UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-00834
| Name of Registrant: | Vanguard Windsor Funds |
| Address of Registrant: | P.O. Box 2600 |
| | Valley Forge, PA 19482 |
| Name and address of agent for service: | Anne E. Robinson, Esquire |
| | P.O. Box 876 |
| | Valley Forge, PA 19482 |
Registrant’s telephone number, including area code: (610) 669-1000
Date of fiscal year end: October 31
Date of reporting period: November 1, 2021—October 31, 2022
Item 1: Reports to Shareholders
Annual Report | October 31, 2022
Vanguard Windsor™ Fund
Contents
Your Fund’s Performance at a Glance
| 1 |
Advisors' Report
| 2 |
About Your Fund’s Expenses
| 6 |
Performance Summary
| 8 |
Financial Statements
| 10 |
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
| • | The 12 months ended October 31, 2022, were a volatile, challenging period for financial markets. Vanguard Windsor Fund returned –2.97% for Investor Shares and –2.89% for Admiral Shares, outpacing the –7.00% return of its benchmark, the Russell 1000 Value Index. |
| • | The global economic backdrop deteriorated as inflation reached multidecade highs, notably in energy and food prices after Russia invaded Ukraine in February. Price increases then broadened to other goods and services, adding to concerns that inflation would remain stubbornly high. Many central banks tightened aggressively to try to rein in inflation, which increased fears of a recession. |
| • | The broad U.S. stock market, as measured by the Russell 3000 Index, returned –16.52%. Value stocks held up significantly better than growth. By market capitalization, there was much less divergence in performance. |
| • | Returns were positive in four industry sectors. The advisors’ selections in financials contributed most to outperformance relative to the benchmark. An underweight to communication services also helped. Health care, consumer staples, and consumer discretionary were net detractors. |
Market Barometer
| | Average Annual Total Returns
Periods Ended October 31, 2022 |
| | One Year | Three Years | Five Years |
| Stocks | | | |
| Russell 1000 Index (Large-caps) | -16.38% | 9.99% | 10.19% |
| Russell 2000 Index (Small-caps) | -18.54 | 7.05 | 5.56 |
| Russell 3000 Index (Broad U.S. market) | -16.52 | 9.79 | 9.87 |
| FTSE All-World ex US Index (International) | -24.20 | -1.16 | -0.18 |
| Bonds | | | |
Bloomberg U.S. Aggregate Float Adjusted Index
(Broad taxable market) | -15.69% | -3.73% | -0.50% |
Bloomberg Municipal Bond Index
(Broad tax-exempt market) | -11.98 | -2.18 | 0.37 |
| FTSE Three-Month U.S. Treasury Bill Index | 0.88 | 0.59 | 1.15 |
| CPI | | | |
| Consumer Price Index | 7.75% | 5.01% | 3.85% |
For the 12 months ended October 31, 2022, Vanguard Windsor Fund returned –2.97% for Investor Shares and –2.89% for Admiral Shares. It outperformed its benchmark, the Russell 1000 Value Index, which returned –7.00%.
Your fund is managed by two independent advisors, a strategy that enhances its diversification by providing exposure to distinct yet complementary investment approaches. It’s not uncommon for different advisors to have different views about individual securities or the broader investment environment.
The accompanying table lists the advisors, the amount and percentage of fund assets each manages, and brief descriptions of their investment strategies.
The advisors have provided the following assessment of the investment environment during the past 12 months and the notable successes and shortfalls in their portfolios. These comments were prepared on November 16, 2022.
Wellington Management Company llp
Portfolio Manager:
David W. Palmer, CFA,
Senior Managing Director
The period under review has brought no shortage of macroeconomic developments, from Russia’s war in Ukraine to inflation persisting at multi-decade highs and the U.S. Federal Reserve committing to tighter monetary policies, which fueled fears of a recession.
As a result, market volatility has remained extremely high. Amid the turmoil, our team continued to see wide alpha opportunities and executed on our investment process to deliver strong outperformance. Over the fiscal year, the best-performing sectors in the portfolio’s benchmark were energy, consumer staples, and utilities, while communication services, information technology, and real estate lagged the market.
Stock selection drove the portfolio’s relative outperformance, led by financials, consumer discretionary, and information technology. Among the stocks that had an impact of at least 30 basis points (0.3%) on relative performance, positive or negative, the winners outnumbered the losers by 61%. The winners were broadly spread over eight of the 11 sectors.
Financials was the portfolio’s best-performing sector on a relative basis. Within the sector, the most notable contributors were M&T Bank and Raymond James, as well as not holding JP Morgan Chase. Shares of M&T Bank and Raymond James Financial both rallied to begin the year as defensively oriented financial stocks were expected to benefit from higher rates. More recently, M&T management’s emphasis that the acquisition of People’s United Financial was accretive to its net operating results and could drive value longer term further supported share prices. Raymond James Financial shares soared later during the period after the company reported strong year-over-year growth in net interest
income and fees generated by its bank deposit program, which helped offset declines elsewhere.
Within consumer discretionary, Dollar Tree, a U.S.-based discount retailer, delivered positive returns as new initiatives, including the company’s decision to move to a $1.25 price point from $1, helped combat rising inflation and improved results.
Weak security selection within health care partially offset positive returns elsewhere in the portfolio. Shares of Dentsply Sirona declined. The stock underperformed because of broad negative sentiment in the direct-to-consumer clear aligner space (although that segment is a small part of the firm’s business), as well as concerns over leadership transition.
Throughout the pandemic, our team has found fortitude, investable insights, and worthwhile challenges to our base assumptions from our many diverse colleagues around the world: from the health care team; from other central research-driven teams across consumer, technology, energy, and industrials; from our fixed income colleagues, helping to pinpoint sources and depth of financing markets for reopening-dependent contrarian ideas; from our climate-, sustainability- and ESG-focused teams, helping us assess disadvantaged (or potentially permanently impaired) assets and the emerging risks from evolving environmental and social change.
Wellington’s macroeconomics team has always helped us to triangulate or rebase
our assumptions around the business cycle, and lately that messaging has turned more cautious. Our macro team’s Global Cycle Index (a proprietary research tool incorporating seven independent variables that we use to assess the global economic cycle), continues to move lower—against a backdrop of rising rates, rising inflation, and slowing growth—which creates some near-term concerns. With this outlook in mind, we have positioned the overall beta of the portfolio near the lower end of its longer-term range, reserving ample dry powder to deploy when we see compelling investment opportunities created by market movements.
Stepping back, we have always believed our best long-term opportunities are with stocks of good companies that have been discarded by other investors for reasons that we feel are temporary. There certainly have been times in the past where the portfolio has been out of sync with marketplace fashion. We are confident that if we remain disciplined in our value approach, we will bring compensatory rewards to our patient shareholders over the long run.
Pzena Investment Management, LLC
Portfolio Managers:
Richard S. Pzena, Managing Principal and
Co-Chief Investment Officer
John J. Flynn, Principal
Benjamin S. Silver, CFA, CPA, Principal
Equities started to weaken towards the end of 2021, as COVID-19 Delta variant concerns lingered in emerging markets, as domestic supply chain issues weighed on shares of companies levered to economic growth the most. With COVID-19 headlines dominating the market narrative, value stocks stumbled into the end of the year, with sentiment only improving in the last few weeks on reports that the Omicron variant might be less severe than public health officials had initially feared.
Stocks’ weakness persisted into 2022, driven predominantly by Russia’s invasion of Ukraine in late February. With both energy and food costs spiking on continued Russian aggression and consequential sanctions—both government-imposed and self-imposed by Western companies—inflationary pressures and macroeconomic weakness heightened fears of a potentially painful global recession. Value nonetheless outperformed growth, as the clear prospect of further rate increases (and consequent higher global yields) affected longer-duration growth stocks the most. Although the portfolio finished the period in the red, it outpaced the Russell 1000 Value Index as well as the broad style-neutral index, with energy the standout contributor.
The top individual performer was pharma distributor McKesson, whose management guided to strong earnings growth for fiscal year 2023, a function of broad strength across its business lines. The stock also benefited from its status
as a more defensive health-care-exposed name amid the market volatility. U.S. integrated energy giant Exxon Mobil and oil servicer Halliburton rose in concert, benefiting from persistently higher crude prices (initially supported by a tight supply-demand dynamic and later rising steeply on the Russian invasion of Ukraine). Shares of Halliburton were also higher on the company’s earnings report that revealed a dividend increase, higher margins, and lower-than-expected capital spending.
Consumer discretionary, industrials, and financials detracted the most. The largest individual detractor was dialysis products and services provider Fresenius Medical Care. Labor shortages and associated cost inflation have pressured the profitability of the firm’s dialysis centers, prompting management to trim guidance substantially. Apparel company PVH, which owns the Tommy Hilfiger and Calvin Klein brands, was weak despite its impressive earnings resiliency, as the market worried about its sizable exposure to the European consumer amid the depreciating euro, and surging inflation. Shares of consumer products company Newell Brands were weak after management lowered guidance, as the firm was not immune to the industry-wide destocking in the retail channel that plagued heavyweights Walmart, Target, and others.
During the period, we sold U.S. oil servicer Baker Hughes, Canadian oil sands driller Cenovus Energy, and Ford Motor, all on relative strength. We also exited our
position in Stanley Black & Decker, as the range of outcomes widened, mostly because of competitive pressures from rival TTI, giving us less confidence in our estimate of normal earnings. We initiated a position in CBRE Group—the largest global commercial real estate broker.
While macro concerns have weighed on the market and the portfolio more
recently, we believe the companies we own are well-positioned for the long term, with solid competitive positions and strong balance sheets. Valuations today are very compelling, and the portfolio remains exposed to economically sensitive and cyclical stocks.
Vanguard Windsor Fund Investment Advisors
| |
| | Fund Assets Managed | |
| Investment Advisor | % | $ Million | Investment Strategy |
| Wellington Management Company LLP | 69 | 15,236 | Seeks to provide long-term total returns above both the S&P 500 and value-oriented indexes over a complete market cycle through bottom-up, fundamentally driven stock selection focused on undervalued securities. |
| Pzena Investment Management, LLC | 30 | 6,574 | Uses a fundamental, bottom-up, deep-value-oriented investment strategy. Seeks to buy good businesses at low prices, focusing exclusively on companies that are underperforming their historically demonstrated earnings power. |
| Cash Investments | 1 | 286 | These short-term reserves are invested by Vanguard in equity index products to simulate investment in stocks. Each advisor may also maintain a modest cash position. |
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
| • | Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period. |
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
| • | Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds. |
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
| Six Months Ended October 31, 2022 | | | |
| | Beginning
Account Value
4/30/2022 | Ending
Account Value
10/31/2022 | Expenses
Paid During
Period |
| Based on Actual Fund Return | | | |
| Windsor Fund | | | |
| Investor Shares | $1,000.00 | $984.60 | $2.05 |
| Admiral™ Shares | 1,000.00 | 985.10 | 1.55 |
| Based on Hypothetical 5% Yearly Return | | | |
| Windsor Fund | | | |
| Investor Shares | $1,000.00 | $1,023.14 | $2.09 |
| Admiral Shares | 1,000.00 | 1,023.64 | 1.58 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.41% for Investor Shares and 0.31% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (184/365).
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: October 31, 2012, Through October 31, 2022
Initial Investment of $10,000
| | | Average Annual Total Returns
Periods Ended October 31, 2022 | |
| | | One
Year | Five
Years | Ten
Years | Final Value
of a $10,000
Investment |
 | Windsor Fund Investor Shares | -2.97% | 9.04% | 11.81% | $30,524 |
 | Russell 1000 Value Index | -7.00 | 7.21 | 10.30 | 26,647 |
 | Dow Jones U.S. Total Stock Market Float Adjusted Index | -16.94 | 9.72 | 12.36 | 32,058 |
| | | | |
| | | One
Year | Five
Years | Ten
Years | Final Value
of a $50,000
Investment |
| Windsor Fund Admiral Shares | -2.89% | 9.15% | 11.92% | $154,124 |
| Russell 1000 Value Index | -7.00 | 7.21 | 10.30 | 133,235 |
| Dow Jones U.S. Total Stock Market Float Adjusted Index | -16.94 | 9.72 | 12.36 | 160,289 |
See Financial Highlights for dividend and capital gains information.
| Communication Services | 5.0% |
| Consumer Discretionary | 10.3 |
| Consumer Staples | 3.3 |
| Energy | 9.2 |
| Financials | 22.6 |
| Health Care | 12.9 |
| Industrials | 8.5 |
| Information Technology | 13.5 |
| Materials | 5.1 |
| Real Estate | 3.3 |
| Utilities | 6.3 |
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.
