UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT COMPANY
Investment Company Act file number: | 811-1685 |
Name of Registrant: | Vanguard Morgan Growth 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: | September 30 |
Date of reporting period: | October 1, 2005 - March 31, 2006 |
Item 1: | Reports to Shareholders |
Vanguard® Morgan Growth Fund
> Semiannual Report
March 31, 2006
> During the six months ended March 31, 2006, the Morgan Growth Fund returned 10.0%.
> The stock market made impressive gains during the period, with returns from small- and mid-capitalization stocks besting those of large-cap issues.
> Selections in the information technology and industrials sectors were areas of strength for the fund, while its consumer discretionary holdings fared less well.
Contents | |
---|---|
Your Fund's Total Returns | 1 |
Chairman's Letter | 2 |
Advisors' Report | 6 |
Fund Profile | 9 |
Performance Summary | 10 |
Financial Statements | 11 |
About Your Fund's Expenses | 26 |
Trustees Renew Advisory Arrangements | 28 |
Glossary | 30 |
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 cover of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
Your Fund’s Total Returns
Six Months Ended March 31, 2006 | |
---|---|
Total Return | |
Vanguard Morgan Growth Fund | |
Investor Shares | 10.0% |
Admiral(TM)Shares1 | 10.0 |
Russell 3000 Growth Index | 7.0 |
Average Multi-Cap Growth Fund2 | 9.2 |
Dow Jones Wilshire 5000 Index | 8.0 |
Your Fund's Performance at a Glance September 30, 2005-March 31, 2006 | Distributions Per Share | |||
---|---|---|---|---|
Starting Share Price | Ending Share Price | Income Dividends | Capital Gains | |
Vanguard Morgan Growth Fund | ||||
Investor Shares | $ 17.04$ | 18.64$ | 0.09$ | 0.000 |
Admiral Shares | 52.91 | 57.81 | 0.39 | 0.000 |
1 A lower-cost class of shares available to many longtime shareholders and to those with significant investments in the fund. 2 Derived from data provided by Lipper Inc. |
1
Chairman’s Letter
Dear Shareholder,
During the half-year ended March 31, 2006, Vanguard Morgan Growth Fund posted solid returns, surpassing the return of the average multi-cap growth fund. The fund also beat the Russell 3000 Growth Index by 3 percentage points. Astute stock selection by the fund’s advisors enhanced the fund’s performance relative to the index (see the first table on page 1).
Stocks soared in the new year as positive reports mounted
In the fiscal half-year, stocks staged a performance in two acts: From October through December, returns stayed modest, but the first three months of 2006 saw a sharp rise in stock prices. First-quarter economic news included a jump in U.S. economic growth from 2005‘s already strong level; a surge in consumer confidence that paralleled growth in new jobs; and a 14% annualized growth rate for corporate earnings—making this the 15th consecutive quarter of double-digit growth.
Markets rewarded the good news handsomely. Continuing a trend of recent years, small-capitalization stocks in the United States led large-caps; reversing recent trends, the U.S. small-caps also outperformed broad international markets. However, Japanese and emerging markets continued to dominate other market segments.
2
Moves in the U.S. bond market signaled a return to normalcy
On March 28, the Federal Reserve Board raised its target for the federal funds rate to 4.75%, the 15th consecutive rate increase since June 2004. During most of 2005, short-term rates followed the Fed’s moves but, in a bond market anomaly, long-term rates held steady. In the first quarter of 2006, however, rate movements followed a more typical pattern, rising in concert across the maturity spectrum. In this environment, shorter-term securities outperformed long-term bonds, and municipal issues generally outperformed corporate securities.
Excellent stock selection helped your fund outperform
During the fiscal half-year, the Morgan Growth Fund achieved a 3-percentage-point advantage over its benchmark index, and surpassed the returns of the average multi-cap growth fund by nearly 1 percentage point. Eleven of the fund’s 12 industry sectors produced positive returns, with utilities the lone exception.
Two sectors, in particular, were areas of strength for the fund: information technology and industrials. The information technology sector returned 14%; among the sector’s important holdings, top contributors included relatively sizable positions in NVIDIA and Network Appliance. In addition, the fund’s relative return was enhanced by its limited exposure to tech giant Intel, which fell
Market Barometer | Total Returns Periods Ended March 31, 2006 | ||
---|---|---|---|
Six Months | One Year | Five Years1 | |
Stocks | |||
Russell 1000 Index (Large-caps) | 6.7% | 13.2% | 4.7% |
Russell 2000 Index (Small-caps) | 15.2 | 25.8 | 12.6 |
Dow Jones Wilshire 5000 Index (Entire market) | 8.0 | 15.0 | 6.0 |
MSCI All Country World Index ex USA (International) | 14.6 | 28.1 | 11.8 |
Bonds | |||
Lehman Aggregate Bond Index (Broad taxable market) | -0.1% | 2.3% | 5.1% |
Lehman Municipal Bond Index | 1.0 | 3.8 | 5.2 |
Citigroup 3-Month Treasury Bill Index | 1.9 | 3.5 | 2.1 |
CPI | |||
Consumer Price Index | 0.5% | 3.4% | 2.5% |
1 Annualized. |
3
on disappointing earnings and lower-than-expected shipments of desktop processors.
The industrials sector, which gained 27% for the period, was a strong contributor. Sound stock selection among capital goods companies was a key driver within the sector, with sizable returns from an overweighted position in mining equipment manufacturer Joy Global.
In contrast, the utilities sector was down during the half-year. Another drag on performance came from comparatively poor stock selection in the consumer discretionary sector, with most of the shortfall attributable to homebuilding companies, where a softening housing market took its toll on performance. XM Satellite Radio, a satellite radio service provider, was also down significantly during the period.
Your fund has compiled an excellent record over the long term, which reflects the skills of its three investment advisors. Their different methods—one advisor relies on traditional fundamental analysis, while two use quantitative methodologies—result in unique subportfolios that contribute to the fund’s diverse blend of over 330 stocks. Despite their varied strategies, the advisors remain focused on equities with solid valuations and above-average growth potential.
Annualized Expense Ratios:1 Your fund compared with its peer group | |||
---|---|---|---|
Investor Shares | Admiral Shares | Average Multi-Cap Growth Fund | |
Morgan Growth Fund | 0.41% | 0.24% | 1.65% |
1 Fund expense ratios reflect the six months ended March 31, 2006. Peer-group expense ratio is derived from data provided by Lipper Inc. and captures information through year-end 2005. |
4
Time is on your side in reaching your goals
As the prudent investor knows, time is your best ally in reaching your financial objectives. Over time, a balanced, well-diversified portfolio helps put you in position to reap the rewards of the best-performing assets while muting the risks of the worst-performing ones.
Vanguard has always counseled that the best strategy for reaching your long-term financial goals is to maintain a carefully considered, balanced portfolio with a mix of money market, bond, and stock mutual funds suitable to your own time horizon, risk tolerance, and objectives.
As one part of just such a balanced portfolio, the Morgan Growth Fund can play a vital role in helping you to move toward your goals.
Thank you for investing with Vanguard.
Sincerely,
John J. Brennan
Chairman and Chief Executive Officer
April 19, 2006
Fund Assets Managed | March 31, 2006 | |
---|---|---|
$ Million | Percentage | |
Wellington Management Company, LLP | $2,521 | 38% |
Franklin Portfolio Associates, LLC | 1,948 | 29 |
Vanguard Quantitative Equity Group | 1,893 | 29 |
Cash Investments1 | 265 | 4 |
Total | $6,627 | 100% |
1 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. |
5
Advisors’ Report
During the six months ended March 31, 2006, the Investor Shares and Admiral Shares of Vanguard Morgan Growth Fund both returned 10.0%. This performance reflects the combined efforts of your fund’s three independent advisors. The use of three advisors provides exposure to distinct, yet complementary, investment approaches, enhancing the fund’s diversification.
The advisors, the percentage of fund assets each manages, and a brief description of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal half-year and of how their portfolio positioning reflects this assessment.
