7
Morningstar FundInvestor
September 2
014
Morningstar Analyst Rating
08-12-14
„
Morningstar Pillars
Process
Performance
People
Parent
Price
¶
Positive
Neutral
Positive
Positive
Positive
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which
its analysts believe lead to funds that are more likely to outperform
over the long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ˇ ¨
Pillar Spectrum
Positive
§
Negative
¶
Neutral
NAV
39.68
36.77
29.38
25.78
25.67
23.68
19.11
31.26
34.75
31.33
30.73
26.49
Total Return %
9.15
30.69
16.72
2.70
10.62
27.05
-36.70
2.23
18.25
7.01
18.31
30.08
+/-S&P 500
-0.74
-1.70
0.72
0.59
-4.44
0.59
0.30
-3.26
2.46
2.10
7.43
1.40
+/-Russ 1000 Vl
-1.20
-1.84
-0.79
2.31
-4.89
7.36
0.15
2.40
-4.00
-0.04
1.82
0.05
Income Return %
1.23
2.51
2.65
2.33
2.06
2.81
2.45
2.34
2.57
2.19
2.20
2.56
Capital Return %
7.92
28.18
14.07
0.37
8.56
24.24
-39.15
-0.11
15.68
4.82
16.11
27.52
Total Rtn % Rank Cat
44
59
25
24
88
28
53
47
50
34
7
33
Income $
0.45
0.73
0.68
0.59
0.49
0.53
0.76
0.81
0.80
0.67
0.58
0.53
Capital Gains $
0.00
0.80
0.00
0.00
0.00
0.00
0.00
3.45
1.44
0.88
0.00
0.00
Expense Ratio %
.
0.36
0.35
0.35
0.35
0.38
0.32
0.32
0.33
0.35
0.37
0.43
Income Ratio %
.
2.25
2.30
2.11
2.08
2.96
2.66
2.19
2.28
2.14
2.07
2.31
Turnover Rate %
.
27
22
23
29
41
37
51
34
28
. .
Net Assets $mil
17,939
18,061
17,893
18,387
20,504
22,005
18,229
30,925
31,569
29,064
29,016
22,766
Performance
08-31-14
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
2010
2011
2012
2013
2014
5.91 -13.79 10.33 9.80 10.62
6.51 0.37 -14.84 12.81
2.70
12.37 -2.89
5.68 1.21 16.72
10.31 4.03
3.99 9.51 30.69
2.88 4.57
. . .
Trailing
Total
+/-
+/- Russ %Rank Growth of
Return% S&P 500 1000 Vl
Cat
$10,000
3 Mo
6 Mo
1 Yr
3 Yr Avg
5 Yr Avg
10 Yr Avg
15 Yr Avg
3.34 -1.35
-1.23
73 10,334
8.21 -0.63
-1.46
52 10,821
22.47 -2.78
-1.96
47 12,247
20.50 -0.11
-1.07
32 17,497
15.76 -1.12
-0.86
31 20,787
8.21 -0.17
-0.02
32 22,013
6.62 1.84
0.07
41 26,157
Tax Analysis
Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated)
5 Yr (estimated)
10 Yr (estimated)
19.60
27
0.75
51
15.10
24
0.57
46
7.39
26
0.76
38
Potential Capital Gain Exposure: 37% of assets
Rating and Risk
Time Load-Adj
Morningstar
Morningstar
Morningstar
Period Return % Rtn vs Cat
Risk vs Cat
Risk-Adj Rating
1 Yr
22.47
3 Yr
20.50
+Avg
Avg
5 Yr
15.76
Avg
Avg
10 Yr
8.21
Avg
Avg
Incept
11.14
Other Measures
Standard Index
Best Fit Index
S&P 500
Russ 1000 Vl
Alpha
0.3
0.2
Beta
0.98
0.94
R-Squared
97
98
Standard Deviation
11.51
Mean
20.50
Sharpe Ratio
1.68
Morningstar’s Take
by Alec Lucas 08-12-14
Vanguard Windsor II is hoping less is more.
The March 2014 dismissal of Armstrong Shaw for
poor performance arguably makes this fund more
aggressive. That’s because Hotchkis & Wiley absorbed
Armstrong’s 4% sleeve, allotting it 11% of assets,
roughly double the percentage Hotchkis managed from
2004-12. By buying shares of troubled firms when their
earnings look anemic and valuations low relative to
their potential, the firm takes a deep-value approach to
investing. Since its late August 2004 inception,
Hotchkis & Wiley Diversified Value HWCAX, which is a
clone of the firm’s strategy here, has often finished in
the large-value category’s top or bottom decile. That’s
made it one of the category’s most volatile offerings,
and one-fourth more volatile than this fund based on
10-year standard deviation. Its 6.5% annualized gain
since inception through Aug. 8, 2014, lags the Russell
1000 Value Index by 1.4 percentage points.
That underperformance must be put in context,
however. It includes a disastrous credit-crisis showing,
thanks to stocks like Freddie Mac FMCC, and 0.85
percentage points of annualized underperformance
would be erased if the offering had sported this fund’s
rock-bottom expense ratio. Plus, Hotchkis’ five-year
return ranks ahead of the index’s and lands in the
category’s top quartile.
