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: 811-05445
Name of Registrant: | Vanguard Fenway Funds |
Address of Registrant: | P.O. Box 2600 |
| Valley Forge, PA 19482 |
Name and address of agent for service: | Anne E. Robinson, Esquire |
| P.O. Box 876 |
| Valley Forge, PA 19482 |
Registrant’s telephone number, including area code: (610) 669-1000
Date of fiscal year end: September 30
Date of reporting period: October 1, 2018—March 31, 2019
Item 1: Reports to Shareholders
Semiannual Report | March 31, 2019
Vanguard Equity Income Fund
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See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.
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Important information about access to shareholder reports
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.
If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.
You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.
Contents |
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About Your Fund’s Expenses | 1 |
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Financial Statements | 4 |
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Trustees Approve Advisory Arrangements | 18 |
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.
Six Months Ended March 31, 2019
| Beginning | Ending | Expenses |
| Account Value | Account Value | Paid During |
Equity Income Fund | 9/30/2018 | 3/31/2019 | Period |
Based on Actual Fund Return |
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|
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Investor Shares | $1,000.00 | $1,006.61 | $1.35 |
Admiral™ Shares | 1,000.00 | 1,007.08 | 0.90 |
Based on Hypothetical 5% Yearly Return |
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Investor Shares | $1,000.00 | $1,023.59 | $1.36 |
Admiral Shares | 1,000.00 | 1,024.03 | 0.91 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.27% for Investor Shares and 0.18% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (182/365).
Equity Income Fund
Sector Diversification
As of March 31, 2019
Communication Services | 7.0% |
Consumer Discretionary | 4.0 |
Consumer Staples | 12.1 |
Energy | 9.8 |
Financials | 16.7 |
Health Care | 16.4 |
Industrials | 9.9 |
Information Technology | 11.4 |
Materials | 3.4 |
Real Estate | 1.2 |
Utilities | 8.1 |
The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. Sector categories are based on the Global Industry Classification Standard (“GICS”), except for the “Other” category (if applicable), which includes securities that have not been provided a GICS classification as of the effective reporting period.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
Equity Income Fund
Financial Statements (unaudited)
Statement of Net Assets
As of March 31, 2019
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports will be available on the SEC’s website at www.sec.gov.
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| Market |
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| Value· |
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| Shares |
| ($000 | ) |
Common Stocks (96.5%)1 |
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Communication Services (6.7%) |
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| Verizon Communications Inc. |
| 18,407,435 |
| 1,088,432 |
|
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| Comcast Corp. Class A |
| 16,969,920 |
| 678,457 |
|
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| AT&T Inc. |
| 6,243,050 |
| 195,782 |
|
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| BCE Inc. |
| 3,935,050 |
| 174,734 |
|
|
| Omnicom Group Inc. |
| 1,038,383 |
| 75,792 |
|
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| CenturyLink Inc. |
| 1,804,501 |
| 21,636 |
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| Viacom Inc. Class B |
| 602,075 |
| 16,900 |
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| Sinclair Broadcast Group Inc. Class A |
| 346,264 |
| 13,324 |
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| TEGNA Inc. |
| 760,653 |
| 10,725 |
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|
|
|
|
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| 2,275,782 |
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Consumer Discretionary (3.7%) |
|
|
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| Home Depot Inc. |
| 1,691,537 |
| 324,589 |
|
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| McDonald’s Corp. |
| 1,658,029 |
| 314,860 |
|
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| Cie Generale des Etablissements Michelin SCA |
| 954,692 |
| 112,792 |
|
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| General Motors Co. |
| 2,979,332 |
| 110,533 |
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| Ralph Lauren Corp. Class A |
| 427,482 |
| 55,436 |
|
|
| Darden Restaurants Inc. |
| 439,172 |
| 53,346 |
|
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| Abercrombie & Fitch Co. |
| 1,662,552 |
| 45,571 |
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^ |
| Brinker International Inc. |
| 944,559 |
| 41,919 |
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| H&R Block Inc. |
| 1,355,378 |
| 32,448 |
|
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| Whirlpool Corp. |
| 212,195 |
| 28,199 |
|
|
| Tapestry Inc. |
| 581,809 |
| 18,903 |
|
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| Signet Jewelers Ltd. |
| 653,543 |
| 17,750 |
|
|
| Tailored Brands Inc. |
| 2,207,570 |
| 17,307 |
|
|
| Dine Brands Global Inc. |
| 183,313 |
| 16,735 |
|
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| Best Buy Co. Inc. |
| 221,668 |
| 15,752 |
|
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| Garmin Ltd. |
| 177,121 |
| 15,294 |
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| Nordstrom Inc. |
| 310,505 |
| 13,780 |
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| Macy’s Inc. |
| 505,117 |
| 12,138 |
|
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| Bed Bath & Beyond Inc. |
| 632,380 |
| 10,744 |
|
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| Autoliv Inc. |
| 79,551 |
| 5,849 |
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|
|
| 1,263,945 |
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Consumer Staples (11.8%) |
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| Philip Morris International Inc. |
| 7,631,128 |
| 674,515 |
|
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| Procter & Gamble Co. |
| 5,094,749 |
| 530,109 |
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| PepsiCo Inc. |
| 4,259,407 |
| 521,990 |
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| Coca-Cola Co. |
| 10,549,698 |
| 494,359 |
|
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| Unilever NV |
| 7,015,691 |
| 408,945 |
|
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| Mondelez International Inc. Class A |
| 4,984,267 |
| 248,815 |
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| Sysco Corp. |
| 3,720,449 |
| 248,377 |
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| Walmart Inc. |
| 2,444,035 |
| 238,367 |
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| Nestle SA |
| 2,001,645 |
| 190,858 |
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| Kimberly-Clark Corp. |
| 893,644 |
| 110,722 |
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| Coca-Cola European Partners plc |
| 1,354,632 |
| 70,089 |
|
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| Altria Group Inc. |
| 1,001,439 |
| 57,513 |
|
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| Archer-Daniels-Midland Co. |
| 1,141,498 |
| 49,233 |
|
|
| Walgreens Boots Alliance Inc. |
| 700,092 |
| 44,295 |
|
|
| Flowers Foods Inc. |
| 2,003,591 |
| 42,716 |
|
|
| Nu Skin Enterprises Inc. Class A |
| 498,905 |
| 23,877 |
|
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| Molson Coors Brewing Co. Class B |
| 338,963 |
| 20,219 |
|
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| Colgate-Palmolive Co. |
| 87,170 |
| 5,975 |
|
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|
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| 3,980,974 |
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Energy (9.5%) |
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| Chevron Corp. |
| 6,891,094 |
| 848,845 |
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| Exxon Mobil Corp. |
| 8,257,045 |
| 667,169 |
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| Suncor Energy Inc. |
| 13,571,901 |
| 440,137 |
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| Occidental Petroleum Corp. |
| 5,085,169 |
| 336,638 |
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| Kinder Morgan Inc. |
| 15,899,782 |
| 318,155 |
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^ |
| TransCanada Corp. |
| 6,151,957 |
| 276,305 |
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| Phillips 66 |
| 1,472,856 |
| 140,172 |
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| ConocoPhillips |
| 1,020,189 |
| 68,087 |
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| Murphy Oil Corp. |