Wellington Management Company, LLP
Portfolio Managers:
Robert D. Rands, CFA, Senior Vice President
Paul E. Marrkand, CFA, Vice President
Over the last six months our portion of the fund benefited primarily from favorable security selection in the information technology sector. Within information technology, the largest contributor to performance was NVIDIA, a graphics semiconductor company. Shares of NVIDIA rose as investors began to anticipate future growth opportunities for the company’s dominant graphics semiconductor business resulting from the rollout of several new products from
Vanguard Morgan Growth Fund Investment Advisors | ||
---|---|---|
Investment Advisors | Fund Assets Managed (%) | Investment Strategy |
Wellington Management Company, LLP | 38 | Traditional methods of stock selection--research and |
analysis--that identify companies believed to have | ||
above-average growth prospects, particularly those | ||
in industries undergoing change. Focuses on mid- | ||
and large-capitalization companies with proven | ||
records of sales and earnings growth, profitability, | ||
and cash-flow generation. | ||
Franklin Portfolio Associates, LLC | 29 | Quantitative management using a blend of valuation |
and growth/momentum factors to drive stock | ||
selection decisions for a mid-cap growth subportfolio. | ||
Vanguard Quantitative Equity Group | 29 | Quantitative management using models that assess |
valuation, marketplace sentiment, and balance-sheet | ||
characteristics of companies versus their peers. | ||
Cash Investments1 | 4 | -- |
1 These short-term reserves are invested by Vanguard in equity index products to simulate investment in stocks. Each advisor also may maintain a modest cash position.
6
manufacturers. Nokia and QUALCOMM were also meaningful contributors within the sector. Both of these companies are expected to generate strong profit growth in coming years as a result of widespread adoption of third-generation wireless technology. Positive stock selection within industrials also benefited the fund during the period, with notable performances from Boeing and Rockwell Collins. Both companies are expected to experience positive growth during the next aerospace cycle, which should last for several years.
The largest detractor from performance came from security selection in the consumer discretionary sector. XM Satellite Radio Holdings, whose shares fell after management missteps caused a decline in the company’s cash flow and market share, was a notably poor performer. We eliminated the holding during the period, as we no longer believe that management will be able to generate strong cash-flow growth in the coming years.
In terms of the economic environment, we remain concerned about the Federal Reserve Board’s aggressive monetary policy, the massive U.S. trade deficit, the ever-rising cost of energy, and the unsustainable appreciation in housing prices. We believe these impediments will reduce sales growth rates and profit levels for numerous companies over the next several years. This backdrop makes sustainable profit growth even more challenging for many companies. Therefore, we seek to invest in innovative companies with an ability to gain market share and to grow sales and profits at a solid rate despite a difficult economic environment. At the end of the fiscal period, for our portion of the fund, the largest overweight positions were in the technology, health care, and energy sectors, and the largest underweight positions were in the materials and consumer sectors.
Franklin Portfolio Associates, LLC
Portfolio Manager: John S. Cone, CFA
Mid-cap stocks have defied expectations with their continued strong performance. The Russell Midcap Growth index, the benchmark for our portion of the portfolio, returned over 11% for the six months ended March 31. Our stock selection process provides the portfolio with characteristics tilting toward positive momentum (stocks with near-term price and earnings growth momentum) and positive valuation (stocks with lower price-to-earnings ratios). This position contributed to the portfolio’s return during the period.
Our results for the half-year benefited from strong stock selection in a mix of industries including semiconductors (graphics processors and software for personal computers from NVIDIA, and semiconductor processing equipment from Lam Research), steel (Nucor), computer hardware (computer hard drives from Western Digital), medical providers (pharmacy services from Express Scripts), and specialty retailers such as Fastenal, a leader in wholesale industrial supplies.
7
The portfolio also received a boost from its mild overweights in heavy machinery, railroads, and restaurants, as well as its underweights in media and motor vehicle stocks. Returns were hampered by a position in Invitrogen, a biomedical company that provides products primarily for molecular biology research. The stock, which dropped significantly in October after a poorly received earnings announcement, has recovered somewhat since and remains in the portfolio.
Our investment process is currently identifying attractive mid-cap stocks in a variety of industries, including NVIDIA, Red Hat (open-source computer software), Patterson UTI Energy (oil and gas drilling), National Semiconductors (semiconductor design and manufacturing), and Norfolk Southern (railroads).
Vanguard Quantitative Equity Group
Portfolio Manager: James P. Stetler, Principal
Our quantitative investment process evaluates a security’s attractiveness from three perspectives: valuation, investor sentiment, and balance-sheet characteristics. Our experience is that each of our underlying models performs well over long time frames, but their effectiveness varies over shorter periods. For example, over the past six months, our balance-sheet model performed well but our valuation model did not add value to our portion of the portfolio. Our process evaluates securities relative to their peer group (for example, a technology stock compared with other tech stocks). We purchase our most attractively ranked stocks and sell those stocks we believe are overvalued based on our model’s output, while neutralizing exposure to risk characteristics (market capitalization, volatility, and industry group differences) versus the Morgan Stanley Capital International U.S. Prime Market Growth Index, our small-cap growth benchmark.
We do not maintain a “view” on the market or individual sectors that is applied in managing our portion of the portfolio. Our process is focused solely on overweighting those stocks in an industry group that we believe will outperform their peers while avoiding securities in the same industry group that we believe will underperform. As mentioned in our shareholder report to you six months ago, our portfolio positioning is both static and dynamic. It’s static from the standpoint that our portfolio always reflects the market capitalization and industry-group weightings of its benchmark. Yet, it’s also dynamic because we are regularly buying and selling securities within these market capitalization and industry groups based on our models’ assessments of individual securities, to try to outperform the return of the benchmark.
8
Fund Profile
As of March 31, 2006
Portfolio Characteristics | |||
---|---|---|---|
Fund | Comparative Index1 | Broad Index2 | |
Number of Stocks | 333 | 2006 | 4980 |
Median Market Cap | $17.1B | $29.3B | $26.3B |
Price/Earnings Ratio | 20.4x | 22.6x | 20.9x |
Price/Book Ratio | 3.8x | 4.1x | 2.9x |
Yield | 1.1% | 1.6% | |
Investor Shares | 0.7% | ||
Admiral Shares | 0.9% | ||
Return on Equity | 18.7% | 19.6% | 17.2% |
Earnings Growth Rate | 19.3% | 18.6% | 10.5% |
Foreign Holdings | 8.3% | 0.0% | 2.4% |
Turnover Rate | 89%3 | -- | -- |
Expense Ratio | -- | -- | |
Investor Shares | 0.41%3 | ||
Admiral Shares | 0.24%3 | ||
Short-Term Reserves | 1% | -- | -- |
Sector Diversification (% of portfolio) | |||
---|---|---|---|
Fund | Comparative Index1 | Broad Index2 | |
Consumer Discretionary | 15% | 14% | 12% |
Consumer Staples | 6 | 11 | 8 |
Energy | 7 | 4 | 9 |
Financials | 8 | 7 | 22 |
Health Care | 18 | 19 | 12 |
Industrials | 13 | 15 | 11 |
Information Technology | 27 | 27 | 16 |
Materials | 2 | 2 | 4 |
Telecommunication Services | 2 | 1 | 3 |
Utilities | 1 | 0 | 3 |
Short-Term Reserves | 1% | ||
Volatility Measures | ||||
---|---|---|---|---|
Fund | Comparative Index1 | Fund | Broad Index2 | |
R-Squared | 0.94 | 1.00 | 0.92 | 1.00 |
Beta | 1.06 | 1.00 | 1.10 | 1.00 |
Ten Largest Holdings4 (% of total net assets) | ||
---|---|---|
Microsoft Corp. | systems software | 3.1% |
The Procter & Gamble Co. | household products | 1.9 |
General Electric Co. | industrial conglomerates | 1.9 |
Oracle Corp. | systems software | 1.6 |
NVIDIA Corp. | semiconductors | 1.5 |
The Boeing Co. | aerospace and defense | 1.4 |
QUALCOMM Inc. | Communications equipment | 1.3 |
Medtronic, Inc. | health care equipment | 1.2 |
UBS AG | Diversified capital markets | 1.1 |
Rockwell Collins, Inc. | Aerospace and defense | 1.1 |
Top Ten | 16.1% | |
Investment Focus
1 Russell 3000 Growth Index.
2 Dow Jones Wilshire 5000 Index.
3 Annualized.
4 “Ten Largest Holdings” excludes any temporary cash investments and equity index products.