The increased allotment to Hotchkis may lead to an
uptick in volatility, but it does not change the case for
this fund. That rests on veteran manager James
Barrow, aided by the tailwind of low fees. Barrow has
capably overseen his firm’s portion, now roughly 60%
of assets, since the fund’s mid-1985 inception. The
problem has been finding the right mix to complement
Barrow. With the latest change, Vanguard has now
added two subadvisors and removed three in the past
10 years, leaving the fund with five subadvisors
currently. Nevertheless, the fund has succeeded
despite these disruptions with an 8% annualized gain
during that time, which ranks near the category’s top
third, although it modestly lags the index. Time will
tell whether the fund’s more-aggressive profile will
help its long-term record versus its bogy.
Address:
Po Box 2600
Valley Forge, PA 19482
800-662-7447
Web Address:
Inception:
06-24-85
Advisor:
Sanders Capital, LLC
Subadvisor:
None
NTF Plans:
Vanguard NTF
Minimum Purchase:
$3000
Add: $100 IRA: $3000
Min Auto Inv Plan:
$0
Add:
.
Sales Fees:
No-load
Management Fee:
0.34%
Actual Fees:
Mgt:0.34% Dist:
.
Expense Projections:
3Yr:$116
5Yr:$202 10Yr:$456
Income Distribution:
Semi-Annually
Data through August 31, 2014
Vanguard Windsor II Inv
Ticker
Status Yield Total Assets
Mstar Category
VWNFX Open
2.1% $50,755 mil
Large Value
97% 97% 96% 95% 98% 98% 97% 97% 98%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 08-14
Historical Profile
Return
Risk
Rating
Average
Average
Neutral
Investment Style
Equity
Stock %
Manager Change
Partial Manager Change
Growth of $10,000
Investment Values of
Fund
Investment Values of
S&P 500
Performance Quartile
(within Category)
History
10.0
14.0
18.0
22.0
26.8
Portfolio Analysis
06-30-14
Share change since 03-14 Total Stocks:254 Sector
PE Tot Ret% % Assets
Microsoft Corp
Technology 17.3 16.87 2.71
Pfizer Inc
Hlth care 18.5 -3.75 2.60
JPMorgan Chase & Co
Finan Svs 15.3 0.60 2.60
Wells Fargo & Co
Finan Svs 12.7 13.55 2.49
Medtronic Inc
Hlth care 21.1 8.60 2.31
Intel Corp
Technology 17.3 32.31 2.30
CMT Market Liquidity Rat
. . .
2.25
Johnson & Johnson
Hlth care 19.2 10.77 2.23
American Express Co
Finan Svs 17.0 -2.22 2.18
Philip Morris Internatio
Cnsmr Def 16.9
.
2.16
Citigroup Inc
Finan Svs 16.8 -6.08 2.03
ConocoPhillips
Energy
12.5 19.76 2.02
Sanofi ADR
Hlth care 26.7 1.02 1.99
WellPoint Inc
Hlth care 14.5 19.80 1.98
PNC Financial Services G
Finan Svs 11.4
.
1.96
Wal-Mart Stores Inc
Cnsmr Def 15.7 -5.27 1.77
General Dynamics Corp
Industrl
17.1 24.09 1.75
Oracle Corporation
Technology 17.4 6.51 1.71
Bank of America Corporat
Finan Svs 25.6 -1.93 1.71
Occidental Petroleum Cor
Energy
13.6 4.26 1.67
Current Investment Style
Market Cap %
Giant
54.1
Large
33.2
Mid
12.0
Small
0.7
Micro
0.0
Avg $mil:
64,593
Value Blnd Growth
Large Mid Small
Value Measures
Rel Category
Price/Earnings
Price/Book
Price/Sales
Price/Cash Flow
Dividend Yield %
14.23
1.80
1.25
5.32
2.85
1.08
1.06
1.08
0.88
1.04
Growth Measures
% Rel Category
Long-Term Erngs
Book Value
Sales
Cash Flow
Historical Erngs
8.43
6.46
1.97
5.96
7.42
0.96
1.25
1.32
1.08
2.13
Profitability
% Rel Category
Return on Equity
Return on Assets
Net Margin
19.05
6.81
15.07
1.17
1.13
1.26
Sector
Weightings
% of
Stocks
Rel
S&P 500 High
3 Year
Low
Cyclical 30.62 1.06
BasicMat 1.19 0.39 2 1
CnsmrCyc 7.58 0.88 8 5
FinanSvs 21.55 1.37 22 19
Real Est 0.30 0.21 1 0
Sensitive 36.81 0.84
CommSrvs 3.32 0.83 5 3
Energy 12.17 1.14 14 12
Industrl
8.71 0.77 13 9
Technlgy 12.61 0.72 13 8
Defensive32.56 1.18
CnsmrDef11.24 0.92 13 11
Hlthcare 17.16 1.45 18 14
Utilities 4.16 1.15 5 4
h
r
t
y
u
j
i
o
p
a
k
s
d
f
Composition - Net
(% of Stock)
Cash
2.3
Stocks 97.7
Bonds 0.0
Other
0.1
Foreign 11.5
©
2014Morningstar, Inc.All rights reserved. The information herein isnot representedorwarranted tobe accurate, correct, completeor
timely.Pastperformance isnoguaranteeof future results.Accessupdated reports at
To order reprints, call 312-696-6100.
mfb.morningstar.com.
Mutual Funds
ß
®
EQ
∞
∞
∞
∞
∞