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.
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.
| | | Shares | Market
Value•
($000) |
| Common Stocks (97.3%) |
| Communication Services (4.9%) |
| * | T-Mobile US Inc. | 2,098,042 | 317,979 |
| * | Meta Platforms Inc. Class A | 2,598,994 | 242,122 |
| | Electronic Arts Inc. | 1,222,185 | 153,946 |
| | Cable One Inc. | 139,595 | 119,972 |
| * | Match Group Inc. | 2,727,309 | 117,820 |
| * | Charter Communications Inc. Class A | 314,609 | 115,657 |
| | Verizon Communications Inc. | 220,056 | 8,224 |
| | | | 1,075,720 |
| Consumer Discretionary (10.0%) |
| * | Dollar Tree Inc. | 1,681,808 | 266,567 |
| * | Las Vegas Sands Corp. | 5,932,991 | 225,513 |
| | TJX Cos. Inc. | 2,856,070 | 205,923 |
| | Lennar Corp. Class A | 2,438,535 | 196,790 |
| | Gildan Activewear Inc. | 6,139,590 | 193,704 |
| | Lear Corp. | 1,381,940 | 191,689 |
| | Newell Brands Inc. | 11,866,202 | 163,872 |
| * | Booking Holdings Inc. | 69,452 | 129,839 |
| * | Skechers USA Inc. Class A | 3,634,099 | 125,122 |
| | Ross Stores Inc. | 1,234,219 | 118,102 |
| * | CarMax Inc. | 1,840,346 | 115,960 |
| * | Mohawk Industries Inc. | 1,060,308 | 100,464 |
| * | Airbnb Inc. Class A | 919,844 | 98,341 |
| | PVH Corp. | 1,588,525 | 81,523 |
| | | | 2,213,409 |
| Consumer Staples (3.2%) |
| | Keurig Dr Pepper Inc. | 6,623,378 | 257,252 |
| | Philip Morris International Inc. | 2,508,541 | 230,410 |
| | Unilever plc (XLON) | 4,827,712 | 219,440 |
| | | | 707,102 |
| Energy (8.9%) |
| | Halliburton Co. | 13,977,692 | 509,068 |
| | Schlumberger NV | 8,405,726 | 437,350 |
| | Canadian Natural Resources Ltd. | 4,811,052 | 288,374 |
| | ConocoPhillips | 1,423,868 | 179,536 |
| | NOV Inc. | 7,869,660 | 176,280 |
| | Diamondback Energy Inc. | 1,092,174 | 171,591 |
| | Shell plc ADR | 2,086,504 | 116,072 |
| | | Shares | Market
Value•
($000) |
| | Exxon Mobil Corp. | 878,247 | 97,319 |
| | | | 1,975,590 |
| Financials (22.0%) |
| | MetLife Inc. | 6,466,895 | 473,441 |
| | Charles Schwab Corp. | 4,953,743 | 394,665 |
| | Chubb Ltd. | 1,621,384 | 348,419 |
| 1 | Voya Financial Inc. | 4,921,319 | 336,421 |
| | Equitable Holdings Inc. | 10,958,065 | 335,536 |
| | American International Group Inc. | 5,723,346 | 326,231 |
| | Allstate Corp. | 2,255,632 | 284,773 |
| | Globe Life Inc. | 2,059,337 | 237,895 |
| | Wells Fargo & Co. | 4,933,654 | 226,899 |
| | Raymond James Financial Inc. | 1,667,843 | 197,039 |
| | Royal Bank of Canada | 2,107,258 | 194,972 |
| | S&P Global Inc. | 586,299 | 188,349 |
| | Capital One Financial Corp. | 1,761,259 | 186,729 |
| | Citigroup Inc. | 4,035,906 | 185,087 |
| | Bank of America Corp. | 4,514,065 | 162,687 |
| | JPMorgan Chase & Co. | 1,265,602 | 159,314 |
| | Apollo Global Management Inc. | 2,693,140 | 149,092 |
| | M&T Bank Corp. | 742,432 | 125,003 |
| | Goldman Sachs Group Inc. | 353,777 | 121,880 |
| | Axis Capital Holdings Ltd. | 1,829,345 | 100,010 |
| | Morgan Stanley | 720,717 | 59,221 |
| | UBS Group AG (Registered) | 2,753,680 | 43,673 |
| | Invesco Ltd. | 852,369 | 13,058 |
| | | | 4,850,394 |
| Health Care (12.5%) |
| * | Centene Corp. | 2,901,207 | 246,980 |
| | AstraZeneca plc ADR | 3,588,214 | 211,023 |
| * | Seagen Inc. | 1,623,245 | 206,412 |
| * | Boston Scientific Corp. | 4,116,591 | 177,466 |
| | Humana Inc. | 300,442 | 167,671 |
| | Novartis AG (Registered) | 1,904,854 | 154,085 |
| | McKesson Corp. | 384,436 | 149,688 |
| | Bristol-Myers Squibb Co. | 1,853,066 | 143,557 |
| * | Avantor Inc. | 6,723,057 | 135,604 |
| | DENTSPLY SIRONA Inc. | 4,180,346 | 128,838 |
| 2 | Fresenius Medical Care AG & Co. KGaA ADR | 9,191,973 | 127,493 |
| | | Shares | Market
Value•
($000) |
| * | Regeneron Pharmaceuticals Inc. | 165,847 | 124,178 |
| | Johnson & Johnson | 616,171 | 107,195 |
| | Becton Dickinson and Co. | 433,761 | 102,354 |
| | Elevance Health Inc. | 186,825 | 102,150 |
| | Encompass Health Corp. | 1,858,759 | 101,191 |
| | Pfizer Inc. | 2,110,186 | 98,229 |
| | Cigna Corp. | 298,096 | 96,303 |
| | Cardinal Health Inc. | 1,164,253 | 88,367 |
| | Amgen Inc. | 269,795 | 72,939 |
| | CVS Health Corp. | 325,808 | 30,854 |
| | | | 2,772,577 |
| Industrials (8.3%) |
| | Westinghouse Air Brake Technologies Corp. | 5,094,306 | 475,197 |
| | Leidos Holdings Inc. | 2,041,836 | 207,430 |
| | General Electric Co. | 2,643,985 | 205,728 |
| | Knight-Swift Transportation Holdings Inc. | 4,231,641 | 203,246 |
| | Johnson Controls International plc | 3,203,599 | 185,296 |
| | PACCAR Inc. | 1,653,887 | 160,146 |
| | Airbus SE | 1,366,915 | 147,905 |
| | Techtronic Industries Co. Ltd. | 12,874,500 | 121,906 |
| | General Dynamics Corp. | 339,199 | 84,732 |
| | Textron Inc. | 527,173 | 36,080 |
| | | | 1,827,666 |
| Information Technology (13.1%) |
| | Cognizant Technology Solutions Corp. Class A | 4,515,727 | 281,104 |
| * | Salesforce Inc. | 1,515,542 | 246,412 |
| | Micron Technology Inc. | 3,906,948 | 211,366 |
| | Fidelity National Information Services Inc. | 2,436,868 | 202,236 |
| | Amdocs Ltd. | 2,333,964 | 201,444 |
| * | F5 Inc. | 1,309,839 | 187,189 |
| | QUALCOMM Inc. | 1,554,295 | 182,878 |
| | SS&C Technologies Holdings Inc. | 3,391,196 | 174,375 |
| | VMware Inc. Class A | 1,506,375 | 169,512 |
| * | GoDaddy Inc. Class A | 2,071,005 | 166,509 |
| | NXP Semiconductors NV | 1,065,505 | 155,649 |
| * | FleetCor Technologies Inc. | 819,234 | 152,476 |
| | Hewlett Packard Enterprise Co. | 10,531,614 | 150,286 |
| | Genpact Ltd. | 3,065,254 | 148,665 |
| | Oracle Corp. | 1,125,306 | 87,853 |
| * | Lumentum Holdings Inc. | 1,036,336 | 77,155 |
| | Samsung Electronics Co. Ltd. | 938,035 | 39,041 |
| | Juniper Networks Inc. | 1,231,241 | 37,676 |
| | Cisco Systems Inc. | 556,397 | 25,277 |
| | | | 2,897,103 |
| Materials (5.0%) |
| | Reliance Steel & Aluminum Co. | 1,079,673 | 217,533 |
| | Dow Inc. | 3,814,708 | 178,299 |
| | | Shares | Market
Value•
($000) |
| | PPG Industries Inc. | 1,355,946 | 154,822 |
| | Rio Tinto plc ADR | 2,882,604 | 153,787 |
| | CRH plc (XDUB) | 4,224,820 | 151,767 |
| | FMC Corp. | 1,240,660 | 147,514 |
| | LG Chem Ltd. | 233,995 | 102,686 |
| | | | 1,106,408 |
| Real Estate (3.2%) |
| | VICI Properties Inc. | 7,312,689 | 234,152 |
| | American Tower Corp. | 906,325 | 187,782 |
| | Equinix Inc. | 245,020 | 138,789 |
| | Americold Realty Trust Inc. | 5,128,341 | 124,362 |
| * | CBRE Group Inc. Class A | 384,588 | 27,283 |
| | | | 712,368 |
| Utilities (6.2%) |
| | Exelon Corp. | 6,204,264 | 239,423 |
| | NRG Energy Inc. | 5,182,794 | 230,116 |
| | Edison International | 3,310,563 | 198,766 |
| | Duke Energy Corp. | 2,009,333 | 187,230 |
| | AES Corp. | 6,836,399 | 178,840 |
| | Iberdrola SA (XMAD) | 15,941,649 | 162,115 |
| | Pinnacle West Capital Corp. | 1,538,877 | 103,428 |
| | Avangrid Inc. | 1,514,392 | 61,605 |
| | | | 1,361,523 |
Total Common Stocks
(Cost $18,757,764) | 21,499,860 |
| Temporary Cash Investments (2.7%) |
| Money Market Fund (1.7%) |
| 3,4 | Vanguard Market Liquidity Fund, 3.117% | 3,666,803 | 366,607 |
| | | Face
Amount
($000) | Market
Value•
($000) |
| Repurchase Agreement (1.0%) |
| | Bank of America Securities, LLC 3.050%, 11/1/22
(Dated 10/31/22, Repurchase Value $222,519,000, collateralized by Ginnie Mae 2.000%–3.000%, 1/20/52–3/20/52, with a value of $226,950,000) | 222,500 | 222,500 |
| Total Temporary Cash Investments (Cost $589,058) | 589,107 |
| Total Investments (100.0%) (Cost $19,346,822) | 22,088,967 |
| Other Assets and Liabilities—Net (0.0%) | 6,957 |
| Net Assets (100%) | 22,095,924 |
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company. |
| 2 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $3,583,000. |
| 3 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 4 | Collateral of $3,616,000 was received for securities on loan. |
| | ADR—American Depositary Receipt. |
Derivative Financial Instruments Outstanding as of Period End
| Futures Contracts |
| | | | ($000) |
| | Expiration | Number of
Long (Short)
Contracts | Notional
Amount | Value and
Unrealized
Appreciation
(Depreciation) |
| Long Futures Contracts | | | | |
| E-mini S&P 500 Index | December 2022 | 1,495 | 290,254 | (1,144) |
See accompanying Notes, which are an integral part of the Financial Statements.