| 2,021,808 |
| 59,239 |
|
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| HollyFrontier Corp. |
| 454,035 |
| 22,370 |
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| Cosan Ltd. |
| 1,109,813 |
| 12,863 |
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Equity Income Fund
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| Market |
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| Value· |
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| Shares |
| ($000 | ) |
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| Schlumberger Ltd. |
| 233,265 |
| 10,163 |
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| Delek US Holdings Inc. |
| 159,089 |
| 5,794 |
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| Archrock Inc. |
| 564,592 |
| 5,522 |
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|
|
|
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| 3,211,459 |
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Financials (16.2%) |
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| JPMorgan Chase & Co. |
| 12,288,299 |
| 1,243,944 |
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| Wells Fargo & Co. |
| 12,331,248 |
| 595,846 |
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| MetLife Inc. |
| 10,133,413 |
| 431,379 |
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| Bank of America Corp. |
| 12,442,650 |
| 343,293 |
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| Marsh & McLennan Cos. Inc. |
| 3,214,978 |
| 301,886 |
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| PNC Financial Services Group Inc. |
| 2,294,971 |
| 281,501 |
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| Chubb Ltd. |
| 1,794,187 |
| 251,330 |
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| M&T Bank Corp. |
| 1,293,041 |
| 203,033 |
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| Travelers Cos. Inc. |
| 1,331,334 |
| 182,606 |
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| US Bancorp |
| 3,753,612 |
| 180,887 |
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| American International Group Inc. |
| 3,425,164 |
| 147,488 |
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| Citigroup Inc. |
| 2,081,401 |
| 129,505 |
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| Aflac Inc. |
| 2,143,034 |
| 107,152 |
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| Principal Financial Group Inc. |
| 2,110,588 |
| 105,930 |
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| BlackRock Inc. |
| 198,684 |
| 84,912 |
|
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| SunTrust Banks Inc. |
| 1,423,449 |
| 84,339 |
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| Ameriprise Financial Inc. |
| 624,375 |
| 79,982 |
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| Fifth Third Bancorp |
| 2,814,257 |
| 70,976 |
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| Regions Financial Corp. |
| 4,790,284 |
| 67,783 |
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| Morgan Stanley |
| 1,581,041 |
| 66,720 |
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| LPL Financial Holdings Inc. |
| 937,968 |
| 65,329 |
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| Prudential Financial Inc. |
| 655,964 |
| 60,270 |
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| BB&T Corp. |
| 991,664 |
| 46,142 |
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| Huntington Bancshares Inc. |
| 3,529,145 |
| 44,750 |
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| First American Financial Corp. |
| 853,617 |
| 43,961 |
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| Franklin Resources Inc. |
| 1,030,379 |
| 34,147 |
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| T. Rowe Price Group Inc. |
| 305,185 |
| 30,555 |
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| Synchrony Financial |
| 907,063 |
| 28,935 |
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| Progressive Corp. |
| 357,510 |
| 25,773 |
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| Arthur J Gallagher & Co. |
| 291,963 |
| 22,802 |
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| Cullen/Frost Bankers Inc. |
| 202,498 |
| 19,656 |
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| Comerica Inc. |
| 259,338 |
| 19,015 |
|
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| Fidelity National Financial Inc. |
| 511,602 |
| 18,699 |
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| People’s United Financial Inc. |
| 802,434 |
| 13,192 |
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| Cincinnati Financial Corp. |
| 137,067 |
| 11,774 |
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| CME Group Inc. |
| 53,453 |
| 8,797 |
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| Unum Group |
| 239,807 |
| 8,113 |
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| PacWest Bancorp |
| 146,080 |
| 5,494 |
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|
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|
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| 5,467,896 |
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Health Care (15.8%) |
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| Johnson & Johnson |
| 8,104,705 |
| 1,132,957 |
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| Merck & Co. Inc. |
| 9,028,614 |
| 750,910 |
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| Pfizer Inc. |
| 17,163,647 |
| 728,940 |
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| Eli Lilly & Co. |
| 4,237,250 |
| 549,826 |
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| Medtronic plc |
| 4,650,435 |
| 423,562 |
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| Bristol-Myers Squibb Co. |
| 6,715,332 |
| 320,388 |
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| Novartis AG |
| 3,081,814 |
| 296,223 |
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| Koninklijke Philips NV |
| 7,151,965 |
| 292,213 |
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| Roche Holding AG |
| 1,019,842 |
| 281,022 |
|
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| AstraZeneca plc ADR |
| 4,026,017 |
| 162,772 |
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| AbbVie Inc. |
| 2,008,237 |
| 161,844 |
|
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| Gilead Sciences Inc. |
| 1,233,349 |
| 80,180 |
|
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| Amgen Inc. |
| 408,936 |
| 77,690 |
|
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| Cardinal Health Inc. |
| 1,491,241 |
| 71,803 |
|
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| CVS Health Corp. |
| 408,407 |
| 22,025 |
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|
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| 5,352,355 |
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Industrials (9.6%) |
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| Lockheed Martin Corp. |
| 1,377,992 |
| 413,618 |
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| Caterpillar Inc. |
| 2,710,286 |
| 367,217 |
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| Union Pacific Corp. |
| 1,884,832 |
| 315,144 |
|
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| 3M Co. |
| 1,493,896 |
| 310,402 |
|
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| Deere & Co. |
| 1,769,337 |
| 282,811 |
|
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| Eaton Corp. plc |
| 3,503,952 |
| 282,278 |
|
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| Honeywell International Inc. |
| 1,400,365 |
| 222,546 |
|
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| United Technologies Corp. |
| 1,580,289 |
| 203,684 |
|
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| BAE Systems plc |
| 26,684,016 |
| 167,730 |
|
|
| United Parcel Service Inc. Class B |
| 996,913 |
| 111,395 |
|
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| PACCAR Inc. |
| 1,217,191 |
| 82,939 |
|
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| Boeing Co. |
| 211,301 |
| 80,595 |
|
|
| Cummins Inc. |
| 485,153 |
| 76,591 |
|
|
| CH Robinson Worldwide Inc. |
| 788,750 |
| 68,613 |
|
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| Waste Management Inc. |
| 581,732 |
| 60,448 |
|
|
| General Electric Co. |
| 4,314,703 |
| 43,104 |
|
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| Raytheon Co. |
| 230,163 |
| 41,908 |
|
|
| GATX Corp. |
| 540,334 |
| 41,265 |
|
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| KAR Auction Services Inc. |
| 557,319 |
| 28,596 |
|
|
| Greenbrier Cos. Inc. |
| 709,432 |
| 22,865 |
|
|
| Illinois Tool Works Inc. |
| 155,486 |
| 22,317 |
|
|
|
|
|
|
| 3,246,066 |
|
Information Technology (10.8%) |
|
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| Cisco Systems Inc. |
| 17,125,536 |
| 924,608 |
|
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| Intel Corp. |
| 14,854,763 |
| 797,701 |
|
|
| Analog Devices Inc. |
| 3,977,119 |
| 418,671 |
|
|
| QUALCOMM Inc. |
| 4,374,115 |
| 249,456 |
|
|
| KLA-Tencor Corp. |
| 1,866,045 |