See page 30 for a glossary of investment terms.
9
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 www.vanguard.com.) 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 30, 1995–March 31, 2006
Average Annual Total Returns: Periods Ended March 31, 2006 | Ten Years | |||||
---|---|---|---|---|---|---|
Inception Date | One Year | Five Years | Capital | Income | Total | |
Investor Shares | 12/31/1968 | 19.43% | 5.48% | 8.65% | 0.69% | 9.34% |
Admiral Shares | 5/14/2001 | 19.61 | 3.662 | -- | -- | -- |
1 Six months ended March 31, 2006.
2 Return since inception.
10
Financial Statements (unaudited)
Statement of Net Assets
As of March 31, 2006
The fund provides a complete list of its holdings 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 www.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).
Shares | Market Value• ($000) | |
---|---|---|
Common Stocks (96.2%)1 | ||
Consumer Discretionary (14.1%) | ||
*Viacom Inc. Class B | 1,679,900 | 65,180 |
Staples, Inc. | 2,204,450 | 56,258 |
The Walt Disney Co. | 2,010,000 | 56,059 |
Starwood Hotels & Resorts Worldwide, Inc. | 681,600 | 46,165 |
News Corp., Class A | 2,436,300 | 40,467 |
Hilton Hotels Corp. | 1,579,500 | 40,214 |
Abercrombie & Fitch Co. | 626,255 | 36,511 |
Darden Restaurants Inc. | 806,000 | 33,070 |
Black & Decker Corp. | 359,900 | 31,272 |
D. R. Horton, Inc. | 924,233 | 30,703 |
*Career Education Corp. | 806,800 | 30,441 |
*EchoStar Communications Corp. Class A | 959,600 | 28,663 |
Home Depot, Inc. | 623,500 | 26,374 |
American Eagle Outfitters, Inc. | 800,440 | 23,901 |
KB HOME | 364,100 | 23,659 |
Yum! Brands, Inc. | 417,600 | 20,404 |
Dollar General Corp. | 1,125,300 | 19,884 |
Claire's Stores, Inc. | 517,000 | 18,772 |
Lennar Corp. Class A | 284,400 | 17,172 |
*Pixar, Inc. | 265,800 | 17,048 |
Lowe's Cos., Inc. | 244,800 | 15,775 |
*Comcast Corp. Class A | 576,051 | 15,069 |
Brinker International, Inc. | 351,500 | 14,851 |
Publishing & Broadcasting Ltd. | 1,044,242 | 12,878 |
Target Corp. | 245,100 | 12,748 |
Barnes & Noble, Inc. | 275,100 | 12,723 |
J.C. Penney Co., Inc. (Holding Co.) | 160,900 | 9,720 |
Geox SpA | 690,240 | 9,182 |
NIKE, Inc. Class B | 102,600 | 8,731 |
*Starbucks Corp. | 225,200 | 8,477 |
*Toll Brothers, Inc. | 228,800 | 7,923 |
International Game Technology | 219,700 | 7,738 |
*IAC/InterActiveCorp | 250,700 | 7,388 |
Standard Pacific Corp. | 216,900 | 7,292 |
Sherwin-Williams Co. | 145,800 | 7,208 |
Polo Ralph Lauren Corp. | 115,300 | 6,988 |
Pulte Homes, Inc. | 175,700 | 6,750 |
*Getty Images, Inc. | 83,794 | 6,274 |
Carnival Corp. | 130,900 | 6,201 |
Meredith Corp. | 100,800 | 5,624 |
The McGraw-Hill Cos., Inc. | 96,800 | 5,578 |
*DIRECTV Group, Inc. | 326,226 | 5,350 |
*The Goodyear Tire & Rubber Co. | 366,900 | 5,313 |
International Speedway Corp. | 99,000 | 5,039 |
Best Buy Co., Inc. | 88,050 | 4,925 |
Omnicom Group Inc. | 58,700 | 4,887 |
*Education Management Corp. | 114,500 | 4,763 |
Boyd Gaming Corp. | 94,600 | 4,724 |
11
Shares | Market Value• ($000) | |
---|---|---|
Nordstrom, Inc. | 117,400 | 4,600 |
*Liberty Media Corp. | 557,499 | 4,577 |
*Sears Holdings Corp. | 33,900 | 4,483 |
^Regal Entertainment Group Class A | 236,300 | 4,445 |
Harley-Davidson, Inc. | 72,200 | 3,746 |
Beazer Homes USA, Inc. | 48,400 | 3,180 |
Advance Auto Parts, Inc. | 72,870 | 3,034 |
News Corp., Class B | 161,353 | 2,833 |
*Univision Communications Inc. | 76,800 | 2,647 |
*Kohl's Corp. | 44,100 | 2,338 |
Harte-Hanks, Inc. | 80,100 | 2,191 |
Michaels Stores, Inc. | 52,884 | 1,987 |
Clear Channel Communications, Inc. | 55,299 | 1,604 |
*MGM Mirage, Inc. | 32,000 | 1,379 |
*Lamar Advertising Co. Class A | 20,944 | 1,102 |
Washington Post Co. Class B | 1,380 | 1,072 |
*Comcast Corp. Special Class A | 10,156 | 265 |
937,819 | ||
Consumer Staples (5.5%) | ||
The Procter & Gamble Co. | 2,163,275 | 124,648 |
PepsiCo, Inc. | 1,154,400 | 66,713 |
Wal-Mart Stores, Inc. | 733,200 | 34,636 |
Altria Group, Inc. | 341,200 | 24,177 |
The Pepsi Bottling Group, Inc. | 467,400 | 14,204 |
The Coca-Cola Co. | 314,200 | 13,156 |
Walgreen Co. | 276,600 | 11,930 |
Brown-Forman Corp. Class B | 128,490 | 9,890 |
CVS Corp. | 300,200 | 8,967 |
Colgate-Palmolive Co. | 152,000 | 8,679 |
Estee Lauder Cos. Class A | 230,100 | 8,557 |
*The Kroger Co. | 387,600 | 7,892 |
Anheuser-Busch Cos., Inc. | 184,500 | 7,891 |
Costco Wholesale Corp. | 138,599 | 7,507 |
Alberto-Culver Co. Class B | 142,600 | 6,307 |
Sysco Corp. | 120,600 | 3,865 |
Kellogg Co. | 75,000 | 3,303 |
The Hershey Co. | 44,300 | 2,314 |
The Clorox Co. | 27,800 | 1,664 |
*Energizer Holdings, Inc. | 17,200 | 912 |
367,212 | ||
Energy (7.1%) | ||
Patterson-UTI Energy, Inc. | 1,695,381 | 54,184 |
ConocoPhillips Co. | 736,900 | 46,535 |
*Petro-Canada | 979,654 | 46,505 |
XTO Energy, Inc. | 866,862 | 37,769 |
Chesapeake Energy Corp. | 1,165,500 | 36,608 |
GlobalSantaFe Corp. | 475,000 | 28,856 |
Petroleo Brasileiro Series A ADR | 340,000 | 27,149 |
Schlumberger Ltd. | 172,900 | 21,884 |
*Unit Corp. | 357,600 | 19,936 |
Kinder Morgan, Inc. | 206,000 | 18,950 |
EOG Resources, Inc. | 242,500 | 17,460 |
*Pride International, Inc. | 495,700 | 15,456 |
Tidewater Inc. | 260,700 | 14,398 |
Halliburton Co. | 176,000 | 12,852 |
ENSCO International, Inc. | 168,600 | 8,674 |
Pioneer Natural Resources Co. | 190,700 | 8,438 |
*Nabors Industries, Inc. | 113,700 | 8,139 |
*Transocean Inc. | 88,400 | 7,099 |
BJ Services Co. | 190,700 | 6,598 |
Sunoco, Inc. | 81,200 | 6,299 |
Baker Hughes, Inc. | 84,000 | 5,746 |
*Grant Prideco, Inc. | 115,700 | 4,957 |
Diamond Offshore Drilling, Inc. | 39,300 | 3,517 |
Apache Corp. | 48,300 | 3,164 |
Devon Energy Corp. | 43,300 | 2,649 |
*Ultra Petroleum Corp. | 35,600 | 2,218 |
Rowan Cos., Inc. | 31,100 | 1,367 |
467,407 | ||
Financials (7.7%) | ||
UBS AG | 656,000 | 72,140 |
American International Group, Inc. | 968,221 | 63,990 |
12
Shares | Market Value• ($000) | |
---|---|---|
Muenchener Rueckversicherungs- Gesellschaft AG | ||
(Registered) | 235,000 | 33,190 |
