000% | 2/15/38 | 23,700 | 6,623 |
United States Treasury Strip Principal | 0.000% | 5/15/38 | 18,495 | 5,102 |
United States Treasury Strip Principal | 0.000% | 2/15/39 | 28,385 | 7,540 |
United States Treasury Strip Principal | 0.000% | 5/15/39 | 29,810 | 7,788 |
United States Treasury Strip Principal | 0.000% | 8/15/39 | 27,400 | 7,058 |
United States Treasury Strip Principal | 0.000% | 11/15/39 | 21,600 | 5,493 |
United States Treasury Strip Principal | 0.000% | 2/15/40 | 39,440 | 9,914 |
United States Treasury Strip Principal | 0.000% | 5/15/40 | 40,300 | 9,996 |
United States Treasury Strip Principal | 0.000% | 8/15/40 | 43,185 | 10,608 |
United States Treasury Strip Principal | 0.000% | 11/15/40 | 38,865 | 9,398 |
United States Treasury Strip Principal | 0.000% | 2/15/41 | 57,500 | 13,701 |
Total U.S. Government and Agency Obligations (Cost $454,786) | 423,047 | |||
Shares | ||||
Temporary Cash Investment (0.0%) | ||||
Money Market Fund (0.0%) | ||||
1 Vanguard Market Liquidity Fund (Cost $55) | 0.213% | 55,000 | 55 | |
Total Investments (100.1%) (Cost $454,841) | 423,102 | |||
Other Assets and Liabilities (-0.1%) | ||||
Other Assets | 17,991 | |||
Liabilities | (18,347) | |||
(356) | ||||
Net Assets (100%) | 422,746 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 452,617 |
Undistributed Net Investment Income | 2,847 |
Accumulated Net Realized Losses | (979) |
Unrealized Appreciation (Depreciation) | (31,739) |
Net Assets | 422,746 |
Institutional Shares—Net Assets | |
Applicable to 12,467,675 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 299,353 |
Net Asset Value Per Share—Institutional Shares | $24.01 |
ETF Shares—Net Assets | |
Applicable to 1,550,000 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 123,393 |
Net Asset Value Per Share—ETF Shares | $79.61 |
See Note A in Notes to Financial Statements.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
See accompanying Notes, which are an integral part of the Financial Statements.
9
Extended Duration Treasury Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Interest1 | 8,907 |
Total Income | 8,907 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 25 |
Management and Administrative—Institutional Shares | 86 |
Management and Administrative—ETF Shares | 46 |
Marketing and Distribution—Institutional Shares | 38 |
Marketing and Distribution—ETF Shares | 25 |
Custodian Fees | 1 |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 7 |
Total Expenses | 228 |
Net Investment Income | 8,679 |
Realized Net Gain (Loss) on Investment Securities Sold | 1,187 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | (106,981) |
Net Increase (Decrease) in Net Assets Resulting from Operations | (97,115) |
1 Interest income from an affiliated company of the fund was $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
10
Extended Duration Treasury Index Fund
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 8,679 | 12,844 |
Realized Net Gain (Loss) | 1,187 | 2,320 |
Change in Unrealized Appreciation (Depreciation) | (106,981) | 69,415 |
Net Increase (Decrease) in Net Assets Resulting from Operations | (97,115) | 84,579 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (5,675) | (7,703) |
ETF Shares | (3,106) | (3,636) |
Realized Capital Gain1 | ||
Institutional Shares | (675) | (18,983) |
ETF Shares | (360) | (9,997) |
Total Distributions | (9,816) | (40,319) |
Capital Share Transactions | ||
Institutional Shares | 80,490 | 105,367 |
ETF Shares | (12,825) | 115,593 |
Net Increase (Decrease) from Capital Share Transactions | 67,665 | 220,960 |
Total Increase (Decrease) | (39,266) | 265,220 |
Net Assets | ||
Beginning of Period | 462,012 | 196,792 |
End of Period2 | 422,746 | 462,012 |
1 Includes fiscal 2011 and 2010 short-term gain distributions totaling $122,000 and $28,980,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed net investment income of $2,847,000 and $2,949,000.
See accompanying Notes, which are an integral part of the Financial Statements.
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/extendedduration_q12752x13x1.jpg)
Extended Duration Treasury Index Fund
Financial Highlights
Institutional Shares | ||||
Six Months | Nov. 28, | |||
Ended | Year Ended | 20071 to | ||
February 28, | August 31, | Aug. 31, | ||
For a Share Outstanding Throughout Each Period | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $31.18 | $30.69 | $29.52 | $30.00 |
Investment Operations | ||||
Net Investment Income | .5482 | 1.1732 | 1.2732 | 1.0232 |
Net Realized and Unrealized Gain (Loss) on Investments3 | (7.061) | 3.796 | 1.221 | (.928) |
Total from Investment Operations | (6.513) | 4.969 | 2.494 | .095 |
Distributions | ||||
Dividends from Net Investment Income | (.589) | (1.134) | (1.324) | (.575) |
Distributions from Realized Capital Gains | (.068) | (3.345) | — | — |
Total Distributions | (.657) | (4.479) | (1.324) | (.575) |
Net Asset Value, End of Period | $24.01 | $31.18 | $30.69 | $29.52 |
Total Return4 | -21.05% | 20.84% | 8.05% | 0.39% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $299 | $286 | $151 | $258 |
Ratio of Total Expenses to Average Net Assets | 0.11% | 0.11% | 0.11% | 0.11%5 |
Ratio of Net Investment Income to Average Net Assets | 4.43% | 4.41% | 3.93% | 4.55%5 |
Portfolio Turnover Rate6 | 18% | 24% | 39% | 36% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 Includes increases from purchase fees of $.01, $.00, $.01, and $.03.
4 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.
5 Annualized.
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.
12
Extended Duration Treasury Index Fund
Financial Highlights
ETF Shares | ||||
Six Months | Dec. 6, | |||
Ended | Year Ended | 20071 to | ||
February 28, | August 31, | Aug. 31, | ||
For a Share Outstanding Throughout Each Period | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $103.39 | $101.91 | $98.11 | $97.78 |
Investment Operations | ||||
Net Investment Income | 1.8362 | 3.9212 | 4.3172 | 3.1662 |
Net Realized and Unrealized Gain (Loss) on Investments3 | (23.450) | 12.419 | 3.880 | (.983) |
Total from Investment Operations | (21.614) | 16.340 | 8.197 | 2.183 |
Distributions | ||||
Dividends from Net Investment Income | (1.941) | (3.752) | (4.397) | (1.853) |
Distributions from Realized Capital Gains | (.225) | (11.108) | — | — |
Total Distributions | (2.166) | (14.860) | (4.397) | (1.853) |
Net Asset Value, End of Period | $79.61 | $103.39 | $101.91 | $98.11 |
Total Return | -21.04% | 20.80% | 7.98% | 2.29% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $123 | $176 | $46 | $5 |
Ratio of Total Expenses to Average Net Assets | 0.13% | 0.13% | 0.14% | 0.14%4 |
Ratio of Net Investment Income to Average Net Assets | 4.41% | 4.39% | 3.90% | 4.52%4 |
Portfolio Turnover Rate5 | 18% | 24% | 39% | 36% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 Includes increases from purchase fees of $.04, $.01, $.02, and $.11.
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.
13
Extended Duration Treasury Index Fund
Notes to Financial Statements
Vanguard Extended Duration Treasury Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers three classes of shares: Institutional Shares, Institutional Plus Shares, and ETF Shares. Institutional Shares and Institutional Plus Shares are designed for investors who meet certain administrative, service, and account-size criteria. The fund has not issued any Institutional Plus Shares through February 28, 2011. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Bonds, and temporary cash investments acquired over 60 days to maturity, are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2008–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. 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 purchases of Institutional Shares 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. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $67,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.03% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
14
Extended Duration Treasury Index Fund
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 fund’s investments as of February 28, 2011, based on the inputs
used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 423,047 | — |
Temporary Cash Investments | 55 | — | — |
Total | 55 | 423,047 | — |
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. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
During the six months ended February 28, 2011, the fund realized $2,139,000 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.
At February 28, 2011, the cost of investment securities for tax purposes was $454,841,000. Net unrealized depreciation of investment securities for tax purposes was $31,739,000, consisting of unrealized gains of $43,000 on securities that had risen in value since their purchase and $31,782,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 28, 2011, the fund purchased $122,055,000 of investment securities and sold $64,191,000 of investment securities, other than temporary cash investments.
15
Extended Duration Treasury Index Fund
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued1 | 79,637 | 3,262 | 94,827 | 3,768 |
Issued in Lieu of Cash Distributions | 6,250 | 240 | 25,988 | 1,069 |
Redeemed | (5,397) | (216) | (15,448) | (573) |
Net Increase (Decrease)—Institutional Shares | 80,490 | 3,286 | 105,367 | 4,264 |
ETF Shares | ||||
Issued1 | 13,508 | 150 | 124,631 | 1,350 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (26,333) | (300) | (9,038) | (100) |
Net Increase (Decrease)—ETF Shares | (12,825) | (150) | 115,593 | 1,250 |
1 Includes purchase fees for fiscal 2011 and 2010 of $193,000 and $55,000, respectively (fund totals). |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
16
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 the transaction fees described in the 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.
17
Six Months Ended February 28, 2011 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Extended Duration Treasury Index Fund | 8/31/2010 | 2/28/2011 | Period |
Based on Actual Fund Return | |||
Institutional Shares | $1,000.00 | $789.51 | $0.49 |
ETF Shares | 1,000.00 | 789.59 | 0.58 |
Based on Hypothetical 5% Yearly Return | |||
Institutional Shares | $1,000.00 | $1,024.25 | $0.55 |
ETF Shares | 1,000.00 | 1,024.15 | 0.65 |
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 0.11% for Institutional Shares and 0.13% 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.
18
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 (in the case of bonds) or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Average Coupon. The average interest rate paid on the fixed income securities held by a fund. It is expressed as a percentage of face value.
Average Duration. An estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. To see how the value could change, multiply the average duration by the change in rates. If interest rates rise by 1 percentage point, the value of the bonds in a fund with an average duration of five years would decline by about 5%. If rates decrease by a percentage point, the value would rise by 5%.
Average Effective Maturity. The average length of time until fixed income securities held by a fund reach maturity and are repaid, taking into consideration the possibility that the issuer may call the bond before its maturity date. The figure reflects the proportion of fund assets represented by each security; it also reflects any futures contracts held. In general, the longer the average effective maturity, the more a fund’s share price will fluctuate in response to changes in market interest rates.
Credit Quality. The credit ratings assigned to fixed income securities are an indicator of risk. They represent a rating agency’s assessment of the issuer’s ability to meet its obligations. For this report, credit-quality ratings for each issue are obtained from Barclays Capital using ratings derived from Moody’s Investors Service, Fitch Ratings, and Standard & Poor’s. When ratings from all three agencies are available, the median rating is used; when ratings are available from two of the agencies, the lower rating is used; and when one rating is available, that rating is used.
Distribution by Coupon. A breakdown of the securities in a fund according to coupon rate—the interest rate that an issuer promises to pay, expressed as an annual percentage of face value. Securities with unusually high coupon rates may be subject to call risk, the possibility that they will be redeemed (or “called”) early by the issuer.
Expense Ratio. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
19
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.
