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, 2011 – February 29, 2012
Item 1: Reports to Shareholders
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/usgrowthx1x1.jpg)
Semiannual Report | February 29, 2012
Vanguard U.S. Growth Fund
> Vanguard U.S. Growth Fund returned almost 15% for the six months ended February 29, 2012, ahead of the results of its comparative standards.
> Overall, growth stocks slightly outperformed the broad stock market as well as their value-oriented counterparts.
> 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. | 6 |
Fund Profile. | 10 |
Performance Summary. | 11 |
Financial Statements. | 12 |
About Your Fund’s Expenses. | 23 |
Trustees Approve Advisory Agreements. | 25 |
Glossary. | 27 |
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 isks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Vanguard was named for the HMS Vanguard, flagship of British Admiral Horatio Nelson. A ship—whose erformance and safety depend on the work of all hands—has served as a fitting metaphor for the Vanguard crew as we trive to help clients reach their financial goals.
Your Fund’s Total Returns
Six Months Ended February 29, 2012 | |
Total | |
Returns | |
Vanguard U.S. Growth Fund | |
Investor Shares | 14.72% |
Admiral™ Shares | 14.81 |
Russell 1000 Growth Index | 13.76 |
Large-Cap Growth Funds Average | 12.46 |
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, 2011, Through February 29, 2012
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard U.S. Growth Fund | ||||
Investor Shares | $18.12 | $20.70 | $0.077 | $0.000 |
Admiral Shares | 46.94 | 53.58 | 0.272 | 0.000 |
1
Chairman’s Letter
Dear Shareholder,
With some stabilization in the European sovereign-debt crisis and growing signs of an upturn in U.S. economic activity, the stock market finished the six-month period significantly higher. Growth stocks were a step ahead of the rest. Vanguard U.S. Growth Fund returned 14.72% for Investor Shares for the six months ended February 29, 2012. This result outpaced the fund’s benchmark index, the broad U.S. stock market (which is diversified across growth and value stocks), and the average return of peer funds by about 1 to 2 percentage points.
Information technology, a classic growth sector, accounted for approximately 40% of the fund’s holdings during the period and more than half of its return.
Notes of optimism
propelled stock prices higher
U.S. stocks produced a strong double-digit return of 13.18% over the period. That statement is true enough, but the headline figure obscures the volatility that has been perhaps the most prominent feature of the financial markets over the past six months and indeed the past few years. If the six-month period had started a month earlier, for example, the Dow Jones U.S. Total Stock Market Index would have returned just 1.97%. A start date two months earlier would have put the six- month return at –5.18%.
2
In the six months through February, however, stock prices benefited from signs of acceleration in the U.S. economic expansion and hope that the European Union’s latest agreement on Greek debt would help to contain a threat that has menaced global markets for much of the past two years. European stocks rallied on the news about Greece, but international stocks still trailed their U.S. counterparts for the full six months.
Bonds’ strength
confounded expectations
Bonds produced solid returns, to the surprise of many long-time observers of the fixed income markets. At the start of the period, the yield of the 10-year U.S.
Treasury note stood at 2.22%, suggesting that returns would be very modest by historical standards. Over the next six months, however, yields moved lower still, boosting bond prices, which move in the opposite direction. At the end of February, the yield of the 10-year T-note stood at 1.98%. As yields decline, obviously, the scope for continued declines—and price increases—diminishes. Municipal bonds performed even more strongly than the broad taxable market.
The returns for 3-month Treasury bills and other money market instruments remained near 0%, consistent with the Federal Reserve’s policy on interest rates.
Market Barometer | |||
Total Returns | |||
Periods Ended February 29, 2012 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.31% | 4.86% | 1.77% |
Russell 2000 Index (Small-caps) | 12.40 | -0.15 | 1.83 |
Dow Jones U.S. Total Stock Market Index | 13.18 | 4.35 | 2.07 |
MSCI All Country World Index ex USA (International) | 3.97 | -6.10 | -0.75 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | 2.73% | 8.37% | 6.36% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | 5.67 | 12.42 | 5.50 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.00 | 0.06 | 1.20 |
CPI | |||
Consumer Price Index | 0.49% | 2.87% | 2.27% |
3
Investors warm up to growth stocks
as macroeconomic fears abate
The six-month period was marked by bouts of anxiety over the European debt crisis and what the Federal Reserve referred to as “significant downside risks” for the domestic economy. But Greece staved off imminent default and the U.S. economy registered better vital signs, including improvements in the unemployment rate and consumer confidence, and unexpected resilience in the manufacturing sector. As a result, investor appetite returned for stocks with above-average earnings growth potential. Of the sectors in which the fund was invested, only consumer staples generated negative returns.
Information technology, a traditional home to growth-oriented companies because of its rapid cycles of innovation, represented about 30% of the benchmark’s assets during the period. The fund was even more heavily invested in IT (about 40% of its assets), a strategic choice that paid off handsomely given the upturn in consumer confidence and robust corporate spending. Skillful stock selection among companies active in key growth areas such as smartphones, retailing services, and business IT generated a return of more than 21% for this sector, which translated into more than 8 percentage points of the fund’s six-month return.
Expense Ratios
Your Fund Compared With Its Peer Group
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
U.S. Growth Fund | 0.44% | 0.30% | 1.37% |
The fund expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.45% for Investor Shares and 0.31% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper Inc. and captures information through year-end 2011.
Peer group: Large-Cap Growth Funds.
4
Geopolitical tensions contributed to keeping the price of oil at more than $100 a barrel for most of the period, which benefited energy stocks in general. While the fund’s allocation to this sector was less than its benchmark’s, its return was higher. Careful stock selection produced good results in the areas of exploration and production of oil and natural gas, as well as in companies providing equipment and services.
Stock selection was also positive for the fund in health care, telecommunication services, industrials, and financials.
Consumer discretionary holdings lagged their benchmark equivalents. While the fund had more of its assets in this sector, stock selection proved to be subpar. Apparel and media companies did well, but retailing and consumer services underperformed.
Although the fund largely avoided consumer staples (which tend not to be growth-oriented), because of poor stock selection this was the only sector that detracted from its performance.
For more about the advisors’ strategy and the fund’s positioning during the six months, please see the Advisors’ Report that follows this letter.
Changes for the better
Your fund’s investment objective is to seek out blue chip companies offering the potential to deliver positive earnings growth and superior returns over the long term. Changes we have made in recent years, including the addition of two new advisory firms in October 2010, seem to be helping the fund achieve its objective. While the broad stock market and peer funds posted strong gains over the last six months, it is encouraging to see that the fund’s returns were even better.
Growth stocks may not repeat this performance over the next six months, but then again they might. The unpredictable nature of the markets is why we encourage investors to maintain a portfolio diversified across asset classes, and within them as well. Such a strategy can limit your exposure to the financial markets’ weakest segments in any period, while also affording you participation in their best.
Vanguard U.S. Growth Fund can play a valuable role in a diversified investment plan by providing exposure to high-quality, blue chip growth companies at a low cost.
As always, thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/usgrowthx7x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 12, 2012
5
Advisors’ Report
For the half-year ended February 29, 2012, Vanguard U.S. Growth Fund returned almost 15%, finishing ahead of its benchmark and peer funds. Your fund is managed by three advisors. 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 14, 2012.
Vanguard U.S. Growth Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Delaware Management Company | 41 | 1,578 | 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. | |||
Wellington Management | 38 | 1,443 | 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. | |||
William Blair & Company, L.L.C. | 18 | 692 | 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 | 3 | 94 | These short-term reserves are invested by Vanguard in |
equity index products to simulate investment in stocks. | |||
Each advisor may also maintain a modest cash | |||
position. |
6
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 believe to be strong secular growth companies with solid business models and competitive positions that can grow market share and deliver shareholder value in a variety of market environments. Consistent with our philosophy, stock selection was meaningful during the six-month period ended February 29, 2012.
Two of our largest relative contributors to performance were Visa and Mastercard. Prior to the period under review, the Federal Reserve released its final proposal for debit card interchange rates and network exclusivity rules, all of which were more favorable than recommendations made in December 2010. We felt that both companies’ competitive positions (with a combined market share of more than 80%) would allow them to avoid the heavy pricing pressure that many investors feared. Investors appeared to again focus on these companies’ fundamentals and business model characteristics, which were especially attractive in a risk-averse environment. The earnings reports released during the period demonstrated these companies’ strong fundamental positions.
The largest detractor from performance during the period was Ctrip.com, the Chinese online travel agency. The stock declined in recent quarters after manage-ment significantly reduced its margin targets. We remain attracted, however, to the thesis that internet-based demand aggregators tend to build very nice businesses when their customers are fragmented, as is the case with the hotel market in China.
Another detractor was Apollo Education. Because of the increased scrutiny on federal loans that finance most higher education, Apollo put in place new selection criteria in order to raise the quality of students and the likelihood of graduation. That new focus led to a dip in the level of new enrollment. This, in turn, caused Apollo’s earnings to be more volatile and sometimes lower than consensus expectations and the company’s stock price to decline late in the fund’s fiscal half-year. We believe Apollo is positioned better than most in the industry and should benefit disproportionately from improving industry dynamics, as well as companyspecific improvements in its business model and competitive position.
7
We believe many investors are still uncertain about the level of future global economic growth. In our view, the lingering effects of the global credit crisis could lead to moderate growth, at best. They are likely to continue to result in often conflicting economic data points and disparate performances depending on the quality of a company’s business model, competitive position, and management.
Wellington Management Company,LLP
Portfolio Manager:
Andrew J. Shilling, CFA, Senior Vice President
The last six months was an extremely volatile period for the capital markets. At certain points, the environment presented a significant challenge to our strategy. In equities, the period began with a flight to safety, as investors directed their interests toward defensive sectors that do not typically offer the growth characteristics we seek for the portfolio. Riskier assets performed better during the period’s final weeks. Poor stock selection within the consumer, information technology, and materials sectors held back performance. On the other hand, our overweight position in information technology stocks as a group contributed favorably to results.
At the stock-specific level, our largest contributors included Apple, National Oilwell Varco, and F5 Networks. Apple, our largest holding, soared during the period. We believe the firm’s outstanding competitive position and upcoming new product launches should continue to enable the stock to outperform. Longer-term opportunities include expanding distribution in China and other emerging markets, a growing tablet market, and the potential to penetrate the smart TV market.
Detractors at the stock-specific level included Green Mountain Coffee, Acme Packet, and Netflix. Green Mountain Coffee, a maker of specialty coffees and coffee makers, tumbled during the period. Shares suffered following an earnings miss and public criticism of management by a prominent and vocal hedge fund manager. We believe that there are many positives for the company, including the dominant position of its Keurig single-cup coffee maker, growth in premium coffees, new users, and partnerships with Starbucks and Dunkin’ Donuts. Green Mountain remains a large holding in our portfolio.
We remain overweighted in information technology, where we believe valuations are attractive relative to earnings growth, especially after adjusting for cash on balance sheets. Trends including cloud computing, mobility, and data storage are creating secular growth opportunities that should help drive sustained earnings growth for some time to come.
8
William Blair & Company, L.L.C.
Portfolio Managers:
James Golan, CFA, Principal
David Ricci, CFA, Principal
Reacting positively to solid corporate earnings and above-consensus economic and employment reports, investors had a growing level of confidence in the economic recovery. European debt concerns also eased as leaders united in announcing a broad package of measures to assist. In general, volatility remained high and investors sought more cyclical stocks at the expense of more defensive sectors.
In this environment, the portfolio performed well, benefiting from its information technology positions. Apple was the largest contributor; its stock rose on strong sales of iPhones, iPads, and Macs. We believe the firm continues to have significant growth opportunities. It should see attractive tablet growth and gain market shares in the PC and mobile phone industries. The best overall portfolio contributor was Goodrich, a leader in aerospace systems. Its stock rallied on the announcement of its acquisition by United Technologies. As a result, it was sold from the portfolio.
Some health care holdings were weak; the greatest detractor was Covidien, a global leader in medical devices, supplies, and pharmaceuticals. It declined on concerns about falling procedure volumes, pricing pressures, and its European exposure. We sold the stock in December in pursuit of more attractive opportunities. In energy, Schlumberger, a leader in global oil service technology, was also a relative laggard. It reported strong North American results but was hindered by pockets of weakness in international services pricing and customer-driven project delays. In our view, it should benefit from continued oil demand driving increased deepwater exploration in international markets. We added to the position on its recent weakness.
Going forward, we are cautiously optimistic about the U.S. economy. Corporations remain strong, with solid profits in a difficult environment and healthy balance sheets.
The Federal Reserve is likely to prolong its accommodative stance, which should assist businesses and consumers. However, investors may continue to be uneasy about macro concerns. While some progress has been made, European sovereign-debt issues, large deficits, deleveraging, and political uncertainties linger.
As always, our philosophy and bottom-up investment process remain in full force. This framework will help us to identify quality growth companies with unique and sustainable competitive advantages, the potential for superior earnings growth and balance sheets, and strong, dynamic management teams. In our view, these companies will likely perform well over the long-term against peers and the market.
9
U.S. Growth Fund
Fund Profile
As of February 29, 2012
Share-Class Characteristics | |||
Investor | Admiral | ||
Shares | Shares | ||
Ticker Symbol | VWUSX | VWUAX | |
Expense Ratio1 | 0.44% | 0.30% | |
30-Day SEC Yield | 0.27% | 0.41% | |
Portfolio Characteristics | |||
Russell | DJ | ||
1000 | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Number of Stocks | 111 | 585 | 3,733 |
Median Market Cap $30.6B | $40.8B | $33.9B | |
Price/Earnings Ratio | 21.0x | 17.4x | 16.5x |
Price/Book Ratio | 3.6x | 4.1x | 2.2x |
Return on Equity | 23.2% | 25.2% | 18.2% |
Earnings Growth Rate 18.2% | 14.5% | 7.6% | |
Dividend Yield | 0.7% | 1.5% | 1.9% |
Foreign Holdings | 3.9% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 31% | — | — |
Short-Term Reserves | 2.2% | — | — |
Sector Diversification (% of equity exposure) | |||
Russell | DJ | ||
1000 | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 16.5% | 14.3% | 11.9% |
Consumer Staples | 4.0 | 11.8 | 9.4 |
Energy | 9.2 | 10.7 | 11.2 |
Financials | 7.0 | 4.2 | 15.4 |
Health Care | 8.4 | 10.3 | 11.4 |
Industrials | 7.6 | 12.8 | 11.2 |
Information | |||
Technology | 42.3 | 29.7 | 19.4 |
Materials | 2.9 | 5.3 | 4.1 |
Telecommunication | |||
Services | 2.0 | 0.8 | 2.5 |
Utilities | 0.1 | 0.1 | 3.5 |
Volatility Measures | ||
DJ | ||
U.S. Total | ||
Russell 1000 | Market | |
Growth Index | Index | |
R-Squared | 0.98 | 0.95 |
Beta | 1.08 | 1.03 |
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months. | ||
Ten Largest Holdings (% of total net assets) | ||
Apple Inc. | Computer | |
Hardware | 8.6% | |
QUALCOMM Inc. | Communications | |
Equipment | 3.8 | |
Google Inc. Class A | Internet Software & | |
Services | 3.3 | |
priceline.com Inc. | Internet Retail | 2.7 |
Mastercard Inc. Class A | Data Processing & | |
Outsourced | ||
Services | 2.7 | |
EOG Resources Inc. | Oil & Gas | |
Exploration & | ||
Production | 2.6 | |
Visa Inc. Class A | Data Processing & | |
Outsourced | ||
Services | 2.2 | |
Allergan Inc. | Pharmaceuticals | 2.2 |
VeriSign Inc. | Internet Software & | |
Services | 2.0 | |
eBay Inc. | Internet Software & | |
Services | 2.0 | |
Top Ten | 32.1% | |
The holdings listed exclude any temporary cash investments and equity index products. | ||
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/usgrowthx12x1.jpg)
1 The expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.45% for Investor Shares and 0.31% for Admiral Shares.
10
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, 2001, Through February 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/usgrowthx13x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | One | Five | Ten | |
Date | Year | Years | Years | |
Investor Shares | 1/6/1959 | -0.68% | 0.48% | 0.04% |
Admiral Shares | 8/13/2001 | -0.53 | 0.66 | 0.23 |
See Financial Highlights for dividend and capital gains information.
11
U.S. Growth Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (95.7%)1 | |||
Consumer Discretionary (15.9%) | |||
* | priceline.com Inc. | 162,790 | 102,073 |
NIKE Inc. Class B | 698,800 | 75,414 | |
* | Apollo Group Inc. | ||
Class A | 1,153,200 | 49,172 | |
Starbucks Corp. | 858,500 | 41,689 | |
Harley-Davidson Inc. | 888,480 | 41,385 | |
Staples Inc. | 2,351,400 | 34,472 | |
* | Amazon.com Inc. | 171,440 | 30,806 |
News Corp. Class A | 1,476,790 | 29,344 | |
* | Ctrip.com | ||
International Ltd. ADR | 813,200 | 22,257 | |
Lowe’s Cos. Inc. | 730,990 | 20,746 | |
Coach Inc. | 261,710 | 19,586 | |
* | Fossil Inc. | 160,100 | 19,529 |
Walt Disney Co. | 463,870 | 19,478 | |
* | Las Vegas Sands Corp. | 316,450 | 17,598 |
* | Sirius XM Radio Inc. | 7,658,700 | 17,309 |
Abercrombie & Fitch Co. | 352,060 | 16,121 | |
* | Discovery | ||
Communications Inc. | |||
Class A | 208,700 | 9,736 | |
Yum! Brands Inc. | 132,220 | 8,758 | |
* | MGM Resorts | ||
International | 602,500 | 8,296 | |
DR Horton Inc. | 491,620 | 7,050 | |
Johnson Controls Inc. | 177,640 | 5,796 | |
Ralph Lauren Corp. | |||
Class A | 25,860 | 4,493 | |
Lennar Corp. Class A | 123,450 | 2,886 | |
* | Michael Kors | ||
Holdings Ltd. | 37,300 | 1,613 | |
605,607 | |||
Consumer Staples (3.7%) | |||
* | Green Mountain | ||
Coffee Roasters Inc. | 962,822 | 62,555 | |
Walgreen Co. | 841,312 | 27,898 | |
Mead Johnson | |||
Nutrition Co. | 284,300 | 22,104 |
Market | |||
Value | |||
Shares | ($000) | ||
Colgate-Palmolive Co. | 165,600 | 15,431 | |
Whole Foods Market Inc. | 158,700 | 12,813 | |
140,801 | |||
Energy (8.7%) | |||
EOG Resources Inc. | 872,800 | 99,377 | |
Schlumberger Ltd. | 675,300 | 52,410 | |
National Oilwell | |||
Varco Inc. | 478,280 | 39,472 | |
El Paso Corp. | 1,261,500 | 35,082 | |
Anadarko | |||
Petroleum Corp. | 284,400 | 23,924 | |
Occidental | |||
Petroleum Corp. | 202,300 | 21,114 | |
Ensco plc ADR | 335,080 | 19,535 | |
^ | Kinder Morgan Inc. | 458,400 | 16,154 |
* | Cameron | ||
International Corp. | 265,080 | 14,768 | |
* | Cobalt International | ||
Energy Inc. | 351,550 | 10,568 | |
332,404 | |||
Exchange-Traded Fund (0.0%) | |||
2 | Vanguard Growth ETF | 3,100 | 213 |
Financials (6.5%) | |||
* | IntercontinentalExchange | ||
Inc. | 427,100 | 58,923 | |
CMEGroup Inc. | 171,550 | 49,662 | |
Progressive Corp. | 1,773,400 | 37,986 | |
American Express Co. | 516,240 | 27,304 | |
JPMorgan Chase & Co. | 510,600 | 20,036 | |
BlackRock Inc. | 86,820 | 17,277 | |
* | Affiliated Managers | ||
Group Inc. | 141,000 | 15,001 | |
T. Rowe Price Group Inc. | 214,300 | 13,199 | |
Ameriprise Financial Inc. | 162,970 | 9,087 | |
248,475 | |||
Health Care (8.0%) | |||
Allergan Inc. | 951,135 | 85,212 | |
Novo Nordisk A/S ADR | 371,700 | 52,161 | |
* | Gilead Sciences Inc. | 677,720 | 30,836 |
12
U.S. Growth Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Perrigo Co. | 295,500 | 30,454 | |
* | Agilent Technologies Inc. | 502,620 | 21,924 |
* | Edwards | ||
Lifesciences Corp. | 259,440 | 18,973 | |
UnitedHealth Group Inc. | 333,910 | 18,616 | |
* | Hologic Inc. | 823,370 | 17,068 |
* | DaVita Inc. | 185,600 | 16,064 |
Covidien plc | 246,500 | 12,880 | |
304,188 | |||
Industrials (7.2%) | |||
Caterpillar Inc. | 357,820 | 40,867 | |
ExpeditorsInternational | |||
of Washington Inc. | 773,000 | 33,726 | |
Precision Castparts Corp. | 111,700 | 18,702 | |
Cummins Inc. | 152,110 | 18,340 | |
WW Grainger Inc. | 79,500 | 16,514 | |
Joy Global Inc. | 186,990 | 16,261 | |
AMETEK Inc. | 339,690 | 16,169 | |
Eaton Corp. | 308,400 | 16,095 | |
Boeing Co. | 202,090 | 15,147 | |
Illinois Tool Works Inc. | 263,030 | 14,648 | |
United Parcel Service Inc. | |||
Class B | 182,600 | 14,040 | |
JB Hunt Transport | |||
Services Inc. | 249,800 | 12,792 | |
* | Jacobs Engineering | ||
Group Inc. | 249,500 | 11,532 | |
* | Stericycle Inc. | 123,500 | 10,716 |
Donaldson Co. Inc. | 136,900 | 10,053 | |
CHRobinson | |||
Worldwide Inc. | 145,030 | 9,597 | |
275,199 | |||
Information Technology (41.0%) | |||
* | Apple Inc. | 606,785 | 329,144 |
QUALCOMM Inc. | 2,340,535 | 145,534 | |
* | Google Inc. Class A | 202,445 | 125,162 |
Mastercard Inc. Class A | 240,980 | 101,212 | |
Visa Inc. Class A | 734,700 | 85,497 | |
VeriSign Inc. | 2,062,150 | 76,196 | |
* | eBayInc. | 2,129,480 | 76,108 |
Intuit Inc. | 1,054,600 | 60,998 | |
Altera Corp. | 1,316,670 | 50,626 | |
* | Adobe Systems Inc. | 1,337,000 | 43,974 |
Oracle Corp. | 1,463,900 | 42,848 | |
* | Teradata Corp. | 639,000 | 42,525 |
* | EMCCorp. | 1,497,600 | 41,469 |
* | Citrix Systems Inc. | 550,350 | 41,133 |
Broadcom Corp. Class A | 1,053,970 | 39,155 | |
* | Juniper Networks Inc. | 1,418,450 | 32,284 |
* | Polycom Inc. | 1,255,825 | 25,933 |
Accenture plc Class A | 334,300 | 19,904 | |
* | F5 Networks Inc. | 143,055 | 17,876 |
* | Alliance Data | ||
Systems Corp. | 143,250 | 17,385 | |
* | Acme Packet Inc. | 535,020 | 16,307 |
TE Connectivity Ltd. | 443,800 | 16,221 |
Market | |||
Value | |||
Shares | ($000) | ||
* | Cognizant Technology | ||
Solutions Corp. Class A | 217,800 | 15,453 | |
* | Trimble Navigation Ltd. | 298,700 | 15,022 |
* | SkyworksSolutions Inc. | 486,110 | 13,110 |
* | BMC Software Inc. | 342,041 | 12,806 |
* | NetApp Inc. | 291,605 | 12,539 |
* | TIBCO Software Inc. | 368,070 | 10,663 |
Analog Devices Inc. | 229,960 | 9,017 | |
* | Rovi Corp. | 240,960 | 8,549 |
* | VMwareInc. Class A | 79,640 | 7,876 |
* | Salesforce.com Inc. | 51,110 | 7,317 |
1,559,843 | |||
Materials (2.7%) | |||
Syngenta AG ADR | 835,500 | 54,591 | |
Monsanto Co. | 313,970 | 24,295 | |
Praxair Inc. | 171,740 | 18,720 | |
Walter Energy Inc. | 97,120 | 6,296 | |
103,902 | |||
Telecommunication Services (2.0%) | |||
* | Crown Castle | ||
International Corp. | 1,433,286 | 74,259 | |
Total Common Stocks | |||
(Cost $2,913,099) | 3,644,891 | ||
Temporary Cash Investments (4.9%)1 | |||
Money Market Fund (3.0%) | |||
3,4 | Vanguard Market | ||
Liquidity Fund, | |||
0.111% | 115,810,994 | 115,811 | |
Face | |||
Amount | |||
($000) | |||
Repurchase Agreement (1.7%) | |||
Bank of America | |||
Securities, LLC | |||
0.170%, 3/1/12 | |||
(Dated 2/29/12, | |||
Repurchase Value | |||
$62,700,000, | |||
collateralized by | |||
Federal Home Loan | |||
Mortgage Corp. | |||
3.500%–5.000%, | |||
1/1/32–4/1/40) | 62,700 | 62,700 | |
U.S. Government and Agency Obligations (0.2%) | |||
5 | United States | ||
Treasury Note/Bond, | |||
4.875%, 6/30/12 | 8,000 | 8,126 | |
Total Temporary Cash Investments | |||
(Cost $186,637) | 186,637 | ||
Total Investments (100.6%) | |||
(Cost $3,099,736) | 3,831,528 |
13
U.S. Growth Fund | |
Market | |
Value | |
($000) | |
Other Assets and Liabilities (-0.6%) | |
Other Assets | 30,774 |
Liabilities3 | (54,841) |
(24,067) | |
Net Assets (100%) | 3,807,461 |
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 4,390,860 |
Overdistributed Net Investment Income | (10,874) |
Accumulated Net Realized Losses | (1,310,955) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 731,792 |
Futures Contracts | 6,638 |
Net Assets | 3,807,461 |
Investor Shares—Net Assets | |
Applicable to 145,410,769 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 3,009,330 |
Net Asset Value Per Share— | |
Investor Shares | $20.70 |
Admiral Shares—Net Assets | |
Applicable to 14,896,742 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 798,131 |
Net Asset Value Per Share— | |
Admiral Shares | $53.58 |
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 $11,587,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 98.1% and 2.5%, respectively, of net assets.
2 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
3 Includes $11,837,000 of collateral received for securities on loan.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
5 Securities with a value of $6,095,000 have been segregated as initial margin for open futures contracts.
ADR—American Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
14
U.S. Growth Fund
Statement of Operations
SixMonths Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 9,144 |
Interest1 | 80 |
Security Lending | 5 |
Total Income | 9,229 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 3,045 |
Performance Adjustment | (263) |
The Vanguard Group—Note C | |
Management and Administrative—Investor Shares | 3,708 |
Management and Administrative—Admiral Shares | 447 |
Marketing and Distribution—Investor Shares | 271 |
Marketing and Distribution—Admiral Shares | 64 |
Custodian Fees | 33 |
Shareholders’ Reports—Investor Shares | 16 |
Shareholders’ Reports—Admiral Shares | 1 |
Trustees’ Fees and Expenses | 5 |
Total Expenses | 7,327 |
Net Investment Income | 1,902 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | 49,095 |
Futures Contracts | (251) |
Realized Net Gain (Loss) | 48,844 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 434,915 |
Futures Contracts | 7,349 |
Foreign Currencies | 1 |
Change in Unrealized Appreciation (Depreciation) | 442,265 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 493,011 |
1 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $1,000, $65,000, and $0, respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
15
U.S. Growth Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 1,902 | 24,431 |
Realized Net Gain (Loss) | 48,844 | 306,241 |
Change in Unrealized Appreciation (Depreciation) | 442,265 | 497,274 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 493,011 | 827,946 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (11,539) | (17,808) |
Admiral Shares | (4,059) | (7,327) |
Realized Capital Gain | ||
Investor Shares | — | — |
Admiral Shares | — | — |
Total Distributions | (15,598) | (25,135) |
Capital Share Transactions | ||
Investor Shares | (262,362) | (525,262) |
Admiral Shares | 21,608 | (240,672) |
Net Increase (Decrease) from Capital Share Transactions | (240,754) | (765,934) |
Total Increase (Decrease) | 236,659 | 36,877 |
Net Assets | ||
Beginning of Period | 3,570,802 | 3,533,925 |
End of Period1 | 3,807,461 | 3,570,802 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($10,874,000) and $2,822,000.
See accompanying Notes, which are an integral part of the Financial Statements.
16
U.S. Growth Fund
Financial Highlights
Investor Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $18.12 | $14.75 | $14.83 | $17.89 | $19.44 | $17.06 |
Investment Operations | ||||||
Net Investment Income | .006 | .1081 | .105 | .105 | .089 | .113 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 2.651 | 3.370 | (.099) | (3.049) | (1.523) | 2.354 |
Total from Investment Operations | 2.657 | 3.478 | .006 | (2.944) | (1.434) | 2.467 |
Distributions | ||||||
Dividends from Net Investment Income | (.077) | (.108) | (.086) | (.116) | (.116) | (.087) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.077) | (.108) | (.086) | (.116) | (.116) | (.087) |
Net Asset Value, End of Period | $20.70 | $18.12 | $14.75 | $14.83 | $17.89 | $19.44 |
Total Return2 | 14.72% | 23.58% | -0.02% | -16.29% | -7.44% | 14.50% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $3,009 | $2,893 | $2,796 | $2,956 | $3,637 | $4,308 |
Ratio of Total Expenses to | ||||||
Average Net Assets3 | 0.45% | 0.44% | 0.45% | 0.49% | 0.43% | 0.50% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.17% | 0.61%1 | 0.66% | 0.79% | 0.47% | 0.60% |
Portfolio Turnover Rate | 31% | 89% | 74% | 101% | 107% | 51% |
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 $0.016 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%), (0.01%), (0.03%), (0.03%), (0.03%), and (0.01%).
See accompanying Notes, which are an integral part of the Financial Statements.
17
U.S. Growth Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $46.94 | $38.20 | $38.41 | $46.37 | $50.42 | $44.24 |
Investment Operations | ||||||
Net Investment Income | .056 | .3451 | .338 | .335 | .325 | .416 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 6.856 | 8.734 | (.256) | (7.919) | (3.950) | 6.107 |
Total from Investment Operations | 6.912 | 9.079 | .082 | (7.584) | (3.625) | 6.523 |
Distributions | ||||||
Dividends from Net Investment Income | (.272) | (.339) | (.292) | (.376) | (.425) | (.343) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.272) | (.339) | (.292) | (.376) | (.425) | (.343) |
Net Asset Value, End of Period | $53.58 | $46.94 | $38.20 | $38.41 | $46.37 | $50.42 |
Total Return2 | 14.81% | 23.77% | 0.13% | -16.15% | -7.28% | 14.80% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $798 | $678 | $737 | $838 | $1,116 | $1,325 |
Ratio of Total Expenses to | ||||||
Average Net Assets3 | 0.31% | 0.30% | 0.29% | 0.30% | 0.24% | 0.27% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.31% | 0.75%1 | 0.82% | 0.98% | 0.66% | 0.83% |
Portfolio Turnover Rate | 31% | 89% | 74% | 101% | 107% | 51% |
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 $0.041 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%), (0.01%), (0.03%), (0.03%), (0.03%), and (0.01%).
See accompanying Notes, which are an integral part of the Financial Statements.
18
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. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
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).
4. Repurchase Agreements: The fund may enter into 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. In the event of default or bankruptcy by the other party to the agreement, the fund may sell or retain the collateral; however, such action may be subject to legal proceedings.
19
U.S. Growth Fund
5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2008–2011), and for the period ended February 29, 2012, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
6. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
7. 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.
8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. Delaware Management Company, Wellington Management Company, LLP, and William Blair & Company, L.L.C., 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 for Delaware Management Company, and Wellington Management Company, LLP, are subject to quarterly adjustments based on performance since November 30, 2010, relative to the Russell 1000 Growth Index. 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.
The Vanguard Group manages the cash reserves of the fund on an at-cost basis.
For the six months ended February 29, 2012, the aggregate investment advisory fee represented an effective annual basic rate of 0.18% of the fund’s average net assets, before a decrease of $263,000 (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 29, 2012, the fund had contributed capital of $554,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.22% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
20
U.S. Growth Fund
D. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the market value of the fund’s investments as of February 29, 2012, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 3,644,891 | — | — |
Temporary Cash Investments | 115,811 | 70,826 | — |
Futures Contracts—Liabilities1 | (482) | — | — |
Total | 3,760,220 | 70,826 | — |
1 Represents variation margin on the last day of the reporting period. |
E. At February 29, 2012, 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 500 Index | March 2012 | 139 | 47,413 | 5,015 |
E-mini S&P 500 Index | March 2012 | 520 | 35,474 | 611 |
E-mini S&P MidCap 400 Index | March 2012 | 91 | 8,887 | 1,012 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
F. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
21
U.S. 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, 2011, the fund had available capital loss carryforwards totaling $1,359,274,000 to offset future net capital gains of $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, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $3,099,736,000. Net unrealized appreciation of investment securities for tax purposes was $731,792,000, consisting of unrealized gains of $830,410,000 on securities that had risen in value since their purchase and $98,618,000 in unrealized losses on securities that had fallen in value since their purchase.
G. During the six months ended February 29, 2012, the fund purchased $522,128,000 of investment securities and sold $727,394,000 of investment securities, other than temporary cash investments.
H. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 114,468 | 6,327 | 297,898 | 16,334 |
Issued in Lieu of Cash Distributions | 11,371 | 625 | 17,562 | 968 |
Redeemed | (388,201) | (21,238) | (840,722) | (47,246) |
Net Increase (Decrease)—Investor Shares | (262,362) | (14,286) | (525,262) | (29,944) |
Admiral Shares | ||||
Issued | 99,033 | 2,063 | 238,781 | 5,167 |
Issued in Lieu of Cash Distributions | 3,764 | 80 | 7,014 | 149 |
Redeemed | (81,189) | (1,682) | (486,467) | (10,184) |
Net Increase (Decrease)—Admiral Shares | 21,608 | 461 | (240,672) | (4,868) |
I. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
22
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
23
Six Months Ended February 29, 2012 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
U.S. Growth Fund | 8/31/2011 | 2/29/2012 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,147.22 | $2.40 |
Admiral Shares | 1,000.00 | 1,148.05 | 1.66 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,022.63 | $2.26 |
Admiral Shares | 1,000.00 | 1,023.32 | 1.56 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.45% for Investor Shares and 0.31% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period.
24
Trustees Approve Advisory Agreements
The board of trustees of Vanguard U.S. Growth Fund has renewed the fund’s investment advisory agreement with William Blair & Company, L.L.C. (William Blair), Delaware Management Company (Delaware Management), and Wellington Management Company, LLP (Wellington Management). The board determined that the retention of the advisors was in the best interests of the fund and its shareholders.
The board based its decisions upon an evaluation of each advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the 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 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 Management. Delaware Management, an indirect subsidiary of Australia-based Macquarie Group, is a Philadelphia-based investment management firm. Delaware Management invests primarily in common stocks of large-capitalization, growth-oriented companies that it believes have long-term capital appreciation potential and are expected to grow faster than the U.S. economy. Delaware Management 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 to the intrinsic value of the securities. Delaware Management 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. The firm utilizes an investment process that relies on thorough, in-depth fundamental analysis. Based on this process, Wellington Management invests in companies that it believes are of high quality and that have sustainable, above-average growth. In selecting stocks, Wellington Management considers some or all of the following company criteria: leadership position within the market it serves, quality of products or services provided, marketing capability, return on equity, accounting policies/financial transparency, and quality/depth of the management team. 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, it 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 each advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory agreements.
25
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 determined that the advisors have carried out the fund’s investment strategy in a disciplined fashion, and recent performance results have allowed the fund to remain competitive versus its benchmark and peer group. 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 below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
The board did not consider the profitability of the fund’s 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.
26
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
27
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.
28
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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 Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services), Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing), |
Board. Principal Occupation(s) During the Past Five | and Delphi Automotive LLP (automotive components); |
Years: Chairman of the Board of The Vanguard Group, | Senior Advisor at New Mountain Capital; Trustee of |
Inc., and of each of the investment companies served | The Conference Board. |
by The Vanguard Group, since January 2010; Director | |
of The Vanguard Group since 2008; Chief Executive | Amy Gutmann |
Officer and President of The Vanguard Group and of | Born 1949. Trustee Since June 2006. Principal |
each of the investment companies served by The | Occupation(s) During the Past Five Years: President |
Vanguard Group since 2008; Director of Vanguard | of the University of Pennsylvania; Christopher H. |
Marketing Corporation; Managing Director of The | Browne Distinguished Professor of Political Science |
Vanguard Group (1995–2008). | in the School of Arts and Sciences with secondary |
appointments at the Annenberg School for Commu- | |
nication and the Graduate School of Education | |
Independent Trustees | of the University of Pennsylvania; Director of |
Carnegie Corporation of New York, Schuylkill River | |
Emerson U. Fullwood | Development Corporation, and Greater Philadelphia |
Born 1948. Trustee Since January 2008. Principal | Chamber of Commerce; Trustee of the National |
Occupation(s) During the Past Five Years: Executive | Constitution Center; Chair of the Presidential |
Chief Staff and Marketing Officer for North America | Commission for the Study of Bioethical Issues. |
and Corporate Vice President (retired 2008) of Xerox | |
Corporation (document management products and | JoAnn Heffernan Heisen |
services); Executive in Residence and 2010 | Born 1950. Trustee Since July 1998. Principal |
Distinguished Minett Professor at the Rochester | Occupation(s) During the Past Five Years: Corporate |
Institute of Technology; Director of SPX Corporation | Vice President and Chief Global Diversity Officer |
(multi-industry manufacturing), the United Way of | (retired 2008) and Member of the Executive |
Rochester, Amerigroup Corporation (managed health | Committee (1997–2008) of Johnson & Johnson |
care), the University of Rochester Medical Center, | (pharmaceuticals/medical devices/consumer |
Monroe Community College Foundation, and North | products); Director of Skytop Lodge Corporation |
Carolina A&T University. | (hotels), the University Medical Center at Princeton, |
the Robert Wood Johnson Foundation, and the Center | |
Rajiv L. Gupta | for Talent Innovation; Member of the Advisory Board |
Born 1945. Trustee Since December 2001. 2 | of the Maxwell School of Citizenship and Public Affairs |
Principal Occupation(s) During the Past Five Years: | at Syracuse University. |
Chairman and Chief Executive Officer (retired 2009) |
F. Joseph Loughrey | Group since 2010; Assistant Controller of each of | |
Born 1949. Trustee Since October 2009. Principal | the investment companies served by The Vanguard | |
Occupation(s) During the Past Five Years: President | Group (2001–2010). | |
and Chief Operating Officer (retired 2009) and Vice | ||
Chairman of the Board (2008–2009) of Cummins Inc. | Thomas J. Higgins | |
(industrial machinery); Director of SKF AB (industrial | Born 1957. Chief Financial Officer Since September | |
machinery), Hillenbrand, Inc. (specialized consumer | 2008. Principal Occupation(s) During the Past Five | |
services), the Lumina Foundation for Education, and | Years: Principal of The Vanguard Group, Inc.; Chief | |
Oxfam America; Chairman of the Advisory Council | Financial Officer of each of the investment companies | |
for the College of Arts and Letters and Member | served by The Vanguard Group since 2008; Treasurer | |
of the Advisory Board to the Kellogg Institute for | of each of the investment companies served by The | |
International Studies at the University of Notre Dame. | Vanguard Group (1998–2008). | |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School (retired 2011); Chief Investment | the investment companies served by The Vanguard | |
Officer and Managing Partner of HighVista Strategies | Group since 2008; Assistant Treasurer of each of the | |
LLC (private investment firm); Director of Rand | investment companies served by The Vanguard Group | |
Merchant Bank; Overseer of the Museum of Fine | (1988–2008). | |
Arts Boston. | ||
Heidi Stam | ||
Alfred M. Rankin, Jr. | Born 1956. Secretary Since July 2005. Principal | |
Born 1941. Trustee Since January 1993. Principal | Occupation(s) During the Past Five Years: Managing | |
Occupation(s) During the Past Five Years: Chairman, | Director of The Vanguard Group, Inc., since 2006; | |
President, and Chief Executive Officer of NACCO | General Counsel of The Vanguard Group since 2005; | |
Industries, Inc. (forklift trucks/housewares/lignite); | Secretary of The Vanguard Group and of each of the | |
Director of Goodrich Corporation (industrial products/ | investment companies served by The Vanguard Group | |
aircraft systems and services) and the National | since 2005; Director and Senior Vice President of | |
Association of Manufacturers; Chairman of the Board | Vanguard Marketing Corporation since 2005; | |
of the Federal Reserve Bank of Cleveland and of | Principal of The Vanguard Group (1997–2006). | |
University Hospitals of Cleveland; Advisory Chairman | ||
of the Board of The Cleveland Museum of Art. | ||
Vanguard Senior Management Team | ||
Peter F. Volanakis | Mortimer J. Buckley | Michael S. Miller |
Born 1955. Trustee Since July 2009. Principal | Kathleen C. Gubanich | James M. Norris |
Occupation(s) During the Past Five Years: President | Paul A. Heller | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Martha G. King | George U. Sauter |
Incorporated (communications equipment); Director of | Chris D. McIsaac | |
Corning Incorporated (2000-2010) and Dow Corning | ||
(2001–2010); Director of SPX Corporation (multi- | ||
industry manufacturing); Overseer of the Amos Tuck | Chairman Emeritus and Senior Advisor | |
School of Business Administration at Dartmouth | ||
College; Advisor to the Norris Cotton Cancer Center. | John J. Brennan | |
Chairman, 1996–2009 | ||
Chief Executive Officer and President, 1996–2008 | ||
Executive Officers | ||
Glenn Booraem | Founder | |
Born 1967. Controller Since July 2010. Principal | ||
Occupation(s) During the Past Five Years: Principal | John C. Bogle | |
of The Vanguard Group, Inc.; Controller of each of | Chairman and Chief Executive Officer, 1974–1996 | |
the investment companies served by The Vanguard |
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. | |
© 2012 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q232 042012 |
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Semiannual Report | February 29, 2012
Vanguard International Growth Fund
> Vanguard International Growth Fund returned about 4% for the six months ended February 29, 2012, exceeding the return of its benchmark index and the average return of peer funds.
> The fund benefited from its holdings in the developed markets of Europe and from its investments in emerging markets.
> From a sector standpoint, financial, industrial, and energy stocks were significant contributors to the fund’s advance.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisors’ Report. | 6 |
Fund Profile. | 11 |
Performance Summary. | 13 |
Financial Statements. | 14 |
About Your Fund’s Expenses. | 29 |
Trustees Approve Advisory Agreements. | 31 |
Glossary. | 33 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Vanguard was named for the HMS Vanguard, flagship of British Admiral Horatio Nelson. A ship—whose performance and safety depend on the work of all hands—has served as a fitting metaphor for the Vanguard crew as we strive to help clients reach their financial goals.
Your Fund’s Total Returns
Six Months Ended February 29, 2012 | |
Total | |
Returns | |
Vanguard International Growth Fund | |
Investor Shares | 4.17% |
Admiral™ Shares | 4.25 |
MSCI All Country World Index ex USA | 3.97 |
International Funds Average | 3.12 |
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, 2011, Through February 29, 2012
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard International Growth Fund | ||||
Investor Shares | $18.27 | $18.64 | $0.334 | $0.000 |
Admiral Shares | 58.17 | 59.30 | 1.144 | 0.000 |
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Chairman’s Letter
Dear Shareholder:
Although global stock markets continued to experience some volatility through the first six months of fiscal 2012, the results were ultimately positive after a downbeat start. Vanguard International Growth Fund returned about 4% for the period, ahead of the result of its benchmark index, the MSCI All Country World Index ex USA, and the average return of its peer funds.
Results in the developed markets of Europe and emerging markets drove the fund’s performance, while financials and industrials were among the strongest sectors. The relative strength of the U.S. dollar compared with the euro and the yen restrained returns, as some holdings lost value when converted into U.S. dollars.
Notes of optimism propelled stock prices higher
U.S. stocks produced a strong double-digit return of 13.18% over the period. That statement is true enough, but the headline figure obscures the volatility that has been perhaps the most prominent feature of the financial markets over the past six months and indeed the past few years. If the six-month period had started a month earlier, for example, the Dow Jones U.S. Total Stock Market Index would have returned just 1.97%. A start date two months earlier would have put the six-month return at –5.18%.
In the six months through February, however, stock prices benefited from signs of acceleration in the U.S. economic
2
expansion and hope that the European Union’s latest agreement on Greek debt would help to contain a threat that has menaced global markets for much of the past two years. European stocks rallied on the news about Greece, but international stocks still trailed their U.S. counterparts for the full six months.
Bonds’ strength
confounded expectations
Bonds produced solid returns, to the surprise of many long-time observers of the fixed income markets. At the start of the period, the yield of the 10-year U.S. Treasury note stood at 2.22%, suggesting that returns would be very modest by historical standards. Over the next six months, however, yields moved lower still, boosting bond prices, which move in the opposite direction. At the end of February, the yield of the 10-year T-note stood at 1.98%. As yields decline, obviously, the scope for continued declines—and price increases—diminishes. Municipal bonds performed even more strongly than the broad taxable market.
The returns for 3-month Treasury bills and other money market instruments remained near 0%, consistent with the Federal Reserve’s policy on interest rates.
Europe, emerging markets
boost fund’s performance
With a focus on finding high-quality growth stocks with long-term potential, Vanguard International Growth Fund’s three advisors take somewhat similar approaches. At the
Market Barometer | |||
Total Returns | |||
Periods Ended February 29, 2012 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.31% | 4.86% | 1.77% |
Russell 2000 Index (Small-caps) | 12.40 | -0.15 | 1.83 |
Dow Jones U.S. Total Stock Market Index | 13.18 | 4.35 | 2.07 |
MSCI All Country World Index ex USA (International) | 3.97 | -6.10 | -0.75 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | 2.73% | 8.37% | 6.36% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | 5.67 | 12.42 | 5.50 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.00 | 0.06 | 1.20 |
CPI | |||
Consumer Price Index | 0.49% | 2.87% | 2.27% |
3
same time, they can diverge from each other and the benchmark index in their quest for performance.
The advisors began the fiscal half-year faced with a challenging environment. Europe’s debt crisis was the primary culprit. Weakened demand for Asia’s exports and slower growth and rampant inflation in several of the largest emerging markets also weighed on returns. Plans to contain the debt crisis as well as better news for the global economy arrived at September’s end, and the markets sharply rebounded.
On average, more than half of the fund’s assets—a larger proportion than the benchmark weighting—were in the developed markets of Europe during the period. This significant allocation, as well as solid stock choices, worked to the fund’s benefit. Nowhere was that more apparent than in the United Kingdom, which made up nearly 20% of the fund’s assets at the reporting period’s close, double the market capitalization of holdings in any other country. The fund’s holdings in the U.K.’s financial, consumer staples, industrial, energy, and consumer discretionary stocks all posted double-digit returns, seeming to escape the effects of the region’s debt drama.
While U.K. stocks were at the forefront of the advance, they weren’t alone. Swedish industrial firms, Belgian brewers, Norwegian energy corporations, and German sports apparel companies also
Expense Ratios
Your Fund Compared With Its Peer Group
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
International Growth Fund | 0.47% | 0.34% | 1.37% |
The fund expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.49% for Investor Shares and 0.36% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper Inc. and captures information through year-end 2011.
Peer group: International Funds.
4
boosted results. The news wasn’t as good in Italy and France, where financials and utilities, respectively, were trouble spots.
Overall returns for emerging markets countries, which make up about one-quarter of the fund’s assets on average, were also positive. But they were quite varied and encompassed a much broader spectrum. The leaders included South Korean information technology holdings and financial firms from Peru, Brazil, Russia, and Thailand, which were bolstered by global economic stabilization.
Chinese stocks, which represented the largest allocation within emerging markets during the period, turned in mixed results. Growing pains and inflation were evident in the world’s most populous nation. China’s industrial and energy stocks performed well, but consumer discretionary and materials holdings stumbled. The advisors’ stock choices further hampered returns. Mexico’s consumer discretionary stocks, specifically home-building companies, also dragged down performance.
Developed markets in the Pacific region, which represented less than one-fifth of the fund’s assets, contributed much less than their European and emerging markets counterparts. Results were modest in Japan, the largest country exposure in the region during the six months, which continued to recover from its natural and nuclear disaster. Returns were also muted in Singapore, Hong Kong, and especially Australia, where many natural-resource producers struggled as investors questioned whether China would sustain its demand for raw materials in a global growth slowdown.
International stocks crucial
to portfolio’s diversification
Since the global financial crisis, returns for U.S. and international stocks have converged, meaning the results are more similar than they have been in the past. This point was discussed in our recently published economic and investment outlook, which can be found at vanguard.com/research. However, the outlook also affirmed our view that international stocks continue to offer diversification for U.S. investors.
Diversification is one of the enduring principles of sound investing. That’s why Vanguard counsels investors to hold a balanced portfolio that includes U.S. and international stocks, as well as bond and money market funds, with allocations that fit their unique goals, time horizon, and risk tolerance. Vanguard International Growth Fund, with its low expenses, can play a valuable role in such a plan.
As always, thank you for entrusting your assets to Vanguard.
Sincerely,
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F. William McNabb III
Chairman and Chief Executive Officer
March 14, 2012
5
Advisors’ Report
For the fiscal half-year ended February 29, 2012, Vanguard International Growth Fund returned about 4%. 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 19, 2012.
Vanguard International Growth Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Baillie Gifford Overseas Ltd. | 48 | 8,500 | 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 | 38 | 6,811 | 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 | 11 | 1,884 | 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 | 495 | These short-term reserves are invested by Vanguard in |
equity index products to simulate investment in stocks. | |||
Each advisor may also maintain a modest cash | |||
position. |
6
Baillie Gifford Overseas Ltd.
Portfolio Manager:
James K. Anderson,
Head of Global Equities
We believe important and positive economic developments have taken place over the last six months. The United States is showing increasing signs of sustainable cyclical recovery, and European institutions are taking firm action to resolve a financial crisis that has been rumbling on since 2008. Share prices have risen somewhat in response, but the mood of market participants and commentators remains exceptionally depressed. We expect a pattern of recovery in developed countries and ongoing secular growth in the developing world to persist. The imbalance between perception and reality therefore strikes us as an unusual opportunity.
The overarching themes in our portion of the portfolio have remained constant. The emergence from poverty of huge numbers of people offers great growth opportunities to our holdings in Eastern-facing consumer goods, financial, and mining companies. The ever-more-rapid speed of technological change allows our disruptive companies in the internet, electronics, and medical areas to expand rapidly, while upending the business models of many established competitors. The effects of globalization are driving financial deepening in developing countries, to the benefit of several of our bank and stock exchange holdings, and steadily boosting the numbers of super-rich consumers of luxury goods.
During the period, our holdings in Swedish engineering companies Atlas Copco and Sandvik and in British aircraft engine manufacturer Rolls-Royce performed particularly strongly as the cyclical demand picture improved. On the other hand, our alternative energy companies Vestas Windsystems and SMA Solar continued to suffer from rising Chinese competition and falling government subsidies. Some of our internet holdings also had a weaker six months: For Baidu and Rakuten, this marked a period of rest after stellar recent rises. For recently purchased Amazon.com, it reflected market disquiet with a long-term investment plan that we find highly appealing.
During the last six months, we have made new purchases of Fiat Auto, the combination of the Fiat, Chrysler, and Ferrari brands; Shandong Weigao, the Chinese medical supply distributor; and SQM, the Chilean mining company. These purchases were funded by reductions to lower-growth holdings such as Tesco, Canon, and Yamaha Motor.
It is likely that economic and political events will cause stock markets to oscillate, but we continue to believe that international growth companies offer appealing returns to investors with a long-term horizon.
7
Schroder Investment Management
North America Inc.
Portfolio Managers:
Virginie Maisonneuve, CFA
Head of Global and International Equities
Simon Webber, CFA
Portfolio Manager
The period began with a severe sell-off during September amid a crisis of confidence in the markets. For the rest of the year, markets swung between risk-on and risk-off as investor panic regarding the European debt crisis was interspersed with hope that “economic meltdown” could be avoided.
However, toward the end of the year and throughout January and February, encouraging data fueled hopes the U.S. economy might be slowly improving. The new year’s market rally has been cautious, and European Central Bank efforts to provide scarce funding and boost liquidity have helped. A more constructive tone among European leaders, increased recognition of the need for growth-oriented policies, and an agreement on a second bailout of Greece gave hope that the worst outcomes for the Eurozone might be avoided.
Emerging markets were particularly hurt by the extreme global risk aversion at the beginning of the period, and market concerns about a hard landing in China increased. Lowered inflation in China in the fourth quarter and signs that small- and medium-sized companies were suffering disproportionally from credit tightness led the Chinese government to ease its monetary policy, as we expected, toward the end of the year, which provided some relief.
Turning to the portfolio, outperformance was primarily driven by information technology and consumer staples. In IT, Samsung Electronics had an excellent run as it became the world’s largest seller of smartphone handsets. Performance in consumer staples was helped by our beverage stocks Diageo and AB InBev. The world’s largest distiller by revenues, Diageo is defying the difficult consumer environment, and its premium brands are showing strong, double-digit growth. Telecommunications also added value, with U.K.-listed Vodafone contributing most. Among the top contributors to the fund during the period were Tata Motors and SAP. Tata continues to tap into strong emerging-market demand for trucks and luxury cars. SAP has done well because of resilient IT demand from industry customers and its successful product strategy, including cloud offerings.
Health care was the largest detractor, and Shanghai Pharmaceuticals hurt most. Changes in government pricing policy in the sector were detrimental.
From a regional perspective, emerging markets and the United Kingdom were the largest sources of added value, while Pacific ex Japan’s materials sector (Atlas Iron and Newcrest Mining) detracted.
Strong signs of global market normalization in 2012 are supporting equities, and reconnection with fundamentals is likely. International equity valuations and global
8
liquidity are also positive. We do, however, expect that volatility will remain a feature for the year. The European restructuring will take time. And other factors, such as election cycles in France, Greece, and the United States and tensions in the Middle East, along with the impact of higher oil prices on a delicate global economy, continue to command vigilance.
Our portfolio is attractively positioned, with a balanced mix of cyclical and defensive growth. We are, as ever, focused on companies with sustainable competitive advantage, experienced management, and financial strength.
M&G Investment Management Limited
Portfolio Managers:
Graham E. French, Portfolio Manager
Greg Aldridge, Portfolio Manager
Equity markets continued to be characterized by high volatility over the review period. Investors focused on macroeconomic events, and stock prices were mainly driven by these factors rather than the fundamentals of the underlying businesses. While many investors have been rattled by recent economic events, corporate fundamentals have largely remained intact. We remain focused on identifying holdings that offer attractive scarce assets, structural growth drivers, and the potential for sustainably high returns.
A number of the portfolio’s holdings produced strong returns. German business management software provider SAP was the leader. The company continues to outpace peers and has the potential to improve margins further as the maintenance business continues to grow. Hong Kong-listed power tool manufacturer Techtronic Industries performed well, benefiting from a growing market share and improved sentiment in its main market, the United States. European aerospace giant EADS also delivered, as investors began to recognize the strength of the company’s order book. The surging price of oil was beneficial for the portfolio’s holdings in the oil and gas sector, as Statoil, Total, and Petróleo Brasileiro all did well.
As investors sought to invest in stocks, sectors, and regions that they viewed as relatively safe given the uncertainty of the economic climate, stocks with exposure to the Eurozone were some of the weaker performers. These included Austrian brick manufacturer Wienerberger, which lagged on concerns over the resilience of demand for building materials. French seamless steel tube specialist Vallourec also detracted. Fears about the short term dominated, even though the long-term investment case for the company remains highly attractive; demand is growing for its products as drilling wells become deeper and more complex. Swedish technology company Ericsson also fell after reporting lower-than-expected fourth-quarter results. While this disappointed the market, which in our opinion is now focused on short-term newsflow, we believe that the firm’s long-term prospects remain intact as data usage and spending on mobile networks continue to increase.
9
As active stockpickers, we found that the recent market volatility created an opportunity to selectively add to the companies that met our investment criteria. These included Atlas Copco, a Swedish manufacturer of air compressors and mining equipment; British speciality chemicals producer AZ Electronic Materials; and Japanese engineering business Misumi. We sold other holdings when we felt there were more attractively valued companies with better growth prospects available. These sales included German electrical engineering and electronics company Siemens and Mexican homebuilder Consorcio Ara.
10
International Growth Fund
Fund Profile
As of February 29, 2012
Share-Class Characteristics | ||
Investor | Admiral | |
Shares | Shares | |
Ticker Symbol | VWIGX | VWILX |
Expense Ratio1 | 0.47% | 0.34% |
Portfolio Characteristics | ||
MSCI AC | ||
World Index | ||
Fund | ex USA | |
Number of Stocks | 185 | 1,840 |
Median Market Cap | $35.3B | $29.1B |
Price/Earnings Ratio | 14.4x | 13.4x |
Price/Book Ratio | 2.0x | 1.5x |
Return on Equity | 20.3% | 17.4% |
Earnings Growth Rate | 11.0% | 3.2% |
Dividend Yield | 2.3% | 3.2% |
Turnover Rate | ||
(Annualized) | 30% | — |
Short-Term Reserves | 1.4% | — |
Sector Diversification (% of equity exposure) | ||
MSCI AC | ||
World Index | ||
Fund | ex USA | |
Consumer Discretionary | 15.6% | 9.3% |
Consumer Staples | 9.1 | 9.4 |
Energy | 7.8 | 11.8 |
Financials | 19.0 | 23.9 |
Health Care | 6.5 | 6.6 |
Industrials | 14.5 | 10.7 |
Information Technology | 14.4 | 6.4 |
Materials | 10.4 | 12.1 |
Telecommunication | ||
Services | 1.8 | 5.9 |
Utilities | 0.9 | 3.9 |
Volatility Measures | ||
Spliced | MSCI AC | |
International | World Index | |
Index | ex USA | |
R-Squared | 0.96 | 0.98 |
Beta | 1.08 | 1.06 |
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months. | ||
Ten Largest Holdings (% of total net assets) | ||
Baidu Inc. ADR | Internet Software & | |
Services | 2.5% | |
Tencent Holdings Ltd. | Internet Software & | |
Services | 2.3 | |
Samsung Electronics Co. | ||
Ltd. | Semiconductors | 2.1 |
Atlas Copco AB Class A | Industrial | |
Machinery | 2.0 | |
BG Group plc | Integrated Oil & | |
Gas | 1.7 | |
Petroleo Brasileiro SA | Integrated Oil & | |
Gas | 1.6 | |
Roche Holding AG | Pharmaceuticals | 1.5 |
SAP AG | Application | |
Software | 1.4 | |
PPR | Department Stores | 1.4 |
HSBC Holdings plc | Diversified Banks | 1.4 |
Top Ten | 17.9% | |
The holdings listed exclude any temporary cash investments and equity index products. | ||
Allocation by Region (% of equity exposure) |
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/intlgrowthx13x1.jpg)
1 The expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.49% for Investor Shares and 0.36% for Admiral Shares.
11
International Growth Fund
Market Diversification (% of equity exposure) | ||
MSCI AC | ||
World | ||
Index | ||
Fund | ex USA | |
Europe | ||
United Kingdom | 20.3% | 15.3% |
Switzerland | 7.2 | 5.6 |
Germany | 6.8 | 5.7 |
France | 6.8 | 6.2 |
Sweden | 4.4 | 2.2 |
Spain | 2.5 | 2.0 |
Denmark | 1.5 | 0.8 |
Norway | 1.3 | 0.7 |
Belgium | 1.1 | 0.7 |
Other | 1.8 | 4.4 |
Subtotal | 53.7% | 43.6% |
Pacific | ||
Japan | 9.3% | 14.4% |
Australia | 4.7 | 5.8 |
Hong Kong | 2.2 | 2.0 |
Other | 0.7 | 1.3 |
Subtotal | 16.9% | 23.5% |
Emerging Markets | ||
China | 9.1% | 4.4% |
Brazil | 7.0 | 3.7 |
South Korea | 3.3 | 3.6 |
India | 1.2 | 1.6 |
Other | 4.0 | 11.0 |
Subtotal | 24.6% | 24.3% |
North America | ||
Canada | 2.8% | 8.2% |
United States | 1.0% | 0.0% |
Subtotal | 3.8% | 8.2% |
Middle East | ||
Israel | 1.0% | 0.4% |
12
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, 2001, Through February 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/intlgrowthx15x1.jpg)
Spliced International Index: MSCI EAFE Index through May 31, 2010; MSCI All Country World Index ex USA thereafter.
Note: For 2012, performance data reflect the six months ended February 29, 2012.
Average Annual Total Returns: Periods Ended December 31, 2011
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | One | Five | Ten | |
Date | Year | Years | Years | |
Investor Shares | 9/30/1981 | -13.68% | -2.02% | 5.57% |
Admiral Shares | 8/13/2001 | -13.58 | -1.85 | 5.75 |
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.