W.R. Berkley Corp. | 541,349 | 31,431 |
ACE Ltd. | 509,400 | 26,494 |
Legg Mason Inc. | 158,600 | 19,877 |
Hudson City Bancorp, Inc. | 1,492,800 | 19,839 |
Synovus Financial Corp. | 699,700 | 18,955 |
American Express Co. | 328,000 | 17,236 |
*E*TRADE Financial Corp. | 617,500 | 16,660 |
TD Ameritrade Holding Corp. | 786,800 | 16,421 |
AFLAC Inc. | 356,900 | 16,107 |
IndyMac Bancorp, Inc. | 377,600 | 15,455 |
Northern Trust Corp. | 289,500 | 15,199 |
*CB Richard Ellis Group, Inc. | 176,000 | 14,203 |
^Commerce Bancorp, Inc. | 353,600 | 12,959 |
Moody's Corp. | 145,800 | 10,419 |
The Chicago Mercantile Exchange | 22,900 | 10,248 |
Franklin Resources Corp. | 102,200 | 9,631 |
SEI Investments Co. | 207,800 | 8,422 |
Progressive Corp. of Ohio | 72,200 | 7,528 |
Prudential Financial, Inc. | 96,300 | 7,301 |
Ambac Financial Group, Inc. | 87,500 | 6,965 |
Federated Investors, Inc. | 172,700 | 6,744 |
State Street Corp. | 93,100 | 5,626 |
*Berkshire Hathaway Inc. Class B | 1,630 | 4,910 |
SLM Corp. | 89,900 | 4,669 |
Nuveen Investments, Inc. Class A | 89,800 | 4,324 |
Golden West Financial Corp. | 49,800 | 3,381 |
HCC Insurance Holdings, Inc. | 93,600 | 3,257 |
Host Marriott Corp. REIT | 138,200 | 2,957 |
Capital One Financial Corp. | 31,701 | 2,553 |
The St. Joe Co. | 21,000 | 1,320 |
General Growth Properties Inc. REIT | 23,300 | 1,139 |
White Mountains Insurance Group Inc. | 1,900 | 1,130 |
Forest City Enterprise Class A | 12,134 | 572 |
513,252 | ||
Health Care (17.0%) | ||
Medtronic, Inc. | 1,501,699 | 76,211 |
*Amgen, Inc. | 941,200 | 68,472 |
Abbott Laboratories | 1,483,812 | 63,017 |
*Express Scripts Inc. | 619,800 | 54,480 |
Johnson & Johnson | 873,000 | 51,699 |
Schering-Plough Corp. | 2,343,420 | 44,502 |
AstraZeneca Group PLC ADR | 798,700 | 40,119 |
Cardinal Health, Inc. | 521,900 | 38,892 |
Sanofi-Aventis | 400,768 | 37,951 |
Becton, Dickinson & Co. | 602,100 | 37,077 |
AmerisourceBergen Corp. | 696,400 | 33,615 |
*^Amylin Pharmaceuticals, Inc. | 669,400 | 32,767 |
*Genzyme Corp. | 417,700 | 28,078 |
*Endo Pharmaceuticals Holdings, Inc. | 854,400 | 28,033 |
*Invitrogen Corp. | 388,000 | 27,210 |
*St. Jude Medical, Inc. | 610,600 | 25,035 |
Dade Behring Holdings Inc. | 678,500 | 24,229 |
*Community Health Systems, Inc. | 663,700 | 23,993 |
*MedImmune Inc. | 630,000 | 23,045 |
Shionogi & Co., Ltd. | 1,391,000 | 22,757 |
UnitedHealth Group Inc. | 399,100 | 22,294 |
Eisai Co., Ltd. | 493,100 | 21,480 |
Teva Pharmaceutical Industries Ltd. Sponsored ADR | 500,000 | 20,590 |
*Coventry Health Care Inc. | 306,500 | 16,545 |
*Sepracor Inc. | 318,200 | 15,531 |
*WellPoint Inc. | 193,972 | 15,019 |
*Alkermes, Inc. | 625,000 | 13,781 |
*ICOS Corp. | 589,100 | 12,990 |
*Hospira, Inc. | 315,000 | 12,430 |
*Genentech, Inc. | 139,299 | 11,772 |
Bausch & Lomb, Inc. | 183,800 | 11,708 |
*Gilead Sciences, Inc. | 167,700 | 10,434 |
Aetna Inc. | 207,472 | 10,195 |
*Thermo Electron Corp. | 273,200 | 10,133 |
McKesson Corp. | 190,500 | 9,931 |
CIGNA Corp. | 69,307 | 9,053 |
Baxter International, Inc. | 231,700 | 8,992 |
13
Shares | Market Value• ($000) | |
---|---|---|
Allergan, Inc. | 82,800 | 8,984 |
Wyeth | 175,998 | 8,539 |
Applera Corp.-Applied Biosystems Group | 307,900 | 8,356 |
*Barr Pharmaceuticals Inc. | 119,500 | 7,526 |
*Laboratory Corp. of America Holdings | 116,400 | 6,807 |
*Lincare Holdings, Inc. | 154,975 | 6,038 |
*Techne Corp. | 97,300 | 5,852 |
Guidant Corp. | 72,400 | 5,652 |
HCA Inc. | 112,300 | 5,142 |
*Kinetic Concepts, Inc. | 122,976 | 5,063 |
*Zimmer Holdings, Inc. | 72,727 | 4,916 |
*Boston Scientific Corp. | 180,400 | 4,158 |
*Triad Hospitals, Inc. | 97,000 | 4,064 |
*Watson Pharmaceuticals, Inc. | 140,000 | 4,024 |
PerkinElmer, Inc. | 167,300 | 3,927 |
Health Management Associates Class A | 164,100 | 3,540 |
*Medco Health Solutions, Inc. | 61,275 | 3,506 |
*Forest Laboratories, Inc. | 75,299 | 3,361 |
*Millennium Pharmaceuticals, Inc. | 286,000 | 2,891 |
Quest Diagnostics, Inc. | 43,700 | 2,242 |
C.R. Bard, Inc. | 29,762 | 2,018 |
Stryker Corp. | 37,400 | 1,658 |
Mylan Laboratories, Inc. | 61,100 | 1,430 |
*Caremark Rx, Inc. | 27,000 | 1,328 |
Universal Health Services Class B | 14,000 | 711 |
1,125,793 | ||
Industrials (12.6%) | ||
General Electric Co. | 3,552,200 | 123,546 |
The Boeing Co. | 1,161,600 | 90,523 |
Rockwell Collins, Inc. | 1,263,600 | 71,204 |
Emerson Electric Co. | 655,000 | 54,778 |
General Dynamics Corp. | 804,400 | 51,466 |
Norfolk Southern Corp. | 921,400 | 49,820 |
Joy Global Inc. | 607,350 | 36,301 |
Parker Hannifin Corp. | 395,000 | 31,841 |
C.H. Robinson Worldwide Inc. | 536,100 | 26,317 |
Manpower Inc. | 427,300 | 24,433 |
Cummins Inc. | 206,900 | 21,745 |
Robert Half International, Inc. | 525,800 | 20,301 |
*^Ryanair Holdings PLC ADR | 311,900 | 17,061 |
Caterpillar, Inc. | 225,900 | 16,222 |
United Technologies Corp. | 266,700 | 15,461 |
W.W. Grainger, Inc. | 199,800 | 15,055 |
United Parcel Service, Inc. | 186,600 | 14,812 |
Southwest Airlines Co. | 801,200 | 14,414 |
The Corporate Executive Board Co. | 141,500 | 14,277 |
Fastenal Co. | 266,200 | 12,602 |
Lockheed Martin Corp. | 133,800 | 10,052 |
Avery Dennison Corp. | 169,100 | 9,889 |
*Thomas & Betts Corp. | 186,100 | 9,562 |
FedEx Corp. | 84,500 | 9,543 |
^Gol-Linhas Aereas Inteligentes S.A | 352,216 | 9,439 |
*Alliant Techsystems, Inc. | 104,000 | 8,026 |
L-3 Communications Holdings, Inc. | 89,600 | 7,687 |
Precision Castparts Corp. | 125,216 | 7,438 |
Rockwell Automation, Inc. | 84,000 | 6,040 |
3M Co. | 74,200 | 5,616 |
PACCAR, Inc. | 74,500 | 5,251 |
Herman Miller, Inc. | 151,300 | 4,904 |
Waste Management, Inc. | 124,900 | 4,409 |
Aramark Corp. Class B | 136,800 | 4,041 |
J.B. Hunt Transport Services, Inc. | 144,700 | 3,117 |
Fluor Corp. | 32,400 | 2,780 |
Republic Services, Inc. Class A | 40,700 | 1,730 |
Masco Corp. | 39,000 | 1,267 |
*Monster Worldwide Inc. | 22,215 | 1,108 |
834,078 | ||
Information Technology (26.7%) | ||
Communications Equipment (4.0%) | ||