| 222,824 |
|
|
| Maxim Integrated Products Inc. |
| 2,901,963 |
| 154,297 |
|
Equity Income Fund
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| Market |
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| Value· |
| |
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| Shares |
| ($000 | ) | |
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| TE Connectivity Ltd. |
| 1,850,117 |
| 149,397 |
| |
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| Texas Instruments Inc. |
| 1,389,800 |
| 147,416 |
| |
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| International Business Machines Corp. |
| 729,810 |
| 102,976 |
| |
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| HP Inc. |
| 4,747,653 |
| 92,247 |
| |
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| Seagate Technology plc |
| 1,650,603 |
| 79,047 |
| |
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| Broadcom Inc. |
| 218,853 |
| 65,811 |
| |
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| Western Union Co. |
| 3,561,360 |
| 65,778 |
| |
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| Microsoft Corp. |
| 507,367 |
| 59,839 |
| |
|
| Cypress Semiconductor Corp. |
| 3,145,347 |
| 46,929 |
| |
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| Science Applications International Corp. |
| 532,664 |
| 40,989 |
| |
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| NetApp Inc. |
| 135,303 |
| 9,382 |
| |
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| Juniper Networks Inc. |
| 293,586 |
| 7,771 |
| |
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| Automatic Data Processing Inc. |
| 46,519 |
| 7,431 |
| |
|
| Xilinx Inc. |
| 54,506 |
| 6,911 |
| |
|
|
|
|
|
| 3,649,481 |
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Materials (3.3%) |
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| DowDuPont Inc. |
| 8,631,158 |
| 460,127 |
| |
^ |
| Nutrien Ltd. |
| 3,742,378 |
| 197,448 |
| |
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| Linde plc |
| 954,227 |
| 167,877 |
| |
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| International Paper Co. |
| 1,941,279 |
| 89,823 |
| |
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| CF Industries Holdings Inc. |
| 1,621,032 |
| 66,268 |
| |
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| Domtar Corp. |
| 876,312 |
| 43,509 |
| |
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| Nucor Corp. |
| 663,179 |
| 38,697 |
| |
|
| Huntsman Corp. |
| 1,317,990 |
| 29,642 |
| |
|
| Greif Inc. Class A |
| 625,196 |
| 25,789 |
| |
|
| RPM International Inc. |
| 120,938 |
| 7,019 |
| |
|
|
|
|
|
| 1,126,199 |
| |
Real Estate (1.1%) |
|
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| Crown Castle International Corp. |
| 3,004,573 |
| 384,585 |
| |
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Utilities (8.0%) |
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| |||
|
| Dominion Energy Inc. |
| 4,916,997 |
| 376,937 |
| |
|
| NextEra Energy Inc. |
| 1,641,789 |
| 317,391 |
| |
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| Sempra Energy |
| 2,195,282 |
| 276,298 |
| |
|
| American Electric Power Co. Inc. |
| 3,295,647 |
| 276,010 |
| |
|
| Eversource Energy |
| 3,148,081 |
| 223,356 |
| |
|
| Exelon Corp. |
| 4,105,800 |
| 205,824 |
| |
|
| Duke Energy Corp. |
| 2,183,562 |
| 196,521 |
| |
|
| Southern Co. |
| 2,001,919 |
| 103,459 |
| |
|
| FirstEnergy Corp. |
| 2,292,533 |
| 95,392 |
| |
|
| Entergy Corp. |
| 923,105 |
| 88,277 |
| |
|
| AES Corp. |
| 4,626,226 |
| 83,642 |
| |
|
| Ameren Corp. |
| 1,086,106 |
| 79,883 |
| |
|
| Xcel Energy Inc. |
| 1,332,170 |
| 74,881 |
| |
|
| Edison International |
| 947,935 |
| 58,696 |
| |
|
| PNM Resources Inc. |
| 966,679 |
| 45,763 |
| |
|
| OGE Energy Corp. |
| 774,007 |
| 33,375 |
| |
|
| IDACORP Inc. |
| 314,858 |
| 31,341 |
| |
|
| MDU Resources Group Inc. |
| 1,115,188 |
| 28,805 |
| |
|
| CenterPoint Energy Inc. |
| 692,047 |
| 21,246 |
| |
|
| Pinnacle West Capital Corp. |
| 219,873 |
| 21,016 |
| |
|
| DTE Energy Co. |
| 152,634 |
| 19,040 |
| |
|
| National Fuel Gas Co. |
| 261,602 |
| 15,947 |
| |
|
| CMS Energy Corp. |
| 163,199 |
| 9,064 |
| |
|
| NRG Energy Inc. |
| 134,838 |
| 5,728 |
| |
|
|
|
|
|
| 2,687,892 |
| |
Total Common Stocks |
|
|
| 32,646,634 |
| |||
Temporary Cash Investments (4.0%)1 |
|
|
|
|
| |||
Money Market Fund (2.4%) |
|
|
|
|
| |||
2,3 |
| Vanguard Market Liquidity Fund, 2.554% |
| 8,119,297 |
| 812,092 |
| |
|
|
|
|
|
|
|
| |
|
|
|
| Face |
|
|
| |
|
|
|
| Amount |
|
|
| |
|
|
|
| ($000 | ) |
|
|
|
Repurchase Agreements (1.5%) |
|
|
|
|
| |||
|
| Goldman Sachs & Co. 2.550%, 4/1/19 (Dated 3/29/19, Repurchase Value $127,827,000, collateralized by Federal National Mortgage Assn. 5.000%, 7/1/35–6/1/40, and Government National Mortgage Assn. 4.070%–6.000%, 11/20/38–3/15/49, with a value of $130,356,000) |
| 127,800 |
| 127,800 |
| |
|
| Nomura International plc 2.570%, 4/1/19 (Dated 3/29/19, Repurchase Value $289,062,000, collateralized by U.S. Treasury Bill 0.000%, 7/11/19–1/30/20, and U.S. Treasury Note/Bond 0.125%–6.000%, 8/15/19–2/15/46, with a value of $294,780,000) |
| 289,000 |
| 289,000 |
| |
Equity Income Fund
|
|
|
| Face |
| Market |
|
|
|
|
| Amount |
| Value· |
|
|
|
|
| ($000 | ) | ($000 | ) |
|
| RBS Securities, Inc. 2.550%, 4/1/19 (Dated 3/29/19, Repurchase Value $69,415,000, collateralized by U.S. Treasury Note/Bond 0.125%–0.750%, 4/15/19–2/15/45, with a value of $70,788,000) |
| 69,400 |
| 69,400 |
|
|
| Societe Generale 2.550%, 4/1/19 (Dated 3/29/19, Repurchase Value $23,005,000, collateralized by Federal Home Loan Bank 1.875%, 12/11/20, U.S. Treasury Bill 0.000%, 6/20/19–2/27/20, and U.S. Treasury Note/Bond 1.375%–6.875%, 4/30/20–8/15/25, with a value of $23,460,000) |
| 23,000 |
| 23,000 |
|
|
|
|
|
|
| 509,200 |
|
U.S. Government and Agency Obligations (0.1%) |
|
|
|
|
| ||
4 |
| United States Treasury Bill, |
|
|
|
|
|
|
| 2.474%–2.479%, 5/9/19 |
| 4,800 |
| 4,788 |
|
4 |
| United States Treasury Bill, |
|
|
|
|
|
|
| 2.398%–2.411%, 5/23/19 |
| 12,000 |
| 11,959 |
|
4 |
| United States Treasury Bill, |
|
|
|
|
|
|
| 2.407%, 6/6/19 |
| 10,000 |
| 9,957 |
|
4 |
| United States Treasury Bill, |
|
|
|
|
|
|
| 2.480%, 9/5/19 |
| 5,000 |
| 4,948 |
|
|
|
|
|
|
| 31,652 |
|
Total Temporary Cash Investments |
|
|
|
|
| ||
(Cost $1,352,793) |
|
|
| 1,352,944 |
| ||
Total Investments (100.5%) |
|
|
|
|
| ||
(Cost $26,843,990) |
|
|
| 33,999,578 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount |
|
|
|
|
|
|
| ($000 | ) |
Other Assets and Liabilities (-0.5%) |
|
|
|
|
| ||
Other Assets |
|
|
|
|
| ||
Investment in Vanguard |
|
|
| 1,692 |
| ||
Receivables for Investment Securities Sold |
|
|
| 64,971 |
| ||
Receivables for Accrued Income |
|
|
| 60,027 |
| ||
Receivables for Capital Shares Issued |
|
|
| 25,275 |
| ||
Variation Margin Receivable—Futures Contracts |
|
|
| 4,318 |
| ||
Other Assets |
|
|
| 20 |
| ||
Total Other Assets |
|
|
| 156,303 |
| ||
Liabilities |
|
|
|
|
| ||
Payables for Investment Securities Purchased |
|
|
| (144,280 | ) | ||
Collateral for Securities on Loan |
|
|
| (130,079 | ) | ||
Payables to Investment Advisor |
|
|
| (6,669 | ) | ||
Payables for Capital Shares Redeemed |
|
|
| (31,470 | ) | ||
Payables to Vanguard |
|
|
| (15,839 | ) | ||
Total Liabilities |
|
|
| (328,337 | ) | ||
Net Assets (100%) |
|
|
| 33,827,544 |
| ||
|
|
|
|
|
|
|
|
At March 31, 2019, net assets consisted of: |
|
|
|
|
| ||
|
|
|
|
|
| Amount |
|
|
|
|
|
|
| ($000 | ) |
Paid-in Capital |
|
|
| 26,577,446 |
| ||
Total Distributable Earnings (Loss) |
|
|
| 7,250,098 |
| ||
Net Assets |
|
|
| 33,827,544 |
| ||
|
|
|
|
|
|
|
|
Investor Shares—Net Assets |
|
|
|
|
| ||
Applicable to 154,265,583 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
|
|
| 5,395,389 |
| ||
Net Asset Value Per Share—Investor Shares |
|
|
| $34.97 |
| ||
|
|
|
|
|
|
|
|
Admiral Shares—Net Assets |
|
|
|
|
| ||
Applicable to 387,880,201 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
|
|
| 28,432,155 |
| ||
Net Asset Value Per Share—Admiral Shares |
|
|
| $73.30 |
|
· See Note A in Notes to Financial Statements.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $125,507,000.
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 98.7% and 1.8%, 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 $130,079,000 of collateral received for securities on loan.
4 Securities with a value of $31,304,000 have been segregated as initial margin for open futures contracts.
ADR—American Depositary Receipt.
Equity Income Fund
Derivative Financial Instruments Outstanding as of Period End | |||||||||
Futures Contracts | |||||||||
|
|
|
|
|
|
|
| ($000
| ) |
|
|
|
|
|
|
|
| Value and |
|
|
|
|
| Number of |
|
|
| Unrealized |
|
|
|
|
| Long (Short | ) | Notional |
| Appreciation |
|
|
| Expiration
|
| Contracts
|
| Amount
|
| (Depreciation
| ) |
Long Futures Contracts |
|
|
|
|
|
|
|
|
|
E-mini S&P 500 Index |
| June 2019 |
| 5,145 |
| 730,024 |
| 19,038 |
|
See accompanying Notes, which are an integral part of the Financial Statements.