20
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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 179 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1 | and President (2006–2008) of Rohm and Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services) and Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing); |
Board. Principal Occupation(s) During the Past Five | Senior Advisor at New Mountain Capital; Trustee |
Years: Chairman of the Board of The Vanguard Group, | of The Conference Board; Member of the Board of |
Inc., and of each of the investment companies served | Managers of Delphi Automotive LLP (automotive |
by The Vanguard Group, since January 2010; Director | components). |
of The Vanguard Group since 2008; Chief Executive | |
Officer and President of The Vanguard Group and of | Amy Gutmann |
each of the investment companies served by The | Born 1949. Trustee Since June 2006. Principal |
Vanguard Group since 2008; Director of Vanguard | Occupation(s) During the Past Five Years: President |
Marketing Corporation; Managing Director of The | of the University of Pennsylvania; Christopher H. |
Vanguard Group (1995–2008). | Browne Distinguished Professor of Political Science |
in the School of Arts and Sciences with secondary | |
appointments at the Annenberg School for Commu- | |
Independent Trustees | nication and the Graduate School of Education |
of the University of Pennsylvania; Director of | |
Emerson U. Fullwood | Carnegie Corporation of New York, Schuylkill River |
Born 1948. Trustee Since January 2008. Principal | Development Corporation, and Greater Philadelphia |
Occupation(s) During the Past Five Years: Executive | Chamber of Commerce; Trustee of the National |
Chief Staff and Marketing Officer for North America | Constitution Center; Chair of the Presidential |
and Corporate Vice President (retired 2008) of Xerox | Commission for the Study of Bioethical Issues. |
Corporation (document management products and | |
services); Executive in Residence and 2010 | JoAnn Heffernan Heisen |
Distinguished Minett Professor at the Rochester | Born 1950. Trustee Since July 1998. Principal |
Institute of Technology; Director of SPX Corporation | Occupation(s) During the Past Five Years: Corporate |
(multi-industry manufacturing), the United Way of | Vice President and Chief Global Diversity Officer |
Rochester, Amerigroup Corporation (managed health | (retired 2008) and Member of the Executive |
care), the University of Rochester Medical Center, | Committee (1997–2008) of Johnson & Johnson |
Monroe Community College Foundation, and North | (pharmaceuticals/consumer products); Director of |
Carolina A&T University. | Skytop Lodge Corporation (hotels), the University |
Medical Center at Princeton, the Robert Wood | |
Rajiv L. Gupta | Johnson Foundation, and the Center for Work Life |
Born 1945. Trustee Since December 2001.2 | Policy; Member of the Advisory Board of the |
Principal Occupation(s) During the Past Five Years: | Maxwell School of Citizenship and Public Affairs |
Chairman and Chief Executive Officer (retired 2009) | at Syracuse University. |
F. Joseph Loughrey | Thomas J. Higgins | |
Born 1949. Trustee Since October 2009. Principal | Born 1957. Chief Financial Officer Since September | |
Occupation(s) During the Past Five Years: President | 2008. Principal Occupation(s) During the Past Five | |
and Chief Operating Officer (retired 2009) and Vice | Years: Principal of The Vanguard Group, Inc.; Chief | |
Chairman of the Board (2008–2009) of Cummins Inc. | Financial Officer of each of the investment companies | |
(industrial machinery); Director of SKF AB (industrial | served by The Vanguard Group since 2008; Treasurer | |
machinery), Hillenbrand, Inc. (specialized consumer | of each of the investment companies served by The | |
services), the Lumina Foundation for Education, and | Vanguard Group (1998–2008). | |
Oxfam America; Chairman of the Advisory Council | ||
for the College of Arts and Letters and Member | Kathryn J. Hyatt | |
of the Advisory Board to the Kellogg Institute for | Born 1955. Treasurer Since November 2008. Principal | |
International Studies at the University of Notre Dame. | Occupation(s) During the Past Five Years: Principal | |
of The Vanguard Group, Inc.; Treasurer of each of | ||
André F. Perold | the investment companies served by The Vanguard | |
Born 1952. Trustee Since December 2004. Principal | Group since 2008; Assistant Treasurer of each of the | |
Occupation(s) During the Past Five Years: George | investment companies served by The Vanguard Group | |
Gund Professor of Finance and Banking at the Harvard | (1988–2008). | |
Business School; Chair of the Investment Committee | ||
of HighVista Strategies LLC (private investment firm). | Heidi Stam | |
Born 1956. Secretary Since July 2005. Principal | ||
Alfred M. Rankin, Jr. | Occupation(s) During the Past Five Years: Managing | |
Born 1941. Trustee Since January 1993. Principal | Director of The Vanguard Group, Inc., since 2006; | |
Occupation(s) During the Past Five Years: Chairman, | General Counsel of The Vanguard Group since 2005; | |
President, and Chief Executive Officer of NACCO | Secretary of The Vanguard Group and of each of the | |
Industries, Inc. (forklift trucks/housewares/lignite); | investment companies served by The Vanguard Group | |
Director of Goodrich Corporation (industrial products/ | since 2005; Director and Senior Vice President of | |
aircraft systems and services) and the National | Vanguard Marketing Corporation since 2005; | |
Association of Manufacturers; Chairman of the | Principal of The Vanguard Group (1997–2006). | |
Federal Reserve Bank of Cleveland; Vice Chairman | ||
of University Hospitals of Cleveland; President of | ||
the Board of The Cleveland Museum of Art. | Vanguard Senior Management Team | |
Peter F. Volanakis | R. Gregory Barton | Michael S. Miller |
Born 1955. Trustee Since July 2009. Principal | Mortimer J. Buckley | James M. Norris |
Occupation(s) During the Past Five Years: President | Kathleen C. Gubanich | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Paul A. Heller | George U. Sauter |
Incorporated (communications equipment); Director of | ||
Corning Incorporated (2000–2010) and Dow Corning | ||
(2001–2010); Overseer of the Amos Tuck School of | Chairman Emeritus and Senior Advisor | |
Business Administration at Dartmouth College. | ||
John J. Brennan | ||
Chairman, 1996–2009 | ||
Executive Officers | Chief Executive Officer and President, 1996–2008 | |
Glenn Booraem | ||
Born 1967. Controller Since July 2010. Principal | Founder | |
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | John C. Bogle | |
the investment companies served by The Vanguard | Chairman and Chief Executive Officer, 1974–1996 | |
Group since 2010; Assistant Controller of each of | ||
the investment companies served by The Vanguard | ||
Group (2001–2010). |
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, Vanguard Growth Equity 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
Vanguard Extended Duration Treasury ETF is not | |
Fund Information > 800-662-7447 | sponsored, endorsed, sold, or promoted by Barclays |
Direct Investor Account Services > 800-662-2739 | Capital. Barclays Capital makes no representation or |
Institutional Investor Services > 800-523-1036 | warranty, express or implied, to the owners of |
Text Telephone for People | Vanguard Extended Duration Treasury ETF or any |
With Hearing Impairment > 800-749-7273 | member of the public regarding the advisability of |
investing in securities generally or in Vanguard | |
This material may be used in conjunction | Extended Duration Treasury ETF particularly or the |
with the offering of shares of any Vanguard | ability of the Barclays Capital Index to track general |
fund only if preceded or accompanied by | bond market performance. Barclays Capital hereby |
expressly disclaims all warranties of merchantability | |
the fund’s current prospectus. | and fitness for a particular purpose with respect to the |
All comparative mutual fund data are from Lipper Inc. or | Barclays Capital Index and any data included therein. |
Morningstar, Inc., unless otherwise noted. | Barclays Capital’s only relationship to Vanguard and |
Vanguard Extended Duration Treasury ETF is the | |
You can obtain a free copy of Vanguard’s proxy voting | licensing of the Barclays Capital Index, which is |
guidelines by visiting vanguard.com/proxyreporting or by | determined, composed, and calculated by Barclays |
calling Vanguard at 800-662-2739. The guidelines are | Capital without regard to Vanguard or Vanguard |
also available from the SEC’s website, sec.gov. In | Extended Duration Treasury ETF. Barclays Capital is not |
addition, you may obtain a free report on how your fund | responsible for, and has not participated in, the |
voted the proxies for securities it owned during the 12 | determination of the timing of, prices of, or quantities |
months ended June 30. To get the report, visit either | of Vanguard Extended Duration Treasury ETF to be |
vanguard.com/proxyreporting or sec.gov. | issued. |
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 e-mail addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2011 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q12752 042011 |
![]() |
Vanguard Mega Cap 300 Index Funds |
Semiannual Report |
February 28, 2011 |
![]() |
Vanguard Mega Cap 300 Index Fund |
Vanguard Mega Cap 300 Growth Index Fund |
Vanguard Mega Cap 300 Value Index Fund |
> For the six-month period ended February 28, 2011, Vanguard’s Mega Cap 300 Index Funds posted returns ranging from about 26% to about 28%.
> All three funds closely tracked their target indexes. The Mega Cap 300 Index Fund slightly outperformed its peer-group average, while the two other funds slightly trailed.
> Information technology and energy companies were among the strongest performers as stocks advanced across sectors.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Mega Cap 300 Index Fund. | 7 |
Mega Cap 300 Growth Index Fund. | 21 |
Mega Cap 300 Value Index Fund. | 35 |
About Your Fund’s Expenses. | 48 |
Glossary. | 50 |
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/megacap300_q8282x2x1.jpg)
Mega Cap 300 Index Fund
Mega Cap 300 Growth Index Fund
Mega Cap 300 Value Index Fund
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.
Cover photograph: Jean Maher.
Your Fund’s Total Returns
Six Months Ended February 28, 2011 | |
Total | |
Returns | |
Vanguard Mega Cap 300 Index Fund | |
Institutional Shares | 27.26% |
ETF Shares | |
Market Price | 27.47 |
Net Asset Value | 27.25 |
MSCI US Large Cap 300 Index | 27.30 |
Large-Cap Core Funds Average | 26.91 |
Large-Cap Core Funds Average: Derived from data provided by Lipper Inc. | |
Vanguard Mega Cap 300 Growth Index Fund | |
Institutional Shares | 28.24% |
ETF Shares | |
Market Price | 28.41 |
Net Asset Value | 28.23 |
MSCI US Large Cap Growth Index | 28.22 |
Large-Cap Growth Funds Average | 29.55 |
Large-Cap Growth Funds Average: Derived from data provided by Lipper Inc. | |
Vanguard Mega Cap 300 Value Index Fund | |
Institutional Shares | 26.36% |
ETF Shares | |
Market Price | 26.57 |
Net Asset Value | 26.36 |
MSCI US Large Cap Value Index | 26.34 |
Large-Cap Value Funds Average | 26.74 |
Large-Cap Value Funds Average: Derived from data provided by Lipper Inc. |
Institutional Shares are available to certain institutional investors who meet specific administrative, service, and account-size criteria. 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. No. 6,879,964 B2; 7,337,138.
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
Chairman’s Letter
Dear Shareholder,
Vanguard’s three Mega Cap 300 Index Funds met their common objective by closely tracking their target indexes for the six months ended February 28, 2011. The funds track MSCI indexes that represent the largest companies in the U.S. stock market.
The Mega Cap 300 Growth Index Fund had the best return among the three, at about 28%. The Mega Cap 300 Value Index Fund returned about 26%, and the Mega Cap 300 Index Fund, which combines the growth and value market segments, ended in between, rising about 27%.
A fretful start, an optimistic finish for global stock markets
Stock markets rallied from their mid summer malaise to produce exceptional returns for the six months. At the start of the period, the U.S. economy seemed in danger of tipping back into recession. By the end, hopes were high that it had reached escape velocity, propelled by steady job growth and notable strength in the manufacturing sector. Smaller stocks, which are especially sensitive to the rhythms of the business cycle, produced the highest sixmonth returns.
In Europe, investor optimism subdued sovereigndebt jitters, driving stock prices higher. Developed markets in the Pacific region perked up on signs of recovery in global trade. Australian stocks posted especially strong returns, benefiting from a surge in the prices of metals and other
2
natural resources. Emerging stock markets trailed a few steps behind their developedmarket counterparts. Most major currencies appreciated relative to the U.S. dollar, enhancing returns from abroad for U.S.based investors.
Interest rates rose, depressing bond prices
U.S. interest rates hovered near generational lows early in the period, but then moved higher, putting pressure on bond prices. For the six months, the broad taxable bond market produced a small negative return. The municipal bond market did worse. Corporate bonds outperformed government debt, as investors stretched for yield beyond government securities, where rates remained low by historical standards.
As it has since December 2008, the Federal Reserve held its target for shortterm interest rates near 0%. This stance kept the returns available from money market instruments, such as the 3month Treasury bill, in the same neighborhood.
Growth again outdid value in the mega-cap arena
The bigcompany stocks that make up the MSCI US Large Cap 300 Indexes came close to matching the performance of the broad U.S. market as a powerful tide lifted companies of all sizes in all sectors. The funds’ advisor, Vanguard Quantitative Equity Group, closely tracked the three indexes’ performance, consistent with its long tradition of superior index fund management. The Mega Cap 300 Index Fund slightly exceeded the average
Market Barometer | |||
Total Returns | |||
Periods Ended February 28, 2011 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 28.65% | 23.54% | 3.17% |
Russell 2000 Index (Small-caps) | 37.55 | 32.60 | 3.80 |
Dow Jones U.S. Total Stock Market Index | 29.24 | 24.45 | 3.59 |
MSCI All Country World Index ex USA (International) | 22.16 | 21.12 | 4.23 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | -0.83% | 4.93% | 5.80% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | -3.51 | 1.72 | 4.07 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.06 | 0.14 | 2.16 |
CPI | |||
Consumer Price Index | 1.37% | 2.11% | 2.18% |
3
performance of largecapitalization core funds, most of which are actively managed. The two other funds slightly trailed the average results for their peer groups.
In the largecap segment of the market, growth stocks modestly outperformed their value counterparts, continuing a trend seen in the previous fiscal year. Consequently, the Mega Cap 300 Growth Index Fund had the highest sixmonth return among the three Vanguard funds. As noted earlier, results for the Mega Cap 300 Index Fund, which combines the two styles, fell between those of the growth fund and the Mega Cap 300 Value Index Fund.
IT and energy companies were strong contributors
Despite their different mandates, the three funds generally saw similar results on a sector level, although the impact depended on each sector’s weighting within a portfolio. Across the megacap spectrum, energy and information technology stocks had some of the best returns. As investors gained confidence from rising computerrelated sales and prospects for continued growth, the IT sector—the largest in both the Mega Cap 300 and Mega Cap 300 Growth Index Funds—was the leading contributor to those funds’ returns, with a gain of more than 30%.
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Institutional | ETF | Peer Group | |
Shares | Shares | Average | |
Mega Cap 300 Index Fund | 0.11% | 0.13% | 1.26% |
Mega Cap 300 Growth Index Fund | 0.11 | 0.13 | 1.37 |
Mega Cap 300 Value Index Fund | 0.11 | 0.13 | 1.27 |
The fund expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were: for the Mega Cap 300 Index Fund, 0.11% for Institutional Shares and 0.13% for ETF Shares; for the Mega Cap 300 Growth Index Fund, 0.11% for Institutional Shares and 0.13% for ETF Shares; and for the Mega Cap 300 Value Index Fund, 0.11% for Institutional Shares and 0.13% for ETF Shares. Peer-group expense ratios are derived from data provided by Lipper Inc. and capture information through year-end 2010.
Peer groups: For the Mega Cap 300 Index Fund, Large-Cap Core Funds; for the Mega Cap 300 Growth Index Fund, Large-Cap Growth Funds; and for the Mega Cap 300 Value Index Fund, Large-Cap Value Funds.
4
In the Mega Cap 300 Value Index Fund, the energy sector was the leading contributor, as rising demand and prices—along with the resolution of the Gulf oil spill—boosted the stocks of the large oil companies. Energy stocks rose roughly 50% or more in each fund, the largest gain for any sector.
Financial companies, which make up the second-largest sector among the roughly 300 mega-cap stocks, were also prominent contributors during the half-year. These stocks climbed approximately 25% as rising longer-term interest rates, improving prospects for business lending, and growing consumer loan demand boosted the performance of many large financial institutions, including investment banks and diversified financial services companies.
Looking beyond the short term is always a prudent approach
The past six months have brought generous returns. Although this is gratifying, we always like to remind our clients that short-term trends, whether good or bad, are transient. As I write this letter, dramatic events have been unfolding in the Middle East and North Africa, and the ramifications of the tragedy in Japan are unclear.
The direction of the markets is unpredictable, so it’s always prudent to focus on the longer term. We encourage investors to view stocks as an investment for a time horizon of five years or more, and to hold them as part of a broadly diversified portfolio that also includes bonds and short-term reserves. Such a balanced approach can help buffer the stock market’s downward swings while allowing you to participate in its long-term potential for growth.
Vanguard’s Mega Cap 300 Index Funds can play a key role in your long-term investment plan by providing low-cost, tax-efficient exposure to the stock market’s largest companies, whether you choose to invest across the segment or specifically in its growth or value portions.