13
International Growth Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (95.9%)1 | |||
Australia (4.3%) | |||
^ | Fortescue Metals | ||
Group Ltd. | 29,815,835 | 176,196 | |
Brambles Ltd. | 14,934,900 | 115,658 | |
Woodside Petroleum Ltd. | 2,777,000 | 110,312 | |
Newcrest Mining Ltd. | 2,631,000 | 93,899 | |
Atlas Iron Ltd. | 25,245,050 | 85,511 | |
Woolworths Ltd. | 2,971,200 | 80,459 | |
James Hardie | |||
Industries SE | 6,196,069 | 48,448 | |
Australia & New Zealand | |||
Banking Group Ltd. | 1,289,125 | 30,156 | |
Sims Metal | |||
Management Ltd. | 1,026,080 | 16,843 | |
757,482 | |||
Austria (0.1%) | |||
Wienerberger AG | 2,035,000 | 25,094 | |
Belgium (1.1%) | |||
Anheuser-Busch | |||
InBev NV | 2,786,000 | 187,167 | |
Brazil (6.9%) | |||
Vale SA Class B ADR | 6,764,400 | 166,269 | |
Itau Unibanco | |||
Holding SA ADR | 6,596,075 | 138,847 | |
BM&FBovespa SA | 20,386,500 | 137,948 | |
Petroleo Brasileiro | |||
SA ADR Type A | 4,381,300 | 124,823 | |
Petroleo Brasileiro | |||
SA ADR | 4,135,000 | 123,389 | |
* | OGX Petroleo e Gas | ||
Participacoes SA | 9,806,100 | 97,247 | |
^ | Cia Brasileira de | ||
Distribuicao Grupo | |||
Pao de Acucar ADR | 2,033,000 | 95,063 | |
BRF - Brasil Foods SA | 4,412,400 | 91,832 |
Market | |||
Value | |||
Shares | ($000) | ||
Itau Unibanco Holding SA | |||
Prior Pfd. | 3,619,500 | 77,354 | |
Anhanguera Educacional | |||
Participacoes SA | 4,074,496 | 53,267 | |
Petroleo Brasileiro SA | |||
Prior Pfd. | 2,830,000 | 40,343 | |
Vale SA Prior Pfd. | 1,550,000 | 38,442 | |
Banco do Brasil SA | 1,900,067 | 30,815 | |
Fibria Celulose SA | 716,170 | 6,510 | |
1,222,149 | |||
Canada (2.8%) | |||
Toronto-Dominion Bank | 2,387,000 | 194,999 | |
Suncor Energy Inc. | 3,522,000 | 126,791 | |
Potash Corp. of | |||
Saskatchewan Inc. | 1,961,000 | 91,227 | |
Niko Resources Ltd. | 1,159,000 | 54,761 | |
Sherritt International Corp. | 2,500,000 | 15,337 | |
* | Harry Winston | ||
Diamond Corp. | 732,000 | 9,906 | |
493,021 | |||
Chile (0.3%) | |||
Sociedad Quimica y | |||
Minera de Chile SA ADR | 823,300 | 48,723 | |
China (9.0%) | |||
* | Baidu Inc. ADR | 3,281,400 | 448,567 |
Tencent Holdings Ltd. | 15,811,000 | 409,456 | |
China Mobile Ltd. | 9,391,000 | 99,833 | |
China Merchants | |||
Bank Co. Ltd. | 36,738,500 | 83,653 | |
China Resources | |||
Enterprise Ltd. | 21,302,000 | 79,482 | |
Ping An Insurance | |||
Group Co. | 8,016,000 | 69,596 | |
Beijing Enterprises | |||
Holdings Ltd. | 10,826,000 | 68,542 | |
CNOOC Ltd. | 29,461,000 | 66,894 | |
Industrial & Commercial | |||
Bank of China | 90,759,000 | 66,224 |
14
International Growth Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
* | Ctrip.com International | ||
Ltd. ADR | 1,729,300 | 47,331 | |
Shandong Weigao Group | |||
Medical Polymer | |||
Co. Ltd. | 44,588,000 | 44,360 | |
Belle International | |||
Holdings Ltd. | 23,826,000 | 39,170 | |
* | Shanghai | ||
Pharmaceuticals | |||
Holding Co. Ltd. | 16,971,600 | 31,467 | |
^ | Mindray Medical | ||
International Ltd. ADR | 1,026,800 | 31,430 | |
Ports Design Ltd. | 4,958,000 | 7,861 | |
^ | Chaoda Modern | ||
Agriculture Holdings Ltd. | 17,258,719 | 1,553 | |
1,595,419 | |||
Denmark (1.5%) | |||
Novo Nordisk A/S Class B | 849,328 | 119,057 | |
^ | Novozymes A/S | 3,172,000 | 94,298 |
AP Moeller - Maersk A/S | |||
Class B | 3,750 | 30,157 | |
^,* | Vestas Wind Systems A/S | 1,653,736 | 16,972 |
260,484 | |||
France (6.4%) | |||
PPR | 1,471,373 | 249,379 | |
L’Oreal SA | 1,271,730 | 144,510 | |
Cie Generale d’Optique | |||
Essilor International SA | 1,556,096 | 123,828 | |
Schneider Electric SA | 1,781,000 | 120,567 | |
Cie Generale des | |||
Etablissements Michelin | 1,492,000 | 102,679 | |
Safran SA | 2,767,099 | 92,537 | |
LVMH Moet Hennessy | |||
Louis Vuitton SA | 505,000 | 84,531 | |
Publicis Groupe SA | 810,000 | 44,251 | |
European Aeronautic | |||
Defence and | |||
Space Co. NV | 1,130,000 | 40,920 | |
Vallourec SA | 565,000 | 39,655 | |
Total SA | 670,000 | 37,480 | |
CFAO SA | 710,000 | 27,859 | |
Societe Generale SA | 691,623 | 22,262 | |
1,130,458 | |||
Germany (6.4%) | |||
SAP AG | 3,705,762 | 250,188 | |
Adidas AG | 2,451,824 | 192,632 | |
GEA Group AG | 3,274,500 | 110,607 | |
Porsche Automobil | |||
Holding SE Prior Pfd. | 1,518,515 | 98,528 | |
^ | Aixtron SE NA | 3,770,512 | 61,898 |
HeidelbergCement AG | 999,207 | 53,733 | |
Symrise AG | 1,650,000 | 48,135 | |
^,* | TUI AG | 5,787,423 | 45,782 |
Market | |||
Value | |||
Shares | ($000) | ||
MTU Aero Engines | |||
Holding AG | 570,000 | 43,361 | |
Wincor Nixdorf AG | 745,000 | 40,515 | |
Software AG | 1,030,000 | 39,021 | |
^ | Axel Springer AG | 813,258 | 38,745 |
Daimler AG | 634,950 | 38,377 | |
* | Infineon Technologies AG | 3,680,772 | 37,161 |
^ | SMA Solar Technology AG | 719,595 | 36,782 |
1,135,465 | |||
Hong Kong (2.2%) | |||
Jardine Matheson | |||
Holdings Ltd. | 2,407,237 | 122,522 | |
Hong Kong Exchanges | |||
and Clearing Ltd. | 4,514,200 | 83,649 | |
Sun Hung Kai | |||
Properties Ltd. | 4,968,000 | 76,228 | |
Swire Pacific Ltd. Class A | 6,033,000 | 68,462 | |
^ | Techtronic Industries Co. | 23,299,943 | 28,066 |
^ | Esprit Holdings Ltd. | 4,419,604 | 9,882 |
388,809 | |||
India (1.2%) | |||
Housing Development | |||
Finance Corp. | 7,087,800 | 95,651 | |
* | Tata Motors Ltd. | 8,967,223 | 49,383 |
HDFC Bank Ltd. | 4,602,179 | 48,466 | |
Reliance Capital Ltd. | 1,454,500 | 11,949 | |
205,449 | |||
Ireland (0.2%) | |||
Kerry Group plc Class A | 925,000 | 39,417 | |
Israel (1.0%) | |||
* | Check Point Software | ||
Technologies Ltd. | 1,891,623 | 110,017 | |
Teva Pharmaceutical | |||
Industries Ltd. ADR | 1,592,900 | 71,378 | |
181,395 | |||
Italy (0.5%) | |||
^ | Fiat SPA | 13,861,000 | 79,896 |
Japan (8.6%) | |||
Rakuten Inc. | 199,916 | 198,700 | |
Honda Motor Co. Ltd. | 4,898,400 | 188,137 | |
Mitsubishi Corp. | 6,079,400 | 149,403 | |
SMC Corp. | 756,400 | 129,040 | |
Seven & I Holdings | |||
Co. Ltd. | 4,502,000 | 124,363 | |
FANUC Corp. | 603,000 | 109,617 | |
^ | Gree Inc. | 2,710,000 | 84,733 |
Sekisui Chemical Co. Ltd. | 9,482,000 | 81,574 | |
Canon Inc. | 1,644,600 | 74,999 | |
Nippon Telegraph & | |||
Telephone Corp. | 1,410,700 | 66,405 | |
Hoya Corp. | 2,310,700 | 53,952 | |
Toyota Motor Corp. | 1,180,000 | 49,052 |
15
International Growth Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Sysmex Corp. | 1,220,000 | 44,121 | |
Astellas Pharma Inc. | 1,000,000 | 41,076 | |
Nintendo Co. Ltd. | 212,500 | 31,763 | |
Kyocera Corp. | 347,900 | 30,873 | |
MISUMI Group Inc. | 1,250,000 | 30,745 | |
Rohm Co. Ltd. | 589,500 | 29,802 | |
1,518,355 | |||
Luxembourg (0.1%) | |||
* | Reinet Investments SCA | 542,339 | 9,680 |
Netherlands (0.9%) | |||
* | ING Groep NV | 14,057,298 | 123,882 |
TNT Express NV | 1,479,130 | 18,409 | |
PostNL NV | 1,556,470 | 9,204 | |
151,495 | |||
Norway (1.2%) | |||
Statoil ASA | 4,037,058 | 115,145 | |
DNB ASA | 8,267,776 | 106,122 | |
221,267 | |||
Peru (0.5%) | |||
Credicorp Ltd. | 763,247 | 93,795 | |
Russia (0.6%) | |||
* | Sberbank of Russia ADR | 5,291,638 | 72,673 |
* | Mail.ru Group Ltd. GDR | 913,206 | 36,101 |
108,774 | |||
Singapore (0.7%) | |||
United Overseas | |||
Bank Ltd. | 3,803,000 | 54,673 | |
Singapore Exchange Ltd. | 6,541,000 | 37,588 | |
DBS Group Holdings Ltd. | 2,580,521 | 29,177 | |
* | Jardine Matheson | ||
Holdings Ltd. | 12,800 | 649 | |
122,087 | |||
South Africa (0.5%) | |||
Impala Platinum | |||
Holdings Ltd. | 1,778,600 | 39,382 | |
Sasol Ltd. | 525,000 | 27,896 | |
MTN Group Ltd. | 1,430,000 | 25,680 | |
92,958 | |||
South Korea (3.3%) | |||
Samsung Electronics | |||
Co. Ltd. | 346,357 | 372,460 | |
Shinhan Financial Group | |||
Co. Ltd. | 1,951,586 | 75,296 | |
Hyundai Mobis | 247,479 | 63,009 | |
Celltrion Inc. | 1,368,991 | 42,763 | |
Hankook Tire Co. Ltd. | 785,000 | 30,000 | |
583,528 | |||
Spain (2.3%) | |||
Inditex SA | 2,477,385 | 228,008 | |
Banco Santander SA | 22,690,801 | 187,827 | |
415,835 |
Market | ||
Value | ||
Shares | ($000) | |
Sweden (4.3%) | ||
Atlas Copco AB Class A | 13,251,679 | 345,334 |
Svenska Handelsbanken | ||
AB Class A | 4,250,782 | 142,723 |
Sandvik AB | 7,223,763 | 110,395 |
Alfa Laval AB | 4,729,586 | 97,099 |
Telefonaktiebolaget LM | ||
Ericsson Class B | 4,600,000 | 46,084 |
^ Oriflame Cosmetics SA | 575,000 | 19,895 |
761,530 | ||
Switzerland (7.1%) | ||
Roche Holding AG | 1,572,694 | 273,735 |
Cie Financiere | ||
Richemont SA | 3,126,400 | 191,725 |
Nestle SA | 3,002,000 | 183,527 |
Syngenta AG | 507,934 | 165,801 |
Novartis AG | 2,138,666 | 116,571 |
Geberit AG | 494,180 | 106,087 |
ABB Ltd. | 3,984,182 | 81,555 |
Zurich Financial | ||
Services AG | 249,736 | 62,945 |
Swatch Group AG (Bearer) | 96,145 | 43,553 |
Holcim Ltd. | 590,000 | 38,487 |
1,263,986 | ||
Taiwan (0.7%) | ||
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. | 37,122,508 | 101,598 |
Compal Electronics Inc. | 21,403,304 | 25,212 |
Chinatrust Financial | ||
Holding Co. Ltd. | ||
Rights Exp. 04/03/2012 | 2,255,928 | 284 |
127,094 | ||
Thailand (0.6%) | ||
Kasikornbank PCL | 22,101,000 | 106,672 |
Turkey (0.8%) | ||
Turkiye Garanti | ||
Bankasi AS | 37,457,981 | 141,859 |
United Kingdom (18.8%) | ||
BG Group plc | 12,621,900 | 304,611 |
HSBC Holdings plc | 28,001,005 | 248,079 |
Standard Chartered plc | 9,525,422 | 245,049 |
Prudential plc | 19,619,000 | 222,581 |
BHP Billiton plc | 6,822,700 | 220,666 |
Diageo plc | 8,090,267 | 193,167 |
Rolls-Royce Holdings plc | 13,797,616 | 178,324 |
Xstrata plc | 9,329,638 | 178,095 |
ARM Holdings plc | 18,243,000 | 164,459 |
GlaxoSmithKline plc | 7,084,034 | 156,543 |
SABMiller plc | 2,786,000 | 112,824 |
Rio Tinto plc | 1,980,518 | 112,354 |
Capita plc | 8,559,000 | 104,238 |
Meggitt plc | 16,409,250 | 100,756 |
16
International Growth Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Vodafone Group plc | 35,992,000 | 96,960 | |
British American | |||
Tobacco plc | 1,698,464 | 85,672 | |
AMEC plc | 4,379,772 | 77,044 | |
United Utilities Group plc | 6,785,336 | 65,860 | |
Centrica plc | 13,500,198 | 65,117 | |
Kingfisher plc | 13,837,000 | 62,523 | |
Unilever plc | 1,470,000 | 47,523 | |
TESCO plc | 9,286,300 | 46,610 | |
Inchcape plc | 7,724,221 | 46,076 | |
G4S plc | 10,000,000 | 45,885 | |
^ | Signet Jewelers Ltd. | 950,513 | 44,449 |
Ultra Electronics | |||
Holdings plc | 1,580,000 | 42,312 | |
Carnival plc | 1,310,000 | 38,443 | |
AZ Electronic | |||
Materials SA | 4,340,280 | 19,490 | |
3,325,710 | |||
United States (1.0%) | |||
* | Amazon.com Inc. | 1,000,200 | 179,726 |
Total Common Stocks | |||
(Cost $14,562,545) | 16,974,779 | ||
Temporary Cash Investments (6.3%)1 | |||
Money Market Fund (6.1%) | |||
2,3 | Vanguard Market | ||
Liquidity Fund, | |||
0.111% | 1,078,724,330 | 1,078,724 |
Face | Market | ||
Amount | Value• | ||
(%000) | ($000) | ||
U.S. Government and Agency Obligations (0.2%) | |||
4,5 | Fannie Mae Discount | ||
Notes, 0.020%, 4/2/12 | 1,000 | 1,000 | |
4,5 | Fannie Mae Discount | ||
Notes, 0.040%, 4/24/12 | 5,000 | 4,999 | |
5,6 | Federal Home Loan | ||
Bank Discount Notes, | |||
0.030%, 3/21/12 | 2,000 | 2,000 | |
4,5 | Freddie Mac Discount | ||
Notes, 0.050%, 4/4/12 | 10,000 | 9,999 | |
4,5 | Freddie Mac Discount | ||
Notes, 0.050%, 4/24/12 | 15,000 | 14,997 | |
32,995 | |||
Total Temporary Cash Investments | |||
(Cost $1,111,722) | 1,111,719 | ||
Total Investments (102.2%) | |||
(Cost $15,674,267) | 18,086,498 | ||
Other Assets and Liabilities (-2.2%) | |||
Other Assets | 171,573 | ||
Liabilities3 | (567,561) | ||
(395,988) | |||
Net Assets (100%) | 17,690,510 |
17
International Growth Fund
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 17,507,014 |
Overdistributed Net Investment Income | (11,193) |
Accumulated Net Realized Losses | (2,253,959) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 2,412,231 |
Futures Contracts | 31,130 |
Forward Currency Contracts | 3,471 |
Foreign Currencies | 1,816 |
Net Assets | 17,690,510 |
Investor Shares—Net Assets | |
Applicable to 564,872,713 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 10,531,684 |
Net Asset Value Per Share— | |
Investor Shares | $18.64 |
Admiral Shares—Net Assets | |
Applicable to 120,713,598 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 7,158,826 |
Net Asset Value Per Share— | |
Admiral Shares | $59.30 |
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 $378,110,000.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 98.5% and 3.7%, 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 $401,428,000 of collateral received for securities on loan.
4 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury in exchange for senior preferred stock.
5 Securities with a value of $29,496,000 have been segregated as initial margin for open futures contracts.
6 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
ADR—American Depositary Receipt.
GDR—Global Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
18
International Growth Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 117,386 |
Interest2 | 370 |
Security Lending | 6,175 |
Total Income | 123,931 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 11,869 |
Performance Adjustment | 3,747 |
The Vanguard Group—Note C | |
Management and Administrative—Investor Shares | 12,631 |
Management and Administrative—Admiral Shares | 4,042 |
Marketing and Distribution—Investor Shares | 1,283 |
Marketing and Distribution—Admiral Shares | 736 |
Custodian Fees | 1,351 |
Shareholders’ Reports—Investor Shares | 52 |
Shareholders’ Reports—Admiral Shares | 7 |
Trustees’ Fees and Expenses | 20 |
Total Expenses | 35,738 |
Expenses Paid Indirectly | (92) |
Net Expenses | 35,646 |
Net Investment Income | 88,285 |
Realized Net Gain (Loss) | |
Investment Securities Sold | (78,904) |
Futures Contracts | (15,290) |
Foreign Currencies and Forward Currency Contracts | (19,856) |
Realized Net Gain (Loss) | (114,050) |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 660,234 |
Futures Contracts | 57,526 |
Foreign Currencies and Forward Currency Contracts | (2,029) |
Change in Unrealized Appreciation (Depreciation) | 715,731 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 689,966 |
1 Dividends are net of foreign withholding taxes of $7,113,000.
2 Interest income from an affiliated company of the fund was $361,000.
See accompanying Notes, which are an integral part of the Financial Statements.
19
International Growth Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 88,285 | 346,864 |
Realized Net Gain (Loss) | (114,050) | 1,071,269 |
Change in Unrealized Appreciation (Depreciation) | 715,731 | 686,943 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 689,966 | 2,105,076 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (192,236) | (193,553) |
Admiral Shares | (128,519) | (99,917) |
Realized Capital Gain | ||
Investor Shares | — | — |
Admiral Shares | — | — |
Total Distributions | (320,755) | (293,470) |
Capital Share Transactions | ||
Investor Shares | (517,630) | (1,004,967) |
Admiral Shares | 474,143 | 1,712,128 |
Net Increase (Decrease) from Capital Share Transactions | (43,487) | 707,161 |
Total Increase (Decrease) | 325,724 | 2,518,767 |
Net Assets | ||
Beginning of Period | 17,364,786 | 14,846,019 |
End of Period1 | 17,690,510 | 17,364,786 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($11,193,000) and $224,700,000.
See accompanying Notes, which are an integral part of the Financial Statements.
20
International Growth Fund
Financial Highlights
Investor Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $18.27 | $16.27 | $15.73 | $20.43 | $26.13 | $23.97 |
Investment Operations | ||||||
Net Investment Income | .094 | .351 | .291 | .3981 | .473 | .594 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | .610 | 1.954 | .535 | (3.633) | (3.431) | 4.132 |
Total from Investment Operations | .704 | 2.305 | .826 | (3.235) | (2.958) | 4.726 |
Distributions | ||||||
Dividends from Net Investment Income | (.334) | (.305) | (.286) | (.562) | (.528) | (.530) |
Distributions from Realized Capital Gains | — | — | — | (.903) | (2.214) | (2.036) |
Total Distributions | (.334) | (.305) | (.286) | (1.465) | (2.742) | (2.566) |
Net Asset Value, End of Period | $18.64 | $18.27 | $16.27 | $15.73 | $20.43 | $26.13 |
Total Return2 | 4.17% | 14.10% | 5.19% | -13.75% | -12.83% | 20.87% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $10,532 | $10,878 | $10,493 | $10,226 | $11,969 | $13,219 |
Ratio of Total Expenses to | ||||||
Average Net Assets3 | 0.49% | 0.47% | 0.49% | 0.53% | 0.47% | 0.51% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.05% | 1.85% | 1.74% | 2.84%1 | 2.07% | 2.47% |
Portfolio Turnover Rate | 30% | 43% | 44% | 51% | 55% | 41% |
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 $0.061 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 0.05%, 0.03%, 0.03%, 0.03%, 0.02%, and 0.01%.
See accompanying Notes, which are an integral part of the Financial Statements.
21
International Growth Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $58.17 | $51.81 | $50.08 | $65.09 | $83.26 | $76.36 |
Investment Operations | ||||||
Net Investment Income | .338 | 1.192 | 1.009 | 1.3401 | 1.649 | 2.051 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 1.936 | 6.209 | 1.708 | (11.571) | (10.929) | 13.159 |
Total from Investment Operations | 2.274 | 7.401 | 2.717 | (10.231) | (9.280) | 15.210 |
Distributions | ||||||
Dividends from Net Investment Income | (1.144) | (1.041) | (.987) | (1.909) | (1.845) | (1.832) |
Distributions from Realized Capital Gains | — | — | — | (2.870) | (7.045) | (6.478) |
Total Distributions | (1.144) | (1.041) | (.987) | (4.779) | (8.890) | (8.310) |
Net Asset Value, End of Period | $59.30 | $58.17 | $51.81 | $50.08 | $65.09 | $83.26 |
Total Return2 | 4.25% | 14.21% | 5.36% | -13.57% | -12.67% | 21.11% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $7,159 | $6,487 | $4,353 | $3,934 | $4,845 | $5,060 |
Ratio of Total Expenses to | ||||||
Average Net Assets3 | 0.36% | 0.34% | 0.33% | 0.34% | 0.28% | 0.31% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.18% | 1.98% | 1.90% | 3.03%1 | 2.26% | 2.67% |
Portfolio Turnover Rate | 30% | 43% | 44% | 51% | 55% | 41% |
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 $0.194 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 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 0.05%, 0.03%, 0.03%, 0.03%, 0.02%, and 0.01%.
See accompanying Notes, which are an integral part of the Financial Statements.
22
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 these contracts is that a counterparty will fail to fulfill its obligation to pay gains due to the fund under
23
International Growth Fund
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, 2008–2011), and for the period ended February 29, 2012, 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 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
24
International Growth Fund
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 29, 2012, the aggregate investment advisory fee represented an effective annual basic rate of 0.15% of the fund’s average net assets, before an increase of $3,747,000 (0.05%) 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 29, 2012, the fund had contributed capital of $2,574,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 1.03% 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 29, 2012, these arrangements reduced the fund’s expenses by $92,000 (an annual rate of 0.00% of average net assets).
E. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the market value of the fund’s investments as of February 29, 2012, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—North and South America | 2,037,414 | — | — |
Common Stocks—Other | 709,372 | 14,227,993 | — |
Temporary Cash Investments | 1,078,724 | 32,995 | — |
Futures Contracts—Liabilities1 | (2,678) | — | |
Forward Currency Contracts—Assets | — | 7,925 | — |
Forward Currency Contracts—Liabilities | — | (4,454) | — |
Total | 3,822,832 | 14,264,459 | — |
1 Represents variation margin on the last day of the reporting period. |
25
International Growth Fund
F. At February 29, 2012, the fair values of derivatives were reflected in the Statement of Net Assets as follows:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Statement of Net Assets Caption | ($000) | ($000) | ($000) |
Other Assets | — | 7,925 | 7,925 |
Liabilities | (2,678) | (4,454) | (7,132) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 29, 2012, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | (15,290) | — | (15,290) |
Forward Currency Contracts | — | (16,433) | (16,433) |
Realized Net Gain (Loss) on Derivatives | (15,290) | (16,433) | (31,723) |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | 57,526 | — | 57,526 |
Forward Currency Contracts | — | (953) | (953) |
Change in Unrealized Appreciation (Depreciation) on Derivatives | 57,526 | (953) | 56,573 |
At February 29, 2012, 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 2012 | 4,979 | 167,176 | 12,290 |
FTSE 100 Index | March 2012 | 1,368 | 127,906 | 6,881 |
Topix Index | March 2012 | 1,007 | 103,699 | 10,654 |
S&P ASX 200 Index | March 2012 | 550 | 63,703 | 1,305 |
Unrealized appreciation (depreciation) on open FTSE 100 Index futures contracts is required to be treated as realized gain (loss) for tax purposes.
26
International Growth Fund
At February 29, 2012, 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. | 3/21/12 | EUR | 114,974 | USD | 153,628 | 2,085 |
Brown Brothers Harriman & Co. | 3/21/12 | GBP | 75,444 | USD | 120,352 | 2,528 |
Brown Brothers Harriman & Co. | 3/13/12 | JPY | 7,512,332 | USD | 92,597 | (4,454) |
Brown Brothers Harriman & Co. | 3/20/12 | AUD | 57,643 | USD | 61,981 | 3,312 |
AUD—Australian dollar.
EUR—Euro.
GBP—British pound.
JPY—Japanese yen.
USD—U.S. dollar.
At February 29, 2012, 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 29, 2012, the fund realized net foreign currency losses of $3,423,000, 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. Passive foreign investment companies held at February 29, 2012, had unrealized appreciation of $6,128,000, as of October 31, 2011, the most recent mark-to-market date for tax purposes. This amount has been distributed and is reflected in the balance of overdistributed net investment income.
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2011, the fund had available capital loss carryforwards totaling $2,143,263,000 to offset future net capital gains of $267,649,000 through August 31, 2017, and $1,875,614,000 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, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
27
International Growth Fund
At February 29, 2012, the cost of investment securities for tax purposes was $15,680,395,000. Net unrealized appreciation of investment securities for tax purposes was $2,406,103,000, consisting of unrealized gains of $3,586,363,000 on securities that had risen in value since their purchase and $1,180,260,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the six months ended February 29, 2012, the fund purchased $2,363,269,000 of investment securities and sold $2,723,743,000 of investment securities, other than temporary cash investments.
I. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 866,793 | 51,177 | 2,372,818 | 124,655 |
Issued in Lieu of Cash Distributions | 188,225 | 11,846 | 190,030 | 10,017 |
Redeemed1 | (1,572,648) | (93,544) | (3,567,815) | (184,077) |
Net Increase (Decrease)—Investor Shares | (517,630) | (30,521) | (1,004,967) | (49,405) |
Admiral Shares | ||||
Issued | 918,012 | 17,255 | 2,858,041 | 46,066 |
Issued in Lieu of Cash Distributions | 119,571 | 2,366 | 92,553 | 1,534 |
Redeemed1 | (563,440) | (10,431) | (1,238,466) | (20,096) |
Net Increase (Decrease)—Admiral Shares | 474,143 | 9,190 | 1,712,128 | 27,504 |
1 Net of redemption fees for fiscal 2012 and 2011 of $562,000 and $827,000, respectively (fund totals). |
J. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
28
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
29
Six Months Ended February 29, 2012 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
International Growth Fund | 8/31/2011 | 2/29/2012 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,041.70 | $2.49 |
Admiral Shares | 1,000.00 | 1,042.51 | 1.83 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,022.43 | $2.46 |
Admiral Shares | 1,000.00 | 1,023.07 | 1.81 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.49% for Investor Shares and 0.36% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period.
30
Trustees Approve Advisory Agreements
The board of trustees of Vanguard International Growth Fund has renewed the fund’s investment advisory agreements with Schroder Investment Management North America Inc. (Schroder Inc.), Baillie Gifford Overseas Ltd., and M&G Investment Management Limited, as well as the sub-advisory agreement with Schroder Investment Management North America Ltd. (Schroder Ltd.). The board determined that the retention of the fund’s advisors was in the best interests of the fund and its shareholders.
The board based its decision upon an evaluation of each advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the 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 services 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. Schroders plc., the parent company of Schroder Investment Management, has existed for more than 200 years and has investment management experience dating back to 1926. Schroder 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. Baillie Gifford 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. M&G 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 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 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 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.
31
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, 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.
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Glossary
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
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Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
34
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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 Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services), Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing), |
Board. Principal Occupation(s) During the Past Five | and Delphi Automotive LLP (automotive components); |
Years: Chairman of the Board of The Vanguard Group, | Senior Advisor at New Mountain Capital; Trustee of |
Inc., and of each of the investment companies served | The Conference Board. |
by The Vanguard Group, since January 2010; Director | |
of The Vanguard Group since 2008; Chief Executive | Amy Gutmann |
Officer and President of The Vanguard Group and of | Born 1949. Trustee Since June 2006. Principal |
each of the investment companies served by The | Occupation(s) During the Past Five Years: President |
Vanguard Group since 2008; Director of Vanguard | of the University of Pennsylvania; Christopher H. |
Marketing Corporation; Managing Director of The | Browne Distinguished Professor of Political Science |
Vanguard Group (1995–2008). | in the School of Arts and Sciences with secondary |
appointments at the Annenberg School for Commu- | |
nication and the Graduate School of Education | |
Independent Trustees | of the University of Pennsylvania; Director of |
Carnegie Corporation of New York, Schuylkill River | |
Emerson U. Fullwood | Development Corporation, and Greater Philadelphia |
Born 1948. Trustee Since January 2008. Principal | Chamber of Commerce; Trustee of the National |
Occupation(s) During the Past Five Years: Executive | Constitution Center; Chair of the Presidential |
Chief Staff and Marketing Officer for North America | Commission for the Study of Bioethical Issues. |
and Corporate Vice President (retired 2008) of Xerox | |
Corporation (document management products and | JoAnn Heffernan Heisen |
services); Executive in Residence and 2010 | Born 1950. Trustee Since July 1998. Principal |
Distinguished Minett Professor at the Rochester | Occupation(s) During the Past Five Years: Corporate |
Institute of Technology; Director of SPX Corporation | Vice President and Chief Global Diversity Officer |
(multi-industry manufacturing), the United Way of | (retired 2008) and Member of the Executive |
Rochester, Amerigroup Corporation (managed health | Committee (1997–2008) of Johnson & Johnson |
care), the University of Rochester Medical Center, | (pharmaceuticals/medical devices/consumer |
Monroe Community College Foundation, and North | products); Director of Skytop Lodge Corporation |
Carolina A&T University. | (hotels), the University Medical Center at Princeton, |
the Robert Wood Johnson Foundation, and the Center | |
Rajiv L. Gupta | for Talent Innovation; Member of the Advisory Board |
Born 1945. Trustee Since December 2001.2 | of the Maxwell School of Citizenship and Public Affairs |
Principal Occupation(s) During the Past Five Years: | at Syracuse University. |
Chairman and Chief Executive Officer (retired 2009) |
F. Joseph Loughrey | Group since 2010; Assistant Controller of each of | |
Born 1949. Trustee Since October 2009. Principal | the investment companies served by The Vanguard | |
Occupation(s) During the Past Five Years: President | Group (2001–2010). | |
and Chief Operating Officer (retired 2009) and Vice | ||
Chairman of the Board (2008–2009) of Cummins Inc. | Thomas J. Higgins | |
(industrial machinery); Director of SKF AB (industrial | Born 1957. Chief Financial Officer Since September | |
machinery), Hillenbrand, Inc. (specialized consumer | 2008. Principal Occupation(s) During the Past Five | |
services), the Lumina Foundation for Education, and | Years: Principal of The Vanguard Group, Inc.; Chief | |
Oxfam America; Chairman of the Advisory Council | Financial Officer of each of the investment companies | |
for the College of Arts and Letters and Member | served by The Vanguard Group since 2008; Treasurer | |
of the Advisory Board to the Kellogg Institute for | of each of the investment companies served by The | |
International Studies at the University of Notre Dame. | Vanguard Group (1998–2008). | |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School (retired 2011); Chief Investment | the investment companies served by The Vanguard | |
Officer and Managing Partner of HighVista Strategies | Group since 2008; Assistant Treasurer of each of the | |
LLC (private investment firm); Director of Rand | investment companies served by The Vanguard Group | |
Merchant Bank; Overseer of the Museum of Fine | (1988–2008). | |
Arts Boston. | ||
Heidi Stam | ||
Alfred M. Rankin, Jr. | Born 1956. Secretary Since July 2005. Principal | |
Born 1941. Trustee Since January 1993. Principal | Occupation(s) During the Past Five Years: Managing | |
Occupation(s) During the Past Five Years: Chairman, | Director of The Vanguard Group, Inc., since 2006; | |
President, and Chief Executive Officer of NACCO | General Counsel of The Vanguard Group since 2005; | |
Industries, Inc. (forklift trucks/housewares/lignite); | Secretary of The Vanguard Group and of each of the | |
Director of Goodrich Corporation (industrial products/ | investment companies served by The Vanguard Group | |
aircraft systems and services) and the National | since 2005; Director and Senior Vice President of | |
Association of Manufacturers; Chairman of the Board | Vanguard Marketing Corporation since 2005; | |
of the Federal Reserve Bank of Cleveland and of | Principal of The Vanguard Group (1997–2006). | |
University Hospitals of Cleveland; Advisory Chairman | ||
of the Board of The Cleveland Museum of Art. | ||
Vanguard Senior Management Team | ||
Peter F. Volanakis | ||
Mortimer J. Buckley | Michael S. Miller | |
Born 1955. Trustee Since July 2009. Principal | Kathleen C. Gubanich | James M. Norris |
Occupation(s) During the Past Five Years: President | Paul A. Heller | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Martha G. King | George U. Sauter |
Incorporated (communications equipment); Director of | Chris D. McIsaac | |
Corning Incorporated (2000-2010) and Dow Corning | ||
(2001–2010); Director of SPX Corporation (multi- | ||
industry manufacturing); Overseer of the Amos Tuck | Chairman Emeritus and Senior Advisor | |
School of Business Administration at Dartmouth | ||
College; Advisor to the Norris Cotton Cancer Center. | John J. Brennan | |
Chairman, 1996–2009 | ||
Chief Executive Officer and President, 1996–2008 | ||
Executive Officers | ||
Glenn Booraem | Founder | |
Born 1967. Controller Since July 2010. Principal | ||
Occupation(s) During the Past Five Years: Principal | John C. Bogle | |
of The Vanguard Group, Inc.; Controller of each of | Chairman and Chief Executive Officer, 1974–1996 | |
the investment companies served by The Vanguard |
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 | 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. | |
© 2012 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q812 042012 |
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Semiannual Report | February 29, 2012
Vanguard FTSE Social Index Fund
> Vanguard FTSE Social Index Fund returned a bit more than 12% for the six months ended February 29, 2012.
> The fund’s return tracked that of its target index and was in line with the average return for large-capitalization growth funds.
> Information technology and financial stocks contributed most to the fund’s 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.
About the cover: Vanguard was named for the HMS Vanguard, flagship of British Admiral Horatio Nelson. A ship—whose performance and safety depend on the work of all hands—has served as a fitting metaphor for the Vanguard crew as we strive to help clients reach their financial goals.
Your Fund’s Total Returns
Six Months Ended February 29, 2012 | |
Total | |
Returns | |
Vanguard FTSE Social Index Fund | |
Investor Shares | 12.31% |
Institutional Shares | 12.43 |
FTSE4Good US Select Index | 12.47 |
Large-Cap Growth Funds Average | 12.46 |
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, 2011 , Through February 29, 2012
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard FTSE Social Index Fund | ||||
Investor Shares | $7.31 | $8.11 | $0.089 | $0.000 |
Institutional Shares | 7.32 | 8.12 | 0.098 | 0.000 |
1
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Chairman’s Letter
Dear Shareholder,
For the six months ended February 29, 2012, the FTSE Social Index Fund returned slightly more than 12%. This result was in line with that of its benchmark index, the FTSE4Good US Select Index, and roughly the same as the average return of large-capitalization growth funds. The fund lagged the broad U.S. market by about 1 percentage point.
The index provider’s social and environmental screening process leads to sector allocations that differ from those of the broad U.S. market. Because your fund seeks to track the performance of the index, it tends to be concentrated in certain sectors, and this can cause the fund to have greater volatility than the market overall.
For the period covered in this report, the fund’s large financial, information technology, and health care holdings boosted its performance, while its smaller exposure to energy and industrial stocks restrained results.
Notes of optimism
propelled stock prices higher
U.S. stocks produced a strong double-digit return of 13.18% over the period. That statement is true enough, but the headline figure obscures the volatility that has been perhaps the most prominent feature of the financial markets over the past six months and indeed the past few years. If the six-month period had started a month earlier, for example, the Dow Jones U.S. Total Stock Market Index would have
2
returned just 1.97%. A start date two months earlier would have put the six-month return at –5.18%.
In the six months through February, however, stock prices benefited from signs of acceleration in the U.S. economic expansion and hope that the European Union’s latest agreement on Greek debt would help to contain a threat that has menaced global markets for much of the past two years. European stocks rallied on the news about Greece, but international stocks still trailed their U.S. counterparts for the full six months.
Bonds’ strength
confounded expectations
Bonds produced solid returns, to the surprise of many long-time observers of the fixed income markets. At the start of the period, the yield of the 10-year U.S. Treasury note stood at 2.22%, suggesting that returns would be very modest by historical standards. Over the next six months, however, yields moved lower still, boosting bond prices, which move in the opposite direction. At the end of February, the yield of the 10-year T-note stood at 1.98%. As yields decline, obviously, the scope for continued declines—and price increases—diminishes. Municipal bonds performed even more strongly than the broad taxable market.
Market Barometer | |||
Total Returns | |||
Periods Ended February 29, 2012 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.31% | 4.86% | 1.77% |
Russell 2000 Index (Small-caps) | 12.40 | -0.15 | 1.83 |
Dow Jones U.S. Total Stock Market Index | 13.18 | 4.35 | 2.07 |
MSCI All Country World Index ex USA (International) | 3.97 | -6.10 | -0.75 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | 2.73% | 8.37% | 6.36% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | 5.67 | 12.42 | 5.50 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.00 | 0.06 | 1.20 |
CPI | |||
Consumer Price Index | 0.49% | 2.87% | 2.27% |
3
The returns for 3-month Treasury bills and other money market instruments remained near 0%, consistent with the Federal Reserve’s policy on interest rates.
Financials, technology, health care
made the strongest contributions
FTSE, the fund’s index provider, follows a socially conscious mandate that favors companies that work to protect the environment, have fair hiring and promotion practices for women and minorities, and maintain safe and healthy workplace policies. Because of this screening process, the index––and thus the fund––tends to be concentrated in just a few sectors, most recently, financials, information technology, and health care. All three sectors made significant contributions to the fund’s returns over the last six months.
Growth was notable across most of the technology spectrum as both corporations and consumers spent liberally. IT services firms, particularly those engaged in the electronic payments industry, and communication equipment corporations were among the sector’s stars. Internet, software, and computer companies also recorded double-digit returns, thanks to the popularity of smartphones and tablet computers and their peripheral products and services.
Financial stocks, which had been battered by the European debt crisis and regulatory concerns last summer, rebounded strongly. Well-managed companies that navigated the financial crisis and subsequent regulatory challenges emerged as standouts. Insurers benefited during
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, 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 2011.
Peer group: Large-Cap Growth Funds.
4
a period of relatively few claims, leading commercial banks made shrewd acquisitions, and top investment banks improved their balance sheets.
Although expiring patents, weak product pipelines, and product recalls hurt some of the giant pharmaceutical companies, the health care sector still made solid contributions to the fund’s return. Health care providers and service firms have improved their operating costs and economies of scale. Mergers and acquisitions and successful new drugs lifted biotechnology stocks.
The fund’s consumer discretionary, materials, and industrial holdings all recorded double-digit returns, although these sectors had lower average weightings in the index during the period than in the broader market. This was particularly noticeable in industrials, as well as in the energy sector, where the fund’s screening process filtered out top performers because of environmental concerns. Of the ten industry sectors, only energy and telecommunication services didn’t produce positive results.
A long-term investment plan
can guard against volatility
While stocks staged a noteworthy comeback over the recent fiscal period, it wasn’t long ago that some investors and stock market pundits questioned whether the turmoil of last summer might escalate into another global financial crisis and the second recession in four years. Of course, that stretch of severe market volatility was preceded by two years of mostly positive returns.
As always, Vanguard believes that instead of fretting over the market’s inevitable highs and lows, it’s more productive to focus on the long term. That means building a diversified and balanced portfolio that includes a mix of stocks, bonds, and cash reserves tailored to your unique goals, time horizon, and risk tolerance.
Recent Stock Market Volatility: Extraordinary or “Ordinary”?—a Vanguard research paper that can be found at vanguard.com/research—explains that investors with balanced, diversified portfolios have experienced lower levels of volatility than the headlines would suggest. Vanguard FTSE Social Index Fund can be a valuable component in such a portfolio, and is especially suited for the socially conscious investor who also pays attention to costs.
Thank you for investing with Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ftsesocialx7x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 12, 2012
5
FTSE Social Index Fund
Fund Profile
As of February 29, 2012
Share-Class Characteristics | |||
Investor | Institutional | ||
Shares | Shares | ||
Ticker Symbol | VFTSX | VFTNX | |
Expense Ratio1 | 0.29% | 0.16% | |
30-Day SEC Yield | 1.59% | 1.72% | |
Portfolio Characteristics | |||
FTSE | DJ | ||
4Good | U.S. Total | ||
US Select | Market | ||
Fund | Index | Index | |
Number of Stocks | 344 | 343 | 3,733 |
Median Market Cap | $33.2B | $33.2B | $33.9B |
Price/Earnings Ratio | 16.4x | 16.4x | 16.5x |
Price/Book Ratio | 2.1x | 2.1x | 2.2x |
Return on Equity | 18.3% | 18.3% | 18.2% |
Earnings Growth Rate | 7.3% | 7.3% | 7.6% |
Dividend Yield | 1.9% | 1.9% | 1.9% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 47% | — | — |
Short-Term Reserves | 0.0% | — | — |
Sector Diversification (% of equity exposure) | |||
FTSE | DJ | ||
4Good | U.S. Total | ||
US Select | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 9.9% | 9.9% | 11.9% |
Consumer Staples | 6.7 | 6.7 | 9.4 |
Energy | 6.1 | 6.1 | 11.2 |
Financials | 22.3 | 22.2 | 15.4 |
Health Care | 22.9 | 22.9 | 11.4 |
Industrials | 7.1 | 7.1 | 11.2 |
Information | |||
Technology | 19.2 | 19.3 | 19.4 |
Materials | 4.3 | 4.3 | 4.1 |
Telecommunication | |||
Services | 0.3 | 0.3 | 2.5 |
Utilities | 1.2 | 1.2 | 3.5 |
Volatility Measures | |||
FTSE | DJ | ||
4Good | U.S. Total | ||
US Select | Market | ||
Index | Index | ||
R-Squared | 1.00 | 0.97 | |
Beta | 1.00 | 1.04 | |
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) | |||
Procter & Gamble Co. | Household | ||
Products | 3.0% | ||
Johnson & Johnson | Pharmaceuticals | 2.9 | |
Pfizer Inc. | Pharmaceuticals | 2.6 | |
Google Inc. | Internet Software & | ||
Services | 2.4 | ||
JPMorgan Chase & Co. | Diversified Financial | ||
Services | 2.4 | ||
Oracle Corp. | Systems Software | 2.4 | |
Merck & Co. Inc. | Pharmaceuticals | 1.9 | |
Schlumberger Ltd. | Oil & Gas | ||
Equipment & | |||
Services | 1.7 | ||
QUALCOMM Inc. | Communications | ||
Equipment | 1.6 | ||
Citigroup Inc. | Diversified Financial | ||
Services | 1.5 | ||
Top Ten | 22.4% | ||
The holdings listed exclude any temporary cash investments and equity index products. | |||
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ftsesocialx8x1.jpg)
1 The expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, 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, 2001, Through February 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ftsesocialx9x1.jpg)
Spliced Social Index: Calvert Social Index though December 16, 2005; FTSE4Good US Select Index thereafter.
Note: For 2012, performance data reflect the six months ended February 29, 2012.
Average Annual Total Returns: Periods Ended December 31, 2011
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | One | Five | Ten | |
Date | Year | Years | Years | |
Investor Shares | 5/31/2000 | -0.78% | -2.90% | 0.84% |
Institutional Shares | 1/14/2003 | -0.52 | -2.75 | 3.501 |
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 29, 2012
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 (9.9%) | |||
* | Amazon.com Inc. | 30,419 | 5,466 |
Ford Motor Co. | 333,142 | 4,124 | |
Lowe’s Cos. Inc. | 112,443 | 3,191 | |
* | priceline.com Inc. | 4,437 | 2,782 |
NIKE Inc. Class B | 25,250 | 2,725 | |
TJX Cos. Inc. | 67,494 | 2,471 | |
Viacom Inc. Class B | 44,846 | 2,136 | |
Johnson Controls Inc. | 60,650 | 1,979 | |
Coach Inc. | 25,812 | 1,932 | |
CBS Corp. Class B | 54,745 | 1,637 | |
* | General Motors Co. | 55,931 | 1,455 |
VF Corp. | 9,831 | 1,436 | |
* | Bed Bath & Beyond Inc. | 21,903 | 1,308 |
Limited Brands Inc. | 26,836 | 1,249 | |
Omnicom Group Inc. | 24,839 | 1,228 | |
McGraw-Hill Cos. Inc. | 26,335 | 1,226 | |
Ross Stores Inc. | 20,722 | 1,105 | |
* | AutoZone Inc. | 2,661 | 997 |
* | O’Reilly Automotive Inc. | 11,415 | 987 |
Harley-Davidson Inc. | 21,175 | 986 | |
Ralph Lauren Corp. Class A | 5,483 | 953 | |
* | Dollar Tree Inc. | 10,761 | 952 |
Genuine Parts Co. | 13,831 | 867 | |
* | BorgWarner Inc. | 9,741 | 807 |
Gap Inc. | 33,989 | 794 | |
* | Sirius XM Radio Inc. | 349,124 | 789 |
Tiffany & Co. | 11,465 | 745 | |
Garmin Ltd. | 13,882 | 655 | |
* | CarMax Inc. | 20,063 | 616 |
Family Dollar Stores Inc. | 10,442 | 564 | |
PetSmart Inc. | 10,063 | 561 | |
Autoliv Inc. | 7,871 | 524 | |
* | Apollo Group Inc. Class A | 11,552 | 493 |
Interpublic Group of Cos. Inc. | 40,945 | 480 | |
Newell Rubbermaid Inc. | 25,920 | 474 | |
H&R Block Inc. | 27,107 | 442 | |
Hasbro Inc. | 11,416 | 403 |
Market | |||
Value | |||
Shares | ($000) | ||
Foot Locker Inc. | 13,677 | 399 | |
* | Mohawk Industries Inc. | 6,070 | 386 |
Scripps Networks | |||
Interactive Inc. Class A | 8,280 | 374 | |
Abercrombie & Fitch Co. | 7,734 | 354 | |
Lennar Corp. Class A | 13,740 | 321 | |
* | AutoNation Inc. | 9,333 | 318 |
Gannett Co. Inc. | 21,222 | 315 | |
Harman International | |||
Industries Inc. | 6,211 | 305 | |
GameStop Corp. Class A | 12,335 | 281 | |
Leggett & Platt Inc. | 12,376 | 280 | |
Washington Post Co. | |||
Class B | 433 | 171 | |
55,043 | |||
Consumer Staples (6.7%) | |||
Procter & Gamble Co. | 245,627 | 16,585 | |
Colgate-Palmolive Co. | 43,252 | 4,030 | |
Kimberly-Clark Corp. | 35,147 | 2,562 | |
General Mills Inc. | 57,298 | 2,195 | |
HJ Heinz Co. | 28,585 | 1,507 | |
Kellogg Co. | 24,116 | 1,263 | |
Estee Lauder Cos. Inc. | |||
Class A | 20,828 | 1,219 | |
Sara Lee Corp. | 52,044 | 1,054 | |
ConAgra Foods Inc. | 36,978 | 971 | |
Coca-Cola Enterprises Inc. | 27,754 | 802 | |
Clorox Co. | 11,733 | 793 | |
Dr Pepper Snapple | |||
Group Inc. | 19,290 | 734 | |
Campbell Soup Co. | 21,349 | 711 | |
Avon Products Inc. | 37,884 | 708 | |
McCormick & Co. Inc. | 10,644 | 537 | |
Tyson Foods Inc. Class A | 26,665 | 504 | |
Hormel Foods Corp. | 17,708 | 504 | |
* | Energizer Holdings Inc. | 5,951 | 455 |
* | Smithfield Foods Inc. | 14,529 | 340 |
37,474 |
8
FTSE Social Index Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Energy (6.1%) | |||
Schlumberger Ltd. | 120,625 | 9,362 | |
Occidental Petroleum Corp. | 72,438 | 7,560 | |
Apache Corp. | 34,179 | 3,689 | |
Devon Energy Corp. | 36,127 | 2,648 | |
Baker Hughes Inc. | 39,100 | 1,966 | |
Spectra Energy Corp. | 58,242 | 1,828 | |
Williams Cos. Inc. | 52,782 | 1,577 | |
* | FMC Technologies Inc. | 21,349 | 1,077 |
Noble Corp. | 22,681 | 911 | |
Peabody Energy Corp. | 23,984 | 837 | |
Consol Energy Inc. | 20,076 | 719 | |
EQT Corp. | 13,230 | 701 | |
* | Newfield Exploration Co. | 11,851 | 427 |
* | Rowan Cos. Inc. | 11,227 | 414 |
* | WPX Energy Inc. | 17,460 | 317 |
34,033 | |||
Financials (22.3%) | |||
JPMorgan Chase & Co. | 339,579 | 13,325 | |
Citigroup Inc. | 258,873 | 8,626 | |
Bank of America Corp. | 901,256 | 7,183 | |
American Express Co. | 103,872 | 5,494 | |
Goldman Sachs Group Inc. | 43,991 | 5,065 | |
US Bancorp | 171,185 | 5,033 | |
PNC Financial Services | |||
Group Inc. | 46,998 | 2,797 | |
MetLife Inc. | 70,705 | 2,726 | |
Prudential Financial Inc. | 42,058 | 2,572 | |
Morgan Stanley | 129,362 | 2,398 | |
Capital One Financial Corp. | 45,926 | 2,324 | |
American Tower Corporation | 35,537 | 2,224 | |
ACE Ltd. | 30,038 | 2,154 | |
Travelers Cos. Inc. | 36,937 | 2,141 | |
Aflac Inc. | 42,157 | 1,992 | |
BlackRock Inc. | 9,377 | 1,866 | |
State Street Corp. | 44,032 | 1,859 | |
BB&T Corp. | 62,156 | 1,818 | |
CME Group Inc. | 5,949 | 1,722 | |
Franklin Resources Inc. | 14,580 | 1,719 | |
Chubb Corp. | 24,817 | 1,687 | |
Charles Schwab Corp. | 113,554 | 1,576 | |
Public Storage | 11,456 | 1,536 | |
Marsh & McLennan Cos. Inc. | 48,581 | 1,516 | |
Equity Residential | 26,202 | 1,491 | |
Discover Financial Services | 49,209 | 1,477 | |
Annaly Capital | |||
Management Inc. | 86,895 | 1,444 | |
Ventas Inc. | 25,784 | 1,442 | |
HCP Inc. | 36,402 | 1,438 | |
Allstate Corp. | 45,051 | 1,416 | |
Loews Corp. | 35,477 | 1,389 | |
T. Rowe Price Group Inc. | 22,537 | 1,388 | |
ProLogis Inc. | 41,126 | 1,384 |
Market | |||
Value | |||
Shares | ($000) | ||
Aon Corp. | 29,057 | 1,360 | |
Progressive Corp. | 55,655 | 1,192 | |
* | American International | ||
Group Inc. | 38,799 | 1,134 | |
Ameriprise Financial Inc. | 20,319 | 1,133 | |
Fifth Third Bancorp | 81,629 | 1,111 | |
SunTrust Banks Inc. | 48,167 | 1,106 | |
Weyerhaeuser Co. | 47,672 | 996 | |
Invesco Ltd. | 40,097 | 993 | |
Northern Trust Corp. | 21,634 | 961 | |
M&T Bank Corp. | 11,157 | 911 | |
* | IntercontinentalExchange Inc. | 6,589 | 909 |
Hartford Financial | |||
Services Group Inc. | 39,504 | 818 | |
Moody’s Corp. | 19,990 | 772 | |
Principal Financial Group Inc. | 27,449 | 759 | |
* | CIT Group Inc. | 17,794 | 724 |
SLM Corp. | 45,176 | 712 | |
NYSE Euronext | 23,083 | 687 | |
KeyCorp | 84,492 | 684 | |
Lincoln National Corp. | 26,815 | 666 | |
Regions Financial Corp. | 111,652 | 643 | |
Macerich Co. | 11,853 | 640 | |
Unum Group | 25,989 | 599 | |
XL Group plc Class A | 28,451 | 592 | |
Plum Creek Timber Co. Inc. | 14,442 | 566 | |
Willis Group Holdings plc | 15,345 | 551 | |
* | CBRE Group Inc. Class A | 28,917 | 530 |
Comerica Inc. | 17,823 | 529 | |
Cincinnati Financial Corp. | 14,465 | 509 | |
New York Community | |||
Bancorp Inc. | 38,650 | 503 | |
Torchmark Corp. | 9,275 | 449 | |
Huntington Bancshares Inc. | 76,776 | 449 | |
People’s United Financial Inc. 32,023 | 403 | ||
* | Genworth Financial Inc. | ||
Class A | 43,391 | 394 | |
PartnerRe Ltd. | 5,958 | 378 | |
Axis Capital Holdings Ltd. | 11,446 | 353 | |
Assurant Inc. | 8,186 | 348 | |
Liberty Property Trust | 10,220 | 347 | |
* | Markel Corp. | 847 | 345 |
Legg Mason Inc. | 12,417 | 340 | |
Arthur J Gallagher & Co. | 9,941 | 339 | |
White Mountains | |||
Insurance Group Ltd. | 665 | 330 | |
RenaissanceRe Holdings Ltd. | 4,558 | 328 | |
Hudson City Bancorp Inc. | 46,792 | 320 | |
Zions Bancorporation | 16,276 | 309 | |
Duke Realty Corp. | 22,266 | 309 | |
Brown & Brown Inc. | 12,576 | 297 | |
Old Republic | |||
International Corp. | 22,962 | 249 |
9
FTSE Social Index Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Erie Indemnity Co. Class A | 3,176 | 242 | |
SEI Investments Co. | 11,880 | 235 | |
City National Corp. | 4,938 | 232 | |
Mercury General Corp. | 2,376 | 102 | |
124,610 | |||
Health Care (22.9%) | |||
Johnson & Johnson | 245,476 | 15,976 | |
Pfizer Inc. | 686,947 | 14,495 | |
Merck & Co. Inc. | 274,793 | 10,489 | |
Abbott Laboratories | 137,955 | 7,810 | |
UnitedHealth Group Inc. | 95,237 | 5,309 | |
Bristol-Myers Squibb Co. | 151,327 | 4,868 | |
Amgen Inc. | 70,910 | 4,818 | |
Eli Lilly & Co. | 102,804 | 4,034 | |
Medtronic Inc. | 94,518 | 3,603 | |
* | Gilead Sciences Inc. | 67,083 | 3,052 |
Baxter International Inc. | 50,356 | 2,927 | |
* | Celgene Corp. | 39,674 | 2,909 |
* | Biogen Idec Inc. | 21,501 | 2,504 |
Allergan Inc. | 27,597 | 2,472 | |
* | Medco Health Solutions Inc. | 34,507 | 2,332 |
* | Express Scripts Inc. | 43,616 | 2,326 |
Covidien plc | 43,114 | 2,253 | |
WellPoint Inc. | 31,119 | 2,042 | |
* | Thermo Fisher Scientific Inc. | 33,848 | 1,916 |
McKesson Corp. | 22,109 | 1,846 | |
* | Intuitive Surgical Inc. | 3,502 | 1,792 |
Aetna Inc. | 32,278 | 1,509 | |
Becton Dickinson and Co. | 19,273 | 1,469 | |
* | Alexion Pharmaceuticals Inc. | 16,614 | 1,391 |
Stryker Corp. | 25,682 | 1,378 | |
* | Agilent Technologies Inc. | 30,960 | 1,350 |
Cardinal Health Inc. | 30,797 | 1,280 | |
Humana Inc. | 14,655 | 1,276 | |
St. Jude Medical Inc. | 28,647 | 1,207 | |
Cigna Corp. | 25,660 | 1,132 | |
* | Zimmer Holdings Inc. | 16,067 | 976 |
* | Mylan Inc. | 37,899 | 888 |
AmerisourceBergen Corp. | |||
Class A | 23,456 | 876 | |
Perrigo Co. | 8,321 | 858 | |
* | Laboratory Corp. of | ||
America Holdings | 9,166 | 824 | |
* | Boston Scientific Corp. | 131,763 | 820 |
Quest Diagnostics Inc. | 13,995 | 812 | |
* | Forest Laboratories Inc. | 24,079 | 783 |
* | Life Technologies Corp. | 16,213 | 767 |
* | Edwards Lifesciences Corp. | 10,157 | 743 |
CR Bard Inc. | 7,859 | 736 | |
* | DaVita Inc. | 8,475 | 734 |
* | Waters Corp. | 8,071 | 723 |
* | Vertex Pharmaceuticals Inc. | 18,510 | 720 |
* | Henry Schein Inc. | 8,181 | 606 |
* | Illumina Inc. | 11,056 | 567 |
Market | |||
Value | |||
Shares | ($000) | ||
* | Watson Pharmaceuticals Inc. | 9,422 | 550 |
* | Hospira Inc. | 14,612 | 520 |
* | CareFusion Corp. | 19,848 | 512 |
DENTSPLY International Inc. | 12,727 | 492 | |
* | Coventry Health Care Inc. | 12,777 | 418 |
Omnicare Inc. | 10,140 | 357 | |
Universal Health | |||
Services Inc. Class B | 7,884 | 352 | |
Patterson Cos. Inc. | 10,482 | 335 | |
* | Human Genome | ||
Sciences Inc. | 17,671 | 139 | |
127,873 | |||
Industrials (7.1%) | |||
Caterpillar Inc. | 57,645 | 6,584 | |
United Parcel Service Inc. | |||
Class B | 64,766 | 4,980 | |
Deere & Co. | 37,022 | 3,070 | |
FedEx Corp. | 28,178 | 2,536 | |
Norfolk Southern Corp. | 34,932 | 2,407 | |
Illinois Tool Works Inc. | 43,180 | 2,405 | |
Cummins Inc. | 17,254 | 2,080 | |
CSX Corp. | 93,993 | 1,975 | |
PACCAR Inc. | 31,928 | 1,469 | |
Waste Management Inc. | 41,246 | 1,443 | |
WW Grainger Inc. | 6,181 | 1,284 | |
Stanley Black & Decker Inc. | 14,954 | 1,148 | |
Ingersoll-Rand plc | 27,768 | 1,107 | |
Rockwell Automation Inc. | 12,751 | 1,020 | |
Cooper Industries plc | 14,063 | 861 | |
Pall Corp. | 10,280 | 652 | |
Iron Mountain Inc. | 16,490 | 512 | |
Equifax Inc. | 10,758 | 452 | |
JB Hunt Transport | |||
Services Inc. | 7,771 | 398 | |
Masco Corp. | 32,022 | 380 | |
Dun & Bradstreet Corp. | 4,429 | 366 | |
Robert Half International Inc. | 12,658 | 360 | |
Pentair Inc. | 8,973 | 345 | |
Pitney Bowes Inc. | 17,739 | 322 | |
Manpower Inc. | 7,210 | 311 | |
Avery Dennison Corp. | 9,507 | 290 | |
* | Fortune Brands Home & | ||
Security Inc. | 13,713 | 265 | |
Ryder System Inc. | 4,549 | 242 | |
RR Donnelley & Sons Co. | 16,705 | 231 | |
ITT Corp. | 8,170 | 204 | |
39,699 | |||
Information Technology (19.2%) | |||
* | Google Inc. Class A | 21,644 | 13,381 |
Oracle Corp. | 452,686 | 13,250 | |
QUALCOMM Inc. | 143,354 | 8,914 | |
Visa Inc. Class A | 46,823 | 5,449 | |
* | EMC Corp. | 184,124 | 5,098 |
Mastercard Inc. Class A | 10,794 | 4,534 |
10
FTSE Social Index Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Hewlett-Packard Co. | 177,439 | 4,491 | |
* | eBay Inc. | 115,040 | 4,112 |
Accenture plc Class A | 57,209 | 3,406 | |
Texas Instruments Inc. | 102,038 | 3,403 | |
Automatic Data | |||
Processing Inc. | 43,689 | 2,373 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 27,120 | 1,924 | |
Corning Inc. | 140,542 | 1,833 | |
* | Yahoo! Inc. | 111,124 | 1,648 |
Broadcom Corp. Class A | 43,169 | 1,604 | |
Intuit Inc. | 27,022 | 1,563 | |
* | Adobe Systems Inc. | 44,241 | 1,455 |
Applied Materials Inc. | 118,234 | 1,447 | |
* | Salesforce.com Inc. | 9,040 | 1,294 |
* | Citrix Systems Inc. | 16,832 | 1,258 |
* | Symantec Corp. | 66,131 | 1,180 |
Altera Corp. | 29,046 | 1,117 | |
* | Check Point Software | ||
Technologies Ltd. | 18,663 | 1,085 | |
* | Juniper Networks Inc. | 47,208 | 1,074 |
* | SanDisk Corp. | 21,267 | 1,052 |
* | Motorola Mobility | ||
Holdings Inc. | 26,413 | 1,049 | |
Xerox Corp. | 124,579 | 1,025 | |
* | Teradata Corp. | 15,147 | 1,008 |
Western Union Co. | 55,592 | 971 | |
CA Inc. | 33,229 | 898 | |
* | F5 Networks Inc. | 7,071 | 884 |
Xilinx Inc. | 23,562 | 870 | |
* | Fiserv Inc. | 12,722 | 843 |
* | NVIDIA Corp. | 54,306 | 823 |
Avago Technologies Ltd. | 21,814 | 820 | |
* | Western Digital Corp. | 20,607 | 809 |
* | VMware Inc. Class A | 8,159 | 807 |
* | Autodesk Inc. | 20,495 | 776 |
* | Micron Technology Inc. | 87,800 | 751 |
* | Red Hat Inc. | 12,873 | 637 |
* | Akamai Technologies Inc. | 15,904 | 573 |
* | BMC Software Inc. | 15,120 | 566 |
* | Alliance Data Systems Corp. | 4,445 | 539 |
VeriSign Inc. | 14,125 | 522 | |
* | Electronic Arts Inc. | 29,340 | 479 |
* | Avnet Inc. | 13,127 | 469 |
* | Lam Research Corp. | 10,612 | 443 |
* | LSI Corp. | 50,045 | 430 |
* | Arrow Electronics Inc. | 9,903 | 398 |
Total System Services Inc. | 17,845 | 390 | |
* | Synopsys Inc. | 12,813 | 390 |
* | Rovi Corp. | 9,897 | 351 |
* | NCR Corp. | 14,108 | 306 |
Broadridge Financial | |||
Solutions Inc. | 10,900 | 265 |
Market | |||
Value | |||
Shares | ($000) | ||
DST Systems Inc. | 3,905 | 207 | |
Molex Inc. | 6,375 | 173 | |
Molex Inc. Class A | 7,129 | 160 | |
107,577 | |||
Materials (4.3%) | |||
EI du Pont | |||
de Nemours & Co. | 82,908 | 4,216 | |
Dow Chemical Co. | 104,967 | 3,517 | |
Praxair Inc. | 26,788 | 2,920 | |
Air Products & | |||
Chemicals Inc. | 19,048 | 1,719 | |
Ecolab Inc. | 26,960 | 1,618 | |
Mosaic Co. | 24,740 | 1,429 | |
International Paper Co. | 39,235 | 1,379 | |
Sherwin-Williams Co. | 9,230 | 952 | |
Cliffs Natural Resources Inc. | 12,721 | 808 | |
Sigma-Aldrich Corp. | 10,858 | 779 | |
Southern Copper Corp. | 22,682 | 729 | |
Ball Corp. | 14,520 | 582 | |
Vulcan Materials Co. | 11,427 | 509 | |
MeadWestvaco Corp. | 15,183 | 460 | |
Ashland Inc. | 6,940 | 441 | |
Airgas Inc. | 5,046 | 415 | |
International Flavors & | |||
Fragrances Inc. | 7,124 | 406 | |
* | Owens-Illinois Inc. | 14,674 | 351 |
Sealed Air Corp. | 17,050 | 335 | |
Bemis Co. Inc. | 9,199 | 289 | |
23,854 | |||
Telecommunication Services (0.3%) | |||
* | Sprint Nextel Corp. | 265,894 | 657 |
Windstream Corp. | 51,293 | 620 | |
Frontier | |||
Communications Corp. | 88,023 | 404 | |
* | Telephone & Data | ||
Systems Inc. | 9,084 | 229 | |
1,910 | |||
Utilities (1.2%) | |||
Consolidated Edison Inc. | 26,043 | 1,513 | |
CenterPoint Energy Inc. | 37,450 | 730 | |
Wisconsin Energy Corp. | 20,571 | 701 | |
NiSource Inc. | 24,914 | 598 | |
Northeast Utilities | 15,735 | 565 | |
* | Calpine Corp. | 32,545 | 498 |
NSTAR | 9,214 | 432 | |
Alliant Energy Corp. | 9,813 | 419 | |
Pepco Holdings Inc. | 20,026 | 389 | |
MDU Resources Group Inc. | 16,701 | 363 | |
TECO Energy Inc. | 19,074 | 342 | |
Questar Corp. | 15,718 | 302 | |
6,852 | |||
Total Common Stocks | |||
(Cost $511,939) | 558,925 |
11
FTSE Social Index Fund | ||
Market | ||
Value | ||
Shares | ($000) | |
Temporary Cash Investment (0.0%) | ||
Money Market Fund (0.0%) | ||
1 Vanguard Market | ||
Liquidity Fund, 0.111% | ||
(Cost $224) | 224,471 | 224 |
Total Investments (100.0%) | ||
(Cost $512,163) | 559,149 | |
Other Assets and Liabilities (0.0%) | ||
Other Assets | 1,464 | |
Liabilities | (1,435) | |
29 | ||
Net Assets (100%) | 559,178 | |
At February 29, 2012, net assets consisted of: | ||
Amount | ||
($000) | ||
Paid-in Capital | 565,090 | |
Undistributed Net Investment Income | 84 | |
Accumulated Net Realized Losses | (52,982) | |
Unrealized Appreciation (Depreciation) | 46,986 | |
Net Assets | 559,178 |
Amount | |
($000) | |
Investor Shares—Net Assets | |
Applicable to 46,236,117 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 375,042 |
Net Asset Value Per Share— | |
Investor Shares | $8.11 |
Institutional Shares—Net Assets | |
Applicable to 22,690,113 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 184,136 |
Net Asset Value Per Share— | |
Institutional Shares | $8.12 |
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.
12
FTSE Social Index Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 3,926 |
Security Lending | 6 |
Total Income | 3,932 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 39 |
Management and Administrative—Investor Shares | 418 |
Management and Administrative—Institutional Shares | 89 |
Marketing and Distribution—Investor Shares | 45 |
Marketing and Distribution—Institutional Shares | 23 |
Custodian Fees | 10 |
Shareholders’ Reports—Investor Shares | 8 |
Shareholders’ Reports—Institutional Shares | 3 |
Total Expenses | 635 |
Net Investment Income | 3,297 |
Realized Net Gain (Loss) on Investment Securities Sold | 58,762 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | (721) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 61,338 |
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 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 3,297 | 5,996 |
Realized Net Gain (Loss) | 58,762 | 14,856 |
Change in Unrealized Appreciation (Depreciation) | (721) | 55,872 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 61,338 | 76,724 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (4,161) | (2,900) |
Institutional Shares | (2,083) | (1,420) |
Realized Capital Gain | ||
Investor Shares | — | — |
Institutional Shares | — | — |
Total Distributions | (6,244) | (4,320) |
Capital Share Transactions | ||
Investor Shares | (6,764) | (12,802) |
Institutional Shares | 11,124 | 6,841 |
Net Increase (Decrease) from Capital Share Transactions | 4,360 | (5,961) |
Total Increase (Decrease) | 59,454 | 66,443 |
Net Assets | ||
Beginning of Period | 499,724 | 433,281 |
End of Period1 | 559,178 | 499,724 |
1 Net Assets—End of Period includes undistributed net investment income of $84,000 and $3,031,000. |
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 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $7.31 | $6.27 | $6.20 | $7.76 | $9.30 | $8.51 |
Investment Operations | ||||||
Net Investment Income | .047 | .084 | .061 | .080 | .125 | .130 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | .842 | 1.016 | .077 | (1.522) | (1.525) | .780 |
Total from Investment Operations | .889 | 1.100 | .138 | (1.442) | (1.400) | .910 |
Distributions | ||||||
Dividends from Net Investment Income | (.089) | (.060) | (.068) | (.118) | (.140) | (.120) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.089) | (.060) | (.068) | (.118) | (.140) | (.120) |
Net Asset Value, End of Period | $8.11 | $7.31 | $6.27 | $6.20 | $7.76 | $9.30 |
Total Return1 | 12.31% | 17.52% | 2.18% | -18.11% | -15.26% | 10.70% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $375 | $344 | $306 | $304 | $395 | $540 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.29% | 0.29% | 0.29% | 0.29% | 0.24% | 0.24% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.25% | 1.10% | 0.91% | 1.50% | 1.48% | 1.48% |
Portfolio Turnover Rate | 47% | 11% | 35% | 30% | 41% | 20% |
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.
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 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $7.32 | $6.27 | $6.20 | $7.77 | $9.32 | $8.52 |
Investment Operations | ||||||
Net Investment Income | .052 | .095 | .070 | .087 | .137 | .152 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | .846 | 1.025 | .075 | (1.528) | (1.535) | .780 |
Total from Investment Operations | .898 | 1.120 | .145 | (1.441) | (1.398) | .932 |
Distributions | ||||||
Dividends from Net Investment Income | (.098) | (.070) | (.075) | (.129) | (.152) | (.132) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.098) | (.070) | (.075) | (.129) | (.152) | (.132) |
Net Asset Value, End of Period | $8.12 | $7.32 | $6.27 | $6.20 | $7.77 | $9.32 |
Total Return | 12.43% | 17.84% | 2.29% | -18.03% | -15.22% | 10.95% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $184 | $155 | $128 | $104 | $139 | $111 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.16% | 0.16% | 0.16% | 0.16% | 0.11% | 0.11% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.38% | 1.23% | 1.04% | 1.63% | 1.61% | 1.61% |
Portfolio Turnover Rate | 47% | 11% | 35% | 30% | 41% | 20% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized. |
See accompanying Notes, which are an integral part of the Financial Statements.
16
FTSE Social Index Fund
Notes to Financial Statements
Vanguard FTSE Social Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: 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, 2008–2011), and for the period ended February 29, 2012, 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.
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 29, 2012, the fund had contributed capital of $83,000 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.
17
FTSE Social 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).