Statement of Assets and Liabilities
|
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value1 | |
| Unaffiliated Issuers (Cost $18,751,203) | 21,385,939 |
| Affiliated Issuers (Cost $595,619) | 703,028 |
| Total Investments in Securities | 22,088,967 |
| Investment in Vanguard | 803 |
| Cash Collateral Pledged—Futures Contracts | 14,953 |
| Receivables for Investment Securities Sold | 45,923 |
| Receivables for Accrued Income | 12,289 |
| Receivables for Capital Shares Issued | 9,032 |
| Total Assets | 22,171,967 |
| Liabilities | |
| Foreign Currency Due to Custodian, at Value (Proceeds $5) | 5 |
| Due to Custodian | 7,361 |
| Payables for Investment Securities Purchased | 38,109 |
| Collateral for Securities on Loan | 3,616 |
| Payables to Investment Advisor | 10,116 |
| Payables for Capital Shares Redeemed | 13,258 |
| Payables to Vanguard | 1,466 |
| Variation Margin Payable—Futures Contracts | 2,112 |
| Total Liabilities | 76,043 |
| Net Assets | 22,095,924 |
| 1 Includes $3,583 of securities on loan. | |
| At October 31, 2022, net assets consisted of: | |
| | |
| Paid-in Capital | 16,575,727 |
| Total Distributable Earnings (Loss) | 5,520,197 |
| Net Assets | 22,095,924 |
| |
| Investor Shares—Net Assets | |
Applicable to 210,922,420 outstanding $.001 par value shares of
beneficial interest (unlimited authorization) | 4,795,564 |
| Net Asset Value Per Share—Investor Shares | $22.74 |
| |
| Admiral Shares—Net Assets | |
Applicable to 225,652,783 outstanding $.001 par value shares of
beneficial interest (unlimited authorization) | 17,300,360 |
| Net Asset Value Per Share—Admiral Shares | $76.67 |
See accompanying Notes, which are an integral part of the Financial Statements.
|
| | Year Ended
October 31, 2022 |
| | ($000) |
| Investment Income | |
| Income | |
| Dividends—Unaffiliated Issuers1 | 392,516 |
| Dividends—Affiliated Issuers | 39,709 |
| Interest—Unaffiliated Issuers | 1,842 |
| Interest—Affiliated Issuers | 2,985 |
| Securities Lending—Net | 1,714 |
| Total Income | 438,766 |
| Expenses | |
| Investment Advisory Fees—Note B | |
| Basic Fee | 29,207 |
| Performance Adjustment | 6,404 |
| The Vanguard Group—Note C | |
| Management and Administrative—Investor Shares | 11,292 |
| Management and Administrative—Admiral Shares | 22,252 |
| Marketing and Distribution—Investor Shares | 311 |
| Marketing and Distribution—Admiral Shares | 554 |
| Custodian Fees | 660 |
| Auditing Fees | 40 |
| Shareholders’ Reports—Investor Shares | 105 |
| Shareholders’ Reports—Admiral Shares | 67 |
| Trustees’ Fees and Expenses | 9 |
| Other Expenses | 72 |
| Total Expenses | 70,973 |
| Expenses Paid Indirectly | (112) |
| Net Expenses | 70,861 |
| Net Investment Income | 367,905 |
| Realized Net Gain (Loss) | |
| Capital Gains Distributions Received – Affiliated Issuers | 10 |
| Investment Securities Sold—Unaffiliated Issuers | 2,875,802 |
| Investment Securities Sold—Affiliated Issuers | (630) |
| Futures Contracts | (32,819) |
| Forward Currency Contracts | 16 |
| Foreign Currencies | (720) |
| Realized Net Gain (Loss) | 2,841,659 |
| Statement of Operations (continued) |
| | Year Ended
October 31, 2022 |
| | ($000) |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities—Unaffiliated Issuers | (3,881,763) |
| Investment Securities—Affiliated Issuers | (5,688) |
| Futures Contracts | (11,143) |
| Foreign Currencies | (76) |
| Change in Unrealized Appreciation (Depreciation) | (3,898,670) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (689,106) |
| | |
| 1 | Dividends are net of foreign withholding taxes of $7,011,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
Statement of Changes in Net Assets
|
| | Year Ended October 31, |
| | 2022
($000) | 2021
($000) |
| | | |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net Investment Income | 367,905 | 351,555 |
| Realized Net Gain (Loss) | 2,841,659 | 2,264,486 |
| Change in Unrealized Appreciation (Depreciation) | (3,898,670) | 6,317,297 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (689,106) | 8,933,338 |
| Distributions | | |
| Investor Shares | (588,332) | (424,284) |
| Admiral Shares | (1,942,815) | (1,221,462) |
| Total Distributions | (2,531,147) | (1,645,746) |
| Capital Share Transactions | | |
| Investor Shares | (200,936) | (723,894) |
| Admiral Shares | 1,248,509 | 439,865 |
| Net Increase (Decrease) from Capital Share Transactions | 1,047,573 | (284,029) |
| Total Increase (Decrease) | (2,172,680) | 7,003,563 |
| Net Assets | | |
| Beginning of Period | 24,268,604 | 17,265,041 |
| End of Period | 22,095,924 | 24,268,604 |
See accompanying Notes, which are an integral part of the Financial Statements.
| Investor Shares | | | | | |
For a Share Outstanding
Throughout Each Period | Year Ended October 31, |
| 2022 | 2021 | 2020 | 2019 | 2018 |
| Net Asset Value, Beginning of Period | $26.24 | $18.55 | $21.76 | $22.02 | $23.38 |
| Investment Operations | | | | | |
| Net Investment Income1 | .359 | .356 | .408 | .419 | .417 |
| Net Realized and Unrealized Gain (Loss) on Investments | (1.131) | 9.122 | (1.412) | 1.700 | (.753) |
| Total from Investment Operations | (.772) | 9.478 | (1.004) | 2.119 | (.336) |
| Distributions | | | | | |
| Dividends from Net Investment Income | (.330) | (.411) | (.420) | (.426) | (.378) |
| Distributions from Realized Capital Gains | (2.398) | (1.377) | (1.786) | (1.953) | (.646) |
| Total Distributions | (2.728) | (1.788) | (2.206) | (2.379) | (1.024) |
| Net Asset Value, End of Period | $22.74 | $26.24 | $18.55 | $21.76 | $22.02 |
| Total Return2 | -2.97% | 53.49% | -5.64% | 11.59% | -1.69% |
| Ratios/Supplemental Data | | | | | |
| Net Assets, End of Period (Millions) | $4,796 | $5,728 | $4,570 | $4,549 | $4,468 |
| Ratio of Total Expenses to Average Net Assets3 | 0.38%4 | 0.30% | 0.29% | 0.30% | 0.31% |
| Ratio of Net Investment Income to Average Net Assets | 1.51% | 1.49% | 2.14% | 2.04% | 1.76% |
| Portfolio Turnover Rate | 43% | 33% | 51% | 39% | 33% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | Includes performance-based investment advisory fee increases (decreases) of 0.03%, (0.05%), (0.07%), (0.05%), and (0.05%). |
| 4 | The ratio of expenses to average net assets for the period net of reduction from broker commission abatement arrangements was 0.38%. |
See accompanying Notes, which are an integral part of the Financial Statements.
| Admiral Shares | | | | | |
For a Share Outstanding
Throughout Each Period | Year Ended October 31, |
| 2022 | 2021 | 2020 | 2019 | 2018 |
| Net Asset Value, Beginning of Period | $88.50 | $62.58 | $73.41 | $74.29 | $78.88 |
| Investment Operations | | | | | |
| Net Investment Income1 | 1.281 | 1.278 | 1.448 | 1.484 | 1.484 |
| Net Realized and Unrealized Gain (Loss) on Investments | (3.820) | 30.747 | (4.770) | 5.735 | (2.538) |
| Total from Investment Operations | (2.539) | 32.025 | (3.322) | 7.219 | (1.054) |
| Distributions | | | | | |
| Dividends from Net Investment Income | (1.203) | (1.460) | (1.485) | (1.509) | (1.358) |
| Distributions from Realized Capital Gains | (8.088) | (4.645) | (6.023) | (6.590) | (2.178) |
| Total Distributions | (9.291) | (6.105) | (7.508) | (8.099) | (3.536) |
| Net Asset Value, End of Period | $76.67 | $88.50 | $62.58 | $73.41 | $74.29 |
| Total Return2 | -2.89% | 53.60% | -5.55% | 11.71% | -1.59% |
| Ratios/Supplemental Data | | | | | |
| Net Assets, End of Period (Millions) | $17,300 | $18,541 | $12,695 | $14,647 | $13,948 |
| Ratio of Total Expenses to Average Net Assets3 | 0.28%4 | 0.20% | 0.19% | 0.20% | 0.21% |
| Ratio of Net Investment Income to Average Net Assets | 1.61% | 1.58% | 2.24% | 2.14% | 1.86% |
| Portfolio Turnover Rate | 43% | 33% | 51% | 39% | 33% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | Includes performance-based investment advisory fee increases (decreases) of 0.03%, (0.05%), (0.07%), (0.05%), and (0.05%). |
| 4 | The ratio of expenses to average net assets for the period net of reduction from broker commission abatement arrangements was 0.28%. |
See accompanying Notes, which are an integral part of the Financial Statements.
Notes to Financial Statements
Vanguard Windsor Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.
Significant market disruptions, such as those caused by pandemics (e.g., COVID-19 pandemic), natural or environmental disasters, war (e.g., Russia’s invasion of Ukraine), acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Any such disruptions could have an adverse impact on the value of the fund’s investments and 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 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 valuation designee to represent fair value and subject to oversight by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature, and in the absence of a default, such collateral cannot be repledged, resold, or rehypothecated. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that,
in the event of a counterparty's default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.
4. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any 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 October 31, 2022, the fund’s average investments in long and short futures contracts represented 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.
5. Forward Currency Contracts: The fund enters into forward currency contracts to protect the value of securities and related receivables and payables against changes in future foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any 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 forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The notional amounts of the contracts are not recorded in the Statement of 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 forward currency contracts.
During the year ended October 31, 2022, the fund’s average investment in forward currency contracts represented less than 1% of net assets, based on the average of the notional amounts at each quarter-end during the period. The fund had no open forward currency contracts at October 31, 2022.
6. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually 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.
7. 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.
8. 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.
9. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.4 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 and are 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, which 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 an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate 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 October 31, 2022, the fund did not utilize the credit facilities or the Interfund Lending Program.
10. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Amounts related to these reclaims are recorded when there are no significant uncertainties as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment. Such tax reclaims and related professional fees, if any, are included in dividend income and other expenses, respectively.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
| B. | The investment advisory firms Wellington Management Company llp and Pzena Investment Management, LLC, each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic |
fee of Wellington Management Company llp is subject to quarterly adjustments based on performance relative to the S&P 500 Index for the preceding three years. The basic fee of Pzena Investment Management, LLC, is subject to quarterly adjustments based on performance relative to the Russell 1000 Value Index for the preceding three years.
Vanguard manages the cash reserves of the fund as described below.
For the year ended October 31, 2022, the aggregate investment advisory fee paid to all advisors represented an effective annual basic rate of 0.13% of the fund’s average net assets, before a net increase of $6,404,000 (0.03%) based on performance.
| C. | In accordance with the terms of a Funds' Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, distribution and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees 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 October 31, 2022, the fund had contributed to Vanguard capital in the amount of $803,000, representing less than 0.01% of the fund’s net assets and 0.32% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
| D. | The fund has asked its investment advisors to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund’s management and administrative expenses. For the year ended October 31, 2022, these arrangements reduced the fund’s expenses by $112,000 (an annual rate of less than 0.01% of average net assets). |
| E. | 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 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments 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 October 31, 2022, based on the inputs used to value them:
| | Level 1
($000) | Level 2
($000) | Level 3
($000) | Total
($000) |
| Investments | | | | |
| Assets | | | | |
| Common Stocks | 20,400,915 | 1,098,945 | — | 21,499,860 |
| Temporary Cash Investments | 366,607 | 222,500 | — | 589,107 |
| Total | 20,767,522 | 1,321,445 | — | 22,088,967 |
| Derivative Financial Instruments | | | | |
| Liabilities | | | | |
| Futures Contracts1 | 1,144 | — | — | 1,144 |
| 1 | Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
| F. | 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 applicable foreign currency transactions and distributions in connection with fund share redemptions were reclassified between the following accounts: |
| | Amount
($000) |
| Paid-in Capital | 166,308 |
| Total Distributable Earnings (Loss) | (166,308) |
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 | 135,186 |
| Undistributed Long-Term Gains | 2,655,859 |
| Capital Loss Carryforwards | — |
| Qualified Late-Year Losses | — |
| Net Unrealized Gains (Losses) | 2,729,152 |
The tax character of distributions paid was as follows:
| | Year Ended October 31, |
| | 2022
Amount
($000) | 2021
Amount
($000) |
| Ordinary Income* | 1,036,600 | 794,066 |
| Long-Term Capital Gains | 1,494,547 | 851,680 |
| Total | 2,531,147 | 1,645,746 |
| * | Includes short-term capital gains, if any. |
As of October 31, 2022, 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 | 19,359,724 |
| Gross Unrealized Appreciation | 4,686,528 |
| Gross Unrealized Depreciation | (1,957,285) |
| Net Unrealized Appreciation (Depreciation) | 2,729,243 |
| G. | During the year ended October 31, 2022, the fund purchased $9,734,282,000 of investment securities and sold $10,828,224,000 of investment securities, other than temporary cash investments. |
The fund purchased securities from and sold securities to other Vanguard funds or accounts managed by Vanguard or its affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the year ended October 31, 2022, such purchases were $23,687,000 and sales were $0; these amounts, other than temporary cash investments, are included in the purchases and sales of investment securities noted above.