As always, thank you for your confidence in Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/megacap300_q8282x7x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 14, 2011
5
Your Fund’s Performance at a Glance | ||||
August 31, 2010 , Through February 28, 2011 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Mega Cap 300 Index Fund | ||||
Institutional Shares | $71.03 | $89.39 | $0.891 | $0.000 |
ETF Shares | 36.03 | 45.35 | 0.448 | 0.000 |
Vanguard Mega Cap 300 Growth Index Fund | ||||
Institutional Shares | $76.74 | $97.63 | $0.703 | $0.000 |
ETF Shares | 38.78 | 49.34 | 0.352 | 0.000 |
Vanguard Mega Cap 300 Value Index Fund | ||||
Institutional Shares | $65.97 | $82.21 | $1.013 | $0.000 |
ETF Shares | 33.26 | 41.46 | 0.508 | 0.000 |
6
Mega Cap 300 Index Fund
Fund Profile
As of February 28, 2011
Share-Class Characteristics | ||
Institutional | ETF | |
Shares | Shares | |
Ticker Symbol | VMCTX | MGC |
Expense Ratio1 | 0.11% | 0.13% |
30-Day SEC Yield | 1.80% | 1.78% |
Portfolio Characteristics | |||
DJ | |||
MSCI US | U.S. Total | ||
Large Cap | Market | ||
Fund | 300 Index | Index | |
Number of Stocks | 304 | 305 | 3,845 |
Median Market Cap | $63.5B | $63.5B | $31.4B |
Price/Earnings Ratio | 16.3x | 16.3x | 17.9x |
Price/Book Ratio | 2.3x | 2.3x | 2.3x |
Return on Equity | 21.4% | 21.2% | 19.2% |
Earnings Growth Rate | 5.5% | 5.6% | 5.4% |
Dividend Yield | 1.9% | 1.9% | 1.6% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 10% | — | — |
Short-Term Reserves | 0.0% | — | — |
Sector Diversification (% of equity exposure) | |||
DJ | |||
MSCI US | U.S. Total | ||
Large Cap | Market | ||
Fund 300 Index | Index | ||
Consumer | |||
Discretionary | 9.8% | 9.9% | 11.8% |
Consumer Staples | 10.7 | 10.7 | 9.1 |
Energy | 13.6 | 13.6 | 11.6 |
Financials | 15.4 | 15.4 | 16.6 |
Health Care | 11.1 | 11.1 | 10.5 |
Industrials | 10.7 | 10.7 | 11.4 |
Information | |||
Technology | 19.5 | 19.5 | 18.9 |
Materials | 3.2 | 3.2 | 4.5 |
Telecommunication | |||
Services | 3.2 | 3.2 | 2.5 |
Utilities | 2.8 | 2.7 | 3.1 |
Volatility Measures | ||
DJ | ||
MSCI US | U.S. Total | |
Large Cap | Market | |
300 Index | Index | |
R-Squared | 1.00 | 0.99 |
Beta | 1.00 | 0.94 |
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) | ||
Exxon Mobil Corp. | Integrated Oil & | |
Gas | 4.0% | |
Apple Inc. | Computer | |
Hardware | 3.0 | |
General Electric Co. | Industrial | |
Conglomerates | 2.1 | |
Chevron Corp. | Integrated Oil & | |
Gas | 1.9 | |
Microsoft Corp. | Systems Software | 1.9 |
International Business | IT Consulting & | |
Machines Corp. | Other Services | 1.9 |
JPMorgan Chase & Co. | Diversified Financial | |
Services | 1.7 | |
Procter & Gamble Co. | Household | |
Products | 1.6 | |
Johnson & Johnson | Pharmaceuticals | 1.6 |
AT&T Inc. | Integrated | |
Telecommunication | ||
Services | 1.6 | |
Top Ten | 21.3% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/megacap300_q8282x9x1.jpg)
1 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.11% for Institutional Shares and 0.13% for ETF Shares.
7
Mega Cap 300 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 (%): December 17, 2007, Through February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/megacap300_q8282x10x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
This table presents average annual total 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 | |
Institutional Shares | 2/22/2008 | 13.84% | -0.41% |
ETF Shares | 12/17/2007 | ||
Market Price | 13.83 | -2.47 | |
Net Asset Value | 13.81 | -2.47 |
See Financial Highlights for dividend and capital gains information.
8
Mega Cap 300 Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (100.0%) | |||
Consumer Discretionary (9.8%) | |||
McDonald’s Corp. | 45,519 | 3,445 | |
Walt Disney Co. | 77,664 | 3,397 | |
Home Depot Inc. | 71,864 | 2,693 | |
* | Amazon.com Inc. | 15,420 | 2,672 |
Comcast Corp. Class A | 82,575 | 2,127 | |
* | Ford Motor Co. | 131,473 | 1,979 |
Time Warner Inc. | 48,072 | 1,836 | |
* | DIRECTV Class A | 35,801 | 1,646 |
Lowe’s Cos. Inc. | 60,008 | 1,570 | |
News Corp. Class A | 87,681 | 1,523 | |
Target Corp. | 28,878 | 1,517 | |
NIKE Inc. Class B | 15,916 | 1,417 | |
Johnson Controls Inc. | 28,793 | 1,175 | |
Time Warner Cable Inc. | 15,165 | 1,095 | |
Viacom Inc. Class B | 23,792 | 1,063 | |
Starbucks Corp. | 31,630 | 1,043 | |
Yum! Brands Inc. | 19,938 | 1,003 | |
* | priceline.com Inc. | 2,074 | 941 |
Comcast Corp. | |||
Class A Special Shares | 37,057 | 901 | |
TJX Cos. Inc. | 16,996 | 848 | |
Carnival Corp. | 19,616 | 837 | |
* | General Motors Co. | 22,414 | 752 |
Coach Inc. | 12,679 | 696 | |
* | Las Vegas Sands Corp. | 14,702 | 686 |
* | Kohl’s Corp. | 12,465 | 672 |
Staples Inc. | 31,203 | 665 | |
Omnicom Group Inc. | 12,913 | 657 | |
CBS Corp. Class B | 26,933 | 643 | |
* | Bed Bath & Beyond Inc. | 11,267 | 542 |
Stanley Black & Decker Inc. | 6,746 | 512 | |
McGraw-Hill Cos. Inc. | 13,223 | 511 | |
Marriott International Inc. | |||
Class A | 12,441 | 488 | |
Best Buy Co. Inc. | 14,521 | 468 | |
Gap Inc. | 19,462 | 438 | |
Macy’s Inc. | 18,093 | 432 |
Market | |||
Value | |||
Shares | ($000) | ||
Wynn Resorts Ltd. | 3,390 | 417 | |
VF Corp. | 3,704 | 354 | |
JC Penney Co. Inc. | 9,090 | 318 | |
* | AutoZone Inc. | 1,210 | 312 |
* | Discovery | ||
Communications Inc. | |||
Class A | 5,837 | 252 | |
* | Discovery | ||
Communications Inc. | 5,992 | 228 | |
* | DISH Network Corp. Class A | 8,903 | 207 |
News Corp. Class B | 9,163 | 169 | |
^,* | Sears Holdings Corp. | 1,844 | 154 |
* | Dollar General Corp. | 4,335 | 122 |
45,423 | |||
Consumer Staples (10.7%) | |||
Procter & Gamble Co. | 120,203 | 7,579 | |
Coca-Cola Co. | 89,742 | 5,736 | |
Philip Morris | |||
International Inc. | 77,913 | 4,891 | |
Wal-Mart Stores Inc. | 84,127 | 4,373 | |
PepsiCo Inc. | 68,078 | 4,317 | |
Kraft Foods Inc. | 74,575 | 2,374 | |
Altria Group Inc. | 89,104 | 2,261 | |
CVS Caremark Corp. | 57,971 | 1,917 | |
Walgreen Co. | 39,754 | 1,723 | |
Colgate-Palmolive Co. | 20,817 | 1,635 | |
Costco Wholesale Corp. | 18,796 | 1,406 | |
Kimberly-Clark Corp. | 17,475 | 1,152 | |
Archer-Daniels-Midland Co. | 27,454 | 1,021 | |
General Mills Inc. | 27,418 | 1,018 | |
Sysco Corp. | 25,209 | 701 | |
HJ Heinz Co. | 13,622 | 684 | |
Kellogg Co. | 11,294 | 605 | |
Kroger Co. | 26,126 | 598 | |
Mead Johnson Nutrition Co. | 8,718 | 522 | |
Reynolds American Inc. | 14,987 | 514 | |
Avon Products Inc. | 18,357 | 510 | |
Lorillard Inc. | 6,442 | 495 | |
Sara Lee Corp. | 26,861 | 460 |
9
Mega Cap 300 Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
Estee Lauder Cos. Inc. | |||
Class A | 4,862 | 459 | |
ConAgra Foods Inc. | 18,816 | 436 | |
Clorox Co. | 5,892 | 399 | |
Safeway Inc. | 16,324 | 356 | |
Hershey Co. | 6,764 | 354 | |
Molson Coors Brewing Co. | |||
Class B | 6,939 | 317 | |
Campbell Soup Co. | 8,722 | 294 | |
Brown-Forman Corp. | |||
Class B | 3,488 | 241 | |
49,348 | |||
Energy (13.6%) | |||
Exxon Mobil Corp. | 216,538 | 18,521 | |
Chevron Corp. | 86,419 | 8,966 | |
Schlumberger Ltd. | 58,455 | 5,461 | |
ConocoPhillips | 59,937 | 4,667 | |
Occidental Petroleum Corp. | 34,895 | 3,558 | |
Apache Corp. | 16,355 | 2,038 | |
Halliburton Co. | 38,990 | 1,830 | |
Anadarko Petroleum Corp. | 21,182 | 1,733 | |
Devon Energy Corp. | 17,635 | 1,613 | |
Marathon Oil Corp. | 30,382 | 1,507 | |
National Oilwell Varco Inc. | 17,875 | 1,422 | |
Baker Hughes Inc. | 18,467 | 1,312 | |
EOG Resources Inc. | 10,864 | 1,220 | |
Hess Corp. | 12,934 | 1,126 | |
Chesapeake Energy Corp. | 28,015 | 998 | |
* | Weatherford | ||
International Ltd. | 31,668 | 766 | |
Williams Cos. Inc. | 25,035 | 760 | |
Peabody Energy Corp. | 11,529 | 755 | |
Spectra Energy Corp. | 27,751 | 742 | |
Noble Energy Inc. | 7,457 | 691 | |
Valero Energy Corp. | 24,246 | 683 | |
* | Southwestern Energy Co. | 14,761 | 583 |
Murphy Oil Corp. | 7,798 | 574 | |
Noble Corp. | 10,967 | 490 | |
* | Ultra Petroleum Corp. | 6,535 | 296 |
Diamond Offshore | |||
Drilling Inc. | 2,891 | 226 | |
* | Kinder Morgan Inc. | 4,100 | 125 |
62,663 | |||
Financials (15.4%) | |||
JPMorgan Chase & Co. | 167,868 | 7,838 | |
Wells Fargo & Co. | 214,124 | 6,908 | |
Bank of America Corp. | 433,078 | 6,189 | |
* | Citigroup Inc. | 1,247,477 | 5,838 |
Goldman Sachs Group Inc. | 20,974 | 3,435 | |
* | Berkshire Hathaway Inc. | ||
Class B | 37,881 | 3,306 | |
US Bancorp | 81,969 | 2,273 | |
American Express Co. | 46,279 | 2,016 | |
MetLife Inc. | 40,044 | 1,896 |
Market | ||
Value | ||
Shares | ($000) | |
Morgan Stanley | 58,470 | 1,735 |
Bank of New York | ||
Mellon Corp. | 53,268 | 1,619 |
PNC Financial Services | ||
Group Inc. | 22,430 | 1,384 |
Simon Property Group Inc. | 12,500 | 1,375 |
Prudential Financial Inc. | 20,757 | 1,366 |
Travelers Cos. Inc. | 20,060 | 1,202 |
Aflac Inc. | 20,094 | 1,183 |
Capital One Financial Corp. | 19,518 | 971 |
State Street Corp. | 21,466 | 960 |
ACE Ltd. | 14,487 | 916 |
CME Group Inc. | 2,854 | 888 |
Franklin Resources Inc. | 6,763 | 850 |
Charles Schwab Corp. | 43,386 | 823 |
BB&T Corp. | 29,597 | 817 |
Chubb Corp. | 13,094 | 795 |
BlackRock Inc. | 3,776 | 770 |
T Rowe Price Group Inc. | 10,988 | 736 |
Marsh & | ||
McLennan Cos. Inc. | 23,192 | 706 |
Public Storage | 6,198 | 696 |
Allstate Corp. | 21,829 | 694 |
Ameriprise Financial Inc. | 10,760 | 681 |
AON Corp. | 12,704 | 669 |
Equity Residential | 12,099 | 667 |
Vornado Realty Trust | 7,008 | 654 |
SunTrust Banks Inc. | 21,356 | 644 |
Loews Corp. | 14,282 | 618 |
Annaly Capital | ||
Management Inc. | 33,900 | 608 |
HCP Inc. | 15,635 | 594 |
Fifth Third Bancorp | 39,306 | 574 |
Boston Properties Inc. | 5,939 | 570 |
Progressive Corp. | 27,116 | 565 |
Weyerhaeuser Co. | 22,958 | 560 |
Hartford Financial | ||
Services Group Inc. | 18,069 | 535 |
Invesco Ltd. | 19,805 | 532 |
Northern Trust Corp. | 9,339 | 482 |
Principal Financial Group Inc. | 13,663 | 468 |
NYSE Euronext | 11,188 | 414 |
M&T Bank Corp. | 3,575 | 315 |
General Growth | ||
Properties Inc. | 18,500 | 294 |
Moody’s Corp. | 8,512 | 272 |
TD Ameritrade Holding Corp. | 9,583 | 209 |
71,110 | ||
Health Care (11.1%) | ||
Johnson & Johnson | 117,767 | 7,236 |
Pfizer Inc. | 343,792 | 6,615 |
Merck & Co. Inc. | 132,300 | 4,309 |
Abbott Laboratories | 66,059 | 3,177 |
* Amgen Inc. | 40,572 | 2,083 |
10
Mega Cap 300 Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
UnitedHealth Group Inc. | 47,233 | 2,011 | |
Bristol-Myers Squibb Co. | 73,379 | 1,894 | |
Medtronic Inc. | 46,282 | 1,848 | |
Eli Lilly & Co. | 44,432 | 1,536 | |
* | Gilead Sciences Inc. | 34,863 | 1,359 |
Baxter International Inc. | 24,948 | 1,326 | |
* | Express Scripts Inc. | 21,466 | 1,207 |
* | WellPoint Inc. | 17,083 | 1,135 |
* | Medco Health Solutions Inc. | 18,224 | 1,123 |
Covidien plc | 21,453 | 1,104 | |
* | Celgene Corp. | 20,063 | 1,065 |
Allergan Inc. | 13,102 | 972 | |
* | Thermo Fisher Scientific Inc. | 17,397 | 971 |
McKesson Corp. | 10,867 | 861 | |
* | Genzyme Corp. | 10,923 | 824 |
Stryker Corp. | 12,698 | 803 | |
Becton Dickinson and Co. | 9,912 | 793 | |
* | Biogen Idec Inc. | 10,303 | 705 |
* | St. Jude Medical Inc. | 14,394 | 689 |
Aetna Inc. | 17,181 | 642 | |
* | Agilent Technologies Inc. | 14,919 | 628 |
Cardinal Health Inc. | 15,051 | 627 | |
* | Intuitive Surgical Inc. | 1,688 | 554 |
* | Zimmer Holdings Inc. | 8,569 | 534 |
CIGNA Corp. | 11,859 | 499 | |
* | Boston Scientific Corp. | 64,848 | 464 |
* | Laboratory Corp. of | ||
America Holdings | 4,407 | 397 | |
* | Forest Laboratories Inc. | 12,202 | 395 |
Quest Diagnostics Inc. | 6,945 | 394 | |
CR Bard Inc. | 4,014 | 392 | |
