Annual Report  |  August 31, 2020

 

 

Vanguard U.S. Sector Index Funds

 

 

 

 

 

 

 

 

 

 

Vanguard Communication Services Index Fund

 

Vanguard Consumer Discretionary Index Fund

 

Vanguard Consumer Staples Index Fund

 

Vanguard Energy Index Fund

 

Vanguard Financials Index Fund

 

Vanguard Health Care Index Fund

 

Vanguard Industrials Index Fund

 

Vanguard Information Technology Index Fund

 

Vanguard Materials Index Fund

 

Vanguard Utilities Index Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

 

 

Contents  
   
Your Fund’s Performance at a Glance 1
About Your Fund’s Expenses 2
Communication Services Index Fund 4
Consumer Discretionary Index Fund 16
Consumer Staples Index Fund 29
Energy Index Fund 41
Financials Index Fund 54
Health Care Index Fund 68
Industrials Index Fund 83
Information Technology Index Fund 96
Materials Index Fund 109
Utilities Index Fund 121
Trustees Approve Advisory Arrangements 135
Liquidity Risk Management 136

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

 

 

Your Fund’s Performance at a Glance

 

 

·   For the 12 months ended August 31, 2020, returns for the Vanguard U.S. Sector Index Funds ranged from about –34% to more than 55%. All ten funds closely tracked their target indexes.

 

·   A number of stock market indexes around the world climbed to record highs in February. Then they plummeted as the spread of the coronavirus outside of China led to lockdowns, the shuttering of nonessential businesses, and travel restrictions in many countries. However, the unprecedented scale of the response from policymakers, progress on vaccines and treatments, and the easing of some pandemic-related restrictions helped lift investor sentiment.

 

·   Seven of the funds had positive returns, led by Vanguard Information Technology Index, Consumer Discretionary Index, Communication Services Index, and Health Care Index Funds. Three funds lost ground, most notably Vanguard Energy Index Fund.

 

 

 

 

Market Barometer  
  Average Annual Total Returns
  Periods Ended August 31, 2020
  One Year Three Years Five Years
Stocks      
Russell 1000 Index (Large-caps) 22.50% 14.58% 14.31%
Russell 2000 Index (Small-caps) 6.02 5.03 7.65
Russell 3000 Index (Broad U.S. market) 21.44 13.95 13.86
FTSE All-World ex US Index (International) 8.78 2.92 6.00
       
Bonds      
Bloomberg Barclays U.S. Aggregate Bond Index (Broad taxable market) 6.47% 5.09% 4.33%
Bloomberg Barclays Municipal Bond Index (Broad tax-exempt market) 3.24 4.09 3.99
FTSE Three-Month U.S. Treasury Bill Index 1.18 1.67 1.15
       
CPI      
Consumer Price Index 1.31% 1.92% 1.75%

 

1

 

 

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.

 

2

 

 

Six Months Ended August 31, 2020        
    Beginning Ending Expenses
    Account Value Account Value Paid During
Index Fund Share Class 2/29/2020 8/31/2020 Period
Based on Actual Fund Return        
Communication Services ETF $1,000.00 $1,216.87 $0.56
  Admiral 1,000.00 1,216.94 0.56
Consumer Discretionary ETF $1,000.00 $1,402.07 $0.60
  Admiral 1,000.00 1,402.31 0.60
Consumer Staples ETF $1,000.00 $1,150.09 $0.54
  Admiral 1,000.00 1,150.25 0.54
Energy ETF $1,000.00 $804.13 $0.45
  Admiral 1,000.00 804.86 0.45
Financials ETF $1,000.00 $937.28 $0.49
  Admiral 1,000.00 937.45 0.49
Health Care ETF $1,000.00 $1,192.22 $0.55
  Admiral 1,000.00 1,192.36 0.55
Industrials ETF $1,000.00 $1,067.75 $0.52
  Admiral 1,000.00 1,067.95 0.52
Information Technology ETF $1,000.00 $1,403.40 $0.60
  Admiral 1,000.00 1,403.84 0.60
Materials ETF $1,000.00 $1,193.71 $0.55
  Admiral 1,000.00 1,193.87 0.55
Utilities ETF $1,000.00 $964.15 $0.49
  Admiral 1,000.00 964.22 0.49
Based on Hypothetical 5% Yearly Return        
Communication Services ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Consumer Discretionary ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Consumer Staples ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Energy ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Financials ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Health Care ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Industrials ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Information Technology ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Materials ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51
Utilities ETF $1,000.00 $1,024.63 $0.51
  Admiral 1,000.00 1,024.63 0.51

 

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are 0.10% for the Communication Services Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Consumer Discretionary Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Consumer Staples Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Energy Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Financials Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Health Care Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Industrials Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Information Technology Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Materials Index Fund ETF Shares and 0.10% for the Admiral Shares; 0.10% for the Utilities Index Fund ETF Shares and 0.10% for the 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 (184/366).

 

3

 

 

Communication Services Index Fund

 

 

Performance Summary

 

 

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.

 

 

Cumulative Performance: August 31, 2010–August 31, 2020

Initial Investment of $10,000

 

 

 

      Average Annual Total Returns Final Value
      Periods Ended August 31, 2020 of a $10,000
    One Year Five Years Ten Years Investment
Communication Services Index Fund ETF Shares Net Asset Value 25.15% 8.21% 9.80% $25,461
Communication Services Index Fund ETF Shares Market Price 25.28 8.23 9.81 25,493
Communication Services Spliced Index 25.23 8.14 9.80 25,463
MSCI US IMI/2500 21.48 13.88 14.99 40,426

 

Communication Services Spliced Index: MSCI US IMI/Telecommunication Services 25/50 through May 2, 2018; MSCI US IMI/ Communication Services 25/50 Transition Index through December 2, 2018; MSCI US IMI/Communication Services 25/50 thereafter.

 

          Final Value
          of a $100,000
    One Year Five Years Ten Years Investment
Communication Services Index Fund Admiral Shares 25.16% 8.21% 9.81% $254,956
Communication Services Spliced Index 25.23 8.14 9.80 254,628
MSCI US IMI/2500 21.48 13.88 14.99 404,265

 

 

Cumulative Returns: ETF Shares, August 31, 2010–August 31, 2020

 

      One Year Five Years Ten Years
Communication Services Index Fund ETF Shares Market Price 25.28% 48.50% 154.93%
Communication Services Index Fund ETF Shares Net Asset Value 25.15 48.35 154.61
Communication Services Spliced Index   25.23 47.89 154.63

 

For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Financial Highlights for dividend and capital gains information.

 

4

 

 

Communication Services Index Fund

 

 

Fund Allocation

 

As of August 31, 2020

 

Advertising 1.4%
Alternative Carriers 3.6
Broadcasting 3.6
Cable & Satellite 11.4
Integrated Telecommunication Services 9.7
Interactive Home Entertainment 5.4
Interactive Media & Services 48.0
Movies & Entertainment 12.4
Publishing 1.5
Wireless Telecommunication Services 3.0

 

The table reflects the fund’s investments, except for short-term investments and derivatives. Sector categories are based on the Global Industry Classification Standard (“GICS”), except for the “Other” category (if applicable), which includes securities that have not been provided a GICS classification as of the effective reporting period.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking its target index as closely as possible.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

5

 

 

Communication Services Index Fund

 

 

Financial Statements

 

 

Schedule of Investments

As of August 31, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value·
    Shares ($000)
Common Stocks (99.9%)    
Diversified Telecommunication Services (13.3%)
  Alternative Carriers (3.6%)    
  CenturyLink Inc. 1,688,650 18,153
* Liberty Global plc Class C 670,143 15,420
* GCI Liberty Inc. Class A 187,443 15,142
* Iridium Communications Inc. 401,197 11,237
* Liberty Global plc Class A 450,525 10,529
  Cogent Communications Holdings Inc. 142,576 9,590
* Bandwidth Inc. Class A 59,800 9,417
* Vonage Holdings Corp. 780,847 8,941
* Liberty Latin America Ltd. Class C 391,651 3,736
* Anterix Inc. 37,682 1,648
* Liberty Latin America Ltd. Class A 133,254 1,306
* ORBCOMM Inc. 255,254 1,024
       
  Integrated Telecommunication Services (9.7%)
  Verizon Communications Inc. 2,617,730 155,153
  AT&T Inc. 4,313,137 128,575
* Cincinnati Bell Inc. 153,937 2,318
  ATN International Inc. 37,872 2,196
* Consolidated Communications Holdings Inc. 242,649 1,888
      396,273
Entertainment (17.7%)    
  Interactive Home Entertainment (5.3%)
  Activision Blizzard Inc. 772,458 64,516
* Electronic Arts Inc. 328,494 45,815
* Take-Two Interactive Software Inc. 166,822 28,558
* Zynga Inc. Class A 1,825,325 16,537
* Glu Mobile Inc. 477,799 3,794
       