Equity Income Fund
Statement of Operations
|
| Six Months Ended |
|
|
| March 31, 2019 |
|
|
|
($000 | ) |
Investment Income |
|
|
|
Income |
|
|
|
Dividends—Unaffiliated Issuers1 |
| 499,433 |
|
Dividends—Affiliated Issuers |
| — |
|
Interest—Unaffiliated Issuers |
| 5,098 |
|
Interest—Affiliated Issuers |
| 6,243 |
|
Securities Lending—Net |
| 259 |
|
Total Income |
| 511,033 |
|
Expenses |
|
|
|
Investment Advisory Fees—Note B |
|
|
|
Basic Fee |
| 13,073 |
|
Performance Adjustment |
| 645 |
|
The Vanguard Group—Note C |
|
|
|
Management and Administrative—Investor Shares |
| 4,509 |
|
Management and Administrative—Admiral Shares |
| 11,706 |
|
Marketing and Distribution—Investor Shares |
| 350 |
|
Marketing and Distribution—Admiral Shares |
| 796 |
|
Custodian Fees |
| 72 |
|
Shareholders’ Reports—Investor Shares |
| 57 |
|
Shareholders’ Reports—Admiral Shares |
| 141 |
|
Trustees’ Fees and Expenses |
| 16 |
|
Total Expenses |
| 31,365 |
|
Net Investment Income |
| 479,668 |
|
Realized Net Gain (Loss) |
|
|
|
Investment Securities Sold—Unaffiliated Issuers |
| 97,069 |
|
Investment Securities Sold—Affiliated Issuers |
| 25,977 |
|
Futures Contracts |
| (37,473 | ) |
Foreign Currencies |
| (157 | ) |
Realized Net Gain (Loss) |
| 85,416 |
|
Change in Unrealized Appreciation (Depreciation) |
|
|
|
Investment Securities—Unaffiliated Issuers |
| (322,393 | ) |
Investment Securities—Affiliated Issuers |
| (33,730 | ) |
Futures Contracts |
| 17,974 |
|
Foreign Currencies |
| (134 | ) |
Change in Unrealized Appreciation (Depreciation) |
| (338,283 | ) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
| 226,801 |
|
1 Dividends are net of foreign withholding taxes of $6,803,000.
See accompanying Notes, which are an integral part of the Financial Statements.
Equity Income Fund
Statement of Changes in Net Assets
|
| Six Months Ended |
| Year Ended |
|
|
| March 31, |
| September 30, |
|
|
| 2019 |
| 2018 |
|
|
| ($000) |
| ($000 | ) |
Increase (Decrease) in Net Assets |
|
|
|
|
|
Operations |
|
|
|
|
|
Net Investment Income |
| 479,668 |
| 846,950 |
|
Realized Net Gain (Loss) |
| 85,416 |
| 2,386,838 |
|
Change in Unrealized Appreciation (Depreciation) |
| (338,283 | ) | (47,829 | ) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
| 226,801 |
| 3,185,959 |
|
Distributions |
|
|
|
|
|
Net Investment Income |
|
|
|
|
|
Investor Shares |
| (81,293 | ) | (148,454 | ) |
Admiral Shares |
| (427,300 | ) | (679,886 | ) |
Realized Capital Gain1 |
|
|
|
|
|
Investor Shares |
| (362,093 | ) | (71,934 | ) |
Admiral Shares |
| (1,805,478 | ) | (298,582 | ) |
Total Distributions |
| (2,676,164 | ) | (1,198,856 | ) |
Capital Share Transactions |
|
|
|
|
|
Investor Shares |
| 70,636 |
| (625,682 | ) |
Admiral Shares |
| 2,830,669 |
| 2,638,920 |
|
Net Increase (Decrease) from Capital Share Transactions |
| 2,901,305 |
| 2,013,238 |
|
Total Increase (Decrease) |
| 451,942 |
| 4,000,341 |
|
Net Assets |
|
|
|
|
|
Beginning of Period |
| 33,375,602 |
| 29,375,261 |
|
End of Period |
| 33,827,544 |
| 33,375,602 |
|
1 Includes fiscal 2019 and 2018 short-term gain distributions totaling $0 and $78,981,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
See accompanying Notes, which are an integral part of the Financial Statements.
Equity Income Fund
Financial Highlights
Investor Shares
|
| Six Months |
|
|
|
|
|
|
|
|
|
|
|
|
| Ended |
|
|
|
|
|
|
|
|
|
|
|
For a Share Outstanding |
| March 31, |
| Year Ended September 30, |
| ||||||||
Throughout Each Period |
| 2019 |
| 2018 |
| 2017 |
| 2016 |
| 2015 |
| 2014 |
|
Net Asset Value, Beginning of Period |
| $37.98 |
| $35.64 |
| $31.69 |
| $28.78 |
| $31.23 |
| $28.26 |
|
Investment Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income |
| .505 | 1 | .965 | 1 | .908 | 1 | .909 |
| .847 |
| .826 |
|
Net Realized and Unrealized Gain (Loss) on Investments |
| (.528 | ) | 2.764 |
| 4.292 |
| 3.912 |
| (1.431 | ) | 3.754 |
|
Total from Investment Operations |
| (.023 | ) | 3.729 |
| 5.200 |
| 4.821 |
| (.584 | ) | 4.580 |
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from Net Investment Income |
| (.540 | ) | (.943 | ) | (.912 | ) | (.895 | ) | (.852 | ) | (.811 | ) |
Distributions from Realized Capital Gains |
| (2.447 | ) | (.446 | ) | (.338 | ) | (1.016 | ) | (1.014 | ) | (.799 | ) |
Total Distributions |
| (2.987 | ) | (1.389 | ) | (1.250 | ) | (1.911 | ) | (1.866 | ) | (1.610 | ) |
Net Asset Value, End of Period |
| $34.97 |
| $37.98 |
| $35.64 |
| $31.69 |
| $28.78 |
| $31.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return2 |
| 0.66% |
| 10.58% |
| 16.68% |
| 17.21% |
| -2.11% |
| 16.62% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets, End of Period (Millions) |
| $5,395 |
| $5,751 |
| $6,002 |
| $5,487 |
| $4,812 |
| $5,528 |
|
Ratio of Total Expenses to Average Net Assets3 |
| 0.27% |
| 0.27% |
| 0.26% |
| 0.26% |
| 0.26% |
| 0.29% |
|
Ratio of Net Investment Income to Average Net Assets |
| 2.92% |
| 2.60% |
| 2.70% |
| 3.00% |
| 2.72% |
| 2.74% |
|
Portfolio Turnover Rate |
| 31% |
| 37% |
| 28% |
| 26% |
| 32% |
| 33% |
|
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Calculated based on average shares outstanding. |
|
|
2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
|
|
3 | Includes performance-based investment advisory fee increases (decreases) of 0.00%, (0.00%), (0.01%), (0.01%), (0.01%), and 0.00%. |
|
|
See accompanying Notes, which are an integral part of the Financial Statements.
Equity Income Fund
Financial Highlights
Admiral Shares
|
| Six Months |
|
|
|
|
|
|
|
|
|
|
|
|
| Ended |
|
|
|
|
|
|
|
|
|
|
|
For a Share Outstanding |
| March 31, |
| Year Ended September 30, |
| ||||||||
Throughout Each Period |
| 2019 |
| 2018 |
| 2017 |
| 2016 |
| 2015 |
| 2014 |
|
Net Asset Value, Beginning of Period |
| $79.61 |
| $74.69 |
| $66.43 |
| $60.31 |
| $65.45 |
| $59.24 |
|
Investment Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income |
| 1.093 | 1 | 2.099 | 1 | 1.968 | 1 | 1.963 |
| 1.834 |
| 1.790 |
|
Net Realized and Unrealized Gain (Loss) on Investments |
| (1.108 | ) | 5.806 |
| 8.977 |
| 8.219 |
| (3.003 | ) | 7.853 |
|
Total from Investment Operations |
| (.015 | ) | 7.905 |
| 10.945 |
| 10.182 |
| (1.169 | ) | 9.643 |
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from Net Investment Income |
| (1.166 | ) | (2.048 | ) | (1.977 | ) | (1.932 | ) | (1.846 | ) | (1.758 | ) |
Distributions from Realized Capital Gains |
| (5.129 | ) | (.937 | ) | (.708 | ) | (2.130 | ) | (2.125 | ) | (1.675 | ) |
Total Distributions |
| (6.295 | ) | (2.985 | ) | (2.685 | ) | (4.062 | ) | (3.971 | ) | (3.433 | ) |
Net Asset Value, End of Period |
| $73.30 |
| $79.61 |
| $74.69 |
| $66.43 |
| $60.31 |
| $65.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return2 |
| 0.71% |
| 10.70% |
| 16.75% |
| 17.35% |
| -2.03% |
| 16.70% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets, End of Period (Millions) |
| $28,432 |
| $27,625 |
| $23,373 |
| $18,115 |
| $12,962 |
| $12,319 |
|
Ratio of Total Expenses to Average Net Assets3 |
| 0.18% |
| 0.18% |
| 0.17% |
| 0.17% |
| 0.17% |
| 0.20% |
|
Ratio of Net Investment Income to Average Net Assets |
| 3.01% |
| 2.69% |
| 2.79% |
| 3.09% |
| 2.81% |
| 2.83% |
|
Portfolio Turnover Rate |
| 31% |
| 37% |
| 28% |
| 26% |
| 32% |
| 33% |
|
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 | Calculated based on average shares outstanding. |
|
|
2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
|
|
3 | Includes performance-based investment advisory fee increases (decreases) of 0.00%, (0.00%), (0.01%), (0.01%), (0.01%), and 0.00%. |
|
|
See accompanying Notes, which are an integral part of the Financial Statements.