At February 29, 2012, 100% of the market value of the fund’s investments was 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, 2011, the fund had available capital losses totaling $111,719,000 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, $64,929,000 through August 31, 2018, and $20,888,000 through August 31, 2019. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $512,163,000. Net unrealized appreciation of investment securities for tax purposes was $46,986,000, consisting of unrealized gains of $88,608,000 on securities that had risen in value since their purchase and $41,622,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $230,862,000 of investment securities and sold $229,191,000 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 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 21,740 | 2,897 | 68,477 | 9,029 |
Issued in Lieu of Cash Distributions | 3,880 | 537 | 2,715 | 363 |
Redeemed | (32,384) | (4,311) | (83,994) | (11,067) |
Net Increase (Decrease)—Investor Shares | (6,764) | (877) | (12,802) | (1,675) |
Institutional Shares | ||||
Issued | 17,258 | 2,292 | 35,819 | 4,671 |
Issued in Lieu of Cash Distributions | 1,436 | 199 | 957 | 128 |
Redeemed | (7,570) | (1,017) | (29,935) | (3,920) |
Net Increase (Decrease)—Institutional Shares | 11,124 | 1,474 | 6,841 | 879 |
G. In preparing the financial statements as of February 29, 2012, 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 any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
20
Six Months Ended February 29, 2012 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
FTSE Social Index Fund | 8/31/2011 | 2/29/2012 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,123.10 | $1.53 |
Institutional Shares | 1,000.00 | 1,124.33 | 0.85 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,023.42 | $1.46 |
Institutional Shares | 1,000.00 | 1,024.07 | 0.81 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense 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 (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
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 Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services), Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing), |
Board. Principal Occupation(s) During the Past Five | and Delphi Automotive LLP (automotive components); |
Years: Chairman of the Board of The Vanguard Group, | Senior Advisor at New Mountain Capital; Trustee of |
Inc., and of each of the investment companies served | The Conference Board. |
by The Vanguard Group, since January 2010; Director | |
of The Vanguard Group since 2008; Chief Executive | Amy Gutmann |
Officer and President of The Vanguard Group and of | Born 1949. Trustee Since June 2006. Principal |
each of the investment companies served by The | Occupation(s) During the Past Five Years: President |
Vanguard Group since 2008; Director of Vanguard | of the University of Pennsylvania; Christopher H. |
Marketing Corporation; Managing Director of The | Browne Distinguished Professor of Political Science |
Vanguard Group (1995–2008). | in the School of Arts and Sciences with secondary |
appointments at the Annenberg School for Commu- | |
nication and the Graduate School of Education | |
Independent Trustees | of the University of Pennsylvania; Director of |
Carnegie Corporation of New York, Schuylkill River | |
Emerson U. Fullwood | Development Corporation, and Greater Philadelphia |
Born 1948. Trustee Since January 2008. Principal | Chamber of Commerce; Trustee of the National |
Occupation(s) During the Past Five Years: Executive | Constitution Center; Chair of the Presidential |
Chief Staff and Marketing Officer for North America | Commission for the Study of Bioethical Issues. |
and Corporate Vice President (retired 2008) of Xerox | |
Corporation (document management products and | JoAnn Heffernan Heisen |
services); Executive in Residence and 2010 | Born 1950. Trustee Since July 1998. Principal |
Distinguished Minett Professor at the Rochester | Occupation(s) During the Past Five Years: Corporate |
Institute of Technology; Director of SPX Corporation | Vice President and Chief Global Diversity Officer |
(multi-industry manufacturing), the United Way of | (retired 2008) and Member of the Executive |
Rochester, Amerigroup Corporation (managed health | Committee (1997–2008) of Johnson & Johnson |
care), the University of Rochester Medical Center, | (pharmaceuticals/medical devices/consumer |
Monroe Community College Foundation, and North | products); Director of Skytop Lodge Corporation |
Carolina A&T University. | (hotels), the University Medical Center at Princeton, |
the Robert Wood Johnson Foundation, and the Center | |
Rajiv L. Gupta | for Talent Innovation; Member of the Advisory Board |
Born 1945. Trustee Since December 2001.2 | of the Maxwell School of Citizenship and Public Affairs |
Principal Occupation(s) During the Past Five Years: | at Syracuse University. |
Chairman and Chief Executive Officer (retired 2009) |
F. Joseph Loughrey | Group since 2010; Assistant Controller of each of | |
Born 1949. Trustee Since October 2009. Principal | the investment companies served by The Vanguard | |
Occupation(s) During the Past Five Years: President | Group (2001–2010). | |
and Chief Operating Officer (retired 2009) and Vice | ||
Chairman of the Board (2008–2009) of Cummins Inc. | Thomas J. Higgins | |
(industrial machinery); Director of SKF AB (industrial | Born 1957. Chief Financial Officer Since September | |
machinery), Hillenbrand, Inc. (specialized consumer | 2008. Principal Occupation(s) During the Past Five | |
services), the Lumina Foundation for Education, and | Years: Principal of The Vanguard Group, Inc.; Chief | |
Oxfam America; Chairman of the Advisory Council | Financial Officer of each of the investment companies | |
for the College of Arts and Letters and Member | served by The Vanguard Group since 2008; Treasurer | |
of the Advisory Board to the Kellogg Institute for | of each of the investment companies served by The | |
International Studies at the University of Notre Dame. | Vanguard Group (1998–2008). | |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School (retired 2011); Chief Investment | the investment companies served by The Vanguard | |
Officer and Managing Partner of HighVista Strategies | Group since 2008; Assistant Treasurer of each of the | |
LLC (private investment firm); Director of Rand | investment companies served by The Vanguard Group | |
Merchant Bank; Overseer of the Museum of Fine | (1988–2008). | |
Arts Boston. | ||
Heidi Stam | ||
Alfred M. Rankin, Jr. | Born 1956. Secretary Since July 2005. Principal | |
Born 1941. Trustee Since January 1993. Principal | Occupation(s) During the Past Five Years: Managing | |
Occupation(s) During the Past Five Years: Chairman, | Director of The Vanguard Group, Inc., since 2006; | |
President, and Chief Executive Officer of NACCO | General Counsel of The Vanguard Group since 2005; | |
Industries, Inc. (forklift trucks/housewares/lignite); | Secretary of The Vanguard Group and of each of the | |
Director of Goodrich Corporation (industrial products/ | investment companies served by The Vanguard Group | |
aircraft systems and services) and the National | since 2005; Director and Senior Vice President of | |
Association of Manufacturers; Chairman of the Board | Vanguard Marketing Corporation since 2005; | |
of the Federal Reserve Bank of Cleveland and of | Principal of The Vanguard Group (1997–2006). | |
University Hospitals of Cleveland; Advisory Chairman | ||
of the Board of The Cleveland Museum of Art. | ||
Vanguard Senior Management Team | ||
Peter F. Volanakis | Mortimer J. Buckley | Michael S. Miller |
Born 1955. Trustee Since July 2009. Principal | Kathleen C. Gubanich | James M. Norris |
Occupation(s) During the Past Five Years: President | Paul A. Heller | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Martha G. King | George U. Sauter |
Incorporated (communications equipment); Director of | Chris D. McIsaac | |
Corning Incorporated (2000-2010) and Dow Corning | ||
(2001–2010); Director of SPX Corporation (multi- | ||
industry manufacturing); Overseer of the Amos Tuck | Chairman Emeritus and Senior Advisor | |
School of Business Administration at Dartmouth | ||
College; Advisor to the Norris Cotton Cancer Center. | John J. Brennan | |
Chairman, 1996–2009 | ||
Chief Executive Officer and President, 1996–2008 | ||
Executive Officers | ||
Glenn Booraem | Founder | |
Born 1967. Controller Since July 2010. Principal | ||
Occupation(s) During the Past Five Years: Principal | John C. Bogle | |
of The Vanguard Group, Inc.; Controller of each of | Chairman and Chief Executive Officer, 1974–1996 | |
the investment companies served by The Vanguard |
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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Q2132 042012 |
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx1x1.jpg)
Semiannual Report | February 29, 2012
Vanguard U.S. Sector Index Funds
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 Index Fund |
Vanguard Health Care Index Fund | Vanguard Utilities Index Fund |
- Despite significant interim declines, the broad U.S. stock market finished the six-month period ended February 29, 2012, with a return of about 13%.
- All ten of the Vanguard U.S. Sector Index Funds posted positive results for the half-year, with returns ranging from about 2% to more than 20%.
- The information technology, consumer discretionary, and industrial sectors posted the strongest gains.
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 | 34 |
Health Care Index Fund | 45 |
Industrials Index Fund | 55 |
Information Technology Index Fund | 65 |
Materials Index Fund | 75 |
Telecommunication Services Index Fund | 84 |
Utilities Index Fund | 92 |
About Your Fund’s Expenses | 100 |
Glossary | 102 |
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx2x1.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.
See the Glossary for definitions of investment terms used in this report.
About the cover: Vanguard was named for the HMS Vanguard, flagship of British Admiral Horatio Nelson. A ship—whose performance and safety depend on the work of all hands—has served as a fitting metaphor for the Vanguard crew as we strive to help clients reach their financial goals.
Your Fund’s Total Returns
Six Months Ended February 29, 2012
Admiral™ Shares1 and ETF Shares2 | ||
Ticker | Total | |
Symbol | Returns | |
Vanguard Consumer | ||
Discretionary Index Fund | VCDAX | 16.52% |
Vanguard Consumer | ||
Discretionary ETF | VCR | |
Market Price | 16.59 | |
Net Asset Value | 16.53 | |
MSCI US IMI/Consumer | ||
Discretionary 25/50 | 16.64 | |
Vanguard Consumer Staples | ||
Index Fund | VCSAX | 8.43% |
Vanguard Consumer Staples ETF | VDC | |
Market Price | 8.48 | |
Net Asset Value | 8.42 | |
MSCI US IMI/Consumer | ||
Staples 25/50 | 8.52 | |
Vanguard Energy Index Fund | VENAX | 10.36% |
Vanguard Energy ETF | VDE | |
Market Price | 10.46% | |
Net Asset Value | 10.35 | |
MSCI US IMI/Energy 25/50 | 10.42 | |
Vanguard Financials Index Fund | VFAIX | 11.17% |
Vanguard Financials ETF | VFH | |
Market Price | 11.25% | |
Net Asset Value | 11.18 | |
MSCI US IMI/Financials 25/50 | 11.27 | |
Vanguard Health Care Index Fund | VHCIX | 10.69% |
Vanguard Health Care ETF | VHT | |
Market Price | 10.73% | |
Net Asset Value | 10.70 | |
MSCI US IMI/Health Care 25/50 | 10.79 | |
Vanguard Industrials Index Fund | VINAX | 16.38% |
Vanguard Industrials ETF | VIS | |
Market Price | 16.40% | |
Net Asset Value | 16.39 | |
MSCI US IMI/Industrials 25/50 | 16.50 |
Ticker | Total | |
Symbol | Returns | |
Vanguard Information | ||
Technology Index Fund | VITAX | 20.61% |
Vanguard Information | ||
Technology ETF | VGT | |
Market Price | 20.67 | |
Net Asset Value | 20.62 | |
MSCI US IMI/Information | ||
Technology 25/50 | 20.71 | |
Vanguard Materials Index Fund | VMIAX | 7.71% |
Vanguard Materials ETF | VAW | |
Market Price | 7.66 | |
Net Asset Value | 7.68 | |
MSCI US IMI/Materials 25/50 | 7.80 | |
Vanguard Telecommunication | ||
Services Index Fund | VTCAX | 1.87% |
Vanguard Telecommunication | ||
Services ETF | VOX | |
Market Price | 1.96 | |
Net Asset Value | 1.86 | |
MSCI US IMI/Telecommunication | ||
Services 25/50 | 1.98 | |
Vanguard Utilities Index Fund | VUIAX | 4.79% |
Vanguard Utilities ETF | VPU | |
Market Price | 4.83 | |
Net Asset Value | 4.80 | |
MSCI US IMI/Utilities 25/50 | 4.91 | |
MSCI US IMI/2500 | 13.34 |
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; 7,720,749; 7,925,573; 8,090,646.
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
The six-month period ended February 29, 2012, took investors on a bumpy ride. A surge in anxiety in September was followed by a plan to deal with Greece’s debt crisis and better vital signs for the U.S. economy. In the end, all ten of the Vanguard U.S. Sector Index Funds posted positive returns for the period, ranging from around 2% to more than 20%.
Sectors that tend to be affected most by the cyclical ups and downs of the economy generally performed the best, with information technology, consumer discretionary, and industrials each gaining more than 15%. Returns from more defensive sectors such as consumer staples and utilities were in the single digits.
Notes of optimism
propelled stock prices higher
U.S. stocks produced a strong double- digit return of 13.18% over the period. That statement is true enough, but the headline figure obscures the volatility that has been perhaps the most prominent feature of the financial markets over the past six months and indeed the past few years. If the six-month period had started a month earlier, for example, the Dow Jones U.S. Total Stock Market Index would have returned just 1.97%. A start date two months earlier would have put the six-month return at –5.18%.
In the six months through February, however, stock prices benefited from signs of acceleration in the U.S. economic expansion and hope that the European Union’s latest agreement on Greek debt would help to contain a threat that has menaced global markets for much of the past two years. European stocks rallied on the news about Greece, but international stocks still trailed their U.S. counterparts for the full six months.
Bonds’ strength
confounded expectations
Bonds produced solid returns, to the surprise of many long-time observers of the fixed income markets. At the start of the period, the yield of the 10-year U.S. Treasury note stood at 2.22%, suggesting that returns would be very modest by historical standards. Over the next six months, however, yields moved lower still, boosting bond prices, which move in the opposite direction. At the end of February, the yield of the 10-year T-note stood at 1.98%. As yields decline, obviously, the scope for continued declines—and price increases—diminishes. Municipal bonds performed even more strongly than the broad taxable market.
Market Barometer | |||
Total Returns | |||
Periods Ended February 29, 2012 | |||
Six Months | One Year | Five Years1 | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.31% | 4.86% | 1.77% |
Russell 2000 Index (Small-caps) | 12.40 | –0.15 | 1.83 |
Dow Jones U.S. Total Stock Market Index | 13.18 | 4.35 | 2.07 |
MSCI All Country World Index ex USA (International) | 3.97 | –6.10 | –0.75 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index | |||
(Broad taxable market) | 2.73% | 8.37% | 6.36% |
Barclays Capital Municipal Bond Index | |||
(Broad tax-exempt market) | 5.67 | 12.42 | 5.50 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.00 | 0.06 | 1.20 |
CPI | |||
Consumer Price Index | 0.49% | 2.87% | 2.27% |
1 Annualized. |
2
The returns for 3-month Treasury bills and other money market instruments remained near 0%, consistent with the Federal Reserve’s policy on interest rates.
Cyclical sectors
swing back into favor
The broad U.S. stock market recovered from a drop of more than 7% in September to finish the fiscal half-year up more than 13%. While all ten market sectors ended the period in positive territory, three more cyclical sectors (information technology, consumer discretionary, and industrials) led the rebound.
Cyclical stocks, which tend to be more sensitive to periods of economic growth and contraction, generally benefited from signs that the economy was gaining traction, including a drop in unemployment, an upturn in consumer confidence, and sustained business spending. The information technology sector, for example, returned more than 20% for the period; within the sector, the computer and peripherals segment surged about 33% on strong demand for smartphones, tablet computers, and data storage. The consumer discretionary sector returned more than 16%, with media companies, home improvement stores, and apparel retailers performing even better than that. Stocks of machinery manufacturers, industrial conglomerates, and aerospace and defense companies lifted the return for the industrial sector to better than 16% as well.
The financial sector, after falling more than 10% in September, was buoyed by an announcement in October that the European Central Bank would provide liquidity to European banks through long-term refinancing operations. Financials returned more than 11% for the period, with large commercial banks and insurance companies leading the way.
Concerns about the impact of reforms continued to weigh on the health care sector. While biotechnology stocks rose around 20%, the sector as a whole returned a little less than 11%.
In energy, simmering geopolitical tensions helped keep the price of crude oil above $100 per barrel for most of the six-month period; this boosted integrated oil and gas stocks, which returned more than 16%. A sharp rise in some natural gas storage and transportation stocks helped offset a fall in coal stocks, which were hurt by the expectation of weaker demand from emerging markets. These contrasting trends resulted in a return of about 10% for the energy sector over the six-month period.
More defensive sectors, such as utilities, consumer staples, and telecommunication services, which tend to benefit less from an improving economic outlook, produced single-digit returns. This was also true of materials, which experienced weaker demand from emerging markets, China in particular.
Diversification: A proven strategy
through thick and thin
You don’t have to look very far back to see how quickly the returns from market sectors can change. Information technology may have been the best- performing sector over the past six months, but it fell about 10% in the previous six-month period when investors were seeking to avoid risk and U.S. economic growth prospects were more muted. And two of the laggards this time around, utilities and consumer staples, produced positive returns in the prior six-month period, in part because of their tendency to deliver relatively steady earnings regardless of which phase of the economic cycle we are in.
The unpredictable nature of the markets is why we encourage investors to maintain a portfolio that is diversified across asset classes, and within them as well. By not putting all your eggs in one basket, you can soften the impact of a sector that performs poorly. And the flip side is true as well: Broad diversification can help to ensure that you’re not left standing on the sidelines when a sector rallies.
The complete palette of U.S. Sector Index Funds is available to investors wishing to further diversify their portfolios, and each of the funds benefits from Vanguard’s expertise in index fund management and at-cost investing.
As always, thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx5x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 16, 2012
A note on expense ratios |
The Fund Profiles that follow this letter display fund expense ratios from the most |
recent prospectus. These figures include the funds’ actual operating expenses. The |
figures for the Financials Index Fund also include “acquired fund fees and expenses,” |
which result from the fund’s holdings in business development companies (BDCs). |
Although the Securities and Exchange Commission requires that BDC costs be |
included in a fund’s expense ratio, these fees are not incurred by the fund. They |
have no impact on a fund’s total return or on its tracking error relative to an index. |
A footnote to the Expense Ratio entry in the Fund Profile reports the fund’s actual |
expenses for the period, a more relevant tally of operating costs incurred by |
shareholders. |
3
Your Fund’s Performance at a Glance
August 31, 2011–February 29, 2012
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Consumer Discretionary Index Fund | ||||
Admiral Shares | $31.22 | $35.88 | $0.439 | $0.000 |
ETF Shares | 60.29 | 69.29 | 0.853 | 0.000 |
Consumer Staples Index Fund | ||||
Admiral Shares | $38.94 | $41.25 | $0.934 | $0.000 |
ETF Shares | 78.96 | 83.66 | 1.894 | 0.000 |
Energy Index Fund | ||||
Admiral Shares | $50.17 | $54.47 | $0.811 | $0.000 |
ETF Shares | 100.41 | 109.03 | 1.618 | 0.000 |
Financials Index Fund | ||||
Admiral Shares | $14.16 | $15.52 | $0.188 | $0.000 |
ETF Shares | 28.25 | 30.97 | 0.373 | 0.000 |
Health Care Index Fund | ||||
Admiral Shares | $29.81 | $32.43 | $0.527 | $0.000 |
ETF Shares | 59.58 | 64.83 | 1.049 | 0.000 |
Industrials Index Fund | ||||
Admiral Shares | $30.89 | $35.25 | $0.627 | $0.000 |
ETF Shares | 60.12 | 68.62 | 1.217 | 0.000 |
Information Technology Index Fund | ||||
Admiral Shares | $30.30 | $36.26 | $0.247 | $0.000 |
ETF Shares | 59.17 | 70.80 | 0.485 | 0.000 |
Materials Index Fund | ||||
Admiral Shares | $39.53 | $41.67 | $0.804 | $0.000 |
ETF Shares | 77.59 | 81.78 | 1.576 | 0.000 |
Telecommunication Services Index Fund | ||||
Admiral Shares | $33.18 | $32.73 | $1.017 | $0.000 |
ETF Shares | 65.11 | 64.22 | 2.009 | 0.000 |
Utilities Index Fund | ||||
Admiral Shares | $36.40 | $37.43 | $0.689 | $0.000 |
ETF Shares | 72.52 | 74.60 | 1.373 | 0.000 |
4
Consumer Discretionary Index Fund
Fund Profile
As of February 29, 2012
Portfolio Characteristics | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Stocks | 369 | 368 | 2,485 | |
Median Market Cap | $22.1B | $22.1B | $34.8B | |
Price/Earnings Ratio | 18.3x | 18.3x | 16.4x | |
Price/Book Ratio | 3.1x | 3.1x | 2.3x | |
Yield3 | 1.4% | 2.0% | ||
Admiral Shares | 1.3% | |||
ETF Shares | 1.3% | |||
Return on Equity | 18.2% | 18.2% | 18.2% | |
Earnings Growth Rate | 11.1% | 11.1% | 7.7% | |
Foreign Holdings | 0.0% | 0.0% | 0.0% | |
Turnover Rate4 | 7% | — | — | |
Expense Ratio5 | — | — | ||
Admiral Shares | 0.19% | |||
ETF Shares | 0.19% | |||
Short-Term Reserves | 0.1% | — | — | |
Volatility Measures6 | ||||
Fund Versus | Fund Versus | |||
Spliced Index7 | Broad Index2 | |||
R-Squared | 1.00 | 0.87 | ||
Beta | 1.00 | 1.18 |
Subindustry Diversification | |
(% of equity exposure) | |
Advertising | 1.3% |
Apparel Retail | 5.8 |
Apparel, Accessories & Luxury Goods | 4.7 |
Auto Parts & Equipment | 3.5 |
Automobile Manufacturers | 3.8 |
Automotive Retail | 2.3 |
Broadcasting | 3.1 |
Cable & Satellite | 10.1 |
Casinos & Gaming | 2.8 |
Department Stores | 2.8 |
Footwear | 2.6 |
General Merchandise Stores | 3.5 |
Home Improvement Retail | 6.2 |
Homebuilding | 1.2 |
Homefurnishing Retail | 1.3 |
Hotels, Resorts & Cruise Lines | 2.9 |
Internet Retail | 6.2 |
Leisure Products | 1.4 |
Movies & Entertainment | 10.4 |
Publishing | 1.5 |
Restaurants | 12.2 |
Specialized Consumer Services | 1.1 |
Specialty Stores | 3.1 |
Other Consumer Discretionary | 6.2 |
Ten Largest Holdings8 (% of total net assets) | |
McDonald’s Corp. | 5.7% |
Comcast Corp. | 4.5 |
Home Depot Inc. | 4.1 |
Walt Disney Co. | 4.0 |
Amazon.com Inc. | 3.7 |
Ford Motor Co. | 2.5 |
News Corp. | 2.4 |
NIKE Inc. Class B | 2.1 |
Time Warner Inc. | 2.1 |
Starbucks Corp. | 2.0 |
Top Ten | 33.1% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.19% for Admiral Shares and 0.18% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx8x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | 3.70% | 1.69% | 3.81% | |
Net Asset Value | 3.71 | 1.71 | 3.81 | |
Admiral Shares3 | 7/14/2005 | 3.69 | 1.68 | 3.15 |
1 Six months ended February 29, 2012.
2 Spliced 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 29, 2012
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%) | |||
Auto Components (3.7%) | |||
Johnson Controls Inc. | 165,520 | 5,401 | |
* | BorgWarner Inc. | 26,692 | 2,211 |
Autoliv Inc. | 21,719 | 1,447 | |
* | TRW Automotive | ||
Holdings Corp. | 25,587 | 1,170 | |
Lear Corp. | 24,854 | 1,124 | |
Gentex Corp. | 34,904 | 825 | |
* | Goodyear Tire & Rubber Co. | 59,446 | 764 |
* | Visteon Corp. | 11,904 | 639 |
* | Dana Holding Corp. | 35,798 | 573 |
* | Tenneco Inc. | 14,669 | 565 |
Cooper Tire & Rubber Co. | 14,349 | 238 | |
* | American Axle & | ||
Manufacturing Holdings Inc. | 16,328 | 186 | |
* | Dorman Products Inc. | 3,074 | 140 |
* | Drew Industries Inc. | 4,801 | 132 |
* | Fuel Systems Solutions Inc. | 4,159 | 108 |
Superior Industries | |||
International Inc. | 5,696 | 103 | |
* | Federal-Mogul Corp. | 5,887 | 101 |
Standard Motor Products Inc. | 4,319 | 98 | |
* | Modine Manufacturing Co. | 9,421 | 86 |
* | Amerigon Inc. | 5,114 | 75 |
* | Stoneridge Inc. | 5,875 | 57 |
* | Exide Technologies | 15,678 | 47 |
* | Tower International Inc. | 1,597 | 20 |
16,110 | |||
Automobiles (4.4%) | |||
Ford Motor Co. | 861,865 | 10,670 | |
* | General Motors Co. | 190,309 | 4,952 |
Harley-Davidson Inc. | 56,676 | 2,640 | |
^,* | Tesla Motors Inc. | 12,687 | 424 |
Thor Industries Inc. | 10,667 | 347 | |
* | Winnebago Industries Inc. | 6,904 | 62 |
19,095 | |||
Distributors (0.9%) | |||
Genuine Parts Co. | 37,867 | 2,373 | |
* | LKQ Corp. | 33,875 | 1,079 |
Pool Corp. | 11,613 | 423 | |
Core-Mark Holding Co. Inc. | 2,223 | 89 | |
Weyco Group Inc. | 1,710 | 40 | |
4,004 | |||
Diversified Consumer Services (1.9%) | |||
* | Apollo Group Inc. Class A | 28,486 | 1,215 |
H&R Block Inc. | 74,385 | 1,212 | |
Sotheby’s | 16,435 | 647 | |
Service Corp. International | 55,465 | 629 | |
Weight Watchers | |||
International Inc. | 8,055 | 628 | |
DeVry Inc. | 14,729 | 523 | |
* | Coinstar Inc. | 7,113 | 414 |
Hillenbrand Inc. | 15,124 | 347 | |
* | ITT Educational Services Inc. | 4,875 | 335 |
Strayer Education Inc. | 2,921 | 301 | |
Regis Corp. | 14,041 | 243 |
Market | |||
Value• | |||
Shares | ($000) | ||
Matthews International Corp. | |||
Class A | 6,957 | 216 | |
* | Steiner Leisure Ltd. | 3,461 | 173 |
* | American Public | ||
Education Inc. | 4,296 | 168 | |
* | Career Education Corp. | 18,470 | 159 |
* | K12 Inc. | 7,077 | 153 |
* | Ascent Capital Group Inc. | ||
Class A | 2,915 | 144 | |
* | Education Management Corp. | 7,710 | 139 |
* | Grand Canyon Education Inc. | 8,107 | 139 |
* | Capella Education Co. | 3,488 | 135 |
Stewart Enterprises Inc. | |||
Class A | 20,075 | 125 | |
* | Bridgepoint Education Inc. | 5,001 | 122 |
* | Corinthian Colleges Inc. | 19,772 | 89 |
* | Universal Technical | ||
Institute Inc. | 5,230 | 68 | |
Lincoln Educational | |||
Services Corp. | 4,524 | 38 | |
* | Archipelago Learning Inc. | 2,198 | 20 |
* | School Specialty Inc. | 3,885 | 12 |
8,394 | |||
Hotels, Restaurants & Leisure (18.0%) | |||
McDonald’s Corp. | 248,922 | 24,713 | |
Starbucks Corp. | 181,336 | 8,806 | |
Yum! Brands Inc. | 112,027 | 7,421 | |
* | Las Vegas Sands Corp. | 89,126 | 4,956 |
Carnival Corp. | 108,637 | 3,291 | |
* | Chipotle Mexican Grill Inc. | ||
Class A | 7,614 | 2,971 | |
Starwood Hotels & | |||
Resorts Worldwide Inc. | 47,519 | 2,561 | |
Wynn Resorts Ltd. | 19,760 | 2,342 | |
Marriott International Inc. | |||
Class A | 65,221 | 2,301 | |
Wyndham Worldwide Corp. | 37,468 | 1,648 | |
Darden Restaurants Inc. | 32,068 | 1,635 | |
* | MGM Resorts International | 83,244 | 1,146 |
International Game | |||
Technology | 72,399 | 1,087 | |
* | Panera Bread Co. Class A | 6,875 | 1,063 |
Royal Caribbean Cruises Ltd. | 34,356 | 979 | |
* | Penn National Gaming Inc. | 16,177 | 688 |
Brinker International Inc. | 19,768 | 545 | |
Six Flags Entertainment Corp. | 10,709 | 485 | |
* | Life Time Fitness Inc. | 9,271 | 459 |
* | Bally Technologies Inc. | 10,580 | 454 |
* | Hyatt Hotels Corp. Class A | 10,870 | 450 |
* | Domino’s Pizza Inc. | 11,326 | 436 |
Wendy’s Co. | 75,585 | 383 | |
* | Buffalo Wild Wings Inc. | 4,425 | 383 |
* | Cheesecake Factory Inc. | 12,903 | 382 |
* | Dunkin’ Brands Group Inc. | 13,016 | 378 |
Vail Resorts Inc. | 8,704 | 366 | |
Cracker Barrel Old Country | |||
Store Inc. | 5,527 | 308 | |
* | BJ’s Restaurants Inc. | 6,067 | 301 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | WMS Industries Inc. | 13,435 | 296 |
Choice Hotels | |||
International Inc. | 7,227 | 272 | |
Bob Evans Farms Inc. | 7,299 | 269 | |
* | Gaylord Entertainment Co. | 8,758 | 261 |
Texas Roadhouse Inc. | |||
Class A | 15,467 | 259 | |
* | Orient-Express Hotels Ltd. | ||
Class A | 24,963 | 247 | |
* | Jack in the Box Inc. | 9,627 | 230 |
PF Chang’s China Bistro Inc. | 5,306 | 203 | |
* | Peet’s Coffee & Tea Inc. | 3,145 | 203 |
* | DineEquity Inc. | 3,786 | 202 |
* | Shuffle Master Inc. | 13,165 | 192 |
* | Papa John’s International Inc. | 4,819 | 179 |
CEC Entertainment Inc. | 4,641 | 177 | |
International Speedway Corp. | |||
Class A | 6,597 | 166 | |
* | Pinnacle Entertainment Inc. | 15,010 | 165 |
* | Scientific Games Corp. | ||
Class A | 15,651 | 165 | |
* | Marriott Vacations | ||
Worldwide Corp. | 6,558 | 164 | |
Ameristar Casinos Inc. | 7,784 | 154 | |
Churchill Downs Inc. | 2,717 | 142 | |
* | Interval Leisure Group Inc. | 9,865 | 133 |
* | Biglari Holdings Inc. | 308 | 126 |
* | Red Robin Gourmet | ||
Burgers Inc. | 3,521 | 121 | |
* | Sonic Corp. | 14,415 | 119 |
* | Krispy Kreme Doughnuts Inc. | 14,486 | 119 |
* | Ruby Tuesday Inc. | 13,943 | 108 |
* | Boyd Gaming Corp. | 13,275 | 106 |
* | AFC Enterprises Inc. | 5,728 | 92 |
* | Denny’s Corp. | 21,923 | 91 |
* | Bravo Brio Restaurant | ||
Group Inc. | 4,403 | 85 | |
Marcus Corp. | 4,854 | 58 | |
Speedway Motorsports Inc. | 3,460 | 54 | |
* | Isle of Capri Casinos Inc. | 4,928 | 31 |
78,127 | |||
Household Durables (3.7%) | |||
Whirlpool Corp. | 18,596 | 1,405 | |
Garmin Ltd. | 28,343 | 1,338 | |
Newell Rubbermaid Inc. | 70,428 | 1,289 | |
* | Tempur-Pedic | ||
International Inc. | 16,054 | 1,268 | |
DR Horton Inc. | 69,199 | 992 | |
* | Mohawk Industries Inc. | 14,220 | 903 |
Lennar Corp. Class A | 37,879 | 886 | |
Tupperware Brands Corp. | 13,954 | 875 | |
* | Toll Brothers Inc. | 36,594 | 858 |
Harman International | |||
Industries Inc. | 17,055 | 838 | |
* | NVR Inc. | 1,149 | 795 |
Leggett & Platt Inc. | 33,877 | 767 | |
Jarden Corp. | 20,985 | 740 | |
* | PulteGroup Inc. | 83,809 | 739 |
7
Consumer Discretionary Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Helen of Troy Ltd. | 7,300 | 237 |
MDC Holdings Inc. | 9,246 | 227 | |
Ryland Group Inc. | 10,685 | 194 | |
KB Home | 16,889 | 193 | |
* | Meritage Homes Corp. | 7,089 | 184 |
* | La-Z-Boy Inc. | 12,358 | 177 |
Ethan Allen Interiors Inc. | 6,317 | 160 | |
* | iRobot Corp. | 5,776 | 147 |
American Greetings Corp. | |||
Class A | 9,076 | 136 | |
* | Standard Pacific Corp. | 26,556 | 116 |
Blyth Inc. | 1,311 | 84 | |
* | Universal Electronics Inc. | 3,609 | 71 |
* | Libbey Inc. | 4,641 | 58 |
* | Beazer Homes USA Inc. | 17,952 | 56 |
* | M/I Homes Inc. | 4,327 | 52 |
* | Zagg Inc. | 4,976 | 52 |
* | Hovnanian Enterprises Inc. | ||
Class A | 17,427 | 48 | |
CSS Industries Inc. | 1,888 | 37 | |
* | Sealy Corp. | 11,207 | 19 |
* | Furniture Brands | ||
International Inc. | 11,800 | 19 | |
15,960 | |||
Internet & Catalog Retail (6.3%) | |||
* | Amazon.com Inc. | 88,504 | 15,903 |
* | priceline.com Inc. | 12,111 | 7,594 |
* | Netflix Inc. | 12,795 | 1,417 |
Expedia Inc. | 23,492 | 800 | |
* | TripAdvisor Inc. | 24,197 | 780 |
HSN Inc. | 10,058 | 374 | |
* | Shutterfly Inc. | 7,101 | 194 |
* | Blue Nile Inc. | 3,481 | 124 |
Nutrisystem Inc. | 6,516 | 73 | |
PetMed Express Inc. | 5,256 | 64 | |
* | Vitacost.com Inc. | 3,846 | 31 |
* | Overstock.com Inc. | 3,845 | 25 |
* | Orbitz Worldwide Inc. | 4,647 | 17 |
27,396 | |||
Leisure Equipment & Products (1.4%) | |||
Mattel Inc. | 82,384 | 2,673 | |
Polaris Industries Inc. | 15,955 | 1,054 | |
Hasbro Inc. | 28,240 | 998 | |
Brunswick Corp. | 20,592 | 492 | |
Sturm Ruger & Co. Inc. | 4,555 | 190 | |
* | Arctic Cat Inc. | 2,919 | 107 |
Jakks Pacific Inc. | 6,511 | 101 | |
Callaway Golf Co. | 15,326 | 101 | |
* | Leapfrog Enterprises Inc. | 11,545 | 81 |
* | Smith & Wesson | ||
Holding Corp. | 14,366 | 75 | |
* | Steinway Musical | ||
Instruments Inc. | 1,791 | 45 | |
5,917 | |||
Media (26.5%) | |||
Walt Disney Co. | 415,191 | 17,434 | |
Comcast Corp. Class A | 501,557 | 14,736 | |
Time Warner Inc. | 243,487 | 9,060 | |
News Corp. Class A | 451,594 | 8,973 | |
* | DIRECTV Class A | 171,648 | 7,951 |
Time Warner Cable Inc. | 77,631 | 6,159 | |
Viacom Inc. Class B | 121,832 | 5,802 | |
Comcast Corp. | 165,651 | 4,736 | |
CBS Corp. Class B | 148,632 | 4,444 | |
McGraw-Hill Cos. Inc. | 71,375 | 3,322 | |
Omnicom Group Inc. | 67,113 | 3,318 | |
* | Liberty Interactive Corp. | ||
Class A | 136,525 | 2,561 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Liberty Media Corp. - | ||
Liberty Capital Class A | 26,427 | 2,375 | |
* | Sirius XM Radio Inc. | 912,392 | 2,062 |
Virgin Media Inc. | 69,545 | 1,752 | |
* | Liberty Global Inc. Class A | 33,714 | 1,692 |
* | Discovery | ||
Communications Inc. | |||
Class A | 34,335 | 1,602 | |
News Corp. Class B | 74,193 | 1,505 | |
DISH Network Corp. Class A | 50,522 | 1,474 | |
* | Liberty Global Inc. | 27,789 | 1,332 |
Interpublic Group of | |||
Cos. Inc. | 112,191 | 1,315 | |
* | Discovery | ||
Communications Inc. | 28,357 | 1,232 | |
Scripps Networks | |||
Interactive Inc. Class A | 21,345 | 965 | |
Gannett Co. Inc. | 57,969 | 860 | |
Cablevision Systems Corp. | |||
Class A | 49,671 | 707 | |
* | Charter Communications Inc. | ||
Class A | 10,530 | 668 | |
* | AMC Networks Inc. Class A | 12,771 | 580 |
John Wiley & Sons Inc. | |||
Class A | 11,247 | 511 | |
* | Lamar Advertising Co. | ||
Class A | 15,149 | 495 | |
Washington Post Co. Class B | 1,184 | 466 | |
Cinemark Holdings Inc. | 22,226 | 465 | |
* | Madison Square Garden Co. | ||
Class A | 13,592 | 433 | |
Morningstar Inc. | 6,055 | 362 | |
* | Live Nation | ||
Entertainment Inc. | 36,876 | 344 | |
Meredith Corp. | 8,806 | 290 | |
* | DreamWorks Animation | ||
SKG Inc. Class A | 16,686 | 288 | |
Regal Entertainment Group | |||
Class A | 20,529 | 284 | |
* | Valassis Communications Inc. | 10,887 | 272 |
* | Lions Gate | ||
Entertainment Corp. | 16,612 | 227 | |
Arbitron Inc. | 6,516 | 218 | |
National CineMedia Inc. | 13,423 | 214 | |
Scholastic Corp. | 6,753 | 206 | |
* | New York Times Co. Class A | 30,159 | 199 |
Belo Corp. Class A | 22,582 | 162 | |
Sinclair Broadcast Group Inc. | |||
Class A | 12,586 | 144 | |
* | Knology Inc. | 7,655 | 136 |
* | Clear Channel Outdoor | ||
Holdings Inc. Class A | 9,476 | 125 | |
Harte-Hanks Inc. | 9,841 | 86 | |
* | EW Scripps Co. Class A | 7,573 | 72 |
World Wrestling | |||
Entertainment Inc. Class A | 6,547 | 60 | |
* | Digital Generation Inc. | 5,970 | 60 |
* | Journal Communications Inc. | ||
Class A | 8,777 | 42 | |
* | Cumulus Media Inc. Class A | 11,454 | 39 |
* | McClatchy Co. Class A | 14,333 | 36 |
* | Entercom | ||
Communications Corp. | |||
Class A | 5,119 | 36 | |
Martha Stewart Living | |||
Omnimedia Class A | 7,675 | 35 | |
* | LIN TV Corp. Class A | 6,888 | 28 |
* | ReachLocal Inc. | 2,005 | 16 |
114,968 |
Market | |||
Value• | |||
Shares | ($000) | ||
Multiline Retail (6.3%) | |||
Target Corp. | 155,213 | 8,799 | |
Macy’s Inc. | 102,275 | 3,883 | |
Kohl’s Corp. | 58,570 | 2,910 | |
* | Dollar Tree Inc. | 28,955 | 2,563 |
Nordstrom Inc. | 40,889 | 2,193 | |
* | Dollar General Corp. | 41,069 | 1,727 |
JC Penney Co. Inc. | 38,921 | 1,541 | |
Family Dollar Stores Inc. | 24,274 | 1,311 | |
^,* | Sears Holdings Corp. | 10,401 | 725 |
* | Big Lots Inc. | 15,947 | 699 |
Dillard’s Inc. Class A | 8,015 | 490 | |
* | Saks Inc. | 27,528 | 321 |
Fred’s Inc. Class A | 8,839 | 122 | |
* | Gordmans Stores Inc. | 1,341 | 20 |
27,304 | |||
Specialty Retail (19.5%) | |||
Home Depot Inc. | 375,021 | 17,840 | |
Lowe’s Cos. Inc. | 306,652 | 8,703 | |
TJX Cos. Inc. | 183,497 | 6,718 | |
* | Bed Bath & Beyond Inc. | 59,515 | 3,555 |
Ross Stores Inc. | 56,245 | 3,000 | |
Limited Brands Inc. | 61,689 | 2,870 | |
* | O’Reilly Automotive Inc. | 31,218 | 2,700 |
Staples Inc. | 170,089 | 2,493 | |
* | AutoZone Inc. | 5,822 | 2,180 |
Tiffany & Co. | 29,415 | 1,912 | |
Best Buy Co. Inc. | 74,916 | 1,850 | |
Gap Inc. | 77,214 | 1,804 | |
* | CarMax Inc. | 55,085 | 1,691 |
PetSmart Inc. | 27,156 | 1,514 | |
Advance Auto Parts Inc. | 17,642 | 1,506 | |
Tractor Supply Co. | 17,279 | 1,477 | |
Foot Locker Inc. | 37,212 | 1,085 | |
Dick’s Sporting Goods Inc. | 23,296 | 1,043 | |
* | Ulta Salon Cosmetics & | ||
Fragrance Inc. | 11,940 | 994 | |
Signet Jewelers Ltd. | 21,143 | 992 | |
Abercrombie & Fitch Co. | 21,204 | 971 | |
Williams-Sonoma Inc. | 22,701 | 876 | |
* | Urban Outfitters Inc. | 30,149 | 856 |
* | Sally Beauty Holdings Inc. | 33,997 | 809 |
* | GNC Holdings Inc. Class A | 24,979 | 809 |
GameStop Corp. Class A | 33,840 | 771 | |
Chico’s FAS Inc. | 41,117 | 617 | |
American Eagle | |||
Outfitters Inc. | 42,421 | 617 | |
* | Ascena Retail Group Inc. | 15,965 | 616 |
Guess? Inc. | 15,799 | 547 | |
Rent-A-Center Inc. | 14,293 | 506 | |
Aaron’s Inc. | 17,454 | 488 | |
Men’s Wearhouse Inc. | 11,737 | 455 | |
* | Express Inc. | 18,385 | 438 |
DSW Inc. Class A | 7,408 | 418 | |
* | Pier 1 Imports Inc. | 23,996 | 412 |
* | Genesco Inc. | 5,883 | 401 |
* | Cabela’s Inc. | 11,004 | 390 |
* | Select Comfort Corp. | 12,300 | 364 |
* | Aeropostale Inc. | 19,642 | 353 |
* | JOS A Bank Clothiers Inc. | 6,770 | 349 |
* | AutoNation Inc. | 10,209 | 348 |
Monro Muffler Brake Inc. | 7,121 | 327 | |
* | Hibbett Sports Inc. | 6,602 | 323 |
* | Childrens Place Retail | ||
Stores Inc. | 6,185 | 314 | |
Buckle Inc. | 6,920 | 311 | |
* | ANN Inc. | 12,740 | 304 |
Finish Line Inc. Class A | 12,669 | 291 | |
Group 1 Automotive Inc. | 5,635 | 291 |
8
Consumer Discretionary Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Vitamin Shoppe Inc. | 6,393 | 271 |
Penske Automotive | |||
Group Inc. | 11,124 | 268 | |
* | Collective Brands Inc. | 14,736 | 265 |
* | Office Depot Inc. | 68,201 | 225 |
PEP Boys-Manny | |||
Moe & Jack | 12,793 | 192 | |
Cato Corp. Class A | 6,741 | 183 | |
* | Asbury Automotive Group Inc. | 6,959 | 180 |
RadioShack Corp. | 24,086 | 171 | |
* | Zumiez Inc. | 5,176 | 163 |
* | Charming Shoppes Inc. | 27,715 | 157 |
Sonic Automotive Inc. | |||
Class A | 8,980 | 154 | |
Lithia Motors Inc. Class A | 5,498 | 130 | |
* | Lumber Liquidators | ||
Holdings Inc. | 5,924 | 130 | |
Brown Shoe Co. Inc. | 10,907 | 118 | |
* | OfficeMax Inc. | 20,919 | 117 |
Stage Stores Inc. | 7,568 | 113 | |
* | Rue21 Inc. | 3,768 | 100 |
* | America’s Car-Mart Inc. | 2,130 | 95 |
HOT Topic Inc. | 10,434 | 93 | |
Bebe Stores Inc. | 9,006 | 81 | |
* | Wet Seal Inc. Class A | 21,870 | 76 |
* | Barnes & Noble Inc. | 5,738 | 76 |
* | Body Central Corp. | 2,589 | 72 |
* | Systemax Inc. | 3,492 | 67 |
* | Kirkland’s Inc. | 3,724 | 59 |
* | Shoe Carnival Inc. | 2,161 | 57 |
* | hhgregg Inc. | 4,808 | 55 |
* | Talbots Inc. | 16,786 | 50 |
* | Stein Mart Inc. | 6,761 | 48 |
Haverty Furniture Cos. Inc. | 3,910 | 43 | |
* | Citi Trends Inc. | 3,541 | 38 |
Big 5 Sporting Goods Corp. | 4,295 | 33 | |
* | Pacific Sunwear of | ||
California Inc. | 12,593 | 26 | |
* | Coldwater Creek Inc. | 21,286 | 20 |
Christopher & Banks Corp. | 8,349 | 18 | |
* | New York & Co. Inc. | 6,372 | 17 |
* | Orchard Supply Hardware | ||
Stores Corp. Class A | 467 | 13 | |
84,473 | |||
Textiles, Apparel & Luxury Goods (7.3%) | |||
NIKE Inc. Class B | 86,366 | 9,321 | |
Coach Inc. | 70,994 | 5,313 | |
VF Corp. | 21,479 | 3,137 |
Market | |||
Value• | |||
Shares | ($000) | ||
Ralph Lauren Corp. Class A | 14,912 | 2,591 | |
* | Lululemon Athletica Inc. | 24,434 | 1,638 |
* | Fossil Inc. | 12,945 | 1,579 |
PVH Corp. | 14,791 | 1,257 | |
* | Under Armour Inc. Class A | 9,305 | 830 |
* | Deckers Outdoor Corp. | 9,393 | 702 |
* | Carter’s Inc. | 14,255 | 692 |
* | Hanesbrands Inc. | 23,640 | 679 |
* | Warnaco Group Inc. | 9,847 | 578 |
Wolverine World Wide Inc. | 11,799 | 450 | |
* | Crocs Inc. | 21,958 | 432 |
* | Steven Madden Ltd. | 9,386 | 405 |
* | Iconix Brand Group Inc. | 17,916 | 325 |
* | Liz Claiborne Inc. | 23,013 | 225 |
Jones Group Inc. | 19,675 | 194 | |
Oxford Industries Inc. | 3,367 | 170 | |
* | Vera Bradley Inc. | 4,402 | 162 |
* | True Religion Apparel Inc. | 5,889 | 155 |
Columbia Sportswear Co. | 2,901 | 145 | |
* | Quiksilver Inc. | 29,489 | 138 |
* | Maidenform Brands Inc. | 5,712 | 120 |
* | Skechers U.S.A. Inc. Class A | 9,387 | 120 |
* | G-III Apparel Group Ltd. | 4,054 | 101 |
Movado Group Inc. | 4,330 | 93 | |
* | Perry Ellis International Inc. | 3,079 | 54 |
* | Kenneth Cole Productions Inc. | ||
Class A | 2,303 | 36 | |
* | Unifi Inc. | 3,515 | 29 |
* | K-Swiss Inc. Class A | 6,433 | 21 |
31,692 | |||
Total Common Stocks | |||
(Cost $377,662) | 433,440 | ||
Temporary Cash Investment (0.3%) | |||
Money Market Fund (0.3%) | |||
1,2 | Vanguard Market | ||
Liquidity Fund, 0.111% | |||
(Cost $1,105) | 1,104,962 | 1,105 | |
Total Investments (100.2%) | |||
(Cost $378,767) | 434,545 | ||
Other Assets and Liabilities (–0.2%) | |||
Other Assets | 4,111 | ||
Liabilities2 | (4,838) | ||
(727) | |||
Net Assets (100%) | 433,818 |
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 393,102 |
Undistributed Net Investment Income | 456 |
Accumulated Net Realized Losses | (15,518) |
Unrealized Appreciation (Depreciation) | 55,778 |
Net Assets | 433,818 |
Admiral Shares—Net Assets | |
Applicable to 306,121 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 10,983 |
Net Asset Value Per Share— | |
Admiral Shares | $35.88 |
ETF Shares—Net Assets | |
Applicable to 6,102,208 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 422,835 |
Net Asset Value Per Share— | |
ETF Shares | $69.29 |
• 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 $766,000.
* 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 $786,000 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 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 2,999 |
Security Lending | 69 |
Total Income | 3,068 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 27 |
Management and Administrative— | |
Admiral Shares | 6 |
Management and Administrative— | |
ETF Shares | 228 |
Marketing and Distribution— | |
Admiral Shares | 2 |
Marketing and Distribution— | |
ETF Shares | 49 |
Custodian Fees | 8 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 13 |
Total Expenses | 333 |
Net Investment Income | 2,735 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 4,222 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 50,356 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 57,313 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 2,735 | 4,430 |
Realized Net Gain (Loss) | 4,222 | 28,183 |
Change in Unrealized Appreciation (Depreciation) | 50,356 | 32,662 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 57,313 | 65,275 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (131) | (88) |
ETF Shares | (4,779) | (3,541) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (4,910) | (3,629) |
Capital Share Transactions | ||
Admiral Shares | (1,318) | 4,297 |
ETF Shares | 40,179 | 37,017 |
Net Increase (Decrease) from Capital Share Transactions | 38,861 | 41,314 |
Total Increase (Decrease) | 91,264 | 102,960 |
Net Assets | ||
Beginning of Period | 342,554 | 239,594 |
End of Period1 | 433,818 | 342,554 |
1 Net Assets—End of Period includes undistributed net investment income of $456,000 and $2,631,000.
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 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $31.22 | $24.76 | $21.43 | $25.03 | $31.02 | $27.03 |
Investment Operations | ||||||
Net Investment Income | .235 | .363 | .307 | .398 | .2851 | .217 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 4.864 | 6.414 | 3.251 | (3.603) | (6.075) | 4.015 |
Total from Investment Operations | 5.099 | 6.777 | 3.558 | (3.205) | (5.790) | 4.232 |
Distributions | ||||||
Dividends from Net Investment Income | (.439) | (.317) | (.228) | (.395) | (.200) | (.242) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.439) | (.317) | (.228) | (.395) | (.200) | (.242) |
Net Asset Value, End of Period | $35.88 | $31.22 | $24.76 | $21.43 | $25.03 | $31.02 |
Total Return2 | 16.52% | 27.36% | 16.62% | –12.34% | –18.74% | 15.64% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $11.0 | $11.0 | $5.3 | $1.3 | $0.7 | $1.0 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.19% | 0.19% | 0.24% | 0.28% | 0.25% | 0.27% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.51% | 1.25% | 1.28% | 1.58% | 1.11% | 0.84% |
Portfolio Turnover Rate3 | 7% | 7% | 7% | 5% | 12% | 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 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 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 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $60.29 | $47.80 | $41.37 | $48.38 | $60.02 | $52.28 |
Investment Operations | ||||||
Net Investment Income | .463 | .698 | .581 | .764 | .5921 | .450 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 9.390 | 12.392 | 6.286 | (6.988) | (11.772) | 7.760 |
Total from Investment Operations | 9.853 | 13.090 | 6.867 | (6.224) | (11.180) | 8.210 |
Distributions | ||||||
Dividends from Net Investment Income | (.853) | (.600) | (.437) | (.786) | (.460) | (.470) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.853) | (.600) | (.437) | (.786) | (.460) | (.470) |
Net Asset Value, End of Period | $69.29 | $60.29 | $47.80 | $41.37 | $48.38 | $60.02 |
Total Return | 16.53% | 27.37% | 16.62% | –12.32% | –18.70% | 15.69% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $423 | $332 | $234 | $141 | $257 | $114 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.52% | 1.25% | 1.28% | 1.61% | 1.16% | 0.89% |
Portfolio Turnover Rate2 | 7% | 7% | 7% | 5% | 12% | 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.
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $61,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and 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 29, 2012, 100% of the market value of the fund’s investments was based on Level 1 inputs.
13
Consumer Discretionary Index Fund
The following table summarizes changes in investments valued based on Level 3 inputs during the six months ended February 29, 2012. Transfers into or out of Level 3 are recognized based on values as of the date of transfer.
Investments in | |
Common Stocks | |
Amount Valued Based on Level 3 Inputs | ($000) |
Balance as of August 31, 2011 | 12 |
Transfers out of Level 3 | (12) |
Balance as of February 29, 2012 | — |
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 29, 2012, the fund realized $1,347,000 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, 2011, the fund had available capital losses totaling $15,150,000 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, $1,527,000 through August 31, 2016, $4,557,000 through August 31, 2017, $7,273,000 through August 31, 2018, and $1,493,000 through August 31, 2019. In addition, the fund realized losses of $2,730,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal year 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $378,767,000. Net unrealized appreciation of investment securities for tax purposes was $55,778,000, consisting of unrealized gains of $78,030,000 on securities that had risen in value since their purchase and $22,252,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $58,336,000 of investment securities and sold $21,639,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 1,248 | 38 | 7,375 | 234 |
Issued in Lieu of Cash Distributions | 109 | 3 | 78 | 2 |
Redeemed1 | (2,675) | (82) | (3,156) | (102) |
Net Increase (Decrease)—Admiral Shares | (1,318) | (41) | 4,297 | 134 |
ETF Shares | ||||
Issued | 46,024 | 700 | 138,751 | 2,300 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (5,845) | (100) | (101,734) | (1,700) |
Net Increase (Decrease)—ETF Shares | 40,179 | 600 | 37,017 | 600 |
1 Net of redemption fees for fiscal 2012 and 2011 of $1,000 and $40,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, 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 29, 2012
Portfolio Characteristics | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Stocks | 109 | 108 | 2,485 | |
Median Market Cap | $63.0B | $63.0B | $34.8B | |
Price/Earnings Ratio | 17.6x | 17.6x | 16.4x | |
Price/Book Ratio | 3.5x | 3.5x | 2.3x | |
Yield3 | 2.8% | 2.0% | ||
Admiral Shares | 2.6% | |||
ETF Shares | 2.6% | |||
Return on Equity | 21.6% | 21.6% | 18.2% | |
Earnings Growth Rate | 7.1% | 7.1% | 7.7% | |
Foreign Holdings | 0.0% | 0.0% | 0.0% | |
Turnover Rate4 | 4% | — | — | |
Expense Ratio5 | — | — | ||
Admiral Shares | 0.19% | |||
ETF Shares | 0.19% | |||
Short-Term Reserves | 0.1% | — | — | |
Volatility Measures6 | ||||
Fund Versus | Fund Versus | |||
Spliced Index7 | Broad Index2 | |||
R-Squared | 0.99 | 0.68 | ||
Beta | 1.00 | 0.49 |
Subindustry Diversification | |
(% of equity exposure) | |
Agricultural Products | 2.7% |
Distillers & Vintners | 1.3 |
Drug Retail | 6.4 |
Food Distributors | 1.6 |
Food Retail | 3.4 |
Household Products | 19.4 |
Hypermarkets & Supercenters | 10.0 |
Packaged Foods & Meats | 17.3 |
Personal Products | 2.9 |
Soft Drinks | 17.8 |
Tobacco | 16.6 |
Other Consumer Staples | 0.6 |
Ten Largest Holdings8 (% of total net assets) | |
Procter & Gamble Co. | 12.4% |
Philip Morris International Inc. | 9.6 |
Coca-Cola Co. | 9.4 |
Wal-Mart Stores Inc. | 7.2 |
PepsiCo Inc. | 6.3 |
Kraft Foods Inc. | 4.5 |
Altria Group Inc. | 4.4 |
CVS Caremark Corp. | 4.2 |
Colgate-Palmolive Co. | 3.2 |
Costco Wholesale Corp. | 2.6 |
Top Ten | 63.8% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.18% for Admiral Shares and 0.18% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx18x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | 13.62% | 7.38% | 8.27% | |
Net Asset Value | 13.64 | 7.36 | 8.26 | |
Admiral Shares3 | 1/30/2004 | 13.65 | 7.34 | 8.31 |
1 Six months ended February 29, 2012.
2 Spliced 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 29, 2012
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 (19.7%) | |||
Coca-Cola Co. | 1,379,775 | 96,391 | |
PepsiCo Inc. | 1,024,856 | 64,504 | |
Coca-Cola Enterprises Inc. | 239,238 | 6,914 | |
* | Monster Beverage Corp. | 114,188 | 6,530 |
Dr Pepper Snapple | |||
Group Inc. | 165,174 | 6,285 | |
Molson Coors Brewing Co. | |||
Class B | 123,281 | 5,417 | |
Brown-Forman Corp. | |||
Class B | 64,329 | 5,253 | |
Beam Inc. | 80,631 | 4,441 | |
* | Constellation Brands Inc. | ||
Class A | 148,004 | 3,232 | |
* | Boston Beer Co. Inc. | ||
Class A | 10,459 | 989 | |
Coca-Cola Bottling Co. | |||
Consolidated | 9,597 | 618 | |
* | National Beverage Corp. | 32,958 | 528 |
^,* | Central European | ||
Distribution Corp. | 100,006 | 436 | |
* | Primo Water Corp. | 72,030 | 192 |
201,730 | |||
Food & Staples Retailing (21.3%) | |||
Wal-Mart Stores Inc. | 1,256,134 | 74,212 | |
CVS Caremark Corp. | 946,839 | 42,703 | |
Costco Wholesale Corp. | 315,110 | 27,118 | |
Walgreen Co. | 644,520 | 21,372 | |
Sysco Corp. | 427,061 | 12,564 | |
Kroger Co. | 426,162 | 10,138 | |
Whole Foods Market Inc. | 111,676 | 9,017 | |
Safeway Inc. | 264,822 | 5,680 | |
* | United Natural Foods Inc. | 40,992 | 1,866 |
Casey’s General Stores Inc. | 35,310 | 1,809 | |
Ruddick Corp. | 39,352 | 1,612 | |
* | Fresh Market Inc. | 29,421 | 1,325 |
SUPERVALU Inc. | 195,301 | 1,275 | |
PriceSmart Inc. | 18,569 | 1,200 | |
* | Rite Aid Corp. | 744,873 | 1,147 |
Andersons Inc. | 20,478 | 882 | |
* | Winn-Dixie Stores Inc. | 84,937 | 805 |
Weis Markets Inc. | 17,768 | 762 | |
Spartan Stores Inc. | 39,270 | 701 | |
* | Susser Holdings Corp. | 23,901 | 606 |
* | Pantry Inc. | 41,392 | 515 |
Nash Finch Co. | 18,772 | 503 | |
Ingles Markets Inc. Class A | 28,091 | 502 | |
Village Super Market Inc. | |||
Class A | 15,744 | 474 | |
218,788 | |||
Food Products (20.0%) | |||
Kraft Foods Inc. | 1,198,144 | 45,613 | |
General Mills Inc. | 463,464 | 17,755 | |
Archer-Daniels-Midland Co. | 465,881 | 14,536 | |
HJ Heinz Co. | 235,475 | 12,412 |
Market | |||
Value• | |||
Shares | ($000) | ||
Mead Johnson Nutrition Co. 150,266 | 11,683 | ||
Kellogg Co. | 187,475 | 9,814 | |
Sara Lee Corp. | 417,137 | 8,447 | |
ConAgra Foods Inc. | 306,099 | 8,035 | |
Hershey Co. | 122,856 | 7,457 | |
Bunge Ltd. | 109,858 | 7,396 | |
JM Smucker Co. | 87,469 | 6,588 | |
* | Green Mountain Coffee | ||
Roasters Inc. | 94,589 | 6,145 | |
Campbell Soup Co. | 148,045 | 4,933 | |
McCormick & Co. Inc. | 92,270 | 4,655 | |
Tyson Foods Inc. Class A | 237,922 | 4,499 | |
Corn Products | |||
International Inc. | 61,112 | 3,505 | |
Hormel Foods Corp. | 117,056 | 3,333 | |
* | Ralcorp Holdings Inc. | 43,989 | 3,282 |
* | Smithfield Foods Inc. | 121,868 | 2,855 |
* | Dean Foods Co. | 166,755 | 2,044 |
Flowers Foods Inc. | 100,762 | 1,929 | |
* | TreeHouse Foods Inc. | 31,350 | 1,806 |
* | Darling International Inc. | 108,259 | 1,731 |
* | Hain Celestial Group Inc. | 35,489 | 1,449 |
Lancaster Colony Corp. | 19,758 | 1,288 | |
B&G Foods Inc. Class A | 52,387 | 1,220 | |
Sanderson Farms Inc. | 22,216 | 1,093 | |
Snyders-Lance Inc. | 42,812 | 961 | |
Fresh Del Monte | |||
Produce Inc. | 42,717 | 959 | |
J&J Snack Foods Corp. | 18,161 | 911 | |
Cal-Maine Foods Inc. | 20,703 | 797 | |
* | Pilgrim’s Pride Corp. | 112,863 | 708 |
* | Post Holdings Inc. | 21,945 | 683 |
Calavo Growers Inc. | 23,914 | 658 | |
Tootsie Roll Industries Inc. | 27,724 | 645 | |
* | Smart Balance Inc. | 105,183 | 630 |
* | Chiquita Brands | ||
International Inc. | 61,830 | 593 | |
* | Dole Food Co. Inc. | 56,972 | 546 |
^ | Diamond Foods Inc. | 20,188 | 483 |
* | Seneca Foods Corp. Class A | 18,441 | 472 |
* | Farmer Bros Co. | 40,630 | 450 |
204,999 | |||
Household Products (19.5%) | |||
Procter & Gamble Co. | 1,885,156 | 127,286 | |
Colgate-Palmolive Co. | 351,792 | 32,780 | |
Kimberly-Clark Corp. | 284,639 | 20,744 | |
Clorox Co. | 100,282 | 6,780 | |
Church & Dwight Co. Inc. | 109,126 | 5,210 | |
* | Energizer Holdings Inc. | 53,616 | 4,099 |
WD-40 Co. | 20,271 | 873 | |
* | Spectrum Brands | ||
Holdings Inc. | 28,455 | 809 | |
* | Central Garden and Pet Co. | ||
Class A | 67,187 | 643 | |
* | Central Garden and Pet Co. | 49,909 | 452 |
199,676 |
Market | |||
Value• | |||
Shares | ($000) | ||
Personal Products (2.9%) | |||
Estee Lauder Cos. Inc. | |||
Class A | 175,294 | 10,262 | |
Avon Products Inc. | 320,725 | 5,994 | |
Herbalife Ltd. | 90,040 | 5,961 | |
Nu Skin Enterprises Inc. | |||
Class A | 48,348 | 2,793 | |
* | Elizabeth Arden Inc. | 28,719 | 1,067 |
* | Prestige Brands | ||
Holdings Inc. | 61,570 | 1,016 | |
* | USANA Health Sciences Inc. | 16,246 | 603 |
Inter Parfums Inc. | 30,772 | 519 | |
* | Revlon Inc. Class A | 33,335 | 505 |
* | Medifast Inc. | 29,651 | 481 |
* | Schiff Nutrition | ||
International Inc. | 2,867 | 32 | |
* | Nature’s Sunshine | ||
Products Inc. | 2,014 | 30 | |
29,263 | |||
Tobacco (16.6%) | |||
Philip Morris | |||
International Inc. | 1,173,146 | 97,981 | |
Altria Group Inc. | 1,494,906 | 44,997 | |
Lorillard Inc. | 100,427 | 13,164 | |
Reynolds American Inc. | 257,693 | 10,805 | |
Universal Corp. | 24,626 | 1,131 | |
Vector Group Ltd. | 52,479 | 952 | |
^,* | Star Scientific Inc. | 174,352 | 654 |
* | Alliance One | ||
International Inc. | 156,240 | 577 | |
170,261 | |||
Total Common Stocks | |||
(Cost $900,635) | 1,024,717 | ||
Temporary Cash Investment (0.1%) | |||
Money Market Fund (0.1%) | |||
1,2 | Vanguard Market | ||
Liquidity Fund, 0.111% | |||
(Cost $1,346) | 1,346,366 | 1,346 | |
Total Investments (100.1%) | |||
(Cost $901,981) | 1,026,063 | ||
Other Assets and Liabilities (–0.1%) | |||
Other Assets | 6,486 | ||
Liabilities2 | (7,951) | ||
(1,465) | |||
Net Assets (100%) | 1,024,598 |
17
Consumer Staples Index Fund
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 915,826 |
Undistributed Net Investment Income | 2,231 |
Accumulated Net Realized Losses | (17,541) |
Unrealized Appreciation (Depreciation) | 124,082 |
Net Assets | 1,024,598 |
Admiral Shares—Net Assets | |
Applicable to 1,905,063 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 78,587 |
Net Asset Value Per Share— | |
Admiral Shares | $41.25 |
ETF Shares—Net Assets | |
Applicable to 11,308,105 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 946,011 |
Net Asset Value Per Share— | |
ETF Shares | $83.66 |
• 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 $369,000.
* 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 $468,000 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 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 12,706 |
Interest1 | 1 |
Security Lending | 15 |
Total Income | 12,722 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 57 |
Management and Administrative— | |
Admiral Shares | 50 |
Management and Administrative— | |
ETF Shares | 574 |
Marketing and Distribution— | |
Admiral Shares | 6 |
Marketing and Distribution— | |
ETF Shares | 110 |
Custodian Fees | 11 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 28 |
Total Expenses | 836 |
Net Investment Income | 11,886 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 4,351 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 60,623 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 76,860 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 11,886 | 19,021 |
Realized Net Gain (Loss) | 4,351 | 14,863 |
Change in Unrealized Appreciation (Depreciation) | 60,623 | 88,679 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 76,860 | 122,563 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (1,495) | (952) |
ETF Shares | (20,079) | (15,636) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (21,574) | (16,588) |
Capital Share Transactions | ||
Admiral Shares | 17,360 | 20,596 |
ETF Shares | 112,933 | 134,847 |
Net Increase (Decrease) from Capital Share Transactions | 130,293 | 155,443 |
Total Increase (Decrease) | 185,579 | 261,418 |
Net Assets | ||
Beginning of Period | 839,019 | 577,601 |
End of Period2 | 1,024,598 | 839,019 |
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 $11,919,000.
