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: | 811-07239 | |
Name of Registrant: | Vanguard Horizon 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, 2017 – September 30, 2018 | ||
Item 1: Reports to Shareholders |
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
CEO’s Perspective. | 3 |
Advisor’s Report. | 5 |
Fund Profile. | 7 |
Performance Summary. | 8 |
Financial Statements. | 10 |
Your Fund’s After-Tax Returns. | 25 |
About Your Fund’s Expenses. | 26 |
Glossary. | 28 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
Your Fund’s Performance at a Glance
• Vanguard Strategic Equity Fund returned nearly 16% for the 12 months ended September 30, 2018. It lagged its benchmark, the MSCI US Small + Mid Cap 2200 Index, but outpaced its peer group average.
• The fund seeks long-term capital appreciation by investing in mid- and small-capitalization domestic stocks, using a quantitative approach.
• Five of the fund’s 11 sectors delivered gains for the year. Consumer discretionary, financials, energy, and information technology were the strongest performers. Industrials, consumer staples, and real estate detracted the most from performance.
• Over the ten years ended September 30, 2018, the fund’s average annual return was slightly below that of its benchmark index but higher than the average return of its peer group.
Total Returns: Fiscal Year Ended September 30, 2018 | |
Total | |
Returns | |
Vanguard Strategic Equity Fund | 15.63% |
MSCI US Small + Mid Cap 2200 Index | 15.92 |
Mid-Cap Core Funds Average | 11.59 |
Mid-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Total Returns: Ten Years Ended September 30, 2018 | |
Average | |
Annual Return | |
Strategic Equity Fund | 12.61% |
MSCI US Small + Mid Cap 2200 Index | 12.69 |
Mid-Cap Core Funds Average | 10.61 |
Mid-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
The figures shown represent past performance, which is not a guarantee of future results. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost.
1
Expense Ratios | ||
Your Fund Compared With Its Peer Group | ||
Peer Group | ||
Fund | Average | |
Strategic Equity Fund | 0.18% | 1.15% |
The fund expense ratio shown is from the prospectus dated January 25, 2018, and represents estimated costs for the current fiscal year.
For the fiscal year ended September 30, 2018, the fund’s expense ratio was 0.17%. The peer-group expense ratio is derived from data
provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2017.
Peer group: Mid-Cap Core Funds.
2
CEO’s Perspective
Tim Buckley
President and Chief Executive Officer
Dear Shareholder,
Over the years, I’ve found that prudent investors exhibit a common trait: discipline. No matter how the markets move or what new investing fad hits the headlines, those who stay focused on their goals and tune out the noise are set up for long-term success.
The prime gateway to investing is saving, and you don’t usually become a saver without a healthy dose of discipline. Savers make the decision to sock away part of their income, which means spending less and delaying gratification, no matter how difficult that may be.
Of course, disciplined investing extends beyond diligent saving. The financial markets, in the short term especially, are unpredictable; I have yet to meet the investor who can time them perfectly. It takes discipline to resist the urge to go all-in when markets are frothy or to retreat when things look bleak.
Staying put with your investments is one strategy for handling volatility. Another, rebalancing, requires even more discipline because it means steering your money away from strong performers and toward poorer performers.
Patience—a form of discipline—is also the friend of long-term investors. Higher returns are the potential reward for weathering the market’s turbulence and uncertainty.
3
We have been enjoying one of the longest bull markets in history, but it won’t continue forever. Prepare yourself now for how you will react when volatility comes back. Don’t panic. Don’t chase returns or look for answers outside the asset classes you trust. And be sure to rebalance periodically, even when there’s turmoil.
Whether you’re a master of self-control, get a boost from technology, or work with a professional advisor, know that discipline
is necessary to get the most out of your investment portfolio. And know that Vanguard is with you for the entire ride.
Thank you for your continued loyalty.
Sincerely,
Mortimer J. Buckley
President and Chief Executive Officer
October 18, 2018
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended September 30, 2018 | |||
One Year | Three Years | Five Years | |
Stocks | |||
Russell 1000 Index (Large-caps) | 17.76% | 17.07% | 13.67% |
Russell 2000 Index (Small-caps) | 15.24 | 17.12 | 11.07 |
Russell 3000 Index (Broad U.S. market) | 17.58 | 17.07 | 13.46 |
FTSE All-World ex US Index (International) | 2.13 | 10.18 | 4.51 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -1.22% | 1.31% | 2.16% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | 0.35 | 2.24 | 3.54 |
FTSE Three-Month U. S. Treasury Bill Index | 1.57 | 0.80 | 0.48 |
CPI | |||
Consumer Price Index | 2.28% | 1.99% | 1.52% |
4
Advisor’s Report
For the year ended September 30, 2018, Vanguard Strategic Equity Fund returned 15.63%. It lagged its benchmark, the MSCI US Small + Midcap 2200 Index, but surpassed the average performance of its peers.
Investment environment
Global markets continued to advance over the 12 months. U.S. stocks led the way as increasing profits and a strong economy outweighed investor concerns about rising interest rates, higher inflation, and trade tensions. Large-capitalization stocks beat small-caps, and growth stocks outpaced value.
Emerging markets stocks were in negative territory, hurt by trade tensions and a rising dollar. Results in Europe and the Asia-Pacific region were muted in part because of these areas’ greater economic dependence on emerging markets.
The overall U.S. fixed income market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, returned –1.22% for the period. Yields rose and prices mostly declined as investors remained concerned about the threat of inflation and the possibility that the Federal Reserve would more aggressively raise rates.
The Fed did raise rates in September—its eighth increase since the current tightening cycle began—and signaled more hikes to come. Attention is now focused on the pace of rate increases for the rest of 2018, with many analysts expecting another one in December and three in 2019.
Investment objective and strategy
Although it’s important to understand how overall performance is affected by the macro factors we’ve described, our approach to investing focuses on fundamentals—not technical analysis of stock price movements. We compare stocks within the same industry group in order to identify those with characteristics that we believe will outperform over the long run.
To do this, we use a strict quantitative approach to evaluate a stock’s attractiveness based on five characteristics: high quality—healthy balance sheets and steady cash-flow generation; management decisions—sound investment policies that favor internal over external funding; consistent earnings growth—the ability to grow earnings year after year; strong market sentiment—market confirmation of our view; and reasonable valuation—we strive to avoid overpriced stocks.
Using these five themes, we generate a daily composite stock ranking as we seek to capitalize on market inefficiencies. We then monitor our portfolio based on those rankings and adjust when appropriate to maximize expected returns while minimizing exposure to risks that our research indicates don’t improve returns (such as industry selection and other risks relative to our benchmark).
5
Our successes and shortfalls
Overall, the fund slightly trailed its benchmark. Five of its 11 sectors boosted relative results. Our growth, momentum, quality, and management decisions models were useful, but our valuation model detracted from performance.
Stock selection in information technology and financials helped the most. Consumer discretionary was also positive, but poor selection in industrials and consumer staples hurt.
Our most successful holdings included Square, Advanced Micro Devices, Etsy, Primerica, and Ralph Lauren. Results were dragged down by Meritor, Wabash National, Sanderson Farms, Pilgrim’s Pride, and Omega Healthcare Investors.
We continue to believe that constructing a portfolio focused on the fundamentals described above will benefit investors over the long term, although we recognize that risk can reward or punish us in the near term. We feel the fund offers a strong mix of stocks with attractive valuation and growth characteristics relative to its benchmark.
We thank you for your investment and look forward to the coming fiscal year.
Portfolio Managers:
James P. Stetler
Binbin Guo, Principal, Head of Alpha Equity
Investments
Vanguard Quantitative Equity Group
October 15, 2018
6
Strategic Equity Fund
Fund Profile
As of September 30, 2018
Portfolio Characteristics | |||
MSCI US | DJ | ||
Small + | U.S. Total | ||
Mid Cap | Market | ||
Fund 2200 | Index | FA Index | |
Number of Stocks | 307 | 2,161 | 3,825 |
Median Market Cap | $7.1B | $7.9B | $73.9B |
Price/Earnings Ratio | 16.6x | 20.0x | 21.0x |
Price/Book Ratio | 3.0x | 2.5x | 3.1x |
Return on Equity | 11.4% | 10.6% | 14.9% |
Earnings Growth | |||
Rate | 14.2% | 9.1% | 8.5% |
Dividend Yield | 1.3% | 1.5% | 1.7% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | 82% | — | — |
Ticker Symbol | VSEQX | — | — |
Expense Ratio1 | 0.18% | — | — |
30-Day SEC Yield | 1.21% | — | — |
Short-Term Reserves | 0.0% | — | — |
Sector Diversification (% of equity exposure) | |
Fund | |
Consumer Discretionary | 14.2% |
Consumer Staples | 2.8 |
Energy | 5.1 |
Financials | 14.8 |
Health Care | 12.4 |
Industrials | 15.3 |
Information Technology | 17.6 |
Materials | 5.2 |
Real Estate | 8.2 |
Telecommunication Services | 0.5 |
Utilities | 3.9 |
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.
Volatility Measures | ||
MSCI US | DJ | |
Small + | U.S. Total | |
Mid Cap | Market | |
2200 Index | FA Index | |
R-Squared | 0.94 | 0.79 |
Beta | 1.10 | 1.14 |
These measures show the degree and timing of the fund’s | ||
fluctuations compared with the indexes over 36 months. |
Ten Largest Holdings (% of total net assets) | ||
Square Inc. | Data Processing & | |
Outsourced Services | 1.2% | |
Advanced Micro Devices | ||
Inc. | Semiconductors | 1.1 |
Best Buy Co. Inc. | Computer & | |
Electronics Retail | 1.0 | |
WellCare Health Plans | Managed Health | |
Inc. | Care | 1.0 |
FirstEnergy Corp. | Electric Utilities | 0.9 |
CDW Corp. | Technology | |
Distributors | 0.9 | |
NRG Energy Inc. | Independent Power | |
Producers & Energy | ||
Traders | 0.9 | |
Entergy Corp. | Electric Utilities | 0.9 |
Spirit AeroSystems | Aerospace & | |
Holdings Inc. | Defense | 0.9 |
WW Grainger Inc. | Trading Companies & | |
Distributors | 0.9 | |
Top Ten | 9.7% | |
The holdings listed exclude any temporary cash investments and | ||
equity index products. |
Investment Focus
1 The expense ratio shown is from the prospectus dated January 25, 2018, and represents estimated costs for the current fiscal year. For
the fiscal year ended September 30, 2018, the expense ratio was 0.17%.
7
Strategic Equity Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: September 30, 2008, Through September 30, 2018
Initial Investment of $10,000
Average Annual Total Returns | |||||
Periods Ended September 30, 2018 | |||||
Final Value | |||||
One | Five | Ten | of a $10,000 | ||
Year | Years | Years | Investment | ||
Strategic Equity Fund* | 15.63% | 12.84% | 12.61% | $32,779 | |
• • • • • • • • | MSCI US Small + Mid Cap 2200 Index | 15.92 | 12.08 | 12.69 | 33,034 |
– – – – | Mid-Cap Core Funds Average | 11.59 | 9.63 | 10.61 | 27,406 |
Dow Jones U.S. Total Stock Market | |||||
Float Adjusted Index | 17.58 | 13.42 | 12.05 | 31,191 | |
Mid-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
See Financial Highlights for dividend and capital gains information.
8
Strategic Equity Fund
Fiscal-Year Total Returns (%): September 30, 2008, Through September 30, 2018
9
Strategic Equity Fund
Financial Statements
Statement of Net Assets
As of September 30, 2018
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (99.5%)1 | |||
Consumer Discretionary (14.1%) | |||
Best Buy Co. Inc. | 993,617 | 78,853 | |
* | Lululemon Athletica Inc. | 378,467 | 61,497 |
*,^ | RH | 396,216 | 51,908 |
Lear Corp. | 357,732 | 51,871 | |
* | Deckers Outdoor Corp. | 435,399 | 51,630 |
Ralph Lauren Corp. | |||
Class A | 356,331 | 49,013 | |
Bloomin’ Brands Inc. | 2,357,308 | 46,651 | |
Tailored Brands Inc. | 1,827,708 | 46,040 | |
PulteGroup Inc. | 1,820,905 | 45,104 | |
* | Liberty Media Corp- | ||
Liberty SiriusXM | |||
Class A | 1,010,548 | 43,898 | |
* | Weight Watchers | ||
International Inc. | 583,916 | 42,036 | |
* | NVR Inc. | 14,068 | 34,759 |
Abercrombie & Fitch Co. | 1,562,122 | 32,992 | |
World Wrestling | |||
Entertainment Inc. | |||
Class A | 313,661 | 30,340 | |
* | Chipotle Mexican Grill | ||
Inc. Class A | 60,673 | 27,577 | |
* | Planet Fitness Inc. | ||
Class A | 483,937 | 26,147 | |
Kohl’s Corp. | 321,272 | 23,951 | |
* | Burlington Stores Inc. | 146,482 | 23,865 |
* | Urban Outfitters Inc. | 577,529 | 23,621 |
* | Chegg Inc. | 813,027 | 23,114 |
American Eagle | |||
Outfitters Inc. | 896,654 | 22,264 | |
^ | Brinker International Inc. | 451,981 | 21,121 |
H&R Block Inc. | 761,312 | 19,604 | |
* | MSG Networks Inc. | 708,433 | 18,278 |
* | Shake Shack Inc. | ||
Class A | 278,766 | 17,565 |
New York Times Co. | |||
Class A | 735,034 | 17,016 | |
News Corp. Class B | 1,026,294 | 13,958 | |
Darden Restaurants Inc. | 122,985 | 13,675 | |
* | Taylor Morrison Home | ||
Corp. Class A | 679,279 | 12,254 | |
* | Live Nation | ||
Entertainment Inc. | 209,801 | 11,428 | |
Domino’s Pizza Inc. | 37,719 | 11,120 | |
* | SeaWorld Entertainment | ||
Inc. | 350,754 | 11,024 | |
Hyatt Hotels Corp. | |||
Class A | 126,853 | 10,096 | |
^ | PetMed Express Inc. | 295,942 | 9,769 |
* | Fossil Group Inc. | 418,220 | 9,736 |
* | Madison Square Garden | ||
Co. Class A | 30,867 | 9,733 | |
^ | Autoliv Inc. | 110,295 | 9,560 |
Winnebago Industries | |||
Inc. | 261,931 | 8,683 | |
Macy’s Inc. | 241,220 | 8,378 | |
^ | Dillard’s Inc. Class A | 97,308 | 7,429 |
* | Cooper-Standard | ||
Holdings Inc. | 51,621 | 6,194 | |
KB Home | 231,089 | 5,525 | |
Delphi Technologies plc | 174,307 | 5,466 | |
Strategic Education Inc. | 31,487 | 4,315 | |
* | Michael Kors Holdings | ||
Ltd. | 59,298 | 4,066 | |
* | Grand Canyon Education | ||
Inc. | 35,780 | 4,036 | |
* | Visteon Corp. | 39,361 | 3,657 |
* | Liberty Media Corp- | ||
Liberty SiriusXM | |||
Class C | 80,505 | 3,498 | |
MDC Holdings Inc. | 117,324 | 3,470 | |
1,117,785 |
10
Strategic Equity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Consumer Staples (2.8%) | |||
Lamb Weston Holdings | |||
Inc. | 662,968 | 44,154 | |
Nu Skin Enterprises Inc. | |||
Class A | 424,663 | 35,001 | |
*,^ | National Beverage Corp. | 272,330 | 31,759 |
* | Herbalife Nutrition Ltd. | 467,765 | 25,516 |
JM Smucker Co. | 161,269 | 16,548 | |
Conagra Brands Inc. | 383,259 | 13,019 | |
* | US Foods Holding Corp. | 406,640 | 12,533 |
Medifast Inc. | 53,173 | 11,780 | |
* | Boston Beer Co. Inc. | ||
Class A | 27,849 | 8,007 | |
* | Sprouts Farmers Market | ||
Inc. | 172,484 | 4,728 | |
Ingles Markets Inc. | |||
Class A | 135,801 | 4,651 | |
Spectrum Brands | |||
Holdings Inc. | 59,122 | 4,418 | |
* | Post Holdings Inc. | 41,262 | 4,045 |
Cal-Maine Foods Inc. | 77,254 | 3,731 | |
* | Central Garden & Pet | ||
Co. Class A | 91,762 | 3,307 | |
223,197 | |||
Energy (5.1%) | |||
HollyFrontier Corp. | 901,536 | 63,017 | |
* | Denbury Resources Inc. | 9,117,263 | 56,527 |
* | California Resources | ||
Corp. | 1,084,976 | 52,654 | |
* | Whiting Petroleum Corp. | 922,835 | 48,947 |
PBF Energy Inc. Class A | 714,836 | 35,678 | |
Marathon Oil Corp. | 1,201,373 | 27,968 | |
SM Energy Co. | 732,333 | 23,090 | |
* | ProPetro Holding Corp. | 1,184,129 | 19,526 |
* | Renewable Energy | ||
Group Inc. | 587,331 | 16,915 | |
* | Newfield Exploration Co. | 523,727 | 15,099 |
Peabody Energy Corp. | 325,015 | 11,584 | |
* | Carrizo Oil & Gas Inc. | 268,045 | 6,755 |
Delek US Holdings Inc. | 133,496 | 5,664 | |
* | Cheniere Energy Inc. | 80,655 | 5,605 |
Diamondback Energy Inc. | 32,384 | 4,378 | |
Murphy Oil Corp. | 120,787 | 4,027 | |
* | Unit Corp. | 136,813 | 3,565 |
400,999 | |||
Financials (14.7%) | |||
Primerica Inc. | 535,643 | 64,572 | |
Regions Financial Corp. | 3,465,863 | 63,599 | |
Zions Bancorporation | 1,217,451 | 61,055 | |
Fifth Third Bancorp | 1,974,235 | 55,121 | |
Comerica Inc. | 600,126 | 54,131 | |
Lincoln National Corp. | 782,691 | 52,957 | |
Unum Group | 1,249,290 | 48,810 | |
LPL Financial Holdings | |||
Inc. | 700,110 | 45,164 |
* | MGIC Investment Corp. | 3,285,248 | 43,727 |
MSCI Inc. Class A | 220,153 | 39,057 | |
Torchmark Corp. | 445,690 | 38,637 | |
* | E*TRADE Financial | ||
Corp. | 723,718 | 37,916 | |
Ally Financial Inc. | 1,335,954 | 35,336 | |
Assured Guaranty Ltd. | 833,422 | 35,195 | |
* | Green Dot Corp. Class A | 394,661 | 35,054 |
Walker & Dunlop Inc. | 658,545 | 34,824 | |
* | Essent Group Ltd. | 610,906 | 27,033 |
* | World Acceptance Corp. | 226,384 | 25,889 |
Washington Federal Inc. | 755,347 | 24,171 | |
Santander Consumer | |||
USA Holdings Inc. | 1,145,949 | 22,965 | |
Universal Insurance | |||
Holdings Inc. | 456,627 | 22,169 | |
Fidelity National Financial | |||
Inc. | 483,765 | 19,036 | |
First American Financial | |||
Corp. | 355,757 | 18,353 | |
Synovus Financial Corp. | 395,334 | 18,102 | |
TCF Financial Corp. | 723,908 | 17,236 | |
* | NMI Holdings Inc. | ||
Class A | 740,710 | 16,777 | |
Umpqua Holdings Corp. | 776,072 | 16,142 | |
Cadence BanCorp | |||
Class A | 530,922 | 13,868 | |
Reinsurance Group of | |||
America Inc. Class A | 91,651 | 13,249 | |
* | Axos Financial Inc. | 380,374 | 13,081 |
Evercore Inc. Class A | 128,562 | 12,927 | |
* | Texas Capital | ||
Bancshares Inc. | 148,330 | 12,259 | |
* | SVB Financial Group | 36,572 | 11,368 |
* | Credit Acceptance Corp. | 25,679 | 11,249 |
Webster Financial Corp. | 189,781 | 11,189 | |
Virtu Financial Inc. | |||
Class A | 512,323 | 10,477 | |
Wintrust Financial Corp. | 121,881 | 10,352 | |
Commerce Bancshares | |||
Inc. | 150,221 | 9,918 | |
Hancock Whitney Corp. | 188,513 | 8,964 | |
BankUnited Inc. | 249,668 | 8,838 | |
Voya Financial Inc. | 156,171 | 7,757 | |
Cullen/Frost Bankers Inc. | 73,717 | 7,699 | |
Federal Agricultural | |||
Mortgage Corp. | 106,447 | 7,683 | |
Nelnet Inc. Class A | 96,092 | 5,494 | |
FirstCash Inc. | 60,316 | 4,946 | |
Nasdaq Inc. | 53,459 | 4,587 | |
*,^ | LendingTree Inc. | 17,500 | 4,027 |
CNO Financial Group Inc. | 182,462 | 3,872 | |
Jefferies Financial Group | |||
Inc. | 165,888 | 3,643 | |
1,170,475 |
11
Strategic Equity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Health Care (12.3%) | |||
* | WellCare Health Plans | ||
Inc. | 243,816 | 78,141 | |
* | Charles River Laboratories | ||
International Inc. | 510,517 | 68,685 | |
Chemed Corp. | 192,585 | 61,546 | |
* | Align Technology Inc. | 152,551 | 59,681 |
* | Molina Healthcare Inc. | 316,233 | 47,024 |
* | PRA Health Sciences Inc. | 400,454 | 44,126 |
* | Nektar Therapeutics | ||
Class A | 703,837 | 42,906 | |
* | ABIOMED Inc. | 94,732 | 42,606 |
* | Array BioPharma Inc. | 2,613,708 | 39,728 |
* | Veeva Systems Inc. | ||
Class A | 339,956 | 37,011 | |
* | Mettler-Toledo | ||
International Inc. | 57,319 | 34,906 | |
Agilent Technologies Inc. | 485,352 | 34,237 | |
* | DexCom Inc. | 236,073 | 33,768 |
* | Haemonetics Corp. | 286,256 | 32,799 |
* | Myriad Genetics Inc. | 698,391 | 32,126 |
* | IQVIA Holdings Inc. | 238,529 | 30,947 |
* | Tivity Health Inc. | 896,323 | 28,817 |
* | Tenet Healthcare Corp. | 986,947 | 28,089 |
* | Varian Medical Systems | ||
Inc. | 224,359 | 25,113 | |
* | Loxo Oncology Inc. | 118,822 | 20,298 |
* | Madrigal | ||
Pharmaceuticals Inc. | 81,387 | 17,427 | |
* | Inogen Inc. | 66,129 | 16,143 |
Encompass Health Corp. | 167,571 | 13,062 | |
* | Arena Pharmaceuticals | ||
Inc. | 278,545 | 12,819 | |
* | Endo International plc | 746,609 | 12,565 |
Bruker Corp. | 367,996 | 12,309 | |
* | IDEXX Laboratories Inc. | 47,053 | 11,747 |
* | ImmunoGen Inc. | 1,158,526 | 10,971 |
* | Enanta Pharmaceuticals | ||
Inc. | 118,781 | 10,151 | |
* | Halozyme Therapeutics | ||
Inc. | 460,497 | 8,367 | |
* | Amedisys Inc. | 66,455 | 8,304 |
* | AnaptysBio Inc. | 77,544 | 7,737 |
* | Sage Therapeutics Inc. | 53,462 | 7,552 |
* | PTC Therapeutics Inc. | 104,335 | 4,904 |
976,612 | |||
Industrials (15.2%) | |||
Spirit AeroSystems | |||
Holdings Inc. Class A | 752,993 | 69,027 | |
WW Grainger Inc. | 192,431 | 68,777 | |
Allison Transmission | |||
Holdings Inc. | 1,241,208 | 64,555 | |
* | United Rentals Inc. | 389,427 | 63,710 |
Greenbrier Cos. Inc. | 1,026,398 | 61,686 | |
GATX Corp. | 612,952 | 53,075 |
SkyWest Inc. | 878,456 | 51,741 | |
Huntington Ingalls | |||
Industries Inc. | 201,874 | 51,696 | |
* | Copart Inc. | 985,947 | 50,806 |
Robert Half | |||
International Inc. | 682,855 | 48,059 | |
* | HD Supply Holdings Inc. | 1,114,307 | 47,681 |
Harris Corp. | 272,317 | 46,079 | |
* | TriNet Group Inc. | 777,373 | 43,782 |
* | Meritor Inc. | 2,158,365 | 41,786 |
Terex Corp. | 861,457 | 34,381 | |
TransUnion | 445,554 | 32,784 | |
* | XPO Logistics Inc. | 257,608 | 29,411 |
Expeditors International | |||
of Washington Inc. | 377,681 | 27,771 | |
* | Avis Budget Group Inc. | 852,363 | 27,395 |
Wabash National Corp. | 1,486,625 | 27,101 | |
* | Harsco Corp. | 865,734 | 24,717 |
* | Axon Enterprise Inc. | 356,154 | 24,372 |
Graco Inc. | 452,301 | 20,960 | |
Quad/Graphics Inc. | 891,293 | 18,575 | |
* | Aerovironment Inc. | 155,670 | 17,461 |
* | Cimpress NV | 125,769 | 17,181 |
Oshkosh Corp. | 234,757 | 16,724 | |
Old Dominion Freight | |||
Line Inc. | 87,446 | 14,101 | |
* | Continental Building | ||
Products Inc. | 348,875 | 13,100 | |
Herman Miller Inc. | 305,626 | 11,736 | |
Pentair plc | 266,600 | 11,557 | |
Insperity Inc. | 90,043 | 10,621 | |
Rush Enterprises Inc. | |||
Class A | 241,532 | 9,495 | |
Global Brass & Copper | |||
Holdings Inc. | 193,167 | 7,128 | |
KAR Auction Services | |||
Inc. | 116,192 | 6,935 | |
ICF International Inc. | 77,344 | 5,836 | |
* | SPX Corp. | 169,625 | 5,650 |
HEICO Corp. | 55,876 | 5,175 | |
Ennis Inc. | 249,515 | 5,103 | |
* | TrueBlue Inc. | 180,826 | 4,710 |
Korn/Ferry International | 92,168 | 4,538 | |
ACCO Brands Corp. | 353,526 | 3,995 | |
Brink’s Co. | 55,833 | 3,894 | |
Cintas Corp. | 18,738 | 3,707 | |
1,208,574 | |||
Information Technology (17.5%) | |||
* | Square Inc. | 990,120 | 98,032 |
*,^ | Advanced Micro | ||
Devices Inc. | 2,773,901 | 85,686 | |
CDW Corp. | 824,122 | 73,281 | |
* | Cadence Design | ||
Systems Inc. | 1,466,830 | 66,477 |
12
Strategic Equity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Booz Allen Hamilton | |||
Holding Corp. Class A | 1,327,334 | 65,876 | |
NetApp Inc. | 751,208 | 64,521 | |
*,^ | Match Group Inc. | 1,008,727 | 58,415 |
* | Aspen Technology Inc. | 468,775 | 53,398 |
* | CACI International Inc. | ||
Class A | 283,858 | 52,272 | |
Seagate Technology plc | 1,087,448 | 51,491 | |
* | RingCentral Inc. Class A | 504,131 | 46,909 |
* | ON Semiconductor | ||
Corp. | 2,542,077 | 46,850 | |
Broadridge Financial | |||
Solutions Inc. | 350,970 | 46,310 | |
Science Applications | |||
International Corp. | 539,635 | 43,495 | |
* | TTM Technologies Inc. | 2,394,726 | 38,100 |
* | New Relic Inc. | 332,759 | 31,356 |
* | Citrix Systems Inc. | 265,905 | 29,558 |
* | Zebra Technologies Corp. | 160,979 | 28,466 |
* | Fortinet Inc. | 302,466 | 27,909 |
SYNNEX Corp. | 323,926 | 27,437 | |
* | Hortonworks Inc. | 1,168,051 | 26,643 |
* | Box Inc. | 1,091,582 | 26,100 |
* | Five9 Inc. | 551,853 | 24,110 |
* | Etsy Inc. | 421,595 | 21,662 |
* | Nutanix Inc. | 499,792 | 21,351 |
Avnet Inc. | 433,267 | 19,397 | |
* | Mellanox Technologies | ||
Ltd. | 263,383 | 19,345 | |
* | Cree Inc. | 508,994 | 19,276 |
* | F5 Networks Inc. | 94,494 | 18,844 |
* | SolarEdge Technologies | ||
Inc. | 463,738 | 17,460 | |
MAXIMUS Inc. | 251,723 | 16,377 | |
Jabil Inc. | 535,429 | 14,499 | |
* | First Solar Inc. | 289,760 | 14,030 |
ManTech International | |||
Corp. Class A | 207,786 | 13,153 | |
*,^ | Unisys Corp. | 585,536 | 11,945 |
* | SMART Global Holdings | ||
Inc. | 392,400 | 11,278 | |
* | Amkor Technology Inc. | 1,077,374 | 7,962 |
* | ePlus Inc. | 85,860 | 7,959 |
* | Synaptics Inc. | 172,561 | 7,872 |
* | Keysight Technologies | ||
Inc. | 118,710 | 7,868 | |
CSG Systems | |||
International Inc. | 152,801 | 6,133 | |
Kulicke & Soffa | |||
Industries Inc. | 232,721 | 5,548 | |
* | Anixter International Inc. | 63,509 | 4,465 |
* | Pure Storage Inc. Class A | 171,852 | 4,460 |
* | PTC Inc. | 40,886 | 4,342 |
Sabre Corp. | 159,180 | 4,151 | |
1,392,069 |
Materials (5.2%) | |||
CF Industries Holdings | |||
Inc. | 1,238,222 | 67,409 | |
Huntsman Corp. | 1,943,996 | 52,935 | |
Louisiana-Pacific Corp. | 1,844,500 | 48,861 | |
Westlake Chemical | |||
Corp. | 436,783 | 36,301 | |
Chemours Co. | 893,260 | 35,230 | |
Freeport-McMoRan | |||
Inc. | 2,206,707 | 30,717 | |
Avery Dennison Corp. | 272,187 | 29,492 | |
Greif Inc. Class A | 357,014 | 19,158 | |
Warrior Met Coal Inc. | 673,866 | 18,221 | |
* | Cleveland-Cliffs Inc. | 1,285,179 | 16,271 |
Eastman Chemical Co. | 131,998 | 12,635 | |
Trinseo SA | 127,194 | 9,959 | |
Sealed Air Corp. | 233,953 | 9,393 | |
Steel Dynamics Inc. | 189,916 | 8,582 | |
Ashland Global | |||
Holdings Inc. | 85,793 | 7,195 | |
* | Alcoa Corp. | 136,395 | 5,510 |
* | Axalta Coating | ||
Systems Ltd. | 135,466 | 3,950 | |
411,819 | |||
Real Estate (8.2%) | |||
Hospitality Properties | |||
Trust | 2,004,594 | 57,812 | |
Host Hotels & | |||
Resorts Inc. | 2,444,914 | 51,588 | |
Extra Space Storage | |||
Inc. | 562,591 | 48,743 | |
Ryman Hospitality | |||
Properties Inc. | 541,957 | 46,700 | |
Jones Lang LaSalle Inc. | 317,069 | 45,759 | |
* | SBA Communications | ||
Corp. Class A | 274,945 | 44,164 | |
Park Hotels & Resorts | |||
Inc. | 1,172,941 | 38,496 | |
Pebblebrook Hotel Trust | 1,054,274 | 38,344 | |
Gaming and Leisure | |||
Properties Inc. | 1,044,368 | 36,814 | |
Spirit Realty Capital Inc. | 4,296,519 | 34,630 | |
Xenia Hotels & Resorts | |||
Inc. | 1,244,920 | 29,505 | |
Life Storage Inc. | 274,705 | 26,141 | |
* | CBRE Group Inc. Class A | 548,496 | 24,189 |
CubeSmart | 802,317 | 22,890 | |
Lexington Realty Trust | 2,402,596 | 19,942 | |
Senior Housing | |||
Properties Trust | 778,531 | 13,671 | |
CoreSite Realty Corp. | 110,956 | 12,332 | |
National Health | |||
Investors Inc. | 144,780 | 10,944 | |
Lamar Advertising Co. | |||
Class A | 126,388 | 9,833 |
13
Strategic Equity Fund
Market | ||||
Value• | ||||
Shares | ($000) | |||
Ashford Hospitality | ||||
Trust Inc. | 1,462,376 | 9,345 | ||
MGM Growth | ||||
Properties LLC Class A | 250,304 | 7,381 | ||
NorthStar Realty | ||||
Europe Corp. | 426,375 | 6,037 | ||
Washington Prime | ||||
Group Inc. | 616,609 | 4,501 | ||
Universal Health Realty | ||||
Income Trust | 58,866 | 4,380 | ||
Uniti Group Inc. | 201,492 | 4,060 | ||
* | Forestar Group Inc. | 129,459 | 2,745 | |
650,946 | ||||
Telecommunication Services (0.5%) | ||||
* | Vonage Holdings Corp. | 1,726,407 | 24,446 | |
* | Zayo Group Holdings Inc. | 464,729 | 16,135 | |
40,581 | ||||
Utilities (3.9%) | ||||
FirstEnergy Corp. | 1,974,571 | 73,395 | ||
NRG Energy Inc. | 1,954,129 | 73,084 | ||
Entergy Corp. | 866,566 | 70,305 | ||
AES Corp. | 2,887,764 | 40,429 | ||
* | Vistra Energy Corp. | 1,151,648 | 28,653 | |
MDU Resources | ||||
Group Inc. | 457,393 | 11,750 | ||
Ameren Corp. | 114,523 | 7,240 | ||
National Fuel Gas Co. | 71,385 | 4,002 | ||
308,858 | ||||
Total Common Stocks | ||||
(Cost $6,260,770) | 7,901,915 | |||
Temporary Cash Investments (1.9%)1 | ||||
Money Market Fund (1.9%) | ||||
2,3 | Vanguard Market Liquidity | |||
Fund, 2.209% | 1,508,109 | 150,811 | ||
Face | ||||
Amount | ||||
($000) | ||||
U. S. Government and Agency Obligations (0.0%) | ||||
4 | United States Treasury Bill, | |||
2.072%, 11/8/18 | 1,000 | 998 | ||
4 | United States Treasury Bill, | |||
2.194%, 1/24/19 | 1,000 | 993 | ||
United States Treasury Bill, | ||||
2.280%, 2/7/19 | 500 | 496 | ||
4 | United States Treasury Bill, | |||
2.313%–2.314%, 2/28/19 | 600 | 594 | ||
3,081 | ||||
Total Temporary Cash Investments | ||||
(Cost $153,886) | 153,892 | |||
Total Investments (101.4%) | ||||
(Cost $6,414,656) | 8,055,807 |
Amount | |
($000) | |
Other Assets and Liabilities (-1.4%) | |
Other Assets | |
Investment in Vanguard | 408 |
Receivables for Investment Securities Sold 1,047 | |
Receivables for Accrued Income | 8,325 |
Receivables for Capital Shares Issued | 6,529 |
Variation Margin Receivable— | |
Futures Contracts | 131 |
Other Assets | 308 |
Total Other Assets | 16,748 |
Liabilities | |
Payables for Investment Securities | |
Purchased | (5,459) |
Collateral for Securities on Loan | (110,059) |
Payables for Capital Shares Redeemed | (5,607) |
Payables to Vanguard | (5,094) |
Total Liabilities | (126,219) |
Net Assets (100%) | |
Applicable to 213,533,935 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 7,946,336 |
Net Asset Value Per Share | $37.21 |
At September 30, 2018, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 5,739,595 |
Undistributed Net Investment Income | 50,031 |
Accumulated Net Realized Gains | 515,941 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 1,641,151 |
Futures Contracts | (382) |
Net Assets | 7,946,336 |
• 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 $103,257,000.
1 The fund invests a portion of its cash reserves in equity
markets through the use of index futures contracts. After
giving effect to futures investments, the fund’s effective
common stock and temporary cash investment positions
represent 100.0% and 1.4%, 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 $110,059,000 of collateral received for securities
on loan.
4 Securities with a value of $1,837,000 have been segregated as
initial margin for open futures contracts.
Strategic Equity 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 Russell 2000 Index | December 2018 | 368 | 31,295 | (227) |
E-mini S&P Mid-Cap 400 Index | December 2018 | 54 | 10,936 | (155) |
(382) |
See accompanying Notes, which are an integral part of the Financial Statements.
15
Strategic Equity Fund
Statement of Operations
Year Ended | |
September 30, 2018 | |
($000) | |
Investment Income | |
Income | |
Dividends | 93,351 |
Interest1 | 604 |
Securities Lending—Net | 985 |
Total Income | 94,940 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 1,650 |
Management and Administrative | 9,751 |
Marketing and Distribution | 1,078 |
Custodian Fees | 56 |
Auditing Fees | 34 |
Shareholders’ Reports and Proxy | 112 |
Trustees’ Fees and Expenses | 6 |
Total Expenses | 12,687 |
Net Investment Income | 82,253 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | 556,849 |
Futures Contracts | 5,228 |
Realized Net Gain (Loss) | 562,077 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities1 | 433,581 |
Futures Contracts | (1,194) |
Change in Unrealized Appreciation (Depreciation) | 432,387 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,076,717 |
1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund | |
were $565,000, ($13,000), and $1,000, respectively. Purchases and sales are for temporary cash investment purposes. |
See accompanying Notes, which are an integral part of the Financial Statements.