Equity Income Fund
Notes to Financial Statements
Vanguard Equity Income 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. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.
Equity Income Fund
Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
During the six months ended March 31, 2019, the fund’s average investments in long and short futures contracts represented 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.
4. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature, and in the absence of a default, such collateral cannot be repledged, resold, or rehypothecated. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.
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 (September 30, 2015–2018), and for the period ended March 31, 2019, 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. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.
7. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the
Equity Income Fund
period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
8. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at March 31, 2019, or at any time during the period then ended.
9. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
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 investment advisory firm Wellington Management Company LLP provides investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fee of Wellington Management Company LLP is subject to quarterly adjustments based on performance relative to the FTSE High Dividend Yield Index for the preceding three years.
Vanguard provides investment advisory services to a portion of the fund as described below; the fund paid Vanguard advisory fees of $854,000 for the six months ended March 31, 2019.
For the six months ended March 31, 2019, the aggregate investment advisory fee paid to all advisors represented an effective annual basic rate of 0.08% of the fund’s average net assets, before an increase of $645,000 (0.00%) based on performance.
C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain
Equity Income Fund
costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2019, the fund had contributed to Vanguard capital in the amount of $1,692,000, representing 0.01% of the fund’s net assets and 0.68% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
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). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.
The following table summarizes the market value of the fund’s investments as of March 31, 2019, based on the inputs used to value them:
Investments |
| Level 1 | ) | Level 2 | ) | Level 3 | ) |
Common Stocks |
| 31,305,796 |
| 1,340,838 |
| — |
|
Temporary Cash Investments |
| 812,092 |
| 540,852 |
| — |
|
Futures Contracts—Assets1 |
| 4,318 |
| — |
| — |
|
Total |
| 32,122,206 |
| 1,881,690 |
| — |
|
1 Represents variation margin on the last day of the reporting period.
E. As of March 31, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
|
| Amount | ) |
Tax Cost |
| 26,843,990 |
|
Gross Unrealized Appreciation |
| 7,982,700 |
|
Gross Unrealized Depreciation |
| (808,074 | ) |
Net Unrealized Appreciation (Depreciation) |
| 7,174,626 |
|
F. During the six months ended March 31, 2019, the fund purchased $5,227,617,000 of investment securities and sold $4,891,639,000 of investment securities, other than temporary cash investments.
Equity Income Fund
G. Capital share transactions for each class of shares were:
|
| Six Months Ended |
| Year Ended |
| ||||
|
| March 31, 2019 |
| September 30, 2018 |
| ||||
|
| Amount |
| Shares |
| Amount |
| Shares |
|
|
| ($000 | ) | (000 | ) | ($000 | ) | (000 | ) |
Investor Shares |
|
|
|
|
|
|
|
|
|
Issued |
| 375,436 |
| 10,825 |
| 998,715 |
| 26,933 |
|
Issued in Lieu of Cash Distributions |
| 408,006 |
| 12,658 |
| 201,873 |
| 5,406 |
|
Redeemed |
| (712,806 | ) | (20,628 | ) | (1,826,270 | ) | (49,355 | ) |
Net Increase (Decrease)—Investor Shares |
| 70,636 |
| 2,855 |
| (625,682 | ) | (17,016 | ) |
Admiral Shares |
|
|
|
|
|
|
|
|
|
Issued |
| 3,203,742 |
| 44,335 |
| 5,851,704 |
| 75,470 |
|
Issued in Lieu of Cash Distributions |
| 1,942,370 |
| 28,738 |
| 837,871 |
| 10,700 |
|
Redeemed |
| (2,315,443 | ) | (32,213 | ) | (4,050,655 | ) | (52,093 | ) |
Net Increase (Decrease)—Admiral Shares |
| 2,830,669 |
| 40,860 |
| 2,638,920 |
| 34,077 |
|
H. Transactions during the period in investments where the issuer is another member of The Vanguard Group were as follows:
|
|
| Current Period Transactions |
| ||||||
| Sept. 30, |
|
| Proceeds | Realized |
|
|
|
| March 31, |
| 2018 |
|
| from | Net | Change in |
|
| Capital Gain | 2019 |
| Market |
| Purchases | Securities | Gain | Unrealized |
|
| Distributions | Market |
| Value |
| at Cost | Sold | (Loss) | App. (Dep.) | Income |
| Received | Value |
| ($000) |
| ($000) | ($000) | ($000) | ($000) | ($000) |
| ($000) | ($000) |
Vanguard High Dividend Yield ETF | 91,266 |
| — | 83,360 | 25,948 | (33,854) | — |
| — | — |
Vanguard Market |
|
|
|
|
|
|
|
|
|
|
Liquidity Fund | 507,279 |
| NA1 | NA1 | 29 | 124 | 6,243 |
| — | 812,092 |
Total | 598,545 |
|
|
| 25,977 | (33,730) | 6,243 |
| — | 812,092 |
1 Not applicable—purchases and sales are for temporary cash investment purposes.
I. Management has determined that no events or transactions occurred subsequent to March 31, 2019, that would require recognition or disclosure in these financial statements.
Trustees Approve Advisory Arrangements
The board of trustees of Vanguard Equity Income Fund has renewed the fund’s investment advisory arrangements with Wellington Management Company LLP (Wellington Management) and The Vanguard Group, Inc. (Vanguard), through its Quantitative Equity Group. The board determined that renewing the fund’s advisory arrangements was in the best interests of the fund and its shareholders.
The board based its decisions upon an evaluation of each advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for advisor oversight and product management. The Portfolio Review Department met regularly with the advisors and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangements. Rather, it was the totality of the circumstances that drove the board’s decisions.
Nature, extent, and quality of services
The board reviewed the quality of the fund’s investment management services over both the short and long term and took into account the organizational depth and stability of each advisor. The board considered the following:
Wellington Management. Wellington Management, founded in 1928, is among the nation’s oldest and most respected institutional investment managers. Using fundamental research, Wellington Management seeks to build a portfolio with an above-market yield, superior growth rate, and attractive valuation. Although every company purchased for the portfolio will pay a dividend, the goal is to build a portfolio with an above-market yield in aggregate, allowing for individual companies with below-market yields. Normalized earnings, normalized price-to-earnings ratios, and improving returns on capital are key to the research process. The board also noted that the portfolio manager of the fund has more than three decades of investment industry experience. The firm has managed a portion of the fund since 2000.
Vanguard. Vanguard has been managing investments for more than four decades. The Quantitative Equity Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth. Vanguard has managed a portion of the fund since 2003.
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 each advisor’s subportfolio, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that each advisory arrangement should continue.
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 expense rate was also well below the peer-group average.
The board did not consider the profitability of Wellington Management in determining whether to approve the advisory fee because Wellington Management is independent of Vanguard and the advisory fee is the result of arm’s-length negotiations. The board does not conduct a profitability analysis of Vanguard because of Vanguard’s unique structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees.
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 schedule for Wellington Management. The breakpoints reduce the effective rate of the fee as the fund’s assets managed by Wellington Management increase. The board also concluded that the fund’s 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.
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| P.O. Box 2600 |
| Valley Forge, PA 19482-2600 |
Connect with Vanguard® > vanguard.com
Fund Information > 800-662-7447
Direct Investor Account Services > 800-662-2739
Institutional Investor Services > 800-523-1036
Text Telephone for People
Who Are Deaf or Hard of Hearing > 800-749-7273
This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.