  Movies & Entertainment (12.4%)  
* Netflix Inc. 264,628 140,136
  Walt Disney Co. 1,003,558 132,339
* Roku Inc. 136,779 23,728
* Live Nation Entertainment Inc. 284,699 16,171
* Liberty Media Corp-Liberty Formula One Class C 382,720 14,918
* Madison Square Garden Sport Corp. Class A 52,631 8,631
  World Wrestling Entertainment Inc. Class A 156,341 6,890
  Cinemark Holdings Inc. 376,837 5,521
* Madison Square Garden Entertainment Corp. Class A 52,332 3,934
* Liberty Media Corp-Liberty Formula One Class A 79,914 2,891
* Lions Gate Entertainment Corp. Class B 304,621 2,760
* Lions Gate Entertainment Corp. Class A 278,736 2,715
* IMAX Corp. 171,849 2,641
* Liberty Media Corp-Liberty Braves Class C 117,755 2,288
  Marcus Corp. 69,337 1,087
^ AMC Entertainment Holdings Inc. Class A 175,799 1,034
* Liberty Media Corp- Liberty Braves Class A 25,717 504
* Reading International Inc. Class A 48,226 198
  Warner Music Group Corp. Class A 1,471 44
      527,650
Interactive Media & Services (47.9%)  
* Facebook Inc. Class A 1,852,722 543,218
* Alphabet Inc. Class C 209,865 342,957
* Alphabet Inc. Class A 204,800 333,728
* Match Group Inc. 325,251 36,324
* Twitter Inc. 885,542 35,935
* Zillow Group Inc. Class C 300,920 25,807
* Snap Inc. 1,121,386 25,332
* Pinterest Inc. Class A 666,012 24,503
* Zillow Group Inc. Class A 161,759 13,795
* IAC/InterActiveCorp 95,701 12,727
  TripAdvisor Inc. 333,481 7,794
* Cargurus Inc. 279,700 6,819
* Yelp Inc. Class A 242,429 5,605
* ANGI Homeservices Inc. Class A 239,519 3,323
* QuinStreet Inc. 156,966 2,064
* Cars.com Inc. 224,555 1,949
* Eventbrite Inc. Class A 164,393 1,767
* TrueCar Inc. 324,316 1,534
* Meet Group Inc. 227,933 1,436
* EverQuote Inc. Class A 23,766 844
* Liberty TripAdvisor Holdings Inc. Class A 240,200 673
      1,428,134
Media (18.0%)    
  Advertising (1.5%)    
  Omnicom Group Inc. 311,420 16,845
  Interpublic Group of Cos. Inc. 745,282 13,236
*,^ Cardlytics Inc. 78,277 5,937
* TechTarget Inc. 80,358 3,188
* Clear Channel Outdoor Holdings Inc. 1,178,333 1,379
* Boston Omaha Corp. Class A 51,029 832
  National CineMedia Inc. 219,935 794
* comScore Inc. 198,757 523
  Emerald Holding Inc. 82,217 227
       
  Broadcasting (3.6%)    
  ViacomCBS Inc. Class B 815,636 22,715
  Fox Corp. Class A 535,109 14,908
* Discovery Communications Inc. Class C 670,740 13,395
  Nexstar Media Group Inc. Class A 125,406 12,040
  Fox Corp. Class B 391,732 10,890
* Discovery Inc. Class A 419,525 9,257
  TEGNA Inc. 697,407 8,732
* Gray Television Inc. 301,452 4,678
  Sinclair Broadcast Group Inc. Class A 171,575 3,570
* AMC Networks Inc. Class A 132,423 3,217
  EW Scripps Co. Class A 163,002 1,813
* iHeartMedia Inc. Class A 196,458 1,811
  Entercom Communications Corp. Class A 403,723 606
* Hemisphere Media Group Inc. 56,487 503
  Entravision Communications Corp. Class A 202,015 307
       
  Cable & Satellite (11.4%)    
  Comcast Corp. Class A 2,959,808 132,629
* Charter Communications Inc. Class A 143,124 88,109
* Liberty Broadband Corp. 132,914 18,620
  Cable One Inc. 9,298 17,111
* DISH Network Corp. Class A 454,774 16,154
* Liberty Broadband Corp. Class A 111,196 15,366
* Altice USA Inc. Class A 554,609 15,296
* Liberty Media Corp-Liberty SiriusXM Class C 352,974 12,705
  Sirius XM Holdings Inc. 1,766,100 10,367
* Liberty Media Corp-Liberty SiriusXM Class A 269,153 9,773
* MSG Networks Inc. 133,369 1,299
* WideOpenWest Inc. 168,715 970
  Loral Space & Communications Inc. 40,407 953
       
  Publishing (1.5%)    
  News Corp. Class A 933,263 14,111
  New York Times Co. Class A 301,577 13,067
  News Corp. Class B 437,299 6,590
  John Wiley & Sons Inc. Class A 150,699 4,770
  Scholastic Corp. 99,680 2,243
  Meredith Corp. 135,201 1,893

 

6

 

 

Communication Services Index Fund

 

 

 

 

 

 

      Market
      Value·
    Shares ($000)
  Gannett Co. Inc. 416,931 721
  Tribune Publishing Co. 41,539 471
      534,621
Wireless Telecommunication Services (3.0%)
* T-Mobile US Inc. 590,093 68,852
  Shenandoah T elecommunications Co. 160,039 8,850
  Telephone and Data Systems Inc. 327,300 7,571
* Boingo Wireless Inc. 141,640 1,840
* United States Cellular Corp. 44,588 1,622
*,^ Gogo Inc. 187,420 963
      89,698
Total Common Stocks
(Cost $2,537,777)
  2,976,376
Temporary Cash Investment (0.3%)  
Money Market Fund (0.3%)    
1,2 Vanguard Market Liquidity Fund, 0.147% (Cost $9,462) 94,641 9,464
Total Investments (100.2%)
(Cost $2,547,239)
  2,985,840
Other Assets and Liabilities—Net (-0.2%)   (4,964)
Net Assets (100%)   2,980,876

 

Cost is in $000.

 

· 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 $5,484,000.

 

1 Collateral of $5,878,000 was received for securities on loan.

 

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.

 

 

 

Derivative Financial Instruments Outstanding as of Period End    
     
Over-the-Counter Total Return Swaps          
        Floating    
        Interest Rate Value and Value and
      Notional Received Unrealized Unrealized
  Termination   Amount (Paid)1 Appreciation (Depreciation)
Reference Entity Date Counterparty ($000) (%) ($000) ($000)
Sirius XM Holdings Inc. 2/2/21 GSI 3,897 (0.161) (73)

 

1 Based on 1-month USD London Interbank Offered Rate (LIBOR) as of the most recent payment date. Floating interest payment received/paid monthly.

 

GSI—Goldman Sachs International.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

7

 

 

Communication Services Index Fund

 

 

Statement of Assets and Liabilities

As of August 31, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $2,537,777) 2,976,376
Affiliated Issuers (Cost $9,462) 9,464
Total Investments in Securities 2,985,840
Investment in Vanguard 115
Receivables for Investment Securities Sold 30,840
Receivables for Accrued Income 797
Receivables for Capital Shares Issued 826
Total Assets 3,018,418
Liabilities  
Payables for Investment Securities Purchased 30,735
Collateral for Securities on Loan 5,878
Payables for Capital Shares Redeemed 714
Payables to Vanguard 142
Unrealized Depreciation—Over-the-Counter Swap Contracts 73
Total Liabilities 37,542
Net Assets 2,980,876
   
   
At August 31, 2020, net assets consisted of:  
   
Paid-in Capital 2,910,458
Total Distributable Earnings (Loss) 70,418
Net Assets 2,980,876
   
ETF Shares—Net Assets  
Applicable to 26,966,985 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 2,913,643
Net Asset Value Per Share—ETF Shares $108.04
   
Admiral Shares—Net Assets  
Applicable to 1,221,048 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 67,233
Net Asset Value Per Share—Admiral Shares $55.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

8

 

 

Communication Services Index Fund

 

 

Statement of Operations

 

 

  Year Ended
  August 31, 2020
  ($000)
Investment Income  
Income  
Dividends 25,836
Interest1 41
Securities Lending—Net 951
Total Income 26,828
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 337
Management and Administrative—ETF Shares 1,489
Management and Administrative—Admiral Shares 39
Marketing and Distribution—ETF Shares 133
Marketing and Distribution—Admiral Shares 4
Custodian Fees 12
Auditing Fees 32
Shareholders’ Reports—ETF Shares 199
Shareholders’ Reports—Admiral Shares 1
Trustees’ Fees and Expenses 1
Total Expenses 2,247
Net Investment Income 24,581
Realized Net Gain (Loss)  
Investment Securities Sold1,2 108,910
Futures Contracts (36)
Swap Contracts (3)
Realized Net Gain (Loss) 108,871
Change in Unrealized Appreciation (Depreciation)  
Investment Securities1 434,938
Swap Contracts (208)
Change in Unrealized Appreciation (Depreciation) 434,730
Net Increase (Decrease) in Net Assets Resulting from Operations 568,182

 

1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $41,000, $6,000, and $1,000, respectively. Purchases and sales are for temporary cash investment purposes.