| H. | Capital share transactions for each class of shares were: |
| | Year Ended October 31, | |
| | 2022 | | 2021 |
| | Amount
($000) | Shares
(000) | | Amount
($000) | Shares
(000) |
| Investor Shares | | | | | |
| Issued | 368,905 | 15,354 | | 422,386 | 17,602 |
| Issued in Lieu of Cash Distributions | 568,128 | 24,748 | | 412,533 | 19,492 |
| Redeemed | (1,137,969) | (47,478) | | (1,558,813) | (65,085) |
| Net Increase (Decrease)—Investor Shares | (200,936) | (7,376) | | (723,894) | (27,991) |
| | Year Ended October 31, | |
| | 2022 | | 2021 |
| | Amount
($000) | Shares
(000) | | Amount
($000) | Shares
(000) |
| Admiral Shares | | | | | |
| Issued | 1,376,749 | 17,029 | | 1,733,594 | 21,194 |
| Issued in Lieu of Cash Distributions | 1,801,699 | 23,298 | | 1,138,412 | 15,936 |
| Redeemed | (1,929,939) | (24,172) | | (2,432,141) | (30,502) |
| Net Increase (Decrease)—Admiral Shares | 1,248,509 | 16,155 | | 439,865 | 6,628 |
| I. | Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company or the issuer is another member of The Vanguard Group. Transactions during the period in securities of these companies were as follows: |
| | | Current Period Transactions | |
| | Oct. 31,
2021
Market
Value
($000) | Purchases
at Cost
($000) | Proceeds
from
Securities
Sold
($000) | Realized
Net
Gain
(Loss)
($000) | Change in
Unrealized
App. (Dep.)
($000) | Income
($000) | Capital Gain
Distributions
Received
($000) | Oct. 31,
2022
Market
Value
($000) |
| Vanguard Market Liquidity Fund | 533,688 | NA1 | NA1 | (103) | 12 | 2,985 | 10 | 366,607 |
| Voya Financial Inc. | NA2 | 16,599 | 11,882 | (527) | (5,700) | 39,709 | — | 336,421 |
| Total | 533,688 | 16,599 | 11,882 | (630) | (5,688) | 42,694 | 10 | 703,028 |
| 1 | Not applicable—purchases and sales are for temporary cash investment purposes. |
| 2 | Not applicable—at October 31, 2021, the issuer was not an affiliated company of the fund. |
| J. | Management has determined that no other events or transactions occurred subsequent to October 31, 2022, that would require recognition or disclosure in these financial statements. |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Vanguard Windsor Funds and Shareholders of Vanguard Windsor Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Vanguard Windsor Fund (one of the funds constituting Vanguard Windsor Funds, referred to hereafter as the "Fund") as of October 31, 2022, the related statement of operations for the year ended October 31, 2022, the statement of changes in net assets for each of the two years in the period ended October 31, 2022, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2022 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2022 and the financial highlights for each of the five years in the period ended October 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2022 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 16, 2022
We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.
Tax information (unaudited)
For corporate shareholders, 80.9%, or if subsequently determined to be different, the maximum percentage allowable by law, of ordinary income (dividend income plus short-term gains, if any) for the fiscal year qualified for the dividends-received deduction.
The fund hereby designates $335,043,000, or if subsequently determined to be different, the maximum amount allowable by law, as qualified dividend income for individual shareholders for the fiscal year.
The fund hereby designates $874,000, or if subsequently determined to be different, the maximum amount allowable by law, of interest earned from obligations of the U.S. government which is generally exempt from state income tax.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund for the fiscal year are qualified short-term capital gains.
The fund distributed $1,659,648,000 as capital gain dividends (20% rate gain distributions) to shareholders during the fiscal year.
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 206 Vanguard funds.
Information for each trustee and executive officer of the fund appears below. That information, as well as the Vanguard fund count, is as of the date on the cover of this fund report. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1
Mortimer J. Buckley
Born in 1969. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chairman of the board (2019–present) of Vanguard and of each of the investment companies served by Vanguard; chief executive officer (2018–present) of Vanguard; chief executive officer, president, and trustee (2018–present) of each of the investment companies served by Vanguard; president and director (2017–present) of Vanguard; and president (2018–present) of Vanguard Marketing Corporation. Chief investment officer (2013–2017), managing director (2002–2017), head of the Retail Investor Group (2006–2012), and chief information officer (2001–2006) of Vanguard. Member of the board of governors of the Investment Company Institute and the board of governors of FINRA. Trustee and vice chair of The Shipley School.
Independent Trustees
Tara Bunch
Born in 1962. Trustee since November 2021. Principal occupation(s) during the past five years and other experience: head of global operations at Airbnb (2020–present). Vice president of AppleCare (2012–2020). Member of the board of directors of Out & Equal (2002–2006), the advisory board of the University of California, Berkeley School of Engineering (2020–present), and the advisory board
of Santa Clara University’s Leavey School of Business (2018–present).
Emerson U. Fullwood
Born in 1948. Trustee since January 2008. Principal occupation(s) during the past five years and other experience: executive chief staff and marketing officer for North America and corporate vice president (retired 2008) of Xerox Corporation (document management products and services). Former president of the Worldwide Channels Group, Latin America, and Worldwide Customer Service and executive chief staff officer of Developing Markets of Xerox. Executive in residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology. Member of the board of directors of the University of Rochester Medical Center, the Monroe Community College Foundation, the United Way of Rochester, North Carolina A&T University, Roberts Wesleyan College, and the Rochester Philharmonic Orchestra. Trustee of the University of Rochester.
F. Joseph Loughrey
Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services). Director of the V Foundation. Member of the advisory council for the College of
1 Mr. Buckley is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
Arts and Letters at the University of Notre Dame. Chairman of the board of Saint Anselm College.
Mark Loughridge
Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.
Scott C. Malpass
Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: adjunct professor of finance at the University of Notre Dame (2020–present). Chief investment officer (retired 2020) and vice president (retired 2020) of the University of Notre Dame. Assistant professor (retired June 2020) of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of superintendence of the Institute for the Works of Religion, and the board of directors of Paxos Trust Company (finance).
Deanna Mulligan
Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer of Purposeful (advisory firm for CEOs and C-level executives; 2021–present). Board chair (2020), chief executive officer (2011–2020), and president (2010–2019) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of the Guardian Life Insurance Company of America. Member of the board of the Economic Club of New York. Trustee of the Partnership for New York City (business leadership), Chief Executives for Corporate Purpose, and the NewYork-Presbyterian Hospital.
André F. Perold
Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies (private investment firm). Member of the board (2018–present) of RIT Capital Partners (investment
firm). Member of the investment committee of Partners Health Care System.
Sarah Bloom Raskin
Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Colin W. Brown Distinguished Professor of the Practice of Law (2021–present), professor (2020–present), Distinguished Fellow of the Global Financial Markets Center (2020–present), and Rubenstein Fellow (2017–2020) at Duke University. Trustee (2017–present) of Amherst College and member of Amherst College Investment Committee (2019–present). Member of the Regenerative Crisis Response Committee (2020–present).
David A. Thomas
Born in 1956. Trustee since July 2021. Principal occupation(s) during the past five years and other experience: president of Morehouse College (2018–present). Professor of business administration, emeritus at Harvard University (2017–2018). Dean (2011–2016) and professor of management (2016–2017) at the Georgetown University McDonough School of Business. Director of DTE Energy Company (2013–present). Trustee of Common Fund (2019–present).
Peter F. Volanakis
Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Member of the BMW Group Mobility Council.
Executive Officers
Christine M. Buchanan
Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2021–present) and treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG (audit, tax, and advisory services).
John Galloway
Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (September 2020–present) of each of the investment companies served by Vanguard. Head of Investor Advocacy (February 2020–present) and head of Marketing Strategy and Planning (2017–2020) at Vanguard. Special assistant to the President of the United States (2015).
Ashley Grim
Born in 1984. Principal occupation(s) during the past five years and other experience: treasurer (February 2022–present) of each of the investment companies served by Vanguard. Fund transfer agent controller (2019–2022) and director of Audit Services (2017–2019) at Vanguard. Senior manager (2015–2017) at PriceWaterhouseCoopers (audit and assurance, consulting, and tax services).
Peter Mahoney
Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.
Anne E. Robinson
Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express. Nonexecutive director of the board of National Grid (energy).
Michael Rollings
Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.
John E. Schadl
Born in 1972. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2019–present) of Vanguard and of each of the investment companies served by Vanguard. Assistant vice president (2019–present) of Vanguard Marketing Corporation.
Vanguard Senior Management Team
| Matthew Benchener | Thomas M. Rampulla |
| Joseph Brennan | Karin A. Risi |
| Mortimer J. Buckley | Anne E. Robinson |
| Gregory Davis | Michael Rollings |
| John James | Nitin Tandon |
| Chris D. Mclsaac | Lauren Valente |
Connect with Vanguard®>vanguard.com
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This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.
All comparative mutual fund data are from Morningstar, Inc., unless otherwise noted.
You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, www.sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or www.sec.gov.
You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.
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CFA® is a registered trademark owned by CFA Institute.
© 2022 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
Q220 122022
Annual Report | October 31, 2022
Vanguard Windsor™ II Fund
Contents
Your Fund’s Performance at a Glance
| 1 |
Advisors' Report
| 2 |
About Your Fund’s Expenses
| 6 |
Performance Summary
| 8 |
Financial Statements
| 10 |
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
| • | The 12 months ended October 31, 2022, were a volatile, challenging period for financial markets. Vanguard Windsor II Fund returned -11.93% for Investor Shares and -11.86% for Admiral Shares, lagging the -7.00% return of its benchmark, the Russell 1000 Value Index. |
| • | The global economic backdrop deteriorated as inflation reached multidecade highs, notably in energy and food prices after Russia invaded Ukraine in February. Price increases then broadened to other goods and services, adding to concerns that inflation would remain stubbornly high. Many central banks tightened monetary policy aggressively to try to rein in inflation, which increased fears of a recession. |
| • | The broad U.S. stock market, as measured by the Russell 3000 Index, returned -16.52%. Value stocks outperformed growth, and large-capitalization stocks lost less ground than mid- and small-caps. |
| • | Returns were negative in seven sectors. Strong selection in industrials and an underweight to real estate contributed most to performance relative to the benchmark. Information technology, the fund’s largest sector, was the biggest net detractor. |
| • | For the decade ended October 31, the fund’s average annual returns were 10.96% for Investor Shares, 11.05% for Admiral Shares, and 10.30% for the benchmark. |
Market Barometer
| | Average Annual Total Returns
Periods Ended October 31, 2022 |
| | One Year | Three Years | Five Years |
| Stocks | | | |
| Russell 1000 Index (Large-caps) | -16.38% | 9.99% | 10.19% |
| Russell 2000 Index (Small-caps) | -18.54 | 7.05 | 5.56 |
| Russell 3000 Index (Broad U.S. market) | -16.52 | 9.79 | 9.87 |
| FTSE All-World ex US Index (International) | -24.20 | -1.16 | -0.18 |
| Bonds | | | |
Bloomberg U.S. Aggregate Float Adjusted Index
(Broad taxable market) | -15.69% | -3.73% | -0.50% |
Bloomberg Municipal Bond Index
(Broad tax-exempt market) | -11.98 | -2.18 | 0.37 |
| FTSE Three-Month U.S. Treasury Bill Index | 0.88 | 0.59 | 1.15 |
| CPI | | | |
| Consumer Price Index | 7.75% | 5.01% | 3.85% |
For the 12 months ended October 31, 2022, Vanguard Windsor II Fund returned -11.93% for Investor Shares and -11.86% for Admiral Shares. It lagged the -7.00% return of its benchmark, the Russell 1000 Value Index.