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 information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.
| © 2019 The Vanguard Group, Inc. |
| All rights reserved. |
| Vanguard Marketing Corporation, Distributor. |
|
|
| Q652 052019 |
Semiannual Report | March 31, 2019
Vanguard PRIMECAP Core Fund
|
See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.
|
Important information about access to shareholder reports
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.
If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.
You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.
Contents |
|
|
|
About Your Fund’s Expenses | 1 |
Financial Statements | 4 |
Trustees Approve Advisory Arrangement | 15 |
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.
Six Months Ended March 31, 2019 |
|
|
|
| Beginning | Ending | Expenses |
| Account Value | Account Value | Paid During |
PRIMECAP Core Fund | 9/30/2018 | 3/31/2019 | Period |
Based on Actual Fund Return | $1,000.00 | $947.78 | $2.23 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,022.64 | 2.32 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratio for that period is 0.46%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (182/365).
PRIMECAP Core Fund
Sector Diversification
As of March 31, 2019
Communication Services | 5.7% |
Consumer Discretionary | 12.5 |
Consumer Staples | 0.4 |
Energy | 0.9 |
Financials | 10.3 |
Health Care | 24.2 |
Industrials | 19.9 |
Information Technology | 24.8 |
Materials | 1.3 |
Real Estate | 0.0 |
The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. Sector categories are based on the Global Industry Classification Standard (“GICS”), except for the “Other” category (if applicable), which includes securities that have not been provided a GICS classification as of the effective reporting period.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
PRIMECAP Core Fund
Financial Statements (unaudited)
Statement of Net Assets
As of March 31, 2019
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports will be available on the SEC’s website at www.sec.gov.
|
|
| Market |
|
|
| Value• |
|
| Shares | ($000) |
Common Stocks (97.5%) |
|
| |
Communication Services (5.6%) |
|
| |
* | Alphabet Inc. Class A | 176,827 | 208,106 |
* | Alphabet Inc. Class C | 166,513 | 195,371 |
* | Sprint Corp. | 8,280,000 | 46,782 |
| Walt Disney Co. | 400,000 | 44,412 |
| Activision Blizzard Inc. | 725,000 | 33,009 |
* | Electronic Arts Inc. | 165,000 | 16,769 |
| Comcast Corp. Class A | 385,000 | 15,392 |
| CBS Corp. Class B | 283,354 | 13,468 |
* | Charter Communications Inc. Class A | 24,400 | 8,465 |
* | T-Mobile US Inc. | 102,900 | 7,110 |
| Entercom Communications Corp. Class A | 694,943 | 3,649 |
* | Netflix Inc. | 8,300 | 2,959 |
|
|
| 595,492 |
Consumer Discretionary (12.2%) |
|
| |
| Sony Corp. ADR | 3,649,000 | 154,134 |
| Whirlpool Corp. | 1,082,274 | 143,823 |
* | CarMax Inc. | 1,994,300 | 139,202 |
| Ross Stores Inc. | 1,101,800 | 102,578 |
| Royal Caribbean Cruises Ltd. | 894,000 | 102,470 |
| TJX Cos. Inc. | 1,860,000 | 98,971 |
* | Alibaba Group Holding Ltd. ADR | 542,430 | 98,966 |
| Carnival Corp. | 1,866,000 | 94,644 |
*,^ | Mattel Inc. | 6,161,771 | 80,103 |
* | Amazon.com Inc. | 30,593 | 54,479 |
* | Altaba Inc. | 691,600 | 51,261 |
| L Brands Inc. | 1,589,700 | 43,844 |
| eBay Inc. | 1,077,600 | 40,022 |
| VF Corp. | 300,000 | 26,073 |
| Marriott International Inc. Class A | 189,000 | 23,642 |
| Newell Brands Inc. | 1,110,000 | 17,027 |
* | Norwegian Cruise Line Holdings Ltd. | 130,000 | 7,145 |
| Restaurant Brands International Inc. | 88,200 | 5,743 |
| MGM Resorts International | 190,000 | 4,875 |
* | Capri Holdings Ltd. | 87,700 | 4,012 |
| Tiffany & Co. | 19,300 | 2,037 |
| McDonald’s Corp. | 7,400 | 1,405 |
* | Tempur Sealy International Inc. | 22,000 | 1,269 |
* | Burlington Stores Inc. | 4,900 | 768 |
| Las Vegas Sands Corp. | 9,000 | 549 |
* | AutoZone Inc. | 455 | 466 |
|
|
| 1,299,508 |
Consumer Staples (0.4%) |
|
| |
| PepsiCo Inc. | 200,000 | 24,510 |
| Tyson Foods Inc. Class A | 231,500 | 16,073 |
| Constellation Brands Inc. Class A | 6,636 | 1,164 |
| Philip Morris International Inc. | 9,275 | 820 |
| Altria Group Inc. | 12,924 | 742 |
|
|
| 43,309 |
Energy (0.9%) |
|
| |
| Pioneer Natural |
|
|
| Resources Co. | 204,723 | 31,175 |
| Cabot Oil & Gas Corp. | 625,150 | 16,316 |
| Hess Corp. | 203,000 | 12,227 |
* | Transocean Ltd. | 1,321,800 | 11,513 |
* | Southwestern Energy Co. | 2,400,000 | 11,256 |
| EOG Resources Inc. | 62,600 | 5,958 |
| National Oilwell Varco Inc. | 150,000 | 3,996 |
| TechnipFMC plc | 27,400 | 645 |
|
|
| 93,086 |
PRIMECAP Core Fund
|
|
| Market |
|
|
| Value• |
|
| Shares | ($000) |
Financials (10.0%) |
|
| |
| JPMorgan Chase & Co. | 3,429,866 | 347,205 |
| Wells Fargo & Co. | 3,424,600 | 165,477 |
| Discover Financial Services | 1,811,981 | 128,941 |
| Charles Schwab Corp. | 2,459,734 | 105,178 |
| Northern Trust Corp. | 1,075,250 | 97,213 |
| Bank of America Corp. | 2,280,559 | 62,921 |
| Marsh & McLennan Cos. Inc. | 536,612 | 50,388 |
| US Bancorp | 773,300 | 37,265 |
| Raymond James Financial Inc. | 408,300 | 32,831 |
| Progressive Corp. | 244,300 | 17,612 |
| CME Group Inc. | 79,850 | 13,142 |
| Travelers Cos. Inc. | 49,000 | 6,721 |
| Comerica Inc. | 35,000 | 2,566 |
|
|
| 1,067,460 |
Health Care (23.6%) |
|
| |
| Eli Lilly & Co. | 3,206,352 | 416,056 |
| Amgen Inc. | 1,737,300 | 330,052 |
| AstraZeneca plc ADR | 6,744,200 | 272,668 |
| Novartis AG ADR | 2,232,000 | 214,585 |
* | Biogen Inc. | 844,200 | 199,552 |
| Roche Holding AG | 556,100 | 153,236 |
| Thermo Fisher Scientific Inc. | 552,800 | 151,312 |
* | Elanco Animal Health Inc. | 4,473,412 | 143,462 |
* | Boston Scientific Corp. | 3,527,200 | 135,374 |
| Abbott Laboratories | 1,049,000 | 83,857 |
| Bristol-Myers Squibb Co. | 1,693,200 | 80,783 |
1 | Siemens Healthineers AG | 1,260,200 | 52,614 |
| CVS Health Corp. | 934,277 | 50,386 |
| Medtronic plc | 552,000 | 50,276 |
* | Illumina Inc. | 143,600 | 44,615 |
| Merck & Co. Inc. | 375,000 | 31,189 |
| Agilent Technologies Inc. | 370,000 | 29,741 |
| Zimmer Biomet Holdings Inc. | 205,600 | 26,255 |
| Sanofi ADR | 540,000 | 23,911 |
* | Waters Corp. | 65,000 | 16,361 |
| Stryker Corp. | 45,500 | 8,987 |
* | Cerner Corp. | 10,000 | 572 |
|
|
| 2,515,844 |
Industrials (19.3%) |
|
| |
| Southwest Airlines Co. | 9,021,525 | 468,307 |
| Siemens AG | 1,740,168 | 187,143 |
| Airbus SE | 1,368,050 | 181,317 |
| FedEx Corp. | 951,500 | 172,612 |
* | United Continental Holdings Inc. | 2,069,800 | 165,129 |
| American Airlines Group Inc. | 4,158,800 | 132,083 |
| Caterpillar Inc. | 661,500 | 89,627 |
| Jacobs Engineering Group Inc. | 1,130,655 | 85,014 |
| United Parcel Service Inc. Class B | 742,700 | 82,989 |