QUALCOMM Inc. | 1,719,900 | 87,044 |
14
Shares | Market Value• ($000) | |
---|---|---|
Nokia Corp. ADR | 2,613,200 | 54,146 |
*Cisco Systems, Inc. | 1,758,000 | 38,096 |
*Corning, Inc. | 852,500 | 22,941 |
*CSR Plc | 920,000 | 19,071 |
Motorola, Inc. | 819,099 | 18,766 |
Harris Corp. | 357,000 | 16,883 |
*Avaya Inc. | 431,200 | 4,873 |
ADTRAN Inc. | 175,400 | 4,592 |
*Lucent Technologies, Inc. | 631,500 | 1,926 |
Computers & Peripherals (3.6%) | ||
*Network Appliance, Inc. | 1,397,400 | 50,348 |
*Dell Inc. | 1,463,000 | 43,539 |
*EMC Corp. | 3,004,400 | 40,950 |
International Business Machines Corp. | 487,700 | 40,221 |
*Western Digital Corp. | 1,577,800 | 30,657 |
*NCR Corp. | 475,700 | 19,880 |
*Apple Computer, Inc. | 247,300 | 15,511 |
Electronic Equipment & Instruments (2.0%) | ||
*Jabil Circuit, Inc. | 985,100 | 42,221 |
CDW Corp. | 468,200 | 27,554 |
Hon Hai Precision Industry Co., Ltd. | 2,959,669 | 18,260 |
*Mettler-Toledo International Inc. | 175,500 | 10,590 |
*Agilent Technologies, Inc. | 270,800 | 10,169 |
Amphenol Corp. | 161,600 | 8,432 |
*Ingram Micro, Inc. Class A | 421,100 | 8,422 |
Molex, Inc. | 188,200 | 6,248 |
*Flextronics International Ltd. | 57,026 | 590 |
Internet Software & Services (0.7%) | ||
*Google Inc. | 58,500 | 22,815 |
*eBay Inc. | 334,400 | 13,062 |
*Yahoo! Inc. | 359,000 | 11,581 |
*VeriSign, Inc. | 75,600 | 1,814 |
IT Services (2.7%) | ||
Accenture Ltd. | 1,859,200 | 55,906 |
*Fiserv, Inc. | 1,021,900 | 43,482 |
*DST Systems, Inc. | 417,000 | 24,161 |
*Affiliated Computer Services, Inc. Class A | 294,500 | 17,570 |
First Data Corp. | 183,700 | 8,601 |
Automatic Data Processing, Inc. | 169,200 | 7,729 |
*Ceridian Corp. | 273,200 | 6,953 |
Global Payments Inc. | 127,900 | 6,780 |
Electronic Data Systems Corp. | 167,400 | 4,491 |
*CheckFree Corp. | 22,608 | 1,142 |
*Alliance Data Systems Corp. | 19,776 | 925 |
Semiconductors & Semiconductor Equipment (6.2%) | ||
*NVIDIA Corp. | 1,754,000 | 100,434 |
National Semiconductor Corp. | 2,196,800 | 61,159 |
*LAM Research Corp. | 1,155,700 | 49,695 |
*Altera Corp. | 2,360,000 | 48,710 |
Intel Corp. | 1,769,400 | 34,238 |
Microchip Technology, Inc. | 858,400 | 31,160 |
*Broadcom Corp. | 571,700 | 24,675 |
*ASML Holding (New York) | 770,000 | 15,685 |
Texas Instruments, Inc. | 474,900 | 15,420 |
*Advanced Micro Devices, Inc. | 429,600 | 14,246 |
Applied Materials, Inc. | 476,199 | 8,338 |
*MEMC Electronic Materials, Inc. | 154,100 | 5,689 |
*Agere Systems Inc. | 33,700 | 507 |
Software (7.5%) | ||
Microsoft Corp. | 7,466,200 | 203,155 |
*Oracle Corp. | 7,798,800 | 106,766 |
*Adobe Systems, Inc. | 1,298,800 | 45,354 |
*Red Hat, Inc. | 1,350,900 | 37,798 |
SAP AG | 128,000 | 27,712 |
Fair Isaac, Inc. | 435,700 | 17,262 |
*Mercury Interactive Corp. | 455,500 | 15,840 |
*Compuware Corp. | 1,529,042 | 11,972 |
15
Shares | Market Value• ($000) | |
---|---|---|
*salesforce.com, Inc. | 215,000 | 7,811 |
*McAfee Inc. | 279,514 | 6,801 |
*BMC Software, Inc. | 297,199 | 6,437 |
*Symantec Corp. | 181,800 | 3,060 |
*Novell, Inc. | 392,400 | 3,014 |
*Autodesk, Inc. | 57,800 | 2,226 |
*Cadence Design Systems, Inc. | 29,600 | 547 |
1,774,653 | ||
Materials (2.0%) | ||
Freeport-McMoRan Copper & Gold, Inc. Class B | 901,664 | 53,892 |
Nucor Corp. | 466,000 | 48,832 |
Phelps Dodge Corp. | 154,796 | 12,466 |
Allegheny Technologies Inc. | 132,000 | 8,076 |
Newmont Mining Corp. (Holding Co.) | 131,098 | 6,803 |
130,069 | ||
Telecommunication Services (2.1%) | ||
Sprint Nextel Corp. | 2,148,004 | 55,504 |
*Nextel Partners, Inc. | 968,700 | 27,434 |
Mobile Telesystems ADR | 725,000 | 23,998 |
America Movil SA de CV Series L ADR | 565,000 | 19,357 |
*NII Holdings Inc. | 104,900 | 6,186 |
Telephone & Data Systems, Inc. | 106,400 | 4,196 |
*Qwest Communications International Inc. | 247,500 | 1,683 |
138,358 | ||
Utilities (0.5%) | ||
*AES Corp. | 934,600 | 15,944 |
Equitable Resources, Inc. | 202,700 | 7,401 |
TXU Corp. | 152,400 | 6,821 |
30,166 | ||
Exchange-Traded Fund (0.9%) | ||
^2Vanguard Growth VIPERs | 1,044,900 | 57,626 |
Total Common Stocks | ||
(Cost $5,388,264) | 6,376,433 | |
Temporary Cash Investments (4.3%)1 | ||
Money Market Fund (3.5%) | ||
3Vanguard Market Liquidity | ||
Fund, 4.715% | 178,550,981 | 178,551 |
3Vanguard Market Liquidity | ||
Fund, 4.715%--Note G | 51,086,200 | 51,086 |
229,637 | ||
Face | ||
Amount | ||
($000) | ||
Repurchase Agreement (0.6%) | ||
Goldman Sachs & Co. 4.850%, | ||
4/3/06 (Dated 3/31/06, | ||
Repurchase Value $39,016,000, | ||
collateralized by Federal Home | ||
Loan Mortgage Corp.,4.500%- | ||
6.500%, 8/1/11-1/1/36) | 39,000 | 39,000 |
U.S. Agency Obligation (0.2%) | ||
4Federal National Mortgage Assn | ||
54.419%, 4/12/2006 | 14,000 | 13,984 |
Total Temporary Cash Investments | ||
(Cost $282,618) | 282,621 | |
Total Investments (100.5%) | ||
(Cost $5,670,882) | 6,659,054 | |
Other Assets and Liabilities (-0.5%) | ||
Other Assets--Note C | 76,899 | |
Liabilities--Note G | (109,177) | |
(32,278) | ||
Net Assets (100%) | 6,626,776 |
16
At March 31, 2006, net assets consisted of:6 | ||
Amount | ||
($000) | ||
Paid-in Capital | 5,655,819 | |
Undistributed Net Investment Income | 11,076 | |
Accumulated Net Realized Losses | (29,062) | |
Unrealized Appreciation (Depreciation) | ||
Investment Securities | 988,172 | |
Futures Contracts | 791 | |
Foreign Currencies | (20) | |
Net Assets | 6,626,776 | |
Investor Shares--Net Assets | ||
Applicable to 274,659,022 outstanding $.001 | ||
par value shares of beneficial interest | ||
(unlimited authorization) | 5,118,443 | |
Net Asset Value Per Share-- | ||
Investor Shares | $18.64 | |
Admiral Shares--Net Assets | ||
Applicable to 26,091,939 outstanding $.001 | ||
par value shares of beneficial interest | ||
(unlimited authorization) | 1,508,333 | |
Net Asset Value Per Share-- | ||
Admiral Shares | $57.81 |
o See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Part of security position is on loan to broker/dealers. See Note G in Notes to Financial Statements.