Your fund is managed by four independent advisors, a strategy that enhances its diversification by providing exposure to distinct yet complementary investment approaches. It’s not uncommon for different advisors to have different views about individual securities or the broader investment environment.
The accompanying table lists the advisors, the amount and percentage of fund assets each manages, and brief descriptions of their investment strategies. The advisors have provided the following assessment of the investment environment during the past 12 months and the notable successes and shortfalls in their portfolios. These comments were prepared on November 16, 2022.
Lazard Asset Management LLC
Portfolio Managers:
Andrew Lacey, Deputy Chairman
Henry Ross Seiden, Managing Director
Ronald Temple, Managing Director
Our strategy is based on the relationship between valuation and financial productivity. We have identified and
historically validated two potential sources of alpha that we focus on exclusively:
| • | Compounders: These are companies our analysis indicates can sustain very high levels of financial productivity for longer than the market expects and for which the share price does not reflect the sustainability of these returns. We typically invest 60% to 80% of our capital in compounders. |
| • | Improvers: We believe that companies can improve returns, but investors often are too optimistic about the probability of success. Our research indicates that companies that improve their returns on capital materially outperform the broad market. We typically invest 20% to 40% of our capital in such improvers. |
The past 12 months were difficult for markets, with several issues facing the global economy, including geopolitical turmoil and uncertainty about the U.S. Federal Reserve’s ability to contain inflation without tipping the economy into a severe recession. U.S. companies in the top three deciles of financial productivity (the compounder universe) underperformed those in the bottom three by 17 percentage points, putting 2022 on track for the widest spread in 10 years. Despite this headwind, our strategy matched the market’s return. Good stock selection in compounders was offset by an underweight to stocks with the lowest financial productivity.
At the end of the fiscal year, the portfolio’s weight in compounders was in the middle of the target range of 60% to 80% of
capital. We believe this remains appropriate amid continued economic uncertainty. We are focused on using this time of increased volatility to identify companies with high financial productivity whose valuations are deeply discounted.
Hotchkis & Wiley Capital
Management, LLC
Portfolio Managers:
George H. Davis, Jr.,
Executive Chairman
Scott McBride, CFA,
Chief Executive Officer
The S&P 500 Index returned -14.6% for the 12 months ended October 31. The Federal Reserve raised its funds rate from 0.25% to 3.25% (upper bound) through five rate hikes (and announced another 75-basis-point hike on November 2, after the end of the fund’s fiscal year). Treasury yields followed suit, with the 10-year yield increasing from 1.6% to 4.1%. The rate increases were in response to elevated inflation, which by some measures reached 40-year highs.
Higher interest rates are generally bad for equities because they increase the cost of capital. Value stocks are typically less affected than growth stocks, because they are shorter on duration securities and include more financials, which stand to benefit from higher rates. Accordingly, the Russell 1000 Value Index returned -7.0% and the Russell 1000 Growth Index returned -24.6%.
The portfolio declined less than the Russell 1000 Value Index. Our view heading into the period was that the prospects for the energy sector were favorable and that the significant lack of investment in new energy projects would result in a supply shortage as demand recovered. We believed this imbalance would put upward pressure on commodity prices and bring about above-normal earnings and free cash flow for many energy companies.
This thesis appears to have been correct; energy was the best-performing sector by a significant margin. Companies used the excess cash flow to pay down debt and return capital to shareholders through increased dividends and share repurchases.
Energy was easily the largest positive contributor for the portfolio. A lack of exposure to real estate and positive stock selection in health care were modestly positive. Stock selection in consumer discretionary and industrials, as well as an overweight position in technology, hurt relative performance.
Sanders Capital, LLC
Portfolio Managers:
Lewis A. Sanders, CFA,
Chief Executive Officer and
Co-Chief Investment Officer
John P. Mahedy, CPA,
Director of Research and
Co-Chief Investment Officer
Value opportunities typically reside in places where investor anxiety is elevated either because of depressed conditions or credible threats to the sustainability of current earnings and cash flow. Our investments fall in both categories and are focused in six sectors: health care (27%), information technology (22%), financials (12%), consumer staples (8%), communication services (7%), and consumer discretionary (7%).
As might be gleaned from its composition, the portfolio had considerable exposure to technological developments in the semiconductor, computing, media, and communications industries. These investments were linked by one overarching theme: enabling the virtualization/digitalization of physical forms of interaction.
The above-average expected returns of the stocks that fit this theme derived primarily from investor anxiety about short-term cyclical risks, which we saw as transitory. Investments in health care provided ballast to such cyclical risks and benefited from the aging of the population, which drove demand for high-acuity health care services.
The statistical character of the portfolio remained in the value domain. It was priced at about a 35% discount to market standards on earnings and cash flow. Relative volatility was estimated to be consistent with the portfolio’s targeted range. Portfolio beta was low, at 0.85.
About 20% of the portfolio was invested in companies domiciled outside the
U.S. We believe these companies were well-positioned in their respective industries and, on average, were priced at about a 20% discount to our U.S. holdings.
Investment results at the fund’s fiscal year-end trailed value benchmarks, primarily because of an underweight in the energy sector, but outpaced broad-based benchmarks. Longer-term returns were substantially ahead of value benchmarks and sustained a premium against broad benchmarks as well, primarily because of effective stock selection.
Aristotle Capital Management, LLC
Portfolio Managers:
Howard Gleicher, CFA,
Chief Executive Officer and
Chief Investment Officer
Gregory D. Padilla, CFA,
Principal, Senior Global Research Analyst
Value investing is often associated with lower quality, but our approach is different. We look for high-quality companies whose current stock prices do not reflect our estimates of their intrinsic value and for which we see company-specific catalysts underway to propel the business forward.
The 12 months ended October 31, 2022, were a reversal from prior years. Inflation surged, and most asset prices declined. Our strategy outpaced the S&P 500 Index but lagged the Russell 1000 Value Index.
Several companies in our portfolio that were top contributors in prior periods were among our largest detractors this year, and vice versa. The recent results are a great example of why we frequently say, “Not every quarter, not every year.” Our investment style does not attempt to produce superior returns every year but rather is designed to generate optimal results over time.
Although the market was volatile, our activity remained typical (for us), with portfolio turnover of approximately 15%. During the fiscal year, we increased our
exposure to the utilities sector, as the market did not seem to fully appreciate the long-term investment cycle needed to upgrade electric and gas infrastructure.
Following our sale of Twitter (the company was acquired), we had no investments in communication services. However, we view much of Crown Castle’s business and a large portion of Sony’s business as part of this sector. Moreover, we are actively researching several companies in the communication services value chain, such as digital advertising.
Vanguard Windsor II Fund Investment Advisors
| |
| | Fund Assets Managed | |
| Investment Advisor | % | $ Million | Investment Strategy |
| Lazard Asset Management LLC | 35 | 18,231 | Employs a relative-value approach that seeks a combination of attractive valuation and high financial productivity. The process is research-driven, relying upon bottom-up stock analysis performed by the firm’s global sector analysts. |
| Hotchkis & Wiley Capital Management, LLC | 23 | 11,429 | Uses a disciplined investment approach, focusing on such investment parameters as a company’s tangible assets, sustainable cash flow, and potential for improving business performance. |
| Sanders Capital, LLC | 21 | 10,365 | Employs a traditional, bottom-up, fundamental research approach to identifying securities that are undervalued relative to their expected total return. |
| Aristotle Capital Management, LLC | 20 | 9,988 | Employs a fundamental, bottom-up security selection process focused on quality companies with attractive valuations and compelling catalysts. |
| Cash Investments | 1 | 411 | These short-term reserves are invested by Vanguard in equity index products to simulate investment in stocks. Each advisor may also maintain a modest cash position. |
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
| • | Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period. |
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
| • | Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds. |
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
| Six Months Ended October 31, 2022 | | | |
| | Beginning
Account Value
4/30/2022 | Ending
Account Value
10/31/2022 | Expenses
Paid During
Period |
| Based on Actual Fund Return | | | |
| Windsor II Fund | | | |
| Investor Shares | $1,000.00 | $960.20 | $1.68 |
| Admiral™ Shares | 1,000.00 | 960.70 | 1.28 |
| Based on Hypothetical 5% Yearly Return | | | |
| Windsor II Fund | | | |
| Investor Shares | $1,000.00 | $1,023.49 | $1.73 |
| Admiral Shares | 1,000.00 | 1,023.90 | 1.33 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.34% for Investor Shares and 0.26% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (184/365).
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: October 31, 2012, Through October 31, 2022
Initial Investment of $10,000
| | | Average Annual Total Returns
Periods Ended October 31, 2022 | |
| | | One
Year | Five
Years | Ten
Years | Final Value
of a $10,000
Investment |
 | Windsor II Fund Investor Shares | -11.93% | 9.41% | 10.96% | $28,284 |
 | Russell 1000 Value Index | -7.00 | 7.21 | 10.30 | 26,647 |
 | Dow Jones U.S. Total Stock Market Float Adjusted Index | -16.94 | 9.72 | 12.36 | 32,058 |
| | | | |
| | | One
Year | Five
Years | Ten
Years | Final Value
of a $50,000
Investment |
| Windsor II Fund Admiral Shares | -11.86% | 9.50% | 11.05% | $142,568 |
| Russell 1000 Value Index | -7.00 | 7.21 | 10.30 | 133,235 |
| Dow Jones U.S. Total Stock Market Float Adjusted Index | -16.94 | 9.72 | 12.36 | 160,289 |
See Financial Highlights for dividend information.
| Communication Services | 6.1% |
| Consumer Discretionary | 8.6 |
| Consumer Staples | 6.8 |
| Energy | 6.7 |
| Financials | 17.2 |
| Health Care | 17.5 |
| Industrials | 10.3 |
| Information Technology | 19.8 |
| Materials | 3.0 |
| Real Estate | 1.5 |
| Utilities | 1.5 |
| Other | 1.0 |
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.
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.
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.