51,172 | |||
Industrials (10.7%) | |||
General Electric Co. | 457,199 | 9,565 | |
United Technologies Corp. | 37,771 | 3,155 | |
Caterpillar Inc. | 27,256 | 2,805 | |
3M Co. | 28,964 | 2,671 | |
United Parcel Service Inc. | |||
Class B | 31,301 | 2,310 | |
Boeing Co. | 29,686 | 2,138 | |
Union Pacific Corp. | 21,292 | 2,031 | |
Emerson Electric Co. | 32,134 | 1,917 | |
Honeywell International Inc. | 31,828 | 1,843 | |
Deere & Co. | 18,167 | 1,638 | |
CSX Corp. | 16,258 | 1,214 | |
Danaher Corp. | 23,733 | 1,201 | |
FedEx Corp. | 12,747 | 1,148 | |
General Dynamics Corp. | 13,851 | 1,054 | |
Lockheed Martin Corp. | 13,206 | 1,045 | |
Norfolk Southern Corp. | 15,800 | 1,036 | |
Illinois Tool Works Inc. | 18,339 | 992 | |
Tyco International Ltd. | 21,297 | 966 | |
Precision Castparts Corp. | 6,097 | 864 | |
Raytheon Co. | 16,031 | 821 |
Market | |||
Value | |||
Shares | ($000) | ||
Cummins Inc. | 8,038 | 813 | |
Northrop Grumman Corp. | 11,954 | 797 | |
Eaton Corp. | 6,831 | 757 | |
Waste Management Inc. | 19,383 | 718 | |
PACCAR Inc. | 14,045 | 704 | |
Ingersoll-Rand plc | 13,808 | 626 | |
Parker Hannifin Corp. | 6,890 | 614 | |
Fluor Corp. | 7,659 | 542 | |
CH Robinson Worldwide Inc. | 7,110 | 515 | |
Republic Services Inc. | |||
Class A | 16,362 | 485 | |
Expeditors International of | |||
Washington Inc. | 9,095 | 435 | |
Rockwell Collins Inc. | 6,738 | 434 | |
ITT Corp. | 7,459 | 432 | |
L-3 Communications | |||
Holdings Inc. | 4,890 | 388 | |
* | Delta Air Lines Inc. | 33,726 | 379 |
Southwest Airlines Co. | 31,868 | 377 | |
49,430 | |||
Information Technology (19.5%) | |||
* | Apple Inc. | 39,392 | 13,914 |
Microsoft Corp. | 330,653 | 8,789 | |
International Business | |||
Machines Corp. | 53,349 | 8,636 | |
* | Google Inc. Class A | 10,668 | 6,544 |
Oracle Corp. | 172,701 | 5,682 | |
Intel Corp. | 239,532 | 5,143 | |
* | Cisco Systems Inc. | 238,018 | 4,418 |
Hewlett-Packard Co. | 97,381 | 4,249 | |
QUALCOMM Inc. | 69,469 | 4,139 | |
* | EMC Corp. | 87,858 | 2,391 |
Texas Instruments Inc. | 50,420 | 1,795 | |
* | eBay Inc. | 50,497 | 1,692 |
Visa Inc. Class A | 21,253 | 1,553 | |
Corning Inc. | 66,798 | 1,540 | |
Accenture plc Class A | 27,215 | 1,401 | |
* | Dell Inc. | 74,827 | 1,185 |
Mastercard Inc. Class A | 4,736 | 1,139 | |
Automatic Data | |||
Processing Inc. | 21,062 | 1,053 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 12,830 | 986 | |
* | Juniper Networks Inc. | 22,206 | 977 |
Applied Materials Inc. | 57,437 | 944 | |
* | Yahoo! Inc. | 53,176 | 872 |
Broadcom Corp. Class A | 19,171 | 790 | |
* | NetApp Inc. | 15,234 | 787 |
* | Adobe Systems Inc. | 22,421 | 774 |
Tyco Electronics Ltd. | 19,104 | 689 | |
* | Intuit Inc. | 12,790 | 672 |
* | Salesforce.com Inc. | 4,939 | 653 |
Xerox Corp. | 59,156 | 636 | |
Western Union Co. | 28,251 | 621 |
11
Mega Cap 300 Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
* | Symantec Corp. | 33,748 | 608 |
* | Citrix Systems Inc. | 7,991 | 561 |
* | NVIDIA Corp. | 24,550 | 556 |
* | Motorola Solutions Inc. | 13,540 | 523 |
Analog Devices Inc. | 12,764 | 509 | |
Paychex Inc. | 13,868 | 466 | |
CA Inc. | 17,615 | 436 | |
* | Marvell Technology | ||
Group Ltd. | 23,607 | 432 | |
Fidelity National Information | |||
Services Inc. | 10,917 | 354 | |
^,* | First Solar Inc. | 2,377 | 350 |
Activision Blizzard Inc. | 23,565 | 262 | |
* | VMware Inc. Class A | 3,062 | 256 |
89,977 | |||
Materials (3.2%) | |||
EI du Pont de | |||
Nemours & Co. | 39,202 | 2,151 | |
Freeport-McMoRan | |||
Copper & Gold Inc. | 40,257 | 2,132 | |
Dow Chemical Co. | 49,633 | 1,844 | |
Monsanto Co. | 23,149 | 1,664 | |
Praxair Inc. | 13,042 | 1,296 | |
Newmont Mining Corp. | 21,078 | 1,165 | |
Air Products & | |||
Chemicals Inc. | 9,109 | 838 | |
Alcoa Inc. | 43,640 | 735 | |
Nucor Corp. | 13,500 | 648 | |
PPG Industries Inc. | 7,079 | 626 | |
Mosaic Co. | 6,621 | 568 | |
International Paper Co. | 17,787 | 494 | |
Ecolab Inc. | 9,999 | 486 | |
Sherwin-Williams Co. | 3,964 | 326 | |
14,973 | |||
Telecommunication Services (3.2%) | |||
AT&T Inc. | 253,789 | 7,203 | |
Verizon | |||
Communications Inc. | 120,886 | 4,463 | |
* | American Tower Corp. | ||
Class A | 17,138 | 925 | |
* | Sprint Nextel Corp. | 126,148 | 551 |
CenturyLink Inc. | 12,915 | 532 | |
* | Crown Castle | ||
International Corp. | 12,443 | 524 | |
Qwest Communications | |||
International Inc. | 66,976 | 457 | |
14,655 |
Market | ||
Value | ||
Shares | ($000) | |
Utilities (2.8%) | ||
Southern Co. | 35,543 | 1,355 |
Exelon Corp. | 28,288 | 1,181 |
Dominion Resources Inc. | 25,243 | 1,152 |
Duke Energy Corp. | 56,442 | 1,015 |
NextEra Energy Inc. | 16,890 | 937 |
PG&E Corp. | 16,713 | 770 |
American Electric | ||
Power Co. Inc. | 20,543 | 735 |
Public Service Enterprise | ||
Group Inc. | 21,624 | 707 |
FirstEnergy Corp. | 17,936 | 687 |
Consolidated Edison Inc. | 12,477 | 624 |
Progress Energy Inc. | 12,541 | 573 |
Entergy Corp. | 7,994 | 569 |
Sempra Energy | 10,093 | 537 |
PPL Corp. | 20,675 | 526 |
Edison International | 13,231 | 491 |
Xcel Energy Inc. | 19,694 | 471 |
* AES Corp. | 28,856 | 357 |
12,687 | ||
Total Common Stocks | ||
(Cost $408,019) | 461,438 | |
Temporary Cash Investment (0.1%) | ||
Money Market Fund (0.1%) | ||
1,2 Vanguard Market | ||
Liquidity Fund, 0.213% | ||
(Cost $559) | 559,301 | 559 |
Total Investments (100.1%) | ||
(Cost $408,578) | 461,997 | |
Other Assets and Liabilities (-0.1%) | ||
Other Assets | 2,776 | |
Liabilities2 | (3,139) | |
(363) | ||
Net Assets (100%) | 461,634 |
12
Mega Cap 300 Index Fund
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 430,533 |
Undistributed Net Investment Income | 1,226 |
Accumulated Net Realized Losses | (23,544) |
Unrealized Appreciation (Depreciation) | 53,419 |
Net Assets | 461,634 |
Institutional Shares—Net Assets | |
Applicable to 1,765,392 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 157,808 |
Net Asset Value Per Share— | |
Institutional Shares | $89.39 |
ETF Shares—Net Assets | |
Applicable to 6,700,000 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 303,826 |
Net Asset Value Per Share— | |
ETF Shares | $45.35 |
See Note A in Notes to Financial Statements.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $384,000.
* Non-income-producing security.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $406,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
13
Mega Cap 300 Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 3,962 |
Security Lending | 5 |
Total Income | 3,967 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 26 |
Management and Administrative—Institutional Shares | 40 |
Management and Administrative—ETF Shares | 95 |
Marketing and Distribution—Institutional Shares | 12 |
Marketing and Distribution—ETF Shares | 40 |
Custodian Fees | 10 |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 7 |
Total Expenses | 230 |
Net Investment Income | 3,737 |
Realized Net Gain (Loss) on Investment Securities Sold | 449 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 83,184 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 87,370 |
See accompanying Notes, which are an integral part of the Financial Statements.
14
Mega Cap 300 Index Fund
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 3,737 | 7,178 |
Realized Net Gain (Loss) | 449 | 4,896 |
Change in Unrealized Appreciation (Depreciation) | 83,184 | (3,219) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 87,370 | 8,855 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (1,152) | (2,266) |
ETF Shares | (2,778) | (4,660) |
Realized Capital Gain | ||
Institutional Shares | — | — |
ETF Shares | — | — |
Total Distributions | (3,930) | (6,926) |
Capital Share Transactions | ||
Institutional Shares | 41,064 | (13,221) |
ETF Shares | 18,538 | 28,699 |
Net Increase (Decrease) from Capital Share Transactions | 59,602 | 15,478 |
Total Increase (Decrease) | 143,042 | 17,407 |
Net Assets | ||
Beginning of Period | 318,592 | 301,185 |
End of Period1 | 461,634 | 318,592 |
1 Net Assets—End of Period includes undistributed net investment income of $1,226,000 and $1,419,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
15
Mega Cap 300 Index Fund
Financial Highlights
Institutional Shares | ||||
Six Months | Feb. 22, | |||
Ended | Year Ended | 20081 to | ||
February 28, | August 31, | Aug. 31, | ||
For a Share Outstanding Throughout Each Period | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $71.03 | $69.95 | $87.14 | $91.07 |
Investment Operations | ||||
Net Investment Income | .812 | 1.657 | 1.6812 | .685 |
Net Realized and Unrealized Gain (Loss) on Investments | 18.439 | 1.033 | (17.409) | (4.028) |
Total from Investment Operations | 19.251 | 2.690 | (15.728) | (3.343) |
Distributions | ||||
Dividends from Net Investment Income | (.891) | (1.610) | (1.462) | (.587) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (.891) | (1.610) | (1.462) | (.587) |
Net Asset Value, End of Period | $89.39 | $71.03 | $69.95 | $87.14 |
Total Return | 27.26% | 3.74% | -17.84% | -3.69% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $158 | $92 | $102 | $53 |
Ratio of Total Expenses to Average Net Assets | 0.11% | 0.11% | 0.11% | 0.08%3 |
Ratio of Net Investment Income to Average Net Assets | 2.01% | 2.24% | 2.59% | 2.14%3 |
Portfolio Turnover Rate4 | 10% | 7% | 10% | 30% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 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.
16
Mega Cap 300 Index Fund
Financial Highlights
Six Months | Dec. 17, | |||
Ended | Year Ended | 20071 to | ||
February 28, | August 31, | Aug. 31, | ||
For a Share Outstanding Throughout Each Period | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $36.03 | $35.49 | $44.21 | $49.24 |
Investment Operations | ||||
Net Investment Income | .408 | .834 | .8222 | .441 |
Net Realized and Unrealized Gain (Loss) on Investments | 9.360 | .517 | (8.808) | (5.179) |
Total from Investment Operations | 9.768 | 1.351 | (7.986) | (4.738) |
Distributions | ||||
Dividends from Net Investment Income | (.448) | (.811) | (.734) | (.292) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (.448) | (.811) | (.734) | (.292) |
Net Asset Value, End of Period | $45.35 | $36.03 | $35.49 | $44.21 |
Total Return | 27.25% | 3.71% | -17.85% | -9.64% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $304 | $227 | $199 | $88 |
Ratio of Total Expenses to Average Net Assets | 0.13% | 0.13% | 0.13% | 0.13%3 |
Ratio of Net Investment Income to Average Net Assets | 1.99% | 2.22% | 2.57% | 2.09%3 |
Portfolio Turnover Rate4 | 10% | 7% | 10% | 30% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 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.
17
Mega Cap 300 Index Fund
Notes to Financial Statements
Vanguard Mega Cap 300 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: Institutional Shares and ETF Shares. Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2008–2010), and for the period ended February 28, 2011, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
3. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
4. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
5. Other: Dividend income is recorded on the ex-dividend date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
18
Mega Cap 300 Index Fund
B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $71,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.03% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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).
At February 28, 2011, 100% of the fund’s investments were valued based on Level 1 inputs.