16
Strategic Equity Fund
Statement of Changes in Net Assets
Year Ended September 30, | ||
2018 | 2017 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 82,253 | 103,003 |
Realized Net Gain (Loss) | 562,077 | 488,417 |
Change in Unrealized Appreciation (Depreciation) | 432,387 | 508,953 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,076,717 | 1,100,373 |
Distributions | ||
Net Investment Income | (92,114) | (101,097) |
Realized Capital Gain1 | (479,773) | (99,945) |
Total Distributions | (571,887) | (201,042) |
Capital Share Transactions | ||
Issued | 889,191 | 1,014,707 |
Issued in Lieu of Cash Distributions | 537,684 | 188,875 |
Redeemed | (1,035,958) | (1,098,154) |
Net Increase (Decrease) from Capital Share Transactions | 390,917 | 105,428 |
Total Increase (Decrease) | 895,747 | 1,004,759 |
Net Assets | ||
Beginning of Period | 7,050,589 | 6,045,830 |
End of Period2 | 7,946,336 | 7,050,589 |
1 Includes fiscal 2018 and 2017 short-term gain distributions totaling $28,727,000 and $0, respectively. Short-term gain distributions | ||
are treated as ordinary income dividends for tax purposes. | ||
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $50,031,000 and $62,713,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
Strategic Equity Fund
Financial Highlights
For a Share Outstanding | Year Ended September 30, | ||||
Throughout Each Period | 2018 | 2017 | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $34.89 | $30.41 | $30.82 | $32.02 | $27.34 |
Investment Operations | |||||
Net Investment Income | . 3921 | .5041 | .624 | . 466 | . 361 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 4.781 | 4.988 | 2.440 | .207 | 4.679 |
Total from Investment Operations | 5.173 | 5.492 | 3.064 | .673 | 5.040 |
Distributions | |||||
Dividends from Net Investment Income | (. 460) | (. 509) | (. 507) | (. 354) | (. 360) |
Distributions from Realized Capital Gains | (2.393) | (.503) | (2.967) | (1.519) | — |
Total Distributions | (2.853) | (1.012) | (3.474) | (1.873) | (.360) |
Net Asset Value, End of Period | $37.21 | $34.89 | $30.41 | $30.82 | $32.02 |
Total Return2 | 15.63% | 18.28% | 10.62% | 2.01% | 18.53% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $7,946 | $7,051 | $6,046 | $5,739 | $5,392 |
Ratio of Total Expenses to Average Net Assets | 0.17% | 0.18% | 0.18% | 0.21% | 0.27% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 1.10% | 1.53% | 2.09% | 1.41% | 1.19% |
Portfolio Turnover Rate | 82% | 81% | 74% | 70% | 60% |
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.
See accompanying Notes, which are an integral part of the Financial Statements.
18
Strategic Equity Fund
Notes to Financial Statements
Vanguard Strategic Equity Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.
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 year ended September 30, 2018, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2015–2018), 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.
19
Strategic Equity Fund
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 counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at September 30, 2018, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.
20
Strategic Equity Fund
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At September 30, 2018, the fund had contributed to Vanguard capital in the amount of $408,000, representing 0.01% of the fund’s net assets and 0.16% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine
the fair value of investments). 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 September 30, 2018, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 7,901,915 | — | — |
Temporary Cash Investments | 150,811 | 3,081 | — |
Futures Contracts—Assets1 | 131 | — | — |
Total | 8,052,857 | 3,081 | — |
1 Represents variation margin on the last day of the reporting period. |
D. Permanent differences between book-basis and tax-basis components of net assets are reclassified among capital accounts in the financial statements to reflect their tax character. These reclassifications have no effect on net assets or net asset value per share. As of period end, the following permanent differences primarily attributable to the accounting for distributions in connection with fund share redemptions were reclassified to the following accounts:
Amount | |
($000) | |
Paid-in Capital | 22,370 |
Undistributed (Overdistributed) Net Investment Income | (2,821) |
Accumulated Net Realized Gains (Losses) | (19,549) |
21
Strategic Equity Fund
Temporary differences between book-basis and tax-basis components of accumulated net earnings (losses) arise when certain items of income, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. The differences are primarily related to the tax deferral of losses on wash sales and the realization of unrealized gains or losses on certain futures contracts. As of period end, the tax-basis components of accumulated net earnings (losses) are detailed in the table as follows:
Amount | |
($000) | |
Undistributed Ordinary Income | 78,576 |
Undistributed Long-Term Gains | 491,551 |
Capital Loss Carryforwards | — |
Net Unrealized Gains (Losses) | 1,641,151 |
As of September 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
Amount | |
($000) | |
Tax Cost | 6,414,656 |
Gross Unrealized Appreciation | 1,819,064 |
Gross Unrealized Depreciation | (177,913) |
Net Unrealized Appreciation (Depreciation) | 1,641,151 |
E. During the year ended September 30, 2018, the fund purchased $6,044,926,000 of investment securities and sold $6,140,821,000 of investment securities, other than temporary cash investments.
F. Capital shares issued and redeemed were:
Year Ended September 30, | ||
2018 | 2017 | |
Shares | Shares | |
(000) | (000) | |
Issued | 24,945 | 30,675 |
Issued in Lieu of Cash Distributions | 15,880 | 5,767 |
Redeemed | (29,353) | (33,176) |
Net Increase (Decrease) in Shares Outstanding | 11,472 | 3,266 |
G. Management has determined that no events or transactions occurred subsequent to September 30, 2018, that would require recognition or disclosure in these financial statements.
22
Report of Independent Registered
Public Accounting Firm
To the Board of Trustees of Vanguard Horizon Funds and Shareholders of Vanguard Strategic Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of net assets of Vanguard Strategic Equity Fund (one of the funds constituting Vanguard Horizon Funds, referred to hereafter as the “Fund”) as of September 30, 2018, the related statement of operations for the year ended September 30, 2018, the statement of changes in net assets for each of the two years in the period ended September 30, 2018, including the related notes, and the financial highlights for each of the five years in the period ended September 30, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended September 30, 2018 and the financial highlights for each of the five years in the period ended September 30, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of September 30, 2018 by correspondence with the custodians and brokers and by agreement to the underlying ownership records of the transfer agent; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 15, 2018
We have served as the auditor of one or more investment companies in The Vanguard Group of
Funds since 1975.
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Special 2018 tax information (unaudited) for Vanguard Strategic Equity Fund
This information for the fiscal year ended September 30, 2018, is included pursuant to provisions of the Internal Revenue Code.
The fund distributed $469,729,000 as capital gain dividends (20% rate gain distributions) to shareholders during the fiscal year.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund are qualified short-term capital gains.
The fund distributed $68,100,000 of qualified dividend income to shareholders during the fiscal year.
For corporate shareholders, 62.4% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.
24
Your Fund’s After-Tax Returns
This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund’s distributions, and (2) assuming that an investor paid taxes on the fund’s distributions and sold all shares at the end of each period.
Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect any qualified dividend income, using actual prior-year figures and estimates for 2018. (In the example, returns after the sale of fund shares may be higher than those assuming no sale. This occurs when the sale would have produced a capital loss. The calculation assumes that the investor received a tax deduction for the loss.)
Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes.
Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.
Average Annual Total Returns: Strategic Equity Fund | |||
Periods Ended September 30, 2018 | |||
One | Five | Ten | |
Year | Years | Years | |
Returns Before Taxes | 15.63% | 12.84% | 12.61% |
Returns After Taxes on Distributions | 13.33 | 11.24 | 11.68 |
Returns After Taxes on Distributions and Sale of Fund Shares | 10.38 | 9.89 | 10.32 |
25
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The 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.
26
Six Months Ended September 30, 2018 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Strategic Equity Fund | 3/31/2018 | 9/30/2018 | Period |
Based on Actual Fund Return | $1,000.00 | $1,090.24 | $0.84 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,024.27 | 0.81 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratio for
that period is 0.16%. 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 (183/365).
27
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share.
For a fund, the weighted average price/book ratio of the stocks it holds.
28
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
29
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.
30
The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 211 Vanguard funds.
Information for each trustee and executive officer of the fund appears below. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustees1
F. William McNabb III
Born in 1957. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: chairman of the board (January 2010–present) of Vanguard and of each of the investment companies served by Vanguard, trustee (2009–present) of each of the investment companies served by Vanguard, and director (2008–present) of Vanguard. Chief executive officer and president (2008–2017) of Vanguard and each of the investment companies served by Vanguard, managing director (1995–2008) of Vanguard, and director (1997–2018) of Vanguard Marketing Corporation. Director (2018–present) of UnitedHealth Group.
Mortimer J. Buckley
Born in 1969. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer (January 2018–present) of Vanguard; chief executive officer, president, and trustee (January 2018–present) of each of the investment companies served by Vanguard; president and director (2017–present) of Vanguard; and president (February 2018–present) of Vanguard Marketing Corporation. Chief investment officer (2013–2017), managing director (2002–2017), head of the Retail Investor Group (2006–2012), and chief information officer (2001–2006) of Vanguard. Chairman of the board (2011–2017) of the Children’s Hospital of Philadelphia.
Independent Trustees
Emerson U. Fullwood
Born in 1948. Trustee since January 2008. Principal occupation(s) during the past five years and other experience: executive chief staff and marketing officer for North America and corporate vice president (retired 2008) of Xerox Corporation (document management products and services). Former president of the Worldwide Channels Group, Latin America, and Worldwide Customer Service and executive chief staff officer of Developing Markets of Xerox. Executive in residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology. Lead director of SPX FLOW, Inc. (multi-industry manufacturing). Director of the University of Rochester Medical Center, the Monroe Community College Foundation, the United Way of Rochester, North Carolina A&T University, and Roberts Wesleyan College. Trustee of the University of Rochester.
Amy Gutmann
Born in 1949. Trustee since June 2006. Principal occupation(s) during the past five years and other experience: president (2004–present) of the University of Pennsylvania. Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and professor of communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania. Trustee of the National Constitution Center.
1 Mr. McNabb and Mr. Buckley are considered “interested persons,” as defined in the Investment Company Act of 1940, because
they are officers of the Vanguard funds.
JoAnn Heffernan Heisen
Born in 1950. Trustee since July 1998. Principal occupation(s) during the past five years and other experience: corporate vice president of Johnson & Johnson (pharmaceuticals/medical devices/consumer products) and member of its executive committee (1997–2008). Chief global diversity officer (retired 2008), vice president and chief information officer (1997–2006), controller (1995–1997), treasurer (1991–1995), and assistant treasurer (1989–1991) of Johnson & Johnson. Director of Skytop Lodge Corporation (hotels) and the Robert Wood Johnson Foundation. Member of the advisory board of the Institute for Women’s Leadership at Rutgers University.
F. Joseph Loughrey
Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education. Director of the V Foundation for Cancer Research. Member of the advisory council for the College of Arts and Letters and chair of the advisory board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.
Scott C. Malpass
Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: chief investment officer (1989–present) and vice president (1996–present) of the University of Notre Dame. Assistant professor of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Chairman of the board of TIFF Advisory Services, Inc. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of advisors for Spruceview Capital Partners, and the board of superintendence of the Institute for the Works of Religion.
Deanna Mulligan
Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: president (2010–present) and chief executive officer (2011–present) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of The Guardian Life Insurance Company of America. Member of the board of The Guardian Life Insurance Company of America, the American Council of Life Insurers, the Partnership for New York City (business leadership), and the Committee Encouraging Corporate Philanthropy. Trustee of the Economic Club of New York and the Bruce Museum (arts and science). Member of the Advisory Council for the Stanford Graduate School of Business.
André F. Perold
Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies LLC (private investment firm). Overseer of the Museum of Fine Arts Boston.
Sarah Bloom Raskin
Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Member of the board of directors (2012–2014) of Neighborhood Reinvestment Corporation. Director of i(x) Investments, LLC.
Peter F. Volanakis
Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Chairman of the board of trustees of Colby-Sawyer College. Member of the Board of Hypertherm Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born in 1967. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (2017–present), treasurer (2015–2017), controller (2010–2015), and assistant controller (2001–2010) of each of the investment companies served by Vanguard.
Christine M. Buchanan
Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard and global head of Fund Administration at Vanguard. Treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG LLP (audit, tax, and advisory services).
Brian Dvorak
Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2017–present) of Vanguard and each of the investment companies served by Vanguard. Assistant vice president (2017–present) of Vanguard Marketing Corporation. Vice president and director of Enterprise Risk Management (2011–2013) at Oppenheimer Funds, Inc.
Thomas J. Higgins
Born in 1957. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2008–present) and treasurer (1998–2008) of each of the investment companies served by Vanguard.
Peter Mahoney
Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.
Anne E. Robinson
Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Director and senior vice president (2016–2018) of Vanguard Marketing Corporation. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express.
Michael Rollings
Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.
Vanguard Senior Management Team | |
Joseph Brennan | Chris D. McIsaac |
Mortimer J. Buckley | James M. Norris |
Gregory Davis | Thomas M. Rampulla |
John James | Karin A. Risi |
Martha G. King | Anne E. Robinson |
John T. Marcante | Michael Rollings |
Chairman Emeritus and Senior Advisor | |
John J. Brennan | |
Chairman, 1996–2009 | |
Chief Executive Officer and President, 1996–2008 | |
Founder | |
John C. Bogle | |
Chairman and Chief Executive Officer, 1974–1996 |
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 | |
Connect with Vanguard® > vanguard.com | |
Fund Information > 800-662-7447 | Source for Bloomberg Barclays indexes: Bloomberg |
Direct Investor Account Services > 800-662-2739 | Index Services Limited. Copyright 2018, Bloomberg. All |
rights reserved. | |
Institutional Investor Services > 800-523-1036 | |
Text Telephone for People | |
Who Are Deaf or Hard of Hearing > 800-749-7273 | |
This material may be used in conjunction | |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by | |
the fund’s current prospectus. | |
All comparative mutual fund data are from Lipper, a | |
Thomson Reuters Company, or Morningstar, Inc., unless | |
otherwise noted. | |
You can obtain a free copy of Vanguard’s proxy voting | |
guidelines by visiting vanguard.com/proxyreporting or by | |
calling Vanguard at 800-662-2739. The guidelines are | |
also available from the SEC’s website, sec.gov. In | |
addition, you may obtain a free report on how your fund | |
voted the proxies for securities it owned during the 12 | |
months ended June 30. To get the report, visit either | |
vanguard.com/proxyreporting or sec.gov. | |
You can review and copy information about your fund at | |
the SEC’s Public Reference Room in Washington, D.C. To | |
find out more about this public service, call the SEC at | |
202-551-8090. Information about your fund is also | |
available on the SEC’s website, and you can receive | |
copies of this information, for a fee, by sending a | |
request in either of two ways: via email addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2018 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q1140 112018 |
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
CEO’s Perspective. | 3 |
Advisor’s Report. | 5 |
Fund Profile. | 8 |
Performance Summary. | 10 |
Financial Statements. | 12 |
Your Fund’s After-Tax Returns. | 26 |
About Your Fund’s Expenses. | 27 |
Glossary. | 29 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
Your Fund’s Performance at a Glance
• Vanguard Capital Opportunity Fund returned about 21% for the 12 months ended September 30, 2018, in line with the return of its benchmark, the Russell Midcap Growth Index, and behind the average return of its multicapitalization growth fund peers.
• The broad U.S. stock market advanced nearly 18% as corporate earnings remained strong and the U.S. economy continued to grow. However, stocks endured a stretch of volatility earlier in 2018 before rebounding.
• Growth stocks outperformed their value brethren over the period, and large- and small-capitalization stocks generally surpassed mid-caps.
• PRIMECAP Management Company, the fund’s advisor, traditionally invests most heavily in the information technology and health care sectors. The fund’s information technology stocks returned about 35%, ahead of those in the benchmark, and contributed about 11 percentage points to results. Its health care stocks returned about 18%, far less than those in the benchmark, and added about 5 percentage points to results.
Total Returns: Fiscal Year Ended September 30, 2018 | |
Total | |
Returns | |
Vanguard Capital Opportunity Fund | |
Investor Shares | 21.03% |
Admiral™ Shares | 21.12 |
Russell Midcap Growth Index | 21.10 |
Multi-Cap Growth Funds Average | 23.04 |
Multi-Cap Growth Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. | |
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements. |
Total Returns: Ten Years Ended September 30, 2018 | |
Average | |
Annual Return | |
Capital Opportunity Fund Investor Shares | 14.78% |
Russell Midcap Growth Index | 13.46 |
Multi-Cap Growth Funds Average | 11.84 |
Multi-Cap Growth Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
The figures shown represent past performance, which is not a guarantee of future results. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost.
1
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
Capital Opportunity Fund | 0.44% | 0.37% | 1.17% |
The fund expense ratios shown are from the prospectus dated January 25, 2018, and represent estimated costs for the current fiscal year.
For the fiscal year ended September 30, 2018, the fund’s expense ratios were 0.43% for Investor Shares and 0.36% for Admiral Shares.
The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through
year-end 2017.
Peer group: Multi-Cap Growth Funds.
2
CEO’s Perspective
Tim Buckley
President and Chief Executive Officer
Dear Shareholder,
Over the years, I’ve found that prudent investors exhibit a common trait: discipline. No matter how the markets move or what new investing fad hits the headlines, those who stay focused on their goals and tune out the noise are set up for long-term success.
The prime gateway to investing is saving, and you don’t usually become a saver without a healthy dose of discipline. Savers make the decision to sock away part of their income, which means spending less and delaying gratification, no matter how difficult that may be.
Of course, disciplined investing extends beyond diligent saving. The financial markets, in the short term especially, are unpredictable; I have yet to meet the investor who can time them perfectly. It takes discipline to resist the urge to go all-in when markets are frothy or to retreat when things look bleak.
Staying put with your investments is one strategy for handling volatility. Another, rebalancing, requires even more discipline because it means steering your money away from strong performers and toward poorer performers.
Patience—a form of discipline—is also the friend of long-term investors. Higher returns are the potential reward for weathering the market’s turbulence and uncertainty.
3
We have been enjoying one of the longest bull markets in history, but it won’t continue forever. Prepare yourself now for how you will react when volatility comes back. Don’t panic. Don’t chase returns or look for answers outside the asset classes you trust. And be sure to rebalance periodically, even when there’s turmoil.
Whether you’re a master of self-control, get a boost from technology, or work with a professional advisor, know that discipline
is necessary to get the most out of your investment portfolio. And know that Vanguard is with you for the entire ride.
Thank you for your continued loyalty.
Sincerely,
Mortimer J. Buckley
President and Chief Executive Officer
October 18, 2018
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended September 30, 2018 | |||
One Year | Three Years | Five Years | |
Stocks | |||
Russell 1000 Index (Large-caps) | 17.76% | 17.07% | 13.67% |
Russell 2000 Index (Small-caps) | 15.24 | 17.12 | 11.07 |
Russell 3000 Index (Broad U.S. market) | 17.58 | 17.07 | 13.46 |
FTSE All-World ex US Index (International) | 2.13 | 10.18 | 4.51 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -1.22% | 1.31% | 2.16% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | 0.35 | 2.24 | 3.54 |
FTSE Three-Month U. S. Treasury Bill Index | 1.57 | 0.80 | 0.48 |
CPI | |||
Consumer Price Index | 2.28% | 1.99% | 1.52% |
4
Advisor’s Report
For the fiscal year ended September 30, 2018, Vanguard Capital Opportunity Fund returned 21.03% for Investor Shares and 21.12% for Admiral Shares. The results were nearly identical to the 21.10% return of the fund’s benchmark, the Russell Midcap Growth Index. The fund’s results trailed the 23.04% average return of its multicapitalization growth fund competitors but exceeded the 17.91% return of the Standard & Poor’s 500 Index, which serves as a proxy for the broad market in the attribution discussion that follows.
Relative to the S&P 500, sector allocation added to results while stock selection detracted from them. Sector allocation benefited most significantly from the fund’s information technology overweight and consumer staples underweight. Within stock selection, unfavorable performance within consumer discretionary more than offset outperformance in industrials.
The investment environment
The fiscal year featured a strengthening U.S. economy and robust U.S. equity market returns. The American consumer remained upbeat given healthy gains in employment, real disposable personal income, and household net worth. Consumer confidence measures, in turn, climbed to historically elevated levels, including a notable recent uptick in sentiment from lower-income households.
On the corporate side, tax legislation in late 2017 catalyzed the best earnings growth since the immediate aftermath of the global financial crisis, and a broad deregulatory agenda helped usher business sentiment to decade-high levels. Various gauges of business activity registered consistent expansion throughout the year, and forward-looking indicators remained encouraging.
While the growth momentum in the U.S. economy ultimately translated into equity strength, the path was not linear. The equity market rose rapidly through late January on enthusiasm for the new federal tax law and consequent upgrades to forward earnings. But market volatility resurfaced in early 2018 as combative trade rhetoric and the regulatory scrutiny of key technology companies escalated. The market corrected lower by more than 10% and largely hovered at those subdued levels for several months. The undeniable fitness of the underlying economy, coupled with key trade resolutions, returned the equity markets to record-setting territory by late August.
Cyclical sectors led the way during the fiscal year, with information technology returning 38% and consumer discretionary returning 35%, while defensive sectors generally underperformed the market averages.
Outlook for U.S. equities
As we look beyond the reporting period, we remain cautiously optimistic. This calendar year’s above-trend GDP growth and exceptional corporate earnings growth will likely decelerate next year, but solid growth on both fronts should endure. The S&P 500’s forward price/earnings (P/E) valuation (16.8 times) sits slightly above its 25-year historical average (16.1 times), while financial conditions remain fairly accommodative despite rising U.S.
5
Treasury yields and a strengthening U.S. dollar. The market’s valuation is thus reasonable overall in our view.
Our largest sector positions continue to be in information technology, health care, and industrials, where we believe our holdings enjoy a combination of strong secular growth, improved industry dynamics, and sensible valuations.
As the fiscal year closed, domestic strength increasingly contrasted with signs of emerging weakness abroad. While U.S. outperformance in this scenario is neither unprecedented nor alarming given superior fundamentals, synchronous global growth is a better environment for U.S. equities. And yet the markets are sounding early warnings, particularly in China, where deteriorating U.S.-China relations have contributed to a slumping equity market and a beleaguered yuan.
The risk of broader trade-induced tumult has diminished somewhat with each preliminary trade agreement announced by the Trump administration, but these developments focus the attention on China, the original and largest target of trade ire. As we have indicated, we are still hopeful that trade-inspired economic and geopolitical risks will continue to subside, even as we acknowledge few signs of progress in this specific dispute. We invest in many companies and industries, such as semiconductors and airlines, that maintain a cyclical bent. These companies rely heavily on international commerce and on global growth more broadly, and some are especially dependent on constructive U.S.-China relations.
Portfolio update
The portfolio maintains large overweight positions in information technology, health care, and industrial stocks. These sectors make up 75% of average assets compared with their 44% combined weighting in the S&P 500. The portfolio is roughly equal-weighted in consumer discretionary (11% versus 10%) and maintains an underweight position in all other sectors. Significant sector underweight positions include consumer staples, energy, financials, and telecommunication services. The fund also has limited or no exposure to several smaller sectors, including materials, real estate, and utilities.
Sector allocation was the primary driver of outperformance during the fiscal year. The fund maintained a large overweight position in information technology, the year’s best-performing sector, while underweight positions in multiple underperforming sectors also helped results, including consumer staples, financials, and utilities.
Stock selection was an overall detractor from relative results. Information technology featured many standout performers, including NetApp (+99%), Splunk (+82%), Adobe Systems (+81%), and NVIDIA (+58%), but negligible exposure to Apple (+49%) did detract. Health care selection was also a slight headwind as Alkermes (–17%) and Roche (–1%) more than offset strength from Illumina (+84%) and Eli Lilly (+29%).
Selection in industrials was a positive factor in relative results, though this largely stemmed from avoiding General
6
Electric’s 52% decline. Performance in the fund’s large airline holdings was mixed. Stock selection elsewhere was unfavorable in aggregate, primarily because of our limited exposure to Amazon (+108%) and Netflix (+106%).
As of September 30, 2018, the fund’s top ten holdings made up 33% of assets.
Advisor perspectives
Information technology has been a consistent source of outperformance for the fund. In recent years, our significant ownership in technology companies, particularly semiconductor stocks, has been an extraordinarily reliable driver of annual upside. Such trends tend not to persist indefinitely. That said, we continue to expect demand for semiconductors and software products—and technology and innovation in general—to outpace demand for goods and services more broadly. We also view the sector’s modest valuation premium (18.3 times forward P/E) as largely justified and not remotely similar to the valuation distortions of technology euphoria in previous eras.
As our assessment of company-level risk/reward evolves after years of outperformance, we have reduced several positions. And if fundamentals or sentiment were to shift after a strong multiyear run, we acknowledge the potential for performance reversion. But, importantly, our ownership is in companies, not sectors, and our conviction is in these companies’ immense opportunities in an increasingly technology-centric world. Our holdings thus continue to constitute a meaningful portfolio overweight.
In contrast to our technology holdings, our health care holdings have generally performed below our expectations in recent years, implying that the projected upside we envisioned from favorable demographics and company-level innovation remains intact. The airlines have also underper-formed of late and now trade at a roughly ten times forward P/E valuation despite continued growth in travel demand. Even as oil prices increase, the airlines’ substantial ongoing earnings power corroborates our contrarian view that this time can indeed be different.
Conclusion
As bottom-up stock pickers, we spend our time searching for opportunities to invest in stocks with long-term prospects we find to be materially better than market prices imply. This approach to stock selection, which drives portfolio composition and therefore sector allocation, often results in portfolios that bear little resemblance to market indexes, creating the possibility for lengthy periods of outperformance or underperformance. We nonetheless believe that this approach can generate superior results for shareholders over the long term.
PRIMECAP Management Company October 22, 2018
7
Capital Opportunity Fund
Fund Profile
As of September 30, 2018
Share-Class Characteristics | ||
Investor | Admiral | |
Shares | Shares | |
Ticker Symbol | VHCOX | VHCAX |
Expense Ratio1 | 0.44% | 0.37% |
30-Day SEC Yield | 0.70% | 0.77% |
Portfolio Characteristics | |||
Russell | DJ | ||
Midcap | U.S. Total | ||
Growth | Market | ||
Fund | Index | FA Index | |
Number of Stocks | 154 | 417 | 3,825 |
Median Market Cap | $53.2B | $15.3B | $73.9B |
Price/Earnings Ratio | 21.2x | 26.5x | 21.0x |
Price/Book Ratio | 4.0x | 6.2x | 3.1x |
Return on Equity | 15.4% | 19.4% | 14.9% |
Earnings Growth Rate | 12.8% | 14.7% | 8.5% |
Dividend Yield | 1.0% | 0.8% | 1.7% |
Foreign Holdings | 12.1% | 0.0% | 0.0% |
Turnover Rate | 10% | — | — |
Short-Term Reserves | 3.2% | — | — |
Volatility Measures | ||
Russell | DJ | |
Midcap | U.S. Total | |
Growth | Market | |
Index | FA Index | |
R-Squared | 0.82 | 0.78 |
Beta | 1.09 | 1.17 |
These measures show the degree and timing of the fund’s | ||
fluctuations compared with the indexes over 36 months. |
Sector Diversification (% of equity exposure) | |
Fund | |
Consumer Discretionary | 8.4% |
Consumer Staples | 0.0 |
Energy | 1.0 |
Financials | 6.1 |
Health Care | 30.5 |
Industrials | 18.4 |
Information Technology | 35.6 |
Materials | 0.0 |
Real Estate | 0.0 |
Telecommunication Services | 0.0 |
Utilities | 0.0 |
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.
Ten Largest Holdings (% of total net assets) | ||
Biogen Inc. | Biotechnology | 4.5% |
Eli Lilly & Co. | Pharmaceuticals | 4.2 |
Amgen Inc. | Biotechnology | 3.5 |
Southwest Airlines Co. | Airlines | 3.4 |
Alphabet Inc. | Internet Software & | |
Services | 3.2 | |
NetApp Inc. | Technology | |
Hardware, Storage & | ||
Peripherals | 3.0 | |
Adobe Systems Inc. | Application Software | 2.8 |
FedEx Corp. | Air Freight & | |
Logistics | 2.8 | |
United Continental | ||
Holdings Inc. | Airlines | 2.7 |
BioMarin Pharmaceutical | ||
Inc. | Biotechnology | 2.7 |
Top Ten | 32.8% | |
The holdings listed exclude any temporary cash investments and | ||
equity index products. |
1 The expense ratios shown are from the prospectus dated January 25, 2018, and represent estimated costs for the current fiscal year. For
the fiscal year ended September 30, 2018, the expense ratios were 0.43% for Investor Shares and 0.36% for Admiral Shares.
8
Capital Opportunity Fund
Investment Focus
9
Capital Opportunity Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: September 30, 2008, Through September 30, 2018
Initial Investment of $10,000
Average Annual Total Returns | |||||
Periods Ended September 30, 2018 | |||||
Final Value | |||||
One | Five | Ten | of a $10,000 | ||
Year | Years | Years | Investment | ||
Capital Opportunity Fund*Investor | |||||
Shares | 21.03% | 16.41% | 14.78% | $39,691 | |
• • • • • • • • | Russell Midcap Growth Index | 21.10 | 13.00 | 13.46 | 35,347 |
– – – – | Multi-Cap Growth Funds Average | 23.04 | 13.23 | 11.84 | 30,628 |
Dow Jones U.S. Total Stock Market | |||||
Float Adjusted Index | 17.58 | 13.42 | 12.05 | 31,191 | |
Multi-Cap Growth Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Final Value | ||||
One | Five | Ten | of a $50,000 | |
Year | Years | Years | Investment | |
Capital Opportunity Fund Admiral | ||||
Shares | 21.12% | 16.49% | 14.86% | $199,881 |
Russell Midcap Growth Index | 21.10 | 13.00 | 13.46 | 176,736 |
Dow Jones U.S. Total Stock Market | ||||
Float Adjusted Index | 17.58 | 13.42 | 12.05 | 155,955 |
See Financial Highlights for dividend and capital gains information.
10
Capital Opportunity Fund
Fiscal-Year Total Returns (%): September 30, 2008, Through September 30, 2018
11
Capital Opportunity Fund
Financial Statements
Statement of Net Assets
As of September 30, 2018
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (96.9%) | |||
Consumer Discretionary (8.2%) | |||
* | CarMax Inc. | 2,777,797 | 207,418 |
Carnival Corp. | 3,178,200 | 202,674 | |
Royal Caribbean Cruises | |||
Ltd. | 1,549,700 | 201,368 | |
TJX Cos. Inc. | 1,575,000 | 176,431 | |
*,^ | Tesla Inc. | 614,366 | 162,666 |
* | Amazon.com Inc. | 76,620 | 153,470 |
Sony Corp. ADR | 1,714,000 | 103,954 | |
* | Norwegian Cruise Line | ||
Holdings Ltd. | 1,290,200 | 74,096 | |
* | Shutterfly Inc. | 446,000 | 29,387 |
Ross Stores Inc. | 250,000 | 24,775 | |
* | Ulta Beauty Inc. | 85,700 | 24,178 |
Gildan Activewear Inc. | |||
Class A | 645,000 | 19,627 | |
Las Vegas Sands Corp. | 319,000 | 18,926 | |
Tribune Media Co. Class A | 459,000 | 17,639 | |
Marriott International Inc. | |||
Class A | 131,300 | 17,335 | |
L Brands Inc. | 540,000 | 16,362 | |
* | Netflix Inc. | 17,750 | 6,641 |
Whirlpool Corp. | 53,100 | 6,306 | |
Hilton Worldwide Holdings | |||
Inc. | 76,333 | 6,166 | |
Restaurant Brands | |||
International Inc. | 88,500 | 5,246 | |
Lowe’s Cos. Inc. | 41,000 | 4,708 | |
Newell Brands Inc. | 208,500 | 4,233 | |
* | Ascena Retail Group Inc. | 670,000 | 3,062 |
CBS Corp. Class B | 52,880 | 3,038 | |
Lions Gate Entertainment | |||
Corp. Class A | 119,600 | 2,917 | |
Signet Jewelers Ltd. | 41,036 | 2,705 | |
Lions Gate Entertainment | |||
Corp. Class B | 110,200 | 2,568 | |
Entercom Communications | |||
Corp. Class A | 274,659 | 2,170 |
* | tronc Inc. | 112,600 | 1,839 |
* | Michael Kors Holdings Ltd. 3,500 | 240 | |
1,502,145 | |||
Energy (0.9%) | |||
*,^ | Transocean Ltd. | 6,979,996 | 97,371 |
Cabot Oil & Gas Corp. | 1,260,550 | 28,388 | |
Pioneer Natural | |||
Resources Co. | 152,550 | 26,573 | |
* | Southwestern Energy Co. 3,000,000 | 15,330 | |
Hess Corp. | 17,674 | 1,265 | |
EOG Resources Inc. | 2,400 | 306 | |
169,233 | |||
Financials (5.9%) | |||
* | E*TRADE Financial Corp. 3,956,229 | 207,267 | |
Charles Schwab Corp. | 3,647,700 | 179,285 | |
Wells Fargo & Co. | 3,206,000 | 168,507 | |
Northern Trust Corp. | 1,155,151 | 117,976 | |
Discover Financial | |||
Services | 1,439,688 | 110,064 | |
Bank of America Corp. | 3,477,417 | 102,445 | |
JPMorgan Chase & Co. | 827,836 | 93,413 | |
Citigroup Inc. | 515,000 | 36,946 | |
CME Group Inc. | 190,554 | 32,434 | |
Progressive Corp. | 362,602 | 25,759 | |
Travelers Cos. Inc. | 36,174 | 4,692 | |
Cboe Global Markets Inc. | 41,100 | 3,944 | |
Moody’s Corp. | 18,200 | 3,043 | |
1,085,775 | |||
Health Care (29.5%) | |||
* | Biogen Inc. | 2,331,100 | 823,601 |
Eli Lilly & Co. | 7,256,700 | 778,717 | |
Amgen Inc. | 3,100,700 | 642,744 | |
* | BioMarin Pharmaceutical | ||
Inc. | 5,097,160 | 494,272 | |
Roche Holding AG | 1,270,900 | 307,323 | |
* | Alkermes plc | 6,687,863 | 283,833 |
* | QIAGEN NV | 7,147,500 | 270,747 |
Novartis AG ADR | 3,012,100 | 259,523 | |
* | Boston Scientific Corp. | 6,353,276 | 244,601 |
12
Capital Opportunity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Bristol-Myers Squibb Co. | 3,347,300 | 207,800 | |
* | Seattle Genetics Inc. | 2,424,900 | 187,008 |
* | Illumina Inc. | 505,800 | 185,659 |
Thermo Fisher Scientific | |||
Inc. | 578,764 | 141,265 | |
* | Edwards Lifesciences | ||
Corp. | 535,000 | 93,144 | |
PerkinElmer Inc. | 953,000 | 92,698 | |
Abbott Laboratories | 1,219,200 | 89,441 | |
Medtronic plc | 879,000 | 86,467 | |
AstraZeneca plc ADR | 1,960,000 | 77,557 | |
* | Charles River Laboratories | ||
International Inc. | 380,000 | 51,125 | |
* | BeiGene Ltd. | 2,366,000 | 31,644 |
Zimmer Biomet Holdings | |||
Inc. | 190,800 | 25,084 | |
* | Waters Corp. | 128,000 | 24,919 |
Agilent Technologies Inc. | 216,000 | 15,237 | |
* | BeiGene Ltd. ADR | 86,000 | 14,811 |
* | ImmunoGen Inc. | 863,800 | 8,180 |
*,1 | Siemens Healthineers AG | 136,900 | 6,015 |
* | Cerner Corp. | 9,400 | 605 |
5,444,020 | |||
Industrials (17.9%) | |||
Southwest Airlines Co. | 10,083,200 | 629,696 | |
FedEx Corp. | 2,106,274 | 507,170 | |
* | United Continental | ||
Holdings Inc. | 5,608,300 | 499,475 | |
American Airlines Group | |||
Inc. | 7,286,800 | 301,163 | |
Airbus SE | 2,296,000 | 288,249 | |
Delta Air Lines Inc. | 4,200,000 | 242,886 | |
Jacobs Engineering | |||
Group Inc. | 2,181,519 | 166,886 | |
* | JetBlue Airways Corp. | 6,961,050 | 134,766 |
* | AECOM | 3,354,830 | 109,569 |
Caterpillar Inc. | 530,100 | 80,835 | |
Rockwell Automation Inc. | 342,600 | 64,244 | |
Textron Inc. | 646,000 | 46,170 | |
Curtiss-Wright Corp. | 331,000 | 45,486 | |
Ritchie Bros Auctioneers | |||
Inc. | 1,222,282 | 44,161 | |
IDEX Corp. | 240,800 | 36,279 | |
Old Dominion Freight | |||
Line Inc. | 165,500 | 26,689 | |
* | Ryanair Holdings plc ADR | 265,000 | 25,451 |
Union Pacific Corp. | 100,000 | 16,283 | |
Spirit AeroSystems | |||
Holdings Inc. Class A | 139,600 | 12,797 | |
Boeing Co. | 32,000 | 11,901 | |
* | TransDigm Group Inc. | 6,700 | 2,494 |
* | Spirit Airlines Inc. | 11,656 | 547 |
3,293,197 |
Information Technology (34.5%) | |||
NetApp Inc. | 6,499,600 | 558,251 | |
* | Adobe Systems Inc. | 1,903,500 | 513,850 |
Microsoft Corp. | 3,579,800 | 409,422 | |
Texas Instruments Inc. | 3,460,450 | 371,272 | |
* | Alibaba Group Holding | ||
Ltd. ADR | 2,115,300 | 348,517 | |
* | Splunk Inc. | 2,569,698 | 310,702 |
* | Micron Technology Inc. | 6,787,800 | 307,012 |
* | Alphabet Inc. Class C | 249,598 | 297,888 |
* | Alphabet Inc. Class A | 242,520 | 292,741 |
NVIDIA Corp. | 933,000 | 262,192 | |
Corning Inc. | 6,410,850 | 226,303 | |
* | Trimble Inc. | 5,066,500 | 220,190 |
* | Flex Ltd. | 15,630,302 | 205,070 |
QUALCOMM Inc. | 2,476,200 | 178,361 | |
*,2 | Descartes Systems | ||
Group Inc. | 4,258,300 | 144,356 | |
Visa Inc. Class A | 956,900 | 143,621 | |
ASML Holding NV | 713,300 | 134,115 | |
* | Cree Inc. | 3,503,100 | 132,662 |
KLA-Tencor Corp. | 1,279,000 | 130,087 | |
* | BlackBerry Ltd. | 8,826,500 | 100,446 |
* | VMware Inc. Class A | 616,600 | 96,227 |
^ | Universal Display Corp. | 652,390 | 76,917 |
HP Inc. | 2,683,200 | 69,146 | |
Intuit Inc. | 255,000 | 57,987 | |
Hewlett Packard | |||
Enterprise Co. | 3,329,865 | 54,310 | |
* | Electronic Arts Inc. | 450,000 | 54,220 |
Entegris Inc. | 1,781,000 | 51,560 | |
* | PayPal Holdings Inc. | 530,000 | 46,555 |
Plantronics Inc. | 741,600 | 44,718 | |
* | Keysight Technologies Inc. | 670,000 | 44,408 |
* | Dell Technologies Inc. | ||
Class V | 415,006 | 40,305 | |
Telefonaktiebolaget LM | |||
Ericsson ADR | 4,437,500 | 39,050 | |
* | Nuance Communications | ||
Inc. | 2,229,000 | 38,606 | |
* | FormFactor Inc. | 2,577,800 | 35,445 |
* | Altaba Inc. | 491,800 | 33,501 |
Analog Devices Inc. | 348,200 | 32,195 | |
Jabil Inc. | 1,175,000 | 31,819 | |
* | eBay Inc. | 832,300 | 27,483 |
Apple Inc. | 100,100 | 22,597 | |
Teradyne Inc. | 593,900 | 21,962 | |
Mastercard Inc. Class A | 97,800 | 21,771 | |
* | salesforce.com Inc. | 132,300 | 21,040 |
* | Facebook Inc. Class A | 113,700 | 18,699 |
DXC Technology Co. | 198,300 | 18,545 | |
Western Digital Corp. | 251,000 | 14,694 | |
Intel Corp. | 290,000 | 13,714 | |
* | Rambus Inc. | 1,113,060 | 12,143 |
13
Capital Opportunity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Autodesk Inc. | 55,000 | 8,586 |
Micro Focus International | |||
plc ADR | 438,010 | 8,094 | |
Booz Allen Hamilton | |||
Holding Corp. Class A | 139,750 | 6,936 | |
Oracle Corp. | 62,500 | 3,222 | |
Perspecta Inc. | 99,150 | 2,550 | |
* | Arista Networks Inc. | 1,100 | 292 |
6,356,355 | |||
Real Estate (0.0%) | |||
Equinix Inc. | 1,200 | 520 | |
Telecommunication Services (0.0%) | |||
* | T-Mobile US Inc. | 22,900 | 1,607 |
* | Sprint Corp. | 215,800 | 1,411 |
3,018 | |||
Total Common Stocks | |||
(Cost $7,446,898) | 17,854,263 | ||
Temporary Cash Investment (3.8%) | |||
Money Market Fund (3.8%) | |||
3,4 | Vanguard Market | ||
Liquidity Fund, 2.209% | |||
(Cost $706,817) | 7,068,303 | 706,830 | |
Total Investments (100.7%) | |||
(Cost $8,153,715) | 18,561,093 | ||
Amount | |||
($000) | |||
Other Assets and Liabilities (-0.7%) | |||
Other Assets | |||
Investment in Vanguard | 943 | ||
Receivables for Investment Securities Sold 2,032 | |||
Receivables for Accrued Income | 12,514 | ||
Receivables for Capital Shares Issued | 5,928 | ||
Other Assets | 370 | ||
Total Other Assets | 21,787 | ||
Liabilities | |||
Payables for Investment Securities | |||
Purchased | (1,185) | ||
Collateral for Securities on Loan | (117,441) | ||
Payables for Investment Advisor | (10,491) | ||
Payables for Capital Shares Redeemed | (3,916) | ||
Payables to Vanguard | (13,372) | ||
Other Liabilities | (2) | ||
Total Liabilities | (146,407) | ||
Net Assets (100%) | 18,436,473 |
At September 30, 2018, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 6,451,850 |
Undistributed Net Investment Income | 76,049 |
Accumulated Net Realized Gains | 1,501,224 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 10,407,378 |
Foreign Currencies | (28) |
Net Assets | 18,436,473 |
Investor Shares—Net Assets | |
Applicable to 27,215,016 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 2,064,856 |
Net Asset Value Per Share— | |
Investor Shares | $75.87 |
Admiral Shares—Net Assets | |
Applicable to 93,368,503 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 16,371,617 |
Net Asset Value Per Share— | |
Admiral Shares | $175.34 |
• 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 $102,231,000.