 

2 Includes $133,403,000 of net gain (loss) resulting from in-kind redemptions.

 

 

Statement of Changes in Net Assets    

 

 

  Year Ended August 31,
  2020 2019
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 24,581 18,049
Realized Net Gain (Loss) 108,871 21,279
Change in Unrealized Appreciation (Depreciation) 434,730 (5,789)
Net Increase (Decrease) in Net Assets Resulting from Operations 568,182 33,539
Distributions1    
ETF Shares (22,506) (14,813)
Admiral Shares (540) (463)
Total Distributions (23,046) (15,276)
Capital Share Transactions    
ETF Shares 364,805 983,508
Admiral Shares 4,709 3,352
Net Increase (Decrease) from Capital Share Transactions 369,514 986,860
Total Increase (Decrease) 914,650 1,005,123
Net Assets    
Beginning of Period 2,066,226 1,061,103
End of Period 2,980,876 2,066,226

 

1 Certain prior-period numbers have been reclassified to conform with current period presentation.

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

9

 

 

Communication Services Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

For a Share Outstanding Year Ended August 31,
Throughout Each Period 2020 2019 2018 2017 2016
Net Asset Value, Beginning of Period $87.24 $86.83 $93.54 $95.16 $83.80
Investment Operations          
Net Investment Income 1.0051 .9171 3.0671 3.1081 2.622
Net Realized and Unrealized Gain (Loss) on Investments 20.743 .316 (6.297) (1.587) 12.811
Total from Investment Operations 21.748 1.233 (3.230) 1.521 15.433
Distributions          
Dividends from Net Investment Income (.948) (.823) (3.480) (3.141) (4.073)
Distributions from Realized Capital Gains
Total Distributions (.948) (.823) (3.480) (3.141) (4.073)
Net Asset Value, End of Period $108.04 $87.24 $86.83 $93.54 $95.16
           
Total Return 25.15% 1.47% -3.50% 1.62% 19.14%
           
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $2,914 $2,016 $1,015 $1,388 $1,483
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of Net Investment Income to Average Net Assets 1.09% 1.09% 3.48% 3.26% 3.10%
Portfolio Turnover Rate2 15% 33% 84% 18% 20%

 

1 Calculated based on average shares outstanding.

 

2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

Admiral Shares

 

For a Share Outstanding Year Ended August 31,
Throughout Each Period 2020 2019 2018 2017 2016
Net Asset Value, Beginning of Period $44.46 $44.25 $47.67 $48.50 $42.71
Investment Operations          
Net Investment Income .5121 .4701 1.5541 1.6011 1.337
Net Realized and Unrealized Gain (Loss) on Investments 10.571 .157 (3.199) (.829) 6.529
Total from Investment Operations 11.083 .627 (1.645) .772 7.866
Distributions          
Dividends from Net Investment Income (.483) (.417) (1.775) (1.602) (2.076)
Distributions from Realized Capital Gains
Total Distributions (.483) (.417) (1.775) (1.602) (2.076)
Net Asset Value, End of Period $55.06 $44.46 $44.25 $47.67 $48.50
           
Total Return2 25.16% 1.46% -3.48% 1.61% 19.14%
           
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $67 $50 $46 $50 $65
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of Net Investment Income to Average Net Assets 1.10% 1.09% 3.48% 3.26% 3.10%
Portfolio Turnover Rate3 15% 33% 84% 18% 20%

 

1 Calculated based on average shares outstanding.

 

2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

10

 

 

Communication Services Index Fund

 

 

 

Notes to Financial Statements

 

 

Vanguard Communication Services Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance.

 

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.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The 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 securities pledged as initial margin for open contracts are noted in the Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Assets and Liabilities. 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 contracts.

 

During the year ended August 31, 2020, 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. The fund had no open futures contracts at August 31, 2020.

 

3. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps 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. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master

 

11

 

 

Communication Services Index Fund

 

 

 

 

 

netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap 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 securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap 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.

 

The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.

 

During the year ended August 31, 2020, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of 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. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for 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 at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

 

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. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. 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 Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes, subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed 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 either facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate (or an acceptable alternate rate, if necessary), federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread, except that borrowings under the uncommitted credit facility may bear interest based upon an alternative rate agreed to by the fund and Vanguard.

 

12

 

 

Communication Services Index Fund

 

 

 

 

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the year ended August 31, 2020, the fund did not utilize the credit facilities or the Interfund Lending Program.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B.     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 and 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 August 31, 2020, the fund had contributed to Vanguard capital in the amount of $115,000, representing less than 0.01% of the fund’s net assets and 0.05% of Vanguard’s capital received pursuant to the FSA. 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 and derivatives. 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 1Quoted prices in active markets for identical securities.

Level 2Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.

 

The following table summarizes the market value of the fund’s investments and derivatives as of August 31, 2020, based on the inputs used to value them:

 

  Level 1   Level 2   Level 3   Total  
  ($000 ) ($000 ) ($000 ) ($000 )
Investments                
Assets                
Common Stocks 2,976,376       2,976,376  
Temporary Cash Investments 9,464       9,464  
Total 2,985,840       2,985,840  
Derivative Financial Instruments                
Liabilities                
Swap Contracts   73     73  

 

13

 

 

Communication Services Index Fund

 

 

 

 

 

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, permanent differences primarily attributable to the accounting for in-kind redemptions and swap agreements were reclassified between the following accounts:

 

  Amount  
  ($000 )
Paid-in Capital 133,403  
Total Distributable Earnings (Loss) (133,403 )

 

Temporary differences between book-basis and tax-basis components of total distributable earnings (loss) 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 deferral of losses from wash sales and the recognition of unrealized gains or losses from certain derivative contracts. As of period end, the tax-basis components of total distributable earnings (loss) are detailed in the table as follows:

 

  Amount  
  ($000 )
Undistributed Ordinary Income 6,600  
Undistributed Long-term Gains  
Capital Loss Carryforwards (374,783 )
Qualified Late-Year Losses  
Net Unrealized Gains (Losses) 438,601  

 

The tax character of distributions paid was as follows:

 

    Year Ended August 31,  
    2020   2019  
    Amount   Amount  
    ($000 ) ($000 )
Ordinary Income*   23,046   15,276  
Long-Term Capital Gains      
Total   23,046   15,276  

 

* Includes short-term capital gains, if any.

 

As of August 31, 2020, 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 2,547,239  
Gross Unrealized Appreciation 582,580  
Gross Unrealized Depreciation (143,979 )
Net Unrealized Appreciation (Depreciation) 438,601  

 

E.     During the year ended August 31, 2020, the fund purchased $1,660,143,000 of investment securities and sold $1,290,004,000 of investment securities, other than temporary cash investments. Purchases and sales include $1,285,915,000 and $962,024,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

14

 

 

Communication Services Index Fund

 

 

 

 

 

F.     Capital share transactions for each class of shares were:

 

            Year Ended August 31,  
      2020         2019  
  Amount   Shares     Amount   Shares  
  ($000 ) (000 )   ($000 ) (000 )
ETF Shares                  
Issued 1,330,015   14,802     1,833,068   21,800  
Issued in Lieu of Cash Distributions          
Redeemed (965,210 ) (10,950 )   (849,560 ) (10,375 )
Net Increase (Decrease)—ETF Shares 364,805   3,852     983,508   11,425  
Admiral Shares                  
Issued 39,541   862     27,900   653  
Issued in Lieu of Cash Distributions 448   10     387   9  
Redeemed (35,280 ) (771 )   (24,935 ) (584 )
Net Increase (Decrease)—Admiral Shares 4,709   101     3,352   78  

 

 

G.     Management has determined that no events or transactions occurred subsequent to August 31, 2020, that would require recognition or disclosure in these financial statements.