* | AECOM | 2,780,600 | 82,500 |
| Delta Air Lines Inc. | 1,495,900 | 77,263 |
| Boeing Co. | 174,600 | 66,596 |
| Deere & Co. | 383,900 | 61,363 |
| Union Pacific Corp. | 204,100 | 34,125 |
* | TransDigm Group Inc. | 71,200 | 32,324 |
| General Dynamics Corp. | 189,400 | 32,062 |
| Honeywell International Inc. | 200,000 | 31,784 |
| Textron Inc. | 603,000 | 30,548 |
| Rockwell Automation Inc. | 76,500 | 13,423 |
| Pentair plc | 270,000 | 12,018 |
| IDEX Corp. | 75,000 | 11,380 |
| Acuity Brands Inc. | 50,000 | 6,000 |
| nVent Electric plc | 200,000 | 5,396 |
| Owens Corning | 30,000 | 1,414 |
* | Herc Holdings Inc. | 33,999 | 1,325 |
| Ritchie Bros Auctioneers Inc. | 2,400 | 82 |
|
|
| 2,063,824 |
Information Technology (24.2%) |
|
| |
| Texas Instruments Inc. | 3,017,200 | 320,034 |
| Microsoft Corp. | 2,481,300 | 292,645 |
| NetApp Inc. | 2,294,800 | 159,121 |
| Hewlett Packard Enterprise Co. | 8,952,367 | 138,135 |
| KLA-Tencor Corp. | 1,111,300 | 132,700 |
| HP Inc. | 6,661,367 | 129,430 |
| Intel Corp. | 2,400,000 | 128,880 |
| Cisco Systems Inc. | 2,151,700 | 116,170 |
| QUALCOMM Inc. | 1,873,680 | 106,856 |
| Telefonaktiebolaget LM Ericsson ADR | 11,636,000 | 106,818 |
* | Flex Ltd. | 10,119,300 | 101,193 |
PRIMECAP Core Fund
|
|
| Market |
|
|
| Value• |
|
| Shares | ($000) |
| ASML Holding NV | 457,000 | 85,939 |
| Intuit Inc. | 325,000 | 84,958 |
* | Adobe Inc. | 300,000 | 79,947 |
* | Micron Technology Inc. | 1,790,000 | 73,981 |
| Micro Focus International plc ADR | 2,355,302 | 60,743 |
| Applied Materials Inc. | 1,502,700 | 59,597 |
| Analog Devices Inc. | 559,300 | 58,878 |
* | Keysight Technologies Inc. | 625,300 | 54,526 |
| NVIDIA Corp. | 292,000 | 52,432 |
* | PayPal Holdings Inc. | 458,300 | 47,590 |
| Corning Inc. | 1,385,000 | 45,844 |
| Visa Inc. Class A | 221,000 | 34,518 |
| Oracle Corp. | 555,000 | 29,809 |
| DXC Technology Co. | 420,675 | 27,054 |
| Apple Inc. | 100,000 | 18,995 |
* | BlackBerry Ltd. | 1,547,500 | 15,614 |
| Perspecta Inc. | 212,338 | 4,293 |
* | Dell Technologies Inc. | 63,600 | 3,733 |
| Western Digital Corp. | 75,000 | 3,605 |
| Teradyne Inc. | 52,000 | 2,072 |
|
|
| 2,576,110 |
Materials (1.3%) |
|
| |
| DowDuPont Inc. | 1,069,500 | 57,015 |
| Linde plc | 229,700 | 40,411 |
| Albemarle Corp. | 490,465 | 40,208 |
| Greif Inc. Class B | 33,000 | 1,614 |
|
|
| 139,248 |
Real Estate (0.0%) |
|
| |
| Equinix Inc. | 3,300 | 1,495 |
Total Common Stocks |
| 10,395,376 | |
Temporary Cash Investments (2.7%) |
|
| |
Money Market Fund (2.7%) |
|
| |
2,3 | Vanguard Market |
|
|
| Liquidity Fund, 2.554% | 2,883,856 | 288,443 |
Total Investments (100.2%) |
| 10,683,819 | |
|
|
|
|
|
|
| Amount |
|
|
| ($000) |
Other Assets and Liabilities (-0.2%) |
|
| |
Other Assets |
|
| |
Investment in Vanguard |
| 547 | |
Receivables for Investment Securities Sold |
| 668 | |
Receivables for Accrued Income |
| 15,156 | |
Receivables for Capital Shares Issued |
| 1,289 | |
Other Assets |
| 135 | |
Total Other Assets |
| 17,795 | |
Liabilities |
|
| |
Payables for Investment |
|
| |
Securities Purchased |
| (1,313) | |
Collateral for Securities on Loan |
| (18,918) | |
Payables to Investment Advisor |
| (8,018) | |
Payables for Capital Shares Redeemed |
| (3,167) | |
Payables to Vanguard |
| (6,914) | |
Total Liabilities |
| (38,330) | |
Net Assets (100%) |
|
| |
Applicable to 411,153,858 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
| 10,663,284 | |
Net Asset Value Per Share |
| $25.94 |
PRIMECAP Core Fund
At March 31, 2019, net assets consisted of:
|
| Amount |
|
| ($000) |
Paid-in Capital |
| 5,650,170 |
Total Distributable Earnings (Loss) |
| 5,013,114 |
Net Assets |
| 10,663,284 |
· See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $17,567,000.
1 Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2019, the value of this security represented 0.5% 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 $18,918,000 of collateral received for securities on loan.
ADR—American Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
PRIMECAP Core Fund
Statement of Operations
|
| Six Months Ended |
|
|
| March 31, 2019 |
|
|
| ($000 | ) |
Investment Income |
|
|
|
Income |
|
|
|
Dividends1 |
| 102,994 |
|
Interest2 |
| 3,156 |
|
Securities Lending—Net |
| 249 |
|
Total Income |
| 106,399 |
|
Expenses |
|
|
|
Investment Advisory Fees—Note B |
| 16,089 |
|
The Vanguard Group—Note C |
|
|
|
Management and Administrative |
| 7,310 |
|
Marketing and Distribution |
| 497 |
|
Custodian Fees |
| 42 |
|
Shareholders’ Reports |
| 29 |
|
Trustees’ Fees and Expenses |
| 5 |
|
Total Expenses |
| 23,972 |
|
Net Investment Income |
| 82,427 |
|
Realized Net Gain (Loss) |
|
|
|
Investment Securities Sold2 |
| 341,391 |
|
Foreign Currencies |
| (70 | ) |
Realized Net Gain (Loss) |
| 341,321 |
|
Change in Unrealized Appreciation (Depreciation) |
|
|
|
Investment Securities2 |
| (1,053,154 | ) |
Foreign Currencies |
| (44 | ) |
Change in Unrealized Appreciation (Depreciation) |
| (1,053,198 | ) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
| (629,450 | ) |
1 Dividends are net of foreign withholding taxes of $3,187,000.
2 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $3,156,000, $51,000, and $58,000, respectively. Purchases and sales are for temporary cash investment purposes.
See accompanying Notes, which are an integral part of the Financial Statements.
PRIMECAP Core Fund
Statement of Changes in Net Assets
|
| Six Months Ended |
| Year Ended |
|
|
| March 31, |
| September 30, |
|
|
| 2019 |
| 2018 |
|
|
| ($000 | ) | ($000 | ) |
Increase (Decrease) in Net Assets |
|
|
|
|
|
Operations |
|
|
|
|
|
Net Investment Income |
| 82,427 |
| 123,032 |
|
Realized Net Gain (Loss) |
| 341,321 |
| 665,390 |
|
Change in Unrealized Appreciation (Depreciation) |
| (1,053,198 | ) | 1,041,000 |
|
Net Increase (Decrease) in Net Assets Resulting from Operations |
| (629,450 | ) | 1,829,422 |
|
Distributions |
|
|
|
|
|
Net Investment Income |
| (124,211 | ) | (111,019 | ) |
Realized Capital Gain1 |
| (728,299 | ) | (315,476 | ) |
Total Distributions |
| (852,510 | ) | (426,495 | ) |
Capital Share Transactions |
|
|
|
|
|
Issued |
| 356,507 |
| 766,774 |
|
Issued in Lieu of Cash Distributions |
| 721,782 |
| 362,767 |
|
Redeemed |
| (587,090 | ) | (1,102,350 | ) |
Net Increase (Decrease) from Capital Share Transactions |
| 491,199 |
| 27,191 |
|
Total Increase (Decrease) |
| (990,761 | ) | 1,430,118 |
|
Net Assets |
|
|
|
|
|
Beginning of Period |
| 11,654,045 |
| 10,223,927 |
|
End of Period |
| 10,663,284 |
| 11,654,045 |
|
1 Includes fiscal 2019 and 2018 short-term gain distributions totaling $8,214,000 and $10,052,000, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
See accompanying Notes, which are an integral part of the Financial Statements.