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 September 30, 2018, the value of this
security represented 0.0% of net assets.
2 Considered an affiliated company of the fund as the fund
owns more than 5% of the outstanding voting securities of
such company.
3 Affiliated money market fund available only to Vanguard funds
and certain trusts and accounts managed by Vanguard. Rate
shown is the 7-day yield.
4 Includes $117,441,000 of collateral received for securities on loan.
ADR—American Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
14
Capital Opportunity Fund
Statement of Operations
Year Ended | |
September 30, 2018 | |
($000) | |
Investment Income | |
Income | |
Dividends—Unaffiliated Issuers1 | 168,470 |
Interest—Affiliated Issuers | 8,575 |
Securities Lending—Net | 2,188 |
Total Income | 179,233 |
Expenses | |
Investment Advisory Fees—Note B | 40,133 |
The Vanguard Group—Note C | |
Management and Administrative—Investor Shares | 3,842 |
Management and Administrative—Admiral Shares | 18,461 |
Marketing and Distribution—Investor Shares | 288 |
Marketing and Distribution—Admiral Shares | 602 |
Custodian Fees | 391 |
Auditing Fees | 32 |
Shareholders’ Reports and Proxy—Investor Shares | 45 |
Shareholders’ Reports and Proxy—Admiral Shares | 83 |
Trustees’ Fees and Expenses | 23 |
Total Expenses | 63,900 |
Net Investment Income | 115,333 |
Realized Net Gain (Loss) | |
Investment Securities Sold—Unaffiliated Issuers | 1,579,441 |
Investment Securities Sold—Affiliated Issuers | 1,278 |
Foreign Currencies | 191 |
Realized Net Gain (Loss) | 1,580,910 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities—Unaffiliated Issuers | 1,542,013 |
Investment Securities—Affiliated Issuers | 26,584 |
Foreign Currencies | (254) |
Change in Unrealized Appreciation (Depreciation) | 1,568,343 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,264,586 |
1 Dividends are net of foreign withholding taxes of $4,240,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
15
Capital Opportunity Fund
Statement of Changes in Net Assets
Year Ended September 30, | ||
2018 | 2017 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 115,333 | 117,929 |
Realized Net Gain (Loss) | 1,580,910 | 1,284,346 |
Change in Unrealized Appreciation (Depreciation) | 1,568,343 | 2,020,787 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,264,586 | 3,423,062 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (13,842) | (14,079) |
Admiral Shares | (92,824) | (87,144) |
Realized Capital Gain1 | ||
Investor Shares | (79,440) | (101,804) |
Admiral Shares | (536,203) | (559,370) |
Total Distributions | (722,309) | (762,397) |
Capital Share Transactions | ||
Investor Shares | (426,473) | (329,656) |
Admiral Shares | 518,196 | (255,195) |
Net Increase (Decrease) from Capital Share Transactions | 91,723 | (584,851) |
Total Increase (Decrease) | 2,634,000 | 2,075,814 |
Net Assets | ||
Beginning of Period | 15,802,473 | 13,726,659 |
End of Period2 | 18,436,473 | 15,802,473 |
1 Includes fiscal 2018 and 2017 short-term gain distributions totaling $16,130,000 and $10,182,000, respectively. Short-term gain
distributions are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $76,049,000 and $70,754,000.
See accompanying Notes, which are an integral part of the Financial Statements.
16
Capital Opportunity Fund
Financial Highlights
Investor Shares | |||||
For a Share Outstanding | Year Ended September 30, | ||||
Throughout Each Period | 2018 | 2017 | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $65.51 | $54.99 | $50.25 | $51.42 | $44.57 |
Investment Operations | |||||
Net Investment Income | . 4281 | .4291 | .375 | .349 | .272 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 12.957 | 13.136 | 7.090 | .666 | 8.314 |
Total from Investment Operations | 13.385 | 13.565 | 7.465 | 1.015 | 8.586 |
Distributions | |||||
Dividends from Net Investment Income | (. 449) | (. 370) | (. 299) | (. 308) | (. 072) 2 |
Distributions from Realized Capital Gains | (2.576) | (2.675) | (2.426) | (1.877) | (1.664) |
Total Distributions | (3.025) | (3.045) | (2.725) | (2.185) | (1.736) |
Net Asset Value, End of Period | $75.87 | $65.51 | $54.99 | $50.25 | $51.42 |
Total Return3 | 21.03% | 25.77% | 15.20% | 1.72% | 19.85% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $2,065 | $2,182 | $2,134 | $2,283 | $2,793 |
Ratio of Total Expenses to Average Net Assets | 0.43% | 0.44% | 0.45% | 0.45% | 0.47% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 0.62% | 0.73% | 0.73% | 0.65% | 0.57% |
Portfolio Turnover Rate | 10% | 9% | 6% | 7% | 7% |
1 Calculated based on average shares outstanding.
2 Fiscal 2013 dividends from net investment income include $.157 per share from a dividend received from ASML Holding NV. Subsequent
to the payment of the fund’s dividend from net investment income in December 2012, the ASML dividend was reallocated to return of
capital. The reallocation reduced the fund’s dividend from net investment income in December 2013. The reallocation had no impact on
net assets, net asset values per share, or total returns.
3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information
about any applicable account service fees.
See accompanying Notes, which are an integral part of the Financial Statements.
17
Capital Opportunity Fund
Financial Highlights
Admiral Shares | |||||
For a Share Outstanding | Year Ended September 30, | ||||
Throughout Each Period | 2018 | 2017 | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $151.28 | $127.00 | $116.06 | $118.79 | $102.97 |
Investment Operations | |||||
Net Investment Income | 1.1031 | 1.0841 | .965 | .916 | .728 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 29.937 | 30.333 | 16.366 | 1.504 | 19.185 |
Total from Investment Operations | 31.040 | 31.417 | 17.331 | 2.420 | 19.913 |
Distributions | |||||
Dividends from Net Investment Income | (1.030) | (. 962) | (.791) | (. 816) | (. 251) 2 |
Distributions from Realized Capital Gains | (5.950) | (6.175) | (5.600) | (4.334) | (3.842) |
Total Distributions | (6.980) | (7.137) | (6.391) | (5.150) | (4.093) |
Net Asset Value, End of Period | $175.34 | $151.28 | $127.00 | $116.06 | $118.79 |
Total Return3 | 21.12% | 25.86% | 15.28% | 1.78% | 19.94% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $16,372 | $13,621 | $11,593 | $10,579 | $10,051 |
Ratio of Total Expenses to Average Net Assets | 0.36% | 0.37% | 0.38% | 0.38% | 0.40% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 0.69% | 0.80% | 0.80% | 0.72% | 0.64% |
Portfolio Turnover Rate | 10% | 9% | 6% | 7% | 7% |
1 Calculated based on average shares outstanding.
2 Fiscal 2013 dividends from net investment income include $.363 per share from a dividend received from ASML Holding NV. Subsequent
to the payment of the fund’s dividend from net investment income in December 2012, the ASML dividend was reallocated to return of
capital. The reallocation reduced the fund’s dividend from net investment income in December 2013. The reallocation had no impact on
net assets, net asset values per share, or total returns.
3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information
about any applicable account service fees.
See accompanying Notes, which are an integral part of the Financial Statements.
18
Capital Opportunity Fund
Notes to Financial Statements
Vanguard Capital Opportunity Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. 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 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 counterparty risk by entering into securities lending transactions only with a diverse group of
19
Capital Opportunity Fund
prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at September 30, 2018, 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.
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), shareholder reporting, and the proxy. 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. 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 year ended September 30, 2018, the investment advisory fee represented an effective annual rate of 0.23% 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
20
Capital Opportunity Fund
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 September 30, 2018, the fund had contributed to Vanguard capital in the amount of $943,000, representing 0.01% of the fund’s net assets and 0.38% 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 September 30, 2018, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 17,221,032 | 633,231 | — |
Temporary Cash Investments | 706,830 | — | — |
Total | 17,927,862 | 633,231 | — |
E. Permanent differences between book-basis and tax-basis components of net assets are reclassified among capital accounts in the financial statements to reflect their tax character. These reclassifications have no effect on net assets or net asset value per share. As of period end, the following permanent differences primarily attributable to the accounting for foreign currency transactions and distributions in connection with fund share redemptions were reclassified to the following accounts:
Amount | |
($000) | |
Paid-in Capital | 53,881 |
Undistributed (Overdistributed) Net Investment Income | (3,372) |
Accumulated Net Realized Gains (Losses) | (50,509) |
21
Capital Opportunity Fund
Temporary differences between book-basis and tax-basis components of accumulated net earnings (losses) arise when certain items of income, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. The differences are primarily related to the tax deferral of losses on wash sales. As of period end, the tax-basis components of accumulated net earnings (losses) are detailed in the table as follows:
Amount | |
($000) | |
Undistributed Ordinary Income | 131,812 |
Undistributed Long-Term Gains | 1,457,651 |
Capital Loss Carryforwards | — |
Net Unrealized Gains (Losses) | 10,407,350 |
As of September 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
Amount | |
($000) | |
Tax Cost | 8,153,715 |
Gross Unrealized Appreciation | 10,637,515 |
Gross Unrealized Depreciation | (230,137) |
Net Unrealized Appreciation (Depreciation) | 10,407,378 |
F. During the year ended September 30, 2018, the fund purchased $1,637,937,000 of investment securities and sold $2,322,867,000 of investment securities, other than temporary cash investments.
G. Capital share transactions for each class of shares were:
Year Ended September 30, | ||||
2018 | 2017 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 303,860 | 4,350 | 278,625 | 4,772 |
Issued in Lieu of Cash Distributions | 87,895 | 1,308 | 110,061 | 2,014 |
Redeemed | (818,228) | (11,752) | (718,342) | (12,285) |
Net Increase (Decrease)—Investor Shares | (426,473) | (6,094) | (329,656) | (5,499) |
Admiral Shares | ||||
Issued | 1,124,125 | 6,979 | 1,019,007 | 7,552 |
Issued in Lieu of Cash Distributions | 566,776 | 3,652 | 586,712 | 4,653 |
Redeemed | (1,172,705) | (7,300) | (1,860,914) | (13,446) |
Net Increase (Decrease)—Admiral Shares | 518,196 | 3,331 | (255,195) | (1,241) |
22
Capital Opportunity Fund
H. Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company or the issuer is another member of The Vanguard Group. Transactions during the period in securities of these companies were as follows:
Current Period Transactions | ||||||||
Sept. 30, | Proceeds | Net | Sept. 30, | |||||
2017 | from | Realized | Change in | Capital Gain | 2018 | |||
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) | |
Descartes Systems | ||||||||
Group Inc. | 119,186 | — | 2,758 | 1,282 | 26,646 | — | — | 144,356 |
Vanguard Market | ||||||||
Liquidity Fund | 541,459 | NA1 | NA1 | (4) | (62) | 8,575 | — | 706,830 |
Total | 660,645 | 1,278 | 26,584 | 8,575 | — | 851,186 | ||
1 Not applicable—purchases and sales are for temporary cash investment purposes. |
I. Management has determined that no events or transactions occurred subsequent to
September 30, 2018, that would require recognition or disclosure in these financial statements.
23
Report of Independent Registered
Public Accounting Firm
To the Board of Trustees of Vanguard Horizon Funds and Shareholders of Vanguard Capital Opportunity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of net assets of Vanguard Capital Opportunity Fund (one of the funds constituting Vanguard Horizon Funds, referred to hereafter as the “Fund”) as of September 30, 2018, the related statement of operations for the year ended September 30, 2018, the statement of changes in net assets for each of the two years in the period ended September 30, 2018, including the related notes, and the financial highlights for each of the five years in the period ended September 30, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended September 30, 2018 and the financial highlights for each of the five years in the period ended September 30, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of September 30, 2018 by correspondence with the custodian and brokers and by agreement to the underlying ownership records of the transfer agent; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 15, 2018
We have served as the auditor of one or more investment companies in The Vanguard Group of
Funds since 1975.
Special 2018 tax information (unaudited) for Vanguard Capital Opportunity Fund
This information for the fiscal year ended September 30, 2018, is included pursuant to provisions of the Internal Revenue Code.
The fund distributed $648,389,000 as capital gain dividends (20% rate gain distributions) to shareholders during the fiscal year.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund are qualified short-term capital gains.
The fund distributed $122,796,000 of qualified dividend income to shareholders during the fiscal year.
For corporate shareholders, 84.0% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.
25
Your Fund’s After-Tax Returns
This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund’s distributions, and (2) assuming that an investor paid taxes on the fund’s distributions and sold all shares at the end of each period.
Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect any qualified dividend income, using actual prior-year figures and estimates for 2018. (In the example, returns after the sale of fund shares may be higher than those assuming no sale. This occurs when the sale would have produced a capital loss. The calculation assumes that the investor received a tax deduction for the loss.)
The table shows returns for Investor Shares only; returns for other share classes will differ. Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes.
Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.
Average Annual Total Returns: Capital Opportunity Fund Investor Shares | |||
Periods Ended September 30, 2018 | |||
One | Five | Ten | |
Year | Years | Years | |
Returns Before Taxes | 21.03% | 16.41% | 14.78% |
Returns After Taxes on Distributions | 19.79 | 15.18 | 13.83 |
Returns After Taxes on Distributions and Sale of Fund Shares | 13.15 | 12.93 | 12.19 |
26
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.
27
Six Months Ended September 30, 2018 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Capital Opportunity Fund | 3/31/2018 | 9/30/2018 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,121.67 | $2.29 |
Admiral Shares | 1,000.00 | 1,122.03 | 1.92 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,022.91 | $2.18 |
Admiral Shares | 1,000.00 | 1,023.26 | 1.83 |
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 0.43% for Investor Shares and 0.36% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the
annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent
six-month period, then divided by the number of days in the most recent 12-month period (183/365).
28
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share.
For a fund, the weighted average price/book ratio of the stocks it holds.
29
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
30
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.
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 211 Vanguard funds.
Information for each trustee and executive officer of the fund appears below. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustees1
F. William McNabb III
Born in 1957. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: chairman of the board (January 2010–present) of Vanguard and of each of the investment companies served by Vanguard, trustee (2009–present) of each of the investment companies served by Vanguard, and director (2008–present) of Vanguard. Chief executive officer and president (2008–2017) of Vanguard and each of the investment companies served by Vanguard, managing director (1995–2008) of Vanguard, and director (1997–2018) of Vanguard Marketing Corporation. Director (2018–present) of UnitedHealth Group.
Mortimer J. Buckley
Born in 1969. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer (January 2018–present) of Vanguard; chief executive officer, president, and trustee (January 2018–present) of each of the investment companies served by Vanguard; president and director (2017–present) of Vanguard; and president (February 2018–present) of Vanguard Marketing Corporation. Chief investment officer (2013–2017), managing director (2002–2017), head of the Retail Investor Group (2006–2012), and chief information officer (2001–2006) of Vanguard. Chairman of the board (2011–2017) of the Children’s Hospital of Philadelphia.
Independent Trustees
Emerson U. Fullwood
Born in 1948. Trustee since January 2008. Principal occupation(s) during the past five years and other experience: executive chief staff and marketing officer for North America and corporate vice president (retired 2008) of Xerox Corporation (document management products and services). Former president of the Worldwide Channels Group, Latin America, and Worldwide Customer Service and executive chief staff officer of Developing Markets of Xerox. Executive in residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology. Lead director of SPX FLOW, Inc. (multi-industry manufacturing). Director of the University of Rochester Medical Center, the Monroe Community College Foundation, the United Way of Rochester, North Carolina A&T University, and Roberts Wesleyan College. Trustee of the University of Rochester.
Amy Gutmann
Born in 1949. Trustee since June 2006. Principal occupation(s) during the past five years and other experience: president (2004–present) of the University of Pennsylvania. Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and professor of communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania. Trustee of the National Constitution Center.
1 Mr. McNabb and Mr. Buckley are considered “interested persons,” as defined in the Investment Company Act of 1940, because
they are officers of the Vanguard funds.
JoAnn Heffernan Heisen
Born in 1950. Trustee since July 1998. Principal occupation(s) during the past five years and other experience: corporate vice president of Johnson & Johnson (pharmaceuticals/medical devices/consumer products) and member of its executive committee (1997–2008). Chief global diversity officer (retired 2008), vice president and chief information officer (1997–2006), controller (1995–1997), treasurer (1991–1995), and assistant treasurer (1989–1991) of Johnson & Johnson. Director of Skytop Lodge Corporation (hotels) and the Robert Wood Johnson Foundation. Member of the advisory board of the Institute for Women’s Leadership at Rutgers University.
F. Joseph Loughrey
Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education. Director of the V Foundation for Cancer Research. Member of the advisory council for the College of Arts and Letters and chair of the advisory board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.
Scott C. Malpass
Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: chief investment officer (1989–present) and vice president (1996–present) of the University of Notre Dame. Assistant professor of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Chairman of the board of TIFF Advisory Services, Inc. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of advisors for Spruceview Capital Partners, and the board of superintendence of the Institute for the Works of Religion.
Deanna Mulligan
Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: president (2010–present) and chief executive officer (2011–present) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of The Guardian Life Insurance Company of America. Member of the board of The Guardian Life Insurance Company of America, the American Council of Life Insurers, the Partnership for New York City (business leadership), and the Committee Encouraging Corporate Philanthropy. Trustee of the Economic Club of New York and the Bruce Museum (arts and science). Member of the Advisory Council for the Stanford Graduate School of Business.
André F. Perold
Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies LLC (private investment firm). Overseer of the Museum of Fine Arts Boston.
Sarah Bloom Raskin
Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Member of the board of directors (2012–2014) of Neighborhood Reinvestment Corporation. Director of i(x) Investments, LLC.
Peter F. Volanakis
Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Chairman of the board of trustees of Colby-Sawyer College. Member of the Board of Hypertherm Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born in 1967. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (2017–present), treasurer (2015–2017), controller (2010–2015), and assistant controller (2001–2010) of each of the investment companies served by Vanguard.
Christine M. Buchanan
Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard and global head of Fund Administration at Vanguard. Treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG LLP (audit, tax, and advisory services).
Brian Dvorak
Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2017–present) of Vanguard and each of the investment companies served by Vanguard. Assistant vice president (2017–present) of Vanguard Marketing Corporation. Vice president and director of Enterprise Risk Management (2011–2013) at Oppenheimer Funds, Inc.
Thomas J. Higgins
Born in 1957. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2008–present) and treasurer (1998–2008) of each of the investment companies served by Vanguard.
Peter Mahoney
Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.
Anne E. Robinson
Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Director and senior vice president (2016–2018) of Vanguard Marketing Corporation. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express.
Michael Rollings
Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.
Vanguard Senior Management Team | |
Joseph Brennan | Chris D. McIsaac |
Mortimer J. Buckley | James M. Norris |
Gregory Davis | Thomas M. Rampulla |
John James | Karin A. Risi |
Martha G. King | Anne E. Robinson |
John T. Marcante | Michael Rollings |
Chairman Emeritus and Senior Advisor | |
John J. Brennan | |
Chairman, 1996–2009 | |
Chief Executive Officer and President, 1996–2008 | |
Founder | |
John C. Bogle | |
Chairman and Chief Executive Officer, 1974–1996 |
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 | |
Connect with Vanguard® > vanguard.com | |
Fund Information > 800-662-7447 | Source for Bloomberg Barclays indexes: Bloomberg |
Direct Investor Account Services > 800-662-2739 | Index Services Limited. Copyright 2018, Bloomberg. All |
rights reserved. | |
Institutional Investor Services > 800-523-1036 | |
Text Telephone for People | |
Who Are Deaf or Hard of Hearing > 800-749-7273 | |
This material may be used in conjunction | |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by | |
the fund’s current prospectus. | |
All comparative mutual fund data are from Lipper, a | |
Thomson Reuters Company, or Morningstar, Inc., unless | |
otherwise noted. | |
You can obtain a free copy of Vanguard’s proxy voting | |
guidelines by visiting vanguard.com/proxyreporting or by | |
calling Vanguard at 800-662-2739. The guidelines are | |
also available from the SEC’s website, sec.gov. In | |
addition, you may obtain a free report on how your fund | |
voted the proxies for securities it owned during the 12 | |
months ended June 30. To get the report, visit either | |
vanguard.com/proxyreporting or sec.gov. | |
You can review and copy information about your fund at | |
the SEC’s Public Reference Room in Washington, D.C. To | |
find out more about this public service, call the SEC at | |
202-551-8090. Information about your fund is also | |
available on the SEC’s website, and you can receive | |
copies of this information, for a fee, by sending a | |
request in either of two ways: via email addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2018 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q1110 112018 |
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
CEO’s Perspective. | 3 |
Advisor’s Report. | 5 |
Fund Profile. | 7 |
Performance Summary. | 8 |
Financial Statements. | 10 |
Your Fund’s After-Tax Returns. | 25 |
About Your Fund’s Expenses. | 26 |
Glossary. | 28 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
Your Fund’s Performance at a Glance
• Vanguard Strategic Small-Cap Equity Fund returned 16.13% for the 12 months ended September 30, 2018. It outpaced its benchmark, the MSCI US Small Cap 1750 Index, and finished well ahead of the average return of its small-capitalization core fund peers.
• The fund recorded positive results in 5 of the 11 industry sectors. Energy and information technology contributed most to relative returns, followed by consumer discretionary.
• Poor selection in health care, industrials, and materials hurt overall returns.
Total Returns: Fiscal Year Ended September 30, 2018 | |
Total | |
Returns | |
Vanguard Strategic Small-Cap Equity Fund | 16.13% |
MSCI US Small Cap 1750 Index | 15.06 |
Small-Cap Core Funds Average | 11.86 |
Small-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Total Returns: Ten Years Ended September 30, 2018 | |
Average | |
Annual Return | |
Strategic Small-Cap Equity Fund | 12.19% |
MSCI US Small Cap 1750 Index | 12.27 |
Small-Cap Core Funds Average | 10.23 |
Small-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
The figures shown represent past performance, which is not a guarantee of future results. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost.
1
Expense Ratios | ||
Your Fund Compared With Its Peer Group | ||
Peer Group | ||
Fund | Average | |
Strategic Small-Cap Equity Fund | 0.29% | 1.20% |
The fund expense ratio shown is from the prospectus dated January 25, 2018, and represents estimated costs for the current fiscal year.
For the fiscal year ended September 30, 2018, the fund’s expense ratio was 0.29%. The peer-group expense ratio is derived from data
provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2017.
Peer group: Small-Cap Core Funds.
2
CEO’s Perspective
Tim Buckley
President and Chief Executive Officer
Dear Shareholder,
Over the years, I’ve found that prudent investors exhibit a common trait: discipline. No matter how the markets move or what new investing fad hits the headlines, those who stay focused on their goals and tune out the noise are set up for long-term success.
The prime gateway to investing is saving, and you don’t usually become a saver without a healthy dose of discipline. Savers make the decision to sock away part of their income, which means spending less and delaying gratification, no matter how difficult that may be.
Of course, disciplined investing extends beyond diligent saving. The financial markets, in the short term especially, are unpredictable; I have yet to meet the investor who can time them perfectly. It takes discipline to resist the urge to go all-in when markets are frothy or to retreat when things look bleak.
Staying put with your investments is one strategy for handling volatility. Another, rebalancing, requires even more discipline because it means steering your money away from strong performers and toward poorer performers.
Patience—a form of discipline—is also the friend of long-term investors. Higher returns are the potential reward for weathering the market’s turbulence and uncertainty.
3
We have been enjoying one of the longest bull markets in history, but it won’t continue forever. Prepare yourself now for how you will react when volatility comes back. Don’t panic. Don’t chase returns or look for answers outside the asset classes you trust. And be sure to rebalance periodically, even when there’s turmoil.
Whether you’re a master of self-control, get a boost from technology, or work with a professional advisor, know that discipline
is necessary to get the most out of your investment portfolio. And know that Vanguard is with you for the entire ride.
Thank you for your continued loyalty.
Sincerely,
Mortimer J. Buckley
President and Chief Executive Officer
October 18, 2018
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended September 30, 2018 | |||
One Year | Three Years | Five Years | |
Stocks | |||
Russell 1000 Index (Large-caps) | 17.76% | 17.07% | 13.67% |
Russell 2000 Index (Small-caps) | 15.24 | 17.12 | 11.07 |
Russell 3000 Index (Broad U.S. market) | 17.58 | 17.07 | 13.46 |
FTSE All-World ex US Index (International) | 2.13 | 10.18 | 4.51 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -1.22% | 1.31% | 2.16% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | 0.35 | 2.24 | 3.54 |
FTSE Three-Month U. S. Treasury Bill Index | 1.57 | 0.80 | 0.48 |
CPI | |||
Consumer Price Index | 2.28% | 1.99% | 1.52% |
4
Advisor’s Report
For the 12 months ended September 30, 2018, Vanguard Strategic Small-Cap Equity Fund returned 16.13%. It outpaced its benchmark, the MSCI US Small Cap 1750 Index, and the average performance of its peer funds.
Investment environment
Global markets generally advanced during the period. U.S. stocks led the way as increasing profits and a strong economy outweighed investor concerns about rising interest rates, higher inflation, and trade tensions. Large-capitalization stocks had higher returns than small-caps, and growth stocks were ahead of value.
Emerging markets stocks were in retreat, under pressure from trade tensions as well as a rising dollar. Results in Europe and the Asia-Pacific region were muted in part because of these areas’ greater economic dependence on emerging markets.
The overall U.S. fixed income market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, returned –1.22% for the 12 months. Yields rose and prices mostly declined as investors remained concerned about the threat of inflation and the possibility that the Federal Reserve would raise rates more aggressively.
The Fed did raise rates in September—its eighth increase since the current tightening cycle began—and signaled more hikes to come. Attention is now focused on the pace of future rate increases, with many analysts expecting one this December and three more in 2019.
Investment objective and strategy
Although we consider it important to understand how overall performance is affected by macro factors, our approach to investing focuses on specific fundamentals—not technical analysis of stock price movements. We compare stocks within industry groups to identify those we believe will outperform over time.
Our strict quantitative approach evaluates a stock’s attractiveness based on five key characteristics: high quality—healthy balance sheets and steady cash flow generation; effective management decisions with sound investment policies that favor internal over external funding; consistent earnings growth with the ability to grow earnings year after year; strong market sentiment with market confirmation of our view; and reasonable valuation focused on avoiding overpriced stocks.
Using these five themes, we generate a daily composite stock ranking, seeking to capitalize on market inefficiencies. We then monitor our portfolio based on those rankings and adjust when appropriate to maximize expected returns and minimize exposure to risks that our research indicates don’t improve returns (such as industry selection and other risks relative to the benchmark).
5
Our successes and shortfalls
Over the period, our sentiment model contributed significantly to relative performance; growth, quality, and management decisions also helped. Our valuation model detracted.
Holdings in five of the fund’s 11 industry sectors boosted relative performance, with energy, information technology, and consumer discretionary adding the most. Poor selection in health care, primarily in biotechnology and pharmaceuticals, hurt results. Selections in materials and industrials also detracted.
At the individual stock level, the largest contributions came from overweighted positions in Square, World Wrestling Entertainment, Inogen, Denbury Resources, and Match Group. Overweighted positions in Avis Budget Group, Nutrisystem, Sanderson Farms, First Solar, and Nektar Therapeutics hurt performance.
We believe that the Strategic Small-Cap Equity Fund offers a strong mix of stocks with attractive valuations and growth characteristics relative to its benchmark. Although we recognize that risk can reward or punish us over the near term, we believe that constructing a portfolio that emphasizes our key fundamentals through different market environments will benefit investors over the long term.
We thank you for your investment and look forward to the coming fiscal year.
Portfolio Managers:
James P. Stetler
Binbin Guo, Principal, Head of
Alpha Equity Investments
Vanguard Quantitative Equity Group
October 16, 2018
6
Strategic Small-Cap Equity Fund
Fund Profile
As of September 30, 2018
Portfolio Characteristics | |||
MSCI US | DJ | ||
Small Cap | U.S. Total | ||
1750 | Market | ||
Fund | Index | FA Index | |
Number of Stocks | 314 | 1,707 | 3,825 |
Median Market Cap | $2.9B | $3.1B | $73.9B |
Price/Earnings Ratio | 17.7x | 19.0x | 21.0x |
Price/Book Ratio | 2.8x | 2.3x | 3.1x |
Return on Equity | 8.6% | 8.2% | 14.9% |
Earnings Growth Rate | 9.7% | 8.9% | 8.5% |
Dividend Yield | 1.2% | 1.4% | 1.7% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | 88% | — | — |
Ticker Symbol | VSTCX | — | — |
Expense Ratio1 | 0.29% | — | — |
30-Day SEC Yield | 1.03% | — | — |
Short-Term Reserves | -0.1% | — | — |
Sector Diversification (% of equity exposure) | |
Fund | |
Consumer Discretionary | 13.1% |
Consumer Staples | 2.8 |
Energy | 5.5 |
Financials | 17.0 |
Health Care | 14.9 |
Industrials | 14.6 |
Information Technology | 15.9 |
Materials | 5.0 |
Real Estate | 7.8 |
Telecommunication Services | 0.7 |
Utilities | 2.7 |
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.
Volatility Measures | ||
MSCI US | DJ | |
Small Cap | U.S. Total | |
1750 | Market | |
Index | FA Index | |
R-Squared | 0.96 | 0.67 |
Beta | 1.05 | 1.14 |
These measures show the degree and timing of the fund’s | ||
fluctuations compared with the indexes over 36 months. |
Ten Largest Holdings (% of total net assets) | ||
Booz Allen Hamilton | IT Consulting & | |
Holding Corp. | Other Services | 0.8% |
Haemonetics Corp. | Health Care Supplies | 0.8 |
Encompass Health Corp. Health Care Facilities | 0.8 | |
Charles River | ||
Laboratories | Life Sciences Tools & | |
International Inc. | Services | 0.8 |
PBF Energy Inc. | Oil & Gas Refining & | |
Marketing | 0.8 | |
Green Dot Corp. | Consumer Finance | 0.7 |
World Wrestling | Movies & | |
Entertainment Inc. | Entertainment | 0.7 |
Chemed Corp. | Health Care Services | 0.7 |
Inogen Inc. | Health Care | |
Equipment | 0.7 | |
CACI International Inc. | IT Consulting & | |
Other Services | 0.7 | |
Top Ten | 7.5% | |
The holdings listed exclude any temporary cash investments and | ||
equity index products. |
Investment Focus
1 The expense ratio shown is from the prospectus dated January 25, 2018, and represents estimated costs for the current fiscal year. For
the fiscal year ended September 30, 2018, the expense ratio was 0.29%.
7
Strategic Small-Cap Equity Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: September 30, 2008, Through September 30, 2018
Initial Investment of $10,000
Average Annual Total Returns | |||||
Periods Ended September 30, 2018 | |||||
Final Value | |||||
One | Five | Ten | of a $10,000 | ||
Year | Years | Years | Investment | ||
Strategic Small-Cap Equity Fund* | 16.13% | 12.06% | 12.19% | $31,576 | |
• • • • • • • • | MSCI US Small Cap 1750 Index | 15.06 | 11.23 | 12.27 | 31,824 |
– – – – | Small-Cap Core Funds Average | 11.86 | 9.45 | 10.23 | 26,487 |
Dow Jones U.S. Total Stock Market | |||||
Float Adjusted Index | 17.58 | 13.42 | 12.05 | 31,191 | |
Small-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
See Financial Highlights for dividend and capital gains information.