 

15

 

 

 

Consumer Discretionary Index Fund

 

 

Performance Summary

 

 

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.

 

Cumulative Performance: August 31, 2010–August 31, 2020 

Initial Investment of $10,000

 

 

 

      Average Annual Total Returns Final Value
      Periods Ended August 31, 2020 of a $10,000
    One Year Five Years Ten Years Investment
Consumer Discretionary Index Fund ETF Shares Net Asset Value 39.98% 17.04% 19.41% $58,919
  Consumer Discretionary Index Fund ETF Shares Market Price 40.17 17.05 19.43 59,031
Consumer Discretionary Spliced Index 40.11 17.13 19.52 59,482
MSCI US IMI/2500 21.48 13.88 14.99 40,426

Consumer Discretionary Spliced Index: MSCI US IMI/Consumer Discretionary 25/50 through May 2, 2018; MSCI US IMI/Consumer Discretionary 25/50 Transition Index through December 2, 2018; MSCI US IMI/Consumer Discretionary 25/50 thereafter.

 

        Final Value
        of a $100,000
  One Year Five Years Ten Years Investment
Consumer Discretionary Index Fund Admiral Shares 40.01% 17.05% 19.41% $589,303
Consumer Discretionary Spliced Index 40.11 17.13 19.52 594,825
MSCI US IMI/2500 21.48 13.88 14.99 404,265

 

Cumulative Returns: ETF Shares, August 31, 2010–August 31, 2020    
     
  One Year Five Years Ten Years
Consumer Discretionary Index Fund ETF Shares Market Price 40.17% 119.73% 490.31%
Consumer Discretionary Index Fund ETF Shares Net Asset Value 39.98 119.64 489.19
Consumer Discretionary Spliced Index 40.11 120.44 494.82

 

For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.

 

 

 

 

 

 

 

 

 

See Financial Highlights for dividend and capital gains information.

 

16

 

 

Consumer Discretionary Index Fund

 

 

 

Fund Allocation 

As of August 31, 2020

 

Apparel Retail 3.8%
Apparel, Accessories & Luxury Goods 2.9
Auto Parts & Equipment 2.4
Automobile Manufacturers 8.9
Automotive Retail 3.6
Casinos & Gaming 2.0
Computer & Electronics Retail 0.8
Consumer Electronics 0.5
Department Stores 0.3
Distributors 1.0
Education Services 1.1
Footwear 3.9
General Merchandise Stores 3.9
Home Furnishings 0.6
Home Improvement Retail 10.9
Homebuilding 3.2
Homefurnishing Retail 0.8
Hotels, Resorts & Cruise Lines 2.8
Household Appliances 0.6
Housewares & Specialties 0.3
Internet & Direct Marketing Retail 29.9
Leisure Facilities 0.5
Leisure Products 1.8
Motorcycle Manufacturers 0.1
Restaurants 10.4
Specialized Consumer Services 0.8
Specialty Stores 2.0
Tires & Rubber 0.2

The table reflects the fund’s investments, except for short-term investments and derivatives. Sector categories are based on the Global Industry Classification Standard (“GICS”), except for the “Other” category (if applicable), which includes securities that have not been provided a GICS classification as of the effective reporting period.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking its target index as closely as possible.

 

 

 

 

 

 

 

 

 

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.

 

17

 

 

Consumer Discretionary Index Fund

 

 

 

Financial Statements

 

 

Schedule of Investments 

As of August 31, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market
      Value
    Shares ($000)
Common Stocks (98.3%)    
Auto Components (2.6%)    
  Aptiv plc 294,302 25,345
  BorgWarner Inc. 253,076 10,272
  Gentex Corp. 304,890 8,247
  Autoliv Inc. 104,421 8,180
  Lear Corp. 70,565 8,040
* Fox Factory Holding Corp. 58,123 5,859
  LCI Industries 38,829 4,412
  Goodyear Tire & Rubber Co. 403,262 3,869
* Dorman Products Inc. 45,259 3,833
  Cooper Tire & Rubber Co. 104,324 3,607
  Dana Inc. 253,273 3,533
* Visteon Corp. 46,368 3,498
*,^ Veoneer Inc. 238,147 3,306
* Delphi Technologies plc 189,674 3,295
* Gentherm Inc. 64,941 2,937
* Adient plc 168,667 2,925
* American Axle & Manufacturing Holdings Inc. 303,856 2,364
  Standard Motor Products Inc. 51,989 2,362
* Stoneridge Inc. 92,576 1,870
* Tenneco Inc. Class A 212,482 1,728
* Motorcar Parts of America Inc. 78,615 1,369
* Modine Manufacturing Co. 200,292 1,356
* Cooper-Standard Holdings Inc. 70,207 1,272
* Garrett Motion Inc. 311,043 855
      114,334
Automobiles (8.8%)    
* Tesla Inc. 620,075 308,996
  General Motors Co. 1,376,841 40,796
  Ford Motor Co. 4,236,906 28,896
  Thor Industries Inc. 71,625 6,763
  Harley-Davidson Inc. 210,733 5,839
  Winnebago Industries Inc. 54,947 2,966
      394,256
Distributors (1.0%)    
  Genuine Parts Co. 165,169 15,598
  Pool Corp. 46,359 15,198
* LKQ Corp. 347,448 11,028
  Core-Mark Holding Co. Inc. 92,605 3,095
* Funko Inc. Class A 78,731 460
      45,379
Diversified Consumer Services (1.8%)  
* Chegg Inc. 144,954 10,689
  Service Corp. International 217,721 9,939
* Bright Horizons Family Solutions Inc. 72,851 9,690
* ServiceMaster Global Holdings Inc. 181,719 7,250
* Grand Canyon Education Inc. 63,474 5,969
* frontdoor Inc. 119,490 5,206
  H&R Block Inc. 289,372 4,196
  Strategic Education Inc. 35,283 3,619
  Graham Holdings Co. Class B 8,043 3,442
* K12 Inc. 92,066 3,426
* Adtalem Global Education Inc. 92,863 3,083
* Laureate Education Inc. Class A 237,917 2,979
* WW International Inc. 103,424 2,428
* Perdoceo Education Corp. 160,149 2,301
* American Public Education Inc. 54,488 1,713
  Carriage Services Inc. Class A 70,128 1,553
  OneSpaWorld Holdings Ltd. 202,286 1,402
* Houghton Mifflin Harcourt Co. 443,419 1,002
* Regis Corp. 103,795 767
      80,654
Hotels, Restaurants & Leisure (15.5%)    
  McDonald’s Corp. 799,198 170,645
  Starbucks Corp. 1,272,559 107,493
* Chipotle Mexican Grill Inc. Class A 28,464 37,296
  Yum! Brands Inc. 325,358 31,186
  Marriott International Inc. Class A 298,974 30,767
  Hilton Worldwide Holdings Inc. 302,283 27,314
  Las Vegas Sands Corp. 383,231 19,434
  Domino’s Pizza Inc. 43,651 17,852
  Royal Caribbean Cruises Ltd. 210,696 14,504
  Darden Restaurants Inc. 150,942 13,082
  MGM Resorts International 558,908 12,575
  Vail Resorts Inc. 47,929 10,433
  Wynn Resorts Ltd. 116,731 10,208
* Caesars Entertainment Inc. 219,362 10,047
  Carnival Corp. 587,252 9,678
* Penn National Gaming Inc. 178,692 9,131
  Churchill Downs Inc. 46,983 8,211
  Aramark 291,834 8,043
  Dunkin’ Brands Group Inc. 103,452 7,871
* Planet Fitness Inc. Class A 107,503 6,535
  Wingstop Inc. 39,904 6,520
  Wyndham Hotels & Resorts Inc. 123,338 6,458
*,^ Norwegian Cruise Line Holdings Ltd. 350,146 5,991
  Texas Roadhouse Inc. Class A 91,940 5,791
  Marriott Vacations Worldwide Corp. 57,229 5,418
  Wendy’s Co. 258,690 5,417
  Choice Hotels International Inc. 52,452 5,208
  Cracker Barrel Old Country Store Inc. 35,298 4,720
  Papa John’s International Inc. 44,470 4,371
  Brinker International Inc. 96,713 4,356
* Shake Shack Inc. Class A 60,261 4,113
  Boyd Gaming Corp. 148,525 3,977
  Wyndham Destinations Inc. 135,726 3,935
  Extended Stay America Inc. 291,091 3,636
  Hyatt Hotels Corp. Class A 61,588 3,479
  Jack in the Box Inc. 40,509 3,338
* Hilton Grand Vacations Inc. 147,707 3,236
  Six Flags Entertainment Corp. 146,279 3,179
  Red Rock Resorts Inc. Class A 177,876 3,037
^ Cheesecake Factory Inc. 101,935 3,010
* Scientific Games Corp. 145,331 3,006
  Bloomin’ Brands Inc. 187,082 2,683
  Dine Brands Global Inc. 44,850 2,671
* SeaWorld Entertainment Inc. 127,400 2,599
  BJ’s Restaurants Inc. 79,507 2,506
  Dave & Buster’s Entertainment Inc. 147,161 2,447
* Everi Holdings Inc. 306,358 2,377
* Denny’s Corp. 201,119 2,305
* Monarch Casino & Resort Inc. 47,540 2,187
* Accel Entertainment Inc. 174,807 2,073
  Twin River Worldwide Holdings Inc. 68,916 1,649
* Chuy’s Holdings Inc. 68,954 1,534
* El Pollo Loco Holdings Inc. 79,591 1,422
  Ruth’s Hospitality Group Inc. 134,540 1,382
* Lindblad Expeditions Holdings Inc. 123,605 1,224
* Carrols Restaurant Group Inc. 153,584 1,023
* Del Taco Restaurants Inc. 115,915 975
* Golden Entertainment Inc 75,592 971
* Playa Hotels & Resorts NV 215,768 911
* Fiesta Restaurant Group Inc. 80,371 805
  BBX Capital Corp. Class A 48,914 753
* Red Robin Gourmet Burgers Inc. 44,612 495
* PlayAGS Inc. 116,495 466
* Biglari Holdings Inc. Class B 3,810 378
* Target Hospitality Corp. 146,960 213
      690,550