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 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $38.94 | $32.92 | $30.62 | $34.06 | $33.22 | $30.56 |
Investment Operations | ||||||
Net Investment Income | .471 | .956 | .8601 | .7771 | .6341 | .662 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 2.773 | 6.013 | 2.290 | (3.648) | .766 | 2.460 |
Total from Investment Operations | 3.244 | 6.969 | 3.150 | (2.871) | 1.400 | 3.122 |
Distributions | ||||||
Dividends from Net Investment Income | (.934) | (.949) | (.850) | (.569) | (.560) | (.462) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.934) | (.949) | (.850) | (.569) | (.560) | (.462) |
Net Asset Value, End of Period | $41.25 | $38.94 | $32.92 | $30.62 | $34.06 | $33.22 |
Total Return2 | 8.43% | 21.39% | 10.34% | –8.26% | 4.15% | 10.30% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $79 | $57 | $30 | $29 | $18 | $9 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.28% | 0.25% | 0.26% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 2.63% | 2.74% | 2.61% | 2.77% | 1.88% | 2.16% |
Portfolio Turnover Rate3 | 4% | 7% | 7% | 17% | 13% | 12% |
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 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 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 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $78.96 | $66.72 | $62.07 | $69.04 | $67.35 | $61.94 |
Investment Operations | ||||||
Net Investment Income | .954 | 1.933 | 1.7531 | 1.6161 | 1.3271 | 1.370 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 5.640 | 12.213 | 4.635 | (7.413) | 1.522 | 5.000 |
Total from Investment Operations | 6.594 | 14.146 | 6.388 | (5.797) | 2.849 | 6.370 |
Distributions | ||||||
Dividends from Net Investment Income | (1.894) | (1.906) | (1.738) | (1.173) | (1.159) | (.960) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.894) | (1.906) | (1.738) | (1.173) | (1.159) | (.960) |
Net Asset Value, End of Period | $83.66 | $78.96 | $66.72 | $62.07 | $69.04 | $67.35 |
Total Return | 8.42% | 21.41% | 10.33% | –8.22% | 4.18% | 10.38% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $946 | $782 | $547 | $552 | $518 | $310 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 2.63% | 2.74% | 2.61% | 2.80% | 1.93% | 2.20% |
Portfolio Turnover Rate2 | 4% | 7% | 7% | 17% | 13% | 12% |
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $150,000 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 29, 2012, 100% of the market value of the fund’s investments was 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 29, 2012, the fund realized $5,089,000 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, 2011, the fund had available capital loss carryforwards totaling $15,530,000 to offset future net capital gains of $219,000 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 $1,134,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $901,981,000. Net unrealized appreciation of investment securities for tax purposes was $124,082,000, consisting of unrealized gains of $147,208,000 on securities that had risen in value since their purchase and $23,126,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $188,016,000 of investment securities and sold $67,461,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 21,752 | 547 | 28,164 | 751 |
Issued in Lieu of Cash Distributions | 1,284 | 32 | 853 | 24 |
Redeemed1 | (5,676) | (143) | (8,421) | (229) |
Net Increase (Decrease)—Admiral Shares | 17,360 | 436 | 20,596 | 546 |
ETF Shares | ||||
Issued | 136,535 | 1,707 | 209,055 | 2,700 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (23,602) | (300) | (74,208) | (1,000) |
Net Increase (Decrease)—ETF Shares | 112,933 | 1,407 | 134,847 | 1,700 |
1 Net of redemption fees for fiscal 2012 and 2011 of $21,000 and $54,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, 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 29, 2012
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 168 | 165 | 2,485 |
Median Market Cap | $41.9B | $41.9B | $34.8B |
Price/Earnings Ratio | 13.1x | 13.1x | 16.4x |
Price/Book Ratio | 2.0x | 2.0x | 2.3x |
Yield3 | 1.6% | 2.0% | |
Admiral Shares | 1.4% | ||
ETF Shares | 1.4% | ||
Return on Equity | 19.2% | 19.2% | 18.2% |
Earnings Growth Rate | –2.2% | –2.2% | 7.7% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 11% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.19% | ||
ETF Shares | 0.19% | ||
Short-Term Reserves | 0.0% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 0.99 | 0.74 |
Beta | 1.02 | 1.16 |
Subindustry Diversification | ||
(% of equity exposure) | ||
Coal & Consumable Fuels | 2.3% | |
Integrated Oil & Gas | 46.0 | |
Oil & Gas Drilling | 2.8 | |
Oil & Gas Equipment & Services | 17.2 | |
Oil & Gas Exploration & Production | 23.2 | |
Oil & Gas Refining & Marketing | 3.4 | |
Oil & Gas Storage & Transportation | 5.1 |
Ten Largest Holdings8 (% of total net assets) | |
Exxon Mobil Corp. | 22.7% |
Chevron Corp. | 12.1 |
Schlumberger Ltd. | 5.5 |
ConocoPhillips | 5.1 |
Occidental Petroleum Corp. | 4.4 |
Anadarko Petroleum Corp. | 2.5 |
Apache Corp. | 2.4 |
National Oilwell Varco Inc. | 2.1 |
Halliburton Co. | 2.0 |
EOG Resources Inc. | 1.8 |
Top Ten | 60.6% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.19% for Admiral Shares and 0.19% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx27x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | 2.75% | 4.95% | 11.80% | |
Net Asset Value | 2.80 | 4.94 | 11.79 | |
Admiral Shares3 | 10/7/2004 | 2.79 | 4.91 | 10.98 |
1 Six months ended February 29, 2012.
2 Spliced 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 29, 2012
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 (20.1%) | |||
Oil & Gas Drilling (2.8%) | |||
Noble Corp. | 356,582 | 14,327 | |
Helmerich & Payne Inc. | 148,872 | 9,126 | |
* | Nabors Industries Ltd. | 402,569 | 8,768 |
Diamond Offshore | |||
Drilling Inc. | 99,680 | 6,825 | |
* | Rowan Cos. Inc. | 178,717 | 6,589 |
Patterson-UTI Energy Inc. | 233,125 | 4,527 | |
* | Atwood Oceanics Inc. | 89,132 | 4,239 |
* | Unit Corp. | 65,580 | 3,120 |
* | Parker Drilling Co. | 238,353 | 1,509 |
* | Pioneer Drilling Co. | 138,615 | 1,381 |
* | Hercules Offshore Inc. | 270,746 | 1,375 |
* | Vantage Drilling Co. | 642,363 | 842 |
Oil & Gas Equipment & Services (17.3%) | |||
Schlumberger Ltd. | 1,569,594 | 121,816 | |
National Oilwell Varco Inc. | 555,738 | 45,865 | |
Halliburton Co. | 1,205,752 | 44,118 | |
Baker Hughes Inc. | 577,140 | 29,019 | |
* | Cameron | ||
International Corp. | 328,720 | 18,313 | |
* | Weatherford | ||
International Ltd. | 1,018,942 | 16,283 | |
* | FMC Technologies Inc. | 322,309 | 16,254 |
Oceaneering | |||
International Inc. | 151,532 | 8,224 | |
Core Laboratories NV | 65,570 | 7,977 | |
* | Superior Energy | ||
Services Inc. | 222,496 | 6,528 | |
* | Oil States International Inc. | 73,803 | 5,994 |
* | Dresser-Rand Group Inc. | 109,143 | 5,732 |
Tidewater Inc. | 77,270 | 4,598 | |
* | McDermott | ||
International Inc. | 349,635 | 4,566 | |
Lufkin Industries Inc. | 46,826 | 3,729 | |
* | Key Energy Services Inc. | 211,393 | 3,606 |
* | Dril-Quip Inc. | 49,729 | 3,481 |
* | SEACOR Holdings Inc. | 32,951 | 3,258 |
* | Helix Energy Solutions | ||
Group Inc. | 162,729 | 3,131 | |
Bristow Group Inc. | 59,411 | 2,805 | |
^ | CARBO Ceramics Inc. | 30,518 | 2,797 |
* | Hornbeck Offshore | ||
Services Inc. | 56,406 | 2,299 | |
* | Gulfmark Offshore Inc. | 42,300 | 2,125 |
* | ION Geophysical Corp. | 244,149 | 1,748 |
* | Exterran Holdings Inc. | 121,352 | 1,747 |
^ | RPC Inc. | 95,170 | 1,524 |
* | Newpark Resources Inc. | 187,173 | 1,473 |
* | Tetra Technologies Inc. | 158,606 | 1,442 |
* | OYO Geospace Corp. | 13,074 | 1,439 |
* | Basic Energy Services Inc. | 68,347 | 1,357 |
* | Tesco Corp. | 84,517 | 1,295 |
* | Heckmann Corp. | 247,770 | 1,264 |
Market | |||
Value• | |||
Shares | ($000) | ||
Gulf Island Fabrication Inc. | 35,604 | 1,044 | |
* | Matrix Service Co. | 77,988 | 1,033 |
* | Dawson Geophysical Co. | 25,786 | 977 |
* | PHI Inc. | 40,700 | 899 |
* | Cal Dive International Inc. | 302,574 | 877 |
* | Global Geophysical | ||
Services Inc. | 75,690 | 816 | |
* | Willbros Group Inc. | 182,696 | 767 |
* | RigNet Inc. | 42,736 | 726 |
445,574 | |||
Oil, Gas & Consumable Fuels (79.9%) | |||
Coal & Consumable Fuels (1.9%) | |||
Peabody Energy Corp. | 367,522 | 12,819 | |
Consol Energy Inc. | 311,443 | 11,156 | |
* | Alpha Natural | ||
Resources Inc. | 317,209 | 5,887 | |
Arch Coal Inc. | 319,492 | 4,336 | |
* | Cloud Peak Energy Inc. | 113,202 | 2,006 |
* | Patriot Coal Corp. | 195,650 | 1,415 |
* | Solazyme Inc. | 77,145 | 1,063 |
*,^ | Uranium Energy Corp. | 236,783 | 888 |
*,^ | James River Coal Co. | 140,293 | 804 |
* | USEC Inc. | 553,301 | 741 |
Integrated Oil & Gas (46.2%) | |||
Exxon Mobil Corp. | 5,812,467 | 502,778 | |
Chevron Corp. | 2,464,256 | 268,900 | |
ConocoPhillips | 1,475,300 | 112,934 | |
Occidental | |||
Petroleum Corp. | 938,144 | 97,914 | |
Hess Corp. | 406,727 | 26,405 | |
Murphy Oil Corp. | 248,509 | 15,890 | |
Oil & Gas Exploration & Production (23.3%) | |||
Anadarko Petroleum Corp. | 650,918 | 54,755 | |
Apache Corp. | 502,363 | 54,220 | |
EOG Resources Inc. | 353,138 | 40,208 | |
Devon Energy Corp. | 508,381 | 37,269 | |
Marathon Oil Corp. | 935,047 | 31,689 | |
Noble Energy Inc. | 234,536 | 22,902 | |
Chesapeake Energy Corp. | 881,705 | 22,043 | |
Pioneer Natural | |||
Resources Co. | 142,435 | 15,617 | |
* | Southwestern Energy Co. | 469,738 | 15,530 |
* | Concho Resources Inc. | 133,439 | 14,257 |
Range Resources Corp. | 219,126 | 13,954 | |
* | Denbury Resources Inc. | 539,992 | 10,751 |
EQT Corp. | 196,426 | 10,415 | |
Cabot Oil & Gas Corp. | 289,636 | 10,103 | |
Cimarex Energy Co. | 118,792 | 9,583 | |
* | Whiting Petroleum Corp. | 163,150 | 9,567 |
* | Plains Exploration & | ||
Production Co. | 197,153 | 8,689 | |
QEP Resources Inc. | 248,576 | 8,486 | |
* | Cobalt International | ||
Energy Inc. | 267,261 | 8,034 | |
SM Energy Co. | 90,675 | 7,138 | |
* | Newfield Exploration Co. | 190,101 | 6,844 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Continental Resources Inc. | 65,208 | 5,913 |
Energen Corp. | 105,100 | 5,594 | |
* | Ultra Petroleum Corp. | 223,228 | 5,572 |
* | WPX Energy Inc. | 287,803 | 5,227 |
* | SandRidge Energy Inc. | 557,305 | 4,832 |
* | Rosetta Resources Inc. | 80,785 | 4,123 |
* | Energy XXI Bermuda Ltd. | 105,297 | 3,941 |
Berry Petroleum Co. | |||
Class A | 72,182 | 3,895 | |
* | Kodiak Oil & Gas Corp. | 385,575 | 3,736 |
* | Oasis Petroleum Inc. | 83,829 | 2,688 |
* | Gran Tierra Energy Inc. | 460,995 | 2,688 |
* | Gulfport Energy Corp. | 77,506 | 2,606 |
* | Forest Oil Corp. | 194,220 | 2,511 |
* | Bill Barrett Corp. | 84,053 | 2,457 |
* | Stone Energy Corp. | 75,221 | 2,403 |
* | McMoRan Exploration Co. | 169,366 | 2,371 |
* | Northern Oil and Gas Inc. | 98,611 | 2,338 |
* | Swift Energy Co. | 73,673 | 2,212 |
* | Carrizo Oil & Gas Inc. | 70,388 | 1,983 |
W&T Offshore Inc. | 73,042 | 1,844 | |
EXCO Resources Inc. | 245,341 | 1,749 | |
* | Approach Resources Inc. | 49,900 | 1,725 |
* | Contango Oil & Gas Co. | 25,518 | 1,622 |
* | Magnum Hunter | ||
Resources Corp. | 232,217 | 1,607 | |
* | Comstock Resources Inc. | 98,124 | 1,573 |
* | Petroleum | ||
Development Corp. | 47,545 | 1,547 | |
* | Clayton Williams Energy Inc. | 17,108 | 1,512 |
* | Lone Pine Resources Inc. | 185,935 | 1,382 |
* | GeoResources Inc. | 41,095 | 1,317 |
* | Rex Energy Corp. | 109,208 | 1,256 |
* | Resolute Energy Corp. | 110,592 | 1,234 |
* | Quicksilver Resources Inc. | 220,949 | 1,224 |
* | Energy Partners Ltd. | 70,296 | 1,198 |
*,^ | ATP Oil & Gas Corp. | 146,300 | 1,170 |
* | Goodrich Petroleum Corp. | 72,536 | 1,156 |
* | Vaalco Energy Inc. | 142,374 | 1,123 |
* | Endeavour | ||
International Corp. | 96,915 | 1,121 | |
* | Venoco Inc. | 96,261 | 1,049 |
* | Abraxas Petroleum Corp. | 259,112 | 1,042 |
* | Petroquest Energy Inc. | 168,115 | 1,026 |
* | FX Energy Inc. | 159,296 | 1,008 |
* | Triangle Petroleum Corp. | 132,689 | 951 |
*,^ | BPZ Resources Inc. | 295,370 | 948 |
* | Warren Resources Inc. | 231,450 | 903 |
Penn Virginia Corp. | 182,036 | 890 | |
* | TransAtlantic | ||
Petroleum Ltd. | 663,156 | 875 | |
* | Harvest Natural | ||
Resources Inc. | 131,788 | 872 | |
*,^ | Houston American | ||
Energy Corp. | 75,009 | 813 | |
* | Gastar Exploration Ltd. | 268,756 | 771 |
*,^ | Hyperdynamics Corp. | 387,667 | 527 |
* | Oilsands Quest Inc. | 3,458,636 | 155 |
26
Energy Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Oil & Gas Refining & Marketing (3.4%) | |||
Marathon Petroleum Corp. | 477,457 | 19,838 | |
Valero Energy Corp. | 753,382 | 18,450 | |
HollyFrontier Corp. | 290,087 | 9,466 | |
Sunoco Inc. | 154,485 | 5,968 | |
* | Tesoro Corp. | 202,883 | 5,383 |
World Fuel Services Corp. | 105,175 | 4,382 | |
* | CVR Energy Inc. | 133,221 | 3,625 |
Western Refining Inc. | 102,667 | 1,863 | |
*,^ | Clean Energy Fuels Corp. | 97,438 | 1,831 |
* | Rentech Inc. | 628,602 | 1,119 |
* | Green Plains Renewable | ||
Energy Inc. | 78,851 | 895 | |
Delek US Holdings Inc. | 58,926 | 778 | |
* | Gevo Inc. | 75,357 | 754 |
Alon USA Energy Inc. | 72,752 | 684 | |
* | Amyris Inc. | 92,840 | 499 |
Oil & Gas Storage & Transportation (5.1%) | |||
El Paso Corp. | 1,019,395 | 28,349 | |
Spectra Energy Corp. | 860,812 | 27,012 | |
Williams Cos. Inc. | 782,889 | 23,393 | |
* | Kinder Morgan | ||
Management LLC | 122,667 | 9,834 | |
Southern Union Co. | 168,434 | 7,401 | |
^ | Kinder Morgan Inc. | 163,716 | 5,769 |
* | Cheniere Energy Inc. | 200,711 | 3,019 |
* | Enbridge Energy | ||
Management LLC | 60,763 | 2,052 | |
* | SemGroup Corp. Class A | 71,046 | 2,016 |
Targa Resources Corp. | 43,860 | 1,949 | |
Crosstex Energy Inc. | 98,468 | 1,352 | |
^ | Overseas Shipholding | ||
Group Inc. | 91,113 | 806 | |
1,770,757 | |||
Total Common Stocks | |||
(Cost $1,893,930) | 2,216,331 | ||
Temporary Cash Investment (0.4%) | |||
Money Market Fund (0.4%) | |||
1,2 | Vanguard Market | ||
Liquidity Fund, 0.111% | |||
(Cost $9,645) | 9,644,501 | 9,645 | |
Total Investments (100.4%) | |||
(Cost $1,903,575) | 2,225,976 | ||
Other Assets and Liabilities (–0.4%) | |||
Other Assets | 31,601 | ||
Liabilities2 | (41,261) | ||
(9,660) | |||
Net Assets (100%) | 2,216,316 |
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 1,971,985 |
Undistributed Net Investment Income | 5,567 |
Accumulated Net Realized Losses | (83,637) |
Unrealized Appreciation (Depreciation) | 322,401 |
Net Assets | 2,216,316 |
Admiral Shares—Net Assets | |
Applicable to 4,761,643 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 259,344 |
Net Asset Value Per Share— | |
Admiral Shares | $54.47 |
ETF Shares—Net Assets | |
Applicable to 17,949,239 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 1,956,972 |
Net Asset Value Per Share— | |
ETF Shares | $109.03 |
• 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 $9,139,000.
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 $9,645,000 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 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 16,932 |
Interest1 | 1 |
Security Lending | 239 |
Total Income | 17,172 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 99 |
Management and Administrative— | |
Admiral Shares | 178 |
Management and Administrative— | |
ETF Shares | 1,197 |
Marketing and Distribution— | |
Admiral Shares | 23 |
Marketing and Distribution— | |
ETF Shares | 252 |
Custodian Fees | 20 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 58 |
Trustees’ Fees and Expenses | 1 |
Total Expenses | 1,828 |
Net Investment Income | 15,344 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 59,103 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 122,864 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 197,311 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 15,344 | 28,868 |
Realized Net Gain (Loss) | 59,103 | 99,840 |
Change in Unrealized Appreciation (Depreciation) | 122,864 | 265,168 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 197,311 | 393,876 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (3,683) | (2,364) |
ETF Shares | (27,747) | (19,009) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (31,430) | (21,373) |
Capital Share Transactions | ||
Admiral Shares | 2,837 | 64,293 |
ETF Shares | 28,826 | 409,546 |
Net Increase (Decrease) from Capital Share Transactions | 31,663 | 473,839 |
Total Increase (Decrease) | 197,544 | 846,342 |
Net Assets | ||
Beginning of Period | 2,018,772 | 1,172,430 |
End of Period2 | 2,216,316 | 2,018,772 |
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 $5,567,000 and $21,654,000.
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 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $50.17 | $37.58 | $37.34 | $54.66 | $50.36 | $40.36 |
Investment Operations | ||||||
Net Investment Income | .407 | .708 | .654 | .578 | .504 | .5011 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 4.704 | 12.508 | .166 | (17.335) | 4.246 | 9.944 |
Total from Investment Operations | 5.111 | 13.216 | .820 | (16.757) | 4.750 | 10.445 |
Distributions | ||||||
Dividends from Net Investment Income | (.811) | (.626) | (.580) | (.563) | (.450) | (.445) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.811) | (.626) | (.580) | (.563) | (.450) | (.445) |
Net Asset Value, End of Period | $54.47 | $50.17 | $37.58 | $37.34 | $54.66 | $50.36 |
Total Return2 | 10.36% | 35.21% | 2.05% | –30.51% | 9.42% | 26.03% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $259 | $237 | $131 | $108 | $148 | $115 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.19% | 0.19% | 0.24% | 0.28% | 0.25% | 0.26% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.55% | 1.48% | 1.71% | 1.81% | 0.99% | 1.16% |
Portfolio Turnover Rate3 | 11% | 11% | 16% | 25% | 11% | 15% |
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 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 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 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $100.41 | $75.20 | $74.74 | $109.54 | $100.92 | $80.90 |
Investment Operations | ||||||
Net Investment Income | .815 | 1.417 | 1.312 | 1.191 | 1.059 | 1.0801 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 9.423 | 25.040 | .341 | (34.808) | 8.501 | 19.869 |
Total from Investment Operations | 10.238 | 26.457 | 1.653 | (33.617) | 9.560 | 20.949 |
Distributions | ||||||
Dividends from Net Investment Income | (1.618) | (1.247) | (1.193) | (1.183) | (.940) | (.929) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.618) | (1.247) | (1.193) | (1.183) | (.940) | (.929) |
Net Asset Value, End of Period | $109.03 | $100.41 | $75.20 | $74.74 | $109.54 | $100.92 |
Total Return | 10.35% | 35.22% | 2.05% | -30.49% | 9.47% | 26.09% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $1,957 | $1,782 | $1,041 | $869 | $845 | $656 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.19% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.55% | 1.48% | 1.71% | 1.84% | 1.04% | 1.20% |
Portfolio Turnover Rate2 | 11% | 11% | 16% | 25% | 11% | 15% |
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $315,000 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 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).
31
Energy Index Fund
The following table summarizes the market value of the fund’s investments as of February 29, 2012, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 2,216,176 | — | 155 |
Temporary Cash Investments | 9,645 | — | — |
Total | 2,225,821 | — | 155 |
The following table summarizes changes in investments valued based on Level 3 inputs during the six months ended February 29, 2012. Transfers into or out of Level 3 are recognized based on values as of the date of transfer.
Investments in | |
Common Stocks | |
Amount Valued Based on Level 3 Inputs | ($000) |
Balance as of August 31, 2011 | 11 |
Sales | (11) |
Transfers into Level 3 | 155 |
Balance as of February 29, 2012 | 155 |
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 29, 2012, the fund realized $20,886,000 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, 2011, the fund had available capital loss carryforwards totaling $121,837,000 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, $66,923,000 through August 31, 2018, and $30,699,000 through August 31, 2019. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $1,903,575,000. Net unrealized appreciation of investment securities for tax purposes was $322,401,000, consisting of unrealized gains of $398,371,000 on securities that had risen in value since their purchase and $75,970,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $205,220,000 of investment securities and sold $188,149,000 of investment securities, other than temporary cash investments.
32
Energy Index Fund
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 19,683 | 390 | 102,400 | 1,964 |
Issued in Lieu of Cash Distributions | 2,872 | 58 | 1,734 | 35 |
Redeemed1 | (19,718) | (406) | (39,841) | (776) |
Net Increase (Decrease)—Admiral Shares | 2,837 | 42 | 64,293 | 1,223 |
ETF Shares | ||||
Issued | 95,711 | 903 | 644,467 | 6,203 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (66,885) | (700) | (234,921) | (2,300) |
Net Increase (Decrease)—ETF Shares | 28,826 | 203 | 409,546 | 3,903 |
1 Net of redemption fees for fiscal 2012 and 2011 of $155,000 and $212,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
33
Financials Index Fund
Fund Profile
As of February 29, 2012
Portfolio Characteristics | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Stocks | 508 | 506 | 2,485 | |
Median Market Cap | $20.4B | $20.4B | $34.8B | |
Price/Earnings Ratio | 15.8x | 15.8x | 16.4x | |
Price/Book Ratio | 1.1x | 1.1x | 2.3x | |
Yield3 | 2.3% | 2.0% | ||
Admiral Shares | 2.1% | |||
ETF Shares | 2.1% | |||
Return on Equity | 9.1% | 9.1% | 18.2% | |
Earnings Growth Rate | –1.0% | –1.0% | 7.7% | |
Foreign Holdings | 0.0% | 0.0% | 0.0% | |
Turnover Rate4 | 8% | — | — | |
Expense Ratio5 | — | — | ||
Admiral Shares | 0.23% | |||
ETF Shares | 0.23% | |||
Short-Term Reserves | 0.1% | — | — | |
Volatility Measures6 | ||||
Fund Versus | Fund Versus | |||
Spliced Index7 | Broad Index2 | |||
R-Squared | 1.00 | 0.86 | ||
Beta | 1.00 | 1.33 |
Subindustry Diversification | |
(% of equity exposure) | |
Asset Management & Custody Banks | 7.8% |
Consumer Finance | 5.0 |
Diversified Banks | 9.7 |
Diversified Financial Services | 14.6 |
Diversified REITs | 1.0 |
Insurance Brokers | 2.0 |
Investment Banking & Brokerage | 5.2 |
Life & Health Insurance | 5.8 |
Mortgage REITs | 2.1 |
Multi-line Insurance | 2.3 |
Office REITs | 2.8 |
Property & Casualty Insurance | 10.2 |
Regional Banks | 9.7 |
Reinsurance | 1.5 |
Residential REITs | 3.0 |
Retail REITs | 4.5 |
Specialized Finance | 2.5 |
Specialized REITs | 6.9 |
Thrifts & Mortgage Finance | 1.4 |
Other Financials | 2.0 |
Ten Largest Holdings8 (% of total net assets) | |
Wells Fargo & Co. | 6.9% |
JPMorgan Chase & Co. | 6.6 |
Citigroup Inc. | 4.3 |
Bank of America Corp. | 3.6 |
Berkshire Hathaway Inc. Class B | 3.1 |
US Bancorp | 2.5 |
American Express Co. | 2.4 |
Goldman Sachs Group Inc. | 2.4 |
MetLife Inc. | 1.8 |
Simon Property Group Inc. | 1.8 |
Top Ten | 35.4% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.18% for Admiral Shares and 0.18% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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.
34
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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx37x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | –14.35% | –13.89% | –5.25% | |
Net Asset Value | –14.35 | –13.86 | –5.25 | |
Admiral Shares3 | 2/4/2004 | –14.39 | –13.88 | –5.09 |
1 Six months ended February 29, 2012.
2 Spliced 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.
35
Financials Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
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%) | |||
Capital Markets (13.1%) | |||
Goldman Sachs Group Inc. | 152,699 | 17,582 | |
Bank of New York | |||
Mellon Corp. | 396,068 | 8,757 | |
Morgan Stanley | 472,184 | 8,754 | |
BlackRock Inc. | 34,117 | 6,789 | |
State Street Corp. | 160,594 | 6,782 | |
Franklin Resources Inc. | 50,438 | 5,946 | |
T. Rowe Price Group Inc. | 82,506 | 5,081 | |
Charles Schwab Corp. | 352,573 | 4,894 | |
Ameriprise Financial Inc. | 73,888 | 4,120 | |
Invesco Ltd. | 147,317 | 3,649 | |
Northern Trust Corp. | 70,850 | 3,146 | |
* | Affiliated Managers | ||
Group Inc. | 16,950 | 1,803 | |
TD Ameritrade | |||
Holding Corp. | 71,739 | 1,339 | |
Raymond James | |||
Financial Inc. | 37,631 | 1,331 | |
Ares Capital Corp. | 71,196 | 1,187 | |
Legg Mason Inc. | 43,294 | 1,186 | |
Eaton Vance Corp. | 38,448 | 1,108 | |
* | American Capital Ltd. | 111,597 | 994 |
SEI Investments Co. | 47,287 | 934 | |
* | E*Trade Financial Corp. | 92,634 | 892 |
Waddell & Reed | |||
Financial Inc. Class A | 27,851 | 879 | |
Jefferies Group Inc. | 42,284 | 707 | |
Federated Investors Inc. | |||
Class B | 30,567 | 626 | |
* | Stifel Financial Corp. | 16,562 | 622 |
Janus Capital Group Inc. | 60,481 | 533 | |
Apollo Investment Corp. | 63,539 | 446 | |
Prospect Capital Corp. | 39,668 | 429 | |
* | Knight Capital Group Inc. | ||
Class A | 30,195 | 400 | |
Greenhill & Co. Inc. | 8,535 | 375 | |
* | LPL Investment | ||
Holdings Inc. | 8,769 | 299 | |
Fifth Street Finance Corp. | 26,764 | 265 | |
Solar Capital Ltd. | 11,245 | 259 | |
* | Financial Engines Inc. | 10,870 | 251 |
BlackRock Kelso | |||
Capital Corp. | 22,511 | 219 | |
Evercore Partners Inc. | |||
Class A | 7,869 | 214 | |
Cohen & Steers Inc. | 6,263 | 206 | |
PennantPark | |||
Investment Corp. | 17,822 | 197 | |
BGC Partners Inc. Class A | 26,262 | 185 | |
Main Street Capital Corp. | 7,834 | 183 | |
Walter Investment | |||
Management Corp. | 8,847 | 180 | |
KBW Inc. | 10,872 | 180 | |
Triangle Capital Corp. | 8,646 | 169 |
Market | |||
Value• | |||
Shares | ($000) | ||
Hercules Technology | |||
Growth Capital Inc. | 15,933 | 164 | |
* | Virtus Investment | ||
Partners Inc. | 1,958 | 156 | |
* | HFF Inc. Class A | 10,725 | 155 |
* | Investment Technology | ||
Group Inc. | 13,359 | 154 | |
Duff & Phelps Corp. | |||
Class A | 10,737 | 148 | |
* | Piper Jaffray Cos. | 5,867 | 144 |
MCG Capital Corp. | 25,560 | 123 | |
* | INTL. FCStone Inc. | 5,213 | 118 |
Epoch Holding Corp. | 4,721 | 118 | |
* | Safeguard Scientifics Inc. | 6,882 | 116 |
TICC Capital Corp. | 10,818 | 106 | |
* | ICG Group Inc. | 12,015 | 104 |
MVC Capital Inc. | 7,645 | 96 | |
GFI Group Inc. | 24,416 | 94 | |
Golub Capital BDC Inc. | 5,752 | 86 | |
Capital Southwest Corp. | 925 | 86 | |
Calamos Asset | |||
Management Inc. Class A | 6,804 | 83 | |
* | Ladenburg Thalmann | ||
Financial Services Inc. | 36,388 | 74 | |
GAMCO Investors Inc. | 1,562 | 72 | |
Westwood Holdings | |||
Group Inc. | 1,769 | 68 | |
* | Cowen Group Inc. Class A | 21,418 | 60 |
Oppenheimer Holdings Inc. | |||
Class A | 3,273 | 55 | |
SWS Group Inc. | 9,774 | 55 | |
Artio Global Investors Inc. | |||
Class A | 10,732 | 51 | |
THL Credit Inc. | 3,301 | 42 | |
* | Gleacher & Co. Inc. | 26,038 | 40 |
* | FBR & Co. | 15,523 | 39 |
Pzena Investment | |||
Management Inc. Class A | 3,043 | 16 | |
96,721 | |||
Commercial Banks (19.4%) | |||
Wells Fargo & Co. | 1,636,328 | 51,201 | |
US Bancorp | 623,251 | 18,324 | |
PNC Financial Services | |||
Group Inc. | 171,850 | 10,229 | |
BB&T Corp. | 227,740 | 6,661 | |
Fifth Third Bancorp | 300,499 | 4,090 | |
SunTrust Banks Inc. | 175,447 | 4,028 | |
M&T Bank Corp. | 36,959 | 3,017 | |
* | CIT Group Inc. | 62,341 | 2,538 |
KeyCorp | 311,259 | 2,521 | |
Regions Financial Corp. | 411,156 | 2,368 | |
Comerica Inc. | 65,375 | 1,941 | |
Huntington Bancshares Inc. | 280,735 | 1,641 | |
Zions Bancorporation | 59,929 | 1,139 | |
East West Bancorp Inc. | 48,685 | 1,077 | |
First Niagara Financial | |||
Group Inc. | 112,594 | 1,076 |
Market | |||
Value• | |||
Shares | ($000) | ||
Cullen/Frost Bankers Inc. | 17,942 | 1,013 | |
Commerce Bancshares Inc. | 25,352 | 979 | |
Hancock Holding Co. | 26,371 | 895 | |
* | Signature Bank | 14,957 | 888 |
* | SVB Financial Group | 14,067 | 834 |
* | First Republic Bank | 27,582 | 827 |
First Horizon National Corp. | 85,370 | 802 | |
Associated Banc-Corp | 57,070 | 756 | |
City National Corp. | 15,576 | 732 | |
Valley National Bancorp | 57,673 | 722 | |
Bank of Hawaii Corp. | 15,356 | 706 | |
Prosperity Bancshares Inc. | 14,496 | 634 | |
* | Popular Inc. | 333,683 | 634 |
Fulton Financial Corp. | 64,635 | 633 | |
CapitalSource Inc. | 85,291 | 576 | |
FirstMerit Corp. | 35,588 | 571 | |
Synovus Financial Corp. | 256,046 | 543 | |
Susquehanna | |||
Bancshares Inc. | 57,916 | 537 | |
FNB Corp. | 45,191 | 533 | |
Webster Financial Corp. | 24,152 | 528 | |
TCF Financial Corp. | 49,017 | 528 | |
Iberiabank Corp. | 9,771 | 518 | |
BOK Financial Corp. | 8,958 | 481 | |
Trustmark Corp. | 19,832 | 468 | |
Umpqua Holdings Corp. | 37,314 | 460 | |
Westamerica Bancorporation | 9,218 | 437 | |
UMB Financial Corp. | 10,427 | 434 | |
United Bankshares Inc. | 14,515 | 425 | |
* | Texas Capital | ||
Bancshares Inc. | 12,164 | 412 | |
Cathay General Bancorp | 24,430 | 399 | |
Wintrust Financial Corp. | 11,650 | 393 | |
Old National Bancorp | 30,794 | 372 | |
National Penn | |||
Bancshares Inc. | 41,758 | 365 | |
MB Financial Inc. | 16,939 | 337 | |
International | |||
Bancshares Corp. | 17,591 | 334 | |
Community Bank | |||
System Inc. | 12,041 | 329 | |
BancorpSouth Inc. | 27,189 | 322 | |
Glacier Bancorp Inc. | 23,310 | 322 | |
First Citizens | |||
BancShares Inc. Class A | 1,772 | 312 | |
First Financial Bancorp | 18,838 | 308 | |
PrivateBancorp Inc. Class A | 20,952 | 304 | |
CVB Financial Corp. | 27,454 | 296 | |
First Financial | |||
Bankshares Inc. | 8,244 | 282 | |
First Midwest Bancorp Inc. | 24,044 | 278 | |
Park National Corp. | 4,023 | 277 | |
Columbia Banking | |||
System Inc. | 12,741 | 269 | |
Bank of the Ozarks Inc. | 8,839 | 259 | |
* | BBCN Bancorp Inc. | 24,423 | 250 |
NBT Bancorp Inc. | 10,978 | 239 |
36
Financials Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
* | Investors Bancorp Inc. | 16,307 | 237 |
Boston Private Financial | |||
Holdings Inc. | 22,709 | 216 | |
PacWest Bancorp | 9,836 | 214 | |
First Commonwealth | |||
Financial Corp. | 33,932 | 203 | |
* | Western Alliance Bancorp | 24,546 | 200 |
Chemical Financial Corp. | 9,024 | 199 | |
* | Sterling Financial Corp. | 9,989 | 194 |
S&T Bancorp Inc. | 9,009 | 191 | |
Home Bancshares Inc. | 7,365 | 186 | |
Independent Bank Corp. | 6,635 | 182 | |
* | Citizens Republic | ||
Bancorp Inc. | 13,001 | 178 | |
* | Pinnacle Financial | ||
Partners Inc. | 10,724 | 178 | |
City Holding Co. | 4,904 | 168 | |
Oriental Financial Group Inc. | 14,224 | 167 | |
WesBanco Inc. | 8,118 | 158 | |
* | State Bank Financial Corp. | 9,434 | 153 |
SCBT Financial Corp. | 4,610 | 143 | |
Sandy Spring Bancorp Inc. | 7,848 | 142 | |
Community Trust | |||
Bancorp Inc. | 4,328 | 133 | |
Lakeland Financial Corp. | 5,127 | 129 | |
Renasant Corp. | 8,395 | 127 | |
Simmons First National Corp. | |||
Class A | 4,801 | 126 | |
* | Central Pacific Financial Corp. | 8,939 | 124 |
First Busey Corp. | 24,571 | 119 | |
1st Source Corp. | 4,750 | 117 | |
Tompkins Financial Corp. | 2,790 | 115 | |
First Financial Corp. | 3,432 | 110 | |
Washington Trust | |||
Bancorp Inc. | 4,641 | 109 | |
Southside Bancshares Inc. | 4,966 | 106 | |
* | West Coast Bancorp | 6,041 | 104 |
TowneBank | 7,955 | 103 | |
Union First Market | |||
Bankshares Corp. | 7,046 | 98 | |
Cardinal Financial Corp. | 8,969 | 96 | |
SY Bancorp Inc. | 4,329 | 94 | |
Sterling Bancorp | 10,333 | 92 | |
Bancfirst Corp. | 2,190 | 90 | |
StellarOne Corp. | 7,696 | 90 | |
* | Wilshire Bancorp Inc. | 20,217 | 88 |
Camden National Corp. | 2,463 | 87 | |
Arrow Financial Corp. | 3,599 | 87 | |
* | Eagle Bancorp Inc. | 5,573 | 86 |
Republic Bancorp Inc. | |||
Class A | 3,242 | 85 | |
Hudson Valley Holding Corp. | 5,155 | 84 | |
Univest Corp. of Pennsylvania | 5,179 | 82 | |
* | United Community Banks Inc. | 8,925 | 80 |
First Connecticut Bancorp Inc. | 5,931 | 77 | |
Trico Bancshares | 4,471 | 72 | |
Lakeland Bancorp Inc. | 7,765 | 70 | |
First Interstate | |||
Bancsystem Inc. | 5,170 | 70 | |
Great Southern Bancorp Inc. | 3,170 | 70 | |
CoBiz Financial Inc. | 11,409 | 67 | |
Heartland Financial USA Inc. | 3,896 | 61 | |
First Community | |||
Bancshares Inc. | 4,905 | 61 | |
* | Southwest Bancorp Inc. | 6,171 | 53 |
First Bancorp | 5,210 | 52 | |
* | Suffolk Bancorp | 3,376 | 41 |
Capital City Bank Group Inc. | 3,424 | 27 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Hampton Roads | ||
Bankshares Inc. | 3,437 | 9 | |
143,404 | |||
Consumer Finance (5.1%) | |||
American Express Co. | 341,437 | 18,059 | |
Capital One Financial Corp. | 162,760 | 8,236 | |
Discover Financial Services | 179,601 | 5,390 | |
SLM Corp. | 166,816 | 2,629 | |
* | Ezcorp Inc. Class A | 14,611 | 460 |
Cash America | |||
International Inc. | 9,596 | 445 | |
* | First Cash Financial | ||
Services Inc. | 9,067 | 383 | |
* | Credit Acceptance Corp. | 3,282 | 316 |
* | World Acceptance Corp. | 4,854 | 308 |
Nelnet Inc. Class A | 9,574 | 253 | |
* | DFC Global Corp. | 13,361 | 239 |
* | Green Dot Corp. Class A | 6,843 | 219 |
Advance America Cash | |||
Advance Centers Inc. | 16,078 | 167 | |
* | Netspend Holdings Inc. | 11,841 | 102 |
* | First Marblehead Corp. | 19,927 | 24 |
37,230 | |||
Diversified Financial Services (17.3%) | |||
JPMorgan Chase & Co. | 1,241,064 | 48,699 | |
Citigroup Inc. | 954,937 | 31,819 | |
Bank of America Corp. | 3,310,522 | 26,385 | |
CME Group Inc. | 20,623 | 5,970 | |
* | IntercontinentalExchange | ||
Inc. | 23,651 | 3,263 | |
NYSE Euronext | 85,606 | 2,548 | |
Moody’s Corp. | 65,170 | 2,516 | |
Leucadia National Corp. | 67,645 | 1,927 | |
* | MSCI Inc. Class A | 39,220 | 1,388 |
* | NASDAQ OMX Group Inc. | 40,341 | 1,063 |
CBOE Holdings Inc. | 29,434 | 812 | |
MarketAxess Holdings Inc. | 9,454 | 313 | |
* | PHH Corp. | 18,498 | 252 |
Interactive Brokers | |||
Group Inc. | 14,993 | 238 | |
* | PICO Holdings Inc. | 6,714 | 148 |
* | NewStar Financial Inc. | 8,456 | 83 |
Life Partners Holdings Inc. | 3,346 | 14 | |
127,438 | |||
Insurance (21.8%) | |||
* | Berkshire Hathaway Inc. | ||
Class B | 296,372 | 23,250 | |
MetLife Inc. | 345,467 | 13,318 | |
Prudential Financial Inc. | 153,521 | 9,389 | |
ACE Ltd. | 109,893 | 7,880 | |
Travelers Cos. Inc. | 134,737 | 7,811 | |
Aflac Inc. | 152,552 | 7,208 | |
Chubb Corp. | 90,747 | 6,167 | |
Marsh & | |||
McLennan Cos. Inc. | 175,978 | 5,491 | |
Allstate Corp. | 165,062 | 5,188 | |
* | American International | ||
Group Inc. | 155,077 | 4,531 | |
Aon Corp. | 94,949 | 4,445 | |
Progressive Corp. | 191,277 | 4,097 | |
Loews Corp. | 103,560 | 4,053 | |
Hartford Financial Services | |||
Group Inc. | 138,383 | 2,866 | |
Principal Financial Group Inc. | 99,603 | 2,755 | |
Lincoln National Corp. | 98,468 | 2,446 | |
Unum Group | 95,412 | 2,199 | |
XL Group plc Class A | 104,741 | 2,179 | |
Willis Group Holdings plc | 53,923 | 1,935 |
Market | |||
Value• | |||
Shares | ($000) | ||
Cincinnati Financial Corp. | 50,427 | 1,774 | |
* | Arch Capital Group Ltd. | 43,910 | 1,627 |
Torchmark Corp. | 33,283 | 1,612 | |
Everest Re Group Ltd. | 17,651 | 1,551 | |
* | Genworth Financial Inc. | ||
Class A | 159,669 | 1,451 | |
Reinsurance Group of | |||
America Inc. Class A | 24,095 | 1,390 | |
WR Berkley Corp. | 37,986 | 1,358 | |
PartnerRe Ltd. | 20,883 | 1,325 | |
Assurant Inc. | 30,017 | 1,275 | |
Arthur J Gallagher & Co. | 37,047 | 1,264 | |
Axis Capital Holdings Ltd. | 40,543 | 1,251 | |
RenaissanceRe Holdings Ltd. | 16,975 | 1,222 | |
* | Markel Corp. | 2,981 | 1,216 |
Fidelity National Financial Inc. | |||
Class A | 67,919 | 1,172 | |
White Mountains Insurance | |||
Group Ltd. | 2,222 | 1,103 | |
HCC Insurance Holdings Inc. | 34,777 | 1,062 | |
Transatlantic Holdings Inc. | 16,099 | 976 | |
Brown & Brown Inc. | 39,831 | 941 | |
American Financial | |||
Group Inc. | 24,365 | 912 | |
Assured Guaranty Ltd. | 53,572 | 900 | |
Old Republic | |||
International Corp. | 79,692 | 865 | |
ProAssurance Corp. | 9,379 | 823 | |
Allied World Assurance Co. | |||
Holdings AG | 11,867 | 783 | |
Protective Life Corp. | 27,409 | 761 | |
Erie Indemnity Co. Class A | 9,420 | 717 | |
Delphi Financial Group Inc. | 16,064 | 716 | |
Validus Holdings Ltd. | 20,872 | 636 | |
Alleghany Corp. | 1,947 | 632 | |
Aspen Insurance | |||
Holdings Ltd. | 23,052 | 612 | |
Hanover Insurance | |||
Group Inc. | 14,719 | 601 | |
* | CNO Financial Group Inc. | 80,692 | 599 |
StanCorp Financial Group Inc. 14,509 | 577 | ||
Alterra Capital Holdings Ltd. | 23,983 | 551 | |
First American Financial Corp. 34,086 | 525 | ||
* | MBIA Inc. | 47,547 | 513 |
Kemper Corp. | 16,569 | 474 | |
Endurance Specialty | |||
Holdings Ltd. | 11,783 | 453 | |
Platinum Underwriters | |||
Holdings Ltd. | 12,115 | 431 | |
RLI Corp. | 6,114 | 428 | |
Primerica Inc. | 15,815 | 396 | |
Mercury General Corp. | 8,832 | 379 | |
Montpelier Re Holdings Ltd. | 19,885 | 343 | |
Argo Group International | |||
Holdings Ltd. | 10,222 | 305 | |
Selective Insurance | |||
Group Inc. | 17,459 | 300 | |
Tower Group Inc. | 12,800 | 295 | |
* | Enstar Group Ltd. | 2,889 | 280 |
Symetra Financial Corp. | 26,812 | 267 | |
* | Greenlight Capital Re Ltd. | ||
Class A | 9,949 | 234 | |
Amtrust Financial | |||
Services Inc. | 8,646 | 234 | |
Harleysville Group Inc. | 3,999 | 226 | |
Horace Mann Educators Corp. 12,886 | 223 | ||
American Equity Investment | |||
Life Holding Co. | 18,377 | 222 |
37
Financials Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Infinity Property & | |||
Casualty Corp. | 3,969 | 218 | |
* | National Financial | ||
Partners Corp. | 13,949 | 213 | |
Employers Holdings Inc. | 11,299 | 195 | |
American National | |||
Insurance Co. | 2,641 | 190 | |
* | Navigators Group Inc. | 3,914 | 184 |
Safety Insurance Group Inc. | 4,107 | 175 | |
FBL Financial Group Inc. | |||
Class A | 4,947 | 168 | |
Flagstone Reinsurance | |||
Holdings SA | 19,620 | 155 | |
Meadowbrook Insurance | |||
Group Inc. | 16,312 | 155 | |
Maiden Holdings Ltd. | 17,540 | 152 | |
United Fire Group Inc. | 7,241 | 145 | |
* | Citizens Inc. | 12,886 | 138 |
* | AMERISAFE Inc. | 5,884 | 133 |
* | Hilltop Holdings Inc. | 14,226 | 117 |
* | eHealth Inc. | 7,042 | 106 |
National Western Life | |||
Insurance Co. Class A | 766 | 104 | |
OneBeacon Insurance | |||
Group Ltd. Class A | 6,741 | 103 | |
* | Global Indemnity plc | 4,502 | 86 |
* | Phoenix Cos. Inc. | 39,224 | 81 |
State Auto Financial Corp. | 5,464 | 76 | |
Stewart Information | |||
Services Corp. | 5,801 | 76 | |
Presidential Life Corp. | 6,225 | 67 | |
Baldwin & Lyons Inc. | 2,643 | 56 | |
National Interstate Corp. | 2,275 | 55 | |
Kansas City Life Insurance Co. | 1,430 | 46 | |
Donegal Group Inc. Class A | 2,610 | 36 | |
EMC Insurance Group Inc. | 1,685 | 35 | |
Crawford & Co. Class B | 4,125 | 18 | |
Crawford & Co. Class A | 5,308 | 18 | |
161,292 | |||
Real Estate Investment Trusts (21.2%) | |||
Simon Property Group Inc. | 96,028 | 13,010 | |
American Tower | |||
Corporation | 128,560 | 8,045 | |
Public Storage | 47,567 | 6,377 | |
Equity Residential | 96,945 | 5,515 | |
Annaly Capital | |||
Management Inc. | 316,931 | 5,267 | |
HCP Inc. | 133,231 | 5,263 | |
Ventas Inc. | 94,057 | 5,260 | |
ProLogis Inc. | 149,683 | 5,038 | |
Boston Properties Inc. | 48,241 | 4,899 | |
Vornado Realty Trust | 54,283 | 4,436 | |
AvalonBay Communities Inc. | 31,108 | 4,034 | |
Health Care REIT Inc. | 68,680 | 3,739 | |
Weyerhaeuser Co. | 174,832 | 3,652 | |
Host Hotels & Resorts Inc. | 230,743 | 3,641 | |
Digital Realty Trust Inc. | 34,286 | 2,486 | |
Kimco Realty Corp. | 132,942 | 2,443 | |
Macerich Co. | 42,909 | 2,317 | |
American Capital | |||
Agency Corp. | 73,258 | 2,250 | |
General Growth | |||
Properties Inc. | 137,476 | 2,237 | |
SL Green Realty Corp. | 28,176 | 2,143 | |
Plum Creek Timber Co. Inc. | 52,593 | 2,059 | |
Federal Realty Investment | |||
Trust | 20,787 | 1,982 | |
UDR Inc. | 71,212 | 1,782 | |
Rayonier Inc. | 39,825 | 1,773 |
Market | ||
Value• | ||
Shares | ($000) | |
Realty Income Corp. | 43,240 | 1,595 |
Camden Property Trust | 25,313 | 1,569 |
Essex Property Trust Inc. | 11,156 | 1,562 |
Alexandria Real Estate | ||
Equities Inc. | 20,163 | 1,445 |
Taubman Centers Inc. | 18,830 | 1,301 |
Liberty Property Trust | 37,656 | 1,277 |
Regency Centers Corp. | 29,244 | 1,251 |
BRE Properties Inc. | 24,625 | 1,193 |
Duke Realty Corp. | 82,704 | 1,148 |
Senior Housing | ||
Properties Trust | 53,204 | 1,139 |
Chimera Investment Corp. | 332,272 | 1,020 |
DDR Corp. | 71,872 | 1,016 |
Hospitality Properties Trust | 40,382 | 999 |
Piedmont Office Realty | ||
Trust Inc. Class A | 55,921 | 985 |
Apartment Investment & | ||
Management Co. | 39,518 | 982 |
American Campus | ||
Communities Inc. | 23,240 | 956 |
Kilroy Realty Corp. | 21,688 | 951 |
Weingarten Realty Investors | 37,351 | 930 |
BioMed Realty Trust Inc. | 49,708 | 916 |
Home Properties Inc. | 15,853 | 914 |
National Retail | ||
Properties Inc. | 33,673 | 897 |
MFA Financial Inc. | 115,876 | 846 |
Equity Lifestyle | ||
Properties Inc. | 12,619 | 839 |
Douglas Emmett Inc. | 39,469 | 832 |
Tanger Factory Outlet | ||
Centers | 28,369 | 831 |
Mack-Cali Realty Corp. | 28,193 | 806 |
CBL & Associates | ||
Properties Inc. | 45,554 | 803 |
Mid-America Apartment | ||
Communities Inc. | 12,389 | 773 |
Extra Space Storage Inc. | 29,155 | 769 |
Highwoods Properties Inc. | 23,778 | 761 |
Post Properties Inc. | 16,997 | 742 |
LaSalle Hotel Properties | 27,507 | 734 |
Hatteras Financial Corp. | 25,047 | 713 |
Two Harbors | ||
Investment Corp. | 68,236 | 701 |
Entertainment | ||
Properties Trust | 15,138 | 689 |
Omega Healthcare | ||
Investors Inc. | 33,598 | 684 |
Invesco Mortgage | ||
Capital Inc. | 37,309 | 639 |
Washington REIT | 21,514 | 637 |
Starwood Property | ||
Trust Inc. | 30,352 | 599 |
Corporate Office | ||
Properties Trust | 23,208 | 569 |
Colonial Properties Trust | 26,784 | 550 |
DiamondRock Hospitality Co. | 54,504 | 543 |
RLJ Lodging Trust | 30,898 | 541 |
Healthcare Realty Trust Inc. | 25,148 | 520 |
CommonWealth REIT | 27,213 | 506 |
Brandywine Realty Trust | 44,091 | 477 |
CYS Investments Inc. | 34,998 | 475 |
DuPont Fabros | ||
Technology Inc. | 20,308 | 465 |
DCT Industrial Trust Inc. | 79,683 | 451 |
CubeSmart | 38,120 | 430 |
Sovran Self Storage Inc. | 8,922 | 424 |
EastGroup Properties Inc. | 8,682 | 418 |
Market | |||
Value• | |||
Shares | ($000) | ||
Medical Properties Trust Inc. | 42,725 | 415 | |
PS Business Parks Inc. | 6,512 | 406 | |
Potlatch Corp. | 12,967 | 400 | |
Lexington Realty Trust | 45,999 | 398 | |
Equity One Inc. | 20,398 | 388 | |
Capstead Mortgage Corp. | 27,280 | 363 | |
National Health Investors Inc. | 7,620 | 359 | |
Pebblebrook Hotel Trust | 16,492 | 353 | |
* | Sunstone Hotel | ||
Investors Inc. | 38,520 | 346 | |
Glimcher Realty Trust | 34,747 | 344 | |
Sun Communities Inc. | 8,008 | 331 | |
* | First Industrial Realty | ||
Trust Inc. | 26,749 | 316 | |
ARMOUR Residential | |||
REIT Inc. | 43,967 | 311 | |
* | Strategic Hotels & | ||
Resorts Inc. | 48,809 | 304 | |
LTC Properties Inc. | 9,718 | 300 | |
Education Realty Trust Inc. | 29,115 | 299 | |
Redwood Trust Inc. | 25,413 | 294 | |
Acadia Realty Trust | 13,732 | 291 | |
Government Properties | |||
Income Trust | 12,190 | 284 | |
Anworth Mortgage | |||
Asset Corp. | 42,708 | 278 | |
CreXus Investment Corp. | 23,650 | 264 | |
Hersha Hospitality Trust | |||
Class A | 50,349 | 253 | |
Alexander’s Inc. | 662 | 251 | |
Inland Real Estate Corp. | 28,756 | 249 | |
Franklin Street | |||
Properties Corp. | 23,775 | 245 | |
Pennsylvania REIT | 17,492 | 235 | |
American Assets Trust Inc. | 10,764 | 232 | |
Cousins Properties Inc. | 30,749 | 227 | |
First Potomac Realty Trust | 16,484 | 218 | |
Investors Real Estate Trust | 26,355 | 201 | |
Associated Estates | |||
Realty Corp. | 13,470 | 201 | |
NorthStar Realty | |||
Finance Corp. | 36,179 | 193 | |
Retail Opportunity | |||
Investments Corp. | 16,063 | 187 | |
Newcastle Investment Corp. | 33,803 | 184 | |
Colony Financial Inc. | 10,620 | 177 | |
Chesapeake Lodging Trust | 9,743 | 172 | |
* | iStar Financial Inc. | 24,074 | 170 |
Sabra Health Care REIT Inc. | 11,830 | 169 | |
PennyMac Mortgage | |||
Investment Trust | 9,263 | 167 | |
Dynex Capital Inc. | 16,375 | 156 | |
Ashford Hospitality Trust Inc. | 18,081 | 153 | |
Saul Centers Inc. | 3,981 | 151 | |
Getty Realty Corp. | 8,822 | 150 | |
Universal Health Realty | |||
Income Trust | 3,963 | 150 | |
* | FelCor Lodging Trust Inc. | 37,990 | 146 |
Coresite Realty Corp. | 6,565 | 140 | |
Ramco-Gershenson | |||
Properties Trust | 12,323 | 136 | |
Resource Capital Corp. | 23,379 | 135 | |
Urstadt Biddle Properties Inc. | |||
Class A | 6,681 | 127 | |
Excel Trust Inc. | 9,779 | 117 | |
Winthrop Realty Trust | 9,896 | 113 | |
Campus Crest | |||
Communities Inc. | 10,271 | 109 | |
Hudson Pacific Properties Inc. | 6,661 | 102 |
38
Financials Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Kite Realty Group Trust | 19,921 | 98 | |
Cedar Realty Trust Inc. | 18,673 | 89 | |
Monmouth Real Estate | |||
Investment Corp. Class A | 9,465 | 89 | |
CapLease Inc. | 21,902 | 88 | |
Apollo Commercial Real | |||
Estate Finance Inc. | 5,832 | 87 | |
Summit Hotel Properties Inc. | 9,058 | 83 | |
* | Rouse Properties Inc. | 5,256 | 77 |
Parkway Properties Inc. | 7,394 | 74 | |
Cogdell Spencer Inc. | 16,222 | 69 | |
156,875 | |||
Real Estate Management & Development (0.7%) | |||
* | CBRE Group Inc. Class A | 96,449 | 1,768 |
Jones Lang LaSalle Inc. | 14,156 | 1,152 | |
* | Forest City Enterprises Inc. | ||
Class A | 43,994 | 643 | |
* | Howard Hughes Corp. | 8,608 | 478 |
* | Altisource Portfolio | ||
Solutions SA | 6,413 | 413 | |
* | St. Joe Co. | 22,643 | 365 |
* | Forestar Group Inc. | 11,394 | 179 |
* | Tejon Ranch Co. | 4,813 | 141 |
Kennedy-Wilson Holdings Inc. | 10,167 | 138 | |
* | AV Homes Inc. | 2,908 | 30 |
5,307 | |||
Thrifts & Mortgage Finance (1.4%) | |||
New York Community | |||
Bancorp Inc. | 142,159 | 1,850 | |
People’s United | |||
Financial Inc. | 117,793 | 1,483 | |
Hudson City Bancorp Inc. | 155,089 | 1,062 | |
Capitol Federal Financial Inc. | 54,539 | 638 | |
Washington Federal Inc. | 35,669 | 578 | |
* | Ocwen Financial Corp. | 32,637 | 526 |
Northwest Bancshares Inc. | 31,847 | 402 | |
* | TFS Financial Corp. | 29,940 | 280 |
* | MGIC Investment Corp. | 58,301 | 263 |
BankUnited Inc. | 11,413 | 263 | |
Astoria Financial Corp. | 28,691 | 252 | |
Provident Financial | |||
Services Inc. | 17,930 | 246 | |
Brookline Bancorp Inc. | 22,667 | 208 |
Market | |||
Value• | |||
Shares | ($000) | ||
Oritani Financial Corp. | 14,183 | 185 | |
ViewPoint Financial Group | 11,599 | 174 | |
Radian Group Inc. | 43,025 | 163 | |
Trustco Bank Corp. NY | 30,232 | 162 | |
Dime Community | |||
Bancshares Inc. | 9,894 | 138 | |
Berkshire Hills Bancorp Inc. | 6,233 | 137 | |
Flushing Financial Corp. | 9,961 | 129 | |
Rockville Financial Inc. | 9,666 | 112 | |
* | Beneficial Mutual | ||
Bancorp Inc. | 12,178 | 110 | |
Provident New York Bancorp | 11,771 | 100 | |
Northfield Bancorp Inc. | 6,328 | 87 | |
WSFS Financial Corp. | 2,244 | 86 | |
United Financial Bancorp Inc. | 4,937 | 78 | |
Territorial Bancorp Inc. | 3,341 | 70 | |
* | Walker & Dunlop Inc. | 5,535 | 69 |
Westfield Financial Inc. | 8,517 | 68 | |
Bank Mutual Corp. | 15,033 | 59 | |
* | Doral Financial Corp. | 39,900 | 56 |
* | Flagstar Bancorp Inc. | 74,063 | 53 |
First Financial Holdings Inc. | 5,189 | 51 | |
Home Federal Bancorp Inc. | 4,724 | 47 | |
Roma Financial Corp. | 2,767 | 28 | |
10,213 | |||
Total Common Stocks | |||
(Cost $896,860) | 738,480 | ||
Temporary Cash Investments (0.1%) | |||
Money Market Fund (0.1%) | |||
1 | Vanguard Market | ||
Liquidity Fund, 0.111% | |||
(Cost $1,048) | 1,048,137 | 1,048 | |
Total Investments (100.1%) | |||
(Cost $897,908) | 739,528 | ||
Other Assets and Liabilities (–0.1%) | |||
Other Assets | 5,153 | ||
Liabilities | (5,897) | ||
(744) | |||
Net Assets (100%) | 738,784 |
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 1,152,294 |
Overdistributed Net Investment Income | (782) |
Accumulated Net Realized Losses | (254,348) |
Unrealized Appreciation (Depreciation) | (158,380) |
Net Assets | 738,784 |
Admiral Shares—Net Assets | |
Applicable to 4,573,497 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 70,982 |
Net Asset Value Per Share— | |
Admiral Shares | $15.52 |
ETF Shares—Net Assets | |
Applicable to 21,562,827 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 667,802 |
Net Asset Value Per Share— | |
ETF Shares | $30.97 |
• 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.
39
Financials Index Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 5,816 |
Security Lending | 3 |
Total Income | 5,819 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 47 |
Management and Administrative— | |
Admiral Shares | 44 |
Management and Administrative— | |
ETF Shares | 352 |
Marketing and Distribution— | |
Admiral Shares | 6 |
Marketing and Distribution— | |
ETF Shares | 77 |
Custodian Fees | 18 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 23 |
Total Expenses | 567 |
Net Investment Income | 5,252 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 2,726 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 62,524 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 70,502 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 5,252 | 10,947 |
Realized Net Gain (Loss) | 2,726 | (28,096) |
Change in Unrealized Appreciation (Depreciation) | 62,524 | 19,290 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 70,502 | 2,141 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (818) | (1,122) |
ETF Shares | (7,253) | (8,791) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (8,071) | (9,913) |
Capital Share Transactions | ||
Admiral Shares | 2,455 | (3,466) |
ETF Shares | 67,270 | 88,600 |
Net Increase (Decrease) from Capital Share Transactions | 69,725 | 85,134 |
Total Increase (Decrease) | 132,156 | 77,362 |
Net Assets | ||
Beginning of Period | 606,628 | 529,266 |
End of Period1 | 738,784 | 606,628 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($782,000) and $2,037,000.
See accompanying Notes, which are an integral part of the Financial Statements.
40
Financials Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $14.16 | $13.99 | $14.72 | $20.38 | $30.10 | $29.86 |
Investment Operations | ||||||
Net Investment Income | .123 | .263 | .209 | .389 | .7001 | .7701 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | 1.425 | .150 | (.715) | (5.596) | (9.699) | .145 |
Total from Investment Operations | 1.548 | .413 | (.506) | (5.207) | (8.999) | .915 |
Distributions | ||||||
Dividends from Net Investment Income | (.188) | (.243) | (.224) | (.453) | (.721) | (.675) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.188) | (.243) | (.224) | (.453) | (.721) | (.675) |
Net Asset Value, End of Period | $15.52 | $14.16 | $13.99 | $14.72 | $20.38 | $30.10 |
Total Return3 | 11.17% | 2.79% | –3.52% | –25.35% | –30.36% | 2.95% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $71 | $62 | $65 | $74 | $81 | $19 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.28% | 0.25% | 0.26% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.96% | 1.63% | 1.36% | 2.97% | 3.06% | 2.37% |
Portfolio Turnover Rate4 | 8% | 10% | 11% | 17% | 10% | 12% |
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, $.00, $.01, $.00, and $.00.
3 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees.
4 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
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $28.25 | $27.92 | $29.38 | $40.66 | $60.04 | $59.57 |
Investment Operations | ||||||
Net Investment Income | .245 | .526 | .417 | .784 | 1.4491 | 1.5571 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | 2.848 | .287 | (1.425) | (11.150) | (19.368) | .282 |
Total from Investment Operations | 3.093 | .813 | (1.008) | (10.366) | (17.919) | 1.839 |
Distributions | ||||||
Dividends from Net Investment Income | (.373) | (.483) | (.452) | (.914) | (1.461) | (1.369) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.373) | (.483) | (.452) | (.914) | (1.461) | (1.369) |
Net Asset Value, End of Period | $30.97 | $28.25 | $27.92 | $29.38 | $40.66 | $60.04 |
Total Return | 11.18% | 2.73% | –3.51% | –25.31% | –30.30% | 2.97% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $668 | $544 | $464 | $580 | $651 | $282 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.96% | 1.63% | 1.36% | 3.00% | 3.11% | 2.41% |
Portfolio Turnover Rate3 | 8% | 10% | 11% | 17% | 10% | 12% |
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, $.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.
42
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $109,000 to Vanguard (included in Other Assets), representing 0.01% 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 29, 2012, 100% of the market value of the fund’s investments was based on Level 1 inputs.
43
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 29, 2012, the fund realized $652,000 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, 2011, the fund had available capital loss carryforwards totaling $226,839,000 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, $129,445,000 through August 31, 2018, and $67,366,000 through August 31, 2019. In addition, the fund realized losses of $29,453,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $897,908,000. Net unrealized depreciation of investment securities for tax purposes was $158,380,000, consisting of unrealized gains of $32,371,000 on securities that had risen in value since their purchase and $190,751,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $122,362,000 of investment securities and sold $52,591,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 9,509 | 673 | 26,207 | 1,651 |
Issued in Lieu of Cash Distributions | 716 | 54 | 1,004 | 64 |
Redeemed1 | (7,770) | (564) | (30,677) | (1,938) |
Net Increase (Decrease)—Admiral Shares | 2,455 | 163 | (3,466) | (223) |
ETF Shares | ||||
Issued | 93,620 | 3,300 | 148,362 | 4,527 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (26,350) | (1,000) | (59,762) | (1,900) |
Net Increase (Decrease)—ETF Shares | 67,270 | 2,300 | 88,600 | 2,627 |
1 Net of redemption fees for fiscal 2012 and 2011 of $31,000 and $134,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
44
Health Care Index Fund
Fund Profile
As of February 29, 2012
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 298 | 296 | 2,485 |
Median Market Cap | $33.9B | $33.9B | $34.8B |
Price/Earnings Ratio | 18.0x | 18.0x | 16.4x |
Price/Book Ratio | 2.7x | 2.7x | 2.3x |
Yield3 | 2.0% | 2.0% | |
Admiral Shares | 1.8% | ||
ETF Shares | 1.8% | ||
Return on Equity | 18.7% | 18.7% | 18.2% |
Earnings Growth Rate | 9.5% | 9.5% | 7.7% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 10% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.19% | ||
ETF Shares | 0.19% | ||
Short-Term Reserves | 0.1% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.61 |
Beta | 1.00 | 0.60 |
Subindustry Diversification | ||
(% of equity exposure) | ||
Biotechnology | 14.0% | |
Health Care Distributors | 6.0 | |
Health Care Equipment | 3.5 | |
Health Care Facilities | 15.5 | |
Health Care Services | 1.6 | |
Health Care Supplies | 1.3 | |
Health Care Technology | 1.3 | |
Life Sciences Tools & Services | 4.8 | |
Managed Health Care | 8.6 | |
Pharmaceuticals | 43.4 |
Ten Largest Holdings8 (% of total net assets) | |
Johnson & Johnson | 10.5% |
Pfizer Inc. | 9.6 |
Merck & Co. Inc. | 6.9 |
Abbott Laboratories | 5.2 |
UnitedHealth Group Inc. | 3.5 |
Bristol-Myers Squibb Co. | 3.2 |
Amgen Inc. | 3.2 |
Eli Lilly & Co. | 2.4 |
Medtronic Inc. | 2.4 |
Gilead Sciences Inc. | 2.0 |
Top Ten | 48.9% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.18% for Admiral Shares and 0.18% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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.