8
Strategic Small-Cap Equity Fund
Fiscal-Year Total Returns (%): September 30, 2008, Through September 30, 2018
9
Strategic Small-Cap Equity Fund
Financial Statements
Statement of Net Assets
As of September 30, 2018
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value• | |||
Shares | ($000) | ||
Common Stocks (99.3%)1 | |||
Consumer Discretionary (13.0%) | |||
World Wrestling | |||
Entertainment Inc. | |||
Class A | 147,546 | 14,272 | |
* | Deckers Outdoor Corp. | 112,413 | 13,330 |
* | Crocs Inc. | 573,009 | 12,199 |
*,^ | RH | 90,490 | 11,855 |
Tailored Brands Inc. | 459,184 | 11,567 | |
* | Weight Watchers | ||
International Inc. | 150,671 | 10,847 | |
* | Urban Outfitters Inc. | 259,052 | 10,595 |
Abercrombie & Fitch Co. | 498,577 | 10,530 | |
BJ’s Restaurants Inc. | 131,302 | 9,480 | |
Ruth’s Hospitality Group | |||
Inc. | 297,928 | 9,400 | |
Bloomin’ Brands Inc. | 465,185 | 9,206 | |
AMC Entertainment | |||
Holdings Inc. Class A | 439,324 | 9,006 | |
New York Times Co. | |||
Class A | 373,159 | 8,639 | |
PetMed Express Inc. | 245,011 | 8,088 | |
American Eagle Outfitters | |||
Inc. | 279,343 | 6,936 | |
* | Cooper-Standard Holdings | ||
Inc. | 55,426 | 6,650 | |
Winnebago Industries Inc. | 192,229 | 6,372 | |
* | Chegg Inc. | 219,563 | 6,242 |
Gannett Co. Inc. | 621,383 | 6,220 | |
* | Penn National Gaming Inc. | 187,465 | 6,171 |
Brinker International Inc. | 130,125 | 6,081 | |
* | Visteon Corp. | 63,870 | 5,934 |
MDC Holdings Inc. | 155,424 | 4,597 | |
*,^ | Conn’s Inc. | 120,856 | 4,272 |
* | MSG Networks Inc. | 160,103 | 4,131 |
* | Planet Fitness Inc. Class A | 73,167 | 3,953 |
* | G-III Apparel Group Ltd. | 73,148 | 3,525 |
Movado Group Inc. | 83,930 | 3,517 |
Dine Brands Global Inc. | 43,139 | 3,508 | |
Churchill Downs Inc. | 9,260 | 2,572 | |
* | Shake Shack Inc. Class A | 38,114 | 2,402 |
Columbia Sportswear Co. | 25,485 | 2,372 | |
Red Rock Resorts Inc. | |||
Class A | 73,715 | 1,965 | |
* | Stoneridge Inc. | 66,031 | 1,962 |
Oxford Industries Inc. | 17,176 | 1,549 | |
Shoe Carnival Inc. | 38,234 | 1,472 | |
* | Vitamin Shoppe Inc. | 144,346 | 1,443 |
* | Fossil Group Inc. | 59,663 | 1,389 |
Buckle Inc. | 50,443 | 1,163 | |
* | Burlington Stores Inc. | 6,864 | 1,118 |
Delphi Technologies plc | 35,410 | 1,110 | |
* | Hibbett Sports Inc. | 46,692 | 878 |
* | Cavco Industries Inc. | 3,381 | 855 |
249,373 | |||
Consumer Staples (2.8%) | |||
Medifast Inc. | 59,219 | 13,120 | |
* | Boston Beer Co. Inc. | ||
Class A | 37,903 | 10,897 | |
Cal-Maine Foods Inc. | 174,093 | 8,409 | |
Ingles Markets Inc. | |||
Class A | 111,946 | 3,834 | |
Calavo Growers Inc. | 35,502 | 3,429 | |
* | Performance Food Group | ||
Co. | 86,504 | 2,881 | |
*,^ | National Beverage Corp. | 16,856 | 1,966 |
* | USANA Health Sciences | ||
Inc. | 15,778 | 1,902 | |
* | United Natural Foods Inc. | 52,208 | 1,564 |
Energizer Holdings Inc. | 21,082 | 1,236 | |
* | Sprouts Farmers Market | ||
Inc. | 40,540 | 1,111 | |
* | Chefs’ Warehouse Inc. | 25,595 | 930 |
MGP Ingredients Inc. | 11,288 | 892 | |
* | Freshpet Inc. | 23,481 | 862 |
10
Strategic Small-Cap Equity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Central Garden & Pet Co. | ||
Class A | 19,923 | 718 | |
53,751 | |||
Energy (5.4%) | |||
PBF Energy Inc. Class A | 295,930 | 14,770 | |
* | Whiting Petroleum Corp. | 256,139 | 13,586 |
* | California Resources | ||
Corp. | 274,100 | 13,302 | |
* | Denbury Resources Inc. | 2,134,326 | 13,233 |
* | W&T Offshore Inc. | 1,237,482 | 11,929 |
SM Energy Co. | 365,752 | 11,532 | |
* | ProPetro Holding Corp. | 506,041 | 8,345 |
* | CONSOL Energy Inc. | 70,130 | 2,862 |
Arch Coal Inc. Class A | 26,694 | 2,386 | |
* | Renewable Energy Group | ||
Inc. | 81,584 | 2,350 | |
^ | CVR Energy Inc. | 43,794 | 1,761 |
* | Penn Virginia Corp. | 20,470 | 1,649 |
Mammoth Energy | |||
Services Inc. | 48,807 | 1,420 | |
* | Exterran Corp. | 40,619 | 1,078 |
Archrock Inc. | 74,558 | 910 | |
* | SEACOR Holdings Inc. | 17,578 | 869 |
* | Par Pacific Holdings Inc. | 38,112 | 777 |
* | REX American Resources | ||
Corp. | 10,210 | 771 | |
* | Carrizo Oil & Gas Inc. | 29,019 | 731 |
104,261 | |||
Financials (16.9%) | |||
* | Green Dot Corp. Class A | 161,351 | 14,331 |
LPL Financial Holdings | |||
Inc. | 201,940 | 13,027 | |
TCF Financial Corp. | 515,415 | 12,272 | |
Synovus Financial Corp. | 265,047 | 12,136 | |
Assured Guaranty Ltd. | 285,549 | 12,059 | |
* | MGIC Investment Corp. | 870,459 | 11,586 |
Universal Insurance | |||
Holdings Inc. | 238,634 | 11,586 | |
American Equity | |||
Investment Life | |||
Holding Co. | 321,886 | 11,382 | |
Primerica Inc. | 91,655 | 11,049 | |
* | NMI Holdings Inc. | ||
Class A | 487,401 | 11,040 | |
International Bancshares | |||
Corp. | 239,868 | 10,794 | |
Umpqua Holdings Corp. | 514,585 | 10,703 | |
Cadence BanCorp | |||
Class A | 406,032 | 10,606 | |
Walker & Dunlop Inc. | 200,213 | 10,587 | |
BankUnited Inc. | 283,570 | 10,038 | |
* | Axos Financial Inc. | 291,742 | 10,033 |
Federal Agricultural | |||
Mortgage Corp. | 128,668 | 9,287 |
Kemper Corp. | 110,821 | 8,915 | |
Evercore Inc. Class A | 82,226 | 8,268 | |
Nelnet Inc. Class A | 135,903 | 7,770 | |
* | First BanCorp | 839,698 | 7,641 |
Washington Federal Inc. | 231,428 | 7,406 | |
First Citizens BancShares | |||
Inc. Class A | 15,799 | 7,146 | |
Cathay General Bancorp | 165,460 | 6,857 | |
Legg Mason Inc. | 214,649 | 6,703 | |
Radian Group Inc. | 290,432 | 6,003 | |
* | Enova International Inc. | 179,673 | 5,175 |
Webster Financial Corp. | 87,590 | 5,164 | |
* | Credit Acceptance Corp. | 11,594 | 5,079 |
Houlihan Lokey Inc. | |||
Class A | 111,942 | 5,029 | |
Hancock Whitney Corp. | 99,009 | 4,708 | |
* | Flagstar Bancorp Inc. | 145,693 | 4,585 |
Greenhill & Co. Inc. | 151,736 | 3,998 | |
BancorpSouth Bank | 117,807 | 3,852 | |
BOK Financial Corp. | 34,416 | 3,348 | |
Popular Inc. | 63,349 | 3,247 | |
Virtu Financial Inc. | |||
Class A | 155,333 | 3,177 | |
Hanover Insurance Group | |||
Inc. | 21,117 | 2,605 | |
* | Seacoast Banking Corp. | ||
of Florida | 79,343 | 2,317 | |
* | Western Alliance Bancorp | 39,458 | 2,245 |
FirstCash Inc. | 25,436 | 2,086 | |
First Financial Bancorp | 60,638 | 1,801 | |
* | Ambac Financial Group | ||
Inc. | 84,059 | 1,716 | |
Moelis & Co. Class A | 29,126 | 1,596 | |
* | EZCORP Inc. Class A | 132,615 | 1,419 |
First Interstate | |||
BancSystem Inc. | |||
Class A | 21,202 | 950 | |
TrustCo Bank Corp. NY | 60,090 | 511 | |
323,833 | |||
Health Care (14.8%) | |||
* | Haemonetics Corp. | 133,937 | 15,346 |
Encompass Health Corp. | 192,233 | 14,985 | |
* | Charles River Laboratories | ||
International Inc. | 110,515 | 14,869 | |
Chemed Corp. | 44,151 | 14,110 | |
* | Inogen Inc. | 56,971 | 13,908 |
* | Myriad Genetics Inc. | 276,760 | 12,731 |
* | Amedisys Inc. | 96,476 | 12,056 |
* | Tenet Healthcare Corp. | 397,070 | 11,301 |
Bruker Corp. | 322,117 | 10,775 | |
* | STAAR Surgical Co. | 217,410 | 10,436 |
* | REGENXBIO Inc. | 137,154 | 10,355 |
* | Enanta Pharmaceuticals | ||
Inc. | 118,453 | 10,123 |
11
Strategic Small-Cap Equity Fund
Market | ||||
Value• | ||||
Shares | ($000) | |||
* | Vanda Pharmaceuticals | |||
Inc. | 376,919 | 8,650 | ||
* | Veeva Systems Inc. | |||
Class A | 79,373 | 8,641 | ||
* | ImmunoGen Inc. | 905,546 | 8,576 | |
* | Spectrum | |||
Pharmaceuticals Inc. | 462,585 | 7,771 | ||
* | Tivity Health Inc. | 225,632 | 7,254 | |
* | WellCare Health Plans | |||
Inc. | 22,244 | 7,129 | ||
* | Halozyme Therapeutics | |||
Inc. | 388,055 | 7,051 | ||
* | PRA Health Sciences Inc. | 58,240 | 6,417 | |
* | Endo International plc | 372,502 | 6,269 | |
* | Integer Holdings Corp. | 73,879 | 6,128 | |
* | Sage Therapeutics Inc. | 42,809 | 6,047 | |
* | Nektar Therapeutics | |||
Class A | 96,170 | 5,863 | ||
* | Acorda Therapeutics Inc. | 253,940 | 4,990 | |
* | Zogenix Inc. | 91,330 | 4,530 | |
* | Array BioPharma Inc. | 279,142 | 4,243 | |
* | PTC Therapeutics Inc. | 86,620 | 4,071 | |
*,^ | Sorrento Therapeutics | |||
Inc. | 812,751 | 3,576 | ||
* | CytomX Therapeutics Inc. | 172,771 | 3,196 | |
* | Novavax Inc. | 1,660,380 | 3,121 | |
* | Addus HomeCare Corp. | 42,016 | 2,947 | |
* | Genomic Health Inc. | 38,823 | 2,726 | |
* | Molina Healthcare Inc. | 16,513 | 2,455 | |
* | Natera Inc. | 95,303 | 2,282 | |
* | Medpace Holdings Inc. | 33,884 | 2,030 | |
Ensign Group Inc. | 49,648 | 1,883 | ||
* | GlycoMimetics Inc. | 121,388 | 1,748 | |
* | uniQure NV | 36,076 | 1,313 | |
* | Assertio Therapeutics Inc. | 204,115 | 1,200 | |
* | Amneal Pharmaceuticals | |||
Inc. | 52,064 | 1,155 | ||
284,257 | ||||
Industrials (14.5%) | ||||
GATX Corp. | 151,330 | 13,104 | ||
* | Harsco Corp. | 452,239 | 12,911 | |
* | Continental Building | |||
Products Inc. | 332,570 | 12,488 | ||
* | Generac Holdings Inc. | 213,048 | 12,018 | |
* | Axon Enterprise Inc. | 168,848 | 11,554 | |
* | Aerovironment Inc. | 102,500 | 11,497 | |
SkyWest Inc. | 192,743 | 11,353 | ||
* | FTI Consulting Inc. | 154,887 | 11,336 | |
Terex Corp. | 268,516 | 10,716 | ||
* | SPX Corp. | 299,320 | 9,970 | |
* | PGT Innovations Inc. | 424,498 | 9,169 | |
Greenbrier Cos. Inc. | 151,772 | 9,122 | ||
ArcBest Corp. | 184,692 | 8,967 | ||
* | Cimpress NV | 65,482 | 8,945 |
* | Meritor Inc. | 448,580 | 8,685 |
Rush Enterprises Inc. | |||
Class A | 214,461 | 8,430 | |
* | TriNet Group Inc. | 142,381 | 8,019 |
Triton International Ltd. | 239,371 | 7,964 | |
Global Brass & Copper | |||
Holdings Inc. | 206,280 | 7,612 | |
Insperity Inc. | 59,443 | 7,011 | |
H&E Equipment Services | |||
Inc. | 178,661 | 6,750 | |
Graco Inc. | 129,644 | 6,008 | |
* | Echo Global Logistics Inc. | 188,865 | 5,845 |
Ennis Inc. | 284,242 | 5,813 | |
Quad/Graphics Inc. | 262,088 | 5,462 | |
* | Vicor Corp. | 115,286 | 5,303 |
EMCOR Group Inc. | 65,102 | 4,890 | |
HEICO Corp. Class A | 61,325 | 4,630 | |
Comfort Systems USA | |||
Inc. | 66,979 | 3,778 | |
Korn/Ferry International | 68,665 | 3,381 | |
* | SP Plus Corp. | 92,213 | 3,366 |
* | Herc Holdings Inc. | 53,534 | 2,741 |
Simpson Manufacturing | |||
Co. Inc. | 34,586 | 2,506 | |
McGrath RentCorp | 40,216 | 2,191 | |
ACCO Brands Corp. | 190,623 | 2,154 | |
* | Atkore International Group | ||
Inc. | 80,528 | 2,136 | |
* | Clean Harbors Inc. | 25,781 | 1,845 |
* | Avis Budget Group Inc. | 51,263 | 1,648 |
* | Proto Labs Inc. | 7,985 | 1,292 |
Advanced Drainage | |||
Systems Inc. | 38,684 | 1,195 | |
* | SPX FLOW Inc. | 21,330 | 1,109 |
* | XPO Logistics Inc. | 8,665 | 989 |
Kforce Inc. | 21,790 | 819 | |
* | NOW Inc. | 45,233 | 749 |
277,471 | |||
Information Technology (15.7%) | |||
Booz Allen Hamilton | |||
Holding Corp. Class A | 316,184 | 15,692 | |
* | CACI International Inc. | ||
Class A | 74,399 | 13,701 | |
* | Square Inc. | 132,952 | 13,164 |
* | RingCentral Inc. Class A | 134,661 | 12,530 |
*,^ | Unisys Corp. | 600,840 | 12,257 |
ManTech International | |||
Corp. Class A | 190,634 | 12,067 | |
*,^ | Match Group Inc. | 204,820 | 11,861 |
* | Glu Mobile Inc. | 1,568,622 | 11,686 |
* | Zebra Technologies Corp. | 65,686 | 11,615 |
* | Hortonworks Inc. | 497,475 | 11,347 |
* | ePlus Inc. | 121,029 | 11,219 |
12
Strategic Small-Cap Equity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Advanced Micro Devices | ||
Inc. | 350,789 | 10,836 | |
* | Five9 Inc. | 239,612 | 10,469 |
* | Apptio Inc. Class A | 279,956 | 10,347 |
* | Appfolio Inc. | 129,325 | 10,139 |
* | Pure Storage Inc. Class A | 285,297 | 7,403 |
* | SolarEdge Technologies | ||
Inc. | 193,497 | 7,285 | |
* | Fitbit Inc. Class A | 1,316,086 | 7,041 |
* | SMART Global Holdings | ||
Inc. | 226,218 | 6,502 | |
^ | Ubiquiti Networks Inc. | 64,943 | 6,420 |
Plantronics Inc. | 105,738 | 6,376 | |
* | Aspen Technology Inc. | 53,636 | 6,110 |
Kulicke & Soffa Industries | |||
Inc. | 241,431 | 5,756 | |
Science Applications | |||
International Corp. | 67,821 | 5,466 | |
Jabil Inc. | 195,387 | 5,291 | |
* | Etsy Inc. | 94,352 | 4,848 |
* | Anixter International Inc. | 66,793 | 4,696 |
Comtech | |||
Telecommunications | |||
Corp. | 118,418 | 4,295 | |
* | New Relic Inc. | 39,914 | 3,761 |
SYNNEX Corp. | 44,164 | 3,741 | |
* | Cree Inc. | 92,437 | 3,501 |
* | Mellanox Technologies | ||
Ltd. | 46,337 | 3,403 | |
TTEC Holdings Inc. | 123,585 | 3,201 | |
* | Plexus Corp. | 53,429 | 3,126 |
* | Avid Technology Inc. | 518,993 | 3,078 |
MAXIMUS Inc. | 42,952 | 2,794 | |
* | Sykes Enterprises Inc. | 78,044 | 2,380 |
Versum Materials Inc. | 63,422 | 2,284 | |
* | First Solar Inc. | 44,776 | 2,168 |
*,^ | SunPower Corp. Class A | 276,399 | 2,018 |
* | Cardtronics plc Class A | 58,701 | 1,857 |
* | Infinera Corp. | 228,421 | 1,667 |
* | Varonis Systems Inc. | 20,796 | 1,523 |
* | Workiva Inc. | 34,469 | 1,362 |
* | Virtusa Corp. | 24,936 | 1,339 |
* | Amkor Technology Inc. | 128,825 | 952 |
* | TTM Technologies Inc. | 51,841 | 825 |
* | Alpha & Omega | ||
Semiconductor Ltd. | 63,771 | 742 | |
302,141 | |||
Materials (5.0%) | |||
* | Cleveland-Cliffs Inc. | 944,834 | 11,962 |
Louisiana-Pacific Corp. | 395,414 | 10,475 | |
Domtar Corp. | 193,215 | 10,080 | |
Greif Inc. Class A | 163,026 | 8,748 | |
Boise Cascade Co. | 236,662 | 8,709 | |
Huntsman Corp. | 295,746 | 8,053 |
Warrior Met Coal Inc. | 296,296 | 8,012 | |
* | AdvanSix Inc. | 197,235 | 6,696 |
Chemours Co. | 164,576 | 6,491 | |
Schnitzer Steel Industries | |||
Inc. | 158,871 | 4,298 | |
Mercer International Inc. | 181,395 | 3,047 | |
* | Alcoa Corp. | 63,966 | 2,584 |
United States Steel Corp. | 66,169 | 2,017 | |
Carpenter Technology | |||
Corp. | 27,466 | 1,619 | |
* | Verso Corp. | 46,371 | 1,561 |
Ashland Global Holdings | |||
Inc. | 11,439 | 959 | |
95,311 | |||
Real Estate (7.8%) | |||
Life Storage Inc. | 129,290 | 12,303 | |
Ryman Hospitality | |||
Properties Inc. | 138,530 | 11,937 | |
Xenia Hotels & Resorts | |||
Inc. | 480,711 | 11,393 | |
Hospitality Properties | |||
Trust | 377,134 | 10,877 | |
CoreSite Realty Corp. | 95,791 | 10,646 | |
Pebblebrook Hotel Trust | 286,717 | 10,428 | |
Rayonier Inc. | 289,522 | 9,789 | |
National Health Investors | |||
Inc. | 100,609 | 7,605 | |
MGM Growth Properties | |||
LLC Class A | 243,743 | 7,188 | |
EastGroup Properties Inc. | 65,404 | 6,254 | |
Chesapeake Lodging | |||
Trust | 187,105 | 6,000 | |
Tier REIT Inc. | 219,101 | 5,280 | |
Taubman Centers Inc. | 71,221 | 4,261 | |
Ashford Hospitality Trust | |||
Inc. | 637,176 | 4,072 | |
Uniti Group Inc. | 201,492 | 4,060 | |
Chatham Lodging Trust | 185,610 | 3,877 | |
Getty Realty Corp. | 116,630 | 3,331 | |
Apple Hospitality REIT | |||
Inc. | 165,951 | 2,902 | |
*,^ | Forestar Group Inc. | 119,017 | 2,523 |
One Liberty Properties | |||
Inc. | 86,383 | 2,400 | |
DiamondRock Hospitality | |||
Co. | 193,063 | 2,253 | |
Universal Health Realty | |||
Income Trust | 26,888 | 2,001 | |
DDR Corp. | 121,631 | 1,629 | |
CoreCivic Inc. | 62,929 | 1,531 | |
Piedmont Office Realty | |||
Trust Inc. Class A | 71,323 | 1,350 | |
Ramco-Gershenson | |||
Properties Trust | 71,772 | 976 |
13
Strategic Small-Cap Equity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
New Senior Investment | |||
Group Inc. | 133,092 | 785 | |
Lexington Realty Trust | 93,002 | 772 | |
Hersha Hospitality Trust | |||
Class A | 33,504 | 760 | |
149,183 | |||
Telecommunication Services (0.7%) | |||
* | Vonage Holdings Corp. | 538,378 | 7,624 |
* | Boingo Wireless Inc. | 164,589 | 5,744 |
13,368 | |||
Utilities (2.7%) | |||
Otter Tail Corp. | 230,839 | 11,057 | |
NextEra Energy Partners | |||
LP | 210,892 | 10,228 | |
PNM Resources Inc. | 208,424 | 8,223 | |
IDACORP Inc. | 68,843 | 6,831 | |
* | Clearway Energy Inc. | 245,842 | 4,733 |
Hawaiian Electric | |||
Industries Inc. | 114,138 | 4,062 | |
American States Water | |||
Co. | 42,445 | 2,595 | |
Avista Corp. | 36,549 | 1,848 | |
Unitil Corp. | 25,180 | 1,282 | |
Chesapeake Utilities Corp. | 6,689 | 561 | |
51,420 | |||
Total Common Stocks | |||
(Cost $1,518,821) | 1,904,369 | ||
Temporary Cash Investments (1.6%)1 | |||
Money Market Fund (1.5%) | |||
2,3 | Vanguard Market Liquidity | ||
Fund, 2.209% | 295,149 | 29,515 | |
Face | |||
Amount | |||
($000 | |||
U. S. Government and Agency Obligations (0.1%) | |||
4 | United States Treasury | ||
Bill, 2.078%, 11/15/18 | 450 | 449 | |
4 | United States Treasury | ||
Bill, 2.280%, 2/21/19 | 500 | 495 | |
944 | |||
Total Temporary Cash Investments | |||
(Cost $30,458) | 30,459 | ||
Total Investments (100.9%) | |||
(Cost $1,549,279) | 1,934,828 |
Amount | ||
($000) | ||
Other Assets and Liabilities (-0.9%) | ||
Other Assets | ||
Investment in Vanguard | 99 | |
Receivables for Investment Securities Sold | 824 | |
Receivables for Accrued Income | 1,692 | |
Receivables for Capital Shares Issued | 2,269 | |
Variation Margin Receivable— | ||
Futures Contracts | 27 | |
Other Assets | 75 | |
Total Other Assets | 4,986 | |
Liabilities | ||
Payables for Investment Securities | ||
Purchased | (244) | |
Collateral for Securities on Loan | (20,777) | |
Payables for Capital Shares Redeemed | (962) | |
Payables to Vanguard | (732) | |
Other Liabilities | (202) | |
Total Liabilities | (22,917) | |
Net Assets (100%) | ||
Applicable to 47,674,480 outstanding | ||
$.001 par value shares of beneficial | ||
interest (unlimited authorization) | 1,916,897 | |
Net Asset Value Per Share | $40.21 |
At September 30, 2018, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 1,386,442 |
Undistributed Net Investment Income | 11,290 |
Accumulated Net Realized Gains | 133,690 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 385,549 |
Futures Contracts | (74) |
Net Assets | 1,916,897 |
• 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 $19,894,000.
1 The fund invests a portion of its cash reserves in equity
markets through the use of index futures contracts. After
giving effect to futures investments, the fund’s effective
common stock and temporary cash investment positions
represent 99.9% and 1.0%, respectively, of net assets.
2 Includes $20,777,000 of collateral received for securities
on loan.
3 Affiliated money market fund available only to Vanguard
funds and certain trusts and accounts managed by Vanguard.
Rate shown is the 7-day yield.
4 Securities with a value of $657,000 have been segregated
as initial margin for open futures contracts.
REIT—Real Estate Investment Trust.
14
Strategic Small-Cap Equity 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 Russell 2000 Index | December 2018 | 131 | 11,140 | (74) |
See accompanying Notes, which are an integral part of the Financial Statements.
15
Strategic Small-Cap Equity Fund
Statement of Operations
Year Ended | |
September 30, 2018 | |
($000) | |
Investment Income | |
Income | |
Dividends | 21,500 |
Interest1 | 150 |
Securities Lending—Net | 736 |
Total Income | 22,386 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 1,211 |
Management and Administrative | 3,416 |
Marketing and Distribution | 322 |
Custodian Fees | 24 |
Auditing Fees | 34 |
Shareholders’ Reports and Proxy | 59 |
Trustees’ Fees and Expenses | 1 |
Total Expenses | 5,067 |
Net Investment Income | 17,319 |
Realized Net Gain (Loss) | |
Investment Securities Sold1 | 153,637 |
Futures Contracts | 1,133 |
Realized Net Gain (Loss) | 154,770 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities1 | 89,524 |
Futures Contracts | (306) |
Change in Unrealized Appreciation (Depreciation) | 89,218 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 261,307 |
1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund | |
were $137,000, ($1,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes. |
See accompanying Notes, which are an integral part of the Financial Statements.
16
Strategic Small-Cap Equity Fund
Statement of Changes in Net Assets
Year Ended September 30, | ||
2018 | 2017 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 17,319 | 21,050 |
Realized Net Gain (Loss) | 154,770 | 88,982 |
Change in Unrealized Appreciation (Depreciation) | 89,218 | 153,357 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 261,307 | 263,389 |
Distributions | ||
Net Investment Income | (17,683) | (20,718) |
Realized Capital Gain1 | (92,040) | — |
Total Distributions | (109,723) | (20,718) |
Capital Share Transactions | ||
Issued | 359,541 | 443,863 |
Issued in Lieu of Cash Distributions | 100,724 | 18,647 |
Redeemed | (367,708) | (382,969) |
Net Increase (Decrease) from Capital Share Transactions | 92,557 | 79,541 |
Total Increase (Decrease) | 244,141 | 322,212 |
Net Assets | ||
Beginning of Period | 1,672,756 | 1,350,544 |
End of Period2 | 1,916,897 | 1,672,756 |
1 Includes fiscal 2018 and 2017 short-term gain distributions totaling $18,625,000 and $0, respectively. Short-term gain distributions | ||
are treated as ordinary income dividends for tax purposes. | ||
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $11,290,000 and $12,550,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
Strategic Small-Cap Equity Fund
Financial Highlights
For a Share Outstanding | Year Ended September 30, | ||||
Throughout Each Period | 2018 | 2017 | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $36.99 | $31.45 | $28.95 | $30.91 | $27.94 |
Investment Operations | |||||
Net Investment Income | . 3731 | .4621 | .494 | .368 | .277 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 5.294 | 5.545 | 2.682 | .349 | 3.201 |
Total from Investment Operations | 5.667 | 6.007 | 3.176 | .717 | 3.478 |
Distributions | |||||
Dividends from Net Investment Income | (. 394) | (. 467) | (. 340) | (. 246) | (. 232) |
Distributions from Realized Capital Gains | (2.053) | — | (.336) | (2.431) | (.276) |
Total Distributions | (2.447) | (.467) | (.676) | (2.677) | (.508) |
Net Asset Value, End of Period | $40.21 | $36.99 | $31.45 | $28.95 | $30.91 |
Total Return2 | 16.13% | 19.19% | 11.14% | 2.10% | 12.48% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $1,917 | $1,673 | $1,351 | $945 | $545 |
Ratio of Total Expenses to Average Net Assets | 0.29% | 0.29% | 0.29% | 0.34% | 0.38% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 0.99% | 1.34% | 1.78% | 1.34% | 0.96% |
Portfolio Turnover Rate | 88% | 91% | 89% | 62% | 64% |
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. |
See accompanying Notes, which are an integral part of the Financial Statements.
Strategic Small-Cap Equity Fund
Notes to Financial Statements
Vanguard Strategic Small-Cap Equity Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any assets pledged as initial margin for open contracts are noted in the Statement of Net Assets.
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 year ended September 30, 2018, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2015–2018), 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.
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Strategic Small-Cap Equity Fund
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 counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at September 30, 2018, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs);
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Strategic Small-Cap Equity Fund
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 September 30, 2018, the fund had contributed to Vanguard capital in the amount of $99,000, representing 0.01% of the fund’s net assets and 0.04% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine
the fair value of investments). 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 September 30, 2018, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 1,904,369 | — | — |
Temporary Cash Investments | 29,515 | 944 | — |
Futures Contracts—Assets1 | 27 | — | — |
Total | 1,933,911 | 944 | — |
1 Represents variation margin on the last day of the reporting period. |
D. Permanent differences between book-basis and tax-basis components of net assets are reclassified among capital accounts in the financial statements to reflect their tax character. These reclassifications have no effect on net assets or net asset value per share. As of period end, the following permanent differences primarily attributable to the accounting for distributions in connection with fund share redemptions were reclassified to the following accounts:
Amount | |
($000) | |
Paid-in Capital | 8,947 |
Undistributed (Overdistributed) Net Investment Income | (896) |
Accumulated Net Realized Gains (Losses) | (8,051) |
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Strategic Small-Cap Equity Fund
Temporary differences between book-basis and tax-basis components of accumulated net earnings (losses) arise when certain items of income, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. The differences are primarily related to the tax deferral of losses on wash sales and the realization of unrealized gains or losses on certain futures contracts. As of period end, the tax-basis components of accumulated net earnings (losses) are detailed in the table as follows:
Amount | |
($000) | |
Undistributed Ordinary Income | 22,362 |
Undistributed Long-Term Gains | 123,017 |
Capital Loss Carryforwards | — |
Net Unrealized Gains (Losses) | 385,549 |
As of September 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
Amount | |
($000) | |
Tax Cost | 1,549,279 |
Gross Unrealized Appreciation | 446,687 |
Gross Unrealized Depreciation | (61,138) |
Net Unrealized Appreciation (Depreciation) | 385,549 |
E. During the year ended September 30, 2018, the fund purchased $1,532,298,000 of investment securities and sold $1,530,502,000 of investment securities, other than temporary cash investments.
F. Capital shares issued and redeemed were:
Year Ended September 30, | ||
2018 | 2017 | |
Shares | Shares | |
(000) | (000) | |
Issued | 9,482 | 12,829 |
Issued in Lieu of Cash Distributions | 2,813 | 534 |
Redeemed | (9,846) | (11,084) |
Net Increase (Decrease) in Shares Outstanding | 2,449 | 2,279 |
G. Management has determined that no events or transactions occurred subsequent to September 30, 2018, that would require recognition or disclosure in these financial statements.
22
Report of Independent Registered
Public Accounting Firm
To the Board of Trustees of Vanguard Horizon Funds and Shareholders of Vanguard Strategic Small-Cap Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of net assets of Vanguard Strategic Small-Cap Equity Fund (one of the funds constituting Vanguard Horizon Funds, referred to hereafter as the “Fund”) as of September 30, 2018, the related statement of operations for the year ended September 30, 2018, the statement of changes in net assets for each of the two years in the period ended September 30, 2018, including the related notes, and the financial highlights for each of the five years in the period ended September 30, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended September 30, 2018 and the financial highlights for each of the five years in the period ended September 30, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of September 30, 2018 by correspondence with the custodians and brokers and by agreement to the underlying ownership records of the transfer agent; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 15, 2018
We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.
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Special 2018 tax information (unaudited) for Vanguard Strategic Small-Cap Equity Fund
This information for the fiscal year ended September 30, 2018, is included pursuant to provisions of the Internal Revenue Code.
The fund distributed $80,843,000 as capital gain dividends (20% rate gain distributions) to shareholders during the fiscal year.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund are qualified short-term capital gains.
The fund distributed $13,910,000 of qualified dividend income to shareholders during the fiscal year.
For corporate shareholders, 55.4% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.
24
Your Fund’s After-Tax Returns
This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund’s distributions, and (2) assuming that an investor paid taxes on the fund’s distributions and sold all shares at the end of each period.
Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect any qualified dividend income, using actual prior-year figures and estimates for 2018. (In the example, returns after the sale of fund shares may be higher than those assuming no sale. This occurs when the sale would have produced a capital loss. The calculation assumes that the investor received a tax deduction for the loss.)
Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes.
Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.
Average Annual Total Returns: Strategic Small-Cap Equity Fund | |||
Periods Ended September 30, 2018 | |||
One | Five | Ten | |
Year | Years | Years | |
Returns Before Taxes | 16.13% | 12.06% | 12.19% |
Returns After Taxes on Distributions | 14.07 | 10.85 | 11.48 |
Returns After Taxes on Distributions and Sale of Fund Shares | 10.28 | 9.25 | 9.97 |
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About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
26
Six Months Ended September 30, 2018 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Strategic Small-Cap Equity Fund | 3/31/2018 | 9/30/2018 | Period |
Based on Actual Fund Return | $1,000.00 | $1,129.49 | $1.55 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,023.61 | 1.47 |
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 0.29%. 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 (183/365).
27
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share.
For a fund, the weighted average price/book ratio of the stocks it holds.
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Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
29
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.
30
The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 211 Vanguard funds.
Information for each trustee and executive officer of the fund appears below. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustees1
F. William McNabb III
Born in 1957. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: chairman of the board (January 2010–present) of Vanguard and of each of the investment companies served by Vanguard, trustee (2009–present) of each of the investment companies served by Vanguard, and director (2008–present) of Vanguard. Chief executive officer and president (2008–2017) of Vanguard and each of the investment companies served by Vanguard, managing director (1995–2008) of Vanguard, and director (1997–2018) of Vanguard Marketing Corporation. Director (2018–present) of UnitedHealth Group.
Mortimer J. Buckley
Born in 1969. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer (January 2018–present) of Vanguard; chief executive officer, president, and trustee (January 2018–present) of each of the investment companies served by Vanguard; president and director (2017–present) of Vanguard; and president (February 2018–present) of Vanguard Marketing Corporation. Chief investment officer (2013–2017), managing director (2002–2017), head of the Retail Investor Group (2006–2012), and chief information officer (2001–2006) of Vanguard. Chairman of the board (2011–2017) of the Children’s Hospital of Philadelphia.
Independent Trustees
Emerson U. Fullwood
Born in 1948. Trustee since January 2008. Principal occupation(s) during the past five years and other experience: executive chief staff and marketing officer for North America and corporate vice president (retired 2008) of Xerox Corporation (document management products and services). Former president of the Worldwide Channels Group, Latin America, and Worldwide Customer Service and executive chief staff officer of Developing Markets of Xerox. Executive in residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology. Lead director of SPX FLOW, Inc. (multi-industry manufacturing). Director of the University of Rochester Medical Center, the Monroe Community College Foundation, the United Way of Rochester, North Carolina A&T University, and Roberts Wesleyan College. Trustee of the University of Rochester.
Amy Gutmann
Born in 1949. Trustee since June 2006. Principal occupation(s) during the past five years and other experience: president (2004–present) of the University of Pennsylvania. Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and professor of communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania. Trustee of the National Constitution Center.
1 Mr. McNabb and Mr. Buckley are considered “interested persons,” as defined in the Investment Company Act of 1940, because
they are officers of the Vanguard funds.
JoAnn Heffernan Heisen
Born in 1950. Trustee since July 1998. Principal occupation(s) during the past five years and other experience: corporate vice president of Johnson & Johnson (pharmaceuticals/medical devices/consumer products) and member of its executive committee (1997–2008). Chief global diversity officer (retired 2008), vice president and chief information officer (1997–2006), controller (1995–1997), treasurer (1991–1995), and assistant treasurer (1989–1991) of Johnson & Johnson. Director of Skytop Lodge Corporation (hotels) and the Robert Wood Johnson Foundation. Member of the advisory board of the Institute for Women’s Leadership at Rutgers University.
F. Joseph Loughrey
Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education. Director of the V Foundation for Cancer Research. Member of the advisory council for the College of Arts and Letters and chair of the advisory board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.
Scott C. Malpass
Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: chief investment officer (1989–present) and vice president (1996–present) of the University of Notre Dame. Assistant professor of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Chairman of the board of TIFF Advisory Services, Inc. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of advisors for Spruceview Capital Partners, and the board of superintendence of the Institute for the Works of Religion.
Deanna Mulligan
Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: president (2010–present) and chief executive officer (2011–present) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of The Guardian Life Insurance Company of America. Member of the board of The Guardian Life Insurance Company of America, the American Council of Life Insurers, the Partnership for New York City (business leadership), and the Committee Encouraging Corporate Philanthropy. Trustee of the Economic Club of New York and the Bruce Museum (arts and science). Member of the Advisory Council for the Stanford Graduate School of Business.
André F. Perold
Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies LLC (private investment firm). Overseer of the Museum of Fine Arts Boston.
Sarah Bloom Raskin
Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Member of the board of directors (2012–2014) of Neighborhood Reinvestment Corporation. Director of i(x) Investments, LLC.
Peter F. Volanakis
Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Chairman of the board of trustees of Colby-Sawyer College. Member of the Board of Hypertherm Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born in 1967. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (2017–present), treasurer (2015–2017), controller (2010–2015), and assistant controller (2001–2010) of each of the investment companies served by Vanguard.
Christine M. Buchanan
Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard and global head of Fund Administration at Vanguard. Treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG LLP (audit, tax, and advisory services).
Brian Dvorak
Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2017–present) of Vanguard and each of the investment companies served by Vanguard. Assistant vice president (2017–present) of Vanguard Marketing Corporation. Vice president and director of Enterprise Risk Management (2011–2013) at Oppenheimer Funds, Inc.
Thomas J. Higgins
Born in 1957. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2008–present) and treasurer (1998–2008) of each of the investment companies served by Vanguard.
Peter Mahoney
Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.
Anne E. Robinson
Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Director and senior vice president (2016–2018) of Vanguard Marketing Corporation. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express.
Michael Rollings
Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.