 

18

 

 

Consumer Discretionary Index Fund

 

 

 

 

      Market
      Value
    Shares ($000)
Household Durables (5.1%)    
  DR Horton Inc. 381,374 27,219
  Lennar Corp. Class A 303,425 22,702
  Garmin Ltd. 161,705 16,754
* NVR Inc. 3,974 16,565
  PulteGroup Inc. 315,519 14,069
  Whirlpool Corp. 74,560 13,251
  Newell Brands Inc. 506,242 8,090
  Leggett & Platt Inc. 176,635 7,242
  Toll Brothers Inc. 170,347 7,192
* Mohawk Industries Inc. 77,824 7,185
* TopBuild Corp. 46,345 7,128
* Helen of Troy Ltd. 32,914 6,807
* Tempur Sealy International Inc. 71,037 6,077
* Meritage Homes Corp. 56,978 5,472
* Taylor Morrison Home Corp. Class A 202,121 4,756
  KB Home 123,466 4,415
* LGI Homes Inc. 36,525 4,086
  MDC Holdings Inc. 93,227 4,044
* Installed Building Products Inc. 45,391 3,941
* TRI Pointe Group Inc. 232,123 3,918
* iRobot Corp. 47,139 3,490
  Tupperware Brands Corp. 202,738 3,303
  La-Z-Boy Inc. 97,362 3,164
* Cavco Industries Inc. 15,945 3,044
* Sonos Inc. 215,552 3,033
* Skyline Champion Corp. 104,904 2,994
* M/I Homes Inc. 68,844 2,930
* Century Communities Inc. 73,241 2,613
* GoPro Inc. Class A 415,600 1,908
* Universal Electronics Inc. 44,598 1,832
* Green Brick Partners Inc. 104,524 1,488
* Beazer Homes USA Inc. 120,044 1,469
  Ethan Allen Interiors Inc. 97,941 1,395
  Hooker Furniture Corp. 49,213 1,213
* Lovesac Co. 45,211 1,197
* Legacy Housing Corp. 35,457 541
      226,527
Internet & Direct Marketing Retail (29.4%)
* Amazon.com Inc. 294,313 1,015,662
* Booking Holdings Inc. 45,498 86,922
* MercadoLibre Inc. 47,689 55,729
  eBay Inc. 872,354 47,787
* Wayfair Inc. 72,997 21,648
* Etsy Inc. 137,339 16,439
  Expedia Group Inc. 155,217 15,234
* Overstock.com Inc. 102,788 8,994
* Grubhub Inc. 114,924 8,315
* Qurate Retail Group Inc. QVC Group Class A 549,332 6,070
* Stamps.com Inc. 23,281 5,805
* Chewy Inc. 93,353 5,701
  Shutterstock Inc. 52,305 2,632
*,^ Stitch Fix Inc. Class A 108,476 2,620
* Quotient Technology Inc. 271,599 2,366
* Groupon Inc. Class A 73,390 2,336
* 1-800-Flowers.com Inc. Class A 76,569 2,292
  PetMed Express Inc. 60,697 2,110
* RealReal Inc. 88,969 1,429
*,^ Revolve Group Inc. 65,573 1,317
* Duluth Holdings Inc. 84,252 815
* Lands’ End Inc. 53,118 711
      1,312,934
Leisure Products (1.7%)    
* Peloton Interactive Inc. Class A 221,830 17,008
  Hasbro Inc. 151,328 11,946
  Polaris Inc. 74,840 7,562
  Brunswick Corp. 103,546 6,408
* YETI Holdings Inc. 117,236 6,023
* Mattel Inc. 501,331 5,387
* Vista Outdoor Inc. 211,099 4,097
  Callaway Golf Co. 176,933 3,691
* Smith & Wesson Brands Inc. 171,205 3,126
  Acushnet Holdings Corp. 77,802 2,746
  Sturm Ruger & Co. Inc. 37,380 2,649
* Malibu Boats Inc. Class A 46,130 2,392
  Johnson Outdoors Inc. Class A 23,822 2,042
* MasterCraft Boat Holdings Inc. 78,161 1,634
* American Outdoor Brands Inc. 42,920 654
      77,365
Multiline Retail (4.2%)    
  Target Corp. 538,880 81,484
  Dollar General Corp. 273,350 55,184
* Dollar Tree Inc. 258,622 24,898
* Ollie’s Bargain Outlet Holdings Inc. 73,749 7,046
  Kohl’s Corp. 227,763 4,865
^ Macy’s Inc. 544,848 3,798
  Big Lots Inc. 77,314 3,645
^ Nordstrom Inc. 200,092 3,201
^ Dillard’s Inc. Class A 35,813 1,082
      185,203
Other (0.0%)1    
*,§ Media General Inc. CVR 69,182 3
       