45
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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx48x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | 10.55% | 3.31% | 3.89% | |
Net Asset Value | 10.57 | 3.31 | 3.89 | |
Admiral Shares3 | 2/5/2004 | 10.57 | 3.29 | 3.86 |
1 Six months ended February 29, 2012.
2 Spliced 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.
46
Health Care Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
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%) | |||
Biotechnology (14.0%) | |||
Amgen Inc. | 406,395 | 27,615 | |
* | Gilead Sciences Inc. | 384,724 | 17,505 |
* | Celgene Corp. | 227,431 | 16,676 |
* | Biogen Idec Inc. | 118,226 | 13,770 |
* | Alexion Pharmaceuticals Inc. | 94,765 | 7,935 |
* | Vertex Pharmaceuticals Inc. | 106,761 | 4,155 |
* | Regeneron | ||
Pharmaceuticals Inc. | 37,119 | 3,890 | |
* | BioMarin Pharmaceutical Inc. | 58,464 | 2,090 |
* | Cubist Pharmaceuticals Inc. | 31,538 | 1,352 |
* | Cepheid Inc. | 32,792 | 1,324 |
* | United Therapeutics Corp. | 26,989 | 1,288 |
* | Onyx Pharmaceuticals Inc. | 32,603 | 1,249 |
* | Amylin Pharmaceuticals Inc. | 67,386 | 1,152 |
* | Ariad Pharmaceuticals Inc. | 79,130 | 1,135 |
* | Medivation Inc. | 16,993 | 1,113 |
* | Myriad Genetics Inc. | 43,413 | 1,051 |
* | Incyte Corp. Ltd. | 58,268 | 988 |
* | Seattle Genetics Inc. | 50,090 | 925 |
* | Alkermes plc | 49,841 | 878 |
* | Dendreon Corp. | 76,318 | 859 |
* | Human Genome | ||
Sciences Inc. | 101,717 | 802 | |
* | Theravance Inc. | 41,502 | 776 |
* | Pharmacyclics Inc. | 28,161 | 709 |
* | Halozyme Therapeutics Inc. | 48,146 | 554 |
* | Immunogen Inc. | 39,247 | 540 |
* | Acorda Therapeutics Inc. | 20,147 | 527 |
* | Ironwood | ||
Pharmaceuticals Inc. | |||
Class A | 34,773 | 466 | |
PDL BioPharma Inc. | 70,842 | 452 | |
* | Isis Pharmaceuticals Inc. | 47,982 | 437 |
* | Exelixis Inc. | 74,260 | 422 |
* | Spectrum | ||
Pharmaceuticals Inc. | 29,377 | 417 | |
* | Micromet Inc. | 37,323 | 410 |
* | Idenix Pharmaceuticals Inc. | 34,779 | 409 |
* | InterMune Inc. | 28,577 | 384 |
* | Opko Health Inc. | 74,396 | 368 |
* | Rigel Pharmaceuticals Inc. | 36,293 | 363 |
* | Momenta | ||
Pharmaceuticals Inc. | 22,058 | 323 | |
* | Alnylam Pharmaceuticals Inc. | 23,192 | 309 |
* | NPS Pharmaceuticals Inc. | 43,645 | 298 |
* | Dynavax Technologies Corp. | 69,059 | 290 |
* | Ardea Biosciences Inc. | 13,401 | 286 |
* | Exact Sciences Corp. | 28,586 | 268 |
* | Neurocrine Biosciences Inc. | 32,712 | 257 |
* | Achillion Pharmaceuticals Inc. | 23,092 | 242 |
* | Genomic Health Inc. | 7,529 | 220 |
* | AVEO Pharmaceuticals Inc. | 15,390 | 201 |
* | Emergent Biosolutions Inc. | 12,550 | 192 |
* | Arqule Inc. | 26,240 | 186 |
* | AMAG Pharmaceuticals Inc. | 10,873 | 172 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Protalix BioTherapeutics Inc. | 31,990 | 171 |
* | ZIOPHARM Oncology Inc. | 33,511 | 165 |
* | Lexicon Pharmaceuticals Inc. | 95,113 | 162 |
* | Raptor Pharmaceutical Corp. | 22,956 | 160 |
* | Progenics | ||
Pharmaceuticals Inc. | 16,058 | 157 | |
* | MannKind Corp. | 57,664 | 135 |
* | Geron Corp. | 67,341 | 135 |
* | Ligand Pharmaceuticals Inc. | ||
Class B | 9,026 | 132 | |
* | Sangamo Biosciences Inc. | 24,826 | 131 |
* | Arena Pharmaceuticals Inc. | 73,488 | 131 |
* | Immunomedics Inc. | 36,413 | 130 |
* | Enzon Pharmaceuticals Inc. | 17,319 | 122 |
* | Cell Therapeutics Inc. | 93,335 | 119 |
* | PROLOR Biotech Inc. | 17,428 | 101 |
* | Aegerion | ||
Pharmaceuticals Inc. | 5,934 | 99 | |
* | Targacept Inc. | 14,541 | 99 |
* | Savient Pharmaceuticals Inc. | 35,513 | 71 |
* | Orexigen Therapeutics Inc. | 17,969 | 70 |
* | Dyax Corp. | 46,521 | 69 |
* | Novavax Inc. | 53,054 | 67 |
* | Biotime Inc. | 12,550 | 63 |
* | Allos Therapeutics Inc. | 39,305 | 59 |
* | Trius Therapeutics Inc. | 11,271 | 57 |
* | SIGA Technologies Inc. | 19,172 | 55 |
* | Metabolix Inc. | 16,580 | 46 |
* | Osiris Therapeutics Inc. | 8,280 | 43 |
* | Codexis Inc. | 10,205 | 40 |
* | Nabi Biopharmaceuticals | 14,598 | 27 |
* | BioMimetic Therapeutics Inc. | 10,233 | 21 |
* | Forest Laboratories Inc. | ||
Contingent Value Rights | |||
Exp. 04/14/2018 | 8,685 | 8 | |
121,075 | |||
Health Care Equipment & Supplies (16.7%) | |||
Medtronic Inc. | 540,862 | 20,618 | |
Baxter International Inc. | 288,820 | 16,789 | |
Covidien plc | 247,171 | 12,915 | |
* | Intuitive Surgical Inc. | 19,975 | 10,220 |
Becton Dickinson and Co. | 110,117 | 8,393 | |
Stryker Corp. | 147,029 | 7,887 | |
St. Jude Medical Inc. | 163,425 | 6,883 | |
* | Zimmer Holdings Inc. | 91,853 | 5,580 |
* | Boston Scientific Corp. | 757,921 | 4,714 |
* | Edwards Lifesciences Corp. | 58,514 | 4,279 |
CR Bard Inc. | 43,976 | 4,117 | |
* | Varian Medical Systems Inc. | 57,715 | 3,766 |
* | CareFusion Corp. | 114,929 | 2,966 |
DENTSPLY International Inc. | 72,459 | 2,803 | |
* | Hologic Inc. | 134,627 | 2,791 |
* | IDEXX Laboratories Inc. | 28,789 | 2,469 |
* | ResMed Inc. | 75,202 | 2,203 |
Cooper Cos. Inc. | 24,482 | 1,946 | |
* | Gen-Probe Inc. | 23,842 | 1,628 |
* | Sirona Dental Systems Inc. | 28,494 | 1,422 |
Teleflex Inc. | 20,886 | 1,238 |
Market | |||
Value• | |||
Shares | ($000) | ||
Hill-Rom Holdings Inc. | 31,939 | 1,085 | |
* | Alere Inc. | 41,932 | 1,066 |
* | Thoratec Corp. | 30,767 | 1,061 |
STERIS Corp. | 29,567 | 928 | |
* | Haemonetics Corp. | 12,815 | 859 |
* | Zoll Medical Corp. | 11,437 | 837 |
* | Align Technology Inc. | 32,272 | 826 |
* | Volcano Corp. | 26,996 | 757 |
West Pharmaceutical | |||
Services Inc. | 17,292 | 719 | |
* | Masimo Corp. | 27,702 | 604 |
* | MAKO Surgical Corp. | 14,995 | 586 |
* | Cyberonics Inc. | 12,755 | 475 |
* | NxStage Medical Inc. | 22,685 | 454 |
* | Insulet Corp. | 22,803 | 450 |
* | CONMED Corp. | 14,434 | 431 |
* | Neogen Corp. | 11,440 | 397 |
Meridian Bioscience Inc. | 21,217 | 382 | |
* | Orthofix International NV | 9,407 | 369 |
* | DexCom Inc. | 34,164 | 369 |
* | Arthrocare Corp. | 14,120 | 369 |
* | HeartWare International Inc. | 5,017 | 368 |
Analogic Corp. | 6,342 | 361 | |
* | ABIOMED Inc. | 16,596 | 346 |
* | NuVasive Inc. | 21,682 | 340 |
* | Wright Medical Group Inc. | 20,234 | 335 |
* | Integra LifeSciences | ||
Holdings Corp. | 10,393 | 328 | |
* | Abaxis Inc. | 11,566 | 307 |
* | ICU Medical Inc. | 6,435 | 295 |
* | Greatbatch Inc. | 11,881 | 294 |
* | Endologix Inc. | 20,402 | 270 |
* | Merit Medical Systems Inc. | 20,171 | 253 |
Invacare Corp. | 14,921 | 246 | |
Cantel Medical Corp. | 11,799 | 238 | |
* | OraSure Technologies Inc. | 22,992 | 231 |
* | Accuray Inc. | 32,850 | 223 |
* | Quidel Corp. | 15,391 | 218 |
* | Conceptus Inc. | 15,097 | 203 |
* | Staar Surgical Co. | 18,210 | 190 |
Atrion Corp. | 819 | 169 | |
* | AngioDynamics Inc. | 12,789 | 166 |
* | Tornier NV | 7,024 | 165 |
* | Natus Medical Inc. | 15,003 | 157 |
* | Symmetry Medical Inc. | 18,484 | 134 |
*,^ | Navidea | ||
Biopharmaceuticals Inc. | 43,681 | 131 | |
* | Unilife Corp. | 34,997 | 130 |
* | SurModics Inc. | 8,507 | 121 |
* | Antares Pharma Inc. | 47,327 | 119 |
* | Palomar Medical | ||
Technologies Inc. | 9,512 | 105 | |
* | RTI Biologics Inc. | 26,945 | 100 |
Kensey Nash Corp. | 4,052 | 91 | |
* | Exactech Inc. | 4,068 | 65 |
145,350 |
47
Health Care Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
Health Care Providers & Services (19.7%) | |||
UnitedHealth Group Inc. | 546,041 | 30,442 | |
* | Medco Health | ||
Solutions Inc. | 198,370 | 13,408 | |
* | Express Scripts Inc. | 236,258 | 12,600 |
WellPoint Inc. | 178,177 | 11,694 | |
McKesson Corp. | 125,840 | 10,509 | |
Aetna Inc. | 185,593 | 8,678 | |
Cardinal Health Inc. | 177,001 | 7,354 | |
Humana Inc. | 83,783 | 7,297 | |
Cigna Corp. | 146,090 | 6,444 | |
AmerisourceBergen Corp. | |||
Class A | 132,379 | 4,944 | |
Quest Diagnostics Inc. | 80,742 | 4,687 | |
* | Laboratory Corp. of | ||
America Holdings | 50,829 | 4,569 | |
* | DaVita Inc. | 47,929 | 4,148 |
* | Henry Schein Inc. | 46,298 | 3,427 |
* | Coventry Health Care Inc. | 73,770 | 2,412 |
HCA Holdings Inc. | 89,342 | 2,383 | |
Omnicare Inc. | 58,773 | 2,068 | |
Universal Health | |||
Services Inc. Class B | 45,782 | 2,042 | |
* | Mednax Inc. | 25,090 | 1,866 |
* | AMERIGROUP Corp. | 24,470 | 1,662 |
* | Health Net Inc. | 42,407 | 1,600 |
Patterson Cos. Inc. | 48,584 | 1,551 | |
* | WellCare Health Plans Inc. | 21,922 | 1,488 |
* | Catalyst Health Solutions Inc. | 23,118 | 1,434 |
* | HMS Holdings Corp. | 43,607 | 1,405 |
* | Centene Corp. | 25,857 | 1,262 |
* | Tenet Healthcare Corp. | 222,121 | 1,255 |
Lincare Holdings Inc. | 45,219 | 1,215 | |
* | Community Health | ||
Systems Inc. | 47,203 | 1,191 | |
* | HealthSouth Corp. | 48,886 | 995 |
* | Brookdale Senior Living Inc. | ||
Class A | 52,533 | 979 | |
Owens & Minor Inc. | 32,564 | 976 | |
* | Health Management | ||
Associates Inc. Class A | 130,188 | 961 | |
* | LifePoint Hospitals Inc. | 24,606 | 959 |
* | VCA Antech Inc. | 42,229 | 929 |
* | Magellan Health | ||
Services Inc. | 14,489 | 685 | |
* | PSS World Medical Inc. | 27,027 | 655 |
Chemed Corp. | 10,111 | 625 | |
* | MWI Veterinary Supply Inc. | 6,271 | 543 |
* | Air Methods Corp. | 5,865 | 529 |
* | Molina Healthcare Inc. | 13,984 | 475 |
* | Accretive Health Inc. | 17,620 | 458 |
* | Amsurg Corp. Class A | 16,129 | 421 |
* | Team Health Holdings Inc. | 14,929 | 324 |
* | Hanger Orthopedic | ||
Group Inc. | 15,341 | 317 | |
* | IPC The Hospitalist Co. Inc. | 8,369 | 304 |
* | Kindred Healthcare Inc. | 26,445 | 272 |
* | Emeritus Corp. | 14,655 | 271 |
Landauer Inc. | 4,922 | 264 | |
* | Bio-Reference Labs Inc. | 12,804 | 258 |
* | Triple-S Management Corp. | ||
Class B | 9,946 | 235 | |
* | Select Medical | ||
Holdings Corp. | 27,121 | 228 | |
Universal American Corp. | 18,079 | 205 | |
* | Sunrise Senior Living Inc. | 26,100 | 202 |
Ensign Group Inc. | 6,940 | 190 | |
* | Amedisys Inc. | 14,779 | 190 |
National Healthcare Corp. | 4,140 | 186 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | PharMerica Corp. | 14,959 | 183 |
Assisted Living Concepts Inc. | |||
Class A | 10,319 | 166 | |
* | MModal Inc. | 15,894 | 164 |
* | ExamWorks Group Inc. | 15,670 | 162 |
* | Corvel Corp. | 3,465 | 157 |
* | Vanguard Health | ||
Systems Inc. | 15,693 | 156 | |
* | BioScrip Inc. | 22,152 | 140 |
* | LHC Group Inc. | 8,245 | 140 |
* | Healthways Inc. | 16,896 | 134 |
* | Gentiva Health Services Inc. | 14,771 | 116 |
* | Almost Family Inc. | 4,225 | 97 |
* | AMN Healthcare | ||
Services Inc. | 16,535 | 88 | |
* | Cross Country | ||
Healthcare Inc. | 14,455 | 82 | |
* | Skilled Healthcare | ||
Group Inc. | 10,369 | 68 | |
* | Sun Healthcare Group Inc. | 12,977 | 58 |
170,582 | |||
Health Care Technology (1.3%) | |||
* | Cerner Corp. | 73,774 | 5,447 |
* | Allscripts Healthcare | ||
Solutions Inc. | 97,003 | 1,874 | |
* | athenahealth Inc. | 17,265 | 1,220 |
Quality Systems Inc. | 21,169 | 908 | |
* | MedAssets Inc. | 23,843 | 341 |
Computer Programs & | |||
Systems Inc. | 5,399 | 329 | |
* | Omnicell Inc. | 16,849 | 251 |
* | Medidata Solutions Inc. | 10,798 | 215 |
* | HealthStream Inc. | 9,654 | 197 |
* | Merge Healthcare Inc. | 27,620 | 180 |
* | Transcend Services Inc. | 4,889 | 105 |
* | Epocrates Inc. | 7,851 | 73 |
11,140 | |||
Life Sciences Tools & Services (4.8%) | |||
* | Thermo Fisher Scientific Inc. 193,828 | 10,975 | |
* | Agilent Technologies Inc. | 177,860 | 7,758 |
* | Life Technologies Corp. | 91,165 | 4,313 |
* | Waters Corp. | 45,943 | 4,117 |
* | Illumina Inc. | 62,092 | 3,182 |
* | Mettler-Toledo | ||
International Inc. | 16,233 | 2,926 | |
PerkinElmer Inc. | 57,858 | 1,562 | |
* | Covance Inc. | 31,142 | 1,486 |
Techne Corp. | 18,071 | 1,294 | |
* | Bio-Rad Laboratories Inc. | ||
Class A | 10,044 | 1,024 | |
* | Charles River Laboratories | ||
International Inc. | 22,714 | 798 | |
* | PAREXEL International Corp. | 30,313 | 742 |
* | Bruker Corp. | 38,261 | 613 |
* | Luminex Corp. | 19,462 | 437 |
* | Sequenom Inc. | 56,666 | 245 |
* | eResearchTechnology Inc. | 24,928 | 159 |
* | Affymetrix Inc. | 34,332 | 143 |
* | Fluidigm Corp. | 8,184 | 118 |
* | Pacific Biosciences of | ||
California Inc. | 17,507 | 73 | |
* | Enzo Biochem Inc. | 17,327 | 45 |
* | Complete Genomics Inc. | 7,787 | 29 |
* | Albany Molecular | ||
Research Inc. | 10,529 | 29 | |
42,068 | |||
Pharmaceuticals (43.5%) | |||
Johnson & Johnson | 1,398,649 | 91,024 | |
Pfizer Inc. | 3,936,929 | 83,069 |
Market | |||
Value• | |||
Shares | ($000) | ||
Merck & Co. Inc. | 1,561,035 | 59,585 | |
Abbott Laboratories | 797,833 | 45,165 | |
Bristol-Myers Squibb Co. | 867,918 | 27,921 | |
Eli Lilly & Co. | 533,757 | 20,945 | |
Allergan Inc. | 156,278 | 14,001 | |
* | Mylan Inc. | 218,237 | 5,115 |
* | Forest Laboratories Inc. | 136,828 | 4,450 |
Perrigo Co. | 42,931 | 4,424 | |
* | Watson | ||
Pharmaceuticals Inc. | 65,170 | 3,801 | |
* | Hospira Inc. | 84,276 | 3,002 |
* | Endo Pharmaceuticals | ||
Holdings Inc. | 59,783 | 2,216 | |
* | Salix Pharmaceuticals Ltd. | 30,286 | 1,494 |
* | Warner Chilcott plc Class A | 71,655 | 1,199 |
* | Questcor | ||
Pharmaceuticals Inc. | 30,501 | 1,186 | |
* | Viropharma Inc. | 36,045 | 1,156 |
Medicis | |||
Pharmaceutical Corp. | |||
Class A | 32,370 | 1,131 | |
* | Vivus Inc. | 45,518 | 1,024 |
* | Impax Laboratories Inc. | 32,353 | 755 |
* | Par Pharmaceutical Cos. Inc. | 18,582 | 690 |
* | Medicines Co. | 27,809 | 596 |
* | Jazz Pharmaceuticals plc | 9,759 | 512 |
* | Auxilium | ||
Pharmaceuticals Inc. | 24,718 | 488 | |
* | Akorn Inc. | 33,618 | 421 |
* | Nektar Therapeutics | 57,929 | 415 |
* | Optimer | ||
Pharmaceuticals Inc. | 22,771 | 291 | |
* | Hi-Tech Pharmacal Co. Inc. | 4,773 | 191 |
* | Depomed Inc. | 28,354 | 178 |
* | MAP Pharmaceuticals Inc. | 10,031 | 161 |
* | AVANIR | ||
Pharmaceuticals Inc. | 56,340 | 155 | |
* | Cadence | ||
Pharmaceuticals Inc. | 29,380 | 110 | |
* | Obagi Medical Products Inc. | 9,622 | 109 |
* | Sagent Pharmaceuticals Inc. | 4,980 | 108 |
* | Pain Therapeutics Inc. | 18,946 | 70 |
* | XenoPort Inc. | 16,144 | 65 |
* | Pozen Inc. | 12,601 | 55 |
* | Endocyte Inc. | 11,779 | 42 |
* | Ampio Pharmaceuticals Inc. | 8,098 | 31 |
* | Durect Corp. | 36,379 | 27 |
* | Alimera Sciences Inc. | 3,870 | 15 |
377,393 | |||
Total Common Stocks | |||
(Cost $837,544) | 867,608 | ||
Temporary Cash Investment (0.1%) | |||
Money Market Fund (0.1%) | |||
1,2 | Vanguard Market | ||
Liquidity Fund, 0.111% | |||
(Cost $639) | 639,000 | 639 | |
Total Investments (100.1%) | |||
(Cost $838,183) | 868,247 | ||
Other Assets and Liabilities (–0.1%) | |||
Other Assets | 6,487 | ||
Liabilities2 | (7,125) | ||
(638) | |||
Net Assets (100%) | 867,609 |
48
Health Care Index Fund
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 871,384 |
Undistributed Net Investment Income | 1,973 |
Accumulated Net Realized Losses | (35,812) |
Unrealized Appreciation (Depreciation) | 30,064 |
Net Assets | 867,609 |
Admiral Shares—Net Assets | |
Applicable to 2,529,687 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 82,046 |
Net Asset Value Per Share— | |
Admiral Shares | $32.43 |
ETF Shares—Net Assets | |
Applicable to 12,116,850 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 785,563 |
Net Asset Value Per Share— | |
ETF Shares | $64.83 |
• 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 $45,000.
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 $60,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
49
Health Care Index Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 8,083 |
Security Lending | 15 |
Total Income | 8,098 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 55 |
Management and Administrative— | |
Admiral Shares | 55 |
Management and Administrative— | |
ETF Shares | 464 |
Marketing and Distribution— | |
Admiral Shares | 8 |
Marketing and Distribution— | |
ETF Shares | 100 |
Custodian Fees | 11 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 28 |
Total Expenses | 721 |
Net Investment Income | 7,377 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 16,635 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 58,052 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 82,064 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 7,377 | 12,989 |
Realized Net Gain (Loss) | 16,635 | 23,853 |
Change in Unrealized Appreciation (Depreciation) | 58,052 | 86,151 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 82,064 | 122,993 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (1,286) | (1,048) |
ETF Shares | (12,186) | (10,588) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (13,472) | (11,636) |
Capital Share Transactions | ||
Admiral Shares | 872 | 10,635 |
ETF Shares | 31,437 | 33,450 |
Net Increase (Decrease) from Capital Share Transactions | 32,309 | 44,085 |
Total Increase (Decrease) | 100,901 | 155,442 |
Net Assets | ||
Beginning of Period | 766,708 | 611,266 |
End of Period1 | 867,609 | 766,708 |
1 Net Assets—End of Period includes undistributed net investment income of $1,973,000 and $8,068,000.
See accompanying Notes, which are an integral part of the Financial Statements.
50
Health Care Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $29.81 | $24.87 | $25.19 | $28.68 | $29.82 | $27.99 |
Investment Operations | ||||||
Net Investment Income | .285 | .533 | .7291 | .398 | .345 | .392 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 2.862 | 4.888 | (.312) | (3.524) | (1.090) | 1.736 |
Total from Investment Operations | 3.147 | 5.421 | .417 | (3.126) | (.745) | 2.128 |
Distributions | ||||||
Dividends from Net Investment Income | (.527) | (.481) | (.737) | (.364) | (.395) | (.298) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.527) | (.481) | (.737) | (.364) | (.395) | (.298) |
Net Asset Value, End of Period | $32.43 | $29.81 | $24.87 | $25.19 | $28.68 | $29.82 |
Total Return2 | 10.69% | 21.90% | 1.41% | –10.74% | –2.59% | 7.65% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $82 | $75 | $54 | $111 | $136 | $132 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.28% | 0.25% | 0.26% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.88% | 1.74% | 2.74%1 | 1.75% | 1.36% | 1.42% |
Portfolio Turnover Rate3 | 10% | 9% | 10% | 6% | 8% | 10% |
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 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 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 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
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $59.58 | $49.72 | $50.37 | $57.36 | $59.65 | $55.99 |
Investment Operations | ||||||
Net Investment Income | .570 | 1.057 | 1.4831 | .809 | .720 | .809 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 5.729 | 9.782 | (.646) | (7.045) | (2.190) | 3.466 |
Total from Investment Operations | 6.299 | 10.839 | .837 | (6.236) | (1.470) | 4.275 |
Distributions | ||||||
Dividends from Net Investment Income | (1.049) | (.979) | (1.487) | (.754) | (.820) | (.615) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.049) | (.979) | (1.487) | (.754) | (.820) | (.615) |
Net Asset Value, End of Period | $64.83 | $59.58 | $49.72 | $50.37 | $57.36 | $59.65 |
Total Return | 10.70% | 21.90% | 1.40% | –10.70% | –2.55% | 7.69% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $786 | $692 | $558 | $554 | $614 | $477 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.88% | 1.74% | 2.74%1 | 1.78% | 1.41% | 1.46% |
Portfolio Turnover Rate2 | 10% | 9% | 10% | 6% | 8% | 10% |
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 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 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.
52
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $131,000 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).
53
Health Care Index Fund
The following table summarizes the market value of the fund’s investments as of February 29, 2012, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 867,600 | — | 8 |
Temporary Cash Investments | 639 | — | — |
Total | 868,239 | — | 8 |
There were no changes in investments valued based on Level 3 inputs during the six months ended February 29, 2012.
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 29, 2012, the fund realized $8,103,000 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, 2011, the fund had available capital loss carryforwards totaling $42,427,000 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, $9,915,000 through August 31, 2018, and $21,575,000 through August 31, 2019. In addition, the fund realized losses of $2,025,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $838,183,000. Net unrealized appreciation of investment securities for tax purposes was $30,064,000, consisting of unrealized gains of $86,346,000 on securities that had risen in value since their purchase and $56,282,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $107,142,000 of investment securities and sold $79,992,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 5,633 | 184 | 23,041 | 773 |
Issued in Lieu of Cash Distributions | 1,112 | 37 | 911 | 32 |
Redeemed1 | (5,873) | (196) | (13,317) | (459) |
Net Increase (Decrease)—Admiral Shares | 872 | 25 | 10,635 | 346 |
ETF Shares | ||||
Issued | 67,291 | 1,102 | 162,423 | 2,600 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (35,854) | (600) | (128,973) | (2,200) |
Net Increase (Decrease)—ETF Shares | 31,437 | 502 | 33,450 | 400 |
1 Net of redemption fees for fiscal 2012 and 2011 of $31,000 and $58,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
54
Industrials Index Fund
Fund Profile
As of February 29, 2012
Portfolio Characteristics | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Stocks | 369 | 368 | 2,485 | |
Median Market Cap | $24.3B | $24.3B | $34.8B | |
Price/Earnings Ratio | 16.4x | 16.4x | 16.4x | |
Price/Book Ratio | 2.7x | 2.7x | 2.3x | |
Yield3 | 2.0% | 2.0% | ||
Admiral Shares | 1.8% | |||
ETF Shares | 1.8% | |||
Return on Equity | 18.9% | 18.9% | 18.2% | |
Earnings Growth Rate | 3.4% | 3.4% | 7.7% | |
Foreign Holdings | 0.0% | 0.0% | 0.0% | |
Turnover Rate4 | 5% | — | — | |
Expense Ratio5 | — | — | ||
Admiral Shares | 0.19% | |||
ETF Shares | 0.19% | |||
Short-Term Reserves | 0.0% | — | — | |
Volatility Measures6 | ||||
Fund Versus | Fund Versus | |||
Spliced Index7 | Broad Index2 | |||
R-Squared | 1.00 | 0.93 | ||
Beta | 1.00 | 1.29 |
Subindustry Diversification | |
(% of equity exposure) | |
Aerospace & Defense | 20.6% |
Air Freight & Logistics | 6.4 |
Airlines | 1.8 |
Building Products | 1.2 |
Construction & Engineering | 2.7 |
Construction & Farm Machinery & | |
Heavy Trucks | 11.2 |
Diversified Support Services | 1.1 |
Electrical Components & Equipment | 6.1 |
Environmental & Facilities Services | 2.7 |
Industrial Conglomerates | 18.8 |
Industrial Machinery | 11.2 |
Railroads | 6.5 |
Research & Consulting Services | 2.0 |
Trading Companies & Distributors | 3.0 |
Trucking | 1.6 |
Other Industrial | 3.1 |
Ten Largest Holdings8 (% of total net assets) | |
General Electric Co. | 11.8% |
Caterpillar Inc. | 4.3 |
United Technologies Corp. | 4.2 |
3M Co. | 3.4 |
United Parcel Service Inc. Class B | 3.3 |
Union Pacific Corp. | 3.1 |
Boeing Co. | 3.1 |
Honeywell International Inc. | 2.6 |
Emerson Electric Co. | 2.2 |
Deere & Co. | 2.0 |
Top Ten | 40.0% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.18% for Admiral Shares and 0.18% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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.
55
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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx58x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | –2.28% | 0.70% | 4.96% | |
Net Asset Value | –2.20 | 0.71 | 4.96 | |
Admiral Shares3 | 5/8/2006 | –2.21 | 0.68 | 0.51 |
1 Six months ended February 29, 2012.
2 Spliced 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.
56
Industrials Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
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%) | |||
Aerospace & Defense (20.6%) | |||
United Technologies Corp. | 261,767 | 21,954 | |
Boeing Co. | 214,719 | 16,093 | |
Honeywell International Inc. | 223,461 | 13,312 | |
Lockheed Martin Corp. | 83,638 | 7,394 | |
Precision Castparts Corp. | 43,849 | 7,342 | |
General Dynamics Corp. | 92,050 | 6,741 | |
Raytheon Co. | 105,249 | 5,317 | |
Goodrich Corp. | 38,081 | 4,797 | |
Northrop Grumman Corp. | 75,483 | 4,515 | |
Rockwell Collins Inc. | 46,019 | 2,728 | |
Textron Inc. | 84,592 | 2,327 | |
L-3 Communications | |||
Holdings Inc. | 30,368 | 2,133 | |
* | TransDigm Group Inc. | 14,545 | 1,728 |
* | BE Aerospace Inc. | 29,798 | 1,366 |
* | Spirit Aerosystems | ||
Holdings Inc. Class A | 36,037 | 863 | |
Triumph Group Inc. | 13,431 | 857 | |
* | Hexcel Corp. | 29,943 | 757 |
* | Teledyne Technologies Inc. | 10,679 | 637 |
* | Esterline Technologies Corp. | 9,308 | 605 |
Alliant Techsystems Inc. | 10,018 | 601 | |
Exelis Inc. | 53,311 | 560 | |
* | Moog Inc. Class A | 11,960 | 525 |
Curtiss-Wright Corp. | 13,484 | 501 | |
* | Huntington Ingalls | ||
Industries Inc. | 13,938 | 500 | |
HEICO Corp. Class A | 7,215 | 288 | |
AAR Corp. | 12,302 | 271 | |
* | Orbital Sciences Corp. | 17,486 | 246 |
Cubic Corp. | 4,864 | 233 | |
* | Ceradyne Inc. | 7,193 | 222 |
American Science & | |||
Engineering Inc. | 2,774 | 202 | |
HEICO Corp. | 3,246 | 178 | |
* | DigitalGlobe Inc. | 11,243 | 173 |
* | Aerovironment Inc. | 5,352 | 152 |
National Presto | |||
Industries Inc. | 1,466 | 127 | |
* | GeoEye Inc. | 6,071 | 123 |
* | Astronics Corp. | 2,834 | 95 |
* | GenCorp Inc. | 13,409 | 80 |
* | Taser International Inc. | 17,669 | 71 |
Ducommun Inc. | 3,078 | 47 | |
* | KEYW Holding Corp. | 3,863 | 27 |
106,688 | |||
Air Freight & Logistics (6.4%) | |||
United Parcel Service Inc. | |||
Class B | 220,056 | 16,920 | |
FedEx Corp. | 91,644 | 8,247 | |
CH Robinson Worldwide Inc. | 49,927 | 3,304 | |
Expeditors International of | |||
Washington Inc. | 64,479 | 2,813 | |
UTi Worldwide Inc. | 31,244 | 504 | |
* | HUB Group Inc. Class A | 11,060 | 394 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Atlas Air Worldwide | ||
Holdings Inc. | 7,867 | 336 | |
Forward Air Corp. | 8,883 | 299 | |
* | Air Transport Services | ||
Group Inc. | 16,662 | 91 | |
* | Pacer International Inc. | 10,722 | 59 |
32,967 | |||
Airlines (1.7%) | |||
* | Delta Air Lines Inc. | 257,619 | 2,527 |
Southwest Airlines Co. | 236,750 | 2,126 | |
* | United Continental | ||
Holdings Inc. | 100,614 | 2,078 | |
* | Alaska Air Group Inc. | 10,814 | 741 |
* | JetBlue Airways Corp. | 75,790 | 387 |
* | US Airways Group Inc. | 48,679 | 361 |
* | Spirit Airlines Inc. | 14,156 | 276 |
* | Allegiant Travel Co. | ||
Class A | 4,561 | 228 | |
SkyWest Inc. | 15,582 | 178 | |
* | Hawaiian Holdings Inc. | 14,499 | 77 |
* | Republic Airways | ||
Holdings Inc. | 13,965 | 74 | |
9,053 | |||
Building Products (1.2%) | |||
Masco Corp. | 109,447 | 1,300 | |
* | Owens Corning | 34,922 | 1,105 |
* | Fortune Brands Home & | ||
Security Inc. | 42,586 | 824 | |
AO Smith Corp. | 11,879 | 536 | |
Lennox International Inc. | 13,561 | 531 | |
Simpson | |||
Manufacturing Co. Inc. | 11,600 | 346 | |
* | USG Corp. | 22,341 | 318 |
* | Armstrong World | ||
Industries Inc. | 6,196 | 317 | |
Quanex Building | |||
Products Corp. | 11,497 | 196 | |
Griffon Corp. | 16,373 | 175 | |
Universal Forest Products Inc. | 5,341 | 172 | |
* | Gibraltar Industries Inc. | 8,314 | 115 |
Apogee Enterprises Inc. | 8,602 | 114 | |
* | Trex Co. Inc. | 3,996 | 108 |
AAON Inc. | 5,654 | 105 | |
* | Ameresco Inc. Class A | 4,431 | 62 |
American Woodmark Corp. | 2,777 | 40 | |
6,364 | |||
Commercial Services & Supplies (5.4%) | |||
Waste Management Inc. | 132,988 | 4,652 | |
Republic Services Inc. | |||
Class A | 90,102 | 2,688 | |
* | Stericycle Inc. | 24,683 | 2,142 |
Cintas Corp. | 35,595 | 1,373 | |
Iron Mountain Inc. | 42,335 | 1,314 | |
Waste Connections Inc. | 35,588 | 1,157 | |
Pitney Bowes Inc. | 60,992 | 1,106 | |
* | Clean Harbors Inc. | 14,519 | 975 |
Avery Dennison Corp. | 30,673 | 936 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Copart Inc. | 16,815 | 837 |
RR Donnelley & Sons Co. | 56,758 | 784 | |
* | Corrections Corp. of | ||
America | 30,260 | 758 | |
Covanta Holding Corp. | 37,682 | 615 | |
* | Tetra Tech Inc. | 18,774 | 461 |
Mine Safety Appliances Co. | 10,450 | 385 | |
Deluxe Corp. | 15,328 | 378 | |
Healthcare Services | |||
Group Inc. | 19,282 | 376 | |
* | Portfolio Recovery | ||
Associates Inc. | 5,175 | 361 | |
United Stationers Inc. | 12,327 | 358 | |
Rollins Inc. | 17,648 | 358 | |
Brink’s Co. | 14,053 | 355 | |
Herman Miller Inc. | 16,603 | 349 | |
ABM Industries Inc. | 15,159 | 344 | |
* | Geo Group Inc. | 19,538 | 344 |
HNI Corp. | 13,458 | 340 | |
Unifirst Corp. | 4,492 | 270 | |
* | Mobile Mini Inc. | 11,585 | 250 |
Steelcase Inc. Class A | 26,436 | 232 | |
Knoll Inc. | 14,552 | 224 | |
McGrath Rentcorp | 7,008 | 223 | |
Interface Inc. Class A | 17,773 | 218 | |
* | KAR Auction Services Inc. | 12,461 | 200 |
* | ACCO Brands Corp. | 16,758 | 198 |
G&K Services Inc. Class A | 5,714 | 190 | |
* | Team Inc. | 5,662 | 173 |
* | SYKES Enterprises Inc. | 12,200 | 168 |
* | Encore Capital Group Inc. | 6,564 | 146 |
* | Consolidated Graphics Inc. | 2,957 | 138 |
Ennis Inc. | 7,936 | 133 | |
Quad/Graphics Inc. | 8,565 | 128 | |
Viad Corp. | 6,219 | 121 | |
* | InnerWorkings Inc. | 9,267 | 106 |
US Ecology Inc. | 5,569 | 105 | |
* | EnergySolutions Inc. | 24,265 | 102 |
* | Swisher Hygiene Inc. | 34,479 | 102 |
* | Standard Parking Corp. | 4,886 | 88 |
Multi-Color Corp. | 3,689 | 81 | |
* | Cenveo Inc. | 17,148 | 67 |
* | Metalico Inc. | 12,963 | 65 |
* | American Reprographics Co. | 10,422 | 55 |
Schawk Inc. Class A | 4,683 | 52 | |
Kimball International Inc. | |||
Class B | 7,925 | 49 | |
* | EnerNOC Inc. | 5,958 | 47 |
27,677 | |||
Construction & Engineering (2.7%) | |||
Fluor Corp. | 51,595 | 3,120 | |
* | Jacobs Engineering | ||
Group Inc. | 38,967 | 1,801 | |
KBR Inc. | 45,438 | 1,650 | |
* | Quanta Services Inc. | 62,532 | 1,307 |
* | URS Corp. | 24,206 | 1,057 |
* | Foster Wheeler AG | 35,557 | 876 |
57
Industrials Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
* | AECOM Technology Corp. | 31,571 | 737 |
* | Shaw Group Inc. | 19,808 | 573 |
EMCOR Group Inc. | 20,095 | 559 | |
* | MasTec Inc. | 17,796 | 313 |
Granite Construction Inc. | 10,422 | 298 | |
* | Dycom Industries Inc. | 10,062 | 214 |
* | Aegion Corp. Class A | 11,784 | 208 |
* | Tutor Perini Corp. | 9,313 | 147 |
* | Layne Christensen Co. | 5,980 | 145 |
Comfort Systems USA Inc. | 11,528 | 132 | |
Primoris Services Corp. | 8,572 | 132 | |
* | MYR Group Inc. | 6,112 | 122 |
Great Lakes Dredge & | |||
Dock Corp. | 16,971 | 120 | |
* | Furmanite Corp. | 10,619 | 78 |
* | Northwest Pipe Co. | 2,839 | 69 |
* | Michael Baker Corp. | 2,524 | 61 |
* | Orion Marine Group Inc. | 8,206 | 60 |
* | Pike Electric Corp. | 5,667 | 51 |
* | Sterling Construction Co. Inc. | 4,771 | 49 |
13,879 | |||
Electrical Equipment (6.4%) | |||
Emerson Electric Co. | 223,743 | 11,257 | |
Rockwell Automation Inc. | 43,142 | 3,451 | |
Cooper Industries plc | 48,078 | 2,943 | |
Roper Industries Inc. | 29,339 | 2,685 | |
AMETEK Inc. | 48,707 | 2,318 | |
Hubbell Inc. Class B | 15,743 | 1,184 | |
* | Thomas & Betts Corp. | 15,069 | 1,088 |
* | Babcock & Wilcox Co. | 34,077 | 877 |
* | Sensata Technologies | ||
Holding NV | 26,776 | 868 | |
Regal-Beloit Corp. | 12,627 | 852 | |
Acuity Brands Inc. | 12,792 | 796 | |
Belden Inc. | 14,246 | 562 | |
* | General Cable Corp. | 15,867 | 491 |
* | EnerSys | 14,505 | 487 |
Brady Corp. Class A | 14,784 | 472 | |
* | GrafTech International Ltd. | 34,922 | 444 |
* | Polypore International Inc. | 10,459 | 430 |
* | II-VI Inc. | 15,971 | 374 |
Franklin Electric Co. Inc. | 5,918 | 296 | |
* | Generac Holdings Inc. | 8,062 | 205 |
AZZ Inc. | 3,734 | 187 | |
Encore Wire Corp. | 5,680 | 166 | |
* | Global Power Equipment | ||
Group Inc. | 4,863 | 118 | |
* | Powell Industries Inc. | 2,837 | 93 |
* | Capstone Turbine Corp. | 79,507 | 88 |
Thermon Group Holdings Inc. 3,611 | 73 | ||
* | American | ||
Superconductor Corp. | 14,711 | 66 | |
Preformed Line Products Co. | 821 | 54 | |
Vicor Corp. | 6,379 | 52 | |
* | A123 Systems Inc. | 28,770 | 52 |
33,029 | |||
Industrial Conglomerates (18.8%) | |||
General Electric Co. | 3,210,519 | 61,160 | |
3M Co. | 202,472 | 17,737 | |
Danaher Corp. | 177,412 | 9,373 | |
Tyco International Ltd. | 140,490 | 7,280 | |
Carlisle Cos. Inc. | 18,614 | 908 | |
Raven Industries Inc. | 5,153 | 325 | |
* | Seaboard Corp. | 111 | 212 |
Standex International Corp. | 3,809 | 146 | |
97,141 | |||
Machinery (22.4%) | |||
Caterpillar Inc. | 196,639 | 22,458 | |
Deere & Co. | 125,876 | 10,439 |
Market | |||
Value• | |||
Shares | ($000) | ||
Illinois Tool Works Inc. | 132,246 | 7,365 | |
Cummins Inc. | 55,757 | 6,723 | |
Eaton Corp. | 96,549 | 5,039 | |
PACCAR Inc. | 98,041 | 4,511 | |
Parker Hannifin Corp. | 45,943 | 4,126 | |
Ingersoll-Rand plc | 94,933 | 3,786 | |
Stanley Black & Decker Inc. | 48,796 | 3,748 | |
Dover Corp. | 56,374 | 3,609 | |
Joy Global Inc. | 31,961 | 2,779 | |
Pall Corp. | 35,035 | 2,223 | |
Flowserve Corp. | 16,896 | 2,003 | |
Donaldson Co. Inc. | 21,407 | 1,572 | |
* | AGCO Corp. | 29,555 | 1,526 |
Xylem Inc. | 53,322 | 1,385 | |
Timken Co. | 25,150 | 1,318 | |
* | WABCO Holdings Inc. | 19,954 | 1,187 |
Pentair Inc. | 29,967 | 1,154 | |
SPX Corp. | 15,511 | 1,134 | |
Lincoln Electric Holdings Inc. | 24,133 | 1,115 | |
Kennametal Inc. | 24,163 | 1,113 | |
Wabtec Corp. | 14,557 | 1,088 | |
IDEX Corp. | 25,375 | 1,061 | |
Gardner Denver Inc. | 15,383 | 1,057 | |
Snap-on Inc. | 16,803 | 1,027 | |
Nordson Corp. | 17,510 | 963 | |
Graco Inc. | 18,150 | 929 | |
* | Navistar International Corp. | 20,961 | 876 |
* | Terex Corp. | 33,352 | 847 |
Trinity Industries Inc. | 24,216 | 842 | |
Woodward Inc. | 17,811 | 780 | |
Valmont Industries Inc. | 6,834 | 759 | |
CLARCOR Inc. | 14,393 | 726 | |
Crane Co. | 14,146 | 687 | |
ITT Corp. | 26,760 | 668 | |
* | Oshkosh Corp. | 27,795 | 648 |
Toro Co. | 9,323 | 632 | |
Robbins & Myers Inc. | 12,563 | 613 | |
* | Chart Industries Inc. | 8,956 | 612 |
Manitowoc Co. Inc. | 37,849 | 596 | |
Actuant Corp. Class A | 20,954 | 590 | |
* | Colfax Corp. | 16,909 | 575 |
Harsco Corp. | 24,539 | 545 | |
Mueller Industries Inc. | 11,625 | 535 | |
* | Middleby Corp. | 5,351 | 523 |
Barnes Group Inc. | 14,204 | 393 | |
Kaydon Corp. | 9,716 | 366 | |
Watts Water | |||
Technologies Inc. Class A | 8,175 | 323 | |
* | RBC Bearings Inc. | 6,712 | 305 |
Titan International Inc. | 12,125 | 299 | |
ESCO Technologies Inc. | 7,968 | 285 | |
Briggs & Stratton Corp. | 15,212 | 258 | |
* | Blount International Inc. | 14,776 | 253 |
Lindsay Corp. | 3,854 | 253 | |
* | EnPro Industries Inc. | 6,286 | 238 |
* | Astec Industries Inc. | 5,851 | 222 |
* | Wabash National Corp. | 20,806 | 220 |
Tennant Co. | 5,114 | 210 | |
Sun Hydraulics Corp. | 6,253 | 205 | |
Albany International Corp. | 8,497 | 203 | |
* | Meritor Inc. | 27,135 | 201 |
* | Sauer-Danfoss Inc. | 3,666 | 198 |
* | Greenbrier Cos. Inc. | 7,705 | 195 |
* | Trimas Corp. | 7,338 | 178 |
Gorman-Rupp Co. | 5,740 | 166 | |
* | Altra Holdings Inc. | 8,147 | 159 |
CIRCOR International Inc. | 4,716 | 156 | |
Cascade Corp. | 2,853 | 152 |
Market | |||
Value• | |||
Shares | ($000) | ||
John Bean | |||
Technologies Corp. | 8,722 | 151 | |
NACCO Industries Inc. | |||
Class A | 1,514 | 148 | |
Mueller Water Products Inc. | |||
Class A | 47,497 | 141 | |
FreightCar America Inc. | 3,624 | 100 | |
* | Commercial Vehicle | ||
Group Inc. | 7,898 | 95 | |
* | American Railcar | ||
Industries Inc. | 3,231 | 95 | |
* | Columbus McKinnon Corp. | 5,536 | 92 |
LB Foster Co. Class A | 3,118 | 92 | |
Dynamic Materials Corp. | 4,111 | 92 | |
* | Federal Signal Corp. | 19,021 | 89 |
* | Accuride Corp. | 10,806 | 86 |
Twin Disc Inc. | 2,604 | 83 | |
* | Kadant Inc. | 3,706 | 81 |
* | PMFG Inc. | 4,882 | 80 |
Douglas Dynamics Inc. | 5,725 | 74 | |
Alamo Group Inc. | 2,733 | 73 | |
Ampco-Pittsburgh Corp. | 2,163 | 46 | |
* | Energy Recovery Inc. | 11,176 | 24 |
* | Tecumseh Products Co. | ||
Class A | 4,124 | 19 | |
115,591 | |||
Marine (0.3%) | |||
* | Kirby Corp. | 15,233 | 1,045 |
Alexander & Baldwin Inc. | 12,677 | 589 | |
* | Genco Shipping & | ||
Trading Ltd. | 9,942 | 68 | |
* | Eagle Bulk Shipping Inc. | 18,891 | 30 |
Baltic Trading Ltd. | 5,047 | 23 | |
1,755 | |||
Professional Services (2.9%) | |||
* | Verisk Analytics Inc. Class A | 42,274 | 1,839 |
Equifax Inc. | 36,903 | 1,551 | |
Dun & Bradstreet Corp. | 14,835 | 1,226 | |
* | IHS Inc. Class A | 12,851 | 1,215 |
Robert Half International Inc. | 41,508 | 1,180 | |
Towers Watson & Co. | |||
Class A | 17,024 | 1,089 | |
Manpower Inc. | 24,720 | 1,065 | |
* | Nielsen Holdings NV | 27,311 | 805 |
* | Acacia Research Corp. | 13,047 | 515 |
* | FTI Consulting Inc. | 12,481 | 500 |
* | CoStar Group Inc. | 7,606 | 456 |
Corporate Executive | |||
Board Co. | 10,124 | 420 | |
* | Advisory Board Co. | 4,978 | 403 |
* | Huron Consulting Group Inc. | 6,452 | 246 |
* | Korn/Ferry International | 14,342 | 229 |
Insperity Inc. | 7,235 | 218 | |
* | Navigant Consulting Inc. | 15,691 | 212 |
* | TrueBlue Inc. | 12,192 | 202 |
* | Exponent Inc. | 4,105 | 198 |
Resources Connection Inc. | 13,614 | 178 | |
* | On Assignment Inc. | 11,296 | 157 |
* | ICF International Inc. | 5,990 | 155 |
* | Kforce Inc. | 9,789 | 138 |
Kelly Services Inc. Class A | 9,192 | 138 | |
Heidrick & Struggles | |||
International Inc. | 5,428 | 110 | |
* | Pendrell Corp. | 43,179 | 105 |
* | Mistras Group Inc. | 4,555 | 102 |
* | CBIZ Inc. | 13,201 | 86 |
* | Dolan Co. | 8,814 | 79 |
* | CRA International Inc. | 3,288 | 78 |
* | RPX Corp. | 3,708 | 63 |
58
Industrials Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
CDI Corp. | 4,006 | 60 | |
* | Hill International Inc. | 7,598 | 41 |
15,059 | |||
Road & Rail (8.1%) | |||
Union Pacific Corp. | 146,904 | 16,196 | |
Norfolk Southern Corp. | 108,391 | 7,468 | |
CSX Corp. | 319,293 | 6,708 | |
* | Kansas City Southern | 33,404 | 2,324 |
JB Hunt Transport | |||
Services Inc. | 28,398 | 1,454 | |
* | Hertz Global Holdings Inc. | 82,366 | 1,178 |
Ryder System Inc. | 15,451 | 822 | |
Landstar System Inc. | 14,339 | 775 | |
* | Genesee & Wyoming Inc. | ||
Class A | 12,193 | 725 | |
* | Dollar Thrifty Automotive | ||
Group Inc. | 8,825 | 670 | |
* | Old Dominion Freight | ||
Line Inc. | 13,098 | 570 | |
Con-way Inc. | 16,691 | 493 | |
* | Avis Budget Group Inc. | 31,493 | 406 |
Werner Enterprises Inc. | 13,118 | 318 | |
Knight Transportation Inc. | 18,107 | 310 | |
* | Swift Transportation Co. | 24,019 | 282 |
Amerco Inc. | 2,341 | 244 | |
Heartland Express Inc. | 16,245 | 235 | |
* | RailAmerica Inc. | 7,174 | 148 |
Arkansas Best Corp. | 7,402 | 132 | |
Marten Transport Ltd. | 5,048 | 105 | |
Celadon Group Inc. | 6,937 | 102 | |
* | Saia Inc. | 4,589 | 75 |
* | Roadrunner Transportation | ||
Systems Inc. | 4,126 | 74 | |
* | Zipcar Inc. | 3,582 | 47 |
* | Patriot Transportation | ||
Holding Inc. | 1,676 | 38 | |
41,899 | |||
Trading Companies & Distributors (3.0%) | |||
Fastenal Co. | 85,284 | 4,493 | |
WW Grainger Inc. | 18,030 | 3,745 | |
MSC Industrial Direct Co. Inc. | |||
Class A | 14,096 | 1,119 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | WESCO International Inc. | 13,155 | 827 |
* | United Rentals Inc. | 18,932 | 789 |
GATX Corp. | 12,751 | 555 | |
Watsco Inc. | 7,758 | 554 | |
* | Air Lease Corp. | 20,799 | 511 |
Applied Industrial | |||
Technologies Inc. | 11,517 | 463 | |
* | RSC Holdings Inc. | 17,155 | 382 |
* | Beacon Roofing Supply Inc. | 13,990 | 330 |
Aircastle Ltd. | 17,999 | 245 | |
TAL International Group Inc. | 6,593 | 238 | |
Kaman Corp. | 6,792 | 234 | |
* | Interline Brands Inc. | 10,136 | 208 |
* | Rush Enterprises Inc. | ||
Class A | 8,255 | 197 | |
* | H&E Equipment Services Inc. | 8,537 | 148 |
* | Titan Machinery Inc. | 5,039 | 132 |
* | DXP Enterprises Inc. | 3,022 | 112 |
Houston Wire & Cable Co. | 5,162 | 73 | |
* | CAI International Inc. | 3,530 | 71 |
SeaCube Container | |||
Leasing Ltd. | 3,383 | 55 | |
15,481 | |||
Transportation Infrastructure (0.1%) | |||
Macquarie | |||
Infrastructure Co. LLC | 12,644 | 378 | |
378 | |||
Total Investments (100.0%) | |||
(Cost $523,638) | 516,961 | ||
Other Assets and Liabilities (0.0%) | |||
Other Assets | 4,635 | ||
Liabilities | (4,556) | ||
79 | |||
Net Assets (100%) | 517,040 |
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 548,693 |
Undistributed Net Investment Income | 1,592 |
Accumulated Net Realized Losses | (26,568) |
Unrealized Appreciation (Depreciation) | (6,677) |
Net Assets | 517,040 |
Admiral Shares—Net Assets | |
Applicable to 428,733 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 15,114 |
Net Asset Value Per Share— | |
Admiral Shares | $35.25 |
ETF Shares—Net Assets | |
Applicable to 7,314,450 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 501,926 |
Net Asset Value Per Share— | |
ETF Shares | $68.62 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
See accompanying Notes, which are an integral part of the Financial Statements.
59
Industrials Index Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 5,432 |
Interest1 | 1 |
Security Lending | 4 |
Total Income | 5,437 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 35 |
Management and Administrative— | |
Admiral Shares | 10 |
Management and Administrative— | |
ETF Shares | 282 |
Marketing and Distribution— | |
Admiral Shares | 2 |
Marketing and Distribution— | |
ETF Shares | 65 |
Custodian Fees | 15 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 16 |
Total Expenses | 425 |
Net Investment Income | 5,012 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 3,786 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 61,550 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 70,348 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 5,012 | 7,993 |
Realized Net Gain (Loss) | 3,786 | 16,274 |
Change in Unrealized Appreciation (Depreciation) | 61,550 | 15,673 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 70,348 | 39,940 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (279) | (137) |
ETF Shares | (8,530) | (5,705) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (8,809) | (5,842) |
Capital Share Transactions | ||
Admiral Shares | (1,043) | 7,281 |
ETF Shares | (9,167) | 122,759 |
Net Increase (Decrease) from Capital Share Transactions | (10,210) | 130,040 |
Total Increase (Decrease) | 51,329 | 164,138 |
Net Assets | ||
Beginning of Period | 465,711 | 301,573 |
End of Period2 | 517,040 | 465,711 |
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 $1,592,000 and $5,389,000.
See accompanying Notes, which are an integral part of the Financial Statements.
60
Industrials Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $30.89 | $26.57 | $23.85 | $34.20 | $37.94 | $30.72 |
Investment Operations | ||||||
Net Investment Income | .378 | .511 | .4461 | .635 | .5761 | .5101 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 4.609 | 4.248 | 2.619 | (10.428) | (3.816) | 7.090 |
Total from Investment Operations | 4.987 | 4.759 | 3.065 | (9.793) | (3.240) | 7.600 |
Distributions | ||||||
Dividends from Net Investment Income | (.627) | (.439) | (.345) | (.557) | (.500) | (.380) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.627) | (.439) | (.345) | (.557) | (.500) | (.380) |
Net Asset Value, End of Period | $35.25 | $30.89 | $26.57 | $23.85 | $34.20 | $37.94 |
Total Return2 | 16.38% | 17.79% | 12.85% | –28.44% | –8.67% | 24.90% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $15 | $14 | $7 | $6 | $11 | $4 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.28% | 0.25% | 0.26% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 2.17% | 1.66% | 1.69% | 2.71% | 1.63% | 1.46% |
Portfolio Turnover Rate3 | 5% | 5% | 10% | 8% | 7% | 13% |
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 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 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
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $60.12 | $51.71 | $46.45 | $66.65 | $73.94 | $59.85 |
Investment Operations | ||||||
Net Investment Income | .732 | .992 | .9101 | 1.253 | 1.1571 | 1.0261 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 8.985 | 8.269 | 5.065 | (20.342) | (7.466) | 13.808 |
Total from Investment Operations | 9.717 | 9.261 | 5.975 | (19.089) | (6.309) | 14.834 |
Distributions | ||||||
Dividends from Net Investment Income | (1.217) | (.851) | (.715) | (1.111) | (.981) | (.744) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.217) | (.851) | (.715) | (1.111) | (.981) | (.744) |
Net Asset Value, End of Period | $68.62 | $60.12 | $51.71 | $46.45 | $66.65 | $73.94 |
Total Return | 16.39% | 17.79% | 12.85% | –28.41% | –8.65% | 24.95% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $502 | $451 | $295 | $186 | $347 | $229 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 2.17% | 1.66% | 1.69% | 2.74% | 1.68% | 1.50% |
Portfolio Turnover Rate2 | 5% | 5% | 10% | 8% | 7% | 13% |
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.
62
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.
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $76,000 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 29, 2012, 100% of the market value of the fund’s investments was based on Level 1 inputs.
63
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 29, 2012, the fund realized $3,879,000 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, 2011, the fund had available capital loss carryforwards totaling $23,825,000 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, $13,144,000 through August 31, 2018, and $5,132,000 through August 31, 2019. In addition, the fund realized losses of $2,467,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $523,638,000. Net unrealized depreciation of investment securities for tax purposes was $6,677,000, consisting of unrealized gains of $47,582,000 on securities that had risen in value since their purchase and $54,259,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $38,287,000 of investment securities and sold $53,021,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 1,300 | 39 | 10,577 | 311 |
Issued in Lieu of Cash Distributions | 224 | 7 | 106 | 3 |
Redeemed1 | (2,567) | (79) | (3,402) | (102) |
Net Increase (Decrease)—Admiral Shares | (1,043) | (33) | 7,281 | 212 |
ETF Shares | ||||
Issued | 26,505 | 405 | 212,539 | 3,206 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (35,672) | (600) | (89,780) | (1,400) |
Net Increase (Decrease)—ETF Shares | (9,167) | (195) | 122,759 | 1,806 |
1 Net of redemption fees for fiscal 2012 and 2011 of $9,000 and $30,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
64
Information Technology Index Fund
Fund Profile
As of February 29, 2012
Portfolio Characteristics | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Stocks | 413 | 412 | 2,485 | |
Median Market Cap $109.3B | $109.3B | $34.8B | ||
Price/Earnings Ratio | 16.2x | 16.2x | 16.4x | |
Price/Book Ratio | 3.4x | 3.4x | 2.3x | |
Yield3 | 1.0% | 2.0% | ||
Admiral Shares | 0.8% | |||
ETF Shares | 0.8% | |||
Return on Equity | 25.6% | 25.6% | 18.2% | |
Earnings Growth Rate | 24.1% | 24.1% | 7.7% | |
Foreign Holdings | 0.0% | 0.0% | 0.0% | |
Turnover Rate4 | 8% | — | — | |
Expense Ratio5 | — | — | ||
Admiral Shares | 0.19% | |||
ETF Shares | 0.19% | |||
Short-Term Reserves | 0.1% | — | — | |
Volatility Measures6 | ||||
Fund Versus | Fund Versus | |||
Spliced Index7 | Broad Index2 | |||
R-Squared | 1.00 | 0.89 | ||
Beta | 1.00 | 1.10 |
Subindustry Diversification | |
(% of equity exposure) | |
Application Software | 5.2% |
Communications Equipment | 10.3 |
Computer Hardware | 19.9 |
Computer Storage & Peripherals | 3.9 |
Data Processing & Outsourced Services | 7.5 |
Electronic Components | 1.3 |
Electronic Manufacturing Services | 1.5 |
Internet Software & Services | 9.3 |
IT Consulting & Other Services | 10.8 |
Semiconductor Equipment | 1.7 |
Semiconductors | 11.7 |
Systems Software | 14.5 |
Other Information Technology | 2.4 |
Ten Largest Holdings8 (% of total net assets) | |
Apple Inc. | 17.1% |
Microsoft Corp. | 8.1 |
International Business Machines Corp. | 7.9 |
Google Inc. Class A | 5.4 |
Intel Corp. | 4.6 |
Oracle Corp. | 4.0 |
Cisco Systems Inc. | 3.6 |
QUALCOMM Inc. | 3.5 |
Visa Inc. Class A | 2.1 |
EMC Corp. | 1.9 |
Top Ten | 58.2% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.18% for Admiral Shares and 0.18% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced US IMI/Information Technology 25/50: MSCI US IMI/Information Technology through February 26, 2010; MSCI US IMI/Information Technology25/50 thereafter.