Vanguard Senior Management Team | |
Joseph Brennan | Chris D. McIsaac |
Mortimer J. Buckley | James M. Norris |
Gregory Davis | Thomas M. Rampulla |
John James | Karin A. Risi |
Martha G. King | Anne E. Robinson |
John T. Marcante | Michael Rollings |
Chairman Emeritus and Senior Advisor | |
John J. Brennan | |
Chairman, 1996–2009 | |
Chief Executive Officer and President, 1996–2008 | |
Founder | |
John C. Bogle | |
Chairman and Chief Executive Officer, 1974–1996 |
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 | |
Connect with Vanguard® > vanguard.com | |
Fund Information > 800-662-7447 | Source for Bloomberg Barclays indexes: Bloomberg |
Direct Investor Account Services > 800-662-2739 | Index Services Limited. Copyright 2018, Bloomberg. All |
rights reserved. | |
Institutional Investor Services > 800-523-1036 | |
Text Telephone for People | |
Who Are Deaf or Hard of Hearing > 800-749-7273 | |
This material may be used in conjunction | |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by | |
the fund’s current prospectus. | |
All comparative mutual fund data are from Lipper, a | |
Thomson Reuters Company, or Morningstar, Inc., unless | |
otherwise noted. | |
You can obtain a free copy of Vanguard’s proxy voting | |
guidelines by visiting vanguard.com/proxyreporting or by | |
calling Vanguard at 800-662-2739. The guidelines are | |
also available from the SEC’s website, sec.gov. In | |
addition, you may obtain a free report on how your fund | |
voted the proxies for securities it owned during the 12 | |
months ended June 30. To get the report, visit either | |
vanguard.com/proxyreporting or sec.gov. | |
You can review and copy information about your fund at | |
the SEC’s Public Reference Room in Washington, D.C. To | |
find out more about this public service, call the SEC at | |
202-551-8090. Information about your fund is also | |
available on the SEC’s website, and you can receive | |
copies of this information, for a fee, by sending a | |
request in either of two ways: via email addressed to | |
publicinfo@sec.gov or via regular mail addressed to the | |
Public Reference Section, Securities and Exchange | |
Commission, Washington, DC 20549-1520. | |
© 2018 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q6150 112018 |
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Performance at a Glance. | 1 |
CEO’s Perspective. | 3 |
Advisors’ Report. | 5 |
Fund Profile. | 9 |
Performance Summary. | 11 |
Financial Statements. | 13 |
Your Fund’s After-Tax Returns. | 33 |
About Your Fund’s Expenses. | 34 |
Glossary. | 36 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
Your Fund’s Performance at a Glance
• Vanguard Global Equity Fund returned 10.22% for the 12 months ended September 30, 2018, surpassing the 9.77% return of its benchmark index and the 8.70% average return of its peers.
• The advisors’ selections in North America and Europe outperformed those in the benchmark. Among countries, the fund’s South Korean and Japanese stocks were two of the leading underperformers.
• Seven of the fund’s 11 industry sectors contributed to performance relative to the benchmark, led by health care, financials, utilities, and energy.
• Information technology and industrials hindered relative performance the most.
• For the ten years ended September 30, the fund’s average annual return exceeded that of its benchmark index and its peer group.
Total Returns: Fiscal Year Ended September 30, 2018 | |
Total | |
Returns | |
Vanguard Global Equity Fund | 10.22% |
MSCI All Country World Index | 9.77 |
Global Funds Average | 8.70 |
Global Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
Total Returns: Ten Years Ended September 30, 2018 | |
Average | |
Annual Return | |
Global Equity Fund | 9.18% |
MSCI All Country World Index | 8.19 |
Global Funds Average | 7.73 |
Global Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
The figures shown represent past performance, which is not a guarantee of future results. (Current
performance may be lower or higher than the performance data cited. For performance data current to the
most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment
returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more
or less than their original cost.
1
Expense Ratios | ||
Your Fund Compared With Its Peer Group | ||
Peer Group | ||
Fund | Average | |
Global Equity Fund | 0.48% | 1.18% |
The fund expense ratio shown is from the prospectus dated January 25, 2018, and represents estimated costs for the current fiscal year.
For the fiscal year ended September 30, 2018, the fund’s expense ratio was 0.48%. The peer-group expense ratio is derived from data
provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2017.
Peer group: Global Funds.
2
CEO’s Perspective
Tim Buckley
President and Chief Executive Officer
Dear Shareholder,
Over the years, I’ve found that prudent investors exhibit a common trait: discipline. No matter how the markets move or what new investing fad hits the headlines, those who stay focused on their goals and tune out the noise are set up for long-term success.
The prime gateway to investing is saving, and you don’t usually become a saver without a healthy dose of discipline. Savers make the decision to sock away part of their income, which means spending less and delaying gratification, no matter how difficult that may be.
Of course, disciplined investing extends beyond diligent saving. The financial markets, in the short term especially, are unpredictable; I have yet to meet the investor who can time them perfectly. It takes discipline to resist the urge to go all-in when markets are frothy or to retreat when things look bleak.
Staying put with your investments is one strategy for handling volatility. Another, rebalancing, requires even more discipline because it means steering your money away from strong performers and toward poorer performers.
Patience—a form of discipline—is also the friend of long-term investors. Higher returns are the potential reward for weathering the market’s turbulence and uncertainty.
3
We have been enjoying one of the longest bull markets in history, but it won’t continue forever. Prepare yourself now for how you will react when volatility comes back. Don’t panic. Don’t chase returns or look for answers outside the asset classes you trust. And be sure to rebalance periodically, even when there’s turmoil.
Whether you’re a master of self-control, get a boost from technology, or work with a professional advisor, know that discipline
is necessary to get the most out of your investment portfolio. And know that Vanguard is with you for the entire ride.
Thank you for your continued loyalty.
Mortimer J. Buckley
President and Chief Executive Officer October 18, 2018
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended September 30, 2018 | |||
One Year | Three Years | Five Years | |
Stocks | |||
Russell 1000 Index (Large-caps) | 17.76% | 17.07% | 13.67% |
Russell 2000 Index (Small-caps) | 15.24 | 17.12 | 11.07 |
Russell 3000 Index (Broad U.S. market) | 17.58 | 17.07 | 13.46 |
FTSE All-World ex US Index (International) | 2.13 | 10.18 | 4.51 |
Bonds | |||
Bloomberg Barclays U.S. Aggregate Bond Index | |||
(Broad taxable market) | -1.22% | 1.31% | 2.16% |
Bloomberg Barclays Municipal Bond Index | |||
(Broad tax-exempt market) | 0.35 | 2.24 | 3.54 |
FTSE Three-Month U. S. Treasury Bill Index | 1.57 | 0.80 | 0.48 |
CPI | |||
Consumer Price Index | 2.28% | 1.99% | 1.52% |
4
Advisors’ Report
For the fiscal year ended September 30, 2018, Vanguard Global Equity Fund returned 10.22%, outpacing its benchmark index and the average return of its peers. Your fund is managed by three independent advisors, a strategy that enhances the fund’s diversification by providing exposure to distinct yet complementary investment approaches. It’s not uncommon for different advisors to have different views about individual securities or the broader investment environment.
The advisors, the amount and percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. Each advisor has also prepared a discussion of the investment environment that existed during the past year and its effect on portfolio positioning. These comments were prepared on October 18, 2018.
Marathon Asset Management LLP
Portfolio Managers:
Neil M. Ostrer,
Co-Head of Global Equity
William J. Arah,
Co-Head of Global Equity
Global equity markets continued to perform well over the 12 months, with the U.S. stock market setting the record for the longest bull run in history. However, concerns remained regarding geopolitical risk arising from trade wars, a rising dollar,
Vanguard Global Equity Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Marathon Asset Management | 33 | 1,906 | A long-term and contrarian investment |
LLP | philosophy and process with a focus on | ||
industry capital cycle analysis and in-depth | |||
management assessment. | |||
Baillie Gifford Overseas Ltd. | 33 | 1,904 | A long-term, active, bottom-up investment |
approach is used to identify companies that can | |||
generate above-average growth in earnings and | |||
cash flow. | |||
Acadian Asset Management LLC | 31 | 1,805 | A quantitative, active, bottom-up investment |
process that combines stock and peer-group | |||
valuation to arrive at a return forecast for each | |||
of more than 40,000 securities in the global | |||
universe. | |||
Cash Investments | 3 | 154 | These short-term reserves are invested by |
Vanguard in equity index products to simulate | |||
investment in stocks. Each advisor may also | |||
maintain a modest cash position. |
5
and slowing global growth. Japan and the United States were particularly strong, outperforming the global benchmark.
At the stock level, not holding underper-forming General Electric helped relative returns the most. The multinational conglomerate’s weak performance from 2017 continued, as the stock fell 22% in the first six months of 2018 over concerns about its turnaround plan. Grubhub, an online food-ordering company, made strong gains after posting solid user growth and securing strategic partnerships. Other top performers included pharmaceutical giant Merck and cosmetics manufacturer Estée Lauder.
A negligible, underweight position in European holding British American Tobacco contributed to performance as the FDA moved to cut nicotine levels in cigarettes. Danish hearing aid specialists GN Store Nord and William Demant also contributed to relative returns. Conversely, not owning outperforming tech stocks such as Apple, Microsoft, and Netflix hurt performance, as did an underweight exposure to high-flying Amazon, which continues to surge in market share dominance and profitability.
By country, stock selection in North America hurt relative returns the most, followed by the impact of cash. Selection in Europe (particularly Denmark) and Japan helped performance, as did an underweight exposure to emerging markets.
There are large valuation disparities in the U.S. market. Cyclical sectors such as industrials and financials are seeing valuation compression as investors discount the late stage of the business cycle and higher interest rates. At the same time, a narrow group of “winner-takes-all” stocks is seen as immune to competitive threats and is experiencing rising valuations.
The disruptive nature of some of these business models is also causing valuations to compress in a wide swath of companies that are perceived as certain losers. These valuation disparities are creating investment opportunities. Markets may move higher to the extent that earnings continue to grow and valuation compression is seen as premature, but, given the late stage of the cycle, defensive positions may offer the best form of protection.
Baillie Gifford Overseas Ltd.
Portfolio Managers: Charles Plowden, Joint Senior Partner and Lead Portfolio Manager Spencer Adair, CFA, Partner and Investment Manager, Global Alpha Strategy Malcolm MacColl, Partner and Investment Manager, Global Alpha Strategy
Although global growth remains robust, notably driven by the U.S. economy, the market’s steady upward progression has stalled. Concerns over online privacy have had an impact on technology companies, and trade skirmishes have affected emerging markets.
6
We are fundamental, bottom-up, long-term investors. We observe these events, but we try not to become distracted. We own many high-profile technology companies, including Facebook, Amazon, Netflix, Alphabet, Baidu, Alibaba, and Tencent (indirectly via Naspers). In the first half of the year these stocks delivered revenue growth close to 40%, with many seeing acceleration from prior years and delivering higher margins. This secular growth can go on for many years as these companies disrupt traditional business models.
Strong long-term demand also can be seen in Asia, where a notable recent purchase was Ping An, a Chinese financial services company with a focus on insurance products. This is our third Asian insurance-oriented holding, along with Prudential and AIA. The long-term Asian insurance opportunity for these companies can be summarized as a middle-class population around six times the size of the G7 countries, but where spending on social welfare is only one-sixth of western levels.
Despite the secular opportunities, after a ten-year updraft in markets we continue to diversify away from stocks with very strong price momentum. We have reduced our exposure to Amazon three times as its share price has continued to rise. We have sold two semiconductor companies, NVIDIA and Samsung Electronics, where market prices suggest an extrapolation of recent very strong demand in what is still a cyclical industry.
One area we have been looking at for new ideas is the unloved mining industry. Companies, chastened after a spectacular decline in demand, have stopped spending on new projects, which should lead to better supply and demand, rising prices, and respectable returns. Our recent purchases include BHP Billiton (a diversified miner), Orica (mining explosives), and Albemarle (lithium mining).
As usual, there seems plenty to worry about. We don’t try to guess where the market is headed. We own companies that will grow over the long term. Diversification remains a key portfolio theme, and as new ideas appear, we will continue to ensure that a broad range of growth drivers will support performance.
Acadian Asset Management LLC
Portfolio Managers:
John R. Chisholm, CFA,
Co-Chief Executive Officer and
Co-Chief Investment Officer
Brendan O. Bradley, Ph.D.,
Senior Vice President and
Co-Chief Investment Officer
Global equities began the 12-month period on a solid note: Key markets rallied, widely spurred by solid corporate earnings and loose monetary policy as global economic growth became increasingly synchronized. Following a volatile start to 2018, global equities rebounded—though markets
7
began absorbing the prospects for less synchronized growth toward the end of the period as the escalating trade war, geopolitical concerns, and global central bank tightening affected regions differently.
The portfolio remained focused on attractively valued stocks that appeared likely to rise in price based on earnings data, price characteristics, and quality. Key overweight positions, based on bottom-up stock selection, included Canada, South Korea, and the United States. The United Kingdom, Japan, and Switzerland were the biggest underweight positions. We focused our sector exposure on health care and information technology; financials and industrials were the largest underweight positions.
With regard to stock selection, the portfolio’s investments in Finland and the United States contributed most to returns; these were offset by holdings in South Korea and Japan. By country allocation, underweight positions in the United Kingdom and Switzerland yielded the biggest gains, while overweight positions in Canada and Turkey detracted. From a sector perspective, overweight positions in information technology and health care saw the strongest results. An underweight position in materials was less successful.
While the global economic expansion continues, risks have shifted to the downside because of growing protection-ism, populism, and polarization. Trade protectionism is arguably the greatest threat to global growth; in addition to the direct effects, the uncertain path of global free trade has unsettled investors and deterred capital expenditures.
The withdrawal of liquidity by global central banks, a strengthening U.S. dollar, and geopolitical issues are also influencing global growth prospects. Financial conditions will continue to tighten as central banks in developed markets, including the Federal Reserve, the Bank of England, and the European Central Bank, normalize monetary policy. The strengthening U.S. dollar has strained more vulnerable developing markets, particularly those with high U.S. dollar-denominated debt. Geopolitics remain a considerable risk as Russia, China, and North Korea seek greater influence in world affairs. Populist politics, particularly in Europe, continue to disrupt and challenge markets.
Future growth will depend on the extent of individual countries’ exposures to trade protectionism as well as other risks, including the withdrawal of supportive monetary policy and its effects on global economies.
8
Global Equity Fund
Fund Profile
As of September 30, 2018
Portfolio Characteristics | ||
MSCI All | ||
Country | ||
Fund | World Index | |
Number of Stocks | 1,428 | 2,789 |
Median Market Cap | $27.1B | $59.2B |
Price/Earnings Ratio | 18.2x | 17.2x |
Price/Book Ratio | 2.1x | 2.3x |
Return on Equity | 13.7% | 14.2% |
Earnings Growth Rate | 8.6% | 8.6% |
Dividend Yield | 1.8% | 2.3% |
Turnover Rate | 40% | — |
Ticker Symbol | VHGEX | — |
Expense Ratio1 | 0.48% | — |
Short-Term Reserves | 1.2% | — |
Sector Diversification (% of equity exposure) | |
Fund | |
Consumer Discretionary | 12.6% |
Consumer Staples | 8.4 |
Energy | 5.7 |
Financials | 19.3 |
Health Care | 12.8 |
Industrials | 11.6 |
Information Technology | 21.7 |
Materials | 5.1 |
Other | 0.2 |
Real Estate | 1.1 |
Telecommunication Services | 0.8 |
Utilities | 0.7 |
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.
Volatility Measures | |
MSCI All | |
Country | |
World Index | |
R-Squared | 0.93 |
Beta | 0.97 |
These measures show the degree and timing of the fund’s | |
fluctuations compared with the index over 36 months. |
Ten Largest Holdings (% of total net assets) | ||
Alphabet Inc. | Internet Software & | |
Services | 2.5% | |
Amazon.com Inc. | Internet & Direct | |
Marketing Retail | 1.7 | |
Apple Inc. | Technology | |
Hardware, Storage & | ||
Peripherals | 1.2 | |
Microsoft Corp. | Systems Software | 1.2 |
Berkshire Hathaway Inc. Multi-Sector | ||
Holdings | 1.1 | |
Mastercard Inc. | Data Processing & | |
Outsourced Services | 1.0 | |
Naspers Ltd. | Cable & Satellite | 1.0 |
Anthem Inc. | Managed Health | |
Care | 0.9 | |
Taiwan Semiconductor | ||
Manufacturing Co. Ltd. | Semiconductors | 0.9 |
Prudential plc | Life & Health | |
Insurance | 0.9 | |
Top Ten | 12.4% | |
The holdings listed exclude any temporary cash investments and | ||
equity index products. |
Allocation by Region (% of equity exposure)
1 The expense ratio shown is from the prospectus dated January 25, 2018, and represents estimated costs for the current fiscal year. For the fiscal year ended September 30, 2018, the expense ratio was 0.48%.
9
Global Equity Fund
Market Diversification (% of equity exposure) | ||
MSCI All | ||
Country | ||
World | ||
Fund | Index | |
Europe | ||
United Kingdom | 4.5% | 5.4% |
Germany | 2.4 | 2.9 |
Switzerland | 2.1 | 2.6 |
France | 1.9 | 3.4 |
Netherlands | 1.3 | 1.0 |
Sweden | 1.3 | 0.8 |
Ireland | 1.2 | 0.1 |
Denmark | 1.1 | 0.5 |
Other | 3.1 | 2.6 |
Subtotal | 18.9% | 19.3% |
Pacific | ||
Japan | 6.8% | 7.6% |
Australia | 1.9 | 2.1 |
South Korea | 1.8 | 1.7 |
Hong Kong | 1.4 | 1.1 |
Other | 0.6 | 0.5 |
Subtotal | 12.5% | 13.0% |
Emerging Markets | ||
China | 5.0% | 3.2% |
Taiwan | 1.7 | 1.4 |
South Africa | 1.4 | 0.7 |
India | 1.2 | 0.9 |
Brazil | 1.2 | 0.7 |
Other | 2.8 | 2.1 |
Subtotal | 13.3% | 9.0% |
North America | ||
United States | 50.2% | 55.2% |
Canada | 4.6 | 3.0 |
Subtotal | 54.8% | 58.2% |
Middle East | ||
Other | 0.5% | 0.5% |
10
Global Equity Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: September 30, 2008, Through September 30, 2018
Initial Investment of $10,000
Average Annual Total Returns | ||||
Periods Ended September 30, 2018 | ||||
Final Value | ||||
One | Five | Ten | of a $10,000 | |
Year | Years | Years | Investment | |
Global Equity Fund* | 10.22% | 9.90% | 9.18% | $24,061 |
• • • • • • • • MSCI All Country World Index | 9.77 | 8.67 | 8.19 | 21,969 |
Global Funds Average | 8.70 | 7.83 | 7.73 | 21,048 |
Global Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. |
See Financial Highlights for dividend and capital gains information.
11
Global Equity Fund
Fiscal-Year Total Returns (%): September 30, 2008, Through September 30, 2018
12
Global Equity Fund
Financial Statements
Statement of Net Assets—Investments Summary
As of September 30, 2018
This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the complete listing of the fund’s holdings is available electronically on vanguard.com and on the Securities and Exchange Commission’s website (sec.gov), or you can have it mailed to you without charge by calling 800-662-7447. For the first and third fiscal quarters, the fund files the lists with the SEC on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | Percentage | ||
Value• | of Net | ||
Shares | ($000) | Assets | |
Common Stocks | |||
Australia † | 102,544 | 1.8% | |
Austria † | 13,041 | 0.2% | |
Belgium † | 4,083 | 0.1% | |
Brazil † | 65,187 | 1.1% | |
Canada | |||
Toronto-Dominion Bank | 469,338 | 28,520 | 0.5% |
Bank of Montreal | 335,600 | 27,682 | 0.5% |
Fairfax Financial Holdings Ltd. | 46,430 | 25,225 | 0.4% |
Canada—Other † | 177,575 | 3.1% | |
259,002 | 4.5% | ||
Chile † | 7,109 | 0.1% | |
China | |||
* Alibaba Group Holding Ltd. ADR | 232,688 | 38,338 | 0.7% |
Ping An Insurance Group Co. of China Ltd. | 2,912,500 | 29,504 | 0.5% |
* Baidu Inc. ADR | 114,013 | 26,072 | 0.4% |
PetroChina Co. Ltd. | 27,582,000 | 22,325 | 0.4% |
CNOOC Ltd. | 10,600,000 | 20,989 | 0.4% |
China Petroleum & Chemical Corp. | 20,144,000 | 20,240 | 0.3% |
Industrial & Commercial Bank of China Ltd. | 19,956,000 | 14,570 | 0.2% |
Agricultural Bank of China Ltd. | 18,804,000 | 9,222 | 0.2% |
Kunlun Energy Co. Ltd. | 2,886,000 | 3,359 | 0.1% |
China Shenhua Energy Co. Ltd. | 1,385,500 | 3,155 | 0.1% |
13
Global Equity Fund | |||
Market | Percentage | ||
Value• | of Net | ||
Shares | ($000) | Assets | |
China Resources Cement Holdings Ltd. | 1,434,000 | 1,668 | 0.0% |
Angang Steel Co. Ltd. | 512,000 | 457 | 0.0% |
China Telecom Corp. Ltd. ADR | 6,955 | 344 | 0.0% |
Dah Chong Hong Holdings Ltd. | 369,000 | 143 | 0.0% |
COSCO SHIPPING International Hong Kong Co. Ltd. | 226,000 | 82 | 0.0% |
China—Other † | 85,768 | 1.5% | |
276,236 | 4.8% | ||
Colombia † | 6,561 | 0.1% | |
Czech Republic † | 1,380 | 0.0% | |
Denmark † | 59,919 | 1.0% | |
Finland | |||
Neste Oyj | 323,657 | 26,678 | 0.5% |
Finland—Other † | 11,980 | 0.2% | |
38,658 | 0.7% | ||
France † | 101,764 | 1.8% | |
Germany | |||
SAP SE | 320,679 | 39,432 | 0.7% |
Germany—Other † | 91,205 | 1.6% | |
130,637 | 2.3% | ||
Greece † | 6,239 | 0.1% | |
Hong Kong | |||
AIA Group Ltd. | 4,398,400 | 39,220 | 0.7% |
Hong Kong—Other † | 40,890 | 0.7% | |
80,110 | 1.4% | ||
Hungary † | 2,638 | 0.0% | |
India | |||
ICICI Bank Ltd. | 6,618,394 | 27,936 | 0.5% |
India—Other † | 38,821 | 0.7% | |
66,757 | 1.2% | ||
Indonesia † | 4,132 | 0.1% | |
Ireland | |||
CRH plc | 827,632 | 27,085 | 0.5% |
§ Ireland—Other † | 41,815 | 0.7% | |
68,900 | 1.2% | ||
Israel † | 29,120 | 0.5% | |
Italy † | 42,984 | 0.7% |
14
Global Equity Fund | |||
Market | Percentage | ||
Value• | of Net | ||
Shares | ($000) | Assets | |
Japan | |||
MS&AD Insurance Group Holdings Inc. | 1,029,200 | 34,379 | 0.6% |
Japan—Other † | 337,896 | 5.9% | |
372,275 | 6.5% | ||
Kenya † | 806 | 0.0% | |
Malaysia | |||
Tenaga Nasional Bhd. | 6,863,900 | 25,664 | 0.4% |
Malaysia—Other † | 4,990 | 0.1% | |
30,654 | 0.5% | ||
1Mexico † | 20,793 | 0.4% | |
Netherlands | |||
Unilever NV | 461,147 | 25,651 | 0.5% |
1 Netherlands—Other † | 48,261 | 0.8% | |
73,912 | 1.3% | ||
New Zealand † | 1,966 | 0.0% | |
Norway † | 36,287 | 0.6% | |
Other † | |||
2 Vanguard FTSE Emerging Markets ETF | 514,464 | 21,093 | 0.4% |
Peru † | 1,012 | 0.0% | |
Philippines † | 1,405 | 0.0% | |
Poland † | 7,930 | 0.1% | |
Portugal † | 2,784 | 0.1% | |
Qatar † | 1,656 | 0.0% | |
Russia † | 43,591 | 0.8% | |
Singapore † | 26,908 | 0.5% | |
South Africa | |||
Naspers Ltd. | 259,353 | 55,851 | 1.0% |
South Africa—Other † | 24,388 | 0.4% | |
80,239 | 1.4% | ||
South Korea | |||
SK Hynix Inc. | 396,933 | 26,260 | 0.5% |
South Korea—Other † | 74,878 | 1.3% | |
101,138 | 1.8% | ||
1Spain † | 32,821 | 0.6% |
15
Global Equity Fund | |||
Market | Percentage | ||
Value• | of Net | ||
Shares | ($000) | Assets | |
Sweden † | 71,429 | 1.2% | |
Switzerland † | 116,868 | 2.0% | |
Taiwan | |||
Taiwan Semiconductor Manufacturing Co. Ltd. ADR | 999,506 | 44,138 | 0.8% |
Taiwan—Other † | 48,298 | 0.8% | |
92,436 | 1.6% | ||
Thailand † | 22,487 | 0.4% | |
Turkey † | 13,191 | 0.2% | |
United Arab Emirates † | 1,308 | 0.0% | |
United Kingdom | |||
Prudential plc | 2,312,827 | 53,029 | 0.9% |
1 United Kingdom—Other † | 188,912 | 3.3% | |
241,941 | 4.2% | ||
United States | |||
Consumer Discretionary | |||
* Amazon.com Inc. | 49,741 | 99,631 | 1.7% |
Home Depot Inc. | 174,951 | 36,241 | 0.7% |
Consumer Discretionary—Other † | 208,764 | 3.6% | |
344,636 | 6.0% | ||
Consumer Staples | |||
Procter & Gamble Co. | 548,128 | 45,621 | 0.8% |
PepsiCo Inc. | 335,016 | 37,455 | 0.6% |
Estee Lauder Cos. Inc. Class A | 196,219 | 28,515 | 0.5% |
Coca-Cola Co. | 588,392 | 27,178 | 0.5% |
Consumer Staples—Other † | 113,802 | 2.0% | |
252,571 | 4.4% | ||
Energy | |||
Apache Corp. | 955,894 | 45,567 | 0.8% |
Energy—Other † | 32,412 | 0.5% | |
77,979 | 1.3% | ||
Financials | |||
* Berkshire Hathaway Inc. Class B | 289,927 | 62,076 | 1.1% |
Moody’s Corp. | 231,886 | 38,771 | 0.7% |
* Markel Corp. | 24,334 | 28,921 | 0.5% |
Travelers Cos. Inc. | 213,704 | 27,719 | 0.5% |
US Bancorp | 470,632 | 24,854 | 0.4% |
Financials—Other † | 220,963 | 3.8% | |
403,304 | 7.0% | ||
Health Care | |||
Anthem Inc. | 195,945 | 53,699 | 0.9% |
Johnson & Johnson | 333,030 | 46,015 | 0.8% |
* Waters Corp. | 191,208 | 37,224 | 0.7% |
* WellCare Health Plans Inc. | 114,675 | 36,752 | 0.6% |
Humana Inc. | 98,953 | 33,498 | 0.6% |
Merck & Co. Inc. | 457,241 | 32,437 | 0.6% |
16
Global Equity Fund | |||||
Market | Percentage | ||||
Value• | of Net | ||||
Shares | ($000) | Assets | |||
* | Myriad Genetics Inc. | 634,017 | 29,165 | 0.5% | |
* | Mettler-Toledo International Inc. | 42,342 | 25,785 | 0.5% | |
* | Charles River Laboratories International Inc. | 186,297 | 25,064 | 0.4% | |
Health Care—Other † | 273,295 | 4.7% | |||
592,934 | 10.3% | ||||
Industrials | |||||
CH Robinson Worldwide Inc. | 255,079 | 24,977 | 0.4% | ||
§ | Industrials—Other † | 201,468 | 3.5% | ||
226,445 | 3.9% | ||||
Information Technology | |||||
* | Alphabet Inc. Class A | 60,236 | 72,710 | 1.3% | |
Apple Inc. | 310,177 | 70,019 | 1.2% | ||
Microsoft Corp. | 611,805 | 69,972 | 1.2% | ||
* | Alphabet Inc. Class C | 56,557 | 67,499 | 1.2% | |
Mastercard Inc. Class A | 271,704 | 60,484 | 1.0% | ||
Oracle Corp. | 784,166 | 40,432 | 0.7% | ||
Visa Inc. Class A | 235,522 | 35,349 | 0.6% | ||
* | Facebook Inc. Class A | 197,552 | 32,489 | 0.6% | |
* | GrubHub Inc. | 215,678 | 29,897 | 0.5% | |
Information Technology—Other † | 256,688 | 4.4% | |||
735,539 | 12.7% | ||||
Materials | |||||
Praxair Inc. | 185,900 | 29,880 | 0.5% | ||
Materials—Other † | 74,874 | 1.3% | |||
104,754 | 1.8% | ||||
Real Estate † | 27,432 | 0.5% | |||
Telecommunication Services † | 5,195 | 0.1% | |||
Utilities † | 105 | 0.0% | |||
2,770,894 | 48.0% | ||||
Total Common Stocks (Cost $4,294,061) | 5,554,825 | 96.3%3 | |||
Coupon | |||||
Temporary Cash Investments | |||||
Money Market Fund | |||||
4,5 | Vanguard Market Liquidity Fund | 2.209% | 2,562,926 | 256,293 | 4.5% |
6U.S. Government and Agency Obligations † | 7,970 | 0.1% | |||
Total Temporary Cash Investments (Cost $264,273) | 264,263 | 4.6%3 | |||
7Total Investments (Cost $4,558,334) | 5,819,088 | 100.9% | |||
Other Assets and Liabilities | |||||
Other Assets 8 | 76,156 | 1.3% | |||
Liabilities 5 | (126,192) | (2.2%) | |||
(50,036) | (0.9%) | ||||
Net Assets | 5,769,052 | 100.0% |
17
Global Equity Fund | |
Amount | |
($000) | |
Statement of Assets and Liabilities | |
Assets | |
Investments in Securities, at Value | |
Unaffiliated Issuers | 5,541,702 |
Affiliated Issuers | 277,386 |
Total Investments in Securities | 5,819,088 |
Investment in Vanguard | 294 |
Receivables for Investment Securities Sold | 51,139 |
Receivables for Accrued Income | 12,492 |
Receivables for Capital Shares Issued | 1,378 |
Unrealized Appreciation—Forward Currency Contracts | 20 |
Other Assets 8 | 10,833 |
Total Assets | 5,895,244 |
Liabilities | |
Payables for Investment Securities Purchased | 49,988 |
Collateral for Securities on Loan | 62,988 |
Payables to Investment Advisor | 3,452 |
Payables for Capital Shares Redeemed | 2,930 |
Payables to Vanguard | 6,294 |
Variation Margin Payable—Futures Contracts | 26 |
Unrealized Depreciation—Forward Currency Contracts | 514 |
Total Liabilities | 126,192 |
Net Assets | 5,769,052 |
18
Global Equity Fund
At September 30, 2018, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 4,152,240 |
Undistributed Net Investment Income | 40,244 |
Accumulated Net Realized Gains | 314,759 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 1,260,754 |
Futures Contracts | 1,852 |
Forward Currency Contracts | (494) |
Foreign Currencies | (303) |
Net Assets | 5,769,052 |
Applicable to 176,845,843 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 5,769,052 |
Net Asset Value Per Share | $32.62 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
§ Certain of the fund’s securities are valued using significant unobservable inputs.
† Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer,
represent 1% or less of net assets.
1 Certain of the fund’s securities are 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 September 30, 2018, the aggregate
value of these securities was $24,315,000, representing 0.4% of net assets.
2 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
3 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 98.6% and 2.3%,
respectively, of net assets.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown
is the 7-day yield.
5 Includes $62,988,000 of collateral received for securities on loan.
6 Securities with a value of $6,282,000 have been segregated as initial margin for open futures contracts.
7 The total value of securities on loan is $58,094,000.
8 Cash of $430,000 has been segregated as collateral for open forward currency contracts.
ADR—American Depositary Receipt.
19
Global Equity 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 | December 2018 | 578 | 84,359 | 221 |
Dow Jones EURO STOXX 50 Index | December 2018 | 469 | 18,444 | 252 |
Topix Index | December 2018 | 79 | 12,637 | 1,024 |
FTSE 100 Index | December 2018 | 129 | 12,588 | 320 |
S&P ASX 200 Index | December 2018 | 48 | 5,373 | 35 |
1,852 |
Forward Currency Contracts | ||||||
Unrealized | ||||||
Contract | Appreciation | |||||
Settlement | Contract Amount (000) | (Depreciation) | ||||
Counterparty | Date | Receive | Deliver | ($000) | ||
Morgan Stanley Capital Services LLC | 12/28/18 | EUR | 15,672 | USD | 18,411 | (70) |
Toronto-Dominion Bank | 12/28/18 | GBP | 9,413 | USD | 12,527 | (202) |
BNP Paribas | 12/18/18 | JPY | 1,370,906 | USD | 12,389 | (242) |
Morgan Stanley Capital Services LLC | 12/27/18 | AUD | 7,329 | USD | 5,290 | 12 |
BNP Paribas | 12/27/18 | AUD | 56 | USD | 40 | — |
JPMorgan Chase Bank, N.A. | 12/18/18 | USD | 455 | JPY | 50,430 | 8 |
(494) | ||||||
AUD—Australian dollar. | ||||||
EUR—Euro. | ||||||
GBP—British pound. | ||||||
JPY—Japanese yen. | ||||||
USD—U.S. dollar. |
See accompanying Notes, which are an integral part of the Financial Statements.
20
Global Equity Fund
Statement of Operations
Year Ended | |
September 30, 2018 | |
($000) | |
Investment Income | |
Income | |
Dividends—Unaffiliated Issuers1 | 100,041 |
Dividends—Affiliated Issuers | 271 |
Interest—Unaffiliated Issuers | 109 |
Interest—Affiliated Issuers | 3,308 |
Securities Lending—Net | 758 |
Total Income | 104,487 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 13,483 |
Performance Adjustment | 1,289 |
The Vanguard Group—Note C | |
Management and Administrative | 10,990 |
Marketing and Distribution | 822 |
Custodian Fees | 690 |
Auditing Fees | 45 |
Shareholders’ Reports and Proxy | 97 |
Trustees’ Fees and Expenses | 10 |
Total Expenses | 27,426 |
Net Investment Income | 77,061 |
Realized Net Gain (Loss) | |
Investment Securities Sold—Unaffiliated Issuers | 385,505 |
Investment Securities Sold—Affiliated Issuers | 797 |
Futures Contracts | 12,198 |
Forward Currency Contracts | (2,175) |
Foreign Currencies | (462) |
Realized Net Gain (Loss) | 395,863 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities—Unaffiliated Issuers | 77,070 |
Investment Securities—Affiliated Issuers | (2,689) |
Futures Contracts | (749) |
Forward Currency Contracts | 169 |
Foreign Currencies | (150) |
Change in Unrealized Appreciation (Depreciation) | 73,651 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 546,575 |
1 Dividends are net of foreign withholding taxes of $5,600,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
21
Global Equity Fund
Statement of Changes in Net Assets
Year Ended September 30, | ||
2018 | 2017 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 77,061 | 62,864 |
Realized Net Gain (Loss) | 395,863 | 258,346 |
Change in Unrealized Appreciation (Depreciation) | 73,651 | 607,205 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 546,575 | 928,415 |
Distributions | ||
Net Investment Income | (72,958) | (66,188) |
Realized Capital Gain | — | — |
Total Distributions | (72,958) | (66,188) |
Capital Share Transactions | ||
Issued | 742,350 | 551,987 |
Issued in Lieu of Cash Distributions | 67,815 | 61,674 |
Redeemed | (901,606) | (604,459) |
Net Increase (Decrease) from Capital Share Transactions | (91,441) | 9,202 |
Total Increase (Decrease) | 382,176 | 871,429 |
Net Assets | ||
Beginning of Period | 5,386,876 | 4,515,447 |
End of Period1 | 5,769,052 | 5,386,876 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $40,244,000 and $40,145,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
22
Global Equity Fund
Financial Highlights
For a Share Outstanding | Year Ended September 30, | ||||
Throughout Each Period | 2018 | 2017 | 2016 | 2015 | 2014 |
Net Asset Value, Beginning of Period | $29.98 | $25.18 | $22.85 | $24.19 | $21.94 |
Investment Operations | |||||
Net Investment Income | . 4261 | .3511 | .385 | .373 | .353 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 2.618 | 4.823 | 2.350 | (1.338) | 2.255 |
Total from Investment Operations | 3.044 | 5.174 | 2.735 | (.965) | 2.608 |
Distributions | |||||
Dividends from Net Investment Income | (. 404) | (. 374) | (. 405) | (. 375) | (. 358) |
Distributions from Realized Capital Gains | — | — | — | — | — |
Total Distributions | (. 404) | (. 374) | (. 405) | (. 375) | (. 358) |
Net Asset Value, End of Period | $32.62 | $29.98 | $25.18 | $22.85 | $24.19 |
Total Return2 | 10.22% | 20.85% | 12.11% | -4.09% | 11.95% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $5,769 | $5,387 | $4,515 | $4,144 | $4,531 |
Ratio of Total Expenses to Average Net Assets3 | 0.48% | 0.48% | 0.51% | 0.57% | 0.61% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 1.34% | 1.30% | 1.61% | 1.49% | 1.45% |
Portfolio Turnover Rate | 40% | 47% | 45% | 36% | 45% |
1 Calculated based on averages 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 0.02%, 0.02%, 0.05%, 0.08%, and 0.08%.
See accompanying Notes, which are an integral part of the Financial Statements.
23
Global Equity Fund
Notes to Financial Statements
Vanguard Global Equity Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market-or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The
24
Global Equity Fund
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.
The fund enters into forward currency contracts to provide the appropriate currency exposure related to any open futures contracts or to protect the value of securities and related receivables and payables against changes in foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counter-party risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The 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 Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.
During the year ended September 30, 2018, the fund’s average investments in long and short futures contracts represented 2% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund’s average investment in forward currency contracts represented less than 1% of net assets, based on the average of the notional amounts at each quarter-end during the period.
4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2015–2018), and has concluded that no provision for federal income tax is required in the fund’s financial statements.
5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes.
25
Global Equity Fund
6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled 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 Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at September 30, 2018, or at any time during the period then ended.