Specialty Retail (21.5%)    
  Home Depot Inc. 1,154,883 329,188
  Lowe’s Cos. Inc. 835,512 137,600
  TJX Cos. Inc. 1,279,737 70,117
* O’Reilly Automotive Inc. 82,479 38,405
  Ross Stores Inc. 386,746 35,225
* AutoZone Inc. 25,949 31,043
  Best Buy Co. Inc. 254,936 28,275
  Tractor Supply Co. 131,597 19,586
* CarMax Inc. 183,140 19,583
* Carvana Co. Class A 78,921 17,044
  Tiffany & Co. 123,379 15,114
* Burlington Stores Inc. 74,870 14,744
* Ulta Beauty Inc. 61,553 14,291
  Advance Auto Parts Inc. 79,958 12,498
  L Brands Inc. 334,912 9,846
  Williams-Sonoma Inc. 96,860 8,500
  Lithia Motors Inc. Class A 33,398 8,315
* Floor & Decor Holdings Inc. Class A 108,656 7,958
* Five Below Inc. 70,054 7,667
* Rh 22,322 7,379
  Gap Inc. 381,953 6,642
  Aaron’s Inc. 104,628 5,848
  Dick’s Sporting Goods Inc. 106,088 5,741
* Murphy USA Inc. 40,020 5,397
* AutoNation Inc. 90,313 5,135
* National Vision Holdings Inc. 128,850 4,841
  Foot Locker Inc. 156,199 4,738
* At Home Group Inc. 212,500 4,061
  Bed Bath & Beyond Inc. 326,639 3,978
* Asbury Automotive Group Inc. 36,924 3,906
  American Eagle Outfitters Inc. 298,594 3,765
*,^ Michaels Cos. Inc. 304,053 3,421
  Group 1 Automotive Inc. 39,332 3,400
* Sleep Number Corp. 67,396 3,235
  Penske Automotive Group Inc. 66,838 3,153
* Urban Outfitters Inc. 133,493 3,142
  Sonic Automotive Inc. Class A 73,724 3,116
  Rent-A-Center Inc. 98,740 3,031
  Signet Jewelers Ltd. 175,374 3,029
* Lumber Liquidators Holdings Inc. 119,258 2,861
  Camping World Holdings Inc. Class A 97,790 2,842
  Monro Inc. 61,612 2,840
  ODP Corp. 118,313 2,766
* MarineMax Inc. 89,352 2,628
* Sally Beauty Holdings Inc. 229,642 2,563
  Abercrombie & Fitch Co. 192,694 2,507
* Boot Barn Holdings Inc. 82,994 2,343
* America’s Car-Mart Inc. 23,267 2,338
* Hibbett Sports Inc. 67,976 2,268
  Buckle Inc. 109,563 2,053
* Zumiez Inc. 79,773 2,049
  Guess? Inc. 163,873 1,885
  Winmark Corp. 11,954 1,846
  Designer Brands Inc. Class A 251,305 1,772
*,^ GameStop Corp. Class A 238,249 1,591
  Haverty Furniture Cos. Inc. 67,398 1,423
  Caleres Inc. 166,468 1,300
  Shoe Carnival Inc. 38,317 1,260
* Conn’s Inc. 90,589 1,158
  Children’s Place Inc. 56,794 1,134
* Genesco Inc. 57,830 1,128
  Cato Corp. Class A 89,223 714
  Chico’s FAS Inc. 478,483 612
* Express Inc. 248,858 276
      958,114
Textiles, Apparel & Luxury Goods (6.7%)
  NIKE Inc. Class B 1,317,126 147,373
* Lululemon Athletica Inc. 132,310 49,705
  VF Corp. 367,249 24,147
  Hanesbrands Inc. 494,206 7,556
* Deckers Outdoor Corp. 36,356 7,412
  PVH Corp. 100,564 5,608
* Skechers USA Inc. Class A 186,524 5,568
  Tapestry Inc. 376,260 5,542
  Carter’s Inc. 61,821 4,922
  Ralph Lauren Corp. Class A 69,236 4,766
* Crocs Inc. 116,220 4,638
  Columbia Sportswear Co. 48,550 4,154
  Wolverine World Wide Inc. 146,922 3,670
* Capri Holdings Ltd. 231,301 3,664
* Under Armour Inc. Class A 348,459 3,418
* Under Armour Inc. Class C 357,274 3,162
  Steven Madden Ltd. 146,848 3,107
  Kontoor Brands Inc. 132,196 2,922
  Oxford Industries Inc. 48,177 2,386

 

19

 

 

Consumer Discretionary Index Fund

 

 

 

 

 

      Market
      Value
    Shares ($000)
  Levi Strauss & Co. Class A 172,883 2,130
* G-III Apparel Group Ltd. 172,594 1,909
* Fossil Group Inc. 200,123 1,288
  Movado Group Inc. 68,401 746
* Unifi Inc. 57,995 709
* Vera Bradley Inc. 96,530 509
      301,011
Total Common Stocks
(Cost $3,228,250)
  4,386,330
Temporary Cash Investment (1.6%)    
2,3 Vanguard Market Liquidity Fund, 0.147% (Cost $72,433) 724,497 72,450
Total Investments (99.9%)
(Cost $3,300,683)
  4,458,780
Other Assets and Liabilities—Net (0.1%)   4,181
Net Assets (100%)   4,462,961

 

Cost is in $000.

 

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 $15,242,000.
     
§ Security value determined using significant unobservable inputs.
     
1 “Other” represents securities that are not classified by the fund’s benchmark index.
     
2 Collateral of $16,252,000 was 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.
     
CVR—Contingent Value Rights.

 

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 2020 9 1,570 (3)

 

Over-the-Counter Total Return Swaps          
        Floating    
        Interest Rate Value and Value and
      Notional Received Unrealized Unrealized
  Termination   Amount (Paid)1 Appreciation (Depreciation)
Reference Entity Date Counterparty ($000) (%) ($000) ($000)
Tesla Inc. 2/2/21 GSI 55,069 (0.161) 19,676

 

1 Based on 1-month USD London Interbank Offered Rate (LIBOR) as of the most recent payment date. Floating interest payment received/ paid monthly.

 

GSI—Goldman Sachs International.

 

At August 31, 2020, a counterparty had deposited in a segregated account securities with a value of $11,743,000 in connection with open over-the-counter swap contracts. After August 31, 2020, the counterparty posted additional collateral of $8,310,000 in connection with open over-the-counter swap contracts as of September 1, 2020.

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

20

 

 

Consumer Discretionary Index Fund

 

 

 

Statement of Assets and Liabilities

As of August 31, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $3,228,250) 4,386,330
Affiliated Issuers (Cost $72,433) 72,450
Total Investments in Securities 4,458,780
Investment in Vanguard 165
Cash Collateral Pledged—Futures Contracts 110
Receivables for Investment Securities Sold 19,300
Receivables for Accrued Income 2,651
Receivables for Capital Shares Issued 1,461
Unrealized Appreciation—Over-the-Counter Swap Contracts 19,676
Total Assets 4,502,143
Liabilities  
Payables for Investment Securities Purchased 20,229
Collateral for Securities on Loan 16,252
Payables for Capital Shares Redeemed 2,487
Payables to Vanguard 211
Variation Margin Payable—Futures Contracts 3
Total Liabilities 39,182
Net Assets 4,462,961
   
   
At August 31, 2020, net assets consisted of:  
   
Paid-in Capital 3,360,485
Total Distributable Earnings (Loss) 1,102,476
Net Assets 4,462,961
   
ETF Shares—Net Assets  
Applicable to 16,310,352 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 4,026,379
Net Asset Value Per Share—ETF Shares $246.86
   
Admiral Shares—Net Assets  
Applicable to 3,416,728 outstanding $.001 par value shares of beneficial interest (unlimited authorization) 436,582
Net Asset Value Per Share—Admiral Shares $127.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

21

 

  

Consumer Discretionary Index Fund

 

 

Statement of Operations

 

 

 

  Year Ended
  August 31, 2020
  ($000)
Investment Income  
Income  
Dividends 37,314
Interest1 140
Securities Lending—Net 1,061
Total Income 38,515
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 497
Management and Administrative—ETF Shares 2,189
Management and Administrative—Admiral Shares 238
Marketing and Distribution—ETF Shares 152
Marketing and Distribution—Admiral Shares 22
Custodian Fees 23
Auditing Fees 32
Shareholders’ Reports—ETF Shares 163
Shareholders’ Reports—Admiral Shares 7
Trustees’ Fees and Expenses 2
Total Expenses 3,325
Expenses Paid Indirectly (5)
Net Expenses 3,320
Net Investment Income 35,195
Realized Net Gain (Loss)  
Investment Securities Sold1,2 413,684
Futures Contracts 48
Swap Contracts 48,435
Realized Net Gain (Loss) 462,167
Change in Unrealized Appreciation (Depreciation)  
Investment Securities1 688,751
Futures Contracts (3)
Swap Contracts 19,381
Change in Unrealized Appreciation (Depreciation) 708,129
Net Increase (Decrease) in Net Assets Resulting from Operations 1,205,491

 

1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $140,000, $3,000, and $15,000, respectively. Purchases and sales are for temporary cash investment purposes.