| | | Shares | Market
Value•
($000) |
| Common Stocks (96.3%) |
| Communication Services (5.9%) |
| * | Alphabet Inc. Class A | 12,510,416 | 1,182,359 |
| * | Alphabet Inc. Class C | 5,847,300 | 553,505 |
| * | Meta Platforms Inc. Class A | 3,262,230 | 303,909 |
| * | Walt Disney Co. | 1,904,063 | 202,859 |
| | Comcast Corp. Class A | 6,368,613 | 202,140 |
| * | Warner Bros Discovery Inc. | 15,346,448 | 199,504 |
| | News Corp. Class A | 7,222,210 | 121,839 |
| | Vodafone Group plc ADR | 9,071,932 | 107,140 |
| | Omnicom Group Inc. | 805,979 | 58,635 |
| 1 | Paramount Global Inc. Class B | 2,830,100 | 51,847 |
| | | | 2,983,737 |
| Consumer Discretionary (8.2%) |
| * | Amazon.com Inc. | 6,905,590 | 707,409 |
| | McDonald's Corp. | 1,644,609 | 448,419 |
| | General Motors Co. | 9,474,101 | 371,858 |
| | Lennar Corp. Class A | 4,030,222 | 325,239 |
| * | Aptiv plc | 3,159,485 | 287,734 |
| | Home Depot Inc. | 831,083 | 246,109 |
| | Dollar General Corp. | 882,774 | 225,151 |
| | Magna International Inc. | 3,725,732 | 207,635 |
| | Sony Group Corp. ADR | 3,031,300 | 204,522 |
| | NIKE Inc. Class B | 1,928,931 | 178,773 |
| | Cie Generale des Etablissements Michelin SCA ADR | 13,712,000 | 174,142 |
| * | Booking Holdings Inc. | 86,500 | 161,710 |
| | Bayerische Motoren Werke AG | 2,025,426 | 158,980 |
| | Mercedes-Benz Group AG | 2,159,229 | 124,980 |
| | DR Horton Inc. | 1,162,980 | 89,410 |
| | Starbucks Corp. | 1,005,144 | 87,035 |
| | Lear Corp. | 548,900 | 76,138 |
| * | Adient plc | 1,311,943 | 45,892 |
| * | Goodyear Tire & Rubber Co. | 2,833,996 | 35,992 |
| | | | 4,157,128 |
| Consumer Staples (6.5%) |
| | Procter & Gamble Co. | 6,040,204 | 813,434 |
| | Coca-Cola Co. | 10,685,095 | 639,503 |
| | Sysco Corp. | 4,769,343 | 412,834 |
| | | Shares | Market
Value•
($000) |
| | PepsiCo Inc. | 1,676,845 | 304,482 |
| | Mondelez International Inc. Class A | 3,706,337 | 227,866 |
| | Constellation Brands Inc. Class A | 846,000 | 209,030 |
| | Estee Lauder Cos. Inc. Class A | 883,782 | 177,189 |
| | Unilever plc ADR | 3,884,298 | 176,774 |
| | Unilever plc (XLON) | 3,390,000 | 154,090 |
| | Nestle SA (Registered) | 1,212,973 | 132,043 |
| | Tyson Foods Inc. Class A | 468,413 | 32,016 |
| | | | 3,279,261 |
| Energy (6.5%) |
| | ConocoPhillips | 5,742,032 | 724,013 |
| | Halliburton Co. | 9,017,335 | 328,411 |
| | Coterra Energy Inc. | 9,614,000 | 299,284 |
| | APA Corp. | 5,984,377 | 272,050 |
| | Suncor Energy Inc. | 7,518,132 | 258,549 |
| | NOV Inc. | 10,181,888 | 228,074 |
| | Phillips 66 | 1,990,000 | 207,537 |
| | Shell plc ADR | 3,650,412 | 203,072 |
| | Marathon Oil Corp. | 6,226,087 | 189,584 |
| | Hess Corp. | 981,067 | 138,409 |
| | Murphy Oil Corp. | 2,797,252 | 135,695 |
| * | Ovintiv Inc. (XNYS) | 1,677,610 | 84,971 |
| | Cenovus Energy Inc. | 3,695,600 | 74,651 |
| | Schlumberger NV | 1,129,000 | 58,742 |
| | Baker Hughes Co. Class A | 1,863,000 | 51,531 |
| | | | 3,254,573 |
| Financials (16.6%) |
| | Wells Fargo & Co. | 19,760,367 | 908,779 |
| | Bank of America Corp. | 22,116,816 | 797,090 |
| | Citigroup Inc. | 13,926,803 | 638,683 |
| | PNC Financial Services Group Inc. | 3,579,402 | 579,255 |
| | Intercontinental Exchange Inc. | 5,585,077 | 533,766 |
| | American Express Co. | 3,432,583 | 509,567 |
| | American International Group Inc. | 7,743,156 | 441,360 |
| | Marsh & McLennan Cos. Inc. | 2,264,390 | 365,676 |
| | Capital One Financial Corp. | 2,991,300 | 317,138 |
| | Commerce Bancshares Inc. | 4,326,366 | 306,480 |
| | | Shares | Market
Value•
($000) |
| | Goldman Sachs Group Inc. | 853,549 | 294,056 |
| | Ameriprise Financial Inc. | 938,800 | 290,202 |
| | JPMorgan Chase & Co. | 2,295,001 | 288,895 |
| | Cullen/Frost Bankers Inc. | 1,577,000 | 244,514 |
| | Bank of New York Mellon Corp. | 5,516,134 | 232,284 |
| | Cincinnati Financial Corp. | 2,192,000 | 226,477 |
| | Blackstone Inc. | 2,402,563 | 218,970 |
| | Hartford Financial Services Group Inc. | 2,768,600 | 200,474 |
| | Citizens Financial Group Inc. | 4,538,951 | 185,643 |
| | BNP Paribas SA | 3,526,900 | 165,390 |
| | Truist Financial Corp. | 2,831,319 | 126,815 |
| 1 | Mitsubishi UFJ Financial Group Inc. ADR | 19,937,000 | 93,903 |
| | First Citizens BancShares Inc. Class A | 101,058 | 83,082 |
| 1 | Corebridge Financial Inc. | 2,694,200 | 61,077 |
| | Equitable Holdings Inc. | 1,842,040 | 56,403 |
| | NatWest Group plc | 19,290,743 | 51,956 |
| | State Street Corp. | 665,188 | 49,224 |
| * | ING Groep NV | 4,579,533 | 45,061 |
| | China Construction Bank Corp. Class H | 51,864,000 | 27,524 |
| | Sumitomo Mitsui Financial Group Inc. | 963,900 | 27,068 |
| | | | 8,366,812 |
| Health Care (16.8%) |
| | Medtronic plc | 11,626,297 | 1,015,441 |
| | Johnson & Johnson | 5,154,289 | 896,692 |
| | UnitedHealth Group Inc. | 1,371,817 | 761,564 |
| | Elevance Health Inc. | 1,364,638 | 746,143 |
| | Danaher Corp. | 2,658,310 | 669,017 |
| | HCA Healthcare Inc. | 2,728,700 | 593,410 |
| | Cigna Corp. | 1,796,273 | 580,304 |
| | Thermo Fisher Scientific Inc. | 804,094 | 413,280 |
| | Humana Inc. | 709,041 | 395,702 |
| * | Boston Scientific Corp. | 6,849,195 | 295,269 |
| | Amgen Inc. | 1,075,000 | 290,626 |
| | Merck & Co. Inc. | 2,560,600 | 259,133 |
| | Roche Holding AG | 776,049 | 257,492 |
| * | IQVIA Holdings Inc. | 976,253 | 204,691 |
| | Zoetis Inc. | 1,252,953 | 188,920 |
| 1 | Alcon Inc. | 2,970,800 | 180,268 |
| | CVS Health Corp. | 1,686,300 | 159,693 |
| * | Centene Corp. | 1,671,888 | 142,328 |
| * | Vertex Pharmaceuticals Inc. | 293,475 | 91,564 |
| | Novartis AG ADR | 1,059,800 | 85,981 |
| | AbbVie Inc. | 544,967 | 79,783 |
| | Zimmer Biomet Holdings Inc. | 676,708 | 76,705 |
| | Sanofi ADR | 1,371,691 | 59,298 |
| | Gsk plc Spon ADR | 1,567,915 | 52,008 |
| | | | 8,495,312 |
| | | Shares | Market
Value•
($000) |
| Industrials (9.9%) |
| | Honeywell International Inc. | 4,087,166 | 833,864 |
| | General Electric Co. | 8,369,545 | 651,234 |
| | Northrop Grumman Corp. | 990,800 | 543,959 |
| | Norfolk Southern Corp. | 1,356,930 | 309,475 |
| | Parker-Hannifin Corp. | 979,000 | 284,517 |
| | Waste Management Inc. | 1,740,801 | 275,691 |
| | FedEx Corp. | 1,719,390 | 275,584 |
| | Xylem Inc. | 2,400,000 | 245,832 |
| | General Dynamics Corp. | 902,000 | 225,320 |
| | Cummins Inc. | 648,372 | 158,533 |
| | CNH Industrial NV | 12,026,699 | 155,626 |
| | Caterpillar Inc. | 709,795 | 153,642 |
| | Oshkosh Corp. | 1,690,000 | 148,720 |
| | HEICO Corp. | 900,618 | 146,477 |
| * | Boeing Co. | 895,000 | 127,546 |
| | Raytheon Technologies Corp. | 1,291,800 | 122,489 |
| | PACCAR Inc. | 1,127,320 | 109,158 |
| * | Southwest Airlines Co. | 2,264,289 | 82,307 |
| * | Daimler Truck Holding AG | 2,948,514 | 78,644 |
| * | Fluor Corp. | 1,403,385 | 42,466 |
| * | Siemens AG (Registered) | 193,374 | 21,118 |
| | | | 4,992,202 |
| Information Technology (19.1%) |
| | Microsoft Corp. | 10,646,349 | 2,471,337 |
| | Apple Inc. | 3,764,348 | 577,225 |
| | Visa Inc. Class A | 2,753,270 | 570,367 |
| * | Adobe Inc. | 1,419,958 | 452,257 |
| | Micron Technology Inc. | 8,303,923 | 449,242 |
| | Taiwan Semiconductor Manufacturing Co. Ltd. ADR | 6,298,485 | 387,672 |
| | Analog Devices Inc. | 2,497,904 | 356,251 |
| | Samsung Electronics Co. Ltd. | 8,514,100 | 354,356 |
| | Oracle Corp. | 4,459,525 | 348,155 |
| * | Salesforce Inc. | 1,760,918 | 286,308 |
| | Cisco Systems Inc. | 6,169,732 | 280,291 |
| * | F5 Inc. | 1,868,200 | 266,984 |
| * | Workday Inc. Class A | 1,673,500 | 260,765 |
| | Amphenol Corp. Class A | 3,379,368 | 256,257 |
| * | Autodesk Inc. | 1,170,000 | 250,731 |
| | Microchip Technology Inc. | 4,061,000 | 250,726 |
| | QUALCOMM Inc. | 2,036,500 | 239,615 |
| * | ANSYS Inc. | 1,025,000 | 226,689 |
| | Applied Materials Inc. | 2,490,549 | 219,891 |
| | Accenture plc Class A | 768,526 | 218,184 |
| * | PayPal Holdings Inc. | 2,181,523 | 182,332 |
| | TE Connectivity Ltd. | 961,966 | 117,581 |
| | Telefonaktiebolaget LM Ericsson ADR | 19,799,680 | 110,284 |
| | Corning Inc. | 3,410,551 | 109,717 |
| | Cognex Corp. | 1,632,092 | 75,452 |
| * | Fiserv Inc. | 648,800 | 66,658 |
| * | Western Digital Corp. | 1,765,936 | 60,695 |
| | Cognizant Technology Solutions Corp. Class A | 937,900 | 58,384 |
| | | Shares | Market
Value•
($000) |
| | Seagate Technology Holdings plc | 1,149,198 | 57,069 |
| * | Lam Research Corp. | 123,521 | 49,999 |
| | | | 9,611,474 |
| Materials (2.9%) |
| | Corteva Inc. | 6,529,000 | 426,605 |
| | Martin Marietta Materials Inc. | 731,000 | 245,601 |
| | RPM International Inc. | 2,399,000 | 226,873 |
| | Ecolab Inc. | 1,293,000 | 203,092 |
| | Avery Dennison Corp. | 1,052,268 | 178,412 |
| | Olin Corp. | 2,815,600 | 149,086 |
| | International Paper Co. | 1,016,629 | 34,169 |
| | | | 1,463,838 |
| Other (0.9%) |
| | SPDR S&P 500 ETF Trust | 1,236,073 | 477,384 |
| Real Estate (1.5%) |
| | Prologis Inc. | 3,627,981 | 401,799 |
| | Crown Castle Inc. | 1,560,000 | 207,886 |
| | Equity LifeStyle Properties Inc. | 2,142,000 | 137,002 |
| | | | 746,687 |
| Utilities (1.5%) |
| | PPL Corp. | 9,803,515 | 259,695 |
| | Atmos Energy Corp. | 2,332,700 | 248,549 |
| | Xcel Energy Inc. | 3,713,100 | 241,760 |
| | | | 750,004 |
Total Common Stocks
(Cost $36,044,116) | 48,578,412 |
| | | Shares | Market
Value•
($000) |
| Temporary Cash Investments (3.5%) |
| Money Market Fund (3.5%) |
| 2,3 | Vanguard Market Liquidity Fund, 3.117% (Cost $1,750,028) | 17,506,403 | 1,750,290 |
| Total Investments (99.8%) (Cost $37,794,144) | 50,328,702 |
| Other Assets and Liabilities—Net (0.2%) | 94,969 |
| Net Assets (100%) | 50,423,671 |
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $10,496,000. |
| 2 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 3 | Collateral of $11,123,000 was received for securities on loan. |
| | ADR—American Depositary Receipt. |
Derivative Financial Instruments Outstanding as of Period End
| Futures Contracts |
| | | | ($000) |
| | Expiration | Number of
Long (Short)
Contracts | Notional
Amount | Value and
Unrealized
Appreciation
(Depreciation) |
| Long Futures Contracts | | | | |
| E-mini S&P 500 Index | December 2022 | 2,125 | 412,569 | 25,875 |
See accompanying Notes, which are an integral part of the Financial Statements.