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 February 28, 2011, the fund realized $3,460,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $14,505,000 to offset future net capital gains of $948,000 through August 31, 2017, and $13,557,000 through August 31, 2018. In addition, the fund realized losses of $6,014,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $408,578,000. Net unrealized appreciation of investment securities for tax purposes was $53,419,000, consisting of unrealized gains of $64,693,000 on securities that had risen in value since their purchase and $11,274,000 in unrealized losses on securities that had fallen in value since their purchase.
19
Mega Cap 300 Index Fund
E. During the six months ended February 28, 2011, the fund purchased $93,888,000 of investment securities and sold $34,848,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 46,112 | 532 | 5,107 | 68 |
Issued in Lieu of Cash Distributions | 1,152 | 14 | 2,266 | 30 |
Redeemed | (6,200) | (70) | (20,594) | (273) |
Net Increase (Decrease)—Institutional Shares | 41,064 | 476 | (13,221) | (175) |
ETF Shares | ||||
Issued | 34,156 | 800 | 80,172 | 2,100 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (15,618) | (400) | (51,473) | (1,400) |
Net Increase (Decrease)—ETF Shares | 18,538 | 400 | 28,699 | 700 |
G. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
20
Mega Cap 300 Growth Index Fund
Fund Profile
As of February 28, 2011
Share-Class Characteristics | ||
Institutional | ETF | |
Shares | Shares | |
Ticker Symbol | VMGAX | MGK |
Expense Ratio1 | 0.11% | 0.13% |
30-Day SEC Yield | 1.18% | 1.16% |
Portfolio Characteristics | |||
MSCI US | DJ | ||
Large Cap | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Number of Stocks | 188 | 187 | 3,845 |
Median Market Cap | $45.5B | $45.5B | $31.4B |
Price/Earnings Ratio | 18.2x | 18.2x | 17.9x |
Price/Book Ratio | 3.6x | 3.6x | 2.3x |
Return on Equity | 25.9% | 25.5% | 19.2% |
Earnings Growth Rate | 13.2% | 13.2% | 5.4% |
Dividend Yield | 1.3% | 1.3% | 1.6% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 26% | — | — |
Short-Term Reserves | 0.0% | — | — |
Sector Diversification (% of equity exposure) | |||
MSCI US | DJ | ||
Large Cap | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 14.4% | 14.5% | 11.8% |
Consumer Staples | 12.9 | 13.0 | 9.1 |
Energy | 7.6 | 7.5 | 11.6 |
Financials | 6.5 | 6.4 | 16.6 |
Health Care | 9.7 | 9.7 | 10.5 |
Industrials | 9.9 | 9.9 | 11.4 |
Information | |||
Technology | 34.0 | 34.0 | 18.9 |
Materials | 4.2 | 4.2 | 4.5 |
Telecommunication | |||
Services | 0.6 | 0.6 | 2.5 |
Utilities | 0.2 | 0.2 | 3.1 |
Volatility Measures | ||
MSCI US | DJ | |
Large Cap | U.S. Total | |
Growth | Market | |
Index | Index | |
R-Squared | 1.00 | 0.97 |
Beta | 1.00 | 0.93 |
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) | ||
Apple Inc. | Computer | |
Hardware | 6.1% | |
Microsoft Corp. | Systems Software | 3.9 |
International Business | IT Consulting & | |
Machines Corp. | Other Services | 3.8 |
Google Inc. Class A | Internet Software & | |
Services | 2.9 | |
Oracle Corp. | Systems Software | 2.5 |
Schlumberger Ltd. | Oil & Gas | |
Equipment & | ||
Services | 2.4 | |
Philip Morris | Tobacco | |
International Inc. | 2.2 | |
Cisco Systems Inc. | Communications | |
Equipment | 1.9 | |
Wal-Mart Stores Inc. | Hypermarkets & | |
Super Centers | 1.9 | |
PepsiCo Inc. | Soft Drinks | 1.9 |
Top Ten | 29.5% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/megacap300_q8282x23x1.jpg)
1 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.11% for Institutional Shares and 0.13% for ETF Shares.
21
Mega Cap 300 Growth 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 (%): December 17, 2007, Through February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/megacap300_q8282x24x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
This table presents average annual total 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 | |
Institutional Shares | 4/3/2008 | 14.69% | 2.03% |
ETF Shares | 12/17/2007 | ||
Market Price | 14.68 | 0.12 | |
Net Asset Value | 14.67 | 0.11 |
See Financial Highlights for dividend and capital gains information.
22
Mega Cap 300 Growth Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (100.0%)1 | |||
Consumer Discretionary (14.4%) | |||
McDonald’s Corp. | 111,131 | 8,410 | |
* | Amazon.com Inc. | 37,766 | 6,544 |
* | Ford Motor Co. | 321,994 | 4,846 |
* | DIRECTV Class A | 87,722 | 4,033 |
Lowe’s Cos. Inc. | 145,171 | 3,799 | |
Target Corp. | 70,745 | 3,718 | |
NIKE Inc. Class B | 38,900 | 3,463 | |
News Corp. Class A | 190,266 | 3,305 | |
Walt Disney Co. | 66,629 | 2,914 | |
Johnson Controls Inc. | 70,969 | 2,896 | |
Time Warner Cable Inc. | 37,436 | 2,702 | |
Starbucks Corp. | 77,990 | 2,572 | |
Yum! Brands Inc. | 49,312 | 2,482 | |
* | priceline.com Inc. | 5,164 | 2,344 |
TJX Cos. Inc. | 41,641 | 2,077 | |
Carnival Corp. | 48,128 | 2,054 | |
Coach Inc. | 31,136 | 1,710 | |
* | Las Vegas Sands Corp. | 35,999 | 1,679 |
* | Kohl’s Corp. | 30,791 | 1,659 |
Staples Inc. | 76,431 | 1,628 | |
Omnicom Group Inc. | 31,581 | 1,608 | |
CBS Corp. Class B | 66,417 | 1,585 | |
* | Bed Bath & Beyond Inc. | 27,607 | 1,329 |
McGraw-Hill Cos. Inc. | 32,376 | 1,252 | |
Marriott International Inc. | |||
Class A | 30,665 | 1,202 | |
Best Buy Co. Inc. | 35,582 | 1,147 | |
Wynn Resorts Ltd. | 8,479 | 1,042 | |
Gap Inc. | 45,586 | 1,027 | |
Comcast Corp. | |||
Class A Special Shares | 38,243 | 930 | |
Viacom Inc. Class B | 20,421 | 912 | |
News Corp. Class B | 48,151 | 886 | |
* | AutoZone Inc. | 2,817 | 727 |
* | Discovery | ||
Communications Inc. | |||
Class A | 14,304 | 617 |
Market | |||
Value | |||
Shares | ($000) | ||
* | Discovery | ||
Communications Inc. | 14,889 | 567 | |
* | Dollar General Corp. | 10,736 | 303 |
* | DISH Network Corp. Class A | 7,752 | 180 |
*,^ | Sears Holdings Corp. | 1,630 | 136 |
80,285 | |||
Consumer Staples (12.9%) | |||
Philip Morris | |||
International Inc. | 190,854 | 11,982 | |
Wal-Mart Stores Inc. | 206,132 | 10,715 | |
PepsiCo Inc. | 166,781 | 10,577 | |
Coca-Cola Co. | 142,868 | 9,132 | |
Walgreen Co. | 97,415 | 4,222 | |
Colgate-Palmolive Co. | 50,902 | 3,997 | |
Costco Wholesale Corp. | 45,479 | 3,401 | |
Kimberly-Clark Corp. | 42,890 | 2,826 | |
General Mills Inc. | 67,309 | 2,500 | |
Sysco Corp. | 61,577 | 1,711 | |
Kroger Co. | 63,821 | 1,462 | |
Kellogg Co. | 27,116 | 1,452 | |
Mead Johnson Nutrition Co. | 21,529 | 1,289 | |
Avon Products Inc. | 45,165 | 1,256 | |
Estee Lauder Cos. Inc. | |||
Class A | 11,922 | 1,126 | |
Clorox Co. | 14,675 | 994 | |
Hershey Co. | 16,672 | 872 | |
HJ Heinz Co. | 16,878 | 848 | |
Campbell Soup Co. | 13,818 | 465 | |
Sara Lee Corp. | 23,016 | 394 | |
Brown-Forman Corp. | |||
Class B | 5,530 | 382 | |
71,603 | |||
Energy (7.6%) | |||
Schlumberger Ltd. | 143,507 | 13,406 | |
Halliburton Co. | 95,715 | 4,493 | |
Anadarko Petroleum Corp. | 52,126 | 4,265 | |
Baker Hughes Inc. | 45,386 | 3,225 | |
EOG Resources Inc. | 26,732 | 3,002 | |
Hess Corp. | 31,931 | 2,779 |
23
Mega Cap 300 Growth Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
* | Weatherford | ||
International Ltd. | 78,024 | 1,887 | |
Peabody Energy Corp. | 28,376 | 1,858 | |
National Oilwell Varco Inc. | 22,081 | 1,757 | |
* | Southwestern Energy Co. | 36,494 | 1,441 |
Murphy Oil Corp. | 19,232 | 1,414 | |
* | Ultra Petroleum Corp. | 15,949 | 723 |
Noble Energy Inc. | 6,421 | 595 | |
Diamond Offshore | |||
Drilling Inc. | 7,308 | 572 | |
Noble Corp. | 9,369 | 419 | |
* | Kinder Morgan Inc. | 9,953 | 304 |
42,140 | |||
Financials (6.5%) | |||
* | Citigroup Inc. | 1,527,748 | 7,150 |
American Express Co. | 113,951 | 4,965 | |
* | Berkshire Hathaway Inc. | ||
Class B | 32,465 | 2,833 | |
State Street Corp. | 52,831 | 2,363 | |
Simon Property Group Inc. | 20,038 | 2,205 | |
CME Group Inc. | 7,047 | 2,194 | |
Franklin Resources Inc. | 16,540 | 2,078 | |
Charles Schwab Corp. | 106,877 | 2,027 | |
T Rowe Price Group Inc. | 26,986 | 1,807 | |
Public Storage | 15,236 | 1,710 | |
Aflac Inc. | 24,797 | 1,460 | |
Northern Trust Corp. | 22,825 | 1,177 | |
SunTrust Banks Inc. | 26,122 | 788 | |
Moody’s Corp. | 20,879 | 666 | |
Ameriprise Financial Inc. | 9,223 | 584 | |
Equity Residential | 10,414 | 574 | |
TD Ameritrade Holding Corp. | 24,040 | 524 | |
Boston Properties Inc. | 5,129 | 492 | |
Progressive Corp. | 23,173 | 483 | |
36,080 | |||
Health Care (9.7%) | |||
Abbott Laboratories | 162,587 | 7,820 | |
Medtronic Inc. | 113,642 | 4,537 | |
* | Gilead Sciences Inc. | 85,417 | 3,330 |
* | Amgen Inc. | 64,601 | 3,316 |
Baxter International Inc. | 61,222 | 3,254 | |
* | Express Scripts Inc. | 52,593 | 2,957 |
* | Medco Health Solutions Inc. | 44,646 | 2,752 |
* | Celgene Corp. | 49,528 | 2,630 |
Allergan Inc. | 32,361 | 2,400 | |
* | Thermo Fisher Scientific Inc. | 41,815 | 2,334 |
McKesson Corp. | 26,624 | 2,111 | |
* | Genzyme Corp. | 27,238 | 2,055 |
Stryker Corp. | 31,343 | 1,983 | |
Becton Dickinson and Co. | 24,290 | 1,943 | |
* | Biogen Idec Inc. | 25,329 | 1,732 |
* | St. Jude Medical Inc. | 36,059 | 1,726 |
* | Agilent Technologies Inc. | 36,471 | 1,535 |
* | Intuitive Surgical Inc. | 4,119 | 1,351 |
Market | |||
Value | |||
Shares | ($000) | ||
* | Zimmer Holdings Inc. | 21,025 | 1,311 |
* | Laboratory Corp. of | ||
America Holdings | 10,778 | 971 | |
Quest Diagnostics Inc. | 17,013 | 965 | |
CR Bard Inc. | 9,819 | 960 | |
53,973 | |||
Industrials (9.9%) | |||
Caterpillar Inc. | 66,755 | 6,871 | |
United Parcel Service Inc. | |||
Class B | 76,664 | 5,658 | |
Union Pacific Corp. | 51,873 | 4,949 | |
Emerson Electric Co. | 79,165 | 4,723 | |
Deere & Co. | 44,606 | 4,021 | |
Boeing Co. | 47,644 | 3,431 | |
Danaher Corp. | 58,496 | 2,960 | |
FedEx Corp. | 31,456 | 2,832 | |
Norfolk Southern Corp. | 38,224 | 2,507 | |
Precision Castparts Corp. | 15,009 | 2,127 | |
Cummins Inc. | 19,795 | 2,002 | |
PACCAR Inc. | 34,541 | 1,732 | |
Honeywell International Inc. | 27,283 | 1,580 | |
Fluor Corp. | 18,816 | 1,331 | |
CH Robinson Worldwide Inc. | 17,471 | 1,265 | |
Republic Services Inc. | |||
Class A | 40,437 | 1,197 | |
Expeditors International of | |||
Washington Inc. | 22,229 | 1,063 | |
Rockwell Collins Inc. | 16,471 | 1,061 | |
ITT Corp. | 18,258 | 1,058 | |
* | Delta Air Lines Inc. | 82,695 | 929 |
Ingersoll-Rand plc | 17,049 | 772 | |
Parker Hannifin Corp. | 8,430 | 752 | |
Southwest Airlines Co. | 38,943 | 461 | |
55,282 | |||
Information Technology (34.0%) | |||
* | Apple Inc. | 96,534 | 34,097 |
Microsoft Corp. | 810,305 | 21,538 | |
International Business | |||
Machines Corp. | 130,740 | 21,164 | |
* | Google Inc. Class A | 26,142 | 16,035 |
Oracle Corp. | 423,222 | 13,924 | |
* | Cisco Systems Inc. | 583,144 | 10,823 |
QUALCOMM Inc. | 170,140 | 10,137 | |
* | EMC Corp. | 216,706 | 5,897 |
Hewlett-Packard Co. | 119,291 | 5,205 | |
Texas Instruments Inc. | 123,516 | 4,398 | |
* | eBay Inc. | 123,678 | 4,144 |
Visa Inc. Class A | 52,267 | 3,818 | |
Accenture plc Class A | 66,755 | 3,437 | |
Mastercard Inc. Class A | 11,596 | 2,789 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 31,918 | 2,454 | |
* | Juniper Networks Inc. | 55,028 | 2,421 |
Broadcom Corp. Class A | 48,007 | 1,979 |
24
Mega Cap 300 Growth Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
* | NetApp Inc. | 37,577 | 1,941 |
* | Adobe Systems Inc. | 53,521 | 1,846 |
Tyco Electronics Ltd. | 46,788 | 1,686 | |
* | Salesforce.com Inc. | 12,437 | 1,645 |
* | Intuit Inc. | 31,268 | 1,644 |
Western Union Co. | 69,193 | 1,522 | |
* | Symantec Corp. | 82,707 | 1,491 |
* | Dell Inc. | 92,093 | 1,458 |
* | Yahoo! Inc. | 84,686 | 1,389 |
* | Citrix Systems Inc. | 19,761 | 1,386 |
Automatic Data | |||
Processing Inc. | 25,952 | 1,298 | |
Analog Devices Inc. | 31,429 | 1,253 | |
CA Inc. | 43,252 | 1,072 | |
* | Marvell Technology | ||
Group Ltd. | 57,880 | 1,058 | |
* | NVIDIA Corp. | 39,130 | 887 |
*,^ | First Solar Inc. | 5,834 | 860 |
* | VMware Inc. Class A | 7,825 | 655 |
Activision Blizzard Inc. | 57,694 | 642 | |
* | Motorola Solutions Inc. | 11,577 | 447 |
Paychex Inc. | 11,906 | 400 | |
188,840 | |||
Materials (4.2%) | |||
Freeport-McMoRan | |||
Copper & Gold Inc. | 99,054 | 5,245 | |
Monsanto Co. | 56,602 | 4,069 | |
Praxair Inc. | 32,242 | 3,204 | |
Newmont Mining Corp. | 51,888 | 2,868 | |
Air Products & | |||
Chemicals Inc. | 22,537 | 2,074 | |
Alcoa Inc. | 107,492 | 1,811 | |
Mosaic Co. | 16,415 | 1,409 | |