 

2 Includes $457,054,000 of net gain (loss) resulting from in-kind redemptions.

 

Statement of Changes in Net Assets

 

  Year Ended August 31,
  2020 2019
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 35,195 38,231
Realized Net Gain (Loss) 462,167 198,044
Change in Unrealized Appreciation (Depreciation) 708,129 (297,760)
Net Increase (Decrease) in Net Assets Resulting from Operations 1,205,491 (61,485)
Distributions1    
ETF Shares (36,170) (34,304)
Admiral Shares (3,859) (3,668)
Total Distributions (40,029) (37,972)
Capital Share Transactions    
ETF Shares (74,809) (55,912)
Admiral Shares 2,845 (1,729)
Net Increase (Decrease) from Capital Share Transactions (71,964) (57,641)
Total Increase (Decrease) 1,093,498 (157,098)
Net Assets    
Beginning of Period 3,369,463 3,526,561
End of Period 4,462,961 3,369,463

 

1 Certain prior-period numbers have been reclassified to conform with current period presentation.

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

22

 

 

Consumer Discretionary Index Fund

 

 

 

Financial Highlights

 

 

 

ETF Shares          
           
For a Share Outstanding Year Ended August 31,
Throughout Each Period 2020 2019 2018 2017 2016
Net Asset Value, Beginning of Period $178.51 $180.85 $141.74 $126.45 $120.80
Investment Operations          
Net Investment Income 1.9981 2.0521 2.0661 2.0681 1.875
Net Realized and Unrealized Gain (Loss) on Investments 68.603 (2.391) 39.031 15.248 6.259
Total from Investment Operations 70.601 (.339) 41.097 17.316 8.134
Distributions          
Dividends from Net Investment Income (2.251) (2.001) (1.987) (2.026) (2.484)
Distributions from Realized Capital Gains
Total Distributions (2.251) (2.001) (1.987) (2.026) (2.484)
Net Asset Value, End of Period $246.86 $178.51 $180.85 $141.74 $126.45
           
Total Return 39.98% -0.14% 29.22% 13.81% 6.84%
           
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $4,026 $3,049 $3,199 $2,198 $1,926
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of Net Investment Income to Average Net Assets 1.06% 1.20% 1.28% 1.53% 1.54%
Portfolio Turnover Rate2 10% 9% 28% 6% 7%

 

1 Calculated based on average shares outstanding.

 

2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

Admiral Shares

 

For a Share Outstanding Year Ended August 31,
Throughout Each Period 2020 2019 2018 2017 2016
Net Asset Value, Beginning of Period $92.40 $93.61 $73.36 $65.45 $62.53
Investment Operations          
Net Investment Income 1.0331 1.0581 1.0731 1.0711 .971
Net Realized and Unrealized Gain (Loss) on Investments 35.512 (1.232) 20.205 7.890 3.239
Total from Investment Operations 36.545 (.174) 21.278 8.961 4.210
Distributions          
Dividends from Net Investment Income (1.165) (1.036) (1.028) (1.051) (1.290)
Distributions from Realized Capital Gains
Total Distributions (1.165) (1.036) (1.028) (1.051) (1.290)
Net Asset Value, End of Period $127.78 $92.40 $93.61 $73.36 $65.45
           
Total Return2 40.01% -0.14% 29.24% 13.81% 6.83%
           
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $437 $321 $328 $204 $169
Ratio of Total Expenses to Average Net Assets 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of Net Investment Income to Average Net Assets 1.06% 1.20% 1.28% 1.53% 1.54%
Portfolio Turnover Rate3 10% 9% 28% 6% 7%

 

1 Calculated based on average shares outstanding.

 

2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

 

3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

23

 

 

Consumer Discretionary Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Consumer Discretionary Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance.

 

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.

 

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The 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 securities pledged as initial margin for open contracts are noted in the Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Assets and Liabilities. 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 contracts.

 

During the year ended August 31, 2020, 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. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

 

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps 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,

 

24

 

 

Consumer Discretionary Index Fund

 

 

 

the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, 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 swap 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 securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap 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.

 

The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.

 

During the year ended August 31, 2020, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of 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. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for 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 at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

 

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. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. 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 Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes, subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed 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

 

25

 

 

Consumer Discretionary Index Fund

 

 

 

Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate (or an acceptable alternate rate, if necessary), federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread, except that borrowings under the uncommitted credit facility may bear interest based upon an alternative rate agreed to by the fund and Vanguard.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the year ended August 31, 2020, the fund did not utilize the credit facilities or the Interfund Lending Program.

 

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

 

B. 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 and 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 August 31, 2020, the fund had contributed to Vanguard capital in the amount of $165,000, representing less than 0.01% of the fund’s net assets and 0.07% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C. The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the year ended August 31, 2020, custodian fee offset arrangements reduced the fund’s expenses by $5,000 (an annual rate of less than 0.01% of average net assets).

 

D. Various inputs may be used to determine the value of the fund’s investments and derivatives. 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 1Quoted prices in active markets for identical securities.

Level 2Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.

 

26

 

 

Consumer Discretionary Index Fund

 

 

 

The following table summarizes the market value of the fund’s investments and derivatives as of August 31, 2020, based on the inputs used to value them:

 

  Level 1   Level 2   Level 3   Total  
  ($000 ) ($000 ) ($000 ) ($000 )
Investments                
Assets                
Common Stocks 4,386,327     3   4,386,330  
Temporary Cash Investments 72,450       72,450  
Total 4,458,777     3   4,458,780  
Derivative Financial Instruments                
Assets                
Swap Contracts   19,676     19,676  
Liabilities                
Futures Contracts1 3       3  

 

1 Represents variation margin on the last day of the reporting period.

 

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, permanent differences primarily attributable to the accounting for in-kind redemptions and swap agreements were reclassified between the following accounts:

 

  Amount  
  ($000 )
Paid-in Capital 457,054  
Total Distributable Earnings (Loss) (457,054 )

 

Temporary differences between book-basis and tax-basis components of total distributable earnings (loss) 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 deferral of losses from wash sales and the recognition of unrealized gains or losses from certain derivative contracts. As of period end, the tax-basis components of total distributable earnings (loss) are detailed in the table as follows:

 

  Amount  
  ($000 )
Undistributed Ordinary Income 69,599  
Undistributed Long-Term Gains  
Capital Loss Carryforwards (121,800 )
Qualified Late-Year Losses  
Net Unrealized Gains (Losses) 1,154,677  

 

The tax character of distributions paid was as follows:  

 

  Year Ended August 31,  
  2020   2019  
  Amount   Amount  
  ($000 ) ($000 )
Ordinary Income* 40,029   37,972  
Long-Term Capital Gains    
Total 40,029   37,972  

 

* Includes short-term capital gains, if any.

 

27

 

 

Consumer Discretionary Index Fund

 

 

 

As of August 31, 2020, 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 3,304,103  
Gross Unrealized Appreciation 1,493,138  
Gross Unrealized Depreciation (338,461 )
Net Unrealized Appreciation (Depreciation) 1,154,677  

 

F. During the year ended August 31, 2020, the fund purchased $1,258,205,000 of investment securities and sold $1,334,703,000 of investment securities, other than temporary cash investments. Purchases and sales include $889,114,000 and $995,849,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

G. Capital share transactions for each class of shares were:

 

          Year Ended August 31,  
      2020       2019  
  Amount   Shares   Amount   Shares  
  ($000 ) (000 ) ($000 ) (000 )
ETF Shares                
Issued 928,490   4,882   625,380   3,592  
Issued in Lieu of Cash Distributions        
Redeemed (1,003,299 ) (5,650 ) (681,292 ) (4,200 )
Net Increase (Decrease)—ETF Shares (74,809 ) (768 ) (55,912 ) (608 )
Admiral Shares                
Issued 134,048   1,375   108,968   1,234  
Issued in Lieu of Cash Distributions 3,403   36   3,235   36  
Redeemed (134,606 ) (1,465 ) (113,932 ) (1,303 )
Net Increase (Decrease)—Admiral Shares 2,845   (54 ) (1,729 ) (33 )

 

H. Management has determined that no events or transactions occurred subsequent to August 31, 2020, that would require recognition or disclosure in these financial statements.

 

28

 

 

Consumer Staples Index Fund

 

 

Performance Summary

 

 

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.

 

Cumulative Performance: August 31, 2010–August 31, 2020

Initial Investment of $10,000

 

 

 

      Average Annual Total Returns Final Value
      Periods Ended August 31, 2020 of a $10,000
    One Year Five Years Ten Years Investment
Consumer Staples Index Fund ETF Shares Net Asset Value 11.01% 9.25% 12.50% $32,486
  Consumer Staples Index Fund ETF Shares Market Price 11.08 9.26 12.52 32,540
MSCI US IMI/Consumer Staples 25/50 11.12 9.34 12.63 32,854
MSCI US IMI/2500 21.48 13.88 14.99 40,426
           
          Final Value
          of a $100,000
    One Year Five Years Ten Years Investment
Consumer Staples Index Fund Admiral Shares 11.03% 9.25% 12.51% $325,107
MSCI US IMI/Consumer Staples 25/50 11.12 9.34 12.63 328,542
MSCI US IMI/2500 21.48 13.88 14.99 404,265

 

Cumulative Returns: ETF Shares, August 31, 2010–August 31, 2020

 

  One Year Five Years Ten Years
Consumer Staples Index Fund ETF Shares Market Price 11.08% 55.72% 225.40%
Consumer Staples Index Fund ETF Shares Net Asset Value 11.01 55.64 224.86
MSCI US IMI/Consumer Staples 25/50 11.12 56.26 228.54

 

For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.