8 The holdings listed exclude any temporary cash investments and equity index products.
65
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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx68x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | 0.53% | 3.79% | 3.01% | |
Net Asset Value | 0.52 | 3.80 | 3.01 | |
Admiral Shares3 | 3/25/2004 | 0.53 | 3.78 | 4.49 |
1 Six months ended February 29, 2012.
2 Spliced 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.
66
Information Technology Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
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%) | |||
Communications Equipment (10.3%) | |||
Cisco Systems Inc. | 4,261,886 | 84,726 | |
QUALCOMM Inc. | 1,332,710 | 82,868 | |
Motorola Solutions Inc. | 219,362 | 10,924 | |
* | Juniper Networks Inc. | 416,981 | 9,490 |
* | Motorola Mobility | ||
Holdings Inc. | 225,647 | 8,958 | |
* | F5 Networks Inc. | 62,960 | 7,867 |
Harris Corp. | 91,742 | 4,003 | |
* | Riverbed Technology Inc. | 116,928 | 3,329 |
* | Polycom Inc. | 140,483 | 2,901 |
* | JDS Uniphase Corp. | 184,908 | 2,411 |
* | Brocade Communications | ||
Systems Inc. | 387,248 | 2,238 | |
ADTRAN Inc. | 48,134 | 1,697 | |
* | Finisar Corp. | 72,110 | 1,463 |
* | Viasat Inc. | 31,572 | 1,456 |
* | Acme Packet Inc. | 45,330 | 1,382 |
* | Aruba Networks Inc. | 63,720 | 1,376 |
InterDigital Inc. | 35,804 | 1,355 | |
Plantronics Inc. | 34,417 | 1,284 | |
* | Ciena Corp. | 76,318 | 1,139 |
* | Netgear Inc. | 29,614 | 1,113 |
Tellabs Inc. | 273,571 | 1,083 | |
* | Arris Group Inc. | 89,536 | 1,020 |
* | EchoStar Corp. Class A | 27,642 | 828 |
* | Emulex Corp. | 69,029 | 722 |
* | Infinera Corp. | 80,758 | 643 |
* | Harmonic Inc. | 90,473 | 533 |
* | Loral Space & | ||
Communications Inc. | 7,459 | 531 | |
Comtech | |||
Telecommunications Corp. | 16,097 | 519 | |
* | Sonus Networks Inc. | 163,382 | 477 |
* | Ixia | 29,879 | 413 |
Black Box Corp. | 14,113 | 380 | |
* | Sycamore Networks Inc. | 16,732 | 309 |
* | Oplink Communications Inc. | 15,339 | 252 |
* | Extreme Networks | 65,318 | 241 |
* | Globecomm Systems Inc. | 16,031 | 232 |
* | Digi International Inc. | 19,954 | 224 |
* | Symmetricom Inc. | 35,848 | 210 |
* | Anaren Inc. | 11,111 | 195 |
* | Oclaro Inc. | 39,475 | 171 |
* | Calix Inc. | 18,197 | 165 |
* | Aviat Networks Inc. | 50,073 | 132 |
* | ShoreTel Inc. | 23,937 | 129 |
Bel Fuse Inc. Class B | 7,317 | 128 | |
* | Mitel Networks Corp. | 14,105 | 55 |
* | Meru Networks Inc. | 8,215 | 39 |
* | Powerwave | ||
Technologies Inc. | 24,744 | 35 | |
241,646 | |||
Computers & Peripherals (23.9%) | |||
* | Apple Inc. | 736,879 | 399,713 |
* | EMC Corp. | 1,617,175 | 44,780 |
Market | |||
Value• | |||
Shares | ($000) | ||
Hewlett-Packard Co. | 1,575,254 | 39,870 | |
* | Dell Inc. | 1,281,748 | 22,174 |
* | NetApp Inc. | 292,090 | 12,560 |
* | SanDisk Corp. | 190,543 | 9,424 |
Seagate Technology plc | 332,901 | 8,742 | |
* | Western Digital Corp. | 185,435 | 7,278 |
* | NCR Corp. | 124,971 | 2,714 |
Lexmark International Inc. | |||
Class A | 59,566 | 2,197 | |
Diebold Inc. | 47,958 | 1,877 | |
* | QLogic Corp. | 79,759 | 1,371 |
* | Synaptics Inc. | 26,002 | 956 |
*,^ | Fusion-io Inc. | 34,247 | 935 |
* | 3D Systems Corp. | 33,951 | 760 |
* | Electronics for Imaging Inc. | 36,939 | 590 |
* | Stratasys Inc. | 15,696 | 578 |
* | Quantum Corp. | 172,333 | 453 |
*,^ | OCZ Technology Group Inc. | 50,161 | 431 |
* | Super Micro Computer Inc. | 22,497 | 372 |
* | STEC Inc. | 33,231 | 322 |
* | Avid Technology Inc. | 30,119 | 321 |
* | Intermec Inc. | 34,967 | 262 |
* | Silicon Graphics | ||
International Corp. | 22,079 | 214 | |
* | Cray Inc. | 25,530 | 203 |
* | Intevac Inc. | 19,127 | 151 |
* | Imation Corp. | 24,046 | 150 |
* | Novatel Wireless Inc. | 25,034 | 86 |
559,484 | |||
Electronic Equipment, Instruments & | |||
Components (4.2%) | |||
Corning Inc. | 1,245,991 | 16,248 | |
TE Connectivity Ltd. | 336,470 | 12,298 | |
Amphenol Corp. Class A | 131,338 | 7,350 | |
* | Trimble Navigation Ltd. | 97,805 | 4,919 |
* | Avnet Inc. | 117,570 | 4,202 |
* | Flextronics | ||
International Ltd. | 565,412 | 3,986 | |
Jabil Circuit Inc. | 148,547 | 3,837 | |
* | Arrow Electronics Inc. | 88,482 | 3,552 |
FLIR Systems Inc. | 123,642 | 3,236 | |
* | Ingram Micro Inc. | 121,607 | 2,326 |
National Instruments Corp. | 76,415 | 2,033 | |
* | Tech Data Corp. | 32,659 | 1,747 |
* | Dolby Laboratories Inc. | ||
Class A | 41,414 | 1,577 | |
* | Anixter International Inc. | 22,123 | 1,538 |
* | Itron Inc. | 32,117 | 1,427 |
* | Vishay Intertechnology Inc. | 113,212 | 1,388 |
* | Universal Display Corp. | 32,847 | 1,357 |
Molex Inc. Class A | 60,535 | 1,354 | |
Cognex Corp. | 31,509 | 1,343 | |
Molex Inc. | 48,886 | 1,325 | |
* | FEI Co. | 29,731 | 1,324 |
* | IPG Photonics Corp. | 22,448 | 1,181 |
* | Coherent Inc. | 18,650 | 1,035 |
* | Plexus Corp. | 27,926 | 969 |
Littelfuse Inc. | 18,159 | 961 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | SYNNEX Corp. | 20,221 | 834 |
* | OSI Systems Inc. | 13,975 | 824 |
* | Scansource Inc. | 21,503 | 796 |
* | Benchmark Electronics Inc. | 47,133 | 774 |
* | Sanmina-SCI Corp. | 63,934 | 742 |
* | Insight Enterprises Inc. | 35,418 | 740 |
* | FARO Technologies Inc. | 13,107 | 727 |
MTS Systems Corp. | 12,515 | 615 | |
AVX Corp. | 39,816 | 527 | |
* | Rofin-Sinar Technologies Inc. | 22,233 | 521 |
* | Newport Corp. | 29,353 | 491 |
* | TTM Technologies Inc. | 41,267 | 483 |
* | Brightpoint Inc. | 53,250 | 469 |
* | Rogers Corp. | 12,550 | 465 |
Park Electrochemical Corp. | 15,354 | 438 | |
* | Maxwell Technologies Inc. | 20,710 | 377 |
* | DTS Inc. | 13,384 | 376 |
* | Measurement | ||
Specialties Inc. | 11,216 | 365 | |
Badger Meter Inc. | 11,230 | 361 | |
* | RealD Inc. | 29,641 | 350 |
* | Checkpoint Systems Inc. | 31,287 | 347 |
* | Mercury Computer | ||
Systems Inc. | 23,705 | 341 | |
* | Power-One Inc. | 77,050 | 334 |
* | Kemet Corp. | 34,489 | 311 |
Electro Scientific | |||
Industries Inc. | 22,431 | 310 | |
Methode Electronics Inc. | 28,873 | 264 | |
* | Fabrinet | 14,643 | 262 |
Daktronics Inc. | 27,730 | 249 | |
Electro Rent Corp. | 13,737 | 248 | |
* | GSI Group Inc. | 20,818 | 239 |
CTS Corp. | 22,800 | 227 | |
* | Multi-Fineline Electronix Inc. | 7,524 | 198 |
* | Aeroflex Holding Corp. | 16,514 | 181 |
* | X-Rite Inc. | 34,117 | 154 |
* | Agilysys Inc. | 18,003 | 145 |
* | Echelon Corp. | 24,822 | 122 |
Pulse Electronics Corp. | 34,104 | 105 | |
* | Viasystems Group Inc. | 4,428 | 82 |
97,907 | |||
Internet Software & Services (9.3%) | |||
* | Google Inc. Class A | 202,957 | 125,478 |
* | eBay Inc. | 921,120 | 32,921 |
* | Yahoo! Inc. | 934,076 | 13,852 |
* | Equinix Inc. | 37,667 | 5,280 |
* | Akamai Technologies Inc. | 142,198 | 5,119 |
VeriSign Inc. | 119,770 | 4,426 | |
* | Rackspace Hosting Inc. | 83,170 | 4,345 |
IAC/InterActiveCorp | 60,400 | 2,754 | |
MercadoLibre Inc. | 22,609 | 2,200 | |
* | AOL Inc. | 77,106 | 1,385 |
* | ValueClick Inc. | 65,545 | 1,363 |
* | LinkedIn Corp. Class A | 14,401 | 1,251 |
* | VistaPrint NV | 30,440 | 1,238 |
j2 Global Inc. | 37,687 | 1,115 | |
* | WebMD Health Corp. | 43,904 | 1,091 |
67
Information Technology Index Fund | |||
Market | |||
Value• | |||
Shares | ($000) | ||
* | DealerTrack Holdings Inc. | 32,707 | 911 |
* | Bankrate Inc. | 31,714 | 756 |
* | Constant Contact Inc. | 22,047 | 667 |
* | Monster Worldwide Inc. | 95,962 | 666 |
* | OpenTable Inc. | 13,179 | 639 |
Earthlink Inc. | 84,229 | 629 | |
* | Liquidity Services Inc. | 14,384 | 622 |
* | LivePerson Inc. | 37,339 | 563 |
* | Digital River Inc. | 30,947 | 546 |
NIC Inc. | 45,108 | 545 | |
* | Ancestry.com Inc. | 23,101 | 526 |
* | LogMeIn Inc. | 14,193 | 523 |
* | comScore Inc. | 20,959 | 461 |
* | LoopNet Inc. | 22,179 | 408 |
* | Cornerstone OnDemand Inc. | 18,763 | 389 |
* | InfoSpace Inc. | 31,531 | 366 |
United Online Inc. | 69,289 | 351 | |
* | Dice Holdings Inc. | 36,749 | 326 |
* | KIT Digital Inc. | 32,063 | 324 |
* | Internap Network | ||
Services Corp. | 38,869 | 291 | |
* | Perficient Inc. | 22,777 | 275 |
* | Move Inc. | 31,276 | 274 |
* | Stamps.com Inc. | 9,066 | 234 |
Keynote Systems Inc. | 11,444 | 228 | |
* | QuinStreet Inc. | 20,452 | 214 |
* | Vocus Inc. | 15,435 | 209 |
* | Limelight Networks Inc. | 53,437 | 201 |
RealNetworks Inc. | 18,254 | 185 | |
* | XO Group Inc. | 20,135 | 182 |
* | Responsys Inc. | 15,056 | 182 |
* | IntraLinks Holdings Inc. | 29,534 | 174 |
* | Active Network Inc. | 10,613 | 170 |
* | SciQuest Inc. | 11,203 | 169 |
* | Demand Media Inc. | 23,005 | 158 |
* | Envestnet Inc. | 12,343 | 154 |
* | Travelzoo Inc. | 4,514 | 115 |
Marchex Inc. Class B | 18,022 | 77 | |
* | TechTarget Inc. | 8,869 | 61 |
217,589 | |||
IT Services (18.3%) | |||
International Business | |||
Machines Corp. | 934,528 | 183,850 | |
Visa Inc. Class A | 413,559 | 48,126 | |
Mastercard Inc. Class A | 86,603 | 36,373 | |
Accenture plc Class A | 508,137 | 30,254 | |
Automatic Data | |||
Processing Inc. | 387,508 | 21,049 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 239,530 | 16,995 | |
* | Teradata Corp. | 132,558 | 8,822 |
Western Union Co. | 490,754 | 8,573 | |
Paychex Inc. | 258,602 | 8,094 | |
* | Fiserv Inc. | 111,551 | 7,396 |
Fidelity National | |||
Information Services Inc. | 189,837 | 6,024 | |
* | Alliance Data Systems Corp. | 39,578 | 4,803 |
* | VeriFone Systems Inc. | 83,466 | 3,997 |
Computer Sciences Corp. | 122,958 | 3,905 | |
Global Payments Inc. | 62,002 | 3,201 | |
Total System Services Inc. | 135,783 | 2,971 | |
* | Gartner Inc. | 68,478 | 2,757 |
* | SAIC Inc. | 216,558 | 2,646 |
Broadridge Financial | |||
Solutions Inc. | 98,443 | 2,396 | |
Jack Henry & | |||
Associates Inc. | 65,354 | 2,205 | |
* | NeuStar Inc. Class A | 51,893 | 1,819 |
* | Wright Express Corp. | 29,252 | 1,810 |
Market | |||
Value• | |||
Shares | ($000) | ||
DST Systems Inc. | 27,868 | 1,477 | |
Lender Processing | |||
Services Inc. | 66,459 | 1,465 | |
* | Convergys Corp. | 94,608 | 1,219 |
* | CACI International Inc. | ||
Class A | 19,860 | 1,174 | |
MAXIMUS Inc. | 27,225 | 1,136 | |
Sapient Corp. | 87,837 | 1,097 | |
* | CoreLogic Inc. | 67,322 | 1,035 |
* | Acxiom Corp. | 64,523 | 906 |
Heartland Payment | |||
Systems Inc. | 30,984 | 877 | |
* | FleetCor Technologies Inc. | 22,285 | 825 |
* | Cardtronics Inc. | 29,655 | 788 |
* | Euronet Worldwide Inc. | 36,632 | 707 |
Syntel Inc. | 13,206 | 676 | |
Mantech International Corp. | |||
Class A | 18,625 | 625 | |
* | Unisys Corp. | 30,335 | 567 |
* | ServiceSource | ||
International Inc. | 31,004 | 521 | |
* | ExlService Holdings Inc. | 16,960 | 472 |
* | CSG Systems | ||
International Inc. | 26,969 | 432 | |
* | iGate Corp. | 24,342 | 424 |
* | Forrester Research Inc. | 12,429 | 401 |
* | TNS Inc. | 19,890 | 365 |
*,^ | Higher One Holdings Inc. | 24,486 | 360 |
* | TeleTech Holdings Inc. | 22,156 | 338 |
Cass Information | |||
Systems Inc. | 7,124 | 274 | |
* | Global Cash Access | ||
Holdings Inc. | 45,554 | 253 | |
* | MoneyGram | ||
International Inc. | 13,516 | 242 | |
* | CIBER Inc. | 52,850 | 231 |
* | Virtusa Corp. | 12,911 | 202 |
ModusLink Global | |||
Solutions Inc. | 34,292 | 191 | |
* | Echo Global Logistics Inc. | 8,632 | 161 |
* | NCI Inc. Class A | 6,693 | 48 |
427,555 | |||
Office Electronics (0.5%) | |||
Xerox Corp. | 1,099,555 | 9,049 | |
* | Zebra Technologies Corp. | 41,157 | 1,582 |
10,631 | |||
Semiconductors & | |||
Semiconductor Equipment (13.4%) | |||
Intel Corp. | 4,036,823 | 108,510 | |
Texas Instruments Inc. | 905,870 | 30,211 | |
Broadcom Corp. Class A | 385,368 | 14,316 | |
Applied Materials Inc. | 1,044,565 | 12,785 | |
Altera Corp. | 255,144 | 9,810 | |
Analog Devices Inc. | 235,882 | 9,249 | |
Xilinx Inc. | 208,987 | 7,718 | |
* | NVIDIA Corp. | 484,184 | 7,335 |
Avago Technologies Ltd. | 175,236 | 6,591 | |
Maxim Integrated | |||
Products Inc. | 232,341 | 6,480 | |
KLA-Tencor Corp. | 132,177 | 6,397 | |
* | Marvell Technology | ||
Group Ltd. | 409,492 | 6,142 | |
Linear Technology Corp. | 180,621 | 6,047 | |
* | Micron Technology Inc. | 704,597 | 6,024 |
Microchip Technology Inc. | 151,574 | 5,467 | |
* | Skyworks Solutions Inc. | 149,018 | 4,019 |
* | Lam Research Corp. | 94,766 | 3,952 |
* | LSI Corp. | 450,667 | 3,876 |
* | Atmel Corp. | 366,371 | 3,704 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Advanced Micro | ||
Devices Inc. | 469,651 | 3,452 | |
* | ON Semiconductor Corp. | 356,673 | 3,235 |
* | Cree Inc. | 87,440 | 2,649 |
* | Novellus Systems Inc. | 52,743 | 2,451 |
* | Teradyne Inc. | 146,726 | 2,409 |
Cypress | |||
Semiconductor Corp. | 116,586 | 2,011 | |
* | Semtech Corp. | 52,596 | 1,510 |
* | Fairchild Semiconductor | ||
International Inc. Class A | 100,564 | 1,467 | |
* | First Solar Inc. | 44,636 | 1,442 |
* | Microsemi Corp. | 68,275 | 1,428 |
* | Silicon Laboratories Inc. | 31,518 | 1,412 |
* | Cavium Inc. | 37,018 | 1,323 |
* | Hittite Microwave Corp. | 22,278 | 1,274 |
* | PMC - Sierra Inc. | 184,225 | 1,266 |
* | International Rectifier Corp. | 55,198 | 1,239 |
MKS Instruments Inc. | 39,350 | 1,179 | |
* | Cirrus Logic Inc. | 48,870 | 1,152 |
Intersil Corp. Class A | 99,265 | 1,124 | |
* | Cymer Inc. | 22,987 | 1,057 |
* | RF Micro Devices Inc. | 218,194 | 1,041 |
* | Entegris Inc. | 106,653 | 964 |
* | Cabot | ||
Microelectronics Corp. | 18,359 | 923 | |
* | GT Advanced | ||
Technologies Inc. | 100,115 | 857 | |
Power Integrations Inc. | 22,940 | 856 | |
* | TriQuint Semiconductor Inc. | 130,455 | 840 |
* | Veeco Instruments Inc. | 30,685 | 830 |
* | Integrated Device | ||
Technology Inc. | 114,314 | 790 | |
* | Omnivision | ||
Technologies Inc. | 47,186 | 772 | |
* | Diodes Inc. | 28,854 | 717 |
* | MEMC Electronic | ||
Materials Inc. | 182,364 | 717 | |
* | Tessera Technologies Inc. | 40,039 | 673 |
* | Freescale Semiconductor | ||
Holdings I Ltd. | 38,909 | 628 | |
Brooks Automation Inc. | 51,615 | 617 | |
* | Lattice Semiconductor Corp. | 92,502 | 610 |
* | Kulicke & Soffa | ||
Industries Inc. | 53,971 | 608 | |
* | Volterra | ||
Semiconductor Corp. | 19,721 | 606 | |
* | Rambus Inc. | 80,558 | 570 |
* | Spansion Inc. Class A | 43,442 | 556 |
* | ATMI Inc. | 25,080 | 553 |
* | Amkor Technology Inc. | 86,130 | 550 |
* | Ultratech Inc. | 20,032 | 545 |
* | Standard Microsystems Corp. | 18,104 | 463 |
* | Monolithic Power | ||
Systems Inc. | 24,810 | 461 | |
* | Ceva Inc. | 18,270 | 450 |
Micrel Inc. | 41,295 | 441 | |
* | Entropic | ||
Communications Inc. | 60,780 | 375 | |
* | Advanced Energy | ||
Industries Inc. | 30,702 | 368 | |
* | Applied Micro Circuits Corp. | 50,269 | 341 |
* | Silicon Image Inc. | 63,337 | 327 |
* | Photronics Inc. | 45,946 | 322 |
* | Nanometrics Inc. | 15,227 | 267 |
* | LTX-Credence Corp. | 38,701 | 261 |
* | Rudolph Technologies Inc. | 24,792 | 245 |
* | MIPS Technologies Inc. | ||
Class A | 41,118 | 237 |
68
Information Technology Index Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | IXYS Corp. | 19,671 | 235 |
* | SunPower Corp. Class A | 30,979 | 233 |
* | Inphi Corp. | 14,931 | 214 |
Cohu Inc. | 18,805 | 211 | |
* | Exar Corp. | 29,746 | 208 |
* | Formfactor Inc. | 39,755 | 203 |
* | Kopin Corp. | 49,959 | 180 |
* | STR Holdings Inc. | 22,651 | 161 |
* | Magnachip | ||
Semiconductor Corp. | 13,846 | 160 | |
* | Supertex Inc. | 8,449 | 156 |
* | Pericom | ||
Semiconductor Corp. | 19,453 | 150 | |
* | Anadigics Inc. | 52,986 | 136 |
* | Sigma Designs Inc. | 23,617 | 136 |
* | Alpha & Omega | ||
Semiconductor Ltd. | 13,464 | 133 | |
* | Rubicon Technology Inc. | 14,366 | 129 |
* | MaxLinear Inc. | 15,951 | 88 |
314,827 | |||
Software (20.1%) | |||
Microsoft Corp. | 6,002,249 | 190,511 | |
Oracle Corp. | 3,199,502 | 93,649 | |
* | Salesforce.com Inc. | 102,487 | 14,672 |
Intuit Inc. | 224,080 | 12,961 | |
* | Adobe Systems Inc. | 388,879 | 12,790 |
* | Citrix Systems Inc. | 148,315 | 11,085 |
* | Symantec Corp. | 584,627 | 10,430 |
CA Inc. | 312,912 | 8,458 | |
* | Red Hat Inc. | 152,889 | 7,562 |
* | Autodesk Inc. | 180,272 | 6,823 |
* | VMware Inc. Class A | 67,903 | 6,715 |
* | BMC Software Inc. | 134,848 | 5,049 |
* | Nuance | ||
Communications Inc. | 190,688 | 4,943 | |
Activision Blizzard Inc. | 408,217 | 4,878 | |
* | ANSYS Inc. | 73,316 | 4,632 |
* | Electronic Arts Inc. | 262,785 | 4,291 |
* | Informatica Corp. | 84,398 | 4,149 |
* | TIBCO Software Inc. | 131,322 | 3,804 |
* | Synopsys Inc. | 113,792 | 3,467 |
* | MICROS Systems Inc. | 63,613 | 3,303 |
* | Rovi Corp. | 87,683 | 3,111 |
Factset Research | |||
Systems Inc. | 34,376 | 3,004 | |
Solera Holdings Inc. | 55,965 | 2,686 | |
* | Cadence Design | ||
Systems Inc. | 215,909 | 2,541 | |
* | Parametric | ||
Technology Corp. | 94,017 | 2,510 | |
* | Ariba Inc. | 79,093 | 2,489 |
* | Concur Technologies Inc. | 36,226 | 2,136 |
* | Fortinet Inc. | 73,347 | 1,984 |
* | QLIK Technologies Inc. | 59,704 | 1,807 |
* | CommVault Systems Inc. | 33,263 | 1,715 |
* | Compuware Corp. | 172,169 | 1,551 |
* | SolarWinds Inc. | 40,682 | 1,516 |
* | Taleo Corp. Class A | 32,955 | 1,510 |
Market | |||
Value• | |||
Shares | ($000) | ||
* | Aspen Technology Inc. | 70,287 | 1,445 |
* | Ultimate Software | ||
Group Inc. | 19,688 | 1,375 | |
* | Progress Software Corp. | 50,736 | 1,177 |
* | ACI Worldwide Inc. | 30,989 | 1,171 |
Fair Isaac Corp. | 28,249 | 1,144 | |
* | Mentor Graphics Corp. | 74,551 | 1,130 |
Blackbaud Inc. | 35,275 | 1,113 | |
* | TiVo Inc. | 95,034 | 1,069 |
* | Sourcefire Inc. | 22,734 | 1,024 |
* | Quest Software Inc. | 47,466 | 950 |
* | Take-Two Interactive | ||
Software Inc. | 58,298 | 901 | |
* | NetSuite Inc. | 18,683 | 891 |
* | MicroStrategy Inc. Class A | 6,473 | 878 |
* | JDA Software Group Inc. | 33,605 | 842 |
*,^ | Zynga Inc. | 63,345 | 834 |
* | Bottomline Technologies Inc. | 28,614 | 804 |
* | Manhattan Associates Inc. | 16,774 | 778 |
* | Tyler Technologies Inc. | 19,995 | 755 |
* | Synchronoss | ||
Technologies Inc. | 21,064 | 705 | |
* | Advent Software Inc. | 26,891 | 692 |
Ebix Inc. | 29,259 | 682 | |
* | VirnetX Holding Corp. | 27,528 | 594 |
* | BroadSoft Inc. | 15,798 | 575 |
* | RealPage Inc. | 28,663 | 568 |
* | Netscout Systems Inc. | 26,701 | 567 |
* | Websense Inc. | 31,063 | 559 |
* | Kenexa Corp. | 20,069 | 558 |
* | SS&C Technologies | ||
Holdings Inc. | 26,678 | 553 | |
* | Verint Systems Inc. | 14,929 | 410 |
* | Monotype Imaging | ||
Holdings Inc. | 28,135 | 395 | |
Pegasystems Inc. | 13,158 | 370 | |
OPNET | 12,245 | 350 | |
* | Accelrys Inc. | 43,203 | 343 |
* | Interactive Intelligence | ||
Group Inc. | 10,975 | 307 | |
* | Net 1 UEPS | ||
Technologies Inc. | 29,970 | 296 | |
EPIQ Systems Inc. | 25,070 | 288 | |
* | PROS Holdings Inc. | 15,741 | 276 |
* | VASCO Data Security | ||
International Inc. | 23,776 | 215 | |
* | Actuate Corp. | 33,177 | 200 |
* | Deltek Inc. | 16,140 | 178 |
* | Seachange International Inc. | 20,099 | 138 |
* | TeleCommunication | ||
Systems Inc. Class A | 40,253 | 108 | |
* | TeleNav Inc. | 14,135 | 95 |
* | Rosetta Stone Inc. | 9,037 | 82 |
* | THQ Inc. | 53,395 | 29 |
* | Motricity Inc. | 18,188 | 24 |
471,170 | |||
Total Common Stocks | |||
(Cost $1,902,422) | 2,340,809 |
Market | ||
Value• | ||
Shares | ($000) | |
Temporary Cash Investment (0.1%) | ||
Money Market Fund (0.1%) | ||
1,2 Vanguard Market | ||
Liquidity Fund, 0.111% | ||
(Cost $2,571) | 2,571,147 | 2,571 |
Total Investments (100.1%) | ||
(Cost $1,904,993) | 2,343,380 | |
Other Assets and Liabilities (–0.1%) | ||
Other Assets | 17,712 | |
Liabilities2 | (19,773) | |
(2,061) | ||
Net Assets (100%) | 2,341,319 | |
At February 29, 2012, net assets consisted of: | ||
Amount | ||
($000) | ||
Paid-in Capital | 1,973,159 | |
Undistributed Net Investment Income | 2,595 | |
Accumulated Net Realized Losses | (72,822) | |
Unrealized Appreciation (Depreciation) | 438,387 | |
Net Assets | 2,341,319 | |
Admiral Shares—Net Assets | ||
Applicable to 2,019,931 outstanding | ||
$.001 par value shares of beneficial | ||
interest (unlimited authorization) | 73,246 | |
Net Asset Value Per Share— | ||
Admiral Shares | $36.26 | |
ETF Shares—Net Assets | ||
Applicable to 32,034,799 outstanding | ||
$.001 par value shares of beneficial | ||
interest (unlimited authorization) | 2,268,073 | |
Net Asset Value Per Share— | ||
ETF Shares | $70.80 |
• 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 $1,249,000.
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 $1,329,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
69
Information Technology Index Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 10,191 |
Interest1 | 1 |
Security Lending | 32 |
Total Income | 10,224 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 96 |
Management and Administrative— | |
Admiral Shares | 47 |
Management and Administrative— | |
ETF Shares | 1,341 |
Marketing and Distribution— | |
Admiral Shares | 5 |
Marketing and Distribution— | |
ETF Shares | 258 |
Custodian Fees | 22 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 58 |
Trustees’ Fees and Expenses | 1 |
Total Expenses | 1,828 |
Net Investment Income | 8,396 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 15,054 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 363,085 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 386,535 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 8,396 | 13,488 |
Realized Net Gain (Loss) | 15,054 | 34,979 |
Change in Unrealized Appreciation (Depreciation) | 363,085 | 158,438 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 386,535 | 206,905 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (463) | (352) |
ETF Shares | (14,955) | (8,695) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (15,418) | (9,047) |
Capital Share Transactions | ||
Admiral Shares | 1,845 | 4,639 |
ETF Shares | 178,814 | 403,796 |
Net Increase (Decrease) from Capital Share Transactions | 180,659 | 408,435 |
Total Increase (Decrease) | 551,776 | 606,293 |
Net Assets | ||
Beginning of Period | 1,789,543 | 1,183,250 |
End of Period2 | 2,341,319 | 1,789,543 |
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 $2,595,000 and $9,617,000.
See accompanying Notes, which are an integral part of the Financial Statements.
70
Information Technology Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $30.30 | $25.30 | $24.39 | $27.28 | $29.95 | $24.40 |
Investment Operations | ||||||
Net Investment Income | .123 | .238 | .146 | .1631 | .121 | .1101 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 6.084 | 4.947 | .882 | (2.897) | (2.706) | 5.500 |
Total from Investment Operations | 6.207 | 5.185 | 1.028 | (2.734) | (2.585) | 5.610 |
Distributions | ||||||
Dividends from Net Investment Income | (.247) | (.185) | (.118) | (.156) | (.085) | (.060) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.247) | (.185) | (.118) | (.156) | (.085) | (.060) |
Net Asset Value, End of Period | $36.26 | $30.30 | $25.30 | $24.39 | $27.28 | $29.95 |
Total Return2 | 20.61% | 20.46% | 4.17% | –9.79% | –8.67% | 23.02% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $73 | $60 | $46 | $33 | $26 | $12 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.28% | 0.25% | 0.26% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.85% | 0.79% | 0.69% | 0.82% | 0.46% | 0.38% |
Portfolio Turnover Rate3 | 8% | 6% | 9% | 12% | 11% | 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 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 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
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $59.17 | $49.40 | $47.64 | $53.32 | $58.52 | $47.66 |
Investment Operations | ||||||
Net Investment Income | .245 | .464 | .296 | .3311 | .249 | .2311 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 11.870 | 9.668 | 1.714 | (5.685) | (5.274) | 10.765 |
Total from Investment Operations | 12.115 | 10.132 | 2.010 | (5.354) | (5.025) | 10.996 |
Distributions | ||||||
Dividends from Net Investment Income | (.485) | (.362) | (.250) | (.326) | (.175) | (.136) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.485) | (.362) | (.250) | (.326) | (.175) | (.136) |
Net Asset Value, End of Period | $70.80 | $59.17 | $49.40 | $47.64 | $53.32 | $58.52 |
Total Return | 20.62% | 20.48% | 4.17% | –9.78% | –8.62% | 23.10% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $2,268 | $1,730 | $1,137 | $639 | $497 | $439 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 0.85% | 0.79% | 0.69% | 0.85% | 0.51% | 0.42% |
Portfolio Turnover Rate2 | 8% | 6% | 9% | 12% | 11% | 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.
72
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $330,000 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 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 29, 2012, 100% of the market value of the fund’s investments was based on Level 1 inputs.
73
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 29, 2012, the fund realized $30,455,000 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, 2011, the fund had available capital loss carryforwards totaling $55,470,000 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, $14,014,000 through August 31, 2017, $20,048,000 through August 31, 2018, and $20,327,000 through August 31, 2019. In addition, the fund realized losses of $1,453,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $1,904,993,000. Net unrealized appreciation of investment securities for tax purposes was $438,387,000, consisting of unrealized gains of $530,498,000 on securities that had risen in value since their purchase and $92,111,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $343,671,000 of investment securities and sold $170,025,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 12,205 | 361 | 25,734 | 809 |
Issued in Lieu of Cash Distributions | 428 | 14 | 331 | 10 |
Redeemed1 | (10,788) | (330) | (21,426) | (672) |
Net Increase (Decrease)—Admiral Shares | 1,845 | 45 | 4,639 | 147 |
ETF Shares | ||||
Issued | 262,304 | 4,100 | 504,551 | 7,919 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (83,490) | (1,300) | (100,755) | (1,700) |
Net Increase (Decrease)—ETF Shares | 178,814 | 2,800 | 403,796 | 6,219 |
1 Net of redemption fees for fiscal 2012 and 2011 of $16,000 and $70,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
74
Materials Index Fund
Fund Profile
As of February 29, 2012
Portfolio Characteristics | ||||
Target | Broad | |||
Fund | Index1 | Index2 | ||
Number of Stocks | 136 | 135 | 2,485 | |
Median Market Cap | $15.4B | $15.4B | $34.8B | |
Price/Earnings Ratio | 16.2x | 16.2x | 16.4x | |
Price/Book Ratio | 2.5x | 2.5x | 2.3x | |
Yield3 | 1.9% | 2.0% | ||
Admiral Shares | 1.7% | |||
ETF Shares | 1.7% | |||
Return on Equity | 19.0% | 19.0% | 18.2% | |
Earnings Growth Rate | 2.0% | 2.0% | 7.7% | |
Foreign Holdings | 0.0% | 0.0% | 0.0% | |
Turnover Rate4 | 11% | — | — | |
Expense Ratio5 | — | — | ||
Admiral Shares | 0.19% | |||
ETF Shares | 0.19% | |||
Short-Term Reserves | 0.0% | — | — | |
Volatility Measures6 | ||||
Fund Versus | Fund Versus | |||
Spliced Index7 | Broad Index2 | |||
R-Squared | 1.00 | 0.89 | ||
Beta | 1.00 | 1.47 |
Subindustry Diversification | |
(% of equity exposure) | |
Aluminum | 2.0% |
Commodity Chemicals | 1.0 |
Construction Materials | 1.9 |
Diversified Chemicals | 20.6 |
Diversified Metals & Mining | 8.8 |
Fertilizers & Agricultural Chemicals | 12.2 |
Gold | 5.9 |
Industrial Gases | 9.4 |
Metal & Glass Containers | 3.7 |
Paper Packaging | 3.1 |
Paper Products | 5.0 |
Precious Metals & Minerals | 1.3 |
Specialty Chemicals | 17.2 |
Steel | 7.6 |
Other Materials | 0.3 |
Ten Largest Holdings8 (% of total net assets) | |
EI du Pont de Nemours & Co. | 7.6% |
Monsanto Co. | 6.7 |
Freeport-McMoRan Copper & Gold Inc. | 6.6 |
Dow Chemical Co. | 6.4 |
Praxair Inc. | 5.3 |
Newmont Mining Corp. | 4.8 |
Air Products & Chemicals Inc. | 3.1 |
Ecolab Inc. | 2.9 |
Mosaic Co. | 2.9 |
International Paper Co. | 2.4 |
Top Ten | 48.7% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.19% for Admiral Shares and 0.19% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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.
75
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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx78x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | –9.57% | 2.88% | 7.13% | |
Net Asset Value | –9.45 | 2.90 | 7.14 | |
Admiral Shares3 | 2/11/2004 | –9.47 | 2.87 | 6.65 |
1 Six months ended February 29, 2012.
2 Spliced 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.
76
Materials Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
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 (60.3%) | |||
EI du Pont de | |||
Nemours & Co. | 1,178,503 | 59,927 | |
Monsanto Co. | 683,052 | 52,854 | |
Dow Chemical Co. | 1,507,598 | 50,520 | |
Praxair Inc. | 382,330 | 41,674 | |
Air Products & | |||
Chemicals Inc. | 268,393 | 24,220 | |
Ecolab Inc. | 382,975 | 22,978 | |
Mosaic Co. | 390,293 | 22,539 | |
PPG Industries Inc. | 196,905 | 17,968 | |
LyondellBasell Industries | |||
NV Class A | 368,365 | 15,906 | |
CF Industries Holdings Inc. | 83,342 | 15,502 | |
Sherwin-Williams Co. | 112,492 | 11,603 | |
Sigma-Aldrich Corp. | 153,603 | 11,027 | |
Eastman Chemical Co. | 175,462 | 9,498 | |
Celanese Corp. Class A | 199,151 | 9,474 | |
FMC Corp. | 89,743 | 8,882 | |
Airgas Inc. | 92,001 | 7,574 | |
Albemarle Corp. | 107,536 | 7,153 | |
Ashland Inc. | 99,668 | 6,335 | |
International Flavors & | |||
Fragrances Inc. | 103,202 | 5,886 | |
* | WR Grace & Co. | 94,260 | 5,369 |
Valspar Corp. | 113,339 | 5,253 | |
* | Rockwood Holdings Inc. | 83,465 | 4,444 |
Solutia Inc. | 155,847 | 4,381 | |
RPM International Inc. | 167,239 | 3,992 | |
Cytec Industries Inc. | 60,186 | 3,579 | |
Huntsman Corp. | 242,562 | 3,313 | |
Cabot Corp. | 81,453 | 3,300 | |
Scotts Miracle-Gro Co. | |||
Class A | 54,348 | 2,546 | |
NewMarket Corp. | 13,640 | 2,488 | |
Sensient Technologies Corp. | 60,720 | 2,246 | |
Olin Corp. | 102,329 | 2,152 | |
* | Chemtura Corp. | 125,312 | 1,945 |
HB Fuller Co. | 62,615 | 1,887 | |
* | Intrepid Potash Inc. | 67,207 | 1,700 |
PolyOne Corp. | 115,731 | 1,554 | |
Westlake Chemical Corp. | 25,560 | 1,539 | |
Minerals Technologies Inc. | 22,476 | 1,451 | |
* | Georgia Gulf Corp. | 43,456 | 1,402 |
Innophos Holdings Inc. | 27,663 | 1,394 | |
* | Kraton Performance | ||
Polymers Inc. | 40,756 | 1,133 | |
* | OM Group Inc. | 41,069 | 1,128 |
* | Calgon Carbon Corp. | 71,816 | 1,085 |
Balchem Corp. | 36,772 | 1,002 | |
Koppers Holdings Inc. | 26,358 | 992 | |
A Schulman Inc. | 37,459 | 968 | |
* | LSB Industries Inc. | 22,823 | 918 |
Stepan Co. | 10,364 | 906 | |
* | Innospec Inc. | 26,937 | 834 |
Kronos Worldwide Inc. | 29,487 | 689 |
Market | |||
Value• | |||
Shares | ($000) | ||
Quaker Chemical Corp. | 16,460 | 678 | |
* | Flotek Industries Inc. | 59,497 | 666 |
Tredegar Corp. | 28,212 | 656 | |
* | Ferro Corp. | 99,402 | 552 |
* | TPC Group Inc. | 14,993 | 521 |
American Vanguard Corp. | 27,984 | 462 | |
* | Zoltek Cos. Inc. | 36,562 | 442 |
Hawkins Inc. | 11,152 | 432 | |
Zep Inc. | 23,617 | 358 | |
* | Omnova Solutions Inc. | 51,742 | 264 |
* | Spartech Corp. | 39,304 | 228 |
472,369 | |||
Construction Materials (1.9%) | |||
Vulcan Materials Co. | 164,907 | 7,348 | |
Martin Marietta | |||
Materials Inc. | 58,332 | 5,009 | |
Eagle Materials Inc. | 54,482 | 1,710 | |
Texas Industries Inc. | 23,198 | 785 | |
* | Headwaters Inc. | 77,434 | 235 |
* | United States Lime & | ||
Minerals Inc. | 2,779 | 169 | |
15,256 | |||
Containers & Packaging (6.9%) | |||
Ball Corp. | 197,153 | 7,902 | |
* | Crown Holdings Inc. | 192,873 | 7,131 |
Rock-Tenn Co. Class A | 89,879 | 6,336 | |
* | Owens-Illinois Inc. | 209,597 | 5,009 |
Aptargroup Inc. | 84,246 | 4,446 | |
Sealed Air Corp. | 220,438 | 4,327 | |
Sonoco Products Co. | 127,603 | 4,190 | |
Bemis Co. Inc. | 131,454 | 4,124 | |
Packaging Corp. of America | 126,781 | 3,758 | |
Silgan Holdings Inc. | 62,276 | 2,648 | |
Greif Inc. Class A | 30,349 | 1,554 | |
Boise Inc. | 122,098 | 1,005 | |
* | Graphic Packaging | ||
Holding Co. | 173,907 | 918 | |
Myers Industries Inc. | 31,894 | 425 | |
53,773 | |||
Metals & Mining (25.6%) | |||
Freeport-McMoRan | |||
Copper & Gold Inc. | 1,209,267 | 51,466 | |
Newmont Mining Corp. | 631,298 | 37,499 | |
Nucor Corp. | 404,081 | 17,590 | |
Alcoa Inc. | 1,357,773 | 13,809 | |
Cliffs Natural | |||
Resources Inc. | 182,373 | 11,577 | |
Allegheny | |||
Technologies Inc. | 128,977 | 5,658 | |
Royal Gold Inc. | 75,034 | 5,211 | |
Walter Energy Inc. | 79,684 | 5,166 | |
Reliance Steel & | |||
Aluminum Co. | 95,734 | 5,143 | |
United States Steel Corp. | 183,694 | 5,000 | |
Steel Dynamics Inc. | 265,094 | 3,926 | |
* | Allied Nevada Gold Corp. | 108,293 | 3,726 |
* | Coeur d’Alene Mines Corp. | 114,436 | 3,255 |
Market | |||
Value• | |||
Shares | ($000) | ||
Compass Minerals | |||
International Inc. | 42,055 | 3,030 | |
Carpenter Technology Corp. | 56,371 | 2,892 | |
* | Stillwater Mining Co. | 146,873 | 2,086 |
Commercial Metals Co. | 147,426 | 1,959 | |
^,* | Molycorp Inc. | 74,991 | 1,852 |
Hecla Mining Co. | 354,903 | 1,803 | |
Titanium Metals Corp. | 111,688 | 1,637 | |
Schnitzer Steel | |||
Industries Inc. | 30,831 | 1,392 | |
* | McEwen Mining Inc. | 254,090 | 1,329 |
* | SunCoke Energy Inc. | 88,796 | 1,273 |
Worthington Industries Inc. | 71,984 | 1,214 | |
AK Steel Holding Corp. | 140,237 | 1,111 | |
Globe Specialty Metals Inc. | 76,598 | 1,089 | |
Gold Resource Corp. | 40,566 | 992 | |
Haynes International Inc. | 15,563 | 985 | |
Kaiser Aluminum Corp. | 19,745 | 955 | |
AMCOL International Corp. | 32,254 | 946 | |
* | RTI International Metals Inc. | 38,483 | 867 |
* | Century Aluminum Co. | 74,278 | 729 |
* | Materion Corp. | 24,797 | 728 |
* | Horsehead Holding Corp. | 55,047 | 628 |
Noranda Aluminum | |||
Holding Corp. | 29,625 | 356 | |
* | Golden Minerals Co. | 41,023 | 342 |
* | Paramount Gold and | ||
Silver Corp. | 127,857 | 326 | |
Olympic Steel Inc. | 11,738 | 275 | |
* | General Moly Inc. | 75,100 | 271 |
* | AM Castle & Co. | 21,947 | 251 |
* | Metals USA Holdings Corp. | 16,459 | 215 |
* | Midway Gold Corp. | 89,971 | 158 |
200,717 | |||
Paper & Forest Products (5.3%) | |||
International Paper Co. | 529,769 | 18,621 | |
MeadWestvaco Corp. | 217,884 | 6,598 | |
Domtar Corp. | 48,163 | 4,617 | |
* | AbitibiBowater Inc. | 123,885 | 1,896 |
Buckeye Technologies Inc. | 50,217 | 1,715 | |
Schweitzer-Mauduit | |||
International Inc. | 20,678 | 1,449 | |
* | Louisiana-Pacific Corp. | 173,859 | 1,420 |
* | KapStone Paper and | ||
Packaging Corp. | 50,414 | 1,013 | |
* | Clearwater Paper Corp. | 28,969 | 994 |
Deltic Timber Corp. | 13,629 | 889 | |
PH Glatfelter Co. | 55,633 | 868 | |
Wausau Paper Corp. | 59,368 | 555 | |
Neenah Paper Inc. | 18,877 | 527 | |
* | Mercer International Inc. | 61,041 | 526 |
41,688 | |||
Total Common Stocks | |||
(Cost $785,674) | 783,803 |
77
Materials Index Fund | ||
Market | ||
Value• | ||
Shares | ($000) | |
Temporary Cash Investment (0.1%) | ||
Money Market Fund (0.1%) | ||
1,2 Vanguard Market | ||
Liquidity Fund, 0.111% | ||
(Cost $1,139) | 1,139,027 | 1,139 |
Total Investments (100.1%) | ||
(Cost $786,813) | 784,942 | |
Other Assets and Liabilities (–0.1%) | ||
Other Assets | 5,191 | |
Liabilities2 | (6,204) | |
(1,013) | ||
Net Assets (100%) | 783,929 |
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 833,026 |
Overdistributed Net Investment Income | (512) |
Accumulated Net Realized Losses | (46,714) |
Unrealized Appreciation (Depreciation) | (1,871) |
Net Assets | 783,929 |
Admiral Shares—Net Assets | |
Applicable to 3,407,944 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 141,997 |
Net Asset Value Per Share— | |
Admiral Shares | $41.67 |
ETF Shares—Net Assets | |
Applicable to 7,849,411 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 641,932 |
Net Asset Value Per Share— | |
ETF Shares | $81.78 |
• 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 $830,000.
* 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 $907,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
78
Materials Index Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 6,575 |
Interest1 | 1 |
Security Lending | 51 |
Total Income | 6,627 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 52 |
Management and Administrative— | |
Admiral Shares | 96 |
Management and Administrative— | |
ETF Shares | 366 |
Marketing and Distribution— | |
Admiral Shares | 13 |
Marketing and Distribution— | |
ETF Shares | 83 |
Custodian Fees | 8 |
Shareholders’ Reports—Admiral Shares | 1 |
Shareholders’ Reports—ETF Shares | 25 |
Total Expenses | 644 |
Net Investment Income | 5,983 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 22,441 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 20,662 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 49,086 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 5,983 | 12,289 |
Realized Net Gain (Loss) | 22,441 | 30,941 |
Change in Unrealized Appreciation (Depreciation) | 20,662 | 56,953 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 49,086 | 100,183 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (2,709) | (2,903) |
ETF Shares | (11,583) | (13,250) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (14,292) | (16,153) |
Capital Share Transactions | ||
Admiral Shares | (3,009) | 24,840 |
ETF Shares | 20,921 | 110,802 |
Net Increase (Decrease) from Capital Share Transactions | 17,912 | 135,642 |
Total Increase (Decrease) | 52,706 | 219,672 |
Net Assets | ||
Beginning of Period | 731,223 | 511,551 |
End of Period2 | 783,929 | 731,223 |
1 Interest income from an affiliated company of the fund was $1,000.
2 Net Assets—End of Period includes undistributed (overdistrubited) net investment income of ($512,000) and $7,797,000.
See accompanying Notes, which are an integral part of the Financial Statements.
79
Materials Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $39.53 | $33.32 | $30.68 | $42.85 | $41.75 | $32.37 |
Investment Operations | ||||||
Net Investment Income | .355 | .579 | .9711 | .622 | .732 | .7002 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments3 | 2.589 | 6.551 | 2.128 | (11.996) | 1.008 | 9.250 |
Total from Investment Operations | 2.944 | 7.130 | 3.099 | (11.374) | 1.740 | 9.950 |
Distributions | ||||||
Dividends from Net Investment Income | (.804) | (.920) | (.459) | (.796) | (.640) | (.570) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.804) | (.920) | (.459) | (.796) | (.640) | (.570) |
Net Asset Value, End of Period | $41.67 | $39.53 | $33.32 | $30.68 | $42.85 | $41.75 |
Total Return4 | 7.71% | 21.26% | 10.07% | –25.91% | 4.09% | 31.00% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $142 | $138 | $97 | $90 | $107 | $57 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.19% | 0.19% | 0.24% | 0.28% | 0.25% | 0.26% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.71% | 1.63% | 2.81%1 | 2.23% | 1.74% | 1.80% |
Portfolio Turnover Rate5 | 11% | 14% | 10% | 12% | 10% | 6% |
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, $.01, $.02, $.02, and $.01.
4 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.
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.
80
Materials Index Fund
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $77.59 | $65.40 | $60.23 | $84.27 | $82.10 | $63.65 |
Investment Operations | ||||||
Net Investment Income | .696 | 1.142 | 1.9071 | 1.242 | 1.470 | 1.4182 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments3 | 5.070 | 12.852 | 4.186 | (23.683) | 1.977 | 18.168 |
Total from Investment Operations | 5.766 | 13.994 | 6.093 | (22.441) | 3.447 | 19.586 |
Distributions | ||||||
Dividends from Net Investment Income | (1.576) | (1.804) | (.923) | (1.599) | (1.277) | (1.136) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.576) | (1.804) | (.923) | (1.599) | (1.277) | (1.136) |
Net Asset Value, End of Period | $81.78 | $77.59 | $65.40 | $60.23 | $84.27 | $82.10 |
Total Return | 7.68% | 21.26% | 10.07% | –25.88% | 4.15% | 31.06% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $642 | $593 | $415 | $375 | $365 | $312 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.19% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.71% | 1.63% | 2.81%1 | 2.26% | 1.79% | 1.84% |
Portfolio Turnover Rate4 | 11% | 14% | 10% | 12% | 10% | 6% |
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, $.02, $.01, $.03, $.04, and $.02.
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.
81
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $118,000 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 29, 2012, 100% of the market value of the fund’s investments was based on Level 1 inputs.
82
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 29, 2012, the fund realized $8,915,000 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, 2011, the fund had available capital loss carryforwards totaling $56,492,000 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, $20,360,000 through August 31, 2018, and $21,134,000 through August 31, 2019. In addition, the fund realized losses of $3,730,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $786,813,000. Net unrealized depreciation of investment securities for tax purposes was $1,871,000, consisting of unrealized gains of $82,105,000 on securities that had risen in value since their purchase and $83,976,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $102,676,000 of investment securities and sold $91,281,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 7,804 | 204 | 51,004 | 1,219 |
Issued in Lieu of Cash Distributions | 2,476 | 67 | 2,684 | 64 |
Redeemed1 | (13,289) | (347) | (28,848) | (704) |
Net Increase (Decrease)—Admiral Shares | (3,009) | (76) | 24,840 | 579 |
ETF Shares | ||||
Issued | 65,135 | 800 | 222,405 | 2,708 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (44,214) | (600) | (111,603) | (1,400) |
Net Increase (Decrease)—ETF Shares | 20,921 | 200 | 110,802 | 1,308 |
1 Net of redemption fees for fiscal 2012 and 2011 of $42,000 and $148,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
83
Telecommunication Services Index Fund
Fund Profile
As of February 29, 2012
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 34 | 33 | 2,485 |
Median Market Cap | $24.8B | $24.8B | $34.8B |
Price/Earnings Ratio | 38.7x | 39.0x | 16.4x |
Price/Book Ratio | 2.0x | 2.0x | 2.3x |
Yield3 | 3.7% | 2.0% | |
Admiral Shares | 3.6% | ||
ETF Shares | 3.6% | ||
Return on Equity | 6.4% | 6.4% | 18.2% |
Earnings Growth Rate | –12.8% | –12.3% | 7.7% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 33% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.19% | ||
ETF Shares | 0.19% | ||
Short-Term Reserves | 0.1% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 0.91 | 0.62 |
Beta | 1.02 | 0.74 |
Subindustry Diversification | ||
(% of equity exposure) | ||
Alternative Carriers | 13.7% | |
Integrated Telecommunication Services | 63.6 | |
Wireless Telecommunication Services | 22.7 |
Ten Largest Holdings8 (% of total net assets) | |
AT&T Inc. | 22.9% |
Verizon Communications Inc. | 22.8 |
CenturyLink Inc. | 4.7 |
Crown Castle International Corp. | 4.5 |
Windstream Corp. | 3.5 |
Sprint Nextel Corp. | 2.9 |
Level 3 Communications Inc. | 2.7 |
SBA Communications Corp. Class A | 2.5 |
Frontier Communications Corp. | 2.2 |
Telephone & Data Systems Inc. | 2.1 |
Top Ten | 70.8% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.19% for Admiral Shares and 0.19% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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.
84
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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx87x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | –2.36% | –0.47% | 5.95% | |
Net Asset Value | –2.25 | –0.44 | 5.96 | |
Admiral Shares3 | 3/11/2005 | –2.23 | –0.46 | 5.31 |
1 Six months ended February 29, 2012.
2 Spliced 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.
85
Telecommunication Services Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
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%) | |||
Diversified Telecommunication Services (77.2%) | |||
Alternative Carriers (13.7%) | |||
* | Level 3 | ||
Communications Inc. | 489,339 | 11,896 | |
* | tw telecom inc Class A | 381,249 | 8,235 |
* | AboveNet Inc. | 93,118 | 6,477 |
* | Cogent Communications | ||
Group Inc. | 346,117 | 6,376 | |
* | Premiere Global | ||
Services Inc. | 605,865 | 5,241 | |
* | Boingo Wireless Inc. | 484,230 | 4,629 |
* | Vonage Holdings Corp. | 1,873,910 | 4,479 |
* | Iridium | ||
Communications Inc. | 585,045 | 4,470 | |
* | Neutral Tandem Inc. | 400,128 | 4,465 |
Lumos Networks Corp. | 319,174 | 4,085 | |
Integrated Telecommunication Services (63.5%) | |||
AT&T Inc. | 3,305,232 | 101,107 | |
Verizon | |||
Communications Inc. | 2,640,372 | 100,625 | |
CenturyLink Inc. | 510,911 | 20,564 | |
Windstream Corp. | 1,285,102 | 15,524 | |
Frontier | |||
Communications Corp. | 2,094,471 | 9,614 | |
* | General | ||
Communication Inc. | |||
Class A | 524,312 | 5,552 | |
* | Cincinnati Bell Inc. | 1,458,014 | 5,468 |
Atlantic Tele-Network Inc. | 133,094 | 5,100 | |
Consolidated | |||
Communications | |||
Holdings Inc. | 252,497 | 4,790 | |
* | Cbeyond Inc. | 571,342 | 4,388 |
IDT Corp. Class B | 471,764 | 4,269 | |
^ | Alaska Communications | ||
Systems Group Inc. | 1,111,864 | 3,558 | |
340,912 |
Market | |||
Value• | |||
Shares | ($000) | ||
Wireless Telecommunication Services (22.7%) | |||
* | Crown Castle | ||
International Corp. | 387,137 | 20,058 | |
* | Sprint Nextel Corp. | 5,209,900 | 12,868 |
* | SBA | ||
Communications Corp. | |||
Class A | 239,704 | 11,249 | |
* | Telephone & | ||
Data Systems Inc. | 364,408 | 9,209 | |
* | Clearwire Corp. Class A | 3,566,190 | 8,202 |
* | MetroPCS | ||
Communications Inc. | 738,169 | 7,603 | |
* | NII Holdings Inc. | 400,040 | 7,153 |
* | Leap Wireless | ||
International Inc. | 549,158 | 5,733 | |
* | United States | ||
Cellular Corp. | 109,344 | 4,717 | |
NTELOS Holdings Corp. | 199,311 | 4,634 | |
USA Mobility Inc. | 323,035 | 4,432 | |
Shenandoah | |||
Telecommunications Co. | 427,392 | 4,270 | |
100,128 | |||
Total Common Stocks | |||
(Cost $472,864) | 441,040 | ||
Temporary Cash Investment (0.1%) | |||
Money Market Fund (0.1%) | |||
1,2 | Vanguard Market | ||
Liquidity Fund, 0.111% | |||
(Cost $586) | 586,422 | 586 | |
Total Investments (100.0%) | |||
(Cost $473,450) | 441,626 | ||
Other Assets and Liabilities (0.0%) | |||
Other Assets | 13,129 | ||
Liabilities2 | (13,187) | ||
(58) | |||
Net Assets (100%) | 441,568 |
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 522,554 |
Undistributed Net Investment Income | 1,894 |
Accumulated Net Realized Losses | (51,056) |
Unrealized Appreciation (Depreciation) | (31,824) |
Net Assets | 441,568 |
Admiral Shares—Net Assets | |
Applicable to 532,789 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 17,437 |
Net Asset Value Per Share— | |
Admiral Shares | $32.73 |
ETF Shares—Net Assets | |
Applicable to 6,603,838 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 424,131 |
Net Asset Value Per Share— | |
ETF Shares | $64.22 |
• 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 $176,000.
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 $220,000 of collateral received for securities on loan.
See accompanying Notes, which are an integral part of the Financial Statements.
86
Telecommunication Services Index Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 6,996 |
Security Lending | 40 |
Total Income | 7,036 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 30 |
Management and Administrative— | |
Admiral Shares | 13 |
Management and Administrative— | |
ETF Shares | 244 |
Marketing and Distribution— | |
Admiral Shares | 2 |
Marketing and Distribution— | |
ETF Shares | 55 |
Custodian Fees | 5 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 26 |
Total Expenses | 375 |
Net Investment Income | 6,661 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 16,501 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | (15,402) |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 7,760 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 6,661 | 13,208 |
Realized Net Gain (Loss) | 16,501 | 45,504 |
Change in Unrealized Appreciation (Depreciation) | (15,402) | (13,681) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 7,760 | 45,031 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (546) | (509) |
ETF Shares | (13,066) | (9,148) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (13,612) | (9,657) |
Capital Share Transactions | ||
Admiral Shares | (1,991) | 3,594 |
ETF Shares | 38,884 | 116,360 |
Net Increase (Decrease) from Capital Share Transactions | 36,893 | 119,954 |
Total Increase (Decrease) | 31,041 | 155,328 |
Net Assets | ||
Beginning of Period | 410,527 | 255,199 |
End of Period1 | 441,568 | 410,527 |
1 Net Assets—End of Period includes undistributed net investment income of $1,894,000 and $8,845,000.
See accompanying Notes, which are an integral part of the Financial Statements.
87
Telecommunication Services Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $33.18 | $29.22 | $25.77 | $31.58 | $41.01 | $33.29 |
Investment Operations | ||||||
Net Investment Income | .5531 | 1.077 | 1.0241 | .8401 | .9081 | .8881 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | .014 | 3.853 | 3.183 | (5.977) | (9.338) | 7.308 |
Total from Investment Operations | .567 | 4.930 | 4.207 | (5.137) | (8.430) | 8.196 |
Distributions | ||||||
Dividends from Net Investment Income | (1.017) | (.970) | (.757) | (.673) | (1.000) | (.476) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.017) | (.970) | (.757) | (.673) | (1.000) | (.476) |
Net Asset Value, End of Period | $32.73 | $33.18 | $29.22 | $25.77 | $31.58 | $41.01 |
Total Return3 | 1.87% | 16.87% | 16.40% | –15.90% | –20.98% | 24.77% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $17 | $20 | $14 | $12 | $19 | $51 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.19% | 0.19% | 0.24% | 0.28% | 0.25% | 0.27% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.28% | 3.60% | 3.60% | 3.39% | 2.50% | 2.17% |
Portfolio Turnover Rate4 | 33% | 21% | 23% | 25% | 28% | 17% |
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, $.00, $.00, $.05, and $.01.
3 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees.
4 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
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $65.11 | $57.34 | $50.58 | $62.05 | $80.60 | $65.40 |
Investment Operations | ||||||
Net Investment Income | 1.0221 | 2.118 | 1.9811 | 1.6021 | 1.7641 | 1.7411 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | .097 | 7.557 | 6.290 | (11.699) | (18.316) | 14.386 |
Total from Investment Operations | 1.119 | 9.675 | 8.271 | (10.097) | (16.552) | 16.127 |
Distributions | ||||||
Dividends from Net Investment Income | (2.009) | (1.905) | (1.511) | (1.373) | (1.998) | (.927) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (2.009) | (1.905) | (1.511) | (1.373) | (1.998) | (.927) |
Net Asset Value, End of Period | $64.22 | $65.11 | $57.34 | $50.58 | $62.05 | $80.60 |
Total Return | 1.86% | 16.87% | 16.39% | –15.88% | –20.94% | 24.81% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $424 | $391 | $241 | $147 | $143 | $266 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.19% | 0.19% | 0.24% | 0.25% | 0.20% | 0.23% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.28% | 3.60% | 3.60% | 3.42% | 2.55% | 2.21% |
Portfolio Turnover Rate3 | 33% | 21% | 23% | 25% | 28% | 17% |
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, $.00, $.00, $.08, and $.03.
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.
89
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, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $64,000 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 29, 2012, 100% of the market value of the fund’s investments was based on Level 1 inputs.
90
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 29, 2012, the fund realized $6,067,000 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, 2011, the fund had available capital loss carryforwards totaling $61,490,000 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, $26,335,000 through August 31, 2018, and $11,458,000 through August 31, 2019. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $473,450,000. Net unrealized depreciation of investment securities for tax purposes was $31,824,000, consisting of unrealized gains of $16,413,000 on securities that had risen in value since their purchase and $48,237,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $156,137,000 of investment securities and sold $125,706,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 1,078 | 34 | 6,808 | 202 |
Issued in Lieu of Cash Distributions | 473 | 15 | 449 | 14 |
Redeemed1 | (3,542) | (111) | (3,663) | (109) |
Net Increase (Decrease)—Admiral Shares | (1,991) | (62) | 3,594 | 107 |
ETF Shares | ||||
Issued | 88,519 | 1,402 | 309,287 | 4,900 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (49,635) | (800) | (192,927) | (3,100) |
Net Increase (Decrease)—ETF Shares | 38,884 | 602 | 116,360 | 1,800 |
1 Net of redemption fees for fiscal 2012 and 2011 of $2,000 and $12,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
91
Utilities Index Fund
Fund Profile
As of February 29, 2012
Portfolio Characteristics | |||
Target | Broad | ||
Fund | Index1 | Index2 | |
Number of Stocks | 84 | 83 | 2,485 |
Median Market Cap | $15.6B | $15.6B | $34.8B |
Price/Earnings Ratio | 15.7x | 15.7x | 16.4x |
Price/Book Ratio | 1.5x | 1.5x | 2.3x |
Yield3 | 4.1% | 2.0% | |
Admiral Shares | 3.9% | ||
ETF Shares | 3.9% | ||
Return on Equity | 12.4% | 12.5% | 18.2% |
Earnings Growth Rate | 2.1% | 2.1% | 7.7% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate4 | 6% | — | — |
Expense Ratio5 | — | — | |
Admiral Shares | 0.19% | ||
ETF Shares | 0.19% | ||
Short-Term Reserves | 0.0% | — | — |
Volatility Measures6 | ||
Fund Versus | Fund Versus | |
Spliced Index7 | Broad Index2 | |
R-Squared | 1.00 | 0.31 |
Beta | 1.00 | 0.32 |
Subindustry Diversification | ||
(% of equity exposure) | ||
Electric | 49.2% | |
Gas Utilities | 7.3 | |
Independent Power Producers & | ||
Energy Traders | 5.2 | |
Multi-Utilities | 36.1 | |
Water Utilities | 2.2 |
Ten Largest Holdings8 (% of total net assets) | |
Southern Co. | 7.3% |
Dominion Resources Inc. | 5.5 |
Duke Energy Corp. | 5.3 |
Exelon Corp. | 5.0 |
NextEra Energy Inc. | 4.6 |
FirstEnergy Corp. | 3.5 |
American Electric Power Co. Inc. | 3.5 |
Consolidated Edison Inc. | 3.3 |
PG&E Corp. | 3.2 |
PPL Corp. | 3.2 |
Top Ten | 44.4% |
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 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.18% for Admiral Shares and 0.18% for ETF Shares.
6 For an explanation of R-squared, beta, and other terms used here, see the Glossary.
7 Spliced 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.
92
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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/ussectorindexx95x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
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 | 18.86% | 3.61% | 9.24% | |
Net Asset Value | 18.91 | 3.62 | 9.23 | |
Admiral Shares3 | 4/28/2004 | 18.92 | 3.60 | 9.48 |
1 Six months ended February 29, 2012.
2 Spliced 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.
93
Utilities Index Fund
Financial Statements (unaudited)
Statement of Net Assets
As of February 29, 2012
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 (49.3%) | ||
Southern Co. | 2,135,719 | 94,377 |
Duke Energy Corp. | 3,302,312 | 69,084 |
Exelon Corp. | 1,642,873 | 64,187 |
NextEra Energy Inc. | 994,646 | 59,191 |
FirstEnergy Corp. | 1,036,290 | 45,897 |
American Electric | ||
Power Co. Inc. | 1,196,627 | 45,005 |
PPL Corp. | 1,432,982 | 40,912 |
Progress Energy Inc. | 730,986 | 38,801 |
Edison International | 766,958 | 32,112 |
Entergy Corp. | 436,423 | 29,079 |
Northeast Utilities | 438,750 | 15,751 |
Pinnacle West | ||
Capital Corp. | 270,584 | 12,726 |
Pepco Holdings Inc. | 562,398 | 10,933 |
ITC Holdings Corp. | 127,185 | 9,600 |
NV Energy Inc. | 584,846 | 9,170 |
Westar Energy Inc. | 290,370 | 7,991 |
Great Plains Energy Inc. | 336,873 | 6,663 |
Hawaiian Electric | ||
Industries Inc. | 237,867 | 5,959 |
Cleco Corp. | 150,369 | 5,786 |
IDACORP Inc. | 123,422 | 4,996 |
Portland General | ||
Electric Co. | 186,841 | 4,604 |
UIL Holdings Corp. | 125,069 | 4,409 |
PNM Resources Inc. | 203,616 | 3,661 |
Allete Inc. | 82,050 | 3,412 |
Unisource Energy Corp. | 91,373 | 3,362 |
El Paso Electric Co. | 89,584 | 2,932 |
MGE Energy Inc. | 57,230 | 2,510 |
Empire District Electric Co. | 103,955 | 2,074 |
Otter Tail Corp. | 80,119 | 1,702 |
Central Vermont Public | ||
Service Corp. | 31,662 | 1,116 |
Unitil Corp. | 27,122 | 721 |
638,723 | ||
Gas Utilities (7.2%) | ||
ONEOK Inc. | 242,442 | 20,035 |
AGL Resources Inc. | 289,310 | 11,535 |
National Fuel Gas Co. | 174,556 | 8,785 |
Questar Corp. | 440,210 | 8,461 |
UGI Corp. | 286,143 | 8,084 |
Atmos Energy Corp. | 223,763 | 6,876 |
Piedmont Natural | ||
Gas Co. Inc. | 178,595 | 5,786 |
Market | |||
Value• | |||
Shares | ($000) | ||
WGL Holdings Inc. | 127,313 | 5,198 | |
New Jersey | |||
Resources Corp. | 102,640 | 4,792 | |
Southwest Gas Corp. | 108,012 | 4,607 | |
South Jersey Industries Inc. | 74,665 | 3,883 | |
Northwest Natural Gas Co. | 66,087 | 3,025 | |
Laclede Group Inc. | 52,831 | 2,171 | |
Chesapeake Utilities Corp. | 23,623 | 970 | |
94,208 | |||
Independent Power Producers & | |||
Energy Traders (5.2%) | |||
* | AES Corp. | 1,616,586 | 21,921 |
Constellation Energy | |||
Group Inc. | 474,498 | 17,205 | |
* | Calpine Corp. | 785,769 | 12,030 |
* | NRG Energy Inc. | 569,865 | 9,745 |
* | GenOn Energy Inc. | 1,912,678 | 4,705 |
Ormat Technologies Inc. | 44,788 | 907 | |
Genie Energy Ltd. Class B | 42,036 | 403 | |
* | Dynegy Inc. Class A | 241,380 | 314 |
67,230 | |||
Multi-Utilities (36.1%) | |||
Dominion Resources Inc. | 1,411,415 | 71,234 | |
Consolidated Edison Inc. | 725,774 | 42,167 | |
PG&E Corp. | 1,005,748 | 41,920 | |
Public Service Enterprise | |||
Group Inc. | 1,253,590 | 38,585 | |
Sempra Energy | 564,559 | 33,444 | |
Xcel Energy Inc. | 1,201,723 | 31,834 | |
DTE Energy Co. | 419,395 | 22,643 | |
CenterPoint Energy Inc. | 1,002,686 | 19,542 | |
Wisconsin Energy Corp. | 573,053 | 19,530 | |
Ameren Corp. | 600,322 | 19,252 | |
NiSource Inc. | 696,577 | 16,718 | |
SCANA Corp. | 305,216 | 13,735 | |
CMS Energy Corp. | 628,378 | 13,454 | |
OGE Energy Corp. | 243,064 | 12,756 | |
NSTAR | 256,715 | 12,040 | |
Alliant Energy Corp. | 275,075 | 11,729 | |
MDU Resources Group Inc. | 467,877 | 10,153 | |
Integrys Energy Group Inc. | 194,063 | 10,097 | |
TECO Energy Inc. | 508,006 | 9,119 | |
Vectren Corp. | 202,838 | 5,927 | |
Avista Corp. | 144,029 | 3,558 | |
NorthWestern Corp. | 89,669 | 3,114 | |
Black Hills Corp. | 92,715 | 3,045 | |
CH Energy Group Inc. | 34,950 | 2,330 | |
467,926 |
Market | ||
Value• | ||
Shares | ($000) | |
Water Utilities (2.2%) | ||
American Water | ||
Works Co. Inc. | 434,994 | 14,912 |
Aqua America Inc. | 343,424 | 7,627 |
California Water | ||
Service Group | 98,411 | 1,891 |
American States Water Co. | 46,430 | 1,711 |
SJW Corp. | 34,481 | 824 |
Middlesex Water Co. | 38,546 | 710 |
Connecticut Water | ||
Service Inc. | 21,624 | 623 |
28,298 | ||
Total Investments (100.0%) | ||
(Cost $1,256,026) | 1,296,385 | |
Other Assets and Liabilities (0.0%) | ||
Other Assets | 10,518 | |
Liabilities | (10,450) | |
68 | ||
Net Assets (100%) | 1,296,453 | |
At February 29, 2012, net assets consisted of: | ||
Amount | ||
($000) | ||
Paid-in Capital | 1,272,222 | |
Undistributed Net Investment Income | 8,714 | |
Accumulated Net Realized Losses | (24,842) | |
Unrealized Appreciation (Depreciation) | 40,359 | |
Net Assets | 1,296,453 | |
Admiral Shares—Net Assets | ||
Applicable to 7,022,117 outstanding | ||
$.001 par value shares of beneficial | ||
interest (unlimited authorization) | 262,872 | |
Net Asset Value Per Share— | ||
Admiral Shares | $37.43 | |
ETF Shares—Net Assets | ||
Applicable to 13,855,760 outstanding | ||
$.001 par value shares of beneficial | ||
interest (unlimited authorization) | 1,033,581 | |
Net Asset Value Per Share— | ||
ETF Shares | $74.60 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
See accompanying Notes, which are an integral part of the Financial Statements.
94
Utilities Index Fund
Statement of Operations
Six Months Ended | |
February 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 23,991 |
Interest1 | 1 |
Total Income | 23,992 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 68 |
Management and Administrative— | |
Admiral Shares | 179 |
Management and Administrative— | |
ETF Shares | 659 |
Marketing and Distribution— | |
Admiral Shares | 24 |
Marketing and Distribution— | |
ETF Shares | 120 |
Custodian Fees | 19 |
Shareholders’ Reports—Admiral Shares | — |
Shareholders’ Reports—ETF Shares | 24 |
Trustees’ Fees and Expenses | 1 |
Total Expenses | 1,094 |
Net Investment Income | 22,898 |
Realized Net Gain (Loss) on | |
Investment Securities Sold | 833 |
Change in Unrealized Appreciation | |
(Depreciation) of Investment Securities | 29,914 |
Net Increase (Decrease) in | |
Net Assets Resulting from Operations | 53,645 |
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
February 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 22,898 | 34,815 |
Realized Net Gain (Loss) | 833 | 836 |
Change in Unrealized Appreciation (Depreciation) | 29,914 | 93,078 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 53,645 | 128,729 |
Distributions | ||
Net Investment Income | ||
Admiral Shares | (4,335) | (6,943) |
ETF Shares | (17,106) | (25,861) |
Realized Capital Gain | ||
Admiral Shares | — | — |
ETF Shares | — | — |
Total Distributions | (21,441) | (32,804) |
Capital Share Transactions | ||
Admiral Shares | 37,758 | 45,146 |
ETF Shares | 177,378 | 174,155 |
Net Increase (Decrease) from Capital Share Transactions | 215,136 | 219,301 |
Total Increase (Decrease) | 247,340 | 315,226 |
Net Assets | ||
Beginning of Period | 1,049,113 | 733,887 |
End of Period2 | 1,296,453 | 1,049,113 |
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 $8,714,000 and $7,257,000.
See accompanying Notes, which are an integral part of the Financial Statements.
95
Utilities Index Fund
Financial Highlights
Admiral Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $36.40 | $32.60 | $30.73 | $39.26 | $40.60 | $36.47 |
Investment Operations | ||||||
Net Investment Income | .689 | 1.344 | 1.2931 | 1.251 | 1.126 | 1.080 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | 1.030 | 3.783 | 1.782 | (8.530) | (1.340) | 4.089 |
Total from Investment Operations | 1.719 | 5.127 | 3.075 | (7.279) | (.214) | 5.169 |
Distributions | ||||||
Dividends from Net Investment Income | (.689) | (1.327) | (1.205) | (1.251) | (1.126) | (1.039) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (.689) | (1.327) | (1.205) | (1.251) | (1.126) | (1.039) |
Net Asset Value, End of Period | $37.43 | $36.40 | $32.60 | $30.73 | $39.26 | $40.60 |
Total Return3 | 4.79% | 16.09% | 10.20% | –18.39% | –0.69% | 14.33% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $263 | $218 | $153 | $81 | $109 | $108 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.28% | 0.25% | 0.26% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.88% | 3.99% | 4.07% | 4.28% | 2.75% | 2.70% |
Portfolio Turnover Rate4 | 6% | 6% | 8% | 10% | 18% | 12% |
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, $.00, $.01, $.02, and $.02.
3 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees.
4 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
Financial Highlights
ETF Shares | ||||||
Six Months | ||||||
Ended | ||||||
For a Share Outstanding | February 29, | Year Ended August 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $72.52 | $64.93 | $61.24 | $78.22 | $80.92 | $72.68 |
Investment Operations | ||||||
Net Investment Income | 1.372 | 2.678 | 2.5541 | 2.512 | 2.285 | 2.180 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments2 | 2.081 | 7.551 | 3.550 | (16.978) | (2.695) | 8.156 |
Total from Investment Operations | 3.453 | 10.229 | 6.104 | (14.466) | (.410) | 10.336 |
Distributions | ||||||
Dividends from Net Investment Income | (1.373) | (2.639) | (2.414) | (2.514) | (2.290) | (2.096) |
Distributions from Realized Capital Gains | — | — | — | — | — | — |
Total Distributions | (1.373) | (2.639) | (2.414) | (2.514) | (2.290) | (2.096) |
Net Asset Value, End of Period | $74.60 | $72.52 | $64.93 | $61.24 | $78.22 | $80.92 |
Total Return | 4.80% | 16.09% | 10.18% | –18.34% | –0.66% | 14.37% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $1,034 | $831 | $581 | $364 | $371 | $285 |
Ratio of Total Expenses to | ||||||
Average Net Assets | 0.18% | 0.19% | 0.24% | 0.25% | 0.20% | 0.22% |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 3.88% | 3.99% | 4.07% | 4.31% | 2.80% | 2.74% |
Portfolio Turnover Rate3 | 6% | 6% | 8% | 10% | 18% | 12% |
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, $.04, and $.03.