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 99.2% and 1.3%, respectively, of net assets. See Note E in Notes to Financial Statements.
2 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
4 The issuer operates under a congressional charter; its securities are neither issued nor guaranteed by the U.S. government. If needed, access to additional funding from the U.S. Treasury (beyond the issuer's line of credit) would require congressional action.
5 Securities with a value of $13,984,000 have been segregated as initial margin for open futures contracts.
6 See Note E in Notes to Financial Statements for the tax-basis components of net assets.
ADR--American Depositary Receipt.
REIT--Real Estate Investment Trust.
17
Statement of Operations
Six Months Ended March 31, 2006 | |
---|---|
($000) | |
Investment Income | |
Income | |
Dividends1 | 33,611 |
Interest1 | 6,109 |
Security Lending | 448 |
Total Income | 40,168 |
Expenses | |
Investment Advisory Fees--Note B | |
Basic Fee | 2,523 |
Performance Adjustment | 551 |
The Vanguard Group--Note C | |
Management and Administrative | |
Investor Shares | 6,801 |
Admiral Shares | 754 |
Marketing and Distribution | |
Investor Shares | 678 |
Admiral Shares | 161 |
Custodian Fees | 58 |
Shareholders' Reports | |
Investor Shares | 71 |
Admiral Shares | 1 |
Trustees' Fees and Expenses | 4 |
Total Expenses | 11,602 |
Expenses Paid Indirectly--Note D | (437) |
Net Expenses | 11,165 |
Net Investment Income | 29,003 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | 386,286 |
Futures Contracts | 3,335 |
Foreign Currencies | (233) |
Realized Net Gain (Loss) | 389,388 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 161,231 |
Futures Contracts | (181) |
Foreign Currencies | (39) |
Change in Unrealized Appreciation (Depreciation) | 161,011 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 579,402 |
1 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $309,000, $3,926,000, and $0, respectively. |
18
Statement of Changes in Net Assets
Six Months Ended Mar. 31, 2006 ($000) | Year Ended Sept. 30, 2005 ($000) | |
---|---|---|
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 29,003 | 43,197 |
Realized Net Gain (Loss) | 389,388 | 345,489 |
Change in Unrealized Appreciation (Depreciation) | 161,011 | 370,462 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 579,402 | 759,148 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (25,348) | (29,142) |
Admiral Shares | (9,445) | (4,441) |
Realized Capital Gain | ||
Investor Shares | -- | -- |
Admiral Shares | -- | -- |
Total Distributions | (34,793) | (33,583) |
Capital Share Transactions--Note H | ||
Investor Shares | 149,666 | (210,401) |
Admiral Shares | 283,605 | 505,807 |
Net Increase (Decrease) from Capital Share Transactions | 433,271 | 295,406 |
Total Increase (Decrease) | 977,880 | 1,020,971 |
Net Assets | ||
Beginning of Period | 5,648,896 | 4,627,925 |
End of Period1 | 6,626,776 | 5,648,896 |
1 Including undistributed net investment income of $11,076,000 and $17,099,000. |
19
Financial Highlights
Morgan Growth Fund Investor Shares | |||||||
---|---|---|---|---|---|---|---|
Six Months Ended Mar. 31, | Year Ended September 30, | Jan. 1 to Sept. 30, | Year Ended Dec. 31, | ||||
For a Share Outstanding Throughout Each Period | 2006 | 2005 | 2004 | 2003 | 2002 | 20011 | 2000 |
Net Asset Value, | |||||||
Beginning of Period | $17.04 | $14.77 | $13.34 | $10.49 | $12.71 | $17.08 | $22.92 |
Investment Operations | |||||||
Net Investment Income | .077 | .1292 | .05 | .04 | .049 | .06 | .16 |
Net Realized and Unrealized | |||||||
Gain (Loss) on Investments | 1.618 | 2.246 | 1.42 | 2.85 | (2.194) | (4.38) | (2.90) |
Total from Investment | |||||||
Operations | 1.695 | 2.375 | 1.47 | 2.89 | (2.145) | (4.32) | (2.74) |
Distributions | |||||||
Dividends from Net | |||||||
Investment Income | (.095) | (.105) | (.04) | (.04) | (.075) | -- | (.15) |
Distributions from | |||||||
Realized Capital Gains | -- | -- | -- | -- | -- | (.05) | (2.95) |
Total Distributions | (.095) | (.105) | (.04) | (.04) | (.075) | (.05) | (3.10) |
Net Asset Value, | |||||||
End of Period | $18.64 | $17.04 | $14.77 | $13.34 | $10.49 | $12.71 | $17.08 |
Total Return | 9.97% | 16.12% | 11.03% | 27.62% | -17.04% | -25.33% | -12.51% |
Ratios/Supplemental Data | |||||||
Net Assets, | |||||||
End of Period (Millions) | $5,118 | $4,539 | $4,115 | $3,329 | $2,369 | $3,066 | $4,661 |
Ratio of Total Expenses to | |||||||
Average Net Assets3 | 0.41%4 | 0.41% | 0.44% | 0.50% | 0.48% | 0.43%4 | 0.40% |
Ratio of Net Investment | |||||||
Income to Average Net Assets | 0.91%4 | 0.82%2 | 0.32% | 0.31% | 0.37% | 0.49%4 | 0.73% |
Portfolio Turnover Rate | 89% | 88% | 88% | 91% | 104% | 53% | 94% |
1 The fund’s fiscal year-end changed from December 31 to September 30, effective September 30, 2001. 2 Net investment income per share and the ratio of net investment income to average net assets include $0.044 and 0.28%, respectively, resulting from a special dividend from Microsoft Corp. in November 2004. 3 Includes performance-based investment advisory fee increases (decreases) of 0.02%, 0.00%, 0.01%, 0.00%, 0.00%, 0.02%, and (0.01%). 4 Annualized. |
20
Morgan Growth Fund Admiral Shares | ||||||
---|---|---|---|---|---|---|
Six Months Ended Mar. 31, | Year Ended September 30, | May 141 to Sept. 30, | ||||
For a Share Outstanding Throughout Each Period | 2006 | 2005 | 2004 | 2003 | 2002 | 20012 |
Net Asset Value, Beginning of Period | $52.91 | $45.84 | $41.40 | $32.58 | $39.44 | $50.00 |
Investment Operations | ||||||
Net Investment Income | .286 | .5003 | .212 | .17 | .20 | .12 |
Net Realized and Unrealized Gain (Loss) | ||||||
on Investments | 5.012 | 6.956 | 4.416 | 8.83 | (6.79) | (10.68) |
Total from Investment Operations | 5.298 | 7.456 | 4.628 | 9.00 | (6.59) | (10.56) |
Distributions | ||||||
Dividends from Net Investment Income | (.398) | (.386) | (.188) | (.18) | (.27) | -- |
Distributions from Realized Capital Gains | -- | -- | -- | -- | -- | -- |
Total Distributions | (.398) | (.386) | (.188) | (.18) | (.27) | -- |
Net Asset Value, End of Period | $57.81 | $52.91 | $45.84 | $41.40 | $32.58 | $39.44 |
Total Return | 10.04% | 16.32% | 11.19% | 27.73% | -16.90% | -21.12% |
Ratios/Supplemental Data | ||||||
Net Assets, End of Period (Millions) | $1,508 | $1,110 | $513 | $390 | $246 | $267 |
Ratio of Total Expenses to | ||||||
Average Net Assets4 | 0.24%5 | 0.24% | 0.30% | 0.36% | 0.36% | 0.36%5 |
Ratio of Net Investment Income to | ||||||
Average Net Assets | 1.08%5 | 0.96%3 | 0.47% | 0.45% | 0.49% | 0.56%5 |
Portfolio Turnover Rate | 89%5 | 88% | 88% | 91% | 104% | 53% |
1 Inception.
2 The fund’s fiscal year-end changed from December 31 to September 30, effective September 30, 2001.
3 Net investment income per share and the ratio of net investment income to average net assets include $0.184 and 0.28%, respectively, resulting from a special dividend from Microsoft Corp. in November 2004.