 

 

 

 

 

 

 

 

 

See Financial Highlights for dividend and capital gains information.

 

29

 

 

Consumer Staples Index Fund

 

 

 

Fund Allocation

As of August 31, 2020

 

Agricultural Products 2.3%
Brewers 0.9
Distillers & Vintners 2.7
Drug Retail 1.6
Food Distributors 2.3
Food Retail 2.3
Household Products 25.0
Hypermarkets & Super Centers 14.0
Packaged Foods & Meats 16.9
Personal Products 3.6
Soft Drinks 20.1
Tobacco 8.3

 

The table reflects the fund’s investments, except for short-term investments and derivatives. Sector categories are based on the Global Industry Classification Standard (“GICS”), except for the “Other” category (if applicable), which includes securities that have not been provided a GICS classification as of the effective reporting period.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking its target index as closely as possible.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Consumer Staples Index Fund

 

 

 

Financial Statements

 

 

 

Schedule of Investments

As of August 31, 2020

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

        Market
        Value·
    Shares   ($000)
Common Stocks (99.6%)      
Beverages (23.5%)      
  Coca-Cola Co. 12,089,815   598,808
  PepsiCo Inc. 4,120,358   577,097
* Monster Beverage Corp. 1,275,415   106,956
  Constellation Brands Inc. Class A 524,782   96,812
  Brown-Forman Corp. Class B 982,541   71,892
* Boston Beer Co. Inc. Class A 39,427   34,774
  Molson Coors Beverage Co. Class B 619,423   23,315
  Coca-Cola Consolidated Inc. 28,825   7,878
*,^ National Beverage Corp. 85,140   6,924
  MGP Ingredients Inc. 81,396   2,894
*,^ NewAge Inc. 702,327   1,524
        1,528,874
Food & Staples Retailing (20.0%)    
  Walmart Inc. 4,195,928   582,604
  Costco Wholesale Corp. 842,245   292,815
  Sysco Corp. 1,626,475   97,816
  Kroger Co. 2,695,579   96,178
  Walgreens Boots Alliance Inc. 2,495,481   94,878
  Casey’s General Stores Inc. 137,547   24,463
* BJ’s Wholesale Club Holdings Inc. 483,942   21,492
* US Foods Holding Corp. 727,019   17,703
* Performance Food Group Co. 428,043   15,628
* Sprouts Farmers Market Inc. 538,353   12,570
  PriceSmart Inc. 117,618   7,733
* United Natural Foods Inc. 382,029   6,896
* Rite Aid Corp. 451,054   5,873
  Weis Markets Inc. 115,674   5,695
  SpartanNash Co. 282,871   5,652
  Ingles Markets Inc. Class A 124,916   5,047
* Chefs’ Warehouse Inc. 259,970   3,850
  Andersons Inc. 181,726   3,222
  Village Super Market Inc. Class A 102,774   2,614
* Grocery Outlet Holding Corp. 42,248   1,738
        1,304,467
Food Products (19.2%)      
  Mondelez International Inc. Class A 4,501,084   262,953
  General Mills Inc. 1,855,771   118,677
  Archer-Daniels-Midland Co. 1,822,265   81,565
  Kraft Heinz Co. 2,111,104   73,973
  Hershey Co. 468,616   69,655
  McCormick & Co. Inc. 313,016   64,544
  Conagra Brands Inc. 1,622,718   62,247
  Tyson Foods Inc. Class A 942,661   59,199
  Kellogg Co. 826,648   58,618
  Hormel Foods Corp. 956,295   48,752
  J M Smucker Co. 365,300   43,902
  Lamb Weston Holdings Inc. 482,677   30,336
* Freshpet Inc. 241,665   27,453
* Darling Ingredients Inc. 741,048   23,691
  Campbell Soup Co. 425,071   22,363
  Bunge Ltd. 476,713   21,748
* Post Holdings Inc. 218,722   19,252
  Ingredion Inc. 237,010   19,065
  Flowers Foods Inc. 690,785   16,897
  Lancaster Colony Corp. 79,481   14,125
* Hain Celestial Group Inc. 392,671   12,876
  Sanderson Farms Inc. 95,747   11,199
* Simply Good Foods Co. 405,622   10,080
  B&G Foods Inc. 318,076   9,905
* TreeHouse Foods Inc. 214,563   9,185
  J&J Snack Foods Corp. 66,809   9,083
* Hostess Brands Inc. Class A 613,955   7,883
* Cal-Maine Foods Inc. 186,640   7,202
  Calavo Growers Inc. 91,805   5,827
* Pilgrim’s Pride Corp. 320,681   5,131
  Tootsie Roll Industries Inc. 159,673   5,108
  John B Sanfilippo & Son Inc. 58,887   4,690
  Fresh Del Monte Produce Inc. 185,089   4,292
* Landec Corp. 316,961   3,246
* Farmer Bros Co. 124,338   782
* Beyond Meat Inc. 5,590   759
  Limoneira Co. 16,552   239
      1,246,502
Household Products (25.0%)      
  Procter & Gamble Co. 7,418,645   1,026,221
  Colgate-Palmolive Co. 2,555,731   202,567
  Kimberly-Clark Corp. 1,093,283   172,476
  Clorox Co. 405,672   90,668
  Church & Dwight Co. Inc. 831,805   79,712
  WD-40 Co. 69,065   14,115
  Spectrum Brands Holdings Inc 203,806   12,147
  Energizer Holdings Inc. 259,295   12,003
* Central Garden & Pet Co.Class A 280,131   10,410
* Central Garden & Pet Co. 116,722   4,749
  Reynolds Consumer Products Inc. 13,317   443
        1,625,511
Personal Products (3.6%)      
  Estee Lauder Cos. Inc. Class A 695,490   154,204
*,^ Herbalife Nutrition Ltd. 450,688   22,151
  Medifast Inc. 110,603   17,997
  Nu Skin Enterprises Inc. Class A 237,677   11,235
* Edgewell Personal Care Co. 244,197   7,011
  Inter Parfums Inc. 146,664   6,552
* USANA Health Sciences Inc. 75,716   5,937
* elf Beauty Inc. 264,753   5,171
  Coty Inc. Class A 1,110,954   3,977
* BellRing Brands Inc. Class A 10,691   208
        234,443
Tobacco (8.3%)      
  Philip Morris International Inc. 3,648,353   291,102
  Altria Group Inc. 5,368,987   234,840
  Vector Group Ltd. 649,080   6,536
  Universal Corp. 125,816   5,462
  Turning Point Brands Inc. 23,995   693
        538,633
Total Common Stocks
(Cost $5,640,230)
    6,478,430
Temporary Cash Investment (0.4%)    
1,2 Vanguard Market Liquidity Fund, 0.147% (Cost $27,476) 274,793   27,479
Total Investments (100.0%)
(Cost $5,667,706)
    6,505,909
Other Assets and Liabilities—Net (0.0%)     (3,124)
Net Assets (100%)     6,502,785

 

Cost is in $000.

 

· 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 $10,485,000.

1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

2 Collateral of $10,904,000 was received for securities on loan.

 

31

 

 

Consumer Staples Index Fund

 

 

 

 

 

Derivative Financial Instruments Outstanding as of Period End
 
Over-the-Counter Total Return Swaps
        Floating    
        Interest Rate Value and Value and
      Notional Received Unrealized Unrealized
  Termination   Amount (Paid)1 Appreciation (Depreciation)
Reference Entity Date Counterparty ($000) (%) ($000) ($000)
Campbell Soup Co. 2/2/21 GSI (9,149) 0.161 57
McCormick & Co. Inc. 2/2/21 GSI (15,172) 0.161 292
          349

 

1 Based on 1-month USD London Interbank Offered Rate (LIBOR) as of the most recent payment date. Floating interest payment received/ paid monthly.

GSI—Goldman Sachs International.

 

At August 31, 2020, a counterparty had deposited in a segregated account securities with a value of $472,000 in connection with open over-the-counter swap contracts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes, which are an integral part of the Financial Statements.

 

32

 

 

Consumer Staples Index Fund

 

 

 

Statement of Assets and Liabilities  
As of August 31, 2020  
   
($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $5,640,230) 6,478,430
Affiliated Issuers (Cost $27,476) 27,479
Total Investments in Securities 6,505,909
Investment in Vanguard 268
Receivables for Investment Securities Sold 5,704
Receivables for Accrued Income 8,631
Receivables for Capital Shares Issued 570
Unrealized Appreciation—Over-the-Counter Swap Contracts 349
Total Assets 6,521,431
Liabilities