8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Taxes on foreign dividends and capital gains have been provided for in accordance with the fund’s understanding of the applicable countries’ tax rules and rates. Foreign capital gains tax is accrued daily based upon net unrealized gains. The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Such tax reclaims received during
26
Global Equity Fund
the year, if any, are included in dividend income. No other amounts for additional tax reclaims are reflected in the financial statements due to the uncertainty as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment.
B. The investment advisory firms Marathon Asset Management LLP, Baillie Gifford Overseas Ltd., and Acadian Asset Management LLC each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fees of Marathon Asset Management LLP, Baillie Gifford Overseas Ltd., and Acadian Asset Management LLC are subject to quarterly adjustments based on performance relative to the MSCI All Country World Index for the preceding three years.
Vanguard manages the cash reserves of the fund as described below.
For the year ended September 30, 2018, the aggregate investment advisory fee represented an effective annual basic rate of 0.23% of the fund’s average net assets, before an increase of $1,289,000 (0.02%) based on performance.
C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, distribution, and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Assets and Liabilities. 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 September 30, 2018, the fund had contributed to Vanguard capital in the amount of $294,000 representing 0.01% of the fund’s net assets and 0.12% 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.
27
Global Equity Fund
The following table summarizes the market value of the fund’s investments as of September 30, 2018, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks—International | 601,326 | 2,182,605 | — |
Common Stocks—United States | 2,770,660 | 234 | — |
Temporary Cash Investments | 256,293 | 7,970 | — |
Futures Contracts—Liabilities1 | (26) | — | — |
Forward Currency Contracts—Assets | — | 20 | — |
Forward Currency Contracts—Liabilities | — | (514) | — |
Total | 3,628,253 | 2,190,315 | — |
1 Represents variation margin on the last day of the reporting period. |
E. At September 30, 2018, the fair values of derivatives were reflected in the Statement of Assets and Liabilities as follows:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Statement of Assets and Liabilities Caption | ($000) | ($000) | ($000) |
Unrealized Appreciation—Forwards Contracts | — | 20 | 20 |
Variation Margin Payable—Futures Contracts | (26) | — | (26) |
Unrealized Depreciation—Forwards Contracts | — | (514) | (514) |
Total Liabilities | (26) | (514) | (540) |
Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the year ended September 30, 2018, were:
Foreign | |||
Equity | Exchange | ||
Contracts | Contracts | Total | |
Realized Net Gain (Loss) on Derivatives | ($000) | ($000) | ($000) |
Futures Contracts | 12,198 | — | 12,198 |
Forward Currency Contracts | — | (2,175) | (2,175) |
Realized Net Gain (Loss) on Derivatives | 12,198 | (2,175) | 10,023 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | |||
Futures Contracts | (749) | — | (749) |
Forward Currency Contracts | — | 169 | 169 |
Change in Unrealized Appreciation (Depreciation) on Derivatives | (749) | 169 | (580) |
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Global Equity Fund
F. Permanent differences between book-basis and tax-basis componets of net assets are reclassified among capital accounts in the financial statements to reflect their tax character. These reclassifications have no effect on net assets or net asset value per share. As of period end, the following permanent differences primarily attributable to the accounting for foreign currency transactions, passive foreign investment companies, distributions in connection with fund share redemptions, and tax expense on capital gains were reclassified to the following accounts:
Amount | |
($000) | |
Paid-in Capital | 24,257 |
Undistributed (Overdistributed) Net Investment Income | (4,004) |
Accumulated Net Realized Gains (Losses) | (20,253) |
Temporary differences between book-basis and tax-basis components of accumulated net earnings (losses) arise when certain items of income, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. The differences are primarily related to the tax deferral of losses on wash sales, the realization of unrealized gains or losses on certain futures contracts, forward currency contracts, and unrealized gains on passive foreign investment companies. As of period end, the tax-basis components of accumulated net earnings (losses) are detailed in the table as follows:
Amount | |
($000) | |
Undistributed Ordinary Income | 58,834 |
Undistributed Long-Term Gains | 314,241 |
Capital Loss Carryforwards (Non-expiring) | — |
Net unrealized gains (losses) | 1,249,440 |
The fund used capital loss carryforwards of $59,941,000 to offset taxable capital gains realized during the year ended September 30, 2018, reducing the amount of capital gains that would otherwise be available to distribute to shareholders.
As of September 30, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
Amount | |
($000) | |
Tax Cost | 4,570,404 |
Gross Unrealized Appreciation | 1,452,645 |
Gross Unrealized Depreciation | (202,902) |
Net Unrealized Appreciation (Depreciation) | 1,249,743 |
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Global Equity Fund
G. During the year ended September 30, 2018, the fund purchased $2,186,286,000 of investment securities and sold $2,281,156,000 of investment securities, other than temporary cash investments.
H. Capital shares issued and redeemed were:
Year Ended September 30, | ||
2018 | 2017 | |
Shares | Shares | |
(000) | (000) | |
Issued | 23,286 | 20,587 |
Issued in Lieu of Cash Distributions | 2,178 | 2,477 |
Redeemed | (28,299) | (22,721) |
Net Increase (Decrease) in Shares Outstanding | (2,835) | 343 |
I. 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 | Net | Change | Sept. 30, | ||||
2017 | from | Realized | in Net | Capital Gain | 2018 | |||
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 FTSE | ||||||||
Emerging Markets | ||||||||
ETF | 17,276 | 56,916 | 51,235 | 814 | (2,678) | 271 | — | 21,093 |
Vanguard Market | ||||||||
Liquidity Fund | 226,433 | NA1 | NA1 | (17) | (11) | 3,308 | — | 256,293 |
Total | 243,709 | 797 | (2,689) | 3,579 | — | 277,386 | ||
1 Not applicable—purchases and sales are for temporary cash investment purposes. |
J. Management has determined that no events or transactions occurred subsequent to September 30, 2018, that would require recognition or disclosure in these financial statements.
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Report of Independent Registered
Public Accounting Firm
To the Board of Trustees of Vanguard Horizon Funds and Shareholders of Vanguard Global Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of net assets—investments summary and statement of assets and liabilities of Vanguard Global Equity Fund (one of the funds constituting Vanguard Horizon Funds, referred to hereafter as the “Fund”) as of September 30, 2018, the related statement of operations for the year ended September 30, 2018, the statement of changes in net assets for each of the two years in the period ended September 30, 2018, including the related notes, and the financial highlights for each of the five years in the period ended September 30, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended September 30, 2018 and the financial highlights for each of the five years in the period ended September 30, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of September 30, 2018 by correspondence with the custodians and brokers and by agreement to the underlying ownership records of the transfer agent; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 15, 2018
We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.
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Special 2018 tax information (unaudited) for Vanguard Global Equity Fund
This information for the fiscal year ended September 30, 2018, is included pursuant to provisions of the Internal Revenue Code.
The fund distributed $65,939,000 of qualified dividend income to shareholders during the fiscal year.
For corporate shareholders, 43.4% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.
The fund designates to shareholders foreign source income of $61,071,000 and foreign taxes paid of $6,705,000. Shareholders will receive more detailed information with their Form 1099-DIV in January 2019 to determine the calendar-year amounts to be included on their 2018 tax returns.
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Your Fund’s After-Tax Returns
This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund’s distributions, and (2) assuming that an investor paid taxes on the fund’s distributions and sold all shares at the end of each period.
Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect any qualified dividend income, using actual prior-year figures and estimates for 2018. (In the example, returns after the sale of fund shares may be higher than those assuming no sale. This occurs when the sale would have produced a capital loss. The calculation assumes that the investor received a tax deduction for the loss.)
Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes.
Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.
Average Annual Total Returns: Global Equity Fund | |||
Periods Ended September 30, 2018 | |||
One | Five | Ten | |
Year | Years | Years | |
Returns Before Taxes | 10.22% | 9.90% | 9.18% |
Returns After Taxes on Distributions | 9.91 | 9.54 | 8.79 |
Returns After Taxes on Distributions and Sale of Fund Shares | 6.29 | 7.81 | 7.47 |
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About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
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Six Months Ended September 30, 2018 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Global Equity Fund | 3/31/2018 | 9/30/2018 | Period |
Based on Actual Fund Return | $1,000.00 | $1,037.86 | $2.40 |
Based on Hypothetical 5% Yearly Return | 1,000.00 | 1,022.71 | 2.38 |
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 0.47%. 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 (183/365).
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Glossary
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
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Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.
Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.
Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.
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The 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.
38
The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 211 Vanguard funds.
Information for each trustee and executive officer of the fund appears below. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustees1
F. William McNabb III
Born in 1957. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: chairman of the board (January 2010–present) of Vanguard and of each of the investment companies served by Vanguard, trustee (2009–present) of each of the investment companies served by Vanguard, and director (2008–present) of Vanguard. Chief executive officer and president (2008–2017) of Vanguard and each of the investment companies served by Vanguard, managing director (1995–2008) of Vanguard, and director (1997–2018) of Vanguard Marketing Corporation. Director (2018–present) of UnitedHealth Group.
Mortimer J. Buckley
Born in 1969. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer (January 2018–present) of Vanguard; chief executive officer, president, and trustee (January 2018–present) of each of the investment companies served by Vanguard; president and director (2017–present) of Vanguard; and president (February 2018–present) of Vanguard Marketing Corporation. Chief investment officer (2013–2017), managing director (2002–2017), head of the Retail Investor Group (2006–2012), and chief information officer (2001–2006) of Vanguard. Chairman of the board (2011–2017) of the Children’s Hospital of Philadelphia.
Independent Trustees
Emerson U. Fullwood
Born in 1948. Trustee since January 2008. Principal occupation(s) during the past five years and other experience: executive chief staff and marketing officer for North America and corporate vice president (retired 2008) of Xerox Corporation (document management products and services). Former president of the Worldwide Channels Group, Latin America, and Worldwide Customer Service and executive chief staff officer of Developing Markets of Xerox. Executive in residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology. Lead director of SPX FLOW, Inc. (multi-industry manufacturing). Director of the University of Rochester Medical Center, the Monroe Community College Foundation, the United Way of Rochester, North Carolina A&T University, and Roberts Wesleyan College. Trustee of the University of Rochester.
Amy Gutmann
Born in 1949. Trustee since June 2006. Principal occupation(s) during the past five years and other experience: president (2004–present) of the University of Pennsylvania. Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and professor of communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania. Trustee of the National Constitution Center.
1 Mr. McNabb and Mr. Buckley are considered “interested persons,” as defined in the Investment Company Act of 1940, because
they are officers of the Vanguard funds.
JoAnn Heffernan Heisen
Born in 1950. Trustee since July 1998. Principal occupation(s) during the past five years and other experience: corporate vice president of Johnson & Johnson (pharmaceuticals/medical devices/consumer products) and member of its executive committee (1997–2008). Chief global diversity officer (retired 2008), vice president and chief information officer (1997–2006), controller (1995–1997), treasurer (1991–1995), and assistant treasurer (1989–1991) of Johnson & Johnson. Director of Skytop Lodge Corporation (hotels) and the Robert Wood Johnson Foundation. Member of the advisory board of the Institute for Women’s Leadership at Rutgers University.
F. Joseph Loughrey
Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services), Oxfam America, and the Lumina Foundation for Education. Director of the V Foundation for Cancer Research. Member of the advisory council for the College of Arts and Letters and chair of the advisory board to the Kellogg Institute for International Studies, both at the University of Notre Dame.
Mark Loughridge
Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.
Scott C. Malpass
Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: chief investment officer (1989–present) and vice president (1996–present) of the University of Notre Dame. Assistant professor of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Chairman of the board of TIFF Advisory Services, Inc. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of advisors for Spruceview Capital Partners, and the board of superintendence of the Institute for the Works of Religion.
Deanna Mulligan
Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: president (2010–present) and chief executive officer (2011–present) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of The Guardian Life Insurance Company of America. Member of the board of The Guardian Life Insurance Company of America, the American Council of Life Insurers, the Partnership for New York City (business leadership), and the Committee Encouraging Corporate Philanthropy. Trustee of the Economic Club of New York and the Bruce Museum (arts and science). Member of the Advisory Council for the Stanford Graduate School of Business.
André F. Perold
Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies LLC (private investment firm). Overseer of the Museum of Fine Arts Boston.
Sarah Bloom Raskin
Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Member of the board of directors (2012–2014) of Neighborhood Reinvestment Corporation. Director of i(x) Investments, LLC.
Peter F. Volanakis
Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Chairman of the board of trustees of Colby-Sawyer College. Member of the Board of Hypertherm Inc. (industrial cutting systems, software, and consumables).
Executive Officers
Glenn Booraem
Born in 1967. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (2017–present), treasurer (2015–2017), controller (2010–2015), and assistant controller (2001–2010) of each of the investment companies served by Vanguard.
Christine M. Buchanan
Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard and global head of Fund Administration at Vanguard. Treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG LLP (audit, tax, and advisory services).
Brian Dvorak
Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2017–present) of Vanguard and each of the investment companies served by Vanguard. Assistant vice president (2017–present) of Vanguard Marketing Corporation. Vice president and director of Enterprise Risk Management (2011–2013) at Oppenheimer Funds, Inc.
Thomas J. Higgins
Born in 1957. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2008–present) and treasurer (1998–2008) of each of the investment companies served by Vanguard.
Peter Mahoney
Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.
Anne E. Robinson
Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Director and senior vice president (2016–2018) of Vanguard Marketing Corporation. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express.
Michael Rollings
Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.
Vanguard Senior Management Team | |
Joseph Brennan | Chris D. McIsaac |
Mortimer J. Buckley | James M. Norris |
Gregory Davis | Thomas M. Rampulla |
John James | Karin A. Risi |
Martha G. King | Anne E. Robinson |
John T. Marcante | Michael Rollings |
Chairman Emeritus and Senior Advisor | |
John J. Brennan | |
Chairman, 1996–2009 | |
Chief Executive Officer and President, 1996–2008 | |
Founder | |
John C. Bogle | |
Chairman and Chief Executive Officer, 1974–1996 |
P.O. Box 2600 | |
Valley Forge, PA 19482-2600 | |
Connect with Vanguard® > vanguard.com | |
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rights reserved. | |
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This material may be used in conjunction | |
with the offering of shares of any Vanguard | |
fund only if preceded or accompanied by | |
the fund’s current prospectus. | |
All comparative mutual fund data are from Lipper, a | |
Thomson Reuters Company, or Morningstar, Inc., unless | |
otherwise noted. | |
You can obtain a free copy of Vanguard’s proxy voting | |
guidelines by visiting vanguard.com/proxyreporting or by | |
calling Vanguard at 800-662-2739. The guidelines are | |
also available from the SEC’s website, sec.gov. In | |
addition, you may obtain a free report on how your fund | |
voted the proxies for securities it owned during the 12 | |
months ended June 30. To get the report, visit either | |
vanguard.com/proxyreporting or sec.gov. | |
You can review and copy information about your fund at | |
the SEC’s Public Reference Room in Washington, D.C. To | |
find out more about this public service, call the SEC at | |
202-551-8090. Information about your fund is also | |
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publicinfo@sec.gov or via regular mail addressed to the | |
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© 2018 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q1290 112018 |
Item 2: Code of Ethics. The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.
Item 3: Audit Committee Financial Expert. All members of the Audit Committee have been determined by the Registrant’s Board of Trustees to be Audit Committee Financial Experts and to be independent: JoAnn Heffernan Heisen, F. Joseph Loughrey, Mark Loughridge, Sarah Bloom Raskin, and Peter F. Volanakis.
Item 4: Principal Accountant Fees and Services.
(a) Audit Fees.
Audit Fees of the Registrant
Fiscal Year Ended September 30, 2018: $145,000
Fiscal Year Ended September 30, 2017: $153,000
Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group.
Fiscal Year Ended September 30, 2018: $9,734,277
Fiscal Year Ended September 30, 2017: $8,424,459
Includes fees billed in connection with audits of the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc. and Vanguard Marketing Corporation.
(b) Audit-Related Fees.
Fiscal Year Ended September 30, 2018: $5,581,336
Fiscal Year Ended September 30, 2017: $3,194,093
Includes fees billed in connection with assurance and related services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(c) Tax Fees.
Fiscal Year Ended September 30, 2018: $347,985
Fiscal Year Ended September 30, 2017: $274,313
Includes fees billed in connection with tax compliance, planning, and advice services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(d) All Other Fees.
Fiscal Year Ended September 30, 2018: $0
Fiscal Year Ended September 30, 2017: $0
Includes fees billed for services related to tax reported information provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(e) (1) Pre-Approval Policies. The policy of the Registrant’s Audit Committee is to consider and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit and non-audit services provided to: the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.
In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, the Chairman of the Audit Committee would be called on to consider and, if appropriate, pre-approve audit or permitted non-audit services in an amount sufficient to complete services through the next Audit Committee meeting, and to determine if such services would be consistent with maintaining the accountant’s independence. At the next scheduled Audit Committee meeting, services and fees would be presented to the Audit Committee for formal consideration, and, if appropriate, approval by the entire Audit Committee. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.
The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Vanguard complex, whether such services are provided to: the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., or other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant.
(2) No percentage of the principal accountant’s fees or services were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) For the most recent fiscal year, over 50% of the hours worked under the principal accountant’s engagement were not performed by persons other than full-time, permanent employees of the principal accountant.
(g) Aggregate Non-Audit Fees.
Fiscal Year Ended September 30, 2018: $347,985
Fiscal Year Ended September 30, 2017: $274,313
Includes fees billed for non-audit services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(h) For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services was consistent with maintaining the principal accountant’s independence.
Item 5: Audit Committee of Listed Registrants.
The Registrant is a listed issuer as defined in rule 10A-3 under the Securities Exchange Act of 1934 (“Exchange Act”). The Registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit committee members are: JoAnn Heffernan Heisen, F. Joseph Loughrey, Mark Loughridge, Sarah Bloom Raskin, and Peter F. Volanakis.
Item 6: Investments.
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
Common Stocks (96.3%)1 | ||
Australia (1.8%) | ||
Aristocrat Leisure Ltd. | 931,612 | 19,132 |
Qantas Airways Ltd. | 4,185,755 | 17,841 |
Orica Ltd. | 834,578 | 10,266 |
South32 Ltd. | 3,204,920 | 9,007 |
* Atlassian Corp. plc Class A | 91,221 | 8,770 |
BlueScope Steel Ltd. | 501,995 | 6,157 |
Cleanaway Waste Management Ltd. | 2,493,203 | 3,381 |
Coca-Cola Amatil Ltd. | 369,500 | 2,605 |
ALS Ltd. | 389,308 | 2,512 |
Alumina Ltd. | 1,179,434 | 2,361 |
QBE Insurance Group Ltd. | 272,685 | 2,190 |
Newcrest Mining Ltd. | 137,170 | 1,926 |
Brambles Ltd. | 231,163 | 1,821 |
GUD Holdings Ltd. | 169,877 | 1,775 |
carsales.com Ltd. | 157,222 | 1,643 |
BHP Billiton Ltd. | 60,210 | 1,500 |
DuluxGroup Ltd. | 254,008 | 1,408 |
Fairfax Media Ltd. | 1,910,973 | 1,137 |
Caltex Australia Ltd. | 50,213 | 1,085 |
Metcash Ltd. | 432,726 | 938 |
Cochlear Ltd. | 6,079 | 881 |
Domain Holdings Australia Ltd. | 281,365 | 710 |
IPH Ltd. | 162,810 | 709 |
Macquarie Group Ltd. | 6,711 | 610 |
GWA Group Ltd. | 256,643 | 579 |
Amcor Ltd. | 47,949 | 474 |
Asaleo Care Ltd. | 829,105 | 434 |
OZ Minerals Ltd. | 40,015 | 270 |
Sigma Healthcare Ltd. | 543,963 | 248 |
Flight Centre Travel Group Ltd. | 1,701 | 65 |
* OM Holdings Ltd. | 32,945 | 36 |
Adairs Ltd. | 17,378 | 33 |
Grange Resources Ltd. | 165,183 | 27 |
* Imdex Ltd. | 14,789 | 13 |
102,544 | ||
Austria (0.2%) | ||
OMV AG | 137,691 | 7,724 |
Erste Group Bank AG | 44,913 | 1,865 |
Raiffeisen Bank International AG | 52,442 | 1,509 |
Wienerberger AG | 40,599 | 1,015 |
Oesterreichische Post AG | 12,505 | 523 |
ANDRITZ AG | 6,455 | 376 |
EVN AG | 1,471 | 29 |
13,041 | ||
Belgium (0.1%) | ||
UCB SA | 23,016 | 2,068 |
Anheuser-Busch InBev SA | 23,015 | 2,015 |
4,083 | ||
Brazil (1.1%) | ||
Banco Bradesco SA Preference Shares | 3,200,667 | 22,722 |
B3 SA - Brasil Bolsa Balcao | 1,505,000 | 8,720 |
Petroleo Brasileiro SA Preference Shares | 1,207,500 | 6,306 |
Porto Seguro SA | 228,191 | 3,350 |
Petroleo Brasileiro SA ADR | 224,696 | 2,712 |
Alpargatas SA Preference Shares | 853,482 | 2,589 |
Natura Cosmeticos SA | 351,626 | 2,471 |
IRB Brasil Resseguros S/A | 149,100 | 2,453 |
TOTVS SA | 328,300 | 2,040 |
MRV Engenharia e Participacoes SA | 577,500 | 1,757 |
Itausa - Investimentos Itau SA Preference Shares | 626,723 | 1,567 |
Cosan Ltd. | 176,033 | 1,185 |
1
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
QGEP Participacoes SA | 327,056 | 1,073 |
Cosan SA | 123,700 | 993 |
Sul America SA | 141,400 | 910 |
* Magnesita Refratarios SA | 46,000 | 809 |
Embraer SA | 124,167 | 610 |
SLC Agricola SA | 36,900 | 557 |
EDP - Energias do Brasil SA | 120,800 | 383 |
* Construtora Tenda SA | 45,395 | 298 |
* LPS Brasil Consultoria de Imoveis SA | 377,000 | 267 |
Tupy SA | 52,900 | 266 |
* B2W Cia Digital | 38,114 | 261 |
Transmissora Alianca de Energia Eletrica SA | 52,300 | 259 |
FII BTG Pactual Corporate Office Fund | 8,514 | 205 |
Banco do Estado do Rio Grande do Sul SA Preference Shares | 48,200 | 179 |
* Eneva SA | 23,700 | 78 |
Randon Participacoes SA Preference Shares | 45,900 | 71 |
Cia Ferro Ligas da Bahia - Ferbasa Preference Shares | 11,300 | 54 |
TPI - Triunfo Participacoes e Investimentos SA | 114,000 | 35 |
Trisul SA | 12,400 | 7 |
65,187 | ||
Canada (4.5%) | ||
Toronto-Dominion Bank | 469,338 | 28,520 |
Bank of Montreal | 335,600 | 27,682 |
Fairfax Financial Holdings Ltd. (Toronto Shares) | 46,430 | 25,225 |
^ Canadian Imperial Bank of Commerce | 261,001 | 24,456 |
Royal Bank of Canada | 223,631 | 17,927 |
Fairfax Financial Holdings Ltd. | 27,770 | 15,080 |
^ Barrick Gold Corp. | 1,037,889 | 11,500 |
Ritchie Bros Auctioneers Inc. (New York Shares) | 301,154 | 10,881 |
Canadian Natural Resources Ltd. | 303,239 | 9,907 |
Brookfield Asset Management Inc. Class A | 204,273 | 9,092 |
Constellation Software Inc. | 12,000 | 8,825 |
* Shopify Inc. | 50,606 | 8,323 |
Loblaw Cos. Ltd. | 154,944 | 7,960 |
^ West Fraser Timber Co. Ltd. | 111,029 | 6,319 |
Rogers Communications Inc. Class B | 115,233 | 5,926 |
Gildan Activewear Inc. | 147,288 | 4,481 |
Ritchie Bros Auctioneers Inc. | 124,145 | 4,480 |
BRP Inc. | 87,934 | 4,125 |
* Canfor Corp. | 180,669 | 3,368 |
^ PrairieSky Royalty Ltd. | 122,942 | 2,160 |
Parkland Fuel Corp. | 59,500 | 2,000 |
* Great Canadian Gaming Corp. | 55,396 | 1,986 |
^ Norbord Inc. | 38,778 | 1,285 |
Maple Leaf Foods Inc. | 50,100 | 1,205 |
Western Forest Products Inc. | 696,500 | 1,138 |
* Interfor Corp. | 74,500 | 1,103 |
Canaccord Genuity Group Inc. | 193,200 | 1,032 |
Linamar Corp. | 21,400 | 986 |
Boyd Group Income Fund | 9,500 | 927 |
Canfor Pulp Products Inc. | 48,500 | 918 |
Aecon Group Inc. | 71,600 | 900 |
Colliers International Group Inc. | 9,393 | 728 |
Enghouse Systems Ltd. | 11,000 | 699 |
Empire Co. Ltd. | 37,000 | 674 |
Cott Corp. | 40,700 | 657 |
Cogeco Inc. | 14,162 | 639 |
* ATS Automation Tooling Systems Inc. | 33,500 | 623 |
Martinrea International Inc. | 54,600 | 558 |
Boardwalk REIT | 13,600 | 528 |
Quebecor Inc. Class B | 22,400 | 449 |
North American Construction Group Ltd. | 42,466 | 416 |
Morguard North American Residential REIT | 30,100 | 373 |
Winpak Ltd. | 10,100 | 373 |
2
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
* Viemed Healthcare Inc. | 67,800 | 352 |
Husky Energy Inc. | 18,400 | 323 |
AGF Management Ltd. Class B | 57,886 | 274 |
Cascades Inc. | 26,400 | 258 |
* International Petroleum Corp. | 36,941 | 241 |
* Transat AT Inc. Class B | 33,500 | 205 |
Wajax Corp. | 9,500 | 192 |
* Aritzia Inc. | 12,100 | 160 |
Rocky Mountain Dealerships Inc. | 19,200 | 152 |
* Taseko Mines Ltd. | 90,528 | 72 |
* CGI Group Inc. Class A | 1,000 | 64 |
* Hardwoods Distribution Inc. | 3,800 | 50 |
* Trisura Group Ltd. | 2,300 | 49 |
Stuart Olson Inc. | 10,500 | 46 |
Exco Technologies Ltd. | 6,300 | 46 |
Polaris Infrastructure Inc. | 3,800 | 34 |
* Conifex Timber Inc. | 8,100 | 26 |
Reitmans Canada Ltd. Class A | 7,400 | 24 |
259,002 | ||
Chile (0.1%) | ||
Quinenco SA | 929,953 | 2,827 |
Cia Cervecerias Unidas SA | 162,682 | 2,268 |
Enaex SA | 60,161 | 833 |
* Cia Sud Americana de Vapores SA | 25,726,522 | 821 |
Cia Cervecerias Unidas SA ADR | 12,912 | 360 |
7,109 | ||
China (4.8%) | ||
* Alibaba Group Holding Ltd. ADR | 232,688 | 38,338 |
Ping An Insurance Group Co. of China Ltd. | 2,912,500 | 29,504 |
* Baidu Inc. ADR | 114,013 | 26,072 |