Statement of Assets and Liabilities
|
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value1 | |
| Unaffiliated Issuers (Cost $36,044,116) | 48,578,412 |
| Affiliated Issuers (Cost $1,750,028) | 1,750,290 |
| Total Investments in Securities | 50,328,702 |
| Investment in Vanguard | 1,854 |
| Cash Collateral Pledged—Futures Contracts | 22,100 |
| Receivables for Investment Securities Sold | 90,302 |
| Receivables for Accrued Income | 47,278 |
| Receivables for Capital Shares Issued | 8,646 |
| Total Assets | 50,498,882 |
| Liabilities | |
| Due to Custodian | 5,907 |
| Payables for Investment Securities Purchased | 15,234 |
| Collateral for Securities on Loan | 11,123 |
| Payables to Investment Advisor | 14,823 |
| Payables for Capital Shares Redeemed | 21,565 |
| Payables to Vanguard | 3,434 |
| Variation Margin Payable—Futures Contracts | 3,125 |
| Total Liabilities | 75,211 |
| Net Assets | 50,423,671 |
| 1 Includes $10,496 of securities on loan. | |
| At October 31, 2022, net assets consisted of: | |
| | |
| Paid-in Capital | 34,991,703 |
| Total Distributable Earnings (Loss) | 15,431,968 |
| Net Assets | 50,423,671 |
| |
| Investor Shares—Net Assets | |
Applicable to 272,827,126 outstanding $.001 par value shares of
beneficial interest (unlimited authorization) | 10,747,063 |
| Net Asset Value Per Share—Investor Shares | $39.39 |
| |
| Admiral Shares—Net Assets | |
Applicable to 567,700,096 outstanding $.001 par value shares of
beneficial interest (unlimited authorization) | 39,676,608 |
| Net Asset Value Per Share—Admiral Shares | $69.89 |
See accompanying Notes, which are an integral part of the Financial Statements.
|
| | Year Ended
October 31, 2022 |
| | ($000) |
| Investment Income | |
| Income | |
| Dividends1 | 925,596 |
| Interest2 | 20,018 |
| Securities Lending—Net | 1,351 |
| Total Income | 946,965 |
| Expenses | |
| Investment Advisory Fees—Note B | |
| Basic Fee | 68,897 |
| Performance Adjustment | (4,131) |
| The Vanguard Group—Note C | |
| Management and Administrative—Investor Shares | 25,163 |
| Management and Administrative—Admiral Shares | 58,329 |
| Marketing and Distribution—Investor Shares | 709 |
| Marketing and Distribution—Admiral Shares | 1,451 |
| Custodian Fees | 561 |
| Auditing Fees | 42 |
| Shareholders’ Reports—Investor Shares | 462 |
| Shareholders’ Reports—Admiral Shares | 182 |
| Trustees’ Fees and Expenses | 21 |
| Other Expenses | 80 |
| Total Expenses | 151,766 |
| Expenses Paid Indirectly | (49) |
| Net Expenses | 151,717 |
| Net Investment Income | 795,248 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold2 | 2,926,827 |
| Futures Contracts | (129,080) |
| Foreign Currencies | (999) |
| Realized Net Gain (Loss) | 2,796,748 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities—Unaffiliated Issuers2 | (10,648,310) |
| Futures Contracts | 4,468 |
| Foreign Currencies | (714) |
| Change in Unrealized Appreciation (Depreciation) | (10,644,556) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (7,052,560) |
| 1 | Dividends are net of foreign withholding taxes of $17,265,000. |
| 2 | Interest income, realized net gain (loss), capital gain distributions received, and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $19,903,000, ($550,000), $47,000, and $109,000, respectively. Purchases and sales are for temporary cash investment purposes. |
See accompanying Notes, which are an integral part of the Financial Statements.
Statement of Changes in Net Assets
|
| | Year Ended October 31, |
| | 2022
($000) | 2021
($000) |
| | | |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net Investment Income | 795,248 | 657,953 |
| Realized Net Gain (Loss) | 2,796,748 | 4,007,994 |
| Change in Unrealized Appreciation (Depreciation) | (10,644,556) | 15,751,779 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (7,052,560) | 20,417,726 |
| Distributions | | |
| Investor Shares | (1,012,782) | (877,466) |
| Admiral Shares | (3,567,050) | (2,558,212) |
| Total Distributions | (4,579,832) | (3,435,678) |
| Capital Share Transactions | | |
| Investor Shares | (437,223) | (1,563,435) |
| Admiral Shares | 1,926,529 | 3,159,805 |
| Net Increase (Decrease) from Capital Share Transactions | 1,489,306 | 1,596,370 |
| Total Increase (Decrease) | (10,143,086) | 18,578,418 |
| Net Assets | | |
| Beginning of Period | 60,566,757 | 41,988,339 |
| End of Period | 50,423,671 | 60,566,757 |
See accompanying Notes, which are an integral part of the Financial Statements.
| Investor Shares | | | | | |
For a Share Outstanding
Throughout Each Period | Year Ended October 31, |
| 2022 | 2021 | 2020 | 2019 | 2018 |
| Net Asset Value, Beginning of Period | $48.48 | $34.85 | $37.22 | $37.39 | $38.81 |
| Investment Operations | | | | | |
| Net Investment Income1 | .585 | .502 | .551 | .775 | .783 |
| Net Realized and Unrealized Gain (Loss) on Investments | (6.039) | 15.971 | .607 | 2.628 | .950 |
| Total from Investment Operations | (5.454) | 16.473 | 1.158 | 3.403 | 1.733 |
| Distributions | | | | | |
| Dividends from Net Investment Income | (.566) | (.516) | (.635) | (.844) | (.740) |
| Distributions from Realized Capital Gains | (3.070) | (2.327) | (2.893) | (2.729) | (2.413) |
| Total Distributions | (3.636) | (2.843) | (3.528) | (3.573) | (3.153) |
| Net Asset Value, End of Period | $39.39 | $48.48 | $34.85 | $37.22 | $37.39 |
| Total Return2 | -11.93% | 49.42% | 2.93% | 10.82% | 4.44% |
| Ratios/Supplemental Data | | | | | |
| Net Assets, End of Period (Millions) | $10,747 | $13,734 | $10,997 | $12,119 | $12,061 |
| Ratio of Total Expenses to Average Net Assets3 | 0.34%4 | 0.34% | 0.34% | 0.33% | 0.33% |
| Ratio of Net Investment Income to Average Net Assets | 1.38% | 1.15% | 1.61% | 2.20% | 2.04% |
| Portfolio Turnover Rate | 18% | 20% | 61% | 32% | 29% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | Includes performance-based investment advisory fee increases (decreases) of (0.01%), (0.00%), (0.01%), (0.03%), and (0.03%). |
| 4 | The ratio of expenses to average net assets for the period net of reduction from broker commission abatement arrangements was 0.34%. |
See accompanying Notes, which are an integral part of the Financial Statements.
| Admiral Shares | | | | | |
For a Share Outstanding
Throughout Each Period | Year Ended October 31, |
| 2022 | 2021 | 2020 | 2019 | 2018 |
| Net Asset Value, Beginning of Period | $86.03 | $61.84 | $66.06 | $66.35 | $68.88 |
| Investment Operations | | | | | |
| Net Investment Income1 | 1.098 | .950 | 1.027 | 1.426 | 1.443 |
| Net Realized and Unrealized Gain (Loss) on Investments | (10.716) | 28.341 | 1.065 | 4.675 | 1.682 |
| Total from Investment Operations | (9.618) | 29.291 | 2.092 | 6.101 | 3.125 |
| Distributions | | | | | |
| Dividends from Net Investment Income | (1.074) | (.972) | (1.178) | (1.547) | (1.371) |
| Distributions from Realized Capital Gains | (5.448) | (4.129) | (5.134) | (4.844) | (4.284) |
| Total Distributions | (6.522) | (5.101) | (6.312) | (6.391) | (5.655) |
| Net Asset Value, End of Period | $69.89 | $86.03 | $61.84 | $66.06 | $66.35 |
| Total Return2 | -11.86% | 49.55% | 3.00% | 10.93% | 4.52% |
| Ratios/Supplemental Data | | | | | |
| Net Assets, End of Period (Millions) | $39,677 | $46,833 | $30,992 | $34,022 | $34,126 |
| Ratio of Total Expenses to Average Net Assets3 | 0.26%4 | 0.26% | 0.26% | 0.25% | 0.25% |
| Ratio of Net Investment Income to Average Net Assets | 1.46% | 1.22% | 1.69% | 2.28% | 2.12% |
| Portfolio Turnover Rate | 18% | 20% | 61% | 32% | 29% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | Includes performance-based investment advisory fee increases (decreases) of (0.01%), (0.00%), (0.01%), (0.03%), and (0.03%). |
| 4 | The ratio of expenses to average net assets for the period net of reduction from broker commission abatement arrangements was 0.26%. |
See accompanying Notes, which are an integral part of the Financial Statements.
Notes to Financial Statements
Vanguard Windsor II Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.
Significant market disruptions, such as those caused by pandemics (e.g., COVID-19 pandemic), natural or environmental disasters, war (e.g., Russia’s invasion of Ukraine), acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Any such disruptions could have an adverse impact on the value of the fund’s investments and 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 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 valuation designee to represent fair value and subject to oversight by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The
clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any 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 October 31, 2022, the fund’s average investments in long and short futures contracts represented 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.
4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually 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 $4.4 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 and are 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, which 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 an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate 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 October 31, 2022, the fund did not utilize the credit facilities or the Interfund Lending Program.
8. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. 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.
Taxes on foreign dividends and capital gains have been provided for in accordance with the fund's understanding of the applicable countries' tax rules and rates. Deferred foreign capital gains tax, if any, is accrued daily based upon net unrealized gains. The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Amounts related to these reclaims are recorded when there are no significant uncertainties as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment. Such tax reclaims and related professional fees, if any, are included in dividend income and other expenses, respectively.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
| B. | The investment advisory firms Lazard Asset Management LLC, Hotchkis & Wiley Capital Management, LLC, Sanders Capital, LLC, and Aristotle Capital Management, LLC, each provide |
investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fee of Lazard Asset Management LLC is subject to quarterly adjustments based on performance relative to the S&P 500 Index for the preceding three years. The basic fee of Hotchkis & Wiley Capital Management, LLC, is subject to quarterly adjustments based on performance relative to the MSCI US Investable Market 2500 Index for the preceding five years. The basic fee of Sanders Capital, LLC, is subject to quarterly adjustments based on performance relative to the Russell 3000 Index for the preceding five years. The basic fee of Aristotle Capital Management, LLC, is subject to quarterly adjustments based on performance relative to the S&P 500 Index since January 31, 2020.
Vanguard manages the cash reserves of the fund as described below.
For the year ended October 31, 2022, the aggregate investment advisory fee paid to all advisors represented an effective annual basic rate of 0.12% of the fund’s average net assets, before a net decrease of $4,131,000 (0.01%) based on performance.