4 Includes performance-based investment advisory fee increases (decreases) of 0.02%, 0.00%, 0.01%, 0.00%, 0.00%, and 0.02%.
5 Annualized.
See accompanying Notes, which are an integral part of the Financial Statements.
21
Notes to Financial Statements
Vanguard Morgan 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, servicing, tenure, 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 4:00 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 at the exchange rates on the valuation date as employed by Morgan Stanley Capital International (MSCI) in the calculation of its indexes. As part of the fund’s fair-value procedures, exchange rates may be adjusted if they change significantly before the fund’s pricing time but after the time at which the MSCI rates are determined (generally 11:00 a.m., Eastern time).
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 asset or liability is settled in cash, when 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.
22
Futures contracts are valued at their quoted daily settlement prices. The aggregate principal amounts of the contracts are not recorded in the financial statements. 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 invest in repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default or bankruptcy by the other party to the agreement, retention of the collateral may be subject to legal proceedings.
5. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the 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 the 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. Wellington Management Company, LLP, and Franklin Portfolio Associates, LLC, provide investment advisory services to the fund for fees calculated at an annual percentage rate of average net assets. The basic fee of Wellington Management Company, LLP, is subject to quarterly adjustments based on performance for the preceding three years relative to the Russell 3000 Growth Index; the basic fee of Franklin Portfolio Associates, LLC, is subject to quarterly adjustments based on performance for the preceding three years relative to the Russell Midcap Growth Index. The Vanguard Group provides investment advisory services to a portion of the fund on an at-cost basis; the fund paid Vanguard advisory fees of $265,000 for the six months ended March 31, 2006.
For the six months ended March 31, 2006, the aggregate investment advisory fee represented an effective annual basic rate of 0.08% of the fund’s average net assets, before an increase of $551,000 based on performance.
23
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 March 31, 2006, the fund had contributed capital of $715,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.71% 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. The fund’s custodian bank has also agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended March 31, 2006, these arrangements reduced the fund’s management and administrative expenses by $435,000 and custodian fees by $2,000. The total expense reduction represented an effective annual rate of 0.01% of the fund’s average net assets.
E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.
The fund’s return of capital distributions and tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at September 30, 2005, the fund had available realized losses of $417,320,000 to offset future net capital gains of $61,202,000 through September 30, 2010, and $356,118,000 through September 30, 2011.
During the six months ended March 31, 2006, the fund realized net foreign currency losses of $233,000, which decreased distributable net income for tax purposes; accordingly, such losses have been reclassified from undistributed net investment income to accumulated net realized losses.
At September 30, 2005, net unrealized appreciation of investment securities for tax purposes was $988,172,000, consisting of unrealized gains of $1,085,274,000 on securities that had risen in value since their purchase and $97,102,000 in unrealized losses on securities that had fallen in value since their purchase.
At March 31, 2006, the aggregate settlement value of open futures contracts expiring in June 2006 and the related unrealized appreciation (depreciation) were:
($000) | |||
---|---|---|---|
Futures Contracts | Number of Long Contracts | Aggregate Settlement Value | Unrealized Appreciation (Depreciation) |
S&P 500 Index | 478 | 155,744 | 973 |
E-mini S&P 500 Index | 650 | 42,357 | (182) |
24
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
F. During the six months ended March 31, 2006, the fund purchased $3,072,515,000 of investment securities and sold $2,598,337,000 of investment securities, other than temporary cash investments.
G. The market value of securities on loan to broker/dealers at March 31, 2006, was $50,392,000, for which the fund received cash collateral of $51,086,000.
H. Capital share transactions for each class of shares were:
Six Months Ended March 31, 2006 | Year Ended September 30, 2005 | |||
---|---|---|---|---|
Amount ($000) | Shares (000) | Amount ($000) | Shares (000) | |
Investor Shares | ||||
Issued | 536,366 | 30,059 | 761,581 | 47,482 |
Issued in Lieu of Cash Distributions | 24,672 | 1,378 | 28,186 | 1,757 |
Redeemed | (411,372) | (23,182) | (1,000,168) | (61,446) |
Net Increase (Decrease)--Investor Shares | 149,666 | 8,255 | (210,401) | (12,207) |
Admiral Shares | ||||
Issued | 351,586 | 6,348 | 575,357 | 11,175 |
Issued in Lieu of Cash Distributions | 6,969 | 125 | 3,187 | 64 |
Redeemed | (74,950) | (1,353) | (72,737) | (1,457) |
Net Increase (Decrease)--Admiral Shares | 283,605 | 5,120 | 505,807 | 9,782 |
25
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The table below 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.
Six Months Ended March 31, 2006 | |||
---|---|---|---|
Morgan Growth Fund | Beginning Account Value 9/30/2005 | Ending Account Value 3/31/2006 | Expenses Paid During Period1 |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,099.70 | $2.15 |
Admiral Shares | 1,000.00 | 1,100.44 | 1.26 |
Based on Hypothetical 5% Return | |||
Investor Shares | $1,000.00 | $1,022.89 | $2.07 |
Admiral Shares | 1,000.00 | 1,023.73 | 1.21 |
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 0.41% for Investor Shares and 0.24% 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.
26
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect any transactional costs or account maintenance fees. They do not include your fund’s low-balance fee, which is described in the prospectus. If this fee were applied to your account, your costs would be higher. Your fund does not charge transaction fees, such as purchase or redemption fees, nor does it carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate fund prospectus.
27
Trustees Renew Advisory Arrangements
The board of trustees of Vanguard Morgan Growth Fund has renewed investment advisory arrangements with the fund’s three advisors: Wellington Management Company, LLP; Franklin Portfolio Associates, LLC; and The Vanguard Group, Inc. (through its Quantitative Equity Group). The board determined that retention of these advisors was in the best interests of the fund and its shareholders.
The board based its decision upon its most recent evaluation of each advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangements. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board considered the quality of the fund’s investment management over both short- and long-term periods and took into account the organizational depth and stability of each advisor. The board noted the following:
• Wellington Management Company. Wellington Management, which was founded in 1928, is among the nation’s oldest and most respected institutional investment managers. The firm has advised the fund since 1984. The investment team at Wellington Management uses traditional methods of stock selection to identify companies that it believes have above-average growth prospects, particularly those in industries undergoing change.
• Franklin Portfolio Associates. Franklin Portfolio Associates, which was founded in 1982, is known for quantitative equity management combining investment experience, financial databases, and computer modeling. In seeking to identify attractive mid-capitalization growth stocks, the investment team employs more than 40 computer models covering a broad range of public data.
• The Vanguard Group. Vanguard has been managing investments for more than two decades. George U. Sauter, Vanguard managing director and chief investment officer, has been in the investment management business since 1985 and oversees more than $690 billion in assets (stocks and bonds). The Quantitative Equity Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
The board concluded that each advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangements.
Investment performance
The board considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance of relevant benchmarks and peer groups. The board concluded that each advisor has carried out the fund’s investment strategy in disciplined fashion, and that performance results have allowed the fund to remain competitive versus its benchmark and its average peer fund. Information about the fund’s performance, including some of the performance data considered by the board, can be found in the Performance Summary portion of this report.