PetroChina Co. Ltd. | 27,582,000 | 22,325 |
CNOOC Ltd. | 10,600,000 | 20,989 |
China Petroleum & Chemical Corp. | 20,144,000 | 20,240 |
Industrial & Commercial Bank of China Ltd. | 19,956,000 | 14,570 |
* 58.com Inc. ADR | 193,807 | 14,264 |
Autohome Inc. ADR | 167,708 | 12,982 |
* Ctrip.com International Ltd. ADR | 332,016 | 12,341 |
* Meituan Dianping Class B | 1,067,500 | 9,375 |
Agricultural Bank of China Ltd. | 18,804,000 | 9,222 |
NetEase Inc. ADR | 27,353 | 6,243 |
Tsingtao Brewery Co. Ltd. | 1,270,000 | 5,957 |
Kingboard Holdings Ltd. | 1,229,000 | 4,001 |
Want Want China Holdings Ltd. | 4,189,557 | 3,524 |
Kunlun Energy Co. Ltd. | 2,886,000 | 3,359 |
China Shenhua Energy Co. Ltd. | 1,385,500 | 3,155 |
* China Biologic Products Holdings Inc. | 33,742 | 2,699 |
China Mengniu Dairy Co. Ltd. | 674,000 | 2,241 |
Tingyi Cayman Islands Holding Corp. | 1,199,608 | 2,203 |
Yum China Holdings Inc. | 59,886 | 2,103 |
Hengan International Group Co. Ltd. | 224,415 | 2,062 |
* Li Ning Co. Ltd. | 2,011,833 | 1,904 |
China Resources Cement Holdings Ltd. | 1,434,000 | 1,668 |
China Shineway Pharmaceutical Group Ltd. | 537,000 | 733 |
Ajisen China Holdings Ltd. | 1,492,000 | 614 |
Road King Infrastructure Ltd. | 324,000 | 555 |
Angang Steel Co. Ltd. | 512,000 | 457 |
Sinotruk Hong Kong Ltd. | 184,500 | 403 |
China Telecom Corp. Ltd. ADR | 6,955 | 344 |
Valuetronics Holdings Ltd. | 516,000 | 268 |
Shougang Fushan Resources Group Ltd. | 1,154,000 | 256 |
Poly Property Group Co. Ltd. | 643,000 | 226 |
China Yuchai International Ltd. | 10,279 | 177 |
3
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
Dah Chong Hong Holdings Ltd. | 369,000 | 143 |
Asia Cement China Holdings Corp. | 115,000 | 118 |
China Sanjiang Fine Chemicals Co. Ltd. | 395,000 | 106 |
TCL Electronics Holdings Ltd. | 210,000 | 100 |
West China Cement Ltd. | 452,000 | 85 |
COSCO SHIPPING International Hong Kong Co. Ltd. | 226,000 | 82 |
Overseas Chinese Town Asia Holdings Ltd. | 148,000 | 51 |
Cabbeen Fashion Ltd. | 137,000 | 43 |
HKC Holdings Ltd. | 51,000 | 42 |
China Lilang Ltd. | 42,000 | 39 |
Henan Jinma Energy Co. Ltd. | 57,000 | 33 |
* Shanghai Prime Machinery Co. Ltd. | 136,000 | 20 |
276,236 | ||
Colombia (0.1%) | ||
Ecopetrol SA ADR | 119,271 | 3,212 |
Bancolombia SA ADR | 54,732 | 2,283 |
Grupo Aval Acciones y Valores Preference Shares | 1,830,372 | 720 |
Almacenes Exito SA | 70,238 | 346 |
6,561 | ||
Czech Republic (0.0%) | ||
Komercni banka as | 33,735 | 1,380 |
Denmark (1.0%) | ||
H Lundbeck A/S | 279,071 | 17,227 |
AP Moller - Maersk A/S Class B | 7,818 | 10,983 |
* Genmab A/S | 44,383 | 6,971 |
Novozymes A/S | 94,341 | 5,175 |
Coloplast A/S Class B | 41,765 | 4,267 |
GN Store Nord A/S | 71,465 | 3,479 |
Vestas Wind Systems A/S | 45,183 | 3,052 |
Novo Nordisk A/S Class B | 55,985 | 2,635 |
* William Demant Holding A/S | 67,446 | 2,532 |
Carlsberg A/S Class B | 13,734 | 1,647 |
Royal Unibrew A/S | 8,783 | 723 |
DSV A/S | 2,899 | 263 |
Danske Bank A/S | 9,343 | 245 |
* Ringkjoebing Landbobank A/S | 4,158 | 220 |
Spar Nord Bank A/S | 19,998 | 185 |
Rockwool International A/S Class B | 395 | 169 |
Per Aarsleff Holding A/S | 3,101 | 117 |
Columbus A/S | 11,386 | 29 |
59,919 | ||
Finland (0.7%) | ||
Neste Oyj | 323,657 | 26,678 |
Tikkurila Oyj | 273,780 | 4,287 |
Sampo Oyj Class A | 69,264 | 3,584 |
Wartsila OYJ Abp | 43,976 | 856 |
Nokian Renkaat Oyj | 19,424 | 795 |
Amer Sports Oyj | 18,528 | 757 |
Orion Oyj Class B | 12,087 | 457 |
Ramirent Oyj | 54,118 | 437 |
Finnair Oyj | 34,124 | 284 |
DNA Oyj | 12,093 | 270 |
Kone Oyj Class B | 3,613 | 193 |
Ahlstrom-Munksjo Oyj | 3,137 | 60 |
38,658 | ||
France (1.8%) | ||
Pernod Ricard SA | 122,063 | 20,020 |
Bureau Veritas SA | 664,682 | 17,164 |
Peugeot SA | 594,426 | 16,035 |
Legrand SA | 137,848 | 10,051 |
TOTAL SA | 102,516 | 6,666 |
L'Oreal SA | 22,751 | 5,485 |
Nexity SA | 87,040 | 4,811 |
4
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
Airbus SE | 21,530 | 2,703 |
Eurofins Scientific SE | 3,865 | 2,199 |
BNP Paribas SA | 31,265 | 1,915 |
^ STMicroelectronics NV ADR | 78,098 | 1,432 |
Edenred | 35,322 | 1,346 |
ArcelorMittal | 37,256 | 1,157 |
Thales SA | 8,089 | 1,149 |
Getlink | 85,067 | 1,087 |
AXA SA | 40,105 | 1,075 |
STMicroelectronics NV | 56,003 | 1,025 |
Teleperformance | 4,796 | 905 |
Eramet | 6,818 | 720 |
JCDecaux SA | 14,902 | 545 |
Elis SA | 22,458 | 529 |
Kering SA | 929 | 498 |
Ipsen SA | 2,633 | 443 |
Neopost SA | 13,276 | 403 |
Elis SA (London Shares) | 14,337 | 339 |
L'Occitane International SA | 186,194 | 334 |
Vicat SA | 4,810 | 293 |
Imerys SA | 3,796 | 280 |
LVMH Moet Hennessy Louis Vuitton SE | 787 | 278 |
Kaufman & Broad SA | 5,573 | 262 |
Hermes International | 290 | 192 |
* Ubisoft Entertainment SA | 798 | 86 |
Manitou BF SA | 2,005 | 74 |
Savencia SA | 845 | 64 |
* Cegedim SA | 1,368 | 44 |
* Stallergenes Greer plc | 1,088 | 39 |
AST Groupe SA | 2,608 | 33 |
Fountaine Pajot SA | 178 | 29 |
Voyageurs du Monde | 176 | 28 |
GL Events | 1,094 | 25 |
* GL Events Rights Exp. 10/08/2018 | 1,094 | 1 |
101,764 | ||
Germany (2.3%) | ||
SAP SE | 320,679 | 39,432 |
Deutsche Lufthansa AG | 993,029 | 24,373 |
Deutsche Boerse AG | 105,744 | 14,139 |
Infineon Technologies AG | 397,784 | 9,052 |
Henkel AG & Co. KGaA Preference Shares | 56,588 | 6,635 |
Henkel AG & Co. KGaA | 53,646 | 5,691 |
Software AG | 96,306 | 4,385 |
Fresenius Medical Care AG & Co. KGaA | 38,157 | 3,920 |
Kloeckner & Co. SE | 264,120 | 3,050 |
Brenntag AG | 36,914 | 2,276 |
BASF SE | 23,890 | 2,120 |
adidas AG | 8,385 | 2,051 |
Volkswagen AG Preference Shares | 9,458 | 1,661 |
Bayerische Motoren Werke AG | 16,980 | 1,530 |
Deutsche Telekom AG | 93,838 | 1,511 |
Axel Springer SE | 22,050 | 1,482 |
Stabilus SA | 17,224 | 1,421 |
Symrise AG | 11,665 | 1,064 |
CTS Eventim AG & Co. KGaA | 23,637 | 1,060 |
MTU Aero Engines AG | 2,449 | 552 |
Wirecard AG | 2,252 | 487 |
TUI AG | 25,148 | 483 |
Hannover Rueck SE | 3,242 | 458 |
Bechtle AG | 4,424 | 449 |
Gerresheimer AG | 5,257 | 444 |
GEA Group AG | 6,306 | 224 |
Siltronic AG | 1,109 | 136 |
* zooplus AG | 723 | 125 |
5
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
Amadeus Fire AG | 1,093 | 124 | |
HeidelbergCement AG | 1,449 | 113 | |
Bauer AG | 2,103 | 40 | |
AT&S Austria Technologie & Systemtechnik AG | 1,613 | 37 | |
* | Tom Tailor Holding SE | 6,162 | 29 |
EDAG Engineering Group AG | 1,250 | 25 | |
Sto AG Preference Shares | 217 | 23 | |
CropEnergies AG | 3,676 | 20 | |
comdirect bank AG | 1,177 | 15 | |
130,637 | |||
Greece (0.1%) | |||
Grivalia Properties REIC AE | 290,691 | 2,689 | |
Fourlis Holdings SA | 168,469 | 1,013 | |
JUMBO SA | 64,346 | 956 | |
Motor Oil Hellas Corinth Refineries SA | 35,911 | 939 | |
* | Alpha Bank AE | 284,993 | 410 |
Hellenic Petroleum SA | 19,568 | 171 | |
Aegean Airlines SA | 5,655 | 50 | |
Intracom Holdings SA | 8,616 | 11 | |
6,239 | |||
Hong Kong (1.4%) | |||
AIA Group Ltd. | 4,398,400 | 39,220 | |
Jardine Matheson Holdings Ltd. | 251,600 | 15,785 | |
Sands China Ltd. | 1,490,400 | 6,712 | |
CK Hutchison Holdings Ltd. | 466,800 | 5,373 | |
HSBC Holdings plc | 495,600 | 4,335 | |
Stella International Holdings Ltd. | 1,379,173 | 1,227 | |
* | Esprit Holdings Ltd. | 5,084,714 | 1,221 |
Television Broadcasts Ltd. | 404,600 | 1,149 | |
CLP Holdings Ltd. | 87,500 | 1,025 | |
First Pacific Co. Ltd. | 2,047,250 | 1,009 | |
Hongkong & Shanghai Hotels Ltd. | 683,700 | 958 | |
Dairy Farm International Holdings Ltd. | 62,000 | 558 | |
Goodbaby International Holdings Ltd. | 949,000 | 380 | |
SmarTone Telecommunications Holdings Ltd. | 209,194 | 279 | |
Hysan Development Co. Ltd. | 39,000 | 197 | |
K Wah International Holdings Ltd. | 334,000 | 158 | |
New World Development Co. Ltd. | 76,000 | 103 | |
Oriental Watch Holdings | 356,000 | 83 | |
PC Partner Group Ltd. | 162,000 | 80 | |
Dah Sing Banking Group Ltd. | 29,600 | 59 | |
Texwinca Holdings Ltd. | 136,823 | 54 | |
Guoco Group Ltd. | 3,000 | 50 | |
Fountain SET Holdings Ltd. | 252,000 | 34 | |
Wing Tai Properties Ltd. | 38,000 | 28 | |
Get Nice Holdings Ltd. | 546,000 | 17 | |
* | Orange Sky Golden Harvest Entertainment Holdings Ltd. | 395,000 | 16 |
80,110 | |||
Hungary (0.0%) | |||
MOL Hungarian Oil & Gas plc | 244,907 | 2,638 | |
India (1.2%) | |||
ICICI Bank Ltd. | 6,618,394 | 27,936 | |
Housing Development Finance Corp. Ltd. | 907,733 | 21,972 | |
Oil & Natural Gas Corp. Ltd. | 2,316,140 | 5,665 | |
* | Axis Bank Ltd. | 420,952 | 3,563 |
Bharti Airtel Ltd. | 254,772 | 1,190 | |
JK Paper Ltd. | 549,552 | 1,092 | |
Shriram Transport Finance Co. Ltd. | 62,097 | 986 | |
* | Vodafone Idea Ltd. | 1,843,681 | 981 |
Bharat Petroleum Corp. Ltd. | 181,492 | 937 | |
Mphasis Ltd. | 45,900 | 743 | |
West Coast Paper Mills Ltd. | 92,356 | 416 | |
Mindtree Ltd. | 20,753 | 296 |
6
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
Persistent Systems Ltd. | 21,788 | 237 | |
HIL Ltd. | 6,611 | 190 | |
* | WNS Holdings Ltd. ADR | 3,284 | 167 |
* | Zensar Technologies Ltd. | 18,475 | 72 |
Sandur Manganese & Iron Ores Ltd. | 4,531 | 67 | |
* | National Fertilizers Ltd. | 121,363 | 64 |
Infinite Computer Solutions India Ltd. | 8,872 | 57 | |
Andhra Sugars Ltd. | 10,565 | 48 | |
* | Vaibhav Global Ltd. | 5,700 | 47 |
DCM Shriram Ltd. | 5,139 | 31 | |
66,757 | |||
Indonesia (0.1%) | |||
United Tractors Tbk PT | 545,900 | 1,209 | |
Harum Energy Tbk PT | 5,361,500 | 863 | |
Media Nusantara Citra Tbk PT | 14,400,850 | 777 | |
Indo Tambangraya Megah Tbk PT | 331,000 | 574 | |
* | Energi Mega Persada Tbk PT | 37,526,300 | 330 |
Adaro Energy Tbk PT | 1,774,900 | 218 | |
Bank CIMB Niaga Tbk PT | 1,908,400 | 119 | |
* | Indo-Rama Synthetics Tbk PT | 115,000 | 42 |
4,132 | |||
Ireland (1.2%) | |||
CRH plc | 827,632 | 27,085 | |
* | Ryanair Holdings plc ADR | 200,974 | 19,302 |
Bank of Ireland Group plc | 2,252,087 | 17,222 | |
* | ICON plc | 17,162 | 2,639 |
Paddy Power Betfair plc (London Shares) | 12,061 | 1,019 | |
Irish Continental Group plc | 165,753 | 1,002 | |
Paddy Power Betfair plc | 7,403 | 631 | |
*,§ | Irish Bank Resolution Corp. Ltd. | 122,273 | — |
68,900 | |||
Israel (0.5%) | |||
* | Check Point Software Technologies Ltd. | 96,739 | 11,383 |
Bank Leumi Le-Israel BM | 1,316,674 | 8,677 | |
Bank Hapoalim BM | 970,143 | 7,104 | |
First International Bank Of Israel Ltd. | 22,888 | 517 | |
* | Radware Ltd. | 17,814 | 472 |
Oil Refineries Ltd. | 687,143 | 341 | |
Paz Oil Co. Ltd. | 1,421 | 222 | |
* | Nice Ltd. ADR | 1,922 | 220 |
Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. | 1,730 | 82 | |
Fox Wizel Ltd. | 2,394 | 49 | |
* | Ceragon Networks Ltd. | 9,732 | 33 |
* | Amir Marketing & Investments in Agriculture Ltd. | 2,900 | 20 |
29,120 | |||
Italy (0.7%) | |||
* | Fiat Chrysler Automobiles NV | 1,284,392 | 22,463 |
CNH Industrial NV | 216,187 | 2,594 | |
Luxottica Group SPA ADR | 37,918 | 2,582 | |
Eni SPA | 130,832 | 2,466 | |
* | Saipem SPA | 299,022 | 1,837 |
ERG SPA | 84,083 | 1,711 | |
UniCredit SPA | 110,025 | 1,651 | |
Piaggio & C SPA | 570,337 | 1,302 | |
EXOR NV | 18,925 | 1,263 | |
Davide Campari-Milano SPA | 97,959 | 834 | |
Maire Tecnimont SPA | 167,995 | 754 | |
Luxottica Group SPA | 10,514 | 713 | |
Iren SPA | 241,831 | 593 | |
Saras SPA | 269,839 | 577 | |
Societa Iniziative Autostradali e Servizi SPA | 29,438 | 435 | |
Intesa Sanpaolo SPA (Registered) | 113,928 | 290 | |
Danieli & C Officine Meccaniche SPA | 12,841 | 231 |
7
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
Hera SPA | 53,425 | 166 | |
* | Fiera Milano SPA | 29,726 | 150 |
* | Arnoldo Mondadori Editore SPA | 78,340 | 136 |
Falck Renewables SPA | 41,576 | 89 | |
Reno de Medici SPA | 60,029 | 67 | |
* | Aeffe SPA | 17,253 | 58 |
Banca Finnat Euramerica SPA | 59,070 | 22 | |
42,984 | |||
Japan (6.5%) | |||
MS&AD Insurance Group Holdings Inc. | 1,029,200 | 34,379 | |
Sumitomo Mitsui Trust Holdings Inc. | 510,100 | 20,989 | |
CyberAgent Inc. | 354,600 | 18,871 | |
Olympus Corp. | 464,600 | 18,129 | |
Secom Co. Ltd. | 185,700 | 15,133 | |
SMC Corp. | 46,300 | 14,819 | |
Daito Trust Construction Co. Ltd. | 114,900 | 14,807 | |
Fujitsu Ltd. | 205,400 | 14,633 | |
Advantest Corp. | 631,500 | 13,347 | |
Tokio Marine Holdings Inc. | 216,100 | 10,728 | |
Kao Corp. | 132,100 | 10,671 | |
Persol Holdings Co. Ltd. | 445,300 | 10,451 | |
Toyota Motor Corp. | 159,600 | 9,944 | |
Rohm Co. Ltd. | 131,700 | 9,635 | |
Sompo Holdings Inc. | 212,200 | 9,042 | |
Kyocera Corp. | 147,400 | 8,847 | |
KDDI Corp. | 297,800 | 8,215 | |
Bridgestone Corp. | 187,000 | 7,067 | |
Nihon Unisys Ltd. | 268,600 | 6,928 | |
*,^ | LINE Corp. | 163,700 | 6,897 |
Kansai Paint Co. Ltd. | 354,800 | 6,539 | |
Nippon Telegraph & Telephone Corp. | 81,500 | 3,678 | |
Sohgo Security Services Co. Ltd. | 81,000 | 3,559 | |
USS Co. Ltd. | 182,000 | 3,379 | |
Sumitomo Mitsui Financial Group Inc. | 76,600 | 3,083 | |
Hitachi Ltd. | 84,000 | 2,855 | |
TIS Inc. | 51,400 | 2,569 | |
Seven & i Holdings Co. Ltd. | 57,600 | 2,568 | |
Dai-ichi Life Holdings Inc. | 122,500 | 2,554 | |
West Japan Railway Co. | 32,700 | 2,280 | |
East Japan Railway Co. | 23,800 | 2,211 | |
Konami Holdings Corp. | 54,000 | 2,114 | |
Japan Post Holdings Co. Ltd. | 172,900 | 2,058 | |
Kirin Holdings Co. Ltd. | 71,600 | 1,836 | |
NTT Data Corp. | 117,400 | 1,625 | |
FUJIFILM Holdings Corp. | 36,000 | 1,620 | |
Resona Holdings Inc. | 277,700 | 1,559 | |
Bandai Namco Holdings Inc. | 36,150 | 1,404 | |
Fuji Media Holdings Inc. | 76,300 | 1,358 | |
Nissan Chemical Corp. | 24,600 | 1,299 | |
EDION Corp. | 115,700 | 1,294 | |
Mitsubishi Corp. | 39,000 | 1,201 | |
Mitsubishi Estate Co. Ltd. | 66,700 | 1,133 | |
Marui Group Co. Ltd. | 43,400 | 1,071 | |
Mixi Inc. | 44,500 | 1,067 | |
Sekisui Chemical Co. Ltd. | 57,500 | 1,060 | |
K's Holdings Corp. | 84,000 | 1,016 | |
NET One Systems Co. Ltd. | 42,200 | 1,013 | |
Alfresa Holdings Corp. | 37,800 | 1,013 | |
Round One Corp. | 73,700 | 976 | |
Obayashi Corp. | 102,200 | 968 | |
Maeda Corp. | 72,400 | 956 | |
TDK Corp. | 8,700 | 948 | |
Mizuho Financial Group Inc. | 534,700 | 932 | |
Inpex Corp. | 73,100 | 913 |
8
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
SCSK Corp. | 18,900 | 893 |
Omron Corp. | 21,100 | 892 |
NTT Urban Development Corp. | 70,300 | 806 |
AEON Financial Service Co. Ltd. | 37,800 | 783 |
Toray Industries Inc. | 103,900 | 780 |
Meitec Corp. | 16,200 | 779 |
ITOCHU Corp. | 42,500 | 778 |
Ryohin Keikaku Co. Ltd. | 2,600 | 773 |
Subaru Corp. | 24,700 | 757 |
Mitsubishi Heavy Industries Ltd. | 19,200 | 741 |
Casio Computer Co. Ltd. | 43,900 | 718 |
Yamato Holdings Co. Ltd. | 23,100 | 709 |
Daifuku Co. Ltd. | 13,900 | 708 |
Tohoku Electric Power Co. Inc. | 52,000 | 707 |
Tokyo Gas Co. Ltd. | 28,700 | 706 |
Nippon Television Holdings Inc. | 40,270 | 698 |
Daiwa House Industry Co. Ltd. | 23,100 | 685 |
Toyo Suisan Kaisha Ltd. | 17,600 | 683 |
Obic Co. Ltd. | 7,200 | 681 |
Nomura Holdings Inc. | 135,600 | 647 |
Fukuoka Financial Group Inc. | 23,400 | 644 |
LIXIL Group Corp. | 33,100 | 637 |
Matsumotokiyoshi Holdings Co. Ltd. | 14,900 | 611 |
Suntory Beverage & Food Ltd. | 14,300 | 606 |
Nomura Co. Ltd. | 28,900 | 597 |
Bic Camera Inc. | 42,800 | 595 |
Sumitomo Electric Industries Ltd. | 37,300 | 585 |
NEC Corp. | 21,100 | 583 |
Sawai Pharmaceutical Co. Ltd. | 10,800 | 583 |
Isetan Mitsukoshi Holdings Ltd. | 45,700 | 561 |
TechnoPro Holdings Inc. | 9,000 | 559 |
Otsuka Holdings Co. Ltd. | 10,900 | 550 |
Toyo Seikan Group Holdings Ltd. | 26,200 | 544 |
Shimizu Corp. | 59,300 | 541 |
Yamada Denki Co. Ltd. | 106,000 | 536 |
* Renesas Electronics Corp. | 81,900 | 513 |
SHO-BOND Holdings Co. Ltd. | 6,300 | 509 |
Hoshizaki Corp. | 4,800 | 497 |
Koshidaka Holdings Co. Ltd. | 42,000 | 482 |
Ushio Inc. | 35,100 | 481 |
Japan Airlines Co. Ltd. | 12,800 | 460 |
Showa Corp. | 29,300 | 450 |
Senko Group Holdings Co. Ltd. | 51,700 | 430 |
Capcom Co. Ltd. | 16,300 | 413 |
Tomy Co. Ltd. | 38,500 | 396 |
Toyota Industries Corp. | 6,600 | 391 |
Azbil Corp. | 17,800 | 387 |
Gunze Ltd. | 7,600 | 383 |
Kanematsu Corp. | 24,400 | 367 |
Geo Holdings Corp. | 23,800 | 360 |
T-Gaia Corp. | 13,400 | 350 |
Sumitomo Dainippon Pharma Co. Ltd. | 14,700 | 338 |
Kawai Musical Instruments Manufacturing Co. Ltd. | 7,000 | 325 |
Sega Sammy Holdings Inc. | 21,500 | 317 |
Mitsubishi Logistics Corp. | 12,100 | 313 |
Nippon Suisan Kaisha Ltd. | 47,000 | 306 |
Kose Corp. | 1,600 | 305 |
Tokyo Electron Ltd. | 2,200 | 303 |
ValueCommerce Co. Ltd. | 13,300 | 290 |
Mandom Corp. | 9,100 | 289 |
Nojima Corp. | 13,100 | 287 |
Noritz Corp. | 17,200 | 273 |
Duskin Co. Ltd. | 11,000 | 268 |
Goldcrest Co. Ltd. | 15,400 | 251 |
9
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
SoftBank Group Corp. | 2,500 | 250 |
Hirata Corp. | 3,400 | 245 |
Information Development Co. | 15,900 | 242 |
Aeon Delight Co. Ltd. | 6,600 | 241 |
Tamron Co. Ltd. | 11,100 | 236 |
Kubota Corp. | 13,900 | 236 |
Iwatani Corp. | 6,600 | 235 |
Toyo Tanso Co. Ltd. | 7,900 | 234 |
Onward Holdings Co. Ltd. | 32,700 | 219 |
Happinet Corp. | 12,000 | 211 |
* Tokyo Electric Power Co. Holdings Inc. | 42,900 | 211 |
Arata Corp. | 4,100 | 206 |
Kurabo Industries Ltd. | 7,200 | 195 |
Tokyu Construction Co. Ltd. | 20,100 | 194 |
Pasona Group Inc. | 12,500 | 185 |
Keihin Corp. | 8,900 | 184 |
Avant Corp. | 11,500 | 173 |
Menicon Co. Ltd. | 6,500 | 159 |
ASAHI YUKIZAI Corp. | 6,500 | 155 |
Shinko Electric Industries Co. Ltd. | 17,000 | 143 |
Internet Initiative Japan Inc. | 6,800 | 138 |
Taisho Pharmaceutical Holdings Co. Ltd. | 1,100 | 135 |
Shimamura Co. Ltd. | 1,400 | 133 |
Krosaki Harima Corp. | 1,700 | 131 |
Tomoe Engineering Co. Ltd. | 5,900 | 120 |
Sakai Chemical Industry Co. Ltd. | 4,700 | 116 |
Zenrin Co. Ltd. | 3,500 | 108 |
Shizuoka Gas Co. Ltd. | 11,900 | 105 |
SKY Perfect JSAT Holdings Inc. | 21,800 | 105 |
Maruwa Co. Ltd. | 1,500 | 100 |
NSD Co. Ltd. | 4,400 | 98 |
Kansai Electric Power Co. Inc. | 6,200 | 94 |
Mitsubishi Research Institute Inc. | 2,400 | 93 |
YAMABIKO Corp. | 7,000 | 87 |
Central Sports Co. Ltd. | 2,300 | 86 |
Feed One Co. Ltd. | 44,800 | 84 |
Alpen Co. Ltd. | 4,300 | 76 |
Jalux Inc. | 3,000 | 75 |
Mochida Pharmaceutical Co. Ltd. | 900 | 74 |
Kohnan Shoji Co. Ltd. | 2,900 | 73 |
Komatsu Wall Industry Co. Ltd. | 3,500 | 68 |
DTS Corp. | 1,700 | 68 |
Imasen Electric Industrial | 6,400 | 67 |
Nitto Kogyo Corp. | 3,600 | 67 |
Airport Facilities Co. Ltd. | 11,500 | 66 |
Kura Corp. | 1,000 | 65 |
Nikon Corp. | 3,300 | 62 |
* Ishihara Sangyo Kaisha Ltd. | 4,000 | 61 |
Furuno Electric Co. Ltd. | 4,500 | 59 |
Koatsu Gas Kogyo Co. Ltd. | 6,900 | 59 |
* Grandy House Corp. | 13,600 | 58 |
Seiko Holdings Corp. | 2,000 | 56 |
Aeon Fantasy Co. Ltd. | 1,500 | 56 |
Daito Pharmaceutical Co. Ltd. | 1,800 | 56 |
Elematec Corp. | 2,200 | 52 |
Mori Trust Sogo Reit Inc. | 36 | 51 |
Cota Co. Ltd. | 3,520 | 51 |
Mikuni Corp. | 7,300 | 49 |
Asahi Diamond Industrial Co. Ltd. | 6,900 | 49 |
Yuken Kogyo Co. Ltd. | 2,300 | 49 |
Yamaya Corp. | 1,800 | 48 |
Wakachiku Construction Co. Ltd. | 3,300 | 48 |
Nihon Eslead Corp. | 3,300 | 46 |
ASKA Pharmaceutical Co. Ltd. | 3,300 | 45 |
10
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
Atsugi Co. Ltd. | 4,400 | 45 |
Nippon Chemiphar Co. Ltd. | 1,100 | 45 |
Ichiken Co. Ltd. | 2,200 | 44 |
Sinanen Holdings Co. Ltd. | 1,700 | 44 |
Sankyo Tateyama Inc. | 3,400 | 43 |
Shofu Inc. | 3,500 | 42 |
Ohsho Food Service Corp. | 600 | 42 |
Maruzen Showa Unyu Co. Ltd. | 1,600 | 41 |
NJS Co. Ltd. | 2,500 | 39 |
Proto Corp. | 2,700 | 38 |
Maruka Machinery Co. Ltd. | 2,000 | 38 |
Gurunavi Inc. | 4,600 | 37 |
Valqua Ltd. | 1,300 | 37 |
Hamakyorex Co. Ltd. | 1,000 | 36 |
NuFlare Technology Inc. | 700 | 36 |
Tachibana Eletech Co. Ltd. | 2,100 | 36 |
Rion Co. Ltd. | 1,600 | 35 |
Tigers Polymer Corp. | 5,100 | 35 |
JK Holdings Co. Ltd. | 4,700 | 34 |
Lonseal Corp. | 1,900 | 34 |
Endo Lighting Corp. | 4,400 | 34 |
Kyosan Electric Manufacturing Co. Ltd. | 6,000 | 32 |
Taiko Bank Ltd. | 1,500 | 30 |
Minori Solutions Co. Ltd. | 2,200 | 29 |
Amiyaki Tei Co. Ltd. | 700 | 28 |
Yushiro Chemical Industry Co. Ltd. | 1,900 | 26 |
JVC Kenwood Corp. | 9,200 | 26 |
Sawada Holdings Co. Ltd. | 2,600 | 25 |
Natoco Co. Ltd. | 2,100 | 22 |
San Holdings Inc. | 900 | 22 |
Ainavo Holdings Co. Ltd. | 2,500 | 22 |
Yaizu Suisankagaku Industry Co. Ltd. | 2,200 | 22 |
Takano Co. Ltd. | 400 | 4 |
372,275 | ||
Kenya (0.0%) | ||
East African Breweries Ltd. | 438,897 | 806 |
Malaysia (0.5%) | ||
Tenaga Nasional Bhd. | 6,863,900 | 25,664 |
Malayan Banking Bhd. | 777,000 | 1,838 |
Petronas Dagangan Bhd. | 225,600 | 1,432 |
Supermax Corp. Bhd. | 419,800 | 329 |
Hengyuan Refining Co. Bhd. | 209,900 | 323 |
Uchi Technologies Bhd. | 413,800 | 309 |
Padini Holdings Bhd. | 115,700 | 164 |
Malaysian Pacific Industries Bhd. | 55,000 | 161 |
* Lion Industries Corp. Bhd. | 595,900 | 140 |
Petron Malaysia Refining & Marketing Bhd. | 33,100 | 66 |
Muhibbah Engineering M Bhd. | 79,700 | 58 |
BIMB Holdings Bhd. | 58,100 | 53 |
Hong Leong Bank Bhd. | 9,500 | 47 |
Batu Kawan Bhd. | 9,900 | 41 |
* Wah Seong Corp. Bhd. | 59,100 | 15 |
Favelle Favco Bhd. | 22,100 | 13 |
Oriental Holdings Bhd. | 900 | 1 |
30,654 | ||
Mexico (0.4%) | ||
Mexichem SAB de CV | 919,173 | 3,161 |
* Genomma Lab Internacional SAB de CV Class B | 3,280,676 | 2,873 |
Gentera SAB de CV | 2,429,552 | 2,465 |
Ternium SA ADR | 71,622 | 2,170 |
11
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
Grupo Televisa SAB ADR | 115,008 | 2,040 | |
2 | Nemak SAB de CV | 2,341,321 | 1,757 |
Grupo Lala SAB de CV | 1,229,751 | 1,406 | |
Grupo Financiero Inbursa SAB de CV | 857,759 | 1,346 | |
Industrias Bachoco SAB de CV Class B | 179,252 | 805 | |
* | Alpek SAB de CV | 433,072 | 706 |
Grupo Aeroportuario del Centro Norte SAB de CV Class B | 57,067 | 407 | |
Grupo Financiero Banorte SAB de CV | 39,062 | 282 | |
* | Grupo Simec SAB de CV Class B | 87,571 | 267 |
Corp Inmobiliaria Vesta SAB de CV | 144,182 | 222 | |
Megacable Holdings SAB de CV | 36,902 | 190 | |
Grupo Comercial Chedraui SA de CV | 77,655 | 174 | |
Rassini SAB de CV | 32,481 | 124 | |
Macquarie Mexico Real Estate Management SA de CV | 91,124 | 109 | |
Bolsa Mexicana de Valores SAB de CV | 29,211 | 60 | |
Concentradora Fibra Danhos SA de CV | 33,721 | 55 | |
Consorcio ARA SAB de CV | 143,302 | 52 | |
PLA Administradora Industrial S de RL de CV | 29,611 | 45 | |
Credito Real SAB de CV SOFOM ER | 25,266 | 35 | |
* | Grupo Famsa SAB de CV Class A | 42,990 | 26 |
* | Grupo GICSA SA de CV | 33,056 | 16 |
20,793 | |||
Netherlands (1.3%) | |||
Unilever NV | 461,147 | 25,651 | |
Koninklijke Ahold Delhaize NV | 649,855 | 14,909 | |
2 | Signify NV | 536,812 | 13,895 |
Koninklijke Philips NV | 97,444 | 4,442 | |
ASR Nederland NV | 58,652 | 2,796 | |
Heineken NV | 27,344 | 2,566 | |
* | RELX NV | 104,531 | 2,196 |
Akzo Nobel NV | 21,483 | 2,010 | |
Koninklijke KPN NV | 436,086 | 1,150 | |
Boskalis Westminster | 27,009 | 850 | |
Aegon NV | 117,234 | 761 | |
ASML Holding NV | 3,252 | 611 | |
IMCD NV | 7,643 | 595 | |
Van Lanschot Kempen NV | 13,384 | 353 | |
Coca-Cola European Partners plc | 7,217 | 328 | |
Randstad NV | 4,694 | 251 | |
NSI NV | 5,876 | 242 | |
Koninklijke Volkerwessels NV | 5,544 | 117 | |
*,2 | Takeaway.com NV | 1,697 | 110 |
Vastned Retail NV | 871 | 33 | |
ICT Group NV | 1,498 | 23 | |
KAS Bank NV | 2,615 | 23 | |
73,912 | |||
New Zealand (0.0%) | |||
Spark New Zealand Ltd. | 320,346 | 860 | |
SKY Network Television Ltd. | 412,618 | 601 | |
*,^ | a2 Milk Co. Ltd. | 61,973 | 458 |
Air New Zealand Ltd. | 23,005 | 47 | |
1,966 | |||
Norway (0.6%) | |||
Schibsted ASA Class A | 293,844 | 11,030 | |
Schibsted ASA Class B | 295,641 | 10,275 | |
Equinor ASA | 162,883 | 4,580 | |
Aker BP ASA | 59,424 | 2,516 | |
Salmar ASA | 33,790 | 1,688 | |
Austevoll Seafood ASA | 83,846 | 1,155 | |
DNO ASA | 520,031 | 1,072 | |
Bakkafrost P/F | 15,319 | 935 | |
DNB ASA | 39,475 | 831 |
12
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
Telenor ASA | 26,038 | 509 | |
* | BW Offshore Ltd. | 58,013 | 460 |
Leroy Seafood Group ASA | 51,815 | 423 | |
Norway Royal Salmon ASA | 14,471 | 349 | |
Aker ASA | 2,298 | 207 | |
SpareBank 1 Nord Norge | 21,914 | 186 | |
* | Kvaerner ASA | 20,785 | 38 |
* | Scottish Salmon Co. plc | 17,992 | 33 |
36,287 | |||
Other (0.4%) | |||
3 | Vanguard FTSE Emerging Markets ETF | 514,464 | 21,093 |
Peru (0.0%) | |||
Cia de Minas Buenaventura SAA ADR | 75,457 | 1,012 | |
Philippines (0.0%) | |||
PLDT Inc. | 32,000 | 806 | |
San Miguel Corp. | 79,920 | 251 | |
Lopez Holdings Corp. | 2,858,149 | 234 | |
Petron Corp. | 706,200 | 114 | |
1,405 | |||
Poland (0.1%) | |||
Grupa Lotos SA | 219,952 | 4,474 | |
Polski Koncern Naftowy ORLEN SA | 48,217 | 1,322 | |
* | Polskie Gornictwo Naftowe i Gazownictwo SA | 587,341 | 1,031 |
Eurocash SA | 173,215 | 849 | |
LPP SA | 50 | 117 | |
* | PKP Cargo SA | 5,726 | 74 |
* | Impexmetal SA | 51,625 | 52 |
* | Lubelski Wegiel Bogdanka SA | 685 | 11 |
7,930 | |||
Portugal (0.1%) | |||
Galp Energia SGPS SA | 119,727 | 2,374 | |
Sonae SGPS SA | 167,478 | 174 | |
Altri SGPS SA | 16,686 | 160 | |
* | Mota-Engil SGPS SA | 18,138 | 44 |
Semapa-Sociedade de Investimento e Gestao | 1,324 | 26 | |
Sonae Capital SGPS SA | 6,922 | 6 | |
2,784 | |||
Qatar (0.0%) | |||
Qatar Fuel QSC | 15,250 | 680 | |
Ooredoo QPSC | 27,036 | 512 | |
Qatar International Islamic Bank QSC | 26,807 | 420 | |
* | Mannai Corp. QSC | 2,843 | 44 |
1,656 | |||
Russia (0.8%) | |||
Sberbank of Russia PJSC ADR | 1,562,756 | 19,760 | |
* | Mail Ru Group GDR | 293,744 | 7,912 |
Tatneft PJSC ADR | 91,637 | 6,992 | |
PhosAgro PJSC GDR | 141,847 | 1,924 | |
* | Yandex NV Class A | 52,081 | 1,713 |
Lukoil PJSC ADR | 20,620 | 1,579 | |
* | Global Ports Investments plc GDR | 504,685 | 1,556 |
Globaltrans Investment plc GDR | 97,300 | 1,022 | |
Magnit PJSC | 15,854 | 926 | |
Novolipetsk Steel PJSC GDR | 4,175 | 113 | |
* | PJSC Magnitogorsk Iron & Steel Works GDR | 5,547 | 57 |
TMK PJSC GDR | 9,043 | 37 | |
43,591 | |||
Singapore (0.5%) | |||
DBS Group Holdings Ltd. | 738,900 | 14,096 | |
United Overseas Bank Ltd. | 159,800 | 3,159 | |
Great Eastern Holdings Ltd. | 138,600 | 2,751 |
13
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
Venture Corp. Ltd. | 138,100 | 1,781 |
Oversea-Chinese Banking Corp. Ltd. | 209,600 | 1,754 |
Delfi Ltd. | 1,842,500 | 1,511 |
Haw Par Corp. Ltd. | 95,041 | 939 |
GL Ltd. | 742,500 | 407 |
United Industrial Corp. Ltd. | 103,900 | 227 |
AEM Holdings Ltd. | 392,700 | 219 |
Olam International Ltd. | 21,000 | 31 |
Golden Energy & Resources Ltd. | 107,600 | 20 |
HRnetgroup Ltd. | 20,200 | 13 |
26,908 | ||
South Africa (1.4%) | ||
Naspers Ltd. | 259,353 | 55,851 |
Sappi Ltd. | 1,141,507 | 7,161 |
Exxaro Resources Ltd. | 392,193 | 4,032 |
Tiger Brands Ltd. | 136,280 | 2,554 |
Anglo American Platinum Ltd. | 74,220 | 2,426 |
Telkom SA SOC Ltd. | 661,875 | 2,417 |
Cie Financiere Richemont SA (Johannesburg Shares) | 128,599 | 1,055 |
* Grindrod Ltd. | 1,528,732 | 843 |
Old Mutual Ltd. | 356,080 | 763 |
Raubex Group Ltd. | 366,647 | 572 |
Reunert Ltd. | 101,022 | 543 |
Tsogo Sun Holdings Ltd. | 362,377 | 523 |
* MMI Holdings Ltd. | 342,354 | 420 |
JSE Ltd. | 36,434 | 410 |
Merafe Resources Ltd. | 1,538,151 | 177 |
MiX Telematics Ltd. ADR | 9,884 | 143 |
* Grindrod Shipping Holdings Ltd. | 18,205 | 129 |
AECI Ltd. | 15,112 | 112 |
Astral Foods Ltd. | 3,412 | 60 |
Absa Bank Ltd. Preference Shares | 967 | 48 |
80,239 | ||
South Korea (1.8%) | ||
SK Hynix Inc. | 396,933 | 26,260 |
Samsung Electronics Co. Ltd. | 588,506 | 24,629 |
LG Electronics Inc. | 200,932 | 12,858 |
LG Display Co. Ltd. | 363,605 | 6,283 |
Shinhan Financial Group Co. Ltd. | 124,925 | 5,048 |
Samsung Fire & Marine Insurance Co. Ltd. | 14,646 | 3,749 |
KT Corp. | 98,618 | 2,681 |
LG Corp. | 34,480 | 2,257 |
Hyundai Motor Co. | 15,837 | 1,849 |
SK Innovation Co. Ltd. | 7,241 | 1,404 |
Hana Financial Group Inc. | 34,206 | 1,373 |
KT Corp. ADR | 83,425 | 1,239 |
Lotte Shopping Co. Ltd. | 6,342 | 1,198 |
S-1 Corp. | 13,915 | 1,146 |
GS Home Shopping Inc. | 4,493 | 821 |
Hanwha Chemical Corp. | 45,431 | 790 |
* Chungdahm Learning Inc. | 21,808 | 539 |
Cheil Worldwide Inc. | 24,870 | 486 |
LG Uplus Corp. | 27,790 | 458 |
LOTTE Fine Chemical Co. Ltd. | 7,500 | 351 |
Douzone Bizon Co. Ltd. | 6,129 | 338 |
Hyundai Elevator Co. Ltd. | 3,201 | 321 |
Huchems Fine Chemical Corp. | 12,429 | 280 |
Hansol Paper Co. Ltd. | 13,439 | 245 |
Hyundai Corp. | 7,369 | 220 |
* Tovis Co. Ltd. | 29,516 | 212 |
Hancom Inc. | 14,538 | 208 |
NOROO Paint & Coatings Co. Ltd. | 18,815 | 204 |
NICE Information Service Co. Ltd. | 21,494 | 199 |
AK Holdings Inc. | 3,494 | 193 |
14
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
JB Financial Group Co. Ltd. | 35,413 | 192 |
E1 Corp. | 2,978 | 172 |
KISCO Corp. | 27,830 | 168 |
Spigen Korea Co. Ltd. | 3,637 | 164 |
Dongkuk Steel Mill Co. Ltd. | 19,523 | 164 |
Handsome Co. Ltd. | 4,565 | 154 |
KT Skylife Co. Ltd. | 11,935 | 151 |
Korea Petrochemical Ind Co. Ltd. | 897 | 149 |
DGB Financial Group Inc. | 13,547 | 124 |
Binggrae Co. Ltd. | 1,779 | 121 |
Silicon Works Co. Ltd. | 3,199 | 117 |
Hyundai Greenfood Co. Ltd. | 8,881 | 112 |
Hyundai Telecommunication Co. Ltd. | 10,288 | 112 |
Visang Education Inc. | 16,159 | 111 |
Huvis Corp. | 10,796 | 89 |
* Dongbu Corp. | 10,638 | 88 |
* Seoul Auction Co. Ltd. | 6,006 | 83 |
* YeaRimDang Publishing Co. Ltd. | 10,877 | 70 |
Daewon Co. Ltd. | 5,602 | 68 |
KyungDong City Gas Co. Ltd. | 1,762 | 67 |
* Bixolon Co. Ltd. | 10,491 | 61 |
* Dohwa Engineering Co. Ltd. | 7,969 | 58 |
LF Corp. | 2,318 | 54 |
iMarketKorea Inc. | 8,406 | 50 |
* Dae Hyun Co. Ltd. | 19,903 | 47 |
Daewon San Up Co. Ltd. | 7,868 | 46 |
Youngone Holdings Co. Ltd. | 751 | 44 |
* Dong-Il Corp. | 668 | 44 |
ESTec Corp. | 4,601 | 42 |
Zeus Co. Ltd. | 2,810 | 40 |
* Kumkang Kind Co. Ltd. | 1,711 | 37 |
* Kukdong Oil & Chemicals Co. Ltd. | 10,815 | 34 |
Telechips Inc. | 3,026 | 32 |
* JASTECH Ltd. | 4,122 | 30 |
GOLFZON Co. Ltd. | 789 | 28 |
* Sammok S-Form Co. Ltd. | 2,168 | 28 |
Moorim Paper Co. Ltd. | 8,414 | 27 |