PRIMECAP Core Fund
Financial Highlights
|
| Six Months |
|
|
|
|
|
|
|
|
|
|
|
|
| Ended |
|
|
|
|
|
|
|
|
|
|
|
For a Share Outstanding |
| March 31, |
| Year Ended September 30, |
| ||||||||
Throughout Each Period |
| 2019 |
| 2018 |
| 2017 |
| 2016 |
| 2015 |
| 2014 |
|
Net Asset Value, Beginning of Period |
| $29.92 |
| $26.33 |
| $22.55 |
| $20.26 |
| $21.87 |
| $18.65 |
|
Investment Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income |
| .205 | 1 | .314 | 1 | .304 | 1 | .275 |
| .285 |
| .255 |
|
Net Realized and Unrealized Gain (Loss) on Investments |
| (1.974 | ) | 4.379 |
| 4.701 |
| 3.047 |
| (.328 | ) | 3.820 |
|
Total from Investment Operations |
| (1.769 | ) | 4.693 |
| 5.005 |
| 3.322 |
| (.043 | ) | 4.075 |
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from Net Investment Income |
| (.322 | ) | (.287 | ) | (.278 | ) | (.243 | ) | (.270 | ) | (.178 | ) |
Distributions from Realized Capital Gains |
| (1.889 | ) | (.816 | ) | (.947 | ) | (.789 | ) | (1.297 | ) | (.677 | ) |
Total Distributions |
| (2.211 | ) | (1.103 | ) | (1.225 | ) | (1.032 | ) | (1.567 | ) | (.855 | ) |
Net Asset Value, End of Period |
| $25.94 |
| $29.92 |
| $26.33 |
| $22.55 |
| $20.26 |
| $21.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return2 |
| -5.22% |
| 18.27% |
| 23.13% |
| 16.78% |
| -0.73% |
| 22.60% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets, End of Period (Millions) |
| $10,663 |
| $11,654 |
| $10,224 |
| $8,420 |
| $6,917 |
| $6,828 |
|
Ratio of Total Expenses to Average Net Assets |
| 0.46% |
| 0.46% |
| 0.46% |
| 0.46% |
| 0.47% |
| 0.50% |
|
Ratio of Net Investment Income to Average Net Assets |
| 1.57% |
| 1.13% |
| 1.27% |
| 1.31% |
| 1.29% |
| 1.23% |
|
Portfolio Turnover Rate |
| 8% |
| 9% |
| 9% |
| 11% |
| 10% |
| 13% |
|
The expense ratio, net investment income ratio, and turnover rate for the current period have been annualized.
1 Calculated on average share 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.
See accompanying Notes, which are an integral part of the Financial Statements.
PRIMECAP Core Fund
Notes to Financial Statements
Vanguard PRIMECAP Core Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value.
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. 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 (September 30, 2015–2018), and for the period ended March 31, 2019, 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. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its
PRIMECAP Core Fund
counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at March 31, 2019, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
B. PRIMECAP Management Company provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. For the six months ended March 31, 2019, the investment advisory fee represented an effective annual rate of 0.31% of the fund’s average net assets.
C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.
PRIMECAP Core Fund
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2019, the fund had contributed to Vanguard capital in the amount of $547,000, 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 employees, respectively, of Vanguard.
D. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Statement of Net Assets.
The following table summarizes the market value of the fund’s investments as of March 31, 2019, based on the inputs used to value them:
|
| Level 1 |
| Level 2 |
| Level 3 |
|
Investments |
| ($000 | ) | ($000 | ) | ($000 | ) |
Common Stocks |
| 9,821,066 |
| 574,310 |
| — |
|
Temporary Cash Investments |
| 288,443 |
| — |
| — |
|
Total |
| 10,109,509 |
| 574,310 |
| — |
|
E. As of March 31, 2019, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
|
| Amount |
|
|
| ($000 | ) |
Tax Cost |
| 5,953,738 |
|
Gross Unrealized Appreciation |
| 5,119,544 |
|
Gross Unrealized Depreciation |
| (389,463 | ) |
Net Unrealized Appreciation (Depreciation) |
| 4,730,081 |
|
F. During the six months ended March 31, 2019, the fund purchased $420,421,000 of investment securities and sold $681,147,000 of investment securities, other than temporary cash investments.
PRIMECAP Core Fund
G. Capital shares issued and redeemed were:
|
| Six Months Ended |
| Year Ended |
|
|
| March 31, 2019 |
| September 30, 2018 |
|
|
| Shares |
| Shares |
|
|
| (000 | ) | (000 | ) |
Issued |
| 14,012 |
| 27,645 |
|
Issued in Lieu of Cash Distributions |
| 30,429 |
| 13,401 |
|
Redeemed |
| (22,774 | ) | (39,811 | ) |
Net Increase (Decrease) in Shares Outstanding |
| 21,667 |
| 1,235 |
|
H. Management has determined that no events or transactions occurred subsequent to March 31, 2019, that would require recognition or disclosure in these financial statements.
Trustees Approve Advisory Arrangement
The board of trustees of Vanguard PRIMECAP Core Fund has renewed the fund’s investment advisory arrangement with PRIMECAP Management Company (PRIMECAP Management). The board determined that renewing the fund’s advisory arrangement was in the best interests of the fund and its shareholders.
The board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made monthly presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received monthly reports, which included a Market and Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance Report.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the fund’s investment management services over both the short and long term, and took into account the organizational depth and stability of the advisor. The board considered that PRIMECAP Management, founded in 1983, is recognized for its long-term approach to equity investing. The portfolio managers are responsible for separate sub-portfolios, and each portfolio manager employs a fundamental, research-driven approach in seeking to identify companies with long-term growth potential that the market has yet to appreciate. The multi-counselor approach that the advisor employs is designed to emphasize individual decision-making and enable the portfolio managers to invest only in their highest-conviction ideas. PRIMECAP Management’s fundamental research focuses on developing opinions independent from Wall Street’s consensus and maintaining a long-term time horizon. PRIMECAP Management has managed the fund since its inception in 2004.
The board concluded that the advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The board considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that the advisory arrangement should continue.
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.
The board did not consider the profitability of PRIMECAP Management in determining whether to approve the advisory fee, because PRIMECAP Management is independent of Vanguard and the advisory fee is the result of arm’s-length negotiations.
The benefit of economies of scale
The board concluded that the fund’s shareholders benefit from economies of scale because of the breakpoints in the fund’s advisory fee schedule. The breakpoints reduce the effective rate of the fee as the fund’s assets increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
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| P.O. Box 2600 Valley Forge, PA 19482-2600 |
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This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.
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 information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.
| © 2019 The Vanguard Group, Inc. |
| All rights reserved. |
| Vanguard Marketing Corporation, Distributor. |
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| Q12202 052019 |
Item 2: Code of Ethics.
Not Applicable.
Item 3: Audit Committee Financial Expert.
Not Applicable.
Item 4: Principal Accountant Fees and Services.
(a) Audit Fees.
Not Applicable.
Item 5: Audit Committee of Listed Registrants.
Not Applicable.
Item 6: Investments.
Not Applicable.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not Applicable.
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not Applicable.
Item 9: Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not Applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11: Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Control Over Financial Reporting. There were no significant changes in Registrant’s Internal Control Over Financial Reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 12: Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not Applicable.
Item 13: 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 FENWAY FUNDS | |
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BY: | /s/ MORTIMER J. BUCKLEY* |
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| MORTIMER J. BUCKLEY |
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| CHIEF EXECUTIVE OFFICER |
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Date: May 17, 2019
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 FENWAY FUNDS | |
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BY: | /s/ MORTIMER J. BUCKLEY* |
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| MORTIMER J. BUCKLEY |
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| CHIEF EXECUTIVE OFFICER |
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Date: May 17, 2019 | ||
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| VANGUARD FENWAY FUNDS | |
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BY: | /s/ THOMAS J. HIGGINS* |
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| THOMAS J. HIGGINS |
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| CHIEF FINANCIAL OFFICER |
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Date: May 17, 2019 |
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* By: /s/ Anne E. Robinson
Anne E. Robinson, pursuant to a Power of Attorney filed on January 18, 2018; see file Number 33-32216, Incorporated by Reference.