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.
97
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 income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2008–2011), and for the period ended February 29, 2012, 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 29, 2012, the fund had contributed capital of $198,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.08% 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 29, 2012, 100% of the market value of the fund’s investments was 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.
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Utilities Index Fund
During the six months ended February 29, 2012, the fund realized $3,290,000 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, 2011, the fund had available capital loss carryforwards totaling $21,748,000 to offset future net capital gains of $515,000 through August 31, 2015, $2,910,000 through August 31, 2017, $14,960,000 through August 31, 2018, and $3,363,000 through August 31, 2019. In addition, the fund realized losses of $617,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $1,256,026,000. Net unrealized appreciation of investment securities for tax purposes was $40,359,000, consisting of unrealized gains of $115,346,000 on securities that had risen in value since their purchase and $74,987,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $264,845,000 of investment securities and sold $47,834,000 of investment securities, other than temporary cash investments.
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Admiral Shares | ||||
Issued | 49,737 | 1,344 | 67,880 | 1,961 |
Issued in Lieu of Cash Distributions | 3,019 | 83 | 4,679 | 138 |
Redeemed1 | (14,998) | (407) | (27,413) | (786) |
Net Increase (Decrease)—Admiral Shares | 37,758 | 1,020 | 45,146 | 1,313 |
ETF Shares | ||||
Issued | 191,650 | 2,601 | 181,037 | 2,606 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed1 | (14,272) | (200) | (6,882) | (100) |
Net Increase (Decrease)—ETF Shares | 177,378 | 2,401 | 174,155 | 2,506 |
1 Net of redemption fees for fiscal 2012 and 2011 of $49,000 and $43,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, 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 any purchase, redemptions, or account service fees described in the fund perspectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.” The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
100
Six Months Ended February 29, 2012 | ||||
Beginning | Ending | Expenses | ||
Account Value | Account Value | Paid During | ||
Index Fund | Share Class | 8/31/2011 | 2/29/2012 | Period1 |
Based on Actual Fund Return | ||||
Consumer Discretionary | Admiral | $1,000.00 | $1,165.24 | $1.02 |
ETF | 1,000.00 | 1,165.28 | 0.97 | |
Consumer Staples | Admiral | $1,000.00 | $1,084.28 | $0.93 |
ETF | 1,000.00 | 1,084.23 | 0.93 | |
Energy | Admiral | $1,000.00 | $1,103.61 | $0.99 |
ETF | 1,000.00 | 1,103.49 | 0.99 | |
Financials | Admiral | $1,000.00 | $1,111.74 | $0.95 |
ETF | 1,000.00 | 1,111.77 | 0.95 | |
Health Care | Admiral | $1,000.00 | $1,106.94 | $0.94 |
ETF | 1,000.00 | 1,106.97 | 0.94 | |
Industrials | Admiral | $1,000.00 | $1,163.82 | $0.97 |
ETF | 1,000.00 | 1,163.93 | 0.97 | |
Information Technology | Admiral | $1,000.00 | $1,206.07 | $0.99 |
ETF | 1,000.00 | 1,206.16 | 0.99 | |
Materials | Admiral | $1,000.00 | $1,077.06 | $0.98 |
ETF | 1,000.00 | 1,076.84 | 0.98 | |
Telecommunication Services | Admiral | $1,000.00 | $1,018.68 | $0.95 |
ETF | 1,000.00 | 1,018.65 | 0.95 | |
Utilities | Admiral | $1,000.00 | $1,047.87 | $0.92 |
ETF | 1,000.00 | 1,048.03 | 0.92 | |
Based on Hypothetical 5% Yearly Return | ||||
Consumer Discretionary | Admiral | $1,000.00 | $1,023.92 | $0.96 |
ETF | 1,000.00 | 1,023.97 | 0.91 | |
Consumer Staples | Admiral | $1,000.00 | $1,023.97 | $0.91 |
ETF | 1,000.00 | 1,023.97 | 0.91 | |
Energy | Admiral | $1,000.00 | $1,023.92 | $0.96 |
ETF | 1,000.00 | 1,023.92 | 0.96 | |
Financials | Admiral | $1,000.00 | $1,023.97 | $0.91 |
ETF | 1,000.00 | 1,023.97 | 0.91 | |
Health Care | Admiral | $1,000.00 | $1,023.97 | $0.91 |
ETF | 1,000.00 | 1,023.97 | 0.91 | |
Industrials | Admiral | $1,000.00 | $1,023.97 | $0.91 |
ETF | 1,000.00 | 1,023.97 | 0.91 | |
Information Technology | Admiral | $1,000.00 | $1,023.97 | $0.91 |
ETF | 1,000.00 | 1,023.97 | 0.91 | |
Materials | Admiral | $1,000.00 | $1,023.92 | $0.96 |
ETF | 1,000.00 | 1,023.92 | 0.96 | |
Telecommunication Services | Admiral | $1,000.00 | $1,023.92 | $0.96 |
ETF | 1,000.00 | 1,023.92 | 0.96 | |
Utilities | Admiral | $1,000.00 | $1,023.97 | $0.91 |
ETF | 1,000.00 | 1,023.97 | 0.91 |
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 0.19% for the Consumer Discretionary Index Fund Admiral Shares and 0.18% for the ETF Shares; 0.18% for the Consumer Staples Index Fund Admiral Shares and 0.18% for the ETF Shares; 0.19% for the Energy Index Fund Admiral Shares and 0.19% for the ETF Shares; 0.18% for the Financials Index Fund Admiral Shares and 0.18% for the ETF Shares; 0.18% for the Health Care Index Fund Admiral Shares and 0.18% for the ETF Shares; 0.18% for the Industrials Index Fund Admiral Shares and 0.18% for the ETF Shares; 0.18% for the Information Technology Index Fund Admiral Shares and 0.18% for the ETF Shares; 0.19% for the Materials Index Fund Admiral Shares and 0.19% for the ETF Shares; 0.19% for the Telecommunication Services Index Fund Admiral Shares and 0.19% for the ETF Shares; and 0.18% for the Utilities Index Fund Admiral Shares and 0.18% 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
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition 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. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
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.
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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 | JoAnn Heffernan Heisen | Executive Officers | |
Born 1950. Trustee Since July 1998. Principal | |||
F. William McNabb III | Occupation(s) During the Past Five Years: Corporate | Glenn Booraem | |
Born 1957. Trustee Since July 2009. Chairman of the | Vice President and Chief Global Diversity Officer | Born 1967. Controller Since July 2010. Principal | |
Board. Principal Occupation(s) During the Past Five | (retired 2008) and Member of the Executive | Occupation(s) During the Past Five Years: Principal | |
Years: Chairman of the Board of The Vanguard Group, | Committee (1997–2008) of Johnson & Johnson | of The Vanguard Group, Inc.; Controller of each of | |
Inc., and of each of the investment companies served | (pharmaceuticals/medical devices/consumer | the investment companies served by The Vanguard | |
by The Vanguard Group, since January 2010; Director | products); Director of Skytop Lodge Corporation | Group since 2010; Assistant Controller of each of | |
of The Vanguard Group since 2008; Chief Executive | (hotels), the University Medical Center at Princeton, | the investment companies served by The Vanguard | |
Officer and President of The Vanguard Group and of | the Robert Wood Johnson Foundation, and the Center | Group (2001–2010). | |
each of the investment companies served by The | for Talent Innovation; Member of the Advisory Board | ||
Vanguard Group since 2008; Director of Vanguard | of the Maxwell School of Citizenship and Public | Thomas J. Higgins | |
Marketing Corporation; Managing Director of The | Affairs at Syracuse University. | Born 1957. Chief Financial Officer Since September | |
Vanguard Group (1995–2008). | 2008. Principal Occupation(s) During the Past Five | ||
F. Joseph Loughrey | Years: Principal of The Vanguard Group, Inc.; Chief | ||
Born 1949. Trustee Since October 2009. Principal | Financial Officer of each of the investment companies | ||
Independent Trustees | Occupation(s) During the Past Five Years: President | served by The Vanguard Group since 2008; Treasurer | |
and Chief Operating Officer (retired 2009) and Vice | of each of the investment companies served by The | ||
Emerson U. Fullwood | Chairman of the Board (2008–2009) of Cummins Inc. | Vanguard Group (1998–2008). | |
Born 1948. Trustee Since January 2008. Principal | (industrial machinery); Director of SKF AB (industrial | ||
Occupation(s) During the Past Five Years: Executive | machinery), Hillenbrand, Inc. (specialized consumer | Kathryn J. Hyatt | |
Chief Staff and Marketing Officer for North America | services), the Lumina Foundation for Education, and | Born 1955. Treasurer Since November 2008. Principal | |
and Corporate Vice President (retired 2008) of Xerox | Oxfam America; Chairman of the Advisory Council | Occupation(s) During the Past Five Years: Principal | |
Corporation (document management products and | for the College of Arts and Letters and Member | of The Vanguard Group, Inc.; Treasurer of each of | |
services); Executive in Residence and 2010 | of the Advisory Board to the Kellogg Institute for | the investment companies served by The Vanguard | |
Distinguished Minett Professor at the Rochester | International Studies at the University of Notre Dame. | Group since 2008; Assistant Treasurer of each of the | |
Institute of Technology; Director of SPX Corporation | investment companies served by The Vanguard Group | ||
(multi-industry manufacturing), the United Way of | André F. Perold | (1988–2008). | |
Rochester, Amerigroup Corporation (managed health | Born 1952. Trustee Since December 2004. Principal | ||
care), the University of Rochester Medical Center, | Occupation(s) During the Past Five Years: George | Heidi Stam | |
Monroe Community College Foundation, and North | Gund Professor of Finance and Banking at the Harvard | Born 1956. Secretary Since July 2005. Principal | |
Carolina A&T University. | Business School (retired 2011); Chief Investment | Occupation(s) During the Past Five Years: Managing | |
Officer and Managing Partner of HighVista Strategies | Director of The Vanguard Group, Inc., since 2006; | ||
Rajiv L. Gupta | LLC (private investment firm); Director of Rand | General Counsel of The Vanguard Group since 2005; | |
Born 1945. Trustee Since December 2001.2 | Merchant Bank; Overseer of the Museum of Fine | Secretary of The Vanguard Group and of each of the | |
Principal Occupation(s) During the Past Five Years: | Arts Boston. | investment companies served by The Vanguard Group | |
Chairman and Chief Executive Officer (retired 2009) | since 2005; Director and Senior Vice President of | ||
and President (2006–2008) of Rohm Haas Co. | Alfred M. Rankin, Jr. | Vanguard Marketing Corporation since 2005; | |
(chemicals); Director of Tyco International, Ltd. | Born 1941. Trustee Since January 1993. Principal | Principal of The Vanguard Group (1997–2006). | |
(diversified manufacturing and services), Hewlett- | Occupation(s) During the Past Five Years: Chairman, | ||
Packard Co. (electronic computer manufacturing), | President, and Chief Executive Officer of NACCO | ||
and Delphi Automotive LLP (automotive components); | Industries, Inc. (forklift trucks/housewares/lignite); | Vanguard Senior Management Team | |
Senior Advisor at New Mountain Capital; Trustee of | Director of Goodrich Corporation (industrial products/ | ||
The Conference Board. | aircraft systems and services) and the National | Mortimer J. Buckley | Michael S. Miller |
Association of Manufacturers; Chairman of the Board | Kathleen C. Gubanich | James M. Norris | |
Amy Gutmann | of the Federal Reserve Bank of Cleveland and of | Paul A. Heller | Glenn W. Reed |
Born 1949. Trustee Since June 2006. Principal | University Hospitals of Cleveland; Advisory Chairman | Martha G. King | George U. Sauter |
Occupation(s) During the Past Five Years: President | of the Board of The Cleveland Museum of Art. | Chris D. McIsaac | |
of the University of Pennsylvania; Christopher H. | |||
Browne Distinguished Professor of Political Science | Peter F. Volanakis | ||
in the School of Arts and Sciences with secondary | Born 1955. Trustee Since July 2009. Principal | Chairman Emeritus and Senior Advisor | |
appointments at the Annenberg School for Commu- | Occupation(s) During the Past Five Years: President | ||
nication and the Graduate School of Education | and Chief Operating Officer (retired 2010) of Corning | John J. Brennan | |
of the University of Pennsylvania; Director of | Incorporated (communications equipment); Director | Chairman, 1996–2009 | |
Carnegie Corporation of New York, Schuylkill River | of Corning Incorporated (2000-2010) and Dow | Chief Executive Officer and President, 1996–2008 | |
Development Corporation, and Greater Philadelphia | Corning (2001–2010); Director of SPX Corporation | ||
Chamber of Commerce; Trustee of the National | (multi-industry manufacturing); Overseer of the Amos | ||
Constitution Center; Chair of the Presidential | Tuck School of Business Administration at Dartmouth | Founder | |
Commission for the Study of Bioethical Issues. | College; Advisor to the Norris Cotton Cancer Center. | ||
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. |
or Morningstar, Inc., unless otherwise noted. | |
Direct Investor Account Services > 800-662-2739 | |
You can obtain a free copy of Vanguard’s proxy voting | |
Institutional Investor Services > 800-523-1036 | guidelines by visiting vanguard.com/proxyreporting or |
Text Telephone for People | by calling Vanguard at 800-662-2739. The guidelines |
With Hearing Impairment > 800-749-7273 | 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 MSCI | available on the SEC’s website, and you can receive |
bears no liability with respect to any such funds or | copies of this information, for a fee, by sending a |
securities. The prospectus or the Statement of Additional | request in either of two ways: via e-mail addressed to |
Information contains a more detailed description of the | publicinfo@sec.gov or via regular mail addressed to the |
limited relationship MSCI has with Vanguard and any | Public Reference Section, Securities and Exchange |
related funds. | Commission, Washington, DC 20549-1520. |
© 2012 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q4832 042012 |
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Semiannual Report | February 29, 2012
Vanguard Extended Duration
Treasury Index Fund
> For the six months ended February 29, 2012, Institutional Shares of Vanguard Extended Duration Treasury Index Fund returned 19.87%.
> The substantial climb in return reflects a decline in long-term bond yields in response to economic and fiscal stresses in the United States and Europe.
> The fund outpaced its benchmark index by 0.35 percentage point, a difference that can occur because of the fund’s sampling strategy and the timing of fund and benchmark prices.
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.
About the cover: Vanguard was named for the HMS Vanguard, flagship of British Admiral Horatio Nelson. A ship—whose
performance and safety depend on the work of all hands—has served as a fitting metaphor for the Vanguard crew as we strive to help clients reach their financial goals.
Your Fund’s Total Returns
Six Months Ended February 29, 2012 | ||||
30-Day SEC | Income | Capital | Total | |
Yields | Returns | Returns | Returns | |
Vanguard Extended Duration Treasury Index Fund | ||||
Institutional Shares | 3.19% | 1.57% | 18.30% | 19.87% |
ETF Shares | 3.17 | |||
Market Price | 19.66 | |||
Net Asset Value | 19.91 | |||
Barclays Capital U.S. Treasury STRIPS 20–30 Year | ||||
Equal Par Bond Index | 19.52 | |||
General U.S. Treasury Funds Average | 5.58 | |||
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; 7,720,749; 7,925,573; 8,090,646.
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, 2011, Through February 29, 2012
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Extended Duration Treasury Index | ||||
Fund | ||||
Institutional Shares | $30.19 | $34.87 | $0.592 | $0.785 |
ETF Shares | 100.09 | 115.55 | 1.951 | 2.602 |
1
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Chairman’s Letter
Dear Shareholder,
A remarkable confluence of economic and fiscal threats that had worried investors during the summer continued into the opening months of the fund’s fiscal period. Investors responded by seeking the perceived safety of U.S. Treasury securities, bidding up prices and lowering long-term yields for long-term bonds.
As a consequence, Vanguard Extended Duration Treasury Index Fund returned almost 20% for the half-year ended February 29, 2012. As you’ll recall, for the 12 months ended August 31, 2011, the fund returned about 1.33%. Dramatic swings in return are not unusual for long-term bonds, the focus of the fund, because of their long duration, a gauge of their sensitivity to changes in interest rates.
The return of the fund’s Institutional Shares was ahead of the return of its benchmark, the Barclays Capital U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index, by 0.35 percentage point. Although index funds aim to match their benchmarks, less real life operating and transaction expenses, they can sometimes outpace their benchmarks (or lag by more than their expenses) because of their sampling techniques and differences in the timing of prices used to calculate the fund and benchmark returns.
2
The fund handily outpaced its peer group. Keep in mind, however, that the peer category is not an especially relevant point of comparison for this long-duration fund. The peer group is heavily oriented toward Treasury bond funds with short- to intermediate-term maturities.
Please note that at the end of the period we increased the purchase fee for fund shares to 0.50% from 0.25%. This fee, which is paid directly to the fund, better reflects the transaction costs associated with purchases of longer-duration Treasury securities. Without this fee, the costs would be borne by the fund’s existing shareholders. Because of the way they’re bought and sold, ETF Shares are not subject to the fee.
Bonds’ strength
confounded expectations
The solid returns produced by the bond market in general surprised many long-time observers of the fixed income markets. At the start of the period, the yield of the 10-year U.S. Treasury note stood at 2.22%, suggesting that returns would be very modest by historical standards. Over the next six months, however, yields moved lower still, boosting bond prices, which move in the opposite direction. At the end of February, the yield of the 10-year T-note stood at 1.98%. As yields decline, obviously, the scope for continued declines—and price increases—diminishes. Municipal bonds performed even more strongly than the broad taxable market.
Market Barometer | |||
Total Returns | |||
Periods Ended February 29, 2012 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | 2.73% | 8.37% | 6.36% |
Barclays Capital Municipal Bond Index (Broad tax-exempt | |||
market) | 5.67 | 12.42 | 5.50 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.00 | 0.06 | 1.20 |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.31% | 4.86% | 1.77% |
Russell 2000 Index (Small-caps) | 12.40 | -0.15 | 1.83 |
Dow Jones U.S. Total Stock Market Index | 13.18 | 4.35 | 2.07 |
MSCI All Country World Index ex USA (International) | 3.97 | -6.10 | -0.75 |
CPI | |||
Consumer Price Index | 0.49% | 2.87% | 2.27% |
3
The returns for 3-month Treasury bills and other money market instruments remained near 0%, consistent with the Federal Reserve’s policy on interest rates.
Notes of optimism
propelled stock prices higher
U.S. stocks produced a strong double-digit return of 13.18% over the period. That statement is true enough, but the headline figure obscures the volatility that has been perhaps the most prominent feature of the financial markets over the past six months and indeed the past few years. If the six-month period had started a month earlier, for example, the Dow Jones U.S. Total Stock Market Index would have returned just 1.97%. A start date two months earlier would have put the six-month return at –5.18%.
In the six months through February, however, stock prices benefited from signs of acceleration in the U.S. economic expansion and hope that the European Union’s latest agreement on Greek debt would help to contain a threat that has menaced global markets for much of the past two years. European stocks rallied on the news about Greece, but international stocks still trailed their U.S. counterparts for the full six months.
Falling bond yields early on
shaped returns for the six months
The six-month fiscal period opened in the midst of a steep drop in the yields of Treasury securities, especially among long-term bonds.
Expense Ratios
Institutional | ETF | |
Shares | Shares | |
Extended Duration Treasury Index Fund | 0.11% | 0.13% |
The fund expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year.
For the six months ended February 29, 2012, the annualized expense ratios were 0.11% for Institutional Shares and 0.13% for ETF Shares.
4
The decline in yields reflected strong demand for Treasuries, which drove up bond prices. (Bond prices and yields move in opposite directions.) As you can see in the Your Fund’s Total Returns table preceding this letter, price gains—reflected in the fund’s capital return—accounted for most of the fund’s total return of almost 20% for the period; the remainder came from interest income from the long-term Treasuries the fund holds.
The sources of investor anxiety during the summer and early fall are probably familiar to you by now: high-stakes budget brinkmanship in Washington; the decision by the Standard & Poor’s rating agency to downgrade the credit of the U.S. Treasury in response to the political gridlock; apprehension that the U.S. economic expansion might falter, and Europe’s ongoing debt struggles. (Please note: Vanguard’s confidence in the full faith and credit of the U.S. Treasury remains unshaken.)
Toward the end of September, the Federal Reserve stepped into the long-term bond market with what has been labeled Operation Twist, a policy of purchasing long-term Treasury bonds in an effort to stimulate the economy by driving down long-term interest rates. Together, this combination of “bad news” and aggressive Fed action helped reduce the yield of 30-year U.S. Treasury bonds by 69 basis points during the first four months of the fiscal period (on top of a drop of 79 basis points in the prior two months).
Yields then rose somewhat for the remainder of the period. On February 29, the SEC yield for the fund’s Institutional Shares was 3.19%, compared with 3.83% six months before and 4.73% a year ago.
The fund can help match
a pension plan’s liabilities
Comparing the fund’s double-digit return during the fiscal half-year with its previous results vividly demonstrates its volatility. Rather than cause for concern, these swings indicate that the fund is working as intended. The fund’s high sensitivity to changes in interest rates can help managers of defined benefit plans match changes in the value of a pension plan’s long-term liabilities with changes in asset values, a so-called liability-driven investment strategy. A pension plan’s assets and liabilities both are highly sensitive to changes in interest rates.
Vanguard Extended Duration Treasury Index Fund can play a valuable role in a liability-driven strategy, providing managers with a low-cost portfolio of high-quality assets to help manage the plan’s long-term obligations.
Thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/extdurationtreasx7x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 11, 2012
5
Extended Duration Treasury Index Fund
Fund Profile
As of February 29, 2012
Share-Class Characteristics | ||
Institutional | ETF | |
Shares | Shares | |
Ticker Symbol | VEDTX | EDV |
Expense Ratio1 | 0.11% | 0.13% |
30-Day SEC Yield | 3.19% | 3.17% |
Financial Attributes | ||
Barclays | ||
Treasury | ||
STRIPS | ||
20–30 Year | ||
Fund | Index | |
Number of Bonds | 54 | 57 |
Yield to Maturity | ||
(before expenses) | 3.2% | 3.2% |
Average Coupon | 0.0% | 0.0% |
Average Duration | 26.9 years | 27.2 years |
Average Effective | ||
Maturity | 25.1 years | 25.3 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 generally not backed by the full faith and credit of the U.S. government.
Volatility Measures | |
Barclays | |
Treasury | |
STRIPS | |
20–30 Year | |
Index | |
R-Squared | 0.99 |
Beta | 1.00 |
These measures show the degree and timing of the fund’s fluctuations compared with the index over 36 months. | |
Distribution by Maturity (% of portfolio) | |
10 - 20 Years | 3.8% |
20 - 30 Years | 96.2 |
Distribution by Credit Quality (% of portfolio) | |
U.S. Government | 100.0% |
For information about these ratings, see the Glossary entry for Credit Quality. | |
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/extdurationtreasx8x1.jpg)
1 The expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, 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 29, 2012
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 | 1.33 | 1.99 |
2012 | 19.91 | 19.52 |
Note: For 2012, performance data reflect the six months ended February 29, 2012. |
Average Annual Total Returns: Periods Ended December 31, 2011
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Since Inception | |||||
Inception Date | One Year | Income | Capital | Total | |
Institutional Shares | 11/28/2007 | 55.79% | 4.33% | 9.04% | 13.37% |
Fee-Adjusted | |||||
Returns | 55.40 | 13.30 | |||
ETF Shares | 12/6/2007 | ||||
Market Price | 56.17 | 13.99 | |||
Net Asset Value | 55.81 | 13.95 |
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 29, 2012
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% | 5/15/32 | 23,475 | 12,438 |
United States Treasury Strip Coupon | 0.000% | 8/15/32 | 24,810 | 13,021 |
United States Treasury Strip Coupon | 0.000% | 11/15/32 | 24,725 | 12,849 |
United States Treasury Strip Coupon | 0.000% | 2/15/33 | 24,650 | 12,683 |
United States Treasury Strip Coupon | 0.000% | 5/15/33 | 23,870 | 12,161 |
United States Treasury Strip Coupon | 0.000% | 8/15/33 | 24,230 | 12,227 |
United States Treasury Strip Coupon | 0.000% | 11/15/33 | 24,805 | 12,397 |
United States Treasury Strip Coupon | 0.000% | 2/15/34 | 23,260 | 11,510 |
United States Treasury Strip Coupon | 0.000% | 5/15/34 | 25,200 | 12,352 |
United States Treasury Strip Coupon | 0.000% | 8/15/34 | 25,450 | 12,343 |
United States Treasury Strip Coupon | 0.000% | 11/15/34 | 24,560 | 11,804 |
United States Treasury Strip Coupon | 0.000% | 2/15/35 | 24,045 | 11,438 |
United States Treasury Strip Coupon | 0.000% | 5/15/35 | 25,945 | 12,208 |
United States Treasury Strip Coupon | 0.000% | 8/15/35 | 26,280 | 12,257 |
United States Treasury Strip Coupon | 0.000% | 11/15/35 | 24,165 | 11,167 |
United States Treasury Strip Coupon | 0.000% | 2/15/36 | 25,725 | 11,781 |
United States Treasury Strip Coupon | 0.000% | 5/15/36 | 24,945 | 11,311 |
United States Treasury Strip Coupon | 0.000% | 8/15/36 | 24,200 | 10,873 |
United States Treasury Strip Coupon | 0.000% | 11/15/36 | 26,285 | 11,695 |
United States Treasury Strip Coupon | 0.000% | 2/15/37 | 29,295 | 12,924 |
United States Treasury Strip Coupon | 0.000% | 5/15/37 | 23,050 | 10,081 |
United States Treasury Strip Coupon | 0.000% | 8/15/37 | 24,350 | 10,550 |
United States Treasury Strip Coupon | 0.000% | 11/15/37 | 25,680 | 11,025 |
United States Treasury Strip Coupon | 0.000% | 2/15/38 | 29,000 | 12,334 |
United States Treasury Strip Coupon | 0.000% | 5/15/38 | 28,200 | 11,901 |
United States Treasury Strip Coupon | 0.000% | 8/15/38 | 24,685 | 10,327 |
United States Treasury Strip Coupon | 0.000% | 11/15/38 | 24,950 | 10,341 |
United States Treasury Strip Coupon | 0.000% | 2/15/39 | 25,500 | 10,477 |
United States Treasury Strip Coupon | 0.000% | 5/15/39 | 27,200 | 11,078 |
United States Treasury Strip Coupon | 0.000% | 8/15/39 | 25,995 | 10,477 |
United States Treasury Strip Coupon | 0.000% | 11/15/39 | 26,710 | 10,697 |
United States Treasury Strip Coupon | 0.000% | 2/15/40 | 25,550 | 10,126 |
United States Treasury Strip Coupon | 0.000% | 5/15/40 | 22,145 | 8,706 |
United States Treasury Strip Coupon | 0.000% | 8/15/40 | 29,000 | 11,296 |
United States Treasury Strip Coupon | 0.000% | 11/15/40 | 20,445 | 7,908 |
United States Treasury Strip Coupon | 0.000% | 2/15/41 | 25,850 | 9,894 |
United States Treasury Strip Coupon | 0.000% | 5/15/41 | 15,500 | 5,880 |
United States Treasury Strip Principal | 0.000% | 2/15/36 | 22,570 | 10,594 |
United States Treasury Strip Principal | 0.000% | 2/15/37 | 15,850 | 7,162 |
United States Treasury Strip Principal | 0.000% | 5/15/37 | 17,475 | 7,819 |
United States Treasury Strip Principal | 0.000% | 2/15/38 | 18,700 | 8,152 |
8
Extended Duration Treasury Index Fund | ||||
Face | Market | |||
Maturity | Amount | Value | ||
Coupon | Date | ($000) | ($000) | |
United States Treasury Strip Principal | 0.000% | 5/15/38 | 20,495 | 8,878 |
United States Treasury Strip Principal | 0.000% | 2/15/39 | 22,685 | 9,483 |
United States Treasury Strip Principal | 0.000% | 5/15/39 | 23,810 | 9,892 |
United States Treasury Strip Principal | 0.000% | 8/15/39 | 20,845 | 8,558 |
United States Treasury Strip Principal | 0.000% | 11/15/39 | 22,850 | 9,303 |
United States Treasury Strip Principal | 0.000% | 2/15/40 | 25,335 | 10,213 |
United States Treasury Strip Principal | 0.000% | 5/15/40 | 29,300 | 11,704 |
United States Treasury Strip Principal | 0.000% | 8/15/40 | 22,780 | 9,002 |
United States Treasury Strip Principal | 0.000% | 11/15/40 | 25,105 | 9,810 |
United States Treasury Strip Principal | 0.000% | 2/15/41 | 42,985 | 16,641 |
United States Treasury Strip Principal | 0.000% | 5/15/41 | 49,495 | 19,015 |
United States Treasury Strip Principal | 0.000% | 8/15/41 | 59,895 | 22,835 |
United States Treasury Strip Principal | 0.000% | 11/15/41 | 47,550 | 17,891 |
United States Treasury Strip Principal | 0.000% | 2/15/42 | 7,200 | 2,682 |
Total U.S. Government and Agency Obligations (Cost $479,185) | 614,171 | |||
Shares | ||||
Temporary Cash Investment (0.0%) | ||||
Money Market Fund (0.0%) | ||||
1 Vanguard Market Liquidity Fund (Cost $43) | 0.111% | 42,848 | 43 | |
Total Investments (100.1%) (Cost $479,228) | 614,214 | |||
Other Assets and Liabilities (-0.1%) | ||||
Other Assets | 28,333 | |||
Liabilities | (28,865) | |||
(532) | ||||
Net Assets (100%) | 613,682 | |||
At February 29, 2012, net assets consisted of: | ||||
Amount | ||||
($000) | ||||
Paid-in Capital | 458,322 | |||
Undistributed Net Investment Income | 3,006 | |||
Accumulated Net Realized Gains | 17,368 | |||
Unrealized Appreciation (Depreciation) | 134,986 | |||
Net Assets | 613,682 | |||
Institutional Shares—Net Assets | ||||
Applicable to 12,792,660 outstanding $.001 par value shares of | ||||
beneficial interest (unlimited authorization) | 446,141 | |||
Net Asset Value Per Share—Institutional Shares | $34.87 | |||
ETF Shares—Net Assets | ||||
Applicable to 1,450,000 outstanding $.001 par value shares of | ||||
beneficial interest (unlimited authorization) | 167,541 | |||
Net Asset Value Per Share—ETF Shares | $115.55 |
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 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Interest | 10,386 |
Total Income | 10,386 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 31 |
Management and Administrative—Institutional Shares | 176 |
Management and Administrative—ETF Shares | 79 |
Marketing and Distribution—Institutional Shares | 55 |
Marketing and Distribution—ETF Shares | 21 |
Custodian Fees | 2 |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 3 |
Total Expenses | 367 |
Net Investment Income | 10,019 |
Realized Net Gain (Loss) on Investment Securities Sold | 36,850 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 61,060 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 107,929 |
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 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 10,019 | 19,237 |
Realized Net Gain (Loss) | 36,850 | 9,230 |
Change in Unrealized Appreciation (Depreciation) | 61,060 | (1,316) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 107,929 | 27,151 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (8,244) | (12,526) |
ETF Shares | (2,697) | (5,732) |
Realized Capital Gain1 | ||
Institutional Shares | (10,632) | (675) |
ETF Shares | (4,033) | (360) |
Total Distributions | (25,606) | (19,293) |
Capital Share Transactions | ||
Institutional Shares | (30,047) | 103,235 |
ETF Shares | 32,116 | (43,815) |
Net Increase (Decrease) from Capital Share Transactions | 2,069 | 59,420 |
Total Increase (Decrease) | 84,392 | 67,278 |
Net Assets | ||
Beginning of Period | 529,290 | 462,012 |
End of Period2 | 613,682 | 529,290 |
1 Includes fiscal 2012 and 2011 short-term gain distributions totaling $7,473,000 and $122,000, 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 $3,006,000 and $3,928,000.
See accompanying Notes, which are an integral part of the Financial Statements.
11
Extended Duration Treasury Index Fund
Financial Highlights
Institutional Shares | |||||
Six Months | Nov. 28, | ||||
Ended | 20071 to | ||||
Year Ended August 31, | |||||
February 29, | Aug. 31, | ||||
For a Share Outstanding Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $30.19 | $31.18 | $30.69 | $29.52 | $30.00 |
Investment Operations | |||||
Net Investment Income | . 539 | 1.127 2 | 1.1732 | 1.2732 | 1.0232 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments 3 | 5.518 | (. 948) | 3.796 | 1.221 | (. 928) |
Total from Investment Operations | 6.057 | .179 | 4.969 | 2.494 | . 095 |
Distributions | |||||
Dividends from Net Investment Income | (. 592) | (1.101) | (1.134) | (1.324) | (. 575) |
Distributions from Realized Capital Gains | (.785) | (. 068) | (3.345) | — | — |
Total Distributions | (1.377) | (1.169) | (4.479) | (1.324) | (. 575) |
Net Asset Value, End of Period | $34.87 | $30.19 | $31.18 | $30.69 | $29.52 |
Total Return4 | 19.87% | 1.33% | 20.84% | 8.05% | 0.39% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $446 | $409 | $286 | $151 | $258 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.11% | 0.11% | 0.11% | 0.11% | 0.11%5 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 3.16% | 4.42% | 4.41% | 3.93% | 4.55%5 |
Portfolio Turnover Rate 6 | 60% | 22% | 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 $0.02, $0.02, $0.00, $0.01, and $0.03.
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 | 20071 to | ||||
February 29, | Year Ended August 31, | Aug. 31, | |||
For a Share Outstanding Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $100.09 | $103.39 | $101.91 | $98.11 | $97.78 |
Investment Operations | |||||
Net Investment Income | 1.774 | 3.723 2 | 3.9212 | 4.3172 | 3.166 2 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments 3 | 18.239 | (3.168) | 12.419 | 3.880 | (.983) |
Total from Investment Operations | 20.013 | . 555 | 16.340 | 8.197 | 2.183 |
Distributions | |||||
Dividends from Net Investment Income | (1.951) | (3.630) | (3.752) | (4.397) | (1.853) |
Distributions from Realized Capital Gains | (2.602) | (. 225) | (11.108) | — | — |
Total Distributions | (4.553) | (3.855) | (14.860) | (4.397) | (1.853) |
Net Asset Value, End of Period | $115.55 | $100.09 | $103.39 | $101.91 | $98.11 |
Total Return | 19.91% | 1.33% | 20.80% | 7.98% | 2.29% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $168 | $120 | $176 | $46 | $5 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.13% | 0.13% | 0.13% | 0.14% | 0.14%4 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 3.14% | 4.40% | 4.39% | 3.90% | 4.52%4 |
Portfolio Turnover Rate 5 | 60% | 22% | 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 $0.08, $0.07, $0.01, $0.02, and $0.11.
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 29, 2012. 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, 2008–2011), and for the period ended February 29, 2012, 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: 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 29, 2012, the fund had contributed capital of $99,000 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.
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 market value of the fund’s investments as of February 29, 2012, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
U.S. Government and Agency Obligations | — | 614,171 | — |
Temporary Cash Investments | 43 | — | — |
Total | 43 | 614,171 | — |
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 29, 2012, the fund realized $7,659,000 of net capital gains resulting from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the fund rather than for cash. Because such gains are not taxable to the fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.
At February 29, 2012, the cost of investment securities for tax purposes was $479,228,000. Net unrealized appreciation of investment securities for tax purposes was $134,986,000, consisting of unrealized gains of $136,097,000 on securities that had risen in value since their purchase and $1,111,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $251,806,000 of investment securities and sold $275,609,000 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 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued1 | 144,508 | 4,225 | 129,441 | 5,304 |
Issued in Lieu of Cash Distributions | 18,153 | 496 | 12,810 | 503 |
Redeemed | (192,708) | (5,483) | (39,016) | (1,434) |
Net Increase (Decrease)—Institutional Shares | (30,047) | (762) | 103,235 | 4,373 |
ETF Shares | ||||
Issued1 | 60,946 | 500 | 34,936 | 400 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (28,830) | (250) | (78,751) | (900) |
Net Increase (Decrease)—ETF Shares | 32,116 | 250 | (43,815) | (500) |
1 Includes purchase fees for fiscal 2012 and 2011 of $435,000 and $358,000, respectively (fund totals). |
G. In preparing the financial statements as of February 29, 2012, 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 any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
17
Six Months Ended February 29, 2012 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Extended Duration Treasury Index Fund | 8/31/2011 | 2/29/2012 | Period |
Based on Actual Fund Return | |||
Institutional Shares | $1,000.00 | $1,198.74 | $0.60 |
ETF Shares | 1,000.00 | 1,199.10 | 0.71 |
Based on Hypothetical 5% Yearly Return | |||
Institutional Shares | $1,000.00 | $1,024.32 | $0.55 |
ETF Shares | 1,000.00 | 1,024.22 | 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 (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Average Coupon. The average interest rate paid on the fixed income securities held by a fund. It is expressed as a percentage of face value.
Average Duration. An estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. To see how the value could change, multiply the average duration by the change in rates. If interest rates rise by 1 percentage point, the value of the bonds in a fund with an average duration of five years would decline by about 5%. If rates decrease by a percentage point, the value would rise by 5%.
Average Effective Maturity. The average length of time until fixed income securities held by a fund reach maturity and are repaid, taking into consideration the possibility that the issuer may call the bond before its maturity date. The figure reflects the proportion of fund assets represented by each security; it also reflects any futures contracts held. In general, the longer the average effective maturity, the more a fund’s share price will fluctuate in response to changes in market interest rates.
Credit Quality. Credit-quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). “Not Rated” is used to classify securities for which a rating is not available. U.S. Treasury, U.S. Agency, and U.S. Agency mortgage-backed securities appear under “U.S. Government.” Credit-quality ratings are obtained from Barclays Capital using ratings generally derived from Moody’s, Fitch, and S&P. When ratings from all three agencies are used, the median rating is shown. When ratings from two of the agencies are used, the lower rating is shown.
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. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
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 Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services), Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing), |
Board. Principal Occupation(s) During the Past Five | and Delphi Automotive LLP (automotive components); |
Years: Chairman of the Board of The Vanguard Group, | Senior Advisor at New Mountain Capital; Trustee of |
Inc., and of each of the investment companies served | The Conference Board. |
by The Vanguard Group, since January 2010; Director | |
of The Vanguard Group since 2008; Chief Executive | Amy Gutmann |
Officer and President of The Vanguard Group and of | Born 1949. Trustee Since June 2006. Principal |
each of the investment companies served by The | Occupation(s) During the Past Five Years: President |
Vanguard Group since 2008; Director of Vanguard | of the University of Pennsylvania; Christopher H. |
Marketing Corporation; Managing Director of The | Browne Distinguished Professor of Political Science |
Vanguard Group (1995–2008). | in the School of Arts and Sciences with secondary |
appointments at the Annenberg School for Commu- | |
nication and the Graduate School of Education | |
Independent Trustees | of the University of Pennsylvania; Director of |
Carnegie Corporation of New York, Schuylkill River | |
Emerson U. Fullwood | Development Corporation, and Greater Philadelphia |
Born 1948. Trustee Since January 2008. Principal | Chamber of Commerce; Trustee of the National |
Occupation(s) During the Past Five Years: Executive | Constitution Center; Chair of the Presidential |
Chief Staff and Marketing Officer for North America | Commission for the Study of Bioethical Issues. |
and Corporate Vice President (retired 2008) of Xerox | |
Corporation (document management products and | JoAnn Heffernan Heisen |
services); Executive in Residence and 2010 | Born 1950. Trustee Since July 1998. Principal |
Distinguished Minett Professor at the Rochester | Occupation(s) During the Past Five Years: Corporate |
Institute of Technology; Director of SPX Corporation | Vice President and Chief Global Diversity Officer |
(multi-industry manufacturing), the United Way of | (retired 2008) and Member of the Executive |
Rochester, Amerigroup Corporation (managed health | Committee (1997–2008) of Johnson & Johnson |
care), the University of Rochester Medical Center, | (pharmaceuticals/medical devices/consumer |
Monroe Community College Foundation, and North | products); Director of Skytop Lodge Corporation |
Carolina A&T University. | (hotels), the University Medical Center at Princeton, |
the Robert Wood Johnson Foundation, and the Center | |
Rajiv L. Gupta | for Talent Innovation; Member of the Advisory Board |
Born 1945. Trustee Since December 2001.2 | of the Maxwell School of Citizenship and Public Affairs |
Principal Occupation(s) During the Past Five Years: | at Syracuse University. |
Chairman and Chief Executive Officer (retired 2009) |
F. Joseph Loughrey | Group since 2010; Assistant Controller of each of | |
Born 1949. Trustee Since October 2009. Principal | the investment companies served by The Vanguard | |
Occupation(s) During the Past Five Years: President | Group (2001–2010). | |
and Chief Operating Officer (retired 2009) and Vice | ||
Chairman of the Board (2008–2009) of Cummins Inc. | Thomas J. Higgins | |
(industrial machinery); Director of SKF AB (industrial | Born 1957. Chief Financial Officer Since September | |
machinery), Hillenbrand, Inc. (specialized consumer | 2008. Principal Occupation(s) During the Past Five | |
services), the Lumina Foundation for Education, and | Years: Principal of The Vanguard Group, Inc.; Chief | |
Oxfam America; Chairman of the Advisory Council | Financial Officer of each of the investment companies | |
for the College of Arts and Letters and Member | served by The Vanguard Group since 2008; Treasurer | |
of the Advisory Board to the Kellogg Institute for | of each of the investment companies served by The | |
International Studies at the University of Notre Dame. | Vanguard Group (1998–2008). | |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School (retired 2011); Chief Investment | the investment companies served by The Vanguard | |
Officer and Managing Partner of HighVista Strategies | Group since 2008; Assistant Treasurer of each of the | |
LLC (private investment firm); Director of Rand | investment companies served by The Vanguard Group | |
Merchant Bank; Overseer of the Museum of Fine | (1988–2008). | |
Arts Boston. | ||
Heidi Stam | ||
Alfred M. Rankin, Jr. | Born 1956. Secretary Since July 2005. Principal | |
Born 1941. Trustee Since January 1993. Principal | Occupation(s) During the Past Five Years: Managing | |
Occupation(s) During the Past Five Years: Chairman, | Director of The Vanguard Group, Inc., since 2006; | |
President, and Chief Executive Officer of NACCO | General Counsel of The Vanguard Group since 2005; | |
Industries, Inc. (forklift trucks/housewares/lignite); | Secretary of The Vanguard Group and of each of the | |
Director of Goodrich Corporation (industrial products/ | investment companies served by The Vanguard Group | |
aircraft systems and services) and the National | since 2005; Director and Senior Vice President of | |
Association of Manufacturers; Chairman of the Board | Vanguard Marketing Corporation since 2005; | |
of the Federal Reserve Bank of Cleveland and of | Principal of The Vanguard Group (1997–2006). | |
University Hospitals of Cleveland; Advisory Chairman | ||
of the Board of The Cleveland Museum of Art. | ||
Vanguard Senior Management Team | ||
Peter F. Volanakis | Mortimer J. Buckley | Michael S. Miller |
Born 1955. Trustee Since July 2009. Principal | Kathleen C. Gubanich | James M. Norris |
Occupation(s) During the Past Five Years: President | Paul A. Heller | Glenn W. Reed |
and Chief Operating Officer (retired 2010) of Corning | Martha G. King | George U. Sauter |
Incorporated (communications equipment); Director of | Chris D. McIsaac | |
Corning Incorporated (2000-2010) and Dow Corning | ||
(2001–2010); Director of SPX Corporation (multi- | ||
industry manufacturing); Overseer of the Amos Tuck | Chairman Emeritus and Senior Advisor | |
School of Business Administration at Dartmouth | ||
College; Advisor to the Norris Cotton Cancer Center. | John J. Brennan | |
Chairman, 1996–2009 | ||
Chief Executive Officer and President, 1996–2008 | ||
Executive Officers | ||
Glenn Booraem | Founder | |
Born 1967. Controller Since July 2010. Principal | ||
Occupation(s) During the Past Five Years: Principal | John C. Bogle | |
of The Vanguard Group, Inc.; Controller of each of | Chairman and Chief Executive Officer, 1974–1996 | |
the investment companies served by The Vanguard |
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 | Vanguard Extended Duration Treasury ETF is not |
Direct Investor Account Services > 800-662-2739 | sponsored, endorsed, sold, or promoted by Barclays |
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. | |
© 2012 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q12752 042012 |
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Semiannual Report | February 29, 2012
Vanguard Mega Cap 300 Index Funds
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 29, 2012, the returns of Vanguard’s Mega Cap 300 Index Funds ranged from about 12% for the Mega Cap 300 Value Index Fund to more than 14% for the Mega Cap 300 Growth Index Fund.
> Each of the funds closely tracked its benchmark index. The Mega Cap 300 Value Index Fund slightly trailed the average return of its peers, while the two other funds outpaced their respective peer groups.
> The information technology, consumer discretionary, and industrial sectors contributed most to the results of the Mega Cap 300 Growth Index Fund and the Mega Cap 300 Index Fund; Mega Cap 300 Value benefited most from strength in the energy and financial 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 |
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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.
About the cover: Vanguard was named for the HMS Vanguard, flagship of British Admiral Horatio Nelson. A ship—whose performance and safety depend on the work of all hands—has served as a fitting metaphor for the Vanguard crew as we strive to help clients reach their financial goals.
Your Fund’s Total Returns
Six Months Ended February 29, 2012 | |
Total | |
Returns | |
Vanguard Mega Cap 300 Index Fund | |
Institutional Shares | 13.52% |
ETF Shares | |
Market Price | 13.60 |
Net Asset Value | 13.51 |
MSCI US Large Cap 300 Index | 13.59 |
Large-Cap Core Funds Average | 12.27 |
Large-Cap Core Funds Average: Derived from data provided by Lipper Inc. | |
Vanguard Mega Cap 300 Growth Index Fund | |
Institutional Shares | 14.87% |
ETF Shares | |
Market Price | 14.83 |
Net Asset Value | 14.85 |
MSCI US Large Cap Growth Index | 14.92 |
Large-Cap Growth Funds Average | 12.46 |
Large-Cap Growth Funds Average: Derived from data provided by Lipper Inc. | |
Vanguard Mega Cap 300 Value Index Fund | |
Institutional Shares | 12.14% |
ETF Shares | |
Market Price | 12.19 |
Net Asset Value | 12.12 |
MSCI US Large Cap Value Index | 12.20 |
Large-Cap Value Funds Average | 12.39 |
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; 7,720,749; 7,925,573; 8,090,646.
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
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Chairman’s Letter
Dear Shareholder,
Vanguard’s trio of Mega Cap 300 Index Funds posted strong returns for the six months ended February 29, 2012, each rebounding sharply from weakness at the beginning of the period. The funds, which represent 300 of the largest companies in the U.S. stock market, met their objective of closely tracking their respective MSCI index benchmarks.
The Mega Cap 300 Growth Index Fund performed best, with a return of more than 14%. The Mega Cap 300 Value Index Fund returned about 12%, and the Mega Cap 300 Index Fund, which combines the growth and value market segments, fell in between, with a return of more than 13%.
Notes of optimism
propelled stock prices higher
U.S. stocks produced a strong double-digit return of 13.18% over the period. That statement is true enough, but the headline figure obscures the volatility that has beenperhaps the most prominent feature of the financial markets over the past six months and indeed the past few years. If the six-month period had started a month earlier, for example, the Dow Jones U.S. Total Stock Market Index would have returned just 1.97%. A start date two months earlier would have put the six-month return at –5.18%.
In the six months through February, however, stock prices benefited from signs of acceleration in the U.S. economic expansion and hope that the European Union’s latest agreement on Greek debt
2
would help contain a threat that has menaced global markets for much of the past two years. European stocks rallied on the news about Greece, but international stocks still trailed their U.S. counterparts for the full six months.
Bonds’ strength
confounded expectations
Bonds produced solid returns, to the surprise of many long-time observers of the fixed income markets. At the start of the period, the yield of the 10-year U.S. Treasury note stood at 2.22%, suggesting that returns would be very modest by historical standards. Over the next six months, however, yields moved lower still, boosting bond prices, which move in the opposite direction. At the end of February, the yield of the 10-year T-note stood at 1.98%. As yields decline, obviously, the scope for continued declines—and price increases—diminishes. Municipal bonds performed even more strongly than the broad taxable market.
The returns for 3-month Treasury bills and other money market instruments remained near 0%, consistent with the Federal Reserve’s policy on interest rates.
Tech sector boosted
mega-cap growth stocks
Despite the extreme stock market volatility earlier in the fiscal half-year, large-cap stocks ended the period on a strong note. Nearly all segments of the stock market were pummeled in the summer and early fall as the European debt crisis reignited and the fragility of the U.S. economic
Market Barometer | |||
Total Returns | |||
Periods Ended February 29, 2012 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 13.31% | 4.86% | 1.77% |
Russell 2000 Index (Small-caps) | 12.40 | -0.15 | 1.83 |
Dow Jones U.S. Total Stock Market Index | 13.18 | 4.35 | 2.07 |
MSCI All Country World Index ex USA (International) | 3.97 | -6.10 | -0.75 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | 2.73% | 8.37% | 6.36% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | 5.67 | 12.42 | 5.50 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.00 | 0.06 | 1.20 |
CPI | |||
Consumer Price Index | 0.49% | 2.87% | 2.27% |
3
recovery became more evident. Still, in such an uncertain environment, investors turned to large-cap stocks as a potential source of refuge. Larger, established companies were generally deemed less risky than smaller ones, which offer the potential for faster growth but don’t always have a track record of stability.
Investors’ preference for large-cap stocks benefited the Mega Cap 300 Index Funds. Two of them—the Mega Cap 300 Growth Index and the Mega Cap 300 Index—outperformed the broad U.S. market for the six-month period, while the Mega Cap 300 Value Index trailed it slightly.
As I mentioned, the Mega Cap 300 Growth Index had the best results of the three funds. It benefited most from its outsized holdings in technology, which represented about one-third of its assets, on average, during the period. Tech stocks outper-formed others because of the stellar fourth-quarter performance of companies selling tablet computers and smartphones. Tech consulting, data processing, and outsourcing services also did well.
The consumer discretionary sector boosted performance, with cable and satellite giants, specialty retailers, and fast-food chains all delivering double-digit returns. By the end of 2011, as the U.S. economic recovery stood on firmer ground, renewed optimism lifted industrial stocks. Businesses within that sector,
Expense Ratios
Your Fund Compared With Its Peer Group
Institutional | ETF | Peer Group | |
Shares | Shares | Average | |
Mega Cap 300 Index Fund | 0.10% | 0.12% | 1.19% |
Mega Cap 300 Growth Index Fund | 0.10 | 0.12 | 1.37 |
Mega Cap 300 Value Index Fund | 0.10 | 0.12 | 1.23 |
The fund expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were: for the Mega Cap 300 Index Fund, 0.10% for Institutional Shares and 0.12% for ETF Shares; for the Mega Cap 300 Growth Index Fund, 0.10% for Institutional Shares and 0.12% for ETF Shares; and for the Mega Cap 300 Value Index Fund, 0.10% for Institutional Shares and 0.12% for ETF Shares. Peer-group expense ratios are derived from data provided by Lipper Inc. and capture information through year-end 2011.
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
including manufacturers of farm and construction machinery, industrial con-glomerates, and aerospace and defense companies, posted impressive returns.
Results for the Mega Cap 300 Index, a blend of large-cap growth and value stocks, fell in between those of its two mega-cap index brethren. Similar to the Mega Cap 300 Growth Index Fund, it benefited most from strength in tech, consumer discretionary, and industrials. The fund also benefited from significant improvements in the financial sector, which rebounded nicely after taking a beating earlier in the period.
The Mega Cap 300 Value Index posted more modest results. As expected, this fund’s performance depends largely on sectors traditionally associated with value stocks, such as financials, energy, and health care. Energy contributed most to the fund’s return. Oil and gas integrators produced double-digit gains, helped by higher crude oil prices.
Financials, the largest sector-holding, representing about one-quarter of the fund’s assets on average during the period, was another strong performer. Commercial banks that weathered the recent financial crisis and subsequent regulatory challenges stood out. Insurance companies, asset managers, and custodial banks also did well. Health care was another source of positive returns but was overshadowed by industrials. That sector, as I mentioned earlier, has been doing even better, thanks to increased demand for heavy machinery and equipment.
Invest for the long term;
ignore the market’s hiccups
The stock market was in dramatically different shape at the beginning of the fiscal half-year than at the end. The contrast is perhaps a good reminder of how quickly conditions can change and how futile it is to try and predict short-term trends.
At Vanguard, we encourage you to always look beyond the market’s recent ups and downs. You are best served by creating a broadly diversified portfolio that includes a mix of stocks, bonds, and money market funds consistent with your long-term investment goals and risk tolerance.
It’s also important to diversify within an asset class; that way, you get some access to whichever sectors or investing styles are in favor along with some buffering when trends suddenly shift. The Vanguard Mega Cap 300 Index Funds, with their low-cost, tax-efficient exposure to the largest companies in the stock market, can be a valuable component of a balanced investment portfolio.
As always, thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/megacap300x7x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
March 13, 2012
5
Your Fund’s Performance at a Glance
August 31, 2011, Through February 29, 2012
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Mega Cap 300 Index Fund | ||||
Institutional Shares | $82.40 | $92.41 | $0.977 | $0.000 |
ETF Shares | 41.80 | 46.88 | 0.492 | 0.000 |
Vanguard Mega Cap 300 Growth Index Fund | ||||
Institutional Shares | $92.75 | $105.70 | $0.728 | $0.000 |
ETF Shares | 46.87 | 53.41 | 0.363 | 0.000 |
Vanguard Mega Cap 300 Value Index Fund | ||||
Institutional Shares | $73.55 | $81.10 | $1.196 | $0.000 |
ETF Shares | 37.09 | 40.90 | 0.599 | 0.000 |
6
Mega Cap 300 Index Fund
Fund Profile
As of February 29, 2012
Share-Class Characteristics | |||
Institutional | ETF | ||
Shares | Shares | ||
Ticker Symbol | VMCTX | MGC | |
Expense Ratio1 | 0.10% | 0.12% | |
30-Day SEC Yield | 2.08% | 2.06% | |
Portfolio Characteristics | |||
DJ | |||
MSCI US | U.S. Total | ||
Large Cap | Market | ||
Fund | 300 Index | Index | |
Number of Stocks | 303 | 303 | 3,733 |
Median Market Cap | $66.9B | $66.9B | $33.9B |
Price/Earnings Ratio | 15.1x | 15.2x | 16.5x |
Price/Book Ratio | 2.3x | 2.3x | 2.2x |
Return on Equity | 20.3% | 20.1% | 18.2% |
Earnings Growth Rate | 8.3% | 8.2% | 7.6% |
Dividend Yield | 2.2% | 2.2% | 1.9% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 4% | — | — |
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 | 10.3% | 10.4% | 11.9% |
Consumer Staples | 11.3 | 11.3 | 9.4 |
Energy | 12.6 | 12.7 | 11.2 |
Financials | 13.8 | 13.8 | 15.4 |
Health Care | 11.5 | 11.4 | 11.4 |
Industrials | 10.3 | 10.3 | 11.2 |
Information | |||
Technology | 21.0 | 21.0 | 19.4 |
Materials | 3.2 | 3.2 | 4.1 |
Telecommunication | |||
Services | 3.1 | 3.0 | 2.5 |
Utilities | 2.9 | 2.9 | 3.5 |
Volatility Measures | |||
DJ | |||
MSCI US | U.S. Total | ||
Large Cap | Market | ||
300 Index | Index | ||
R-Squared | 1.00 | 0.99 | |
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 | 4.6% | ||
Exxon Mobil Corp. | Integrated Oil & | ||
Gas | 3.8 | ||
Microsoft Corp. | Systems Software | 2.2 | |
International Business | IT Consulting & | ||
Machines Corp. | Other Services | 2.1 | |
Chevron Corp. | Integrated Oil & | ||
Gas | 2.0 | ||
General Electric Co. | Industrial | ||
Conglomerates | 1.8 | ||
Procter & Gamble Co. | Household | ||
Products | 1.7 | ||
AT&T Inc. | Integrated | ||
Telecommunication | |||
Services | 1.6 | ||
Johnson & Johnson | Pharmaceuticals | 1.6 | |
Pfizer Inc. | Pharmaceuticals | 1.5 | |
Top Ten | 22.9% | ||
The holdings listed exclude any temporary cash investments and equity index products. | |||
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/megacap300x9x1.jpg)
1 The expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.10% for Institutional Shares and 0.12% 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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/megacap300x10x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | One | Since | |
Date | Year | Inception | |
Institutional Shares | 2/22/2008 | 2.34% | 0.30% |
ETF Shares | 12/17/2007 | ||
Market Price | 2.33 | -1.30 | |
Net Asset Value | 2.32 | -1.31 |
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 29, 2012
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%) | |||
Consumer Discretionary (10.3%) | |||
McDonald’s Corp. | 52,624 | 5,224 | |
Home Depot Inc. | 79,178 | 3,766 | |
Walt Disney Co. | 87,646 | 3,680 | |
* | Amazon.com Inc. | 18,689 | 3,358 |
Comcast Corp. Class A | 106,920 | 3,141 | |
Ford Motor Co. | 182,107 | 2,254 | |
News Corp. Class A | 99,411 | 1,975 | |
NIKE Inc. Class B | 18,250 | 1,970 | |
Time Warner Inc. | 51,395 | 1,912 | |
Starbucks Corp. | 38,316 | 1,861 | |
Target Corp. | 32,687 | 1,853 | |
Lowe’s Cos. Inc. | 64,795 | 1,839 | |
* | DIRECTV Class A | 36,230 | 1,678 |
* | priceline.com Inc. | 2,559 | 1,605 |
Yum! Brands Inc. | 23,665 | 1,568 | |
TJX Cos. Inc. | 38,839 | 1,422 | |
Time Warner Cable Inc. | 16,584 | 1,316 | |
Viacom Inc. Class B | 25,716 | 1,225 | |
Johnson Controls Inc. | 34,686 | 1,132 | |
Coach Inc. | 15,001 | 1,123 | |
* | General Motors Co. | 39,897 | 1,038 |
* | Las Vegas Sands Corp. | 18,665 | 1,038 |
Comcast Corp. | 33,966 | 971 | |
CBSCorp. Class B | 32,030 | 958 | |
Macy’s Inc. | 21,733 | 825 | |
* | Bed Bath & Beyond Inc. | 12,696 | 758 |
McGraw-Hill Cos. Inc. | 15,355 | 715 | |
Omnicom Group Inc. | 14,246 | 704 | |
Carnival Corp. | 23,243 | 704 | |
VF Corp. | 4,476 | 654 | |
Kohl’s Corp. | 12,356 | 614 | |
Ralph Lauren Corp. Class A | 3,148 | 547 | |
Staples Inc. | 36,216 | 531 | |
Marriott International Inc. | |||
Class A | 14,427 | 509 | |
* | Liberty Media Corp.– | ||
Liberty Capital Class A | 5,557 | 499 |
Market | |||
Value | |||
Shares | ($000) | ||
Wynn Resorts Ltd. | 4,153 | 492 | |
* | AutoZone Inc. | 1,278 | 479 |
Best Buy Co. Inc. | 16,278 | 402 | |
Gap Inc. | 16,275 | 380 | |
* | Dollar General Corp. | 8,660 | 364 |
* | Discovery Communications | ||
Inc. Class A | 7,231 | 337 | |
DISH Network Corp. Class A | 10,680 | 312 | |
* | Discovery | ||
Communications Inc. | 6,398 | 278 | |
News Corp. Class B | 11,566 | 235 | |
58,246 | |||
Consumer Staples (11.3%) | |||
Procter & Gamble Co. | 141,333 | 9,543 | |
Philip Morris | |||
International Inc. | 89,218 | 7,451 | |
Coca-Cola Co. | 104,993 | 7,335 | |
Wal-Mart Stores Inc. | 97,377 | 5,753 | |
PepsiCo Inc. | 80,301 | 5,054 | |
Kraft Foods Inc. | 86,274 | 3,284 | |
Altria Group Inc. | 105,711 | 3,182 | |
CVS Caremark Corp. | 66,844 | 3,015 | |
Colgate-Palmolive Co. | 24,844 | 2,315 | |
Costco Wholesale Corp. | 22,310 | 1,920 | |
Walgreen Co. | 45,082 | 1,495 | |
Kimberly-Clark Corp. | 20,258 | 1,476 | |
General Mills Inc. | 32,963 | 1,263 | |
Archer-Daniels-Midland Co. | 34,518 | 1,077 | |
Lorillard Inc. | 7,083 | 928 | |
Sysco Corp. | 30,156 | 887 | |
HJ Heinz Co. | 16,337 | 861 | |
Mead Johnson Nutrition Co. | 10,386 | 808 | |
Reynolds American Inc. | 17,818 | 747 | |
Estee Lauder Cos. Inc. | |||
Class A | 12,125 | 710 | |
Kroger Co. | 29,294 | 697 | |
Kellogg Co. | 12,922 | 676 | |
Sara Lee Corp. | 28,548 | 578 | |
ConAgra Foods Inc. | 21,164 | 556 | |
Hershey Co. | 8,521 | 517 |
9
Mega Cap 300 Index Fund
Market | |||
Value | |||
Shares | ($000) | ||
Clorox Co. | 6,723 | 455 | |
Avon Products Inc. | 22,060 | 412 | |
Molson Coors Brewing Co. | |||
Class B | 8,391 | 369 | |
Brown-Forman Corp. Class B | 4,309 | 352 | |
Campbell Soup Co. | 9,902 | 330 | |
64,046 | |||
Energy (12.6%) | |||
Exxon Mobil Corp. | 246,376 | 21,311 | |
Chevron Corp. | 102,365 | 11,170 | |
Schlumberger Ltd. | 68,987 | 5,354 | |
ConocoPhillips | 64,775 | 4,959 | |
Occidental Petroleum Corp. | 41,728 | 4,355 | |
Anadarko Petroleum Corp. | 25,597 | 2,153 | |
Apache Corp. | 19,742 | 2,131 | |
National Oilwell Varco Inc. | 21,787 | 1,798 | |
Halliburton Co. | 47,299 | 1,731 | |
EOG Resources Inc. | 13,820 | 1,574 | |
Devon Energy Corp. | 19,705 | 1,445 | |
Marathon Oil Corp. | 36,426 | 1,234 | |
Baker Hughes Inc. | 22,272 | 1,120 | |
El Paso Corp. | 39,337 | 1,094 | |
Spectra Energy Corp. | 33,221 | 1,042 | |
Hess Corp. | 15,635 | 1,015 | |
Williams Cos. Inc. | 29,964 | 895 | |
Noble Energy Inc. | 9,026 | 881 | |
Chesapeake Energy Corp. | 33,658 | 841 | |
Marathon Petroleum Corp. | 18,148 | 754 | |
Valero Energy Corp. | 29,146 | 714 | |
* | Cameron International Corp. | 12,486 | 696 |
* | Weatherford | ||
International Ltd. | 38,658 | 618 | |
Murphy Oil Corp. | 9,379 | 600 | |
* | Southwestern Energy Co. | 17,755 | 587 |
Noble Corp. | 13,347 | 536 | |
Peabody Energy Corp. | 13,847 | 483 | |
Diamond Offshore | |||
Drilling Inc. | 3,525 | 241 | |
^ | Kinder Morgan Inc. | 5,662 | 200 |
71,532 | |||
Financials (13.8%) | |||
Wells Fargo & Co. | 257,347 | 8,052 | |
JPMorgan Chase & Co. | 195,146 | 7,658 | |
Citigroup Inc. | 150,190 | 5,004 | |
Bank of America Corp. | 520,667 | 4,150 | |
* | Berkshire Hathaway Inc. | ||
Class B | 46,599 | 3,656 | |
US Bancorp | 98,056 | 2,883 | |
American Express Co. | 53,685 | 2,839 | |
Goldman Sachs Group Inc. | 24,019 | 2,766 | |
MetLife Inc. | 54,365 | 2,096 | |
Simon Property Group Inc. | 15,102 | 2,046 | |
PNCFinancial Services | |||
Group Inc. | 27,044 | 1,610 |
Market | |||
Value | |||
Shares | ($000) | ||
Prudential Financial Inc. | 24,136 | 1,476 | |
Bank of New York | |||
Mellon Corp. | 62,826 | 1,389 | |
Morgan Stanley | 73,680 | 1,366 | |
Capital One Financial Corp. | 25,616 | 1,296 | |
American Tower Corporation | 20,181 | 1,263 | |
Travelers Cos. Inc. | 21,351 | 1,238 | |
ACE Ltd. | 17,232 | 1,236 | |
Aflac Inc. | 23,839 | 1,126 | |
State Street Corp. | 25,745 | 1,087 | |
BlackRock Inc. | 5,362 | 1,067 | |
BB&T Corp. | 35,604 | 1,041 | |
Public Storage | 7,412 | 994 | |
Chubb Corp. | 14,610 | 993 | |
CME Group Inc. | 3,233 | 936 | |
Franklin Resources Inc. | 7,897 | 931 | |
Marsh & | |||
McLennan Cos. Inc. | 27,558 | 860 | |
EquityResidential | 15,086 | 858 | |
Discover Financial Services | 28,254 | 848 | |
Allstate Corp. | 26,298 | 827 | |
Annaly Capital | |||
Management Inc. | 49,327 | 820 | |
Ventas Inc. | 14,650 | 819 | |
HCP Inc. | 20,720 | 818 | |
T. Rowe Price Group Inc. | 13,055 | 804 | |
ProLogis Inc. | 23,371 | 787 | |
Charles Schwab Corp. | 54,916 | 762 | |
Boston Properties Inc. | 7,482 | 760 | |
* | American International | ||
Group Inc. | 24,194 | 707 | |
Aon Corp. | 14,979 | 701 | |
Vornado Realty Trust | 8,459 | 691 | |
Ameriprise Financial Inc. | 12,034 | 671 | |
Progressive Corp. | 30,927 | 662 | |
Loews Corp. | 16,486 | 645 | |
Fifth Third Bancorp | 46,910 | 638 | |
SunTrust Banks Inc. | 27,392 | 629 | |
Weyerhaeuser Co. | 27,503 | 575 | |
Invesco Ltd. | 23,020 | 570 | |
Northern Trust Corp. | 11,087 | 492 | |
M&T Bank Corp. | 5,783 | 472 | |
Hartford Financial | |||
Services Group Inc. | 21,661 | 449 | |
Principal Financial | |||
Group Inc. | 16,050 | 444 | |
General Growth | |||
Properties Inc. | 22,307 | 363 | |
TD Ameritrade Holding Corp. | 11,452 | 214 | |
78,085 | |||
Health Care (11.5%) | |||
Johnson & Johnson | 140,276 | 9,129 | |
PfizerInc. | 394,819 | 8,331 | |
Merck & Co. Inc. | 157,121 | 5,997 | |
Abbott Laboratories | 80,023 | 4,530 |
10
Mega Cap 300 Index Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
UnitedHealth Group Inc. | 54,928 | 3,062 | |
Bristol-Myers Squibb Co. | 87,070 | 2,801 | |
Amgen Inc. | 40,788 | 2,772 | |
Eli Lilly & Co. | 53,561 | 2,102 | |
Medtronic Inc. | 54,189 | 2,066 | |
* | Gilead Sciences Inc. | 38,576 | 1,755 |
Baxter International Inc. | 28,957 | 1,683 | |
* | Celgene Corp. | 22,797 | 1,672 |
Allergan Inc. | 15,672 | 1,404 | |
* | Biogen Idec Inc. | 11,863 | 1,382 |
* | Medco Health Solutions Inc. | 19,901 | 1,345 |
Covidien plc | 25,156 | 1,314 | |
* | Express Scripts Inc. | 23,658 | 1,262 |
WellPoint Inc. | 17,864 | 1,172 | |
* | Thermo Fisher Scientific Inc. | 19,501 | 1,104 |
McKesson Corp. | 12,585 | 1,051 | |
* | Intuitive Surgical Inc. | 1,995 | 1,021 |
Aetna Inc. | 18,974 | 887 | |
Becton Dickinson and Co. | 11,069 | 844 | |
Stryker Corp. | 14,830 | 795 | |
* | Agilent Technologies Inc. | 17,722 | 773 |
Humana Inc. | 8,469 | 738 | |
Cardinal Health Inc. | 17,552 | 729 | |
St. Jude Medical Inc. | 16,792 | 707 | |
Cigna Corp. | 14,554 | 642 | |
* | Zimmer Holdings Inc. | 9,199 | 559 |
* | Boston Scientific Corp. | 78,284 | 487 |
Quest Diagnostics Inc. | 8,097 | 470 | |
* | Forest Laboratories Inc. | 14,052 | 457 |
HCA Holdings Inc. | 8,841 | 236 | |
65,279 | |||
Industrials (10.3%) | |||
General Electric Co. | 542,299 | 10,331 | |
Caterpillar Inc. | 33,217 | 3,794 | |
United Technologies Corp. | 44,246 | 3,711 | |
3M Co. | 34,405 | 3,014 | |
United Parcel Service Inc. | |||
Class B | 37,166 | 2,858 | |
Union Pacific Corp. | 24,917 | 2,747 | |
Boeing Co. | 36,294 | 2,720 | |
Honeywell International Inc. | 37,961 | 2,261 | |
Emerson Electric Co. | 37,947 | 1,909 | |
Deere & Co. | 21,277 | 1,764 | |
Danaher Corp. | 29,988 | 1,584 | |
FedEx Corp. | 15,491 | 1,394 | |
Norfolk Southern Corp. | 18,313 | 1,262 | |
Illinois Tool Works Inc. | 22,552 | 1,256 | |
Lockheed Martin Corp. | 14,123 | 1,249 | |
Precision Castparts Corp. | 7,348 | 1,230 | |
Tyco International Ltd. | 23,693 | 1,228 | |
General Dynamics Corp. | 15,699 | 1,150 | |
Cummins Inc. | 9,442 | 1,138 | |
CSX Corp. | 53,915 | 1,133 |
Market | |||
Value | |||
Shares | ($000) | ||
Raytheon Co. | 17,991 | 909 | |
Eaton Corp. | 16,492 | 861 | |
Goodrich Corp. | 6,366 | 802 | |
Waste Management Inc. | 22,831 | 799 | |
PACCARInc. | 16,759 | 771 | |
Northrop Grumman Corp. | 12,743 | 762 | |
Parker Hannifin Corp. | 7,901 | 709 | |
Ingersoll-Rand plc | 16,028 | 639 | |
Stanley Black & Decker Inc. | 8,156 | 626 | |
Dover Corp. | 9,485 | 607 | |
Rockwell Automation Inc. | 7,306 | 584 | |
CHRobinson Worldwide Inc. | 8,419 | 557 | |
Fluor Corp. | 8,876 | 537 | |
Expeditors International of | |||
Washington Inc. | 10,843 | 473 | |
Rockwell Collins Inc. | 7,860 | 466 | |
Republic Services Inc. | |||
Class A | 15,407 | 460 | |
58,295 | |||
Information Technology (21.0%) | |||
* | Apple Inc. | 47,773 | 25,914 |
Microsoft Corp. | 388,923 | 12,344 | |
International Business | |||
Machines Corp. | 60,536 | 11,909 | |
* | Google Inc. Class A | 13,152 | 8,131 |
Intel Corp. | 261,501 | 7,029 | |
Oracle Corp. | 207,303 | 6,068 | |
Cisco Systems Inc. | 276,098 | 5,489 | |
QUALCOMMInc. | 86,352 | 5,369 | |
Visa Inc. Class A | 26,808 | 3,120 | |
* | EMC Corp. | 105,408 | 2,919 |
Hewlett-Packard Co. | 102,031 | 2,582 | |
Mastercard Inc. Class A | 5,611 | 2,357 | |
* | eBayInc. | 59,722 | 2,134 |
Texas Instruments Inc. | 58,871 | 1,963 | |
Accenture plc Class A | 32,838 | 1,955 | |
* | Dell Inc. | 83,669 | 1,448 |
Automatic Data | |||
Processing Inc. | 24,953 | 1,355 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 15,504 | 1,100 | |
Corning Inc. | 80,215 | 1,046 | |
* | Salesforce.com Inc. | 6,642 | 951 |
Broadcom Corp. Class A | 24,983 | 928 | |
* | Yahoo! Inc. | 61,327 | 910 |
Intuit Inc. | 14,702 | 850 | |
* | Adobe Systems Inc. | 25,140 | 827 |
Applied Materials Inc. | 67,040 | 821 | |
* | NetApp Inc. | 18,763 | 807 |
TE Connectivity Ltd. | 22,068 | 807 | |
* | Citrix Systems Inc. | 9,594 | 717 |
Motorola Solutions Inc. | 14,200 | 707 | |
* | Symantec Corp. | 37,768 | 674 |
11
Mega Cap 300 Index Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Altera Corp. | 16,518 | 635 | |
* | Juniper Networks Inc. | 27,186 | 619 |
Analog Devices Inc. | 15,275 | 599 | |
Xerox Corp. | 71,601 | 589 | |
Western Union Co. | 32,040 | 560 | |
CAInc. | 20,611 | 557 | |
Paychex Inc. | 16,675 | 522 | |
* | VMware Inc. Class A | 4,383 | 433 |
* | Marvell Technology | ||
Group Ltd. | 26,606 | 399 | |
Fidelity National | |||
Information Services Inc. | 12,545 | 398 | |
Activision Blizzard Inc. | 26,424 | 316 | |
118,858 | |||
Materials (3.2%) | |||
EI du Pont | |||
de Nemours & Co. | 47,615 | 2,421 | |
Monsanto Co. | 27,522 | 2,130 | |
Freeport-McMoRan | |||
Copper & Gold Inc. | 48,725 | 2,074 | |
Dow Chemical Co. | 60,748 | 2,036 | |
Praxair Inc. | 15,397 | 1,678 | |
Newmont Mining Corp. | 25,435 | 1,511 | |
Air Products & | |||
Chemicals Inc. | 10,896 | 983 | |
Ecolab Inc. | 15,349 | 921 | |
Mosaic Co. | 15,569 | 899 | |
International Paper Co. | 21,161 | 744 | |
PPG Industries Inc. | 8,023 | 732 | |
Nucor Corp. | 16,123 | 702 | |
LyondellBasell Industries | |||
NV Class A | 14,842 | 641 | |
Alcoa Inc. | 54,329 | 552 | |
18,024 | |||
Telecommunication Services (3.0%) | |||
AT&T Inc. | 304,411 | 9,312 | |
Verizon | |||
Communications Inc. | 145,430 | 5,543 | |
CenturyLink Inc. | 31,672 | 1,275 | |
* | Crown Castle | ||
International Corp. | 14,594 | 756 | |
* | Sprint Nextel Corp. | 153,572 | 379 |
17,265 |
Market | ||
Value | ||
Shares | ($000) | |
Utilities (2.9%) | ||
Southern Co. | 44,279 | 1,957 |
Dominion Resources Inc. | 29,280 | 1,478 |
Duke Energy Corp. | 68,507 | 1,433 |
Exelon Corp. | 33,779 | 1,320 |
NextEra Energy Inc. | 20,464 | 1,218 |
FirstEnergy Corp. | 21,391 | 947 |
American Electric | ||
Power Co. Inc. | 24,650 | 927 |
Consolidated Edison Inc. | 14,986 | 871 |
PG&E Corp. | 20,865 | 870 |
PPL Corp. | 29,404 | 839 |
Progress Energy Inc. | 14,996 | 796 |
Public Service | ||
Enterprise Group Inc. | 25,757 | 793 |
Sempra Energy | 11,601 | 687 |
Edison International | 15,780 | 661 |
Xcel Energy Inc. | 24,703 | 654 |
Entergy Corp. | 9,017 | 601 |
* AES Corp. | 34,017 | 461 |
16,513 | ||
Total Common Stocks | ||
(Cost $495,438) | 566,143 | |
Temporary Cash Investment (0.1%) | ||
Money Market Fund (0.1%) | ||
1,2 Vanguard Market | ||
Liquidity Fund, 0.111% | ||
(Cost $304) | 304,102 | 304 |
Total Investments (100.0%) | ||
(Cost $495,742) | 566,447 | |
Other Assets and Liabilities (0.0%) | ||
Other Assets | 3,965 | |
Liabilities2 | (4,211) | |
(246) | ||
Net Assets (100%) | 566,201 |
12
Mega Cap 300 Index Fund
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 516,166 |
Undistributed Net Investment Income | 1,733 |
Accumulated Net Realized Losses | (22,403) |
Unrealized Appreciation (Depreciation) | 70,705 |
Net Assets | 566,201 |
Institutional Shares—Net Assets | |
Applicable to 2,068,354 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 191,147 |
Net Asset Value Per Share— | |
Institutional Shares | $92.41 |
ETF Shares—Net Assets | |
Applicable to 8,000,000 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 375,054 |
Net Asset Value Per Share— | |
ETF Shares | $46.88 |
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 $298,000.