28
Cost
The board concluded that the fund’s expense ratio was far below the average expense ratio charged by funds in its peer group. The fund’s advisory fee was also well below the peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the advisory fee rate.
The board did not consider profitability of Wellington Management or Franklin in determining whether to approve the advisory fee, because the two firms are independent of Vanguard and the advisory fees are the result of arm’s-length negotiations. The board does not consider a profitability analysis of Vanguard because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees, and produces “profits” only in the form of reduced expenses for fund shareholders.
The benefit of economies of scale
The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the advisory fee schedules for Wellington Management and Franklin. The breakpoints reduce the effective rate of the fees as the fund’s assets managed by Wellington Management and Franklin increase. The board also concluded that the fund’s low-cost arrangement with Vanguard ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as the fund’s assets managed by Vanguard increase.
The board will consider whether to renew the advisory arrangements again after a one-year period.
29
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%. 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.
Expense Ratio. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Foreign Holdings. The percentage of a fund’s equity assets represented by stocks or depositary receipts of companies based outside the United States.
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.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
Yield. A snapshot of a fund’s income from interest and dividends. The yield, expressed as a percentage of the fund’s net asset value, is based on income earned over the past 30 days and is annualized, or projected forward for the coming year. The index yield is based on the current annualized rate of income provided by securities in the index.
30
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund 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.
Our independent board members bring distinguished backgrounds in business, academia, and public service to their task of working with Vanguard officers to establish the policies and oversee the activities of the funds. Among board members’ responsibilities are selecting investment advisors for the funds; monitoring fund operations, performance, and costs; reviewing contracts; nominating and selecting new trustees/directors; and electing Vanguard officers.
Each trustee serves a fund until its termination; or until the trustee’s retirement, resignation, or death; or otherwise as specified in the fund’s organizational documents. Any trustee may be removed at a shareholders’ meeting by a vote representing two-thirds of the net asset value of all shares of the fund together with shares of other Vanguard funds organized within the same trust. The table on these two pages shows information for each trustee and executive officer of the fund. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482.
Chairman of the Board, Chief Executive Officer, and Trustee
John J. Brennan1 | |
---|---|
Born 1954 Trustee since May 1987; Chairman of the Board and Chief Executive Officer 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: Chairman of the Board, Chief Executive Officer, and Director/ Trustee of The Vanguard Group, Inc., and of each of the investment companies served by The Vanguard Group. |
IndependentTrustees | |
Charles D. Ellis | |
Born 1937 Trustee since January 2001 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: Applecore Partners (pro bono ventures in education); Senior Advisor to Greenwich Associates (international business strategy consulting); Successor Trustee of Yale University; Overseer of the Stern School of Business at New York University; Trustee of the Whitehead Institute for Biomedical Research. |
Rajiv L. Gupta | |
Born 1945 Trustee since December 20012 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: Chairman and Chief Executive Officer of Rohm and Haas Co. (chemicals); Board Member of the American Chemistry Council; Director of Tyco International, Ltd. (diversified manufacturing and services) (since 2005); Trustee of Drexel University and of the Chemical Heritage Foundation. |
JoAnn Heffernan Heisen | |
Born 1950 Trustee since July 1998 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: Corporate Vice President and Chief Global Diversity Officer (since January 2006), Vice President and Chief Information Officer (1997–2005), and Member of the Executive Committee of Johnson & Johnson (pharmaceuticals/consumer products); Director of the University Medical Center at Princeton and Women’s Research and Education Institute. |
André F. Perold | |
---|---|
Born 1952 Trustee since December 2004 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: George Gund Professor of Finance and Banking, Harvard Business School (since 2000); Senior Associate Dean, Director of Faculty Recruiting, and Chair of Finance Faculty, Harvard Business School; Director and Chairman of UNX, Inc. (equities trading firm) (since 2003); Director of registered investment companies advised by Merrill Lynch Investment Managers and affiliates (1985–2004), Genbel Securities Limited (South African financial services firm) (1999–2003), Gensec Bank (1999–2003), Sanlam, Ltd. (South African insurance company) (2001–2003), and Stockback, Inc. (credit card firm) (2000–2002). |
Alfred M. Rankin, Jr. | |
Born 1941 Trustee since January 1993 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: Chairman, President, Chief Executive Officer, and Director of NACCO Industries, Inc. (forklift trucks/housewares/lignite); Director of Goodrich Corporation (industrial products/aircraft systems and services); Director of Standard Products Company (supplier for the automotive industry) until 1998. |
J. Lawrence Wilson | |
Born 1936 Trustee since April 1985 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: Retired Chairman and Chief Executive Officer of Rohm and Haas Co. (chemicals); Director of Cummins Inc. (diesel engines), MeadWestvaco Corp. (packaging products), and AmerisourceBergen Corp. (pharmaceutical distribution); Trustee of Vanderbilt University and of Culver Educational Foundation. |
Executive Officers1 | |
Heidi Stam | |
Born 1956 Secretary since July 2005 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group, Inc., since November 1997; General Counsel of The Vanguard Group since July 2005; Secretary of The Vanguard Group and of each of the investment companies served by The Vanguard Group since July 2005. |
Thomas J. Higgins | |
Born 1957 Treasurer since July 1998 133 Vanguard Funds Overseen | Principal Occupation(s) During the Past Five Years: Principal of The Vanguard Group, Inc.; Treasurer of each of the investment companies served by The Vanguard Group. |
Vanguard Senior Management Team | |
R. Gregory Barton | |
Mortimer J. Buckley | |
James H. Gately | |
Kathleen C. Gubanich | |
F. William McNabb, III | |
Michael S. Miller | |
Ralph K. Packard | |
George U. Sauter | |
Founder | |
John C. Bogle | |
Chairman and Chief Executive Officer, 1974-1996 |
1 | Officers of the funds are “interested persons” as defined in the Investment Company Act of 1940. |
2 | December 2002 for Vanguard Equity Income Fund, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds. |
More information about the trustees is in the Statement of Additional Information, available from The Vanguard Group. |
P.O. Box 2600
Valley Forge, PA 19482-2600
Connect with Vanguard™ > www.vanguard.com
Fund Information > 800-662-7447 | Vanguard, Vanguard.com, Admiral, Morgan, VIPERs, |
Connect with Vanguard, and the ship logo are | |
Direct Investor Account Services > 800-662-2739 | trademarks of The Vanguard Group, Inc. |
Institutional Investor Services > 800-523-1036 | |
All other marks are the exclusive property of their | |
Text Telephone > 800-952-3335 | respective owners. |
All comparative mutual fund data are from Lipper Inc. | |
or Morningstar, Inc., unless otherwise noted. | |
This material may be used in conjunction | |
with the offering of shares of any Vanguard | You can obtain a free copy of Vanguard's proxy voting |
fund only if preceded or accompanied by | guidelines by visiting our website, www.vanguard.com, |
the fund's current prospectus | and searching for "proxy voting guidelines," or by calling |
Vanguard at 800-662-2739. They are also available from | |
the SEC's website, www.sec.gov. In addition, you may | |
obtain a free report on how your fund voted the proxies for | |
securities it owned during the 12 months ended June 30. | |
To get the report, visit either www.vanguard.com | |
or www.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 20549-0102. | |
(C) 2006 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q262 052006 |
Item 2: Not Applicable
Item 3: Not Applicable
Item 4: Not Applicable
Item 5: Not applicable.
Item 6: Not applicable.
Item 7: Not applicable.
Item 8: Not applicable.
Item 9: Not applicable.
Item 10: 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.
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 MORGAN GROWTH FUND | |
BY: | (signature) |
(HEIDI STAM) JOHN J. BRENNAN* CHIEF EXECUTIVE OFFICER |
Date: | May 16, 2006 |
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 MORGAN GROWTH FUND | |
BY: | (signature) |
(HEIDI STAM) JOHN J. BRENNAN* CHIEF EXECUTIVE OFFICER |
Date: | May 16, 2006 |
VANGUARD MORGAN GROWTH FUND | |
BY: | (signature) |
(HEIDI STAM) THOMAS J. HIGGINS* TREASURER |
Date: | May 16, 2006 |
*By Power of Attorney. See File Number 2-31333, filed on January 23, 2006. Incorporated by Reference.