Ecolab Inc. | 24,413 | 1,188 | |
Sherwin-Williams Co. | 9,665 | 794 | |
Nucor Corp. | 11,600 | 556 | |
23,218 | |||
Telecommunication Services (0.6%) | |||
* | American Tower Corp. | ||
Class A | 42,044 | 2,268 | |
* | Crown Castle | ||
International Corp. | 30,598 | 1,290 | |
3,558 | |||
Utilities (0.2%) | |||
* | AES Corp. | 70,796 | 876 |
Total Common Stocks | |||
(Cost $455,765) | 555,855 |
Market | ||
Value | ||
Shares | ($000) | |
Temporary Cash Investments (0.1%)1 | ||
Money Market Fund (0.1%) | ||
2,3 Vanguard Market | ||
Liquidity Fund, 0.213% | 795,301 | 795 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.0%) | ||
4,5 Federal Home Loan | ||
Bank Discount Notes, | ||
0.200%, 3/11/11 | 100 | 100 |
Total Temporary Cash Investments | ||
(Cost $895) | 895 | |
Total Investments (100.1%) | ||
(Cost $456,660) | 556,750 | |
Other Assets and Liabilities (-0.1%) | ||
Other Assets | 3,268 | |
Liabilities3 | (3,948) | |
(680) | ||
Net Assets (100%) | 556,070 |
25
Mega Cap 300 Growth Index Fund
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 499,138 |
Undistributed Net Investment Income | 595 |
Accumulated Net Realized Losses | (43,751) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 100,090 |
Futures Contracts | (2) |
Net Assets | 556,070 |
Institutional Shares—Net Assets | |
Applicable to 1,248,692 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 121,910 |
Net Asset Value Per Share— | |
Institutional Shares | $97.63 |
ETF Shares—Net Assets | |
Applicable to 8,800,000 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 434,160 |
Net Asset Value Per Share— | |
ETF Shares | $49.34 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $744,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.1%, 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 $795,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
5 Securities with a value of $100,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
26
Mega Cap 300 Growth Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 3,248 |
Security Lending | 14 |
Total Income | 3,262 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 33 |
Management and Administrative—Institutional Shares | 40 |
Management and Administrative—ETF Shares | 143 |
Marketing and Distribution—Institutional Shares | 8 |
Marketing and Distribution—ETF Shares | 53 |
Custodian Fees | 9 |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 4 |
Total Expenses | 290 |
Net Investment Income | 2,972 |
Realized Net Gain (Loss) | |
Investment Securities Sold | (1,624) |
Futures Contracts | (43) |
Realized Net Gain (Loss) | (1,667) |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 107,372 |
Futures Contracts | (2) |
Change in Unrealized Appreciation (Depreciation) | 107,370 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 108,675 |
See accompanying Notes, which are an integral part of the Financial Statements.
27
Mega Cap 300 Growth Index Fund
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 2,972 | 5,462 |
Realized Net Gain (Loss) | (1,667) | 52,781 |
Change in Unrealized Appreciation (Depreciation) | 107,370 | (28,108) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 108,675 | 30,135 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (822) | (1,017) |
ETF Shares | (2,712) | (4,676) |
Realized Capital Gain | ||
Institutional Shares | — | — |
ETF Shares | — | — |
Total Distributions | (3,534) | (5,693) |
Capital Share Transactions | ||
Institutional Shares | 7,914 | 26,091 |
ETF Shares | 66,555 | (272,394) |
Net Increase (Decrease) from Capital Share Transactions | 74,469 | (246,303) |
Total Increase (Decrease) | 179,610 | (221,861) |
Net Assets | ||
Beginning of Period | 376,460 | 598,321 |
End of Period1 | 556,070 | 376,460 |
1 Net Assets—End of Period includes undistributed net investment income of $595,000 and $1,157,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
28
Mega Cap 300 Growth Index Fund
Financial Highlights
Institutional Shares | ||||
Six Months | Apr. 3, | |||
Ended | Year Ended | 20081 to | ||
February 28, | August 31, | Aug. 31, | ||
For a Share Outstanding Throughout Each Period | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $76.74 | $74.21 | $91.10 | $92.21 |
Investment Operations | ||||
Net Investment Income | .573 | 1.180 | 1.053 | .343 |
Net Realized and Unrealized Gain (Loss) on Investments | 21.020 | 2.465 | (16.900) | (1.250) |
Total from Investment Operations | 21.593 | 3.645 | (15.847) | (.907) |
Distributions | ||||
Dividends from Net Investment Income | (.703) | (1.115) | (1.043) | (.203) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (.703) | (1.115) | (1.043) | (.203) |
Net Asset Value, End of Period | $97.63 | $76.74 | $74.21 | $91.10 |
Total Return | 28.24% | 4.84% | -17.25% | -0.99% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $122 | $90 | $62 | $97 |
Ratio of Total Expenses to Average Net Assets | 0.11% | 0.11% | 0.11% | 0.08%2 |
Ratio of Net Investment Income to Average Net Assets | 1.29% | 1.39% | 1.59% | 1.16%2 |
Portfolio Turnover Rate3 | 26% | 21% | 31% | 9% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
29
Mega Cap 300 Growth Index Fund
Financial Highlights
ETF Shares | ||||
Six Months | Dec. 17, | |||
Ended | Year Ended | 20071 to | ||
February 28, | August 31, | Aug. 31, | ||
For a Share Outstanding Throughout Each Period | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $38.78 | $37.50 | $46.04 | $49.10 |
Investment Operations | ||||
Net Investment Income | .285 | .586 | .528 | .237 |
Net Realized and Unrealized Gain (Loss) on Investments | 10.627 | 1.248 | (8.548) | (3.139) |
Total from Investment Operations | 10.912 | 1.834 | (8.020) | (2.902) |
Distributions | ||||
Dividends from Net Investment Income | (.352) | (.554) | (.520) | (.158) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (.352) | (.554) | (.520) | (.158) |
Net Asset Value, End of Period | $49.34 | $38.78 | $37.50 | $46.04 |
Total Return | 28.23% | 4.82% | -17.28% | -5.91% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $434 | $287 | $536 | $161 |
Ratio of Total Expenses to Average Net Assets | 0.13% | 0.13% | 0.13% | 0.13%2 |
Ratio of Net Investment Income to Average Net Assets | 1.27% | 1.37% | 1.57% | 1.11%2 |
Portfolio Turnover Rate3 | 26% | 21% | 31% | 9% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Annualized.
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.
See accompanying Notes, which are an integral part of the Financial Statements.
30
Mega Cap 300 Growth Index Fund
Notes to Financial Statements
Vanguard Mega Cap 300 Growth Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Institutional Shares and ETF Shares. Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, enhancing returns, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The fund may seek to enhance returns by using futures contracts instead of the underlying securities when futures are believed to be priced more attractively than the underlying securities. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued at their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2008–2010), and for the period ended February 28, 2011, 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.
31
Mega Cap 300 Growth Index Fund
5. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
6. Other: Dividend income is recorded on the ex-dividend date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $87,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.03% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers 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 fund’s investments as of February 28, 2011, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 555,855 | — | — |
Temporary Cash Investments | 795 | 100 | — |
Futures Contracts—Assets1 | 1 | — | — |
Total | 556,651 | 100 | — |
1 Represents variation margin on the last day of the reporting period. |
32
Mega Cap 300 Growth Index Fund
D. At February 28, 2011, 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 | March 2011 | 3 | 199 | (2) |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
During the six months ended February 28, 2011, the fund realized $3,775,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $33,005,000 to offset future net capital gains of $7,258,000 through August 31, 2017, and $25,747,000 through August 31, 2018. In addition, the fund realized losses of $5,267,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $456,660,000. Net unrealized appreciation of investment securities for tax purposes was $100,090,000, consisting of unrealized gains of $106,855,000 on securities that had risen in value since their purchase and $6,765,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended February 28, 2011, the fund purchased $162,132,000 of investment securities and sold $87,892,000 of investment securities, other than temporary cash investments.
33
Mega Cap 300 Growth Index Fund
G. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 7,170 | 74 | 25,101 | 317 |
Issued in Lieu of Cash Distributions | 822 | 9 | 1,017 | 13 |
Redeemed | (78) | (1) | (27) | — |
Net Increase (Decrease)—Institutional Shares | 7,914 | 82 | 26,091 | 330 |
ETF Shares | ||||
Issued | 98,097 | 2,100 | 93,521 | 2,300 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (31,542) | (700) | (365,915) | (9,200) |
Net Increase (Decrease)—ETF Shares | 66,555 | 1,400 | (272,394) | (6,900) |
H. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
34
Mega Cap 300 Value Index Fund
Fund Profile
As of February 28, 2011
Share-Class Characteristics | ||
Institutional | ETF | |
Shares | Shares | |
Ticker Symbol | VMVLX | MGV |
Expense Ratio1 | 0.11% | 0.13% |
30-Day SEC Yield | 2.38% | 2.36% |
Portfolio Characteristics | |||
MSCI US | DJ | ||
Large Cap | U.S. Total | ||
Value | Market | ||
Fund | Index | Index | |
Number of Stocks | 154 | 154 | 3,845 |
Median Market Cap | $84.3B | $84.3B | $31.4B |
Price/Earnings Ratio | 14.8x | 14.8x | 17.9x |
Price/Book Ratio | 1.7x | 1.8x | 2.3x |
Return on Equity | 17.4% | 17.4% | 19.2% |
Earnings Growth Rate | -1.7% | -1.6% | 5.4% |
Dividend Yield | 2.5% | 2.5% | 1.6% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 27% | — | — |
Short-Term Reserves | 0.0% | — | — |
Sector Diversification (% of equity exposure) | |||
MSCI US | DJ | ||
Large Cap | U.S. Total | ||
Value | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 5.4% | 5.5% | 11.8% |
Consumer Staples | 8.6 | 8.6 | 9.1 |
Energy | 19.4 | 19.4 | 11.6 |
Financials | 24.0 | 24.0 | 16.6 |
Health Care | 12.4 | 12.4 | 10.5 |
Industrials | 11.4 | 11.4 | 11.4 |
Information | |||
Technology | 5.6 | 5.6 | 18.9 |
Materials | 2.4 | 2.3 | 4.5 |
Telecommunication | |||
Services | 5.6 | 5.6 | 2.5 |
Utilities | 5.2 | 5.2 | 3.1 |
Volatility Measures | ||
MSCI US | DJ | |
Large Cap | U.S. Total | |
Value | Market | |
Index | Index | |
R-Squared | 1.00 | 0.94 |
Beta | 1.00 | 0.95 |
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) | ||
Exxon Mobil Corp. | Integrated Oil & | |
Gas | 7.9% | |
General Electric Co. | Industrial | |
Conglomerates | 4.1 | |
Chevron Corp. | Integrated Oil & | |
Gas | 3.8 | |
JPMorgan Chase & Co. | Diversified Financial | |
Services | 3.3 | |
Procter & Gamble Co. | Household | |
Products | 3.2 | |
Johnson & Johnson | Pharmaceuticals | 3.1 |
AT&T Inc. | Integrated | |
Telecommunication | ||
Services | 3.1 | |
Wells Fargo & Co. | Diversified Banks | 2.9 |
Pfizer Inc. | Pharmaceuticals | 2.8 |
Bank of America Corp. | Diversified Financial | |
Services | 2.6 | |
Top Ten | 36.8% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/megacap300_q8282x37x1.jpg)
1 The expense ratios shown are from the prospectus dated December 15, 2010, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2011, the annualized expense ratios were 0.11% for Institutional Shares and 0.13% for ETF Shares.
35
Mega Cap 300 Value 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 (%): December 17, 2007, Through February 28, 2011
![](https://capedge.com/proxy/N-CSRS/0000932471-11-002357/megacap300_q8282x38x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2010
This table presents average annual total 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 | |
Institutional Shares | 3/5/2008 | 13.00% | -2.52% |
ETF Shares | 12/17/2007 | ||
Market Price | 13.00 | -5.02 | |
Net Asset Value | 12.98 | -5.03 |
See Financial Highlights for dividend and capital gains information.