Young Poong Precision Corp. | 3,958 | 27 |
Interpark Holdings Corp. | 11,428 | 26 |
* Sempio Foods Co. | 769 | 25 |
* Iljin Power Co. Ltd. | 4,114 | 23 |
Heng Sheng Holding Group Ltd. | 15,242 | 20 |
101,138 | ||
Spain (0.6%) | ||
* ACS Actividades de Construccion y Servicios SA | 474,806 | 20,167 |
Ence Energia y Celulosa SA | 251,404 | 2,548 |
* Repsol SA | 78,692 | 1,567 |
Cia de Distribucion Integral Logista Holdings SA | 58,648 | 1,507 |
Viscofan SA | 18,184 | 1,324 |
^ Distribuidora Internacional de Alimentacion SA | 516,660 | 1,198 |
Bankia SA | 298,755 | 1,166 |
Amadeus IT Group SA | 9,171 | 850 |
Acerinox SA | 55,830 | 796 |
2 Gestamp Automocion SA | 64,620 | 488 |
Grifols SA | 14,251 | 401 |
Banco Santander SA | 42,336 | 212 |
* Ferrovial SA | 8,563 | 177 |
CIE Automotive SA | 4,436 | 138 |
Prosegur Cia de Seguridad SA | 20,942 | 130 |
Mediaset Espana Comunicacion SA | 17,623 | 128 |
* Laboratorio Reig Jofre SA | 7,862 | 24 |
32,821 | ||
Sweden (1.2%) | ||
Svenska Handelsbanken AB Class A | 1,519,691 | 19,166 |
15
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
* | Atlas Copco AB Class B | 537,488 | 14,320 |
* | Epiroc AB Class B | 1,052,243 | 10,807 |
* | Spotify Technology SA | 53,358 | 9,649 |
Assa Abloy AB Class B | 172,405 | 3,456 | |
Swedish Match AB | 57,424 | 2,935 | |
Kindred Group plc | 168,541 | 1,889 | |
Sandvik AB | 95,588 | 1,692 | |
Lundin Petroleum AB | 37,518 | 1,430 | |
Axfood AB | 61,546 | 1,152 | |
Nordea Bank Abp | 84,283 | 917 | |
Millicom International Cellular SA | 15,702 | 901 | |
Modern Times Group MTG AB Class B | 18,655 | 684 | |
* | Betsson AB | 79,239 | 610 |
Nolato AB Class B | 6,897 | 425 | |
Saab AB Class B | 4,835 | 243 | |
Securitas AB Class B | 13,213 | 230 | |
Peab AB | 19,343 | 177 | |
* | Tethys Oil AB | 14,312 | 157 |
Cloetta AB Class B | 46,467 | 143 | |
Oriflame Holding AG | 4,593 | 117 | |
Arjo AB | 33,503 | 113 | |
Momentum Group AB Class B | 5,028 | 64 | |
Paradox Interactive AB | 2,739 | 48 | |
* | Instalco Intressenter AB | 4,868 | 39 |
* | Sectra AB Class B | 1,447 | 39 |
*,^ | Orexo AB | 3,676 | 26 |
71,429 | |||
Switzerland (2.0%) | |||
Cie Financiere Richemont SA | 297,991 | 24,295 | |
Schindler Holding AG | 95,070 | 23,725 | |
Nestle SA | 272,982 | 22,722 | |
Novartis AG | 166,291 | 14,314 | |
Roche Holding AG | 45,941 | 11,109 | |
Geberit AG | 15,005 | 6,965 | |
OC Oerlikon Corp. AG | 230,138 | 3,163 | |
Adecco Group AG | 38,775 | 2,038 | |
Logitech International SA | 39,874 | 1,788 | |
UBS Group AG | 90,739 | 1,433 | |
Sonova Holding AG | 5,858 | 1,163 | |
DKSH Holding AG | 11,506 | 783 | |
Vontobel Holding AG | 6,876 | 486 | |
Swissquote Group Holding SA | 6,650 | 484 | |
Bucher Industries AG | 1,179 | 380 | |
Tecan Group AG | 1,336 | 316 | |
Valora Holding AG | 1,010 | 271 | |
Barry Callebaut AG | 142 | 269 | |
Helvetia Holding AG | 441 | 269 | |
Schindler Holding AG (Registered) | 902 | 218 | |
Belimo Holding AG | 45 | 215 | |
Tornos Holding AG | 13,237 | 130 | |
Liechtensteinische Landesbank AG | 1,819 | 120 | |
ams AG | 1,511 | 85 | |
* | VP Bank AG | 313 | 49 |
Siegfried Holding AG | 95 | 44 | |
Jungfraubahn Holding AG | 236 | 34 | |
116,868 | |||
Taiwan (1.6%) | |||
Taiwan Semiconductor Manufacturing Co. Ltd. ADR | 999,506 | 44,138 | |
Taiwan Semiconductor Manufacturing Co. Ltd. | 1,079,577 | 9,213 | |
United Microelectronics Corp. | 17,405,000 | 9,183 | |
* | HTC Corp. | 2,415,000 | 3,207 |
Formosa Petrochemical Corp. | 559,000 | 2,710 | |
Delta Electronics Inc. | 623,488 | 2,673 | |
Yungtay Engineering Co. Ltd. | 1,517,000 | 2,376 |
16
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
Teco Electric and Machinery Co. Ltd. | 2,699,190 | 1,958 |
* PChome Online Inc. | 364,510 | 1,652 |
Holtek Semiconductor Inc. | 509,000 | 1,322 |
Chroma ATE Inc. | 272,000 | 1,305 |
Taiwan Business Bank | 3,519,360 | 1,279 |
Simplo Technology Co. Ltd. | 184,000 | 1,263 |
Giant Manufacturing Co. Ltd. | 291,469 | 1,250 |
Acter Co. Ltd. | 87,400 | 576 |
Radiant Opto-Electronics Corp. | 240,000 | 542 |
Taiwan Surface Mounting Technology Corp. | 392,000 | 513 |
AU Optronics Corp. | 1,154,000 | 487 |
Far Eastern Department Stores Ltd. | 790,000 | 442 |
TOPBI International Holdings Ltd. | 130,000 | 432 |
Shanghai Commercial & Savings Bank Ltd. | 295,878 | 348 |
Greatek Electronics Inc. | 209,000 | 345 |
Machvision Inc. | 28,000 | 340 |
Asia Cement Corp. | 216,000 | 293 |
* Mercuries Life Insurance Co. Ltd. | 558,831 | 290 |
Edom Technology Co. Ltd. | 564,000 | 278 |
TPK Holding Co. Ltd. | 152,000 | 261 |
Stark Technology Inc. | 158,800 | 199 |
YFY Inc. | 467,000 | 190 |
Topoint Technology Co. Ltd. | 308,000 | 190 |
Coretronic Corp. | 100,000 | 177 |
Winstek Semiconductor Co. Ltd. | 178,000 | 173 |
* Taita Chemical Co. Ltd. | 351,000 | 167 |
DA CIN Construction Co. Ltd. | 240,000 | 166 |
Sinon Corp. | 288,000 | 162 |
Gigabyte Technology Co. Ltd. | 101,000 | 159 |
Aten International Co. Ltd. | 58,000 | 155 |
Holiday Entertainment Co. Ltd. | 81,000 | 155 |
Compal Electronics Inc. | 221,000 | 137 |
Globe Union Industrial Corp. | 224,000 | 120 |
Sysage Technology Co. Ltd. | 115,500 | 117 |
APCB Inc. | 126,000 | 114 |
Apacer Technology Inc. | 102,000 | 111 |
LCY Technology Corp. | 136,934 | 108 |
Shinkong Insurance Co. Ltd. | 77,000 | 102 |
Sirtec International Co. Ltd. | 109,200 | 99 |
Central Reinsurance Co. Ltd. | 157,500 | 94 |
Taiwan FamilyMart Co. Ltd. | 13,000 | 91 |
Youngtek Electronics Corp. | 62,000 | 90 |
T3EX Global Holdings Corp. | 102,000 | 86 |
Global Brands Manufacture Ltd. | 158,000 | 70 |
Hong Pu Real Estate Development Co. Ltd. | 96,000 | 66 |
Creative Sensor Inc. | 87,000 | 61 |
Union Bank Of Taiwan | 174,070 | 59 |
Raydium Semiconductor Corp. | 26,941 | 55 |
Hotung Investment Holdings Ltd. | 35,800 | 47 |
Planet Technology Corp. | 22,000 | 42 |
* Pegavision Corp. | 6,346 | 38 |
Lion Travel Service Co. Ltd. | 13,000 | 38 |
Yuanta Futures Co. Ltd. | 24,000 | 33 |
Nien Hsing Textile Co. Ltd. | 37,000 | 30 |
Audix Corp. | 23,000 | 28 |
Sheng Yu Steel Co. Ltd. | 21,000 | 14 |
Sunrex Technology Corp. | 15,000 | 8 |
Hsing TA Cement Co. | 14,000 | 7 |
Airmate Cayman International Co. Ltd. | 4,000 | 2 |
92,436 | ||
Thailand (0.4%) | ||
* PTT PCL | 2,417,000 | 4,058 |
PTT Exploration & Production PCL | 627,100 | 3,010 |
17
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
Bangkok Bank PCL (Foreign) | 363,900 | 2,454 |
PTT PCL NVDR | 1,260,000 | 2,115 |
Star Petroleum Refining PCL | 4,223,100 | 1,946 |
Thai Oil PCL NVDR | 604,800 | 1,656 |
Banpu PCL | 2,226,900 | 1,315 |
Kasikornbank PCL (Foreign) | 181,600 | 1,224 |
Siamgas & Petrochemicals PCL NVDR | 2,451,699 | 941 |
* PTT Exploration and Production PCL (Local) | 184,400 | 885 |
IRPC PCL | 3,127,600 | 658 |
Esso Thailand PCL | 1,310,200 | 632 |
* Thai Oil PCL | 122,100 | 334 |
* BEC World PCL (Foreign) | 1,455,100 | 313 |
* Siamgas & Petrochemicals PCL | 658,200 | 252 |
* Bangchak Corp. PCL | 214,100 | 233 |
Susco PCL | 2,240,100 | 225 |
Lanna Resources PCL | 229,300 | 113 |
SNC Former PCL | 117,200 | 53 |
Lanna Resources PCL NVDR | 69,700 | 34 |
Padaeng Industry PCL | 47,000 | 21 |
* Tata Steel Thailand PCL | 560,300 | 13 |
* Sena Development PCL | 14,050 | 2 |
22,487 | ||
Turkey (0.2%) | ||
* Turk Hava Yollari AO | 1,217,421 | 3,840 |
Tupras Turkiye Petrol Rafinerileri AS | 147,305 | 3,271 |
Tekfen Holding AS | 556,564 | 1,990 |
Turkiye Garanti Bankasi AS | 1,554,767 | 1,982 |
* Ulker Biskuvi Sanayi AS | 238,127 | 668 |
Trakya Cam Sanayii AS | 902,259 | 641 |
Anadolu Cam Sanayii AS | 390,128 | 213 |
* Ozak Gayrimenkul Yatirim Ortakligi | 434,733 | 174 |
Turkiye Sise ve Cam Fabrikalari AS | 113,036 | 109 |
* Pegasus Hava Tasimaciligi AS | 18,804 | 84 |
Albaraka Turk Katilim Bankasi AS | 237,382 | 59 |
Indeks Bilgisayar Sistemleri Muhendislik Sanayi ve Ticaret AS | 48,235 | 52 |
Celebi Hava Servisi AS | 5,729 | 49 |
TAV Havalimanlari Holding AS | 6,568 | 34 |
* Kardemir Karabuk Demir Celik Sanayi ve Ticaret AS | 37,582 | 25 |
13,191 | ||
United Arab Emirates (0.0%) | ||
Emirates NBD PJSC | 341,315 | 882 |
Dana Gas PJSC | 1,198,537 | 377 |
Air Arabia PJSC | 96,213 | 25 |
* Ras Al Khaimah Ceramics | 38,273 | 24 |
1,308 | ||
United Kingdom (4.2%) | ||
Prudential plc | 2,312,827 | 53,029 |
BHP Billiton plc | 915,757 | 19,983 |
Reckitt Benckiser Group plc | 211,959 | 19,363 |
Hays plc | 4,425,332 | 11,747 |
* Just Eat plc | 1,060,681 | 9,257 |
Spectris plc | 281,115 | 8,683 |
WPP plc | 391,687 | 5,736 |
GlaxoSmithKline plc | 278,733 | 5,590 |
Intertek Group plc | 69,699 | 4,534 |
SSP Group plc | 418,822 | 3,955 |
Compass Group plc | 172,765 | 3,841 |
* Rightmove plc | 596,160 | 3,659 |
BP plc | 473,247 | 3,627 |
Burberry Group plc | 129,263 | 3,394 |
2 Auto Trader Group plc | 574,412 | 3,342 |
Bunzl plc | 99,195 | 3,119 |
Unilever plc | 55,698 | 3,060 |
18
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
HomeServe plc | 217,796 | 2,905 |
Standard Chartered plc | 347,792 | 2,882 |
Diageo plc | 75,097 | 2,661 |
RELX plc | 126,162 | 2,654 |
2 Merlin Entertainments plc | 506,940 | 2,644 |
Experian plc | 87,622 | 2,248 |
3i Group plc | 175,495 | 2,149 |
Rolls-Royce Holdings plc | 162,684 | 2,093 |
TUI AG (London Shares) | 108,786 | 2,087 |
BAE Systems plc | 232,753 | 1,909 |
NEX Group plc | 144,850 | 1,873 |
DCC plc | 20,363 | 1,847 |
Glencore plc | 426,461 | 1,838 |
2 ConvaTec Group plc | 556,398 | 1,683 |
Ferrexpo plc | 619,463 | 1,611 |
Barclays plc | 710,957 | 1,577 |
G4S plc | 489,762 | 1,545 |
Admiral Group plc | 55,840 | 1,514 |
Anglo American plc Ordinary Shares | 66,010 | 1,490 |
Royal Dutch Shell plc Class A | 42,357 | 1,451 |
Antofagasta plc | 127,762 | 1,420 |
ITV plc | 667,497 | 1,370 |
Carnival plc | 21,758 | 1,350 |
Royal Dutch Shell plc Class B | 37,311 | 1,306 |
Pagegroup plc | 171,898 | 1,281 |
WH Smith plc | 47,104 | 1,265 |
Rio Tinto plc | 24,299 | 1,226 |
Lloyds Banking Group plc | 1,540,994 | 1,185 |
* Gulf Keystone Petroleum Ltd. | 303,686 | 1,141 |
Informa plc | 113,551 | 1,128 |
* Nomad Foods Ltd. | 47,526 | 963 |
Dart Group plc | 79,149 | 961 |
IG Group Holdings plc | 111,817 | 922 |
GVC Holdings plc | 74,607 | 893 |
Inchcape plc | 101,255 | 882 |
St. James's Place plc | 57,304 | 854 |
Thomas Cook Group plc | 1,099,598 | 829 |
* Serco Group plc | 627,939 | 800 |
Capita plc | 418,102 | 778 |
International Personal Finance plc | 262,756 | 767 |
easyJet plc | 41,987 | 719 |
Tesco plc | 229,735 | 718 |
* Provident Financial plc | 90,164 | 709 |
Daily Mail & General Trust plc | 74,119 | 677 |
John Wood Group plc | 59,580 | 598 |
Abcam plc | 28,794 | 537 |
British American Tobacco plc | 10,966 | 511 |
Jupiter Fund Management plc | 90,150 | 475 |
Close Brothers Group plc | 22,948 | 473 |
Hansteen Holdings plc | 362,773 | 459 |
Devro plc | 165,249 | 443 |
Vodafone Group plc | 199,031 | 426 |
National Grid plc | 40,471 | 418 |
JD Sports Fashion plc | 69,058 | 413 |
Games Workshop Group plc | 7,471 | 369 |
Dechra Pharmaceuticals plc | 12,702 | 360 |
Smith & Nephew plc | 17,429 | 318 |
Meggitt plc | 41,101 | 303 |
* Georgia Capital plc | 20,422 | 297 |
Barratt Developments plc | 38,353 | 283 |
Imperial Brands plc | 7,923 | 276 |
Softcat plc | 26,523 | 275 |
Scapa Group plc | 43,818 | 258 |
Petrofac Ltd. | 30,233 | 254 |
19
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
2 | Non-Standard Finance plc | 337,398 | 252 |
* | EI Group plc | 114,218 | 247 |
Rotork plc | 56,522 | 243 | |
Playtech plc | 37,369 | 237 | |
National Express Group plc | 43,312 | 220 | |
Pets at Home Group plc | 140,758 | 219 | |
Moneysupermarket.com Group plc | 55,621 | 202 | |
IMI plc | 14,018 | 200 | |
Stagecoach Group plc | 92,530 | 189 | |
Britvic plc | 18,202 | 185 | |
Rathbone Brothers plc | 5,443 | 170 | |
Morgan Sindall Group plc | 8,971 | 154 | |
Computacenter plc | 8,735 | 144 | |
2 | McCarthy & Stone plc | 82,383 | 144 |
SThree plc | 26,014 | 128 | |
Croda International plc | 1,520 | 103 | |
Advanced Medical Solutions Group plc | 23,190 | 100 | |
EMIS Group plc | 6,184 | 81 | |
Gocompare.Com Group plc | 47,701 | 60 | |
FDM Group Holdings plc | 4,314 | 55 | |
Vertu Motors plc | 93,374 | 53 | |
U & I Group plc | 9,834 | 29 | |
Speedy Hire plc | 34,429 | 29 | |
* | IG Design Group plc | 3,861 | 27 |
241,941 | |||
United States (48.0%) | |||
Consumer Discretionary (6.0%) | |||
* | Amazon.com Inc. | 49,741 | 99,631 |
Home Depot Inc. | 174,951 | 36,241 | |
Royal Caribbean Cruises Ltd. | 183,285 | 23,816 | |
* | Booking Holdings Inc. | 9,942 | 19,725 |
McDonald's Corp. | 109,153 | 18,260 | |
Service Corp. International | 325,649 | 14,394 | |
*,^ | Tesla Inc. | 49,965 | 13,229 |
* | Netflix Inc. | 34,705 | 12,984 |
Omnicom Group Inc. | 189,091 | 12,862 | |
* | CarMax Inc. | 158,895 | 11,865 |
* | NVR Inc. | 4,343 | 10,731 |
TJX Cos. Inc. | 82,744 | 9,269 | |
* | Chipotle Mexican Grill Inc. Class A | 20,017 | 9,098 |
Harley-Davidson Inc. | 188,660 | 8,546 | |
* | Ulta Beauty Inc. | 20,155 | 5,686 |
Wolverine World Wide Inc. | 133,102 | 5,198 | |
BJ's Restaurants Inc. | 70,189 | 5,068 | |
^ | Entercom Communications Corp. Class A | 541,341 | 4,277 |
^ | Williams-Sonoma Inc. | 59,521 | 3,912 |
* | AutoZone Inc. | 4,553 | 3,532 |
* | TripAdvisor Inc. | 58,658 | 2,996 |
* | Stoneridge Inc. | 56,642 | 1,683 |
Movado Group Inc. | 32,490 | 1,361 | |
* | MSG Networks Inc. | 49,051 | 1,266 |
* | K12 Inc. | 63,227 | 1,119 |
* | tronc Inc. | 65,590 | 1,071 |
Shoe Carnival Inc. | 23,164 | 892 | |
Johnson Outdoors Inc. Class A | 9,426 | 877 | |
* | American Public Education Inc. | 25,393 | 839 |
Nutrisystem Inc. | 21,645 | 802 | |
* | Cambium Learning Group Inc. | 34,285 | 406 |
Rocky Brands Inc. | 14,203 | 402 | |
* | Regis Corp. | 15,584 | 318 |
* | Tropicana Entertainment Inc. | 4,248 | 313 |
* | Town Sports International Holdings Inc. | 32,463 | 281 |
Tilly's Inc. Class A | 12,041 | 228 |
20
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
* Helen of Troy Ltd. | 1,741 | 228 |
* Fiesta Restaurant Group Inc. | 8,516 | 228 |
* Lee Enterprises Inc. | 74,783 | 198 |
* Container Store Group Inc. | 14,408 | 160 |
Entravision Communications Corp. Class A | 25,976 | 127 |
* New York & Co. Inc. | 29,229 | 113 |
Core-Mark Holding Co. Inc. | 2,871 | 97 |
* Ascena Retail Group Inc. | 18,383 | 84 |
* Habit Restaurants Inc. Class A | 4,509 | 72 |
* TravelCenters of America LLC | 10,024 | 57 |
* Bridgepoint Education Inc. Class A | 3,840 | 39 |
Marine Products Corp. | 1,321 | 30 |
* Build-A-Bear Workshop Inc. | 2,781 | 25 |
344,636 | ||
Consumer Staples (4.4%) | ||
Procter & Gamble Co. | 548,128 | 45,621 |
PepsiCo Inc. | 335,016 | 37,455 |
Estee Lauder Cos. Inc. Class A | 196,219 | 28,515 |
Coca-Cola Co. | 588,392 | 27,178 |
Hershey Co. | 241,776 | 24,661 |
Archer-Daniels-Midland Co. | 441,372 | 22,188 |
Colgate-Palmolive Co. | 277,984 | 18,611 |
Bunge Ltd. | 198,290 | 13,625 |
Costco Wholesale Corp. | 43,664 | 10,256 |
Walmart Inc. | 77,702 | 7,297 |
Kimberly-Clark Corp. | 49,413 | 5,615 |
Medifast Inc. | 17,536 | 3,885 |
* Herbalife Nutrition Ltd. | 57,605 | 3,142 |
* USANA Health Sciences Inc. | 11,434 | 1,378 |
* Performance Food Group Co. | 36,483 | 1,215 |
* Avon Products Inc. | 312,314 | 687 |
Inter Parfums Inc. | 7,422 | 478 |
* Lifevantage Corp. | 32,856 | 361 |
Nu Skin Enterprises Inc. Class A | 3,265 | 269 |
* Natural Grocers by Vitamin Cottage Inc. | 7,941 | 134 |
252,571 | ||
Energy (1.3%) | ||
Apache Corp. | 955,894 | 45,567 |
EOG Resources Inc. | 189,003 | 24,111 |
National Oilwell Varco Inc. | 166,370 | 7,167 |
* Par Pacific Holdings Inc. | 26,890 | 549 |
TechnipFMC plc | 7,460 | 234 |
* Geopark Ltd. | 10,868 | 222 |
Hallador Energy Co. | 20,104 | 125 |
Adams Resources & Energy Inc. | 96 | 4 |
77,979 | ||
Financials (7.0%) | ||
* Berkshire Hathaway Inc. Class B | 289,927 | 62,076 |
Moody's Corp. | 231,886 | 38,771 |
* Markel Corp. | 24,334 | 28,921 |
Travelers Cos. Inc. | 213,704 | 27,719 |
US Bancorp | 470,632 | 24,854 |
First Republic Bank | 224,652 | 21,567 |
Arthur J Gallagher & Co. | 262,344 | 19,529 |
Wells Fargo & Co. | 356,864 | 18,757 |
Loews Corp. | 351,226 | 17,642 |
MarketAxess Holdings Inc. | 97,904 | 17,475 |
American Express Co. | 158,422 | 16,870 |
21
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
Aflac Inc. | 330,694 | 15,566 | |
TD Ameritrade Holding Corp. | 270,793 | 14,306 | |
Chubb Ltd. | 94,502 | 12,629 | |
Jefferies Financial Group Inc. | 565,333 | 12,415 | |
Hartford Financial Services Group Inc. | 179,359 | 8,961 | |
Interactive Brokers Group Inc. | 157,294 | 8,700 | |
*,^ | LendingTree Inc. | 36,019 | 8,288 |
Alleghany Corp. | 11,844 | 7,729 | |
T. Rowe Price Group Inc. | 45,039 | 4,917 | |
Willis Towers Watson plc | 29,289 | 4,128 | |
RenaissanceRe Holdings Ltd. | 25,286 | 3,378 | |
Axis Capital Holdings Ltd. | 55,776 | 3,219 | |
M&T Bank Corp. | 16,784 | 2,762 | |
Annaly Capital Management Inc. | 48,407 | 495 | |
TPG Specialty Lending Inc. | 23,443 | 478 | |
* | FGL Holdings | 48,331 | 433 |
Exantas Capital Corp. | 38,457 | 422 | |
CNA Financial Corp. | 3,747 | 171 | |
WTB Financial Corp. Class B | 139 | 53 | |
* | Elevate Credit Inc. | 5,969 | 48 |
BankFinancial Corp. | 1,575 | 25 | |
403,304 | |||
Health Care (10.3%) | |||
Anthem Inc. | 195,945 | 53,699 | |
Johnson & Johnson | 333,030 | 46,015 | |
* | Waters Corp. | 191,208 | 37,224 |
* | WellCare Health Plans Inc. | 114,675 | 36,752 |
Humana Inc. | 98,953 | 33,498 | |
Merck & Co. Inc. | 457,241 | 32,437 | |
* | Myriad Genetics Inc. | 634,017 | 29,165 |
* | Mettler-Toledo International Inc. | 42,342 | 25,785 |
* | Charles River Laboratories International Inc. | 186,297 | 25,064 |
Bruker Corp. | 709,966 | 23,748 | |
* | PRA Health Sciences Inc. | 202,811 | 22,348 |
Thermo Fisher Scientific Inc. | 91,220 | 22,265 | |
ResMed Inc. | 185,290 | 21,371 | |
* | United Therapeutics Corp. | 156,099 | 19,962 |
* | Seattle Genetics Inc. | 246,845 | 19,037 |
* | Emergent BioSolutions Inc. | 280,291 | 18,452 |
* | Molina Healthcare Inc. | 107,986 | 16,057 |
* | Centene Corp. | 87,650 | 12,690 |
* | Amedisys Inc. | 95,328 | 11,912 |
* | Bio-Rad Laboratories Inc. Class A | 31,742 | 9,935 |
Baxter International Inc. | 93,678 | 7,222 | |
* | Alnylam Pharmaceuticals Inc. | 77,190 | 6,756 |
Bristol-Myers Squibb Co. | 105,972 | 6,579 | |
* | Corcept Therapeutics Inc. | 441,795 | 6,194 |
* | Globus Medical Inc. | 108,473 | 6,157 |
* | Enanta Pharmaceuticals Inc. | 68,563 | 5,859 |
* | Supernus Pharmaceuticals Inc. | 114,574 | 5,769 |
Cigna Corp. | 24,791 | 5,163 | |
* | Medpace Holdings Inc. | 84,996 | 5,092 |
* | Mallinckrodt plc | 111,915 | 3,280 |
* | Inogen Inc. | 10,713 | 2,615 |
Chemed Corp. | 7,136 | 2,280 | |
Luminex Corp. | 59,736 | 1,811 | |
* | Pacira Pharmaceuticals Inc. | 23,081 | 1,134 |
* | Genomic Health Inc. | 15,775 | 1,108 |
* | PDL BioPharma Inc. | 375,797 | 988 |
* | Orthofix Medical Inc. | 16,499 | 954 |
* | Veeva Systems Inc. Class A | 8,654 | 942 |
* | Concert Pharmaceuticals Inc. | 61,816 | 917 |
* | Cambrex Corp. | 12,222 | 836 |
22
Vanguard® Global Equity Fund | |||
Schedule of Investments | |||
September 30, 2018 | |||
Market | |||
Value | |||
Shares | ($000) | ||
* | Assertio Therapeutics Inc. | 117,449 | 691 |
HCA Healthcare Inc. | 4,527 | 630 | |
* | Tenet Healthcare Corp. | 19,856 | 565 |
* | Triple-S Management Corp. Class B | 28,538 | 539 |
* | Prestige Consumer Healthcare Inc. | 10,169 | 385 |
Phibro Animal Health Corp. Class A | 7,849 | 337 | |
* | ChemoCentryx Inc. | 24,905 | 315 |
* | Applied Genetic Technologies Corp. | 15,032 | 110 |
* | Palatin Technologies Inc. | 98,993 | 99 |
* | Fluidigm Corp. | 7,679 | 57 |
* | Haemonetics Corp. | 501 | 57 |
* | Regeneron Pharmaceuticals Inc. | 134 | 54 |
* | Five Star Senior Living Inc. | 26,481 | 23 |
592,934 | |||
Industrials (3.9%) | |||
CH Robinson Worldwide Inc. | 255,079 | 24,977 | |
* | Verisk Analytics Inc. Class A | 168,030 | 20,256 |
ManpowerGroup Inc. | 221,278 | 19,021 | |
* | Kirby Corp. | 225,815 | 18,573 |
Wabtec Corp. | 154,297 | 16,183 | |
Union Pacific Corp. | 85,981 | 14,000 | |
United Parcel Service Inc. Class B | 117,487 | 13,717 | |
* | Stericycle Inc. | 221,588 | 13,003 |
United Technologies Corp. | 79,177 | 11,070 | |
3M Co. | 47,885 | 10,090 | |
* | NOW Inc. | 542,341 | 8,976 |
* | SiteOne Landscape Supply Inc. | 102,494 | 7,722 |
* | Clean Harbors Inc. | 102,812 | 7,359 |
Fastenal Co. | 120,740 | 7,005 | |
* | FTI Consulting Inc. | 91,536 | 6,700 |
Expeditors International of Washington Inc. | 77,696 | 5,713 | |
* | TriNet Group Inc. | 84,409 | 4,754 |
PACCAR Inc. | 60,543 | 4,128 | |
Lincoln Electric Holdings Inc. | 37,079 | 3,465 | |
Kelly Services Inc. Class A | 88,229 | 2,120 | |
* | Vectrus Inc. | 52,706 | 1,644 |
Insperity Inc. | 12,758 | 1,505 | |
Heidrick & Struggles International Inc. | 31,357 | 1,061 | |
Korn/Ferry International | 18,709 | 921 | |
ICF International Inc. | 9,627 | 726 | |
Systemax Inc. | 17,647 | 581 | |
Kforce Inc. | 11,836 | 445 | |
BG Staffing Inc. | 10,388 | 283 | |
* | Nexeo Solutions Inc. | 9,168 | 112 |
ArcBest Corp. | 1,852 | 90 | |
* | Veritiv Corp. | 1,711 | 62 |
Ennis Inc. | 2,464 | 50 | |
* | Transcat Inc. | 2,198 | 50 |
* | TrueBlue Inc. | 1,825 | 48 |
* | ARC Document Solutions Inc. | 12,126 | 35 |
*,§ | Sun-Times Media Group Inc. Class A | 130,959 | — |
226,445 | |||
Information Technology (12.7%) | |||
* | Alphabet Inc. Class A | 60,236 | 72,710 |
Apple Inc. | 310,177 | 70,019 | |
Microsoft Corp. | 611,805 | 69,972 | |
* | Alphabet Inc. Class C | 56,557 | 67,499 |
Mastercard Inc. Class A | 271,704 | 60,484 | |
Oracle Corp. | 784,166 | 40,432 | |
Visa Inc. Class A | 235,522 | 35,349 | |
* | Facebook Inc. Class A | 197,552 | 32,489 |
* | GrubHub Inc. | 215,678 | 29,897 |
Intel Corp. | 480,734 | 22,734 |
23
Vanguard® Global Equity Fund | ||
Schedule of Investments | ||
September 30, 2018 | ||
Market | ||
Value | ||
Shares | ($000) | |
Texas Instruments Inc. | 174,333 | 18,704 |
Intuit Inc. | 78,530 | 17,858 |
* Zillow Group Inc. | 370,149 | 16,379 |
Xilinx Inc. | 173,822 | 13,935 |
* F5 Networks Inc. | 66,039 | 13,169 |
* Cadence Design Systems Inc. | 281,386 | 12,752 |
Analog Devices Inc. | 133,247 | 12,320 |
Teradyne Inc. | 278,127 | 10,285 |
Accenture plc Class A | 60,387 | 10,278 |
Maxim Integrated Products Inc. | 175,379 | 9,890 |
* Fair Isaac Corp. | 39,103 | 8,937 |
* Advanced Micro Devices Inc. | 287,515 | 8,881 |
* PayPal Holdings Inc. | 92,043 | 8,085 |
Paychex Inc. | 109,173 | 8,041 |
* ANSYS Inc. | 37,925 | 7,080 |
Dolby Laboratories Inc. Class A | 92,662 | 6,484 |
* eBay Inc. | 188,271 | 6,217 |
* IPG Photonics Corp. | 34,239 | 5,344 |
Progress Software Corp. | 105,570 | 3,726 |
* Aspen Technology Inc. | 32,670 | 3,721 |
* CoreLogic Inc. | 73,819 | 3,647 |
* Manhattan Associates Inc. | 44,102 | 2,408 |
* CACI International Inc. Class A | 13,044 | 2,402 |
* First Data Corp. Class A | 97,859 | 2,395 |
Total System Services Inc. | 22,227 | 2,195 |
* Zillow Group Inc. Class A | 44,560 | 1,970 |
* Adobe Systems Inc. | 6,410 | 1,730 |
* Cardtronics plc Class A | 44,824 | 1,418 |
* Unisys Corp. | 66,251 | 1,351 |
* SailPoint Technologies Holding Inc. | 35,925 | 1,222 |
* Verint Systems Inc. | 23,127 | 1,159 |
Genpact Ltd. | 37,418 | 1,145 |
Broadridge Financial Solutions Inc. | 8,611 | 1,136 |
Alliance Data Systems Corp. | 4,494 | 1,061 |
* Apptio Inc. Class A | 21,537 | 796 |
* Diodes Inc. | 23,810 | 793 |
* Sykes Enterprises Inc. | 25,075 | 764 |
* QuinStreet Inc. | 48,382 | 657 |
* Fortinet Inc. | 6,218 | 574 |
* Stamps.com Inc. | 2,426 | 549 |
* NETGEAR Inc. | 6,315 | 397 |
AVX Corp. | 17,846 | 322 |
* Vishay Precision Group Inc. | 8,519 | 319 |
* Cargurus Inc. | 5,115 | 285 |
QAD Inc. Class A | 4,457 | 252 |
* OneSpan Inc. | 10,216 | 195 |
* Photronics Inc. | 18,641 | 184 |
* PCM Inc. | 8,588 | 168 |
* Finjan Holdings Inc. | 37,350 | 161 |
* MoneyGram International Inc. | 20,092 | 107 |
TransAct Technologies Inc. | 3,048 | 44 |
* Information Services Group Inc. | 7,003 | 33 |
* Computer Task Group Inc. | 3,825 | 20 |
* Lantronix Inc. | 1,406 | 6 |
* eGain Corp. | 331 | 3 |
735,539 | ||
Materials (1.8%) | ||
Praxair Inc. | 185,900 | 29,880 |
Martin Marietta Materials Inc. | 111,391 | 20,268 |
PPG Industries Inc. | 103,098 | 11,251 |
Albemarle Corp. | 99,016 | 9,880 |
Warrior Met Coal Inc. | 307,299 | 8,309 |
24
Vanguard® Global Equity Fund | |||||
Schedule of Investments | |||||
September 30, 2018 | |||||
Market | |||||
Value | |||||
Shares | ($000) | ||||
Domtar Corp. | 145,286 | 7,580 | |||
* | Axalta Coating Systems Ltd. | 214,087 | 6,243 | ||
Mercer International Inc. | 175,159 | 2,943 | |||
* | Resolute Forest Products Inc. | 182,358 | 2,361 | ||
Boise Cascade Co. | 56,778 | 2,089 | |||
* | Verso Corp. | 43,190 | 1,454 | ||
Schnitzer Steel Industries Inc. | 34,688 | 938 | |||
* | Ingevity Corp. | 7,697 | 784 | ||
Louisiana-Pacific Corp. | 9,843 | 261 | |||
* | Universal Stainless & Alloy Products Inc. | 7,361 | 188 | ||
Myers Industries Inc. | 6,591 | 153 | |||
Huntsman Corp. | 4,455 | 121 | |||
* | UFP Technologies Inc. | 1,387 | 51 | ||
104,754 | |||||
Real Estate (0.5%) | |||||
Rayonier Inc. | 307,117 | 10,384 | |||
* | Howard Hughes Corp. | 62,457 | 7,758 | ||
Weyerhaeuser Co. | 146,301 | 4,721 | |||
RMR Group Inc. Class A | 35,311 | 3,277 | |||
Xenia Hotels & Resorts Inc. | 50,947 | 1,208 | |||
NexPoint Residential Trust Inc. | 2,540 | 84 | |||
27,432 | |||||
Telecommunication Services (0.1%) | |||||
* | United States Cellular Corp. | 55,292 | 2,476 | ||
* | Vonage Holdings Corp. | 85,002 | 1,204 | ||
Telephone & Data Systems Inc. | 32,605 | 992 | |||
Shenandoah Telecommunications Co. | 13,503 | 523 | |||
5,195 | |||||
Utilities (0.0%) | |||||
Atlantica Yield plc | 5,106 | 105 | |||
2,770,894 | |||||
Total Common Stocks (Cost $4,294,061) | 5,554,825 | ||||
Market | |||||
Value | |||||
Coupon | Shares | ($000) | |||
Temporary Cash Investments (4.6%)1 | |||||
Money Market Fund (4.5%) | |||||
4,5 | Vanguard Market Liquidity Fund | 2.209% | 2,562,926 | 256,293 | |
Face | Market | ||||
Maturity | Amount | Value | |||
Coupon | Date | ($000) | ($000) | ||
U.S. Government and Agency Obligations (0.1%) | |||||
6 | United States Treasury Bill | 1.918% | 10/4/18 | 100 | 100 |
6 | United States Treasury Bill | 2.034%-2.078% | 11/15/18 | 4,400 | 4,389 |
6 | United States Treasury Bill | 2.033% | 11/23/18 | 1,500 | 1,495 |
6 | United States Treasury Bill | 2.199% | 1/24/19 | 2,000 | 1,986 |
7,970 | |||||
Total Temporary Cash Investments (Cost $264,273) | 264,263 | ||||
Total Investments (100.9%) (Cost $4,558,334) | 5,819,088 | ||||
Other Assets and Liabilities—Net (-0.9%)5,7 | (50,036) | ||||
Net Assets (100%) | 5,769,052 | ||||
* | Non-income-producing security. | ||||
^ | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $58,094,000. | ||||
25 |
Vanguard® Global Equity Fund
Schedule of Investments
September 30, 2018
§ Security value determined using significant unobservable inputs.
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 98.6% and 2.3%, respectively, of net assets.
2 Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30, 2018, the aggregate value of these securities was $24,315,000,
representing 0.4% of net assets.
3 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day
yield.
5 Includes $62,988,000 of collateral received for securities on loan.
6 Securities with a value of $6,282,000 have been segregated as initial margin for open futures contracts.
7 Cash of $430,000 has been segregated as collateral for open forward currency contracts.
ADR—American Depositary Receipt.
GDR—Global Depositary Receipt.
NVDR—Non-Voting Depository Receipt.
REIT—Real Estate Investment Trust.
26
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© 2018 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SNA1290 112018
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Vanguard Horizon Funds and Shareholders of Vanguard Global Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of net assets—investments summary and statement of assets and liabilities of Vanguard Global Equity Fund (one of the funds constituting Vanguard Horizon Funds, referred to hereafter as the "Fund”) as of September 30, 2018, the related statement of operations for the year ended September 30, 2018, the statement of changes in net assets for each of the two years in the period ended September 30, 2018, including the related notes, and the financial highlights for each of the five years in the period ended September 30, 2018 (included in Item 1 of this Form N-CSR) and the schedule of investments (included in Item 6 of this Form N-CSR) as of September 30, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended September 30, 2018 and the financial highlights for each of the five years in the period ended September 30, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of September 30, 2018 by correspondence with the custodians and brokers and by agreement to the underlying ownership records of the transfer agent; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
November 15, 2018
We have served as the auditor of one or more investment companies in The Vanguard Group of Funds
since 1975.
PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1800, 2001 Market Street, Philadelphia, PA 19103-7042
T: (267) 330 3000, F: (267) 330 3300, www.pwc.com/us
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) Code of Ethics.
(b) Certifications.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VANGUARD HORIZON FUNDS | |
BY: | /s/ MORTIMER J. BUCKLEY* |
MORTIMER J. BUCKLEY | |
CHIEF EXECUTIVE OFFICER | |
Date: November 16, 2018 |
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 HORIZON FUNDS | |
BY: | /s/ MORTIMER J. BUCKLEY * |
MORTIMER J. BUCKLEY | |
CHIEF EXECUTIVE OFFICER | |
Date: November 16, 2018 | |
| VANGUARD HORIZON FUNDS |
BY: | /s/ THOMAS J. HIGGINS* |
THOMAS J. HIGGINS | |
CHIEF FINANCIAL OFFICER | |
Date: November 16, 2018 |
* 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.