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 $304,000 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 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 5,753 |
Security Lending | 15 |
Total Income | 5,768 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 35 |
Management and Administrative—Institutional Shares | 22 |
Management and Administrative—ETF Shares | 118 |
Marketing and Distribution—Institutional Shares | 18 |
Marketing and Distribution—ETF Shares | 44 |
Custodian Fees | 10 |
Shareholders’ Reports—Institutional Shares | 26 |
Shareholders’ Reports—ETF Shares | 4 |
Total Expenses | 277 |
Net Investment Income | 5,491 |
Realized Net Gain (Loss) on Investment Securities Sold | 730 |
Change in Unrealized Appreciation (Depreciation) of Investment Securities | 59,433 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 65,654 |
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 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 5,491 | 8,544 |
Realized Net Gain (Loss) | 730 | 3,860 |
Change in Unrealized Appreciation (Depreciation) | 59,433 | 41,037 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 65,654 | 53,441 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (1,805) | (2,557) |
ETFShares | (3,690) | (5,669) |
Realized Capital Gain | ||
Institutional Shares | — | — |
ETFShares | — | — |
Total Distributions | (5,495) | (8,226) |
Capital Share Transactions | ||
Institutional Shares | 19,231 | 47,374 |
ETFShares | 21,557 | 54,073 |
Net Increase (Decrease) from Capital Share Transactions | 40,788 | 101,447 |
Total Increase (Decrease) | 100,947 | 146,662 |
Net Assets | ||
Beginning of Period | 465,254 | 318,592 |
End of Period1 | 566,201 | 465,254 |
1 Net Assets—End of Period includes undistributed net investment income of $1,733,000 and $1,737,000. |
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 | 20081 to | ||||
February 29, | Year Ended August 31, | Aug. 31, | |||
For a Share Outstanding Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $82.40 | $71.03 | $69.95 | $87.14 | $91.07 |
Investment Operations | |||||
Net Investment Income | .952 | 1.676 | 1.657 | 1.6812 | .685 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 10.035 | 11.379 | 1.033 | (17.409) | (4.028) |
Total from Investment Operations | 10.987 | 13.055 | 2.690 | (15.728) | (3.343) |
Distributions | |||||
Dividends from Net Investment Income | (.977) | (1.685) | (1.610) | (1.462) | (.587) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (.977) | (1.685) | (1.610) | (1.462) | (.587) |
Net Asset Value, End of Period | $92.41 | $82.40 | $71.03 | $69.95 | $87.14 |
Total Return | 13.52% | 18.38% | 3.74% | -17.84% | -3.69% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $191 | $152 | $92 | $102 | $53 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.10% | 0.10% | 0.11% | 0.11% | 0.08%3 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 2.26% | 2.01% | 2.24% | 2.59% | 2.14%3 |
Portfolio Turnover Rate4 | 4% | 8% | 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
ETF Shares | |||||
Six Months | Dec. 17, | ||||
Ended | 20071 to | ||||
February 29, | Year Ended August 31, | Aug. 31, | |||
For a Share Outstanding Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $41.80 | $36.03 | $35.49 | $44.21 | $49.24 |
Investment Operations | |||||
Net Investment Income | .479 | .842 | .834 | .8222 | .441 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 5.093 | 5.774 | .517 | (8.808) | (5.179) |
Total from Investment Operations | 5.572 | 6.616 | 1.351 | (7.986) | (4.738) |
Distributions | |||||
Dividends from Net Investment Income | (.492) | (.846) | (.811) | (.734) | (.292) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (.492) | (.846) | (.811) | (.734) | (.292) |
Net Asset Value, End of Period | $46.88 | $41.80 | $36.03 | $35.49 | $44.21 |
Total Return | 13.51% | 18.35% | 3.71% | -17.85% | -9.64% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $375 | $313 | $227 | $199 | $88 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.12% | 0.12% | 0.13% | 0.13% | 0.13%3 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 2.24% | 1.99% | 2.22% | 2.57% | 2.09%3 |
Portfolio Turnover Rate4 | 4% | 8% | 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, 2008–2011), and for the period ended February 29, 2012, 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.
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 29, 2012, 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.
18
Mega Cap 300 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).
At February 29, 2012, 100% of the market value of the fund’s investments was 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 29, 2012, the fund realized $1,687,000 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, 2011, the fund had available capital loss carryforwards totaling $20,709,000 to offset future net capital gains of $948,000 through August 31, 2017, $13,557,000 through August 31, 2018, and $6,204,000 through August 31, 2019. In addition, the fund realized losses of $733,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $495,742,000. Net unrealized appreciation of investment securities for tax purposes was $70,705,000, consisting of unrealized gains of $93,520,000 on securities that had risen in value since their purchase and $22,815,000 in unrealized losses on securities that had fallen in value since their purchase.
E. During the six months ended February 29, 2012, the fund purchased $56,619,000 of investment securities and sold $15,581,000 of investment securities, other than temporary cash investments.
19
Mega Cap 300 Index Fund
F. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
February 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 17,554 | 205 | 51,121 | 593 |
Issued in Lieu of Cash Distributions | 1,677 | 21 | 2,453 | 29 |
Redeemed | — | — | (6,200) | (70) |
Net Increase (Decrease)—Institutional Shares | 19,231 | 226 | 47,374 | 552 |
ETF Shares | ||||
Issued | 26,265 | 600 | 74,109 | 1,700 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (4,708) | (100) | (20,036) | (500) |
Net Increase (Decrease)—ETF Shares | 21,557 | 500 | 54,073 | 1,200 |
G. In preparing the financial statements as of February 29, 2012, 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 29, 2012
Share-Class Characteristics | |||
Institutional | ETF | ||
Shares | Shares | ||
Ticker Symbol | VMGAX | MGK | |
Expense Ratio1 | 0.10% | 0.12% | |
30-Day SEC Yield | 1.37% | 1.35% | |
Portfolio Characteristics | |||
MSCI US | DJ | ||
Large Cap | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Number of Stocks | 176 | 176 | 3,733 |
Median Market Cap | $57.0B | $57.0B | $33.9B |
Price/Earnings Ratio | 17.4x | 17.4x | 16.5x |
Price/Book Ratio | 3.8x | 3.8x | 2.2x |
Return on Equity | 24.6% | 24.2% | 18.2% |
Earnings Growth Rate | 16.2% | 16.1% | 7.6% |
Dividend Yield | 1.5% | 1.5% | 1.9% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 15% | — | — |
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 | 16.8% | 16.9% | 11.9% |
Consumer Staples | 13.0 | 13.0 | 9.4 |
Energy | 8.0 | 8.0 | 11.2 |
Financials | 4.9 | 4.9 | 15.4 |
Health Care | 8.2 | 8.1 | 11.4 |
Industrials | 11.9 | 11.9 | 11.2 |
Information | |||
Technology | 33.9 | 34.0 | 19.4 |
Materials | 2.8 | 2.8 | 4.1 |
Telecommunication | |||
Services | 0.3 | 0.3 | 2.5 |
Utilities | 0.2 | 0.1 | 3.5 |
Volatility Measures | |||
MSCI US | DJ | ||
Large Cap | U.S. Total | ||
Growth | Market | ||
Index | Index | ||
R-Squared | 1.00 | 0.96 | |
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) | |||
Apple Inc. | Computer | ||
Hardware | 9.0% | ||
International Business | IT Consulting & | ||
Machines Corp. | Other Services | 4.1 | |
Google Inc. Class A | Internet Software & | ||
Services | 2.8 | ||
Microsoft Corp. | Systems Software | 2.8 | |
Philip Morris | |||
International Inc. | Tobacco | 2.6 | |
Coca-Cola Co. | Soft Drinks | 2.6 | |
Oracle Corp. | Systems Software | 2.1 | |
Wal-Mart Stores Inc. | Hypermarkets & | ||
Super Centers | 2.0 | ||
Cisco Systems Inc. | Communications | ||
Equipment | 1.9 | ||
QUALCOMM Inc. | Communications | ||
Equipment | 1.9 | ||
Top Ten | 31.8% | ||
The holdings listed exclude any temporary cash investments and equity index products. | |||
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/megacap300x23x1.jpg)
1 The expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.10% for Institutional Shares and 0.12% 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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/megacap300x24x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | One | Since | |
Date | Year | Inception | |
Institutional Shares | 4/3/2008 | 3.07% | 2.31% |
ETF Shares | 12/17/2007 | ||
Market Price | 3.04 | 0.84 | |
Net Asset Value | 3.05 | 0.83 |
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 29, 2012
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%)1 | |||
Consumer Discretionary (16.7%) | |||
McDonald’s Corp. | 133,701 | 13,274 | |
Comcast Corp. Class A | 352,697 | 10,362 | |
* | Amazon.com Inc. | 47,587 | 8,551 |
Ford Motor Co. | 462,461 | 5,725 | |
NIKE Inc. Class B | 46,373 | 5,005 | |
Home Depot Inc. | 100,601 | 4,786 | |
Starbucks Corp. | 97,377 | 4,729 | |
Target Corp. | 83,181 | 4,716 | |
Lowe’s Cos. Inc. | 164,572 | 4,671 | |
News Corp. Class A | 221,703 | 4,405 | |
* | DIRECTV Class A | 92,050 | 4,264 |
* | priceline.com Inc. | 6,508 | 4,081 |
Yum! Brands Inc. | 60,158 | 3,985 | |
TJX Cos. Inc. | 98,418 | 3,603 | |
Time Warner Cable Inc. | 41,633 | 3,303 | |
Walt Disney Co. | 77,914 | 3,272 | |
Viacom Inc. Class B | 65,312 | 3,110 | |
Johnson Controls Inc. | 88,898 | 2,901 | |
Coach Inc. | 38,123 | 2,853 | |
* | Las Vegas Sands Corp. | 47,895 | 2,663 |
CBSCorp. Class B | 79,711 | 2,383 | |
* | Bed Bath & Beyond Inc. | 31,933 | 1,908 |
McGraw-Hill Cos. Inc. | 38,214 | 1,778 | |
VF Corp. | 11,540 | 1,685 | |
Kohl’s Corp. | 31,341 | 1,557 | |
Ralph Lauren Corp. Class A | 8,048 | 1,398 | |
* | Liberty Media Corp.– | ||
Liberty Capital Class A | 14,132 | 1,270 | |
Wynn Resorts Ltd. | 10,634 | 1,261 | |
Marriott International Inc. | |||
Class A | 34,992 | 1,234 | |
News Corp. Class B | 60,372 | 1,225 | |
Omnicom Group Inc. | 23,686 | 1,171 | |
* | AutoZone Inc. | 3,122 | 1,169 |
Gap Inc. | 41,360 | 966 | |
* | Dollar General Corp. | 21,976 | 924 |
* | Discovery Communications | ||
Inc. Class A | 18,394 | 858 |
Market | ||
Value | ||
Shares | ($000) | |
* Discovery | ||
Communications Inc. | 15,192 | 660 |
DISH Network Corp. Class A | 13,605 | 397 |
Comcast Corp. | 5,359 | 153 |
122,256 | ||
Consumer Staples (12.9%) | ||
Philip Morris | ||
International Inc. | 226,834 | 18,945 |
Coca-Cola Co. | 266,942 | 18,649 |
Wal-Mart Stores Inc. | 247,491 | 14,622 |
PepsiCo Inc. | 204,178 | 12,851 |
Colgate-Palmolive Co. | 63,235 | 5,892 |
Costco Wholesale Corp. | 56,524 | 4,864 |
Walgreen Co. | 114,496 | 3,797 |
Mead Johnson Nutrition Co. | 26,549 | 2,064 |
Estee Lauder Cos. Inc. | ||
Class A | 30,434 | 1,782 |
Kroger Co. | 74,500 | 1,772 |
Kellogg Co. | 32,860 | 1,720 |
General Mills Inc. | 41,943 | 1,607 |
Hershey Co. | 21,572 | 1,309 |
Avon Products Inc. | 56,111 | 1,049 |
Sara Lee Corp. | 47,401 | 960 |
Brown-Forman Corp. | ||
Class B | 10,947 | 894 |
HJ Heinz Co. | 14,542 | 767 |
Clorox Co. | 11,126 | 752 |
Campbell Soup Co. | 8,771 | 292 |
94,588 | ||
Energy (8.0%) | ||
Schlumberger Ltd. | 175,213 | 13,598 |
Occidental Petroleum Corp. | 105,974 | 11,061 |
National Oilwell Varco Inc. | 55,336 | 4,567 |
Halliburton Co. | 120,117 | 4,395 |
EOG Resources Inc. | 35,094 | 3,996 |
Baker Hughes Inc. | 57,067 | 2,869 |
El Paso Corp. | 100,728 | 2,801 |
Anadarko Petroleum Corp. | 32,536 | 2,737 |
Williams Cos. Inc. | 77,019 | 2,301 |
* Cameron International Corp. | 32,080 | 1,787 |
23
Mega Cap 300 Growth Index Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
* | Weatherford | ||
International Ltd. | 99,120 | 1,584 | |
* | Southwestern Energy Co. | 45,329 | 1,499 |
Noble Energy Inc. | 15,080 | 1,473 | |
Peabody Energy Corp. | 35,311 | 1,232 | |
Noble Corp. | 17,092 | 687 | |
Marathon Petroleum Corp. | 16,253 | 675 | |
Diamond Offshore | |||
Drilling Inc. | 9,145 | 626 | |
^ | Kinder Morgan Inc. | 14,508 | 511 |
58,399 | |||
Financials (4.9%) | |||
American Express Co. | 136,368 | 7,213 | |
Simon Property Group Inc. | 38,357 | 5,197 | |
* | Berkshire Hathaway Inc. | ||
Class B | 41,536 | 3,259 | |
American Tower | |||
Corporation | 51,251 | 3,207 | |
Public Storage | 19,038 | 2,552 | |
Franklin Resources Inc. | 20,167 | 2,377 | |
Ventas Inc. | 37,641 | 2,105 | |
T. Rowe Price Group Inc. | 32,963 | 2,030 | |
Boston Properties Inc. | 19,364 | 1,966 | |
Charles Schwab Corp. | 140,971 | 1,957 | |
Weyerhaeuser Co. | 69,835 | 1,459 | |
Northern Trust Corp. | 28,259 | 1,255 | |
Aon Corp. | 13,492 | 632 | |
TD Ameritrade | |||
Holding Corp. | 28,628 | 534 | |
35,743 | |||
Health Care (8.2%) | |||
UnitedHealth Group Inc. | 139,069 | 7,753 | |
Amgen Inc. | 67,336 | 4,575 | |
* | Gilead Sciences Inc. | 98,028 | 4,460 |
Baxter International Inc. | 73,506 | 4,273 | |
* | Celgene Corp. | 57,874 | 4,244 |
Allergan Inc. | 39,917 | 3,576 | |
* | Biogen Idec Inc. | 30,187 | 3,516 |
* | Medco Health Solutions Inc. | 50,586 | 3,419 |
* | Express Scripts Inc. | 60,211 | 3,211 |
* | Thermo Fisher Scientific Inc. | 49,451 | 2,800 |
McKesson Corp. | 31,976 | 2,670 | |
* | Intuitive Surgical Inc. | 5,095 | 2,607 |
Becton Dickinson and Co. | 28,137 | 2,145 | |
Stryker Corp. | 37,385 | 2,005 | |
* | Agilent Technologies Inc. | 45,384 | 1,980 |
St. Jude Medical Inc. | 41,594 | 1,752 | |
* | Zimmer Holdings Inc. | 23,349 | 1,418 |
Quest Diagnostics Inc. | 20,621 | 1,197 | |
Humana Inc. | 10,672 | 930 | |
HCA Holdings Inc. | 22,724 | 606 | |
* | Forest Laboratories Inc. | 17,381 | 565 |
59,702 |
Market | |||
Value | |||
Shares | ($000) | ||
Industrials (11.9%) | |||
Caterpillar Inc. | 84,502 | 9,651 | |
3M Co. | 86,899 | 7,612 | |
United Parcel Service Inc. | |||
Class B | 94,590 | 7,273 | |
Union Pacific Corp. | 63,183 | 6,966 | |
Boeing Co. | 92,247 | 6,914 | |
Emerson Electric Co. | 95,995 | 4,830 | |
Deere & Co. | 54,093 | 4,486 | |
Danaher Corp. | 76,155 | 4,023 | |
FedEx Corp. | 39,404 | 3,546 | |
Norfolk Southern Corp. | 46,604 | 3,211 | |
Precision Castparts Corp. | 18,900 | 3,164 | |
Tyco International Ltd. | 60,365 | 3,128 | |
Cummins Inc. | 24,018 | 2,896 | |
CSX Corp. | 136,994 | 2,878 | |
Goodrich Corp. | 16,384 | 2,064 | |
Honeywell International Inc. | 33,697 | 2,007 | |
PACCARInc. | 42,079 | 1,936 | |
Lockheed Martin Corp. | 17,880 | 1,581 | |
Rockwell Automation Inc. | 18,533 | 1,482 | |
CHRobinson Worldwide Inc. | 21,354 | 1,413 | |
Fluor Corp. | 22,133 | 1,339 | |
Expeditors International of | |||
Washington Inc. | 27,506 | 1,200 | |
Rockwell Collins Inc. | 19,721 | 1,169 | |
Republic Services Inc. | |||
Class A | 38,601 | 1,152 | |
Dover Corp. | 12,115 | 776 | |
86,697 | |||
Information Technology (34.1%) | |||
* | Apple Inc. | 121,378 | 65,840 |
International Business | |||
Machines Corp. | 153,969 | 30,290 | |
* | Google Inc. Class A | 33,419 | 20,661 |
Microsoft Corp. | 642,674 | 20,399 | |
Oracle Corp. | 526,869 | 15,422 | |
Cisco Systems Inc. | 702,030 | 13,956 | |
QUALCOMMInc. | 219,426 | 13,644 | |
Visa Inc. Class A | 68,108 | 7,926 | |
* | EMC Corp. | 266,266 | 7,373 |
Mastercard Inc. Class A | 14,264 | 5,991 | |
* | eBayInc. | 151,686 | 5,421 |
Accenture plc Class A | 83,719 | 4,985 | |
Automatic Data | |||
Processing Inc. | 63,870 | 3,469 | |
Texas Instruments Inc. | 96,894 | 3,231 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 39,413 | 2,796 | |
* | Salesforce.com Inc. | 16,873 | 2,416 |
Broadcom Corp. Class A | 63,460 | 2,358 | |
Intuit Inc. | 36,826 | 2,130 | |
* | Adobe Systems Inc. | 64,010 | 2,105 |
24
Mega Cap 300 Growth Index Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
* | NetApp Inc. | 48,124 | 2,069 |
* | Dell Inc. | 105,449 | 1,824 |
* | Citrix Systems Inc. | 24,363 | 1,821 |
* | Symantec Corp. | 96,107 | 1,715 |
Altera Corp. | 41,938 | 1,613 | |
* | Juniper Networks Inc. | 68,651 | 1,563 |
Analog Devices Inc. | 38,741 | 1,519 | |
* | Yahoo! Inc. | 99,892 | 1,481 |
Western Union Co. | 81,352 | 1,421 | |
* | VMware Inc. Class A | 11,103 | 1,098 |
* | Marvell Technology | ||
Group Ltd. | 67,752 | 1,016 | |
Activision Blizzard Inc. | 67,084 | 802 | |
Paychex Inc. | 14,862 | 465 | |
248,820 | |||
Materials (2.8%) | |||
Monsanto Co. | 69,911 | 5,410 | |
Praxair Inc. | 39,104 | 4,262 | |
Newmont Mining Corp. | 64,674 | 3,841 | |
Ecolab Inc. | 39,245 | 2,355 | |
Mosaic Co. | 39,962 | 2,308 | |
Air Products & | |||
Chemicals Inc. | 13,683 | 1,235 | |
PPG Industries Inc. | 10,097 | 921 | |
20,332 | |||
Telecommunication Services (0.3%) | |||
* | Crown Castle | ||
International Corp. | 37,188 | 1,927 | |
Utilities (0.1%) | |||
* | AES Corp. | 85,101 | 1,154 |
Total Common Stocks | |||
(Cost $581,054) | 729,618 | ||
Temporary Cash Investments (0.1%)1 | |||
Money Market Fund (0.1%) | |||
2,3 | Vanguard Market Liquidity | ||
Fund, 0.111% | 619,462 | 619 |
Face | Market | |
Amount | Value | |
($000) | ($000) | |
U.S. Government and Agency Obligations (0.0%) | ||
4,5 Freddie Mac Discount | ||
Notes, 0.050%, 4/24/12 | 100 | 100 |
Total Temporary Cash Investments | ||
(Cost $719) | 719 | |
Total Investments (100.0%) | ||
(Cost $581,773) | 730,337 | |
Other Assets and Liabilities (0.0%) | ||
Other Assets | 5,160 | |
Liabilities3 | (5,459) | |
(299) | ||
Net Assets (100%) | 730,038 |
25
Mega Cap 300 Growth Index Fund
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 623,944 |
Undistributed Net Investment Income | 968 |
Accumulated Net Realized Losses | (43,453) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 148,564 |
Futures Contracts | 15 |
Net Assets | 730,038 |
Institutional Shares—Net Assets | |
Applicable to 1,247,219 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 131,831 |
Net Asset Value Per Share— | |
Institutional Shares | $105.70 |
ETF Shares—Net Assets | |
Applicable to 11,200,000 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 598,207 |
Net Asset Value Per Share— | |
ETF Shares | $53.41 |
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 $577,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 Includes $589,000 of collateral received for securities on loan.
4 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury in exchange for senior preferred stock.
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 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 5,136 |
Security Lending | 14 |
Total Income | 5,150 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 46 |
Management and Administrative—Institutional Shares | 38 |
Management and Administrative—ETF Shares | 198 |
Marketing and Distribution—Institutional Shares | 12 |
Marketing and Distribution—ETF Shares | 73 |
Custodian Fees | 10 |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—ETF Shares | 7 |
Total Expenses | 384 |
Net Investment Income | 4,766 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 4,765 |
Futures Contracts | 37 |
Realized Net Gain (Loss) | 4,802 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 84,772 |
Futures Contracts | 15 |
Change in Unrealized Appreciation (Depreciation) | 84,787 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 94,355 |
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 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 4,766 | 7,212 |
Realized Net Gain (Loss) | 4,802 | 4,484 |
Change in Unrealized Appreciation (Depreciation) | 84,787 | 71,074 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 94,355 | 82,770 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (942) | (1,559) |
ETFShares | (4,080) | (5,586) |
Realized Capital Gain | ||
Institutional Shares | — | — |
ETFShares | — | — |
Total Distributions | (5,022) | (7,145) |
Capital Share Transactions | ||
Institutional Shares | (8,263) | 15,479 |
ETFShares | 9,684 | 171,720 |
Net Increase (Decrease) from Capital Share Transactions | 1,421 | 187,199 |
Total Increase (Decrease) | 90,754 | 262,824 |
Net Assets | ||
Beginning of Period | 639,284 | 376,460 |
End of Period1 | 730,038 | 639,284 |
1 Net Assets—End of Period includes undistributed net investment income of $968,000 and $1,224,000. |
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 | April 3, | ||||
Ended | 20081 to | ||||
February 29, | Year Ended August 31, | Aug. 31, | |||
For a Share Outstanding Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $92.75 | $76.74 | $74.21 | $91.10 | $92.21 |
Investment Operations | |||||
Net Investment Income | .691 | 1.227 | 1.180 | 1.053 | .343 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 12.987 | 16.067 | 2.465 | (16.900) | (1.250) |
Total from Investment Operations | 13.678 | 17.294 | 3.645 | (15.847) | (.907) |
Distributions | |||||
Dividends from Net Investment Income | (.728) | (1.284) | (1.115) | (1.043) | (.203) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (.728) | (1.284) | (1.115) | (1.043) | (.203) |
Net Asset Value, End of Period | $105.70 | $92.75 | $76.74 | $74.21 | $91.10 |
Total Return | 14.87% | 22.57% | 4.84% | -17.25% | -0.99% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $132 | $124 | $90 | $62 | $97 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.10% | 0.10% | 0.11% | 0.11% | 0.08%2 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 1.46% | 1.35% | 1.39% | 1.59% | 1.16%2 |
Portfolio Turnover Rate3 | 15% | 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 | 20071 to | ||||
February 29, | Year Ended August 31, | Aug. 31, | |||
For a Share Outstanding Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $46.87 | $38.78 | $37.50 | $46.04 | $49.10 |
Investment Operations | |||||
Net Investment Income | .344 | .611 | .586 | .528 | .237 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 6.559 | 8.120 | 1.248 | (8.548) | (3.139) |
Total from Investment Operations | 6.903 | 8.731 | 1.834 | (8.020) | (2.902) |
Distributions | |||||
Dividends from Net Investment Income | (.363) | (.641) | (.554) | (.520) | (.158) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (.363) | (.641) | (.554) | (.520) | (.158) |
Net Asset Value, End of Period | $53.41 | $46.87 | $38.78 | $37.50 | $46.04 |
Total Return | 14.85% | 22.54% | 4.82% | -17.28% | -5.91% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $598 | $516 | $287 | $536 | $161 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.12% | 0.12% | 0.13% | 0.13% | 0.13%2 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 1.44% | 1.33% | 1.37% | 1.57% | 1.11%2 |
Portfolio Turnover Rate3 | 15% | 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, 2008–2011), and for the period ended February 29, 2012, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. 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.
31
Mega Cap 300 Growth Index Fund
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 29, 2012, the fund had contributed capital of $107,000 to Vanguard (included in Other Assets), representing 0.01% 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).
The following table summarizes the market value of the fund’s investments as of February 29, 2012, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 729,618 | — | — |
Temporary Cash Investments | 619 | 100 | — |
Futures Contracts—Liabilities1 | (1) | — | — |
Total | 730,236 | 100 | — |
1 Represents variation margin on the last day of the reporting period. |
32
Mega Cap 300 Growth Index Fund
D. At February 29, 2012, 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 2012 | 3 | 205 | 15 |
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 29, 2012, the fund realized $3,903,000 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, 2011, the fund had available capital loss carryforwards totaling $38,182,000 to offset future net capital gains of $7,258,000 through August 31, 2017, $25,747,000 through August 31, 2018, and $5,177,000 through August 31, 2019. In addition, the fund realized losses of $6,166,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $581,773,000. Net unrealized appreciation of investment securities for tax purposes was $148,564,000, consisting of unrealized gains of $156,361,000 on securities that had risen in value since their purchase and $7,797,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended February 29, 2012, the fund purchased $74,499,000 of investment securities and sold $73,276,000 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 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 36 | — | 14,556 | 157 |
Issued in Lieu of Cash Distributions | 942 | 10 | 1,559 | 17 |
Redeemed | (9,241) | (97) | (636) | (7) |
Net Increase (Decrease)—Institutional Shares | (8,263) | (87) | 15,479 | 167 |
ETF Shares | ||||
Issued | 23,622 | 500 | 237,976 | 5,000 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (13,938) | (300) | (66,256) | (1,400) |
Net Increase (Decrease)—ETF Shares | 9,684 | 200 | 171,720 | 3,600 |
H. In preparing the financial statements as of February 29, 2012, 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 29, 2012
Share-Class Characteristics | |||
Institutional | ETF | ||
Shares | Shares | ||
Ticker Symbol | VMVLX | MGV | |
Expense Ratio1 | 0.10% | 0.12% | |
30-Day SEC Yield | 2.82% | 2.80% | |
Portfolio Characteristics | MSCI US | DJ | |
Large Cap | U.S. Total | ||
Value | Market | ||
Fund | Index | Index | |
Number of Stocks | 155 | 155 | 3,733 |
Median Market Cap | $76.8B | $76.8B | $33.9B |
Price/Earnings Ratio | 13.4x | 13.4x | 16.5x |
Price/Book Ratio | 1.7x | 1.7x | 2.2x |
Return on Equity | 16.4% | 16.4% | 18.2% |
Earnings Growth Rate | 0.0% | 0.0% | 7.6% |
Dividend Yield | 2.9% | 2.9% | 1.9% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 17% | — | — |
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 | 3.6% | 3.7% | 11.9% |
Consumer Staples | 9.6 | 9.6 | 9.4 |
Energy | 17.4 | 17.5 | 11.2 |
Financials | 23.0 | 22.9 | 15.4 |
Health Care | 15.0 | 14.8 | 11.4 |
Industrials | 8.6 | 8.7 | 11.2 |
Information | |||
Technology | 7.5 | 7.6 | 19.4 |
Materials | 3.6 | 3.6 | 4.1 |
Telecommunication | |||
Services | 5.9 | 5.9 | 2.5 |
Utilities | 5.8 | 5.7 | 3.5 |
Volatility Measures | ||
MSCI US | DJ | |
Large Cap | U.S. Total | |
Value | Market | |
Index | Index | |
R-Squared | 1.00 | 0.95 |
Beta | 1.00 | 0.92 |
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 | 7.6% | |
Chevron Corp. | Integrated Oil & | |
Gas | 4.0 | |
General Electric Co. | Industrial | |
Conglomerates | 3.7 | |
Procter & Gamble Co. | Household | |
Products | 3.4 | |
AT&T Inc. | Integrated | |
Telecommunication | ||
Services | 3.3 | |
Johnson & Johnson | Pharmaceuticals | 3.3 |
Pfizer Inc. | Pharmaceuticals | 3.0 |
Wells Fargo & Co. | Diversified Banks | 2.9 |
JPMorgan Chase & Co. | Diversified Financial | |
Services | 2.7 | |
Intel Corp. | Semiconductors | 2.5 |
Top Ten | 36.4% | |
The holdings listed exclude any temporary cash investments and equity index products. | ||
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/megacap300x37x1.jpg)
1 The expense ratios shown are from the prospectus dated December 20, 2011, and represent estimated costs for the current fiscal year. For the six months ended February 29, 2012, the annualized expense ratios were 0.10% for Institutional Shares and 0.12% 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 29, 2012
![](https://capedge.com/proxy/N-CSRS/0000932471-12-004446/megacap300x38x1.jpg)
Average Annual Total Returns: Periods Ended December 31, 2011
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.
Inception | One | Since | |
Date | Year | Inception | |
Institutional Shares | 3/5/2008 | 1.49% | -1.49% |
ETF Shares | 12/17/2007 | ||
Market Price | 1.45 | -3.46 | |
Net Asset Value | 1.47 | -3.46 |
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 29, 2012
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%)1 | ||
Consumer Discretionary (3.6%) | ||
Walt Disney Co. | 101,499 | 4,262 |
Time Warner Inc. | 91,575 | 3,408 |
Home Depot Inc. | 70,537 | 3,355 |
* General Motors Co. | 71,660 | 1,865 |
Macy’s Inc. | 38,780 | 1,472 |
Carnival Corp. | 40,781 | 1,235 |
Staples Inc. | 64,532 | 946 |
Best Buy Co. Inc. | 28,108 | 694 |
Omnicom Group Inc. | 8,910 | 441 |
DISH Network Corp. Class A | 9,426 | 275 |
17,953 | ||
Consumer Staples (9.6%) | ||
Procter & Gamble Co. | 251,902 | 17,008 |
Kraft Foods Inc. | 153,709 | 5,852 |
Altria Group Inc. | 188,027 | 5,660 |
CVS Caremark Corp. | 119,043 | 5,369 |
Kimberly-Clark Corp. | 36,091 | 2,630 |
Archer-Daniels-Midland Co. | 61,252 | 1,911 |
Lorillard Inc. | 12,324 | 1,615 |
Sysco Corp. | 53,755 | 1,581 |
Reynolds American Inc. | 32,032 | 1,343 |
General Mills Inc. | 29,293 | 1,122 |
HJ Heinz Co. | 18,891 | 996 |
ConAgra Foods Inc. | 37,680 | 989 |
Molson Coors Brewing Co. | ||
Class B | 14,446 | 635 |
Campbell Soup Co. | 11,392 | 380 |
Sara Lee Corp. | 17,792 | 360 |
Clorox Co. | 4,197 | 284 |
47,735 | ||
Energy (17.4%) | ||
Exxon Mobil Corp. | 438,683 | 37,946 |
Chevron Corp. | 182,365 | 19,900 |
ConocoPhillips | 115,380 | 8,832 |
Apache Corp. | 35,199 | 3,799 |
Devon Energy Corp. | 35,084 | 2,572 |
Marathon Oil Corp. | 64,394 | 2,182 |
Market | |||
Value | |||
Shares | ($000) | ||
Anadarko Petroleum Corp. | 22,846 | 1,922 | |
Spectra Energy Corp. | 59,614 | 1,871 | |
Hess Corp. | 28,070 | 1,822 | |
Chesapeake Energy Corp. | 60,361 | 1,509 | |
Valero Energy Corp. | 51,226 | 1,255 | |
Murphy Oil Corp. | 16,870 | 1,079 | |
Marathon Petroleum Corp. | 21,119 | 877 | |
Noble Energy Inc. | 5,593 | 546 | |
Noble Corp. | 11,881 | 477 | |
86,589 | |||
Financials (22.9%) | |||
Wells Fargo & Co. | 458,591 | 14,349 | |
JPMorgan Chase & Co. | 347,758 | 13,646 | |
Citigroup Inc. | 267,611 | 8,917 | |
Bank of America Corp. | 927,794 | 7,395 | |
US Bancorp | 174,496 | 5,130 | |
Goldman Sachs Group Inc. | 42,730 | 4,920 | |
* | Berkshire Hathaway Inc. | ||
Class B | 54,048 | 4,240 | |
MetLife Inc. | 96,886 | 3,735 | |
PNCFinancial Services | |||
Group Inc. | 48,252 | 2,872 | |
Prudential Financial Inc. | 42,975 | 2,628 | |
Morgan Stanley | 132,386 | 2,454 | |
Bank of New York | |||
Mellon Corp. | 110,918 | 2,452 | |
Capital One Financial Corp. | 45,645 | 2,310 | |
ACE Ltd. | 30,878 | 2,214 | |
Travelers Cos. Inc. | 37,742 | 2,188 | |
Aflac Inc. | 42,528 | 2,009 | |
BlackRock Inc. | 9,592 | 1,909 | |
State Street Corp. | 45,005 | 1,901 | |
BB&T Corp. | 63,855 | 1,868 | |
Chubb Corp. | 25,428 | 1,728 | |
CME Group Inc. | 5,766 | 1,669 | |
EquityResidential | 26,951 | 1,533 | |
Marsh & McLennan Cos. Inc. | 49,069 | 1,531 | |
Discover Financial Services | 50,362 | 1,511 | |
Annaly Capital | |||
Management Inc. | 88,805 | 1,476 |
37
Mega Cap 300 Value Index Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
HCP Inc. | 37,328 | 1,474 | |
Allstate Corp. | 46,250 | 1,454 | |
ProLogis Inc. | 41,766 | 1,406 | |
* | American International | ||
Group Inc. | 43,497 | 1,271 | |
Vornado Realty Trust | 15,278 | 1,249 | |
Ameriprise Financial Inc. | 20,656 | 1,152 | |
Progressive Corp. | 53,597 | 1,148 | |
Loews Corp. | 29,306 | 1,147 | |
Fifth Third Bancorp | 83,388 | 1,135 | |
SunTrust Banks Inc. | 48,663 | 1,117 | |
Invesco Ltd. | 41,008 | 1,016 | |
M&T Bank Corp. | 10,279 | 839 | |
Aon Corp. | 17,283 | 809 | |
Hartford Financial | |||
Services Group Inc. | 38,302 | 793 | |
Principal Financial Group Inc. | 27,866 | 771 | |
General Growth | |||
Properties Inc. | 38,467 | 626 | |
113,992 | |||
Health Care (15.0%) | |||
Johnson & Johnson | 250,050 | 16,273 | |
PfizerInc. | 703,550 | 14,845 | |
Merck & Co. Inc. | 278,972 | 10,648 | |
Abbott Laboratories | 142,661 | 8,076 | |
Bristol-Myers Squibb Co. | 154,886 | 4,983 | |
Eli Lilly & Co. | 95,410 | 3,744 | |
Medtronic Inc. | 96,685 | 3,686 | |
Covidien plc | 44,104 | 2,304 | |
WellPoint Inc. | 31,769 | 2,085 | |
Amgen Inc. | 25,440 | 1,729 | |
Aetna Inc. | 33,091 | 1,547 | |
Cardinal Health Inc. | 31,682 | 1,316 | |
Cigna Corp. | 26,142 | 1,153 | |
* | Boston Scientific Corp. | 135,520 | 843 |
Humana Inc. | 7,483 | 652 | |
* | Forest Laboratories Inc. | 12,408 | 404 |
74,288 | |||
Industrials (8.6%) | |||
General Electric Co. | 966,380 | 18,409 | |
United Technologies Corp. | 78,825 | 6,611 | |
Honeywell International Inc. | 43,843 | 2,612 | |
Illinois Tool Works Inc. | 39,731 | 2,213 | |
General Dynamics Corp. | 27,621 | 2,023 | |
Raytheon Co. | 31,592 | 1,596 | |
Eaton Corp. | 29,015 | 1,514 | |
Waste Management Inc. | 40,013 | 1,400 | |
Northrop Grumman Corp. | 22,714 | 1,358 | |
Parker Hannifin Corp. | 13,807 | 1,240 | |
Ingersoll-Rand plc | 28,499 | 1,137 | |
Stanley Black & Decker Inc. | 14,719 | 1,130 | |
Lockheed Martin Corp. | 12,518 | 1,107 | |
Dover Corp. | 8,486 | 543 | |
42,893 |
Market | |||
Value | |||
Shares | ($000) | ||
Information Technology (7.5%) | |||
Intel Corp. | 466,052 | 12,528 | |
Microsoft Corp. | 242,607 | 7,700 | |
Hewlett-Packard Co. | 181,783 | 4,601 | |
Corning Inc. | 143,850 | 1,876 | |
Applied Materials Inc. | 120,649 | 1,477 | |
TE Connectivity Ltd. | 38,781 | 1,417 | |
* | Dell Inc. | 74,473 | 1,288 |
Motorola Solutions Inc. | 25,232 | 1,257 | |
Texas Instruments Inc. | 36,765 | 1,226 | |
Xerox Corp. | 127,221 | 1,047 | |
CAInc. | 36,108 | 976 | |
Fidelity National | |||
Information Services Inc. | 22,129 | 702 | |
Paychex Inc. | 19,271 | 603 | |
* | Yahoo! Inc. | 38,215 | 567 |
37,265 | |||
Materials (3.6%) | |||
EI du Pont | |||
de Nemours & Co. | 84,476 | 4,296 | |
Freeport-McMoRan | |||
Copper & Gold Inc. | 86,791 | 3,694 | |
Dow Chemical Co. | 108,235 | 3,627 | |
International Paper Co. | 37,741 | 1,327 | |
Nucor Corp. | 29,004 | 1,262 | |
LyondellBasell Industries | |||
NV Class A | 26,527 | 1,145 | |
Alcoa Inc. | 96,553 | 982 | |
Air Products & | |||
Chemicals Inc. | 9,659 | 872 | |
PPG Industries Inc. | 7,129 | 650 | |
17,855 | |||
Telecommunication Services (5.9%) | |||
AT&T Inc. | 542,484 | 16,595 | |
Verizon | |||
Communications Inc. | 259,230 | 9,879 | |
CenturyLink Inc. | 56,535 | 2,276 | |
* | Sprint Nextel Corp. | 271,414 | 670 |
29,420 | |||
Utilities (5.8%) | |||
Southern Co. | 78,900 | 3,487 | |
Dominion Resources Inc. | 52,191 | 2,634 | |
Duke Energy Corp. | 121,992 | 2,552 | |
Exelon Corp. | 60,735 | 2,373 | |
NextEra Energy Inc. | 36,770 | 2,188 | |
FirstEnergy Corp. | 38,308 | 1,697 | |
American Electric | |||
Power Co. Inc. | 44,252 | 1,664 | |
Consolidated Edison Inc. | 26,858 | 1,560 | |
PG&E Corp. | 37,182 | 1,550 | |
PPL Corp. | 52,984 | 1,513 | |
Progress Energy Inc. | 27,045 | 1,436 | |
Public Service | |||
Enterprise Group Inc. | 46,364 | 1,427 |
38
Mega Cap 300 Value Index Fund | ||
Market | ||
Value | ||
Shares | ($000) | |
Sempra Energy | 20,915 | 1,239 |
Edison International | 28,190 | 1,180 |
Xcel Energy Inc. | 44,390 | 1,176 |
Entergy Corp. | 16,209 | 1,080 |
28,756 | ||
Total Common Stocks | ||
(Cost $471,168) | 496,746 | |
Temporary Cash Investments (0.0%)1 | ||
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.0%) | ||
2,3 Fannie Mae Discount | ||
Notes, 0.030%, 4/2/12 | 100 | 100 |
Total Temporary Cash Investments | ||
(Cost $100) | 100 | |
Total Investments (99.9%) | ||
(Cost $471,268) | 496,846 | |
Other Assets and Liabilities (0.1%) | ||
Other Assets | 5,129 | |
Liabilities | (4,836) | |
293 | ||
Net Assets (100%) | 497,139 |
At February 29, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 497,905 |
Undistributed Net Investment Income | 2,336 |
Accumulated Net Realized Losses | (28,688) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 25,578 |
Futures Contracts | 8 |
Net Assets | 497,139 |
Institutional Shares—Net Assets | |
Applicable to 1,389,478 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 112,680 |
Net Asset Value Per Share— | |
Institutional Shares | $81.10 |
ETF Shares—Net Assets | |
Applicable to 9,400,000 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 384,459 |
Net Asset Value Per Share— | |
ETF Shares | $40.90 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.9% and 0.0%, respectively, of net assets.
2 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury in exchange for senior preferred stock.
3 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 29, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends | 7,165 |
Security Lending | 25 |
Total Income | 7,190 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 33 |
Management and Administrative—Institutional Shares | 26 |
Management and Administrative—ETF Shares | 123 |
Marketing and Distribution—Institutional Shares | 15 |
Marketing and Distribution—ETF Shares | 49 |
Custodian Fees | 9 |
Shareholders’ Reports—Institutional Shares | 2 |
Shareholders’ Reports—ETF Shares | 4 |
Total Expenses | 261 |
Net Investment Income | 6,929 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 6,545 |
Futures Contracts | 51 |
Realized Net Gain (Loss) | 6,596 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 39,136 |
Futures Contracts | 25 |
Change in Unrealized Appreciation (Depreciation) | 39,161 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 52,686 |
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 29, | August 31, | |
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 6,929 | 11,005 |
Realized Net Gain (Loss) | 6,596 | 22,208 |
Change in Unrealized Appreciation (Depreciation) | 39,161 | 113 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 52,686 | 33,326 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (1,710) | (2,376) |
ETFShares | (5,506) | (7,751) |
Realized Capital Gain | ||
Institutional Shares | — | — |
ETFShares | — | — |
Total Distributions | (7,216) | (10,127) |
Capital Share Transactions | ||
Institutional Shares | (3,163) | 21,590 |
ETFShares | 8,562 | 99,575 |
Net Increase (Decrease) from Capital Share Transactions | 5,399 | 121,165 |
Total Increase (Decrease) | 50,869 | 144,364 |
Net Assets | ||
Beginning of Period | 446,270 | 301,906 |
End of Period1 | 497,139 | 446,270 |
1 Net Assets—End of Period includes undistributed net investment income of $2,336,000 and $2,623,000. |
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 | March 5, | ||||
Ended | 20081 to | ||||
February 29, | Year Ended August 31, | Aug. 31, | |||
For a Share Outstanding Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $73.55 | $65.97 | $66.02 | $83.69 | $90.01 |
Investment Operations | |||||
Net Investment Income | 1.144 | 1.965 | 1.932 | 2.135 | 1.1242 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 7.602 | 7.528 | (.075) | (17.658) | (6.444) |
Total from Investment Operations | 8.746 | 9.493 | 1.857 | (15.523) | (5.320) |
Distributions | |||||
Dividends from Net Investment Income | (1.196) | (1.913) | (1.907) | (2.147) | (1.000) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (1.196) | (1.913) | (1.907) | (2.147) | (1.000) |
Net Asset Value, End of Period | $81.10 | $73.55 | $65.97 | $66.02 | $83.69 |
Total Return | 12.14% | 14.33% | 2.69% | -18.29% | -5.96% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $113 | $105 | $76 | $70 | $53 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.10% | 0.10% | 0.11% | 0.11% | 0.08%3 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 3.08% | 2.65% | 2.88% | 3.66% | 3.19%3 |
Portfolio Turnover Rate4 | 17% | 24% | 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 | 20071 to | ||||
February 29, | Year Ended August 31, | Aug. 31, | |||
For a Share Outstanding Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $37.09 | $33.26 | $33.29 | $42.21 | $49.38 |
Investment Operations | |||||
Net Investment Income | .574 | .983 | .969 | 1.070 | .8862 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 3.835 | 3.805 | (.042) | (8.915) | (7.560) |
Total from Investment Operations | 4.409 | 4.788 | .927 | (7.845) | (6.674) |
Distributions | |||||
Dividends from Net Investment Income | (.599) | (.958) | (.957) | (1.075) | (.496) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (.599) | (.958) | (.957) | (1.075) | (.496) |
Net Asset Value, End of Period | $40.90 | $37.09 | $33.26 | $33.29 | $42.21 |
Total Return | 12.12% | 14.32% | 2.68% | -18.32% | -13.56% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $384 | $341 | $226 | $163 | $97 |
Ratio of Total Expenses to | |||||
Average Net Assets | 0.12% | 0.12% | 0.13% | 0.13% | 0.13%3 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 3.06% | 2.63% | 2.86% | 3.64% | 3.14%3 |
Portfolio Turnover Rate4 | 17% | 24% | 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. 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, 2008–2011), and for the period ended February 29, 2012, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. 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.
44
Mega Cap 300 Value Index Fund
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 29, 2012, the fund had contributed capital of $73,000 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 market value of the fund’s investments as of February 29, 2012, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 496,746 | — | — |
Temporary Cash Investments | — | 100 | — |
Futures Contracts—Liabilities1 | (1) | — | — |
Total | 496,745 | 100 | — |
1 Represents variation margin on the last day of the reporting period. |
45
Mega Cap 300 Value Index Fund
D. At February 29, 2012, 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 2012 | 2 | 136 | 8 |
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 29, 2012, the fund realized $1,873,000 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, 2011, the fund had available capital loss carryforwards totaling $29,150,000 to offset future net capital gains of $851,000 through August 31, 2017, $18,544,000 through August 31, 2018, and $9,755,000 through August 31, 2019. In addition, the fund realized losses of $4,278,000 during the period from November 1, 2010, through August 31, 2011, which are deferred and will be treated as realized for tax purposes in fiscal 2012. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2012; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
At February 29, 2012, the cost of investment securities for tax purposes was $471,268,000. Net unrealized appreciation of investment securities for tax purposes was $25,578,000, consisting of unrealized gains of $49,643,000 on securities that had risen in value since their purchase and $24,065,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended February 29, 2012, the fund purchased $61,395,000 of investment securities and sold $56,227,000 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 29, 2012 | August 31, 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 9,384 | 128 | 34,981 | 452 |
Issued in Lieu of Cash Distributions | 1,550 | 22 | 2,375 | 31 |
Redeemed | (14,097) | (189) | (15,766) | (203) |
Net Increase (Decrease)—Institutional Shares | (3,163) | (39) | 21,590 | 280 |
ETF Shares | ||||
Issued | 22,765 | 600 | 211,596 | 5,300 |
Issued in Lieu of Cash Distributions | — | — | — | — |
Redeemed | (14,203) | (400) | (112,021) | (2,900) |
Net Increase (Decrease)—ETF Shares | 8,562 | 200 | 99,575 | 2,400 |
H. In preparing the financial statements as of February 29, 2012, 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. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
48
Six Months Ended February 29, 2012 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
8/31/2011 | 2/29/2012 | Period | |
Based on Actual Fund Return | |||
Mega Cap 300 Index Fund | |||
Institutional Shares | $1,000.00 | $1,135.19 | $0.53 |
ETF Shares | 1,000.00 | 1,135.08 | 0.64 |
Mega Cap 300 Growth Index Fund | |||
Institutional Shares | $1,000.00 | $1,148.71 | $0.53 |
ETF Shares | 1,000.00 | 1,148.50 | 0.64 |
Mega Cap 300 Value Index Fund | |||
Institutional Shares | $1,000.00 | $1,121.43 | $0.53 |
ETF Shares | 1,000.00 | 1,121.23 | 0.63 |
Based on Hypothetical 5% Yearly Return | |||
Mega Cap 300 Index Fund | |||
Institutional Shares | $1,000.00 | $1,024.37 | $0.50 |
ETF Shares | 1,000.00 | 1,024.27 | 0.60 |
Mega Cap 300 Growth Index Fund | |||
Institutional Shares | $1,000.00 | $1,024.37 | $0.50 |
ETF Shares | 1,000.00 | 1,024.27 | 0.60 |
Mega Cap 300 Value Index Fund | |||
Institutional Shares | $1,000.00 | $1,024.37 | $0.50 |
ETF Shares | 1,000.00 | 1,024.27 | 0.60 |
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, 0.10% for Institutional Shares and 0.12% for ETF Shares; for the Mega Cap 300 Growth Index Fund, 0.10% for Institutional Shares and 0.12% for ETF Shares; and for the Mega Cap 300 Value Index Fund, 0.10% for Institutional Shares and 0.12% 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 (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
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 Haas Co. |
(chemicals); Director of Tyco International, Ltd. | |
F. William McNabb III | (diversified manufacturing and services), Hewlett- |
Born 1957. Trustee Since July 2009. Chairman of the | Packard Co. (electronic computer manufacturing), |
Board. Principal Occupation(s) During the Past Five | and Delphi Automotive LLP (automotive components); |
Years: Chairman of the Board of The Vanguard Group, | Senior Advisor at New Mountain Capital; Trustee of |
Inc., and of each of the investment companies served | The Conference Board. |
by The Vanguard Group, since January 2010; Director | |
of The Vanguard Group since 2008; Chief Executive | Amy Gutmann |
Officer and President of The Vanguard Group and of | Born 1949. Trustee Since June 2006. Principal |
each of the investment companies served by The | Occupation(s) During the Past Five Years: President |
Vanguard Group since 2008; Director of Vanguard | of the University of Pennsylvania; Christopher H. |
Marketing Corporation; Managing Director of The | Browne Distinguished Professor of Political Science |
Vanguard Group (1995–2008). | in the School of Arts and Sciences with secondary |
appointments at the Annenberg School for Commu- | |
nication and the Graduate School of Education | |
Independent Trustees | of the University of Pennsylvania; Director of |
Carnegie Corporation of New York, Schuylkill River | |
Emerson U. Fullwood | Development Corporation, and Greater Philadelphia |
Born 1948. Trustee Since January 2008. Principal | Chamber of Commerce; Trustee of the National |
Occupation(s) During the Past Five Years: Executive | Constitution Center; Chair of the Presidential |
Chief Staff and Marketing Officer for North America | Commission for the Study of Bioethical Issues. |
and Corporate Vice President (retired 2008) of Xerox | |
Corporation (document management products and | JoAnn Heffernan Heisen |
services); Executive in Residence and 2010 | Born 1950. Trustee Since July 1998. Principal |
Distinguished Minett Professor at the Rochester | Occupation(s) During the Past Five Years: Corporate |
Institute of Technology; Director of SPX Corporation | Vice President and Chief Global Diversity Officer |
(multi-industry manufacturing), the United Way of | (retired 2008) and Member of the Executive |
Rochester, Amerigroup Corporation (managed health | Committee (1997–2008) of Johnson & Johnson |
care), the University of Rochester Medical Center, | (pharmaceuticals/medical devices/consumer |
Monroe Community College Foundation, and North | products); Director of Skytop Lodge Corporation |
Carolina A&T University. | (hotels), the University Medical Center at Princeton, |
the Robert Wood Johnson Foundation, and the Center | |
Rajiv L. Gupta | for Talent Innovation; Member of the Advisory Board |
Born 1945. Trustee Since December 2001. 2 | of the Maxwell School of Citizenship and Public Affairs |
Principal Occupation(s) During the Past Five Years: | at Syracuse University. |
Chairman and Chief Executive Officer (retired 2009) |
F. Joseph Loughrey | Group since 2010; Assistant Controller of each of | |
Born 1949. Trustee Since October 2009. Principal | the investment companies served by The Vanguard | |
Occupation(s) During the Past Five Years: President | Group (2001–2010). | |
and Chief Operating Officer (retired 2009) and Vice | ||
Chairman of the Board (2008–2009) of Cummins Inc. | Thomas J. Higgins | |
(industrial machinery); Director of SKF AB (industrial | Born 1957. Chief Financial Officer Since September | |
machinery), Hillenbrand, Inc. (specialized consumer | 2008. Principal Occupation(s) During the Past Five | |
services), the Lumina Foundation for Education, and | Years: Principal of The Vanguard Group, Inc.; Chief | |
Oxfam America; Chairman of the Advisory Council | Financial Officer of each of the investment companies | |
for the College of Arts and Letters and Member | served by The Vanguard Group since 2008; Treasurer | |
of the Advisory Board to the Kellogg Institute for | of each of the investment companies served by The | |
International Studies at the University of Notre Dame. | Vanguard Group (1998–2008). | |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School (retired 2011); Chief Investment | the investment companies served by The Vanguard | |
Officer and Managing Partner of HighVista Strategies | Group since 2008; Assistant Treasurer of each of the | |
LLC (private investment firm); Director of Rand | investment companies served by The Vanguard Group | |
Merchant Bank; Overseer of the Museum of Fine | (1988–2008). | |
Arts Boston. | ||
Heidi Stam | ||
Alfred M. Rankin, Jr. | Born 1956. Secretary Since July 2005. Principal | |
Born 1941. Trustee Since January 1993. Principal | Occupation(s) During the Past Five Years: Managing | |
Occupation(s) During the Past Five Years: Chairman, | Director of The Vanguard Group, Inc., since 2006; | |
President, and Chief Executive Officer of NACCO | General Counsel of The Vanguard Group since 2005; | |
Industries, Inc. (forklift trucks/housewares/lignite); | Secretary of The Vanguard Group and of each of the | |
Director of Goodrich Corporation (industrial products/ | investment companies served by The Vanguard Group | |
aircraft systems and services) and the National | since 2005; Director and Senior Vice President of | |
Association of Manufacturers; Chairman of the Board | Vanguard Marketing Corporation since 2005; | |
of the Federal Reserve Bank of Cleveland and of | Principal of The Vanguard Group (1997–2006). | |
University Hospitals of Cleveland; Advisory Chairman | ||
of the Board of The Cleveland Museum of Art. | ||
Vanguard Senior Management Team | ||
Peter F. Volanakis | ||
Born 1955. Trustee Since July 2009. Principal | Mortimer J. Buckley | Michael S. Miller |
Occupation(s) During the Past Five Years: President | Kathleen C. Gubanich | James M. Norris |
and Chief Operating Officer (retired 2010) of Corning | Paul A. Heller | Glenn W. Reed |
Incorporated (communications equipment); Director of | Martha G. King | George U. Sauter |
Corning Incorporated (2000-2010) and Dow Corning | Chris D. McIsaac | |
(2001–2010); Director of SPX Corporation (multi- | ||
industry manufacturing); Overseer of the Amos Tuck | Chairman Emeritus and Senior Advisor | |
School of Business Administration at Dartmouth | ||
College; Advisor to the Norris Cotton Cancer Center. | John J. Brennan | |
Chairman, 1996–2009 | ||
Chief Executive Officer and President, 1996–2008 | ||
Executive Officers | ||
Glenn Booraem | Founder | |
Born 1967. Controller Since July 2010. Principal | ||
Occupation(s) During the Past Five Years: Principal | John C. Bogle | |
of The Vanguard Group, Inc.; Controller of each of | Chairman and Chief Executive Officer, 1974–1996 | |
the investment companies served by The Vanguard |
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 | The funds or securities referred to herein are not |
Direct Investor Account Services > 800-662-2739 | sponsored, endorsed, or promoted by MSCI, and MSCI |
bears no liability with respect to any such funds or | |
Institutional Investor Services > 800-523-1036 | securities. The prospectus or the Statement of |
Text Telephone for People | Additional Information contains a more detailed |
With Hearing Impairment > 800-749-7273 | description of the limited relationship MSCI has with |
Vanguard and any related funds. | |
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. | |
© 2012 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q8282 042012 |
Item 2:
Not Applicable.
Item 3:
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) 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 20, 2012 |
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 20, 2012 |
VANGUARD WORLD FUND | |
By: | /s/ THOMAS J. HIGGINS* |
THOMAS J. HIGGINS | |
CHIEF FINANCIAL OFFICER | |
Date: April 20, 2012 |
* By: /s/ Heidi Stam
Heidi Stam, pursuant to a Power of Attorney filed on March 27, 2012 see file Number 2-11444, Incorporated by Reference.