36
Mega Cap 300 Value Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 28, 2011
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (100.0%)1 | |||
Consumer Discretionary (5.4%) | |||
Home Depot Inc. | 134,355 | 5,034 | |
Walt Disney Co. | 94,339 | 4,126 | |
Time Warner Inc. | 89,501 | 3,419 | |
Comcast Corp. Class A | 105,893 | 2,728 | |
Comcast Corp. Class A | |||
Special Shares | 90,457 | 2,200 | |
* | General Motors Co. | 42,173 | 1,414 |
Viacom Inc. Class B | 29,064 | 1,298 | |
Stanley Black & Decker Inc. | 12,707 | 964 | |
Macy’s Inc. | 33,919 | 811 | |
VF Corp. | 6,995 | 669 | |
JC Penney Co. Inc. | 17,106 | 598 | |
* | DISH Network Corp. Class A | 10,926 | 254 |
*,^ | Sears Holdings Corp. | 2,326 | 194 |
*,^ | Garmin Ltd. | 88 | 3 |
23,712 | |||
Consumer Staples (8.6%) | |||
Procter & Gamble Co. | 225,631 | 14,226 | |
Kraft Foods Inc. | 140,916 | 4,487 | |
Altria Group Inc. | 168,428 | 4,273 | |
Coca-Cola Co. | 59,005 | 3,772 | |
CVS Caremark Corp. | 109,617 | 3,624 | |
Archer-Daniels-Midland Co. | 51,655 | 1,920 | |
Reynolds American Inc. | 28,102 | 964 | |
Lorillard Inc. | 12,168 | 934 | |
ConAgra Foods Inc. | 35,329 | 818 | |
Safeway Inc. | 30,612 | 668 | |
HJ Heinz Co. | 12,928 | 649 | |
Molson Coors Brewing Co. | |||
Class B | 13,021 | 595 | |
Sara Lee Corp. | 32,052 | 549 | |
Campbell Soup Co. | 5,752 | 194 | |
Brown-Forman Corp. Class B | 2,264 | 157 | |
37,830 | |||
Energy (19.4%) | |||
Exxon Mobil Corp. | 406,458 | 34,764 | |
Chevron Corp. | 162,213 | 16,830 |
Market | |||
Value | |||
Shares | ($000) | ||
ConocoPhillips | 112,440 | 8,756 | |
Occidental Petroleum Corp. | 65,475 | 6,677 | |
Apache Corp. | 30,793 | 3,837 | |
Devon Energy Corp. | 33,076 | 3,025 | |
Marathon Oil Corp. | 57,224 | 2,838 | |
Chesapeake Energy Corp. | 52,564 | 1,872 | |
Williams Cos. Inc. | 47,000 | 1,427 | |
Spectra Energy Corp. | 52,086 | 1,393 | |
National Oilwell Varco Inc. | 16,845 | 1,340 | |
Valero Energy Corp. | 45,529 | 1,283 | |
Noble Energy Inc. | 9,132 | 846 | |
Noble Corp. | 13,349 | 597 | |
85,485 | |||
Financials (24.0%) | |||
JPMorgan Chase & Co. | 315,102 | 14,712 | |
Wells Fargo & Co. | 401,926 | 12,966 | |
Bank of America Corp. | 812,921 | 11,617 | |
Goldman Sachs Group Inc. | 39,184 | 6,418 | |
* | Citigroup Inc. | 1,171,782 | 5,484 |
US Bancorp | 154,755 | 4,291 | |
* | Berkshire Hathaway Inc. | ||
Class B | 46,244 | 4,036 | |
MetLife Inc. | 75,419 | 3,572 | |
Morgan Stanley | 109,765 | 3,258 | |
Bank of New York | |||
Mellon Corp. | 100,051 | 3,041 | |
PNC Financial Services | |||
Group Inc. | 42,383 | 2,615 | |
Prudential Financial Inc. | 38,980 | 2,566 | |
Travelers Cos. Inc. | 37,156 | 2,227 | |
Capital One Financial Corp. | 36,832 | 1,833 | |
ACE Ltd. | 27,358 | 1,730 | |
BB&T Corp. | 55,921 | 1,543 | |
Chubb Corp. | 24,606 | 1,493 | |
BlackRock Inc. | 7,107 | 1,450 | |
Marsh & | |||
McLennan Cos. Inc. | 43,612 | 1,328 | |
Allstate Corp. | 41,099 | 1,306 | |
AON Corp. | 23,833 | 1,255 | |
Vornado Realty Trust | 13,253 | 1,237 |
37
Mega Cap 300 Value Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
Loews Corp. | 26,845 | 1,161 | |
Annaly Capital | |||
Management Inc. | 63,709 | 1,142 | |
Aflac Inc. | 18,982 | 1,117 | |
HCP Inc. | 29,280 | 1,113 | |
Fifth Third Bancorp | 73,632 | 1,075 | |
Weyerhaeuser Co. | 42,991 | 1,049 | |
Hartford Financial Services | |||
Group Inc. | 33,908 | 1,004 | |
Invesco Ltd. | 37,117 | 996 | |
Simon Property Group Inc. | 8,233 | 906 | |
Principal Financial Group Inc. | 25,731 | 881 | |
Ameriprise Financial Inc. | 13,113 | 830 | |
Equity Residential | 14,811 | 816 | |
NYSE Euronext | 20,997 | 777 | |
Boston Properties Inc. | 7,342 | 704 | |
Progressive Corp. | 33,064 | 689 | |
SunTrust Banks Inc. | 20,055 | 605 | |
M&T Bank Corp. | 6,687 | 589 | |
General Growth | |||
Properties Inc. | 34,738 | 553 | |
Hudson City Bancorp Inc. | 357 | 4 | |
105,989 | |||
Health Care (12.4%) | |||
Johnson & Johnson | 221,364 | 13,600 | |
Pfizer Inc. | 645,648 | 12,422 | |
Merck & Co. Inc. | 248,162 | 8,083 | |
UnitedHealth Group Inc. | 88,753 | 3,779 | |
Bristol-Myers Squibb Co. | 137,748 | 3,555 | |
Eli Lilly & Co. | 83,656 | 2,891 | |
* | WellPoint Inc. | 31,757 | 2,111 |
Covidien plc | 39,974 | 2,057 | |
* | Amgen Inc. | 26,706 | 1,371 |
Aetna Inc. | 32,290 | 1,206 | |
Cardinal Health Inc. | 28,209 | 1,175 | |
CIGNA Corp. | 21,917 | 922 | |
* | Boston Scientific Corp. | 121,750 | 872 |
* | Forest Laboratories Inc. | 22,971 | 744 |
54,788 | |||
Industrials (11.4%) | |||
General Electric Co. | 858,830 | 17,967 | |
United Technologies Corp. | 70,697 | 5,906 | |
3M Co. | 54,786 | 5,053 | |
CSX Corp. | 30,190 | 2,254 | |
Honeywell International Inc. | 38,862 | 2,250 | |
General Dynamics Corp. | 25,972 | 1,977 | |
Lockheed Martin Corp. | 24,751 | 1,959 | |
Illinois Tool Works Inc. | 34,050 | 1,842 | |
Tyco International Ltd. | 39,490 | 1,790 | |
Raytheon Co. | 29,415 | 1,506 | |
Northrop Grumman Corp. | 22,467 | 1,498 | |
Eaton Corp. | 12,888 | 1,428 | |
Boeing Co. | 19,662 | 1,416 | |
Waste Management Inc. | 36,457 | 1,351 |
Market | |||
Value | |||
Shares | ($000) | ||
L-3 Communications | |||
Holdings Inc. | 9,176 | 728 | |
Ingersoll-Rand plc | 12,957 | 587 | |
Parker Hannifin Corp. | 6,466 | 577 | |
Southwest Airlines Co. | 29,950 | 354 | |
50,443 | |||
Information Technology (5.6%) | |||
Intel Corp. | 449,619 | 9,653 | |
Hewlett-Packard Co. | 91,497 | 3,992 | |
Corning Inc. | 125,979 | 2,905 | |
Applied Materials Inc. | 107,879 | 1,772 | |
Xerox Corp. | 111,820 | 1,202 | |
* | Dell Inc. | 70,298 | 1,113 |
Automatic Data | |||
Processing Inc. | 19,763 | 988 | |
Fidelity National Information | |||
Services Inc. | 20,622 | 668 | |
* | Motorola Solutions Inc. | 16,707 | 646 |
* | Yahoo! Inc. | 35,171 | 577 |
Paychex Inc. | 17,000 | 572 | |
* | NVIDIA Corp. | 16,189 | 367 |
24,455 | |||
Materials (2.4%) | |||
EI du Pont de | |||
Nemours & Co. | 73,642 | 4,041 | |
Dow Chemical Co. | 93,562 | 3,477 | |
PPG Industries Inc. | 13,248 | 1,171 | |
International Paper Co. | 33,351 | 926 | |
Nucor Corp. | 16,492 | 791 | |
10,406 | |||
Telecommunication Services (5.6%) | |||
AT&T Inc. | 476,380 | 13,520 | |
Verizon | |||
Communications Inc. | 227,700 | 8,407 | |
* | Sprint Nextel Corp. | 236,701 | 1,034 |
CenturyLink Inc. | 24,445 | 1,007 | |
Qwest Communications | |||
International Inc. | 125,555 | 856 | |
24,824 | |||
Utilities (5.2%) | |||
Southern Co. | 66,961 | 2,552 | |
Exelon Corp. | 53,315 | 2,226 | |
Dominion Resources Inc. | 46,837 | 2,137 | |
Duke Energy Corp. | 106,769 | 1,921 | |
NextEra Energy Inc. | 31,844 | 1,766 | |
PG&E Corp. | 31,604 | 1,456 | |
American Electric | |||
Power Co. Inc. | 38,715 | 1,385 | |
Public Service Enterprise | |||
Group Inc. | 40,674 | 1,330 | |
FirstEnergy Corp. | 33,595 | 1,287 | |
Consolidated Edison Inc. | 23,433 | 1,171 | |
Progress Energy Inc. | 23,614 | 1,079 | |
Entergy Corp. | 14,599 | 1,040 |
38
Mega Cap 300 Value Index Fund
Market | ||
Value | ||
Shares | ($000) | |
PPL Corp. | 38,777 | 986 |
Sempra Energy | 18,403 | 980 |
Edison International | 24,864 | 923 |
Xcel Energy Inc. | 36,876 | 883 |
23,122 | ||
Total Common Stocks | ||
(Cost $384,729) | 441,054 | |
Temporary Cash Investments (0.1%)1 | ||
Money Market Fund (0.1%) | ||
2,3 Vanguard Market | ||
Liquidity Fund, 0.213% | 447,101 | 447 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.0%) | ||
4,5 Freddie Mac | ||
Discount Notes, | ||
0.250%, 6/22/11 | 100 | 100 |
Total Temporary Cash Investments | ||
(Cost $547) | 547 | |
Total Investments (100.1%) | ||
(Cost $385,276) | 441,601 | |
Other Assets and Liabilities (-0.1%) | ||
Other Assets | 3,565 | |
Liabilities3 | (3,867) | |
(302) | ||
Net Assets (100%) | 441,299 |
At February 28, 2011, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 417,927 |
Undistributed Net Investment Income | 1,668 |
Accumulated Net Realized Losses | (34,625) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 56,325 |
Futures Contracts | 4 |
Net Assets | 441,299 |
Institutional Shares—Net Assets | |
Applicable to 1,283,149 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 105,491 |
Net Asset Value Per Share— | |
Institutional Shares | $82.21 |
ETF Shares—Net Assets | |
Applicable to 8,100,000 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 335,808 |
Net Asset Value Per Share— | |
ETF Shares | $41.46 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $178,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.1%, 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 $181,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
5 Securities with a value of $100,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
39
Mega Cap 300 Value Index Fund
Statement of Operations | |
Six Months Ended | |
February 28, 2011 | |
($000) | |
Investment Income | |
Income | |
Dividends | 4,957 |
Interest | 1 |
Security Lending | 6 |
Total Income | 4,964 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 26 |
Management and Administrative—Institutional Shares | 24 |
Management and Administrative—ETF Shares | 100 |
Marketing and Distribution—Institutional Shares | 14 |
Marketing and Distribution—ETF Shares | 41 |
Custodian Fees | 13 |
Shareholders’ Reports—Institutional Shares | 1 |
Shareholders’ Reports—ETF Shares | 4 |
Total Expenses | 223 |
Net Investment Income | 4,741 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 7,552 |
Futures Contracts | (39) |
Realized Net Gain (Loss) | 7,513 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 70,013 |
Futures Contracts | 4 |
Change in Unrealized Appreciation (Depreciation) | 70,017 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 82,271 |
See accompanying Notes, which are an integral part of the Financial Statements.
40
Mega Cap 300 Value Index Fund
Statement of Changes in Net Assets | ||
Six Months Ended | Year Ended | |
February 28, | August 31, | |
2011 | 2010 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 4,741 | 8,090 |
Realized Net Gain (Loss) | 7,513 | 779 |
Change in Unrealized Appreciation (Depreciation) | 70,017 | (5,528) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 82,271 | 3,341 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (1,183) | (2,101) |
ETF Shares | (3,635) | (5,508) |
Realized Capital Gain | ||
Institutional Shares | — | — |
ETF Shares | — | — |
Total Distributions | (4,818) | (7,609) |
Capital Share Transactions | ||
Institutional Shares | 10,577 | 6,114 |
ETF Shares | 51,363 | 66,952 |
Net Increase (Decrease) from Capital Share Transactions | 61,940 | 73,066 |
Total Increase (Decrease) | 139,393 | 68,798 |
Net Assets | ||
Beginning of Period | 301,906 | 233,108 |
End of Period1 | 441,299 | 301,906 |
1 Net Assets—End of Period includes undistributed net investment income of $1,668,000 and $1,745,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
41
Mega Cap 300 Value Index Fund
Financial Highlights
Institutional Shares | ||||
Six Months | Mar. 5, | |||
Ended | Year Ended | 20081 to | ||
February 28, | August 31, | Aug. 31, | ||
For a Share Outstanding Throughout Each Period | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $65.97 | $66.02 | $83.69 | $90.01 |
Investment Operations | ||||
Net Investment Income | .942 | 1.932 | 2.135 | 1.1242 |
Net Realized and Unrealized Gain (Loss) on Investments | 16.311 | (.075) | (17.658) | (6.444) |
Total from Investment Operations | 17.253 | 1.857 | (15.523) | (5.320) |
Distributions | ||||
Dividends from Net Investment Income | (1.013) | (1.907) | (2.147) | (1.000) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (1.013) | (1.907) | (2.147) | (1.000) |
Net Asset Value, End of Period | $82.21 | $65.97 | $66.02 | $83.69 |
Total Return | 26.36% | 2.69% | -18.29% | -5.96% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $105 | $76 | $70 | $53 |
Ratio of Total Expenses to Average Net Assets | 0.11% | 0.11% | 0.11% | 0.08%3 |
Ratio of Net Investment Income to Average Net Assets | 2.66% | 2.88% | 3.66% | 3.19%3 |
Portfolio Turnover Rate4 | 27% | 26% | 31% | 12% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 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.