| C. | In accordance with the terms of a Funds' Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, distribution and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees 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 October 31, 2022, the fund had contributed to Vanguard capital in the amount of $1,854,000, representing less than 0.01% of the fund’s net assets and 0.74% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
| D. | The fund has asked its investment advisors to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund’s management and administrative expenses. For the year ended October 31, 2022, these arrangements reduced the fund’s expenses by $49,000 (an annual rate of less than 0.01% of average net assets). |
| E. | 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 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments 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 October 31, 2022, based on the inputs used to value them:
| | Level 1
($000) | Level 2
($000) | Level 3
($000) | Total
($000) |
| Investments | | | | |
| Assets | | | | |
| Common Stocks | 46,979,710 | 1,598,702 | — | 48,578,412 |
| Temporary Cash Investments | 1,750,290 | — | — | 1,750,290 |
| Total | 48,730,000 | 1,598,702 | — | 50,328,702 |
| Derivative Financial Instruments | | | | |
| Assets | | | | |
| Futures Contracts1 | 25,875 | — | — | 25,875 |
| 1 | Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
| F. | 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 applicable foreign currency transactions and distributions in connection with fund share redemptions were reclassified between the following accounts: |
| | Amount
($000) |
| Paid-in Capital | 150,407 |
| Total Distributable Earnings (Loss) | (150,407) |
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 | 263,505 |
| Undistributed Long-Term Gains | 2,674,577 |
| Capital Loss Carryforwards | — |
| Qualified Late-Year Losses | — |
| Net Unrealized Gains (Losses) | 12,493,886 |
The tax character of distributions paid was as follows:
| | Year Ended October 31, |
| | 2022
Amount
($000) | 2021
Amount
($000) |
| Ordinary Income* | 1,414,463 | 781,945 |
| Long-Term Capital Gains | 3,165,369 | 2,653,733 |
| Total | 4,579,832 | 3,435,678 |
| * | Includes short-term capital gains, if any. |
As of October 31, 2022, 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 | 37,834,352 |
| Gross Unrealized Appreciation | 15,329,566 |
| Gross Unrealized Depreciation | (2,835,216) |
| Net Unrealized Appreciation (Depreciation) | 12,494,350 |
| G. | During the year ended October 31, 2022, the fund purchased $9,760,828,000 of investment securities and sold $11,387,249,000 of investment securities, other than temporary cash investments. |
| H. | Capital share transactions for each class of shares were: |
| | Year Ended October 31, | |
| | 2022 | | 2021 |
| | Amount
($000) | Shares
(000) | | Amount
($000) | Shares
(000) |
| Investor Shares | | | | | |
| Issued | 594,292 | 13,465 | | 823,222 | 18,805 |
| Issued in Lieu of Cash Distributions | 986,376 | 22,623 | | 856,941 | 22,227 |
| Redeemed | (2,017,891) | (46,545) | | (3,243,598) | (73,302) |
| Net Increase (Decrease)—Investor Shares | (437,223) | (10,457) | | (1,563,435) | (32,270) |
| Admiral Shares | | | | | |
| Issued | 2,903,794 | 37,328 | | 4,997,051 | 63,663 |
| Issued in Lieu of Cash Distributions | 3,344,538 | 43,301 | | 2,400,086 | 35,053 |
| Redeemed | (4,321,803) | (57,306) | | (4,237,332) | (55,504) |
| Net Increase (Decrease)—Admiral Shares | 1,926,529 | 23,323 | | 3,159,805 | 43,212 |
| I. | Management has determined that no events or transactions occurred subsequent to October 31, 2022, that would require recognition or disclosure in these financial statements. |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Vanguard Windsor Funds and Shareholders of Vanguard Windsor II Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Vanguard Windsor II Fund (one of the funds constituting Vanguard Windsor Funds, referred to hereafter as the "Fund") as of October 31, 2022, the related statement of operations for the year ended October 31, 2022, the statement of changes in net assets for each of the two years in the period ended October 31, 2022, including the related notes, and the financial highlights for each of the five years in the period ended October 31, 2022 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of October 31, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended October 31, 2022 and the financial highlights for each of the five years in the period ended October 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2022 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 16, 2022
We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.
Tax information (unaudited)
For corporate shareholders, 84.8%, or if subsequently determined to be different, the maximum percentage allowable by law, of ordinary income (dividend income plus short-term gains, if any) for the fiscal year qualified for the dividends-received deduction.
The fund hereby designates $890,042,000, or if subsequently determined to be different, the maximum amount allowable by law, as qualified dividend income for individual shareholders for the fiscal year.
The fund hereby designates $5,826,000, or if subsequently determined to be different, the maximum amount allowable by law, of interest earned from obligations of the U.S. government which is generally exempt from state income tax.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund for the fiscal year are qualified short-term capital gains.
The fund distributed $3,315,403,000 as capital gain dividends (20% rate gain distributions) to shareholders during the fiscal year.
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 206 Vanguard funds.
Information for each trustee and executive officer of the fund appears below. That information, as well as the Vanguard fund count, is as of the date on the cover of this fund report. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
Interested Trustee1
Mortimer J. Buckley
Born in 1969. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chairman of the board (2019–present) of Vanguard and of each of the investment companies served by Vanguard; chief executive officer (2018–present) of Vanguard; chief executive officer, president, and trustee (2018–present) of each of the investment companies served by Vanguard; president and director (2017–present) of Vanguard; and president (2018–present) of Vanguard Marketing Corporation. Chief investment officer (2013–2017), managing director (2002–2017), head of the Retail Investor Group (2006–2012), and chief information officer (2001–2006) of Vanguard. Member of the board of governors of the Investment Company Institute and the board of governors of FINRA. Trustee and vice chair of The Shipley School.
Independent Trustees
Tara Bunch
Born in 1962. Trustee since November 2021. Principal occupation(s) during the past five years and other experience: head of global operations at Airbnb (2020–present). Vice president of AppleCare (2012–2020). Member of the board of directors of Out & Equal (2002–2006), the advisory board of the University of California, Berkeley School of Engineering (2020–present), and the advisory board
of Santa Clara University’s Leavey School of Business (2018–present).
Emerson U. Fullwood
Born in 1948. Trustee since January 2008. Principal occupation(s) during the past five years and other experience: executive chief staff and marketing officer for North America and corporate vice president (retired 2008) of Xerox Corporation (document management products and services). Former president of the Worldwide Channels Group, Latin America, and Worldwide Customer Service and executive chief staff officer of Developing Markets of Xerox. Executive in residence and 2009–2010 Distinguished Minett Professor at the Rochester Institute of Technology. Member of the board of directors of the University of Rochester Medical Center, the Monroe Community College Foundation, the United Way of Rochester, North Carolina A&T University, Roberts Wesleyan College, and the Rochester Philharmonic Orchestra. Trustee of the University of Rochester.
F. Joseph Loughrey
Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services). Director of the V Foundation. Member of the advisory council for the College of
1 Mr. Buckley is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
Arts and Letters at the University of Notre Dame. Chairman of the board of Saint Anselm College.
Mark Loughridge
Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.
Scott C. Malpass
Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: adjunct professor of finance at the University of Notre Dame (2020–present). Chief investment officer (retired 2020) and vice president (retired 2020) of the University of Notre Dame. Assistant professor (retired June 2020) of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of superintendence of the Institute for the Works of Religion, and the board of directors of Paxos Trust Company (finance).
Deanna Mulligan
Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer of Purposeful (advisory firm for CEOs and C-level executives; 2021–present). Board chair (2020), chief executive officer (2011–2020), and president (2010–2019) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of the Guardian Life Insurance Company of America. Member of the board of the Economic Club of New York. Trustee of the Partnership for New York City (business leadership), Chief Executives for Corporate Purpose, and the NewYork-Presbyterian Hospital.
André F. Perold
Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies (private investment firm). Member of the board (2018–present) of RIT Capital Partners (investment
firm). Member of the investment committee of Partners Health Care System.
Sarah Bloom Raskin
Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Colin W. Brown Distinguished Professor of the Practice of Law (2021–present), professor (2020–present), Distinguished Fellow of the Global Financial Markets Center (2020–present), and Rubenstein Fellow (2017–2020) at Duke University. Trustee (2017–present) of Amherst College and member of Amherst College Investment Committee (2019–present). Member of the Regenerative Crisis Response Committee (2020–present).
David A. Thomas
Born in 1956. Trustee since July 2021. Principal occupation(s) during the past five years and other experience: president of Morehouse College (2018–present). Professor of business administration, emeritus at Harvard University (2017–2018). Dean (2011–2016) and professor of management (2016–2017) at the Georgetown University McDonough School of Business. Director of DTE Energy Company (2013–present). Trustee of Common Fund (2019–present).
Peter F. Volanakis
Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Member of the BMW Group Mobility Council.
Executive Officers
Christine M. Buchanan
Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2021–present) and treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG (audit, tax, and advisory services).
John Galloway
Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (September 2020–present) of each of the investment companies served by Vanguard. Head of Investor Advocacy (February 2020–present) and head of Marketing Strategy and Planning (2017–2020) at Vanguard. Special assistant to the President of the United States (2015).
Ashley Grim
Born in 1984. Principal occupation(s) during the past five years and other experience: treasurer (February 2022–present) of each of the investment companies served by Vanguard. Fund transfer agent controller (2019–2022) and director of Audit Services (2017–2019) at Vanguard. Senior manager (2015–2017) at PriceWaterhouseCoopers (audit and assurance, consulting, and tax services).
Peter Mahoney
Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.
Anne E. Robinson
Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express. Nonexecutive director of the board of National Grid (energy).
Michael Rollings
Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.
John E. Schadl
Born in 1972. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2019–present) of Vanguard and of each of the investment companies served by Vanguard. Assistant vice president (2019–present) of Vanguard Marketing Corporation.
Vanguard Senior Management Team
| Matthew Benchener | Thomas M. Rampulla |
| Joseph Brennan | Karin A. Risi |
| Mortimer J. Buckley | Anne E. Robinson |
| Gregory Davis | Michael Rollings |
| John James | Nitin Tandon |
| Chris D. Mclsaac | Lauren Valente |
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All comparative mutual fund data are from Morningstar, Inc., unless otherwise noted.
You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, www.sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or www.sec.gov.
You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to publicinfo@sec.gov.
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Q730 122022
Item 2: Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.
Item 3: Audit Committee Financial Expert.
All members of the Audit Committee have been determined by the Registrant’s Board of Trustees to be Audit Committee Financial Experts and to be independent: F. Joseph Loughrey, Mark Loughridge, Sarah Bloom Raskin, and Peter F. Volanakis.
Item 4: Principal Accountant Fees and Services.
(a) Audit Fees.
Audit Fees of the Registrant.
Fiscal Year Ended October 31, 2022: $82,000
Fiscal Year Ended October 31, 2021: $92,000
Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group.
Fiscal Year Ended October 31, 2022: $10,494,508
Fiscal Year Ended October 31, 2021: $11,244,694
Includes fees billed in connection with audits of the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(b) Audit-Related Fees.
Fiscal Year Ended October 31, 2022: $2,757,764
Fiscal Year Ended October 31, 2021: $2,955,181
Includes fees billed in connection with assurance and related services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(c) Tax Fees.
Fiscal Year Ended October 31, 2022: $5,202,689
Fiscal Year Ended October 31, 2021: $2,047,574
Includes fees billed in connection with tax compliance, planning, and advice services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(d) All Other Fees.
Fiscal Year Ended October 31, 2022: $298,000
Fiscal Year Ended October 31, 2021: $280,000
Includes fees billed for services related to tax reported information provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(e) (1) Pre-Approval Policies. The policy of the Registrant’s Audit Committee is to consider, and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit and non-audit services provided to: the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.
In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, the Chairman of the Audit Committee would be called on to consider and, if appropriate, pre-approve audit or permitted non-audit services in an amount sufficient to complete services through the next Audit Committee meeting, and to determine if such services would be consistent with maintaining the accountant’s independence. At the next scheduled Audit Committee meeting, services and fees would be presented to the Audit Committee for formal consideration, and, if appropriate, approval by the entire Audit Committee. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.
The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Vanguard complex, whether such services are provided to: the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., or other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant.
(2) No percentage of the principal accountant’s fees or services were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) For the most recent fiscal year, over 50% of the hours worked under the principal accountant’s engagement were not performed by persons other than full-time, permanent employees of the principal accountant.
(g) Aggregate Non-Audit Fees.
Fiscal Year Ended October 31, 2022: $5,500,689
Fiscal Year Ended October 31, 2021: $2,327,574
Includes fees billed for non-audit services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
(h) For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services was consistent with maintaining the principal accountant’s independence.
Item 5: Audit Committee of Listed Registrants.
The Registrant is a listed issuer as defined in rule 10A-3 under the Securities Exchange Act of 1934 (“Exchange Act”). The Registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit committee members are: F. Joseph Loughrey, Mark Loughridge, Sarah Bloom Raskin, and Peter F. Volanakis.
Item 6: Investments.
Not applicable. The complete schedule of investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9: Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11: Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Control Over Financial Reporting. There were no significant changes in the Registrant’s Internal Control Over Financial Reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 12: Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13: Exhibits.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | VANGUARD WINDSOR FUNDS |
| | | |
| BY: | /s/ MORTIMER J. BUCKLEY* | |
| | MORTIMER J. BUCKLEY | |
| | CHIEF EXECUTIVE OFFICER | |
Date: December 19, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | VANGUARD WINDSOR FUNDS |
| | | |
| BY: | /s/ MORTIMER J. BUCKLEY* | |
| | MORTIMER J. BUCKLEY | |
| | CHIEF EXECUTIVE OFFICER | |
Date: December 19, 2022
| | VANGUARD WINDSOR FUNDS |
| | | |
| BY: | /s/ CHRISTINE BUCHANAN* | |
| | CHRISTINE BUCHANAN | |
| | CHIEF FINANCIAL OFFICER | |
Date: December 19, 2022
| * By: | /s/ Anne E. Robinson | |
Anne E. Robinson, pursuant to a Power of Attorney filed on October 11, 2022 (see File Number 333-11763), Incorporated by Reference.