42
Mega Cap 300 Value Index Fund
Financial Highlights
ETF Shares | ||||
Six Months | Dec. 17, | |||
Ended | Year Ended | 20071 to | ||
February 28, | August 31, | Aug. 31, | ||
For a Share Outstanding Throughout Each Period | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $33.26 | $33.29 | $42.21 | $49.38 |
Investment Operations | ||||
Net Investment Income | .472 | .969 | 1.070 | .8862 |
Net Realized and Unrealized Gain (Loss) on Investments | 8.236 | (.042) | (8.915) | (7.560) |
Total from Investment Operations | 8.708 | .927 | (7.845) | (6.674) |
Distributions | ||||
Dividends from Net Investment Income | (.508) | (.957) | (1.075) | (.496) |
Distributions from Realized Capital Gains | — | — | — | — |
Total Distributions | (.508) | (.957) | (1.075) | (.496) |
Net Asset Value, End of Period | $41.46 | $33.26 | $33.29 | $42.21 |
Total Return | 26.36% | 2.68% | -18.32% | -13.56% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $336 | $226 | $163 | $97 |
Ratio of Total Expenses to Average Net Assets | 0.13% | 0.13% | 0.13% | 0.13%3 |
Ratio of Net Investment Income to Average Net Assets | 2.64% | 2.86% | 3.64% | 3.14%3 |
Portfolio Turnover Rate4 | 27% | 26% | 31% | 12% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Inception.
2 Calculated based on average shares outstanding.
3 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.
43
Mega Cap 300 Value Index Fund
Notes to Financial Statements
Vanguard Mega Cap 300 Value Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Institutional Shares and ETF Shares. Institutional Shares are designed for investors who meet certain administrative, service, and account-size criteria. ETF Shares are listed for trading on the NYSE Arca, Inc.; they can be purchased and sold through a broker.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, enhancing returns, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The fund may seek to enhance returns by using futures contracts instead of the underlying securities when futures are believed to be priced more attractively than the underlying securities. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued at their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2008–2010), and for the period ended February 28, 2011, 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.
44
Mega Cap 300 Value Index Fund
5. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
6. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2011, the fund had contributed capital of $65,000 to Vanguard (included in Other Assets), 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 officers 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 fund’s investments as of February 28, 2011, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 441,054 | — | — |
Temporary Cash Investments | 447 | 100 | — |
Futures Contracts—Assets1 | 1 | — | — |
Total | 441,502 | 100 | — |
1 Represents variation margin on the last day of the reporting period. |
45
Mega Cap 300 Value Index Fund
D. At February 28, 2011, 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 | March 2011 | 3 | 199 | 4 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
During the six months ended February 28, 2011, the fund realized $11,857,000 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 August 31, 2010, the fund had available capital loss carryforwards totaling $19,395,000 to offset future net capital gains of $851,000 through August 31, 2017, and $18,544,000 through August 31, 2018. In addition, the fund realized losses of $9,749,000 during the period from November 1, 2009, through August 31, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2011; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 28, 2011, the cost of investment securities for tax purposes was $385,276,000. Net unrealized appreciation of investment securities for tax purposes was $56,325,000, consisting of unrealized gains of $60,422,000 on securities that had risen in value since their purchase and $4,097,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended February 28, 2011, the fund purchased $157,988,000 of investment securities and sold $96,409,000 of investment securities, other than temporary cash investments.
46
Mega Cap 300 Value Index Fund
G. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 28, 2011 | August 31, 2010 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 14,625 | 189 | 14,527 | 210 |
Issued in Lieu of Cash Distributions | 1,183 | 16 | 2,101 | 30 |
Redeemed | (5,231) | (70) | (10,514) | (152) |
Net Increase (Decrease)—Institutional Shares | 10,577 | 135 | 6,114 | 88 |
ETF Shares | ||||
Issued | 100,476 | 2,600 | 111,531 | 3,200 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (49,113) | (1,300) | (44,579) | (1,300) |
Net Increase (Decrease)—ETF Shares | 51,363 | 1,300 | 66,952 | 1,900 |
H. In preparing the financial statements as of February 28, 2011, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
47
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. Your fund does not charge transaction fees, such as purchase or redemption fees, nor does it 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.
48
Six Months Ended February 28, 2011 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
8/31/2010 | 2/28/2011 | Period | |
Based on Actual Fund Return | |||
Mega Cap 300 Index Fund | |||
Institutional Shares | $1,000.00 | $1,272.56 | $0.62 |
ETF Shares | 1,000.00 | 1,272.46 | 0.73 |
Mega Cap 300 Growth Index Fund | |||
Institutional Shares | $1,000.00 | $1,282.38 | $0.62 |
ETF Shares | 1,000.00 | 1,282.26 | 0.74 |
Mega Cap 300 Value Index Fund | |||
Institutional Shares | $1,000.00 | $1,263.58 | $0.62 |
ETF Shares | 1,000.00 | 1,263.64 | 0.73 |
Based on Hypothetical 5% Yearly Return | |||
Mega Cap 300 Index Fund | |||
Institutional Shares | $1,000.00 | $1,024.25 | $0.55 |
ETF Shares | 1,000.00 | 1,024.15 | 0.65 |
Mega Cap 300 Growth Index Fund | |||
Institutional Shares | $1,000.00 | $1,024.25 | $0.55 |
ETF Shares | 1,000.00 | 1,024.15 | 0.65 |
Mega Cap 300 Value Index Fund | |||
Institutional Shares | $1,000.00 | $1,024.25 | $0.55 |
ETF Shares | 1,000.00 | 1,024.15 | 0.65 |
The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Mega Cap 300 Index Fund, 0.11% for Institutional Shares and 0.13% for ETF Shares; for the Mega Cap 300 Growth Index Fund, 0.11% for Institutional Shares and 0.13% for ETF Shares; and for the Mega Cap 300 Value Index Fund, 0.11% for Institutional Shares and 0.13% 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.
49
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 (in the case of bonds) 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.
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. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Foreign Holdings. The percentage of a fund represented by stocks 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.
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.
50
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.
51
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 179 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1 | and President (2006–2008) of Rohm and Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services) and Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing); |
Board. Principal Occupation(s) During the Past Five | Senior Advisor at New Mountain Capital; Trustee |
Years: Chairman of the Board of The Vanguard Group, | of The Conference Board; Member of the Board of |
Inc., and of each of the investment companies served | Managers of Delphi Automotive LLP (automotive |
by The Vanguard Group, since January 2010; Director | components). |
of The Vanguard Group since 2008; Chief Executive | |
Officer and President of The Vanguard Group and of | Amy Gutmann |
each of the investment companies served by The | Born 1949. Trustee Since June 2006. Principal |
Vanguard Group since 2008; Director of Vanguard | Occupation(s) During the Past Five Years: President |
Marketing Corporation; Managing Director of The | of the University of Pennsylvania; Christopher H. |
Vanguard Group (1995–2008). | Browne Distinguished Professor of Political Science |
in the School of Arts and Sciences with secondary | |
appointments at the Annenberg School for Commu- | |
Independent Trustees | nication and the Graduate School of Education |
of the University of Pennsylvania; Director of | |
Emerson U. Fullwood | Carnegie Corporation of New York, Schuylkill River |
Born 1948. Trustee Since January 2008. Principal | Development Corporation, and Greater Philadelphia |
Occupation(s) During the Past Five Years: Executive | Chamber of Commerce; Trustee of the National |
Chief Staff and Marketing Officer for North America | Constitution Center; Chair of the Presidential |
and Corporate Vice President (retired 2008) of Xerox | Commission for the Study of Bioethical Issues. |
Corporation (document management products and | |
services); Executive in Residence and 2010 | JoAnn Heffernan Heisen |
Distinguished Minett Professor at the Rochester | Born 1950. Trustee Since July 1998. Principal |
Institute of Technology; Director of SPX Corporation | Occupation(s) During the Past Five Years: Corporate |
(multi-industry manufacturing), the United Way of | Vice President and Chief Global Diversity Officer |
Rochester, Amerigroup Corporation (managed health | (retired 2008) and Member of the Executive |
care), the University of Rochester Medical Center, | Committee (1997–2008) of Johnson & Johnson |
Monroe Community College Foundation, and North | (pharmaceuticals/consumer products); Director of |
Carolina A&T University. | Skytop Lodge Corporation (hotels), the University |
Medical Center at Princeton, the Robert Wood | |
Rajiv L. Gupta | Johnson Foundation, and the Center for Work Life |
Born 1945. Trustee Since December 2001.2 | Policy; Member of the Advisory Board of the |
Principal Occupation(s) During the Past Five Years: | Maxwell School of Citizenship and Public Affairs |
Chairman and Chief Executive Officer (retired 2009) | at Syracuse University. |
F. Joseph Loughrey | Thomas J. Higgins | |
Born 1949. Trustee Since October 2009. Principal | Born 1957. Chief Financial Officer Since September | |
Occupation(s) During the Past Five Years: President | 2008. Principal Occupation(s) During the Past Five | |
and Chief Operating Officer (retired 2009) and Vice | Years: Principal of The Vanguard Group, Inc.; Chief | |
Chairman of the Board (2008–2009) of Cummins Inc. | Financial Officer of each of the investment companies | |
(industrial machinery); Director of SKF AB (industrial | served by The Vanguard Group since 2008; Treasurer | |
machinery), Hillenbrand, Inc. (specialized consumer | of each of the investment companies served by The | |
services), the Lumina Foundation for Education, and | Vanguard Group (1998–2008). | |
Oxfam America; Chairman of the Advisory Council | ||
for the College of Arts and Letters and Member | Kathryn J. Hyatt | |
of the Advisory Board to the Kellogg Institute for | Born 1955. Treasurer Since November 2008. Principal | |
International Studies at the University of Notre Dame. | Occupation(s) During the Past Five Years: Principal | |
of The Vanguard Group, Inc.; Treasurer of each of | ||
André F. Perold | the investment companies served by The Vanguard | |
Born 1952. Trustee Since December 2004. Principal | Group since 2008; Assistant Treasurer of each of the | |
Occupation(s) During the Past Five Years: George | investment companies served by The Vanguard Group | |
Gund Professor of Finance and Banking at the Harvard | (1988–2008). | |
Business School; Chair of the Investment Committee | ||
of HighVista Strategies LLC (private investment firm). | Heidi Stam | |
Born 1956. Secretary Since July 2005. Principal | ||
Alfred M. Rankin, Jr. | Occupation(s) During the Past Five Years: Managing | |
Born 1941. Trustee Since January 1993. Principal | Director of The Vanguard Group, Inc., since 2006; | |
Occupation(s) During the Past Five Years: Chairman, | General Counsel of The Vanguard Group since 2005; | |
President, and Chief Executive Officer of NACCO | Secretary of The Vanguard Group and of each of the | |
Industries, Inc. (forklift trucks/housewares/lignite); | investment companies served by The Vanguard Group | |
Director of Goodrich Corporation (industrial products/ | since 2005; Director and Senior Vice President of | |
aircraft systems and services) and the National | Vanguard Marketing Corporation since 2005; | |
Association of Manufacturers; Chairman of the | Principal of The Vanguard Group (1997–2006). | |
Federal Reserve Bank of Cleveland; Vice Chairman | ||
of University Hospitals of Cleveland; President of | ||
the Board of The Cleveland Museum of Art. | Vanguard Senior Management Team | |
Peter F. Volanakis | R. Gregory Barton | Michael S. Miller |
Born 1955. Trustee Since July 2009. Principal | Mortimer J. Buckley | James M. Norris |
Occupation(s) During the Past Five Years: President | Kathleen C. Gubanich | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Paul A. Heller | George U. Sauter |
Incorporated (communications equipment); Director of | ||
Corning Incorporated (2000–2010) and Dow Corning | ||
(2001–2010); Overseer of the Amos Tuck School of | Chairman Emeritus and Senior Advisor | |
Business Administration at Dartmouth College. | ||
John J. Brennan | ||
Chairman, 1996–2009 | ||
Executive Officers | Chief Executive Officer and President, 1996–2008 | |
Glenn Booraem | ||
Born 1967. Controller Since July 2010. Principal | Founder | |
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | John C. Bogle | |
the investment companies served by The Vanguard | Chairman and Chief Executive Officer, 1974–1996 | |
Group since 2010; Assistant Controller of each of | ||
the investment companies served by The Vanguard | ||
Group (2001–2010). |
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, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
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P.O. Box 2600 | |
Valley Forge, PA 19482-2600 |
Connect with Vanguard® > vanguard.com
The funds or securities referred to herein are not | |
Fund Information > 800-662-7447 | sponsored, endorsed, or promoted by MSCI, and MSCI |
Direct Investor Account Services > 800-662-2739 | bears no liability with respect to any such funds or |
Institutional Investor Services > 800-523-1036 | securities. For any such funds or securities, the |
Text Telephone for People | prospectus or the Statement of Additional Information |
With Hearing Impairment > 800-749-7273 | contains a more detailed description of the limited |
relationship MSCI has with The Vanguard Group and | |
This material may be used in conjunction | any related funds. |
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 Inc. 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 e-mail addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2011 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q8282 042011 |
Item 2: Code of Ethics.
Not Applicable.
Item 3: Audit Committee Financial Expert.
Not Applicable.
Item 4: Principal Accountant Fees and Services.
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) Code of Ethics.
(b) Certifications.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VANGUARD WORLD FUND | |
By: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: April 15, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
VANGUARD WORLD FUND | |
By: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: April 15, 2011 |
VANGUARD WORLD FUND | |
By: | /s/ THOMAS J. HIGGINS* |
THOMAS J. HIGGINS | |
CHIEF FINANCIAL OFFICER | |
Date: April 15, 2011 |
* By: /s/ Heidi Stam
Heidi Stam, pursuant to a Power of Attorney filed on April 26, 2010, see file Number 33-53683,
Incorporated by Reference.