Vanguard Global Capital Cycles Fund Annual Report January ...

Annual Report | January 31, 2021

Vanguard Global Capital Cycles Fund

Contents

Your Fund’s Performance at a Glance . . . . . . . . . . . . . . . . .1

Advisor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

About Your Fund’s Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .5

Performance Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promisesor advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of thisreport. Of course, the risks of investing in your fund are spelled out in the prospectus.

• Vanguard Global Capital Cycles Fund returned 22.63% for the 12 months endedJanuary 31, 2021. The fund’s performance benchmark, the S&P Global BMI Metals &Mining 25%Weighted Index, returned 20.70%.

• The year was marked by the COVID-19 pandemic and efforts to contain it, as well asa tumultuous U.S. election cycle and renewed attention to issues of income inequalityand social justice. Unemployment spiked and stock prices plummeted, but economicconditions improved as global policymakers approved massive stimulus programs andscientists raced to develop coronavirus vaccines. Stocks recovered from their worstlows to finish the 12 months significantly higher as the first vaccines were rolled out.

• Returns were positive in 10 of the 11 sectors the portfolio invests in, most notably inmaterials, the fund’s largest sector. Utilities holdings were the biggest detractors.

• On a regional basis, stocks of companies in emerging markets, especially those inChina, contributed the most. North American and European firms detracted, particularlythose in the U.S. and France.

• Over the decade ended January 31, 2021, the fund recorded an average annualreturn approximately 4 percentage points below that of its spliced benchmark index.(Formerly known as Vanguard Precious Metals and Mining Fund, the fund changed itsname, performance benchmark, and investment strategy on September 26, 2018.)

Market Barometer

Average Annual Total ReturnsPeriods Ended January 31, 2021

One Year Three Years Five Years

Stocks

Russell 1000 Index (Large-caps) 19.84% 12.48% 16.69%

Russell 2000 Index (Small-caps) 30.17 11.11 16.50

Russell 3000 Index (Broad U.S. market) 20.48 12.38 16.68

FTSE All-World ex US Index (International) 14.59 3.40 10.77

Bonds

Bloomberg Barclays U.S. Aggregate Bond Index(Broad taxable market) 4.72% 5.49% 4.00%

Bloomberg Barclays Municipal Bond Index(Broad tax-exempt market) 4.01 5.28 3.79

FTSE Three-Month U.S. Treasury Bill Index 0.45 1.53 1.16

CPI

Consumer Price Index 1.40% 1.81% 2.00%

Your Fund’s Performance at a Glance

1

For the 12 months ended January 31,2021, Vanguard Global Capital Cycles Fundreturned 22.63%, ahead of the 20.70%return of the S&P Global BMI Metals &Mining 25%Weighted Index.

The investment environmentAfter COVID-19 broke out across theglobe in early 2020, lockdown andquarantine measures causedunprecedented disruption to financialmarkets and economies. Global equitiesrebounded sharply in the second and thirdquarters, fueled by optimism aboutvaccine development, fiscal and monetarystimulus, and signs that global economicactivity was improving.

In the fourth quarter, markets continued torecover after two COVID-19 vaccinesdemonstrated high efficacy rates in Phase3 trials. However, the logistical challengesof distributing and administering thevaccines remained significant.

In the U.S., infections hit record highs,while the government agreed on apandemic relief plan to extend many ofthe Coronavirus Aid, Relief, and EconomicSecurity (CARES) Act support measures.

The European Central Bank expanded itsmassive monetary stimulus program by500 billion euros as new lockdownmeasures weighed on the eurozone’srecovery. The U.K. and the E.U. agreed toa trade deal, setting the terms for apost-Brexit future and ending four years ofpolitical negotiations since the U.K.’s 2016referendum on E.U. membership.

In January, global equities retreatedmodestly as investors continued to weighvaccine rollouts against growing globalinfections.

The fund’s shortfallsSector allocation weighed on relativeperformance, most notably overweightedpositions in utilities and energy and anunderweight to information technology.

The fund’s largest relative detractorsincluded Rubis SCA (utilities) and ENGIE(utilities).

Shares of fuel distribution company RubisSCA declined because of subduedexpectations for energy volumes and areclassification from the utilities sector torefining and marketing within the energysector. Nevertheless, we continue tobelieve that Rubis is very attractive (it hasdouble-digit free cash flow yields, ahigh-single-digit dividend yield, and zerodebt) and has a portfolio of long-lifeenergy storage assets and growingmarkets. Therefore, we modestlyincreased our position.

ENGIE, a European utilities company, alsocame under pressure. Shares declinedwith global oil prices as the pandemicshut down economies and natural gasprices fell on concerns that a warm winterwould crush heating demand. From along-term perspective, ENGIE isundergoing a transition away from fossilfuels into renewables. This will not onlyenable higher growth but also increasethe potential for a higher valuation as

Advisor’s Report

2

earnings quality improves.We continue tohold an out-of-benchmark allocation to thestock.

Another headwind has been thecontinued outperformance of growthrelative to value. This was most notable inour large underweight to informationtechnology.We anticipate opportunity inunderappreciated industries andgeographic areas—from the hard-hitnatural resources sector to China, whererecord-low valuations and negativesentiment have combined withimprovements in industry structure andshareholder alignment, which we believeis a positive setup for forward returns.

The fund’s successesSecurity selection contributed to relativeoutperformance in aggregate. Ourselections in materials (Barrick Gold,Livent), energy (Cabot Oil & Gas, NACKazatomprom), and communicationservices (Baidu, AT&T) boostedperformance, as did an overweightedallocation to materials.

The fund’s largest relative contributorsincluded Baidu and Barrick Gold. Baidu is aChinese internet search and artificialintelligence company. Shares rose in thefourth quarter after reports that thecompany had held preliminary talks withautomakers about the possibility ofcontract manufacturing or setting up amajority-owned venture to make its ownelectric vehicles. This would be a stepforward in the race among Chinesetechnology companies to develop smartcars.

We believe Baidu has a unique edge inthe marketplace because of itsinvestment in autonomous driving. As thecompany focuses more on monetizationof its assets and less on new projects,growth and margins should improve.

Shares of Barrick Gold, a global goldmining company, also rose, as investorssought gold exposure as a safe havenasset amid concerns about the potentialeconomic impacts of the coronavirusoutbreak. The company posted strongthird-quarter earnings.

Barrick continues to execute well on allfronts. It remains focused on a range ofenvironmental, social and governance(ESG)-related issues, including localemployment, environmental stewardship,and improving relations with hostcountries.

The fund’s positioning andinvestment strategyThe fund invests in areas that presentopportunities from changing investorsentiment resulting from cycles of under-and overinvestment in capital-intensiveindustries. At least 25% of the fund isinvested in metals and mining securities,where capital cycles have been historicallyrobust. The remainder of the fund focuseson industries and companies with scarce,high-quality assets that are not easilyreplicable. As capital flows out of areasthat we believe will endure beyond anytemporary negative sentiment, we lookfor opportunities to invest at attractivevaluations.

3

We have long believed parts of the marketwere overvalued based on growthexpectations that relied too heavily onexternal sources of capital.. At the core,we view the high valuations of manyhigh-growth companies—largelyattributable to the low-interest-rateenvironment—as at odds with thelong-term competitive dynamics that theeasy capital environment has helpedcreate.

We worry that the projected demandassociated with the COVID-19 pandemic,combined with the easy capitalenvironment, is setting up much morecompetition in segments where thecompanies are priced for perfection. Anypressure on margins could have asignificant impact on multiples.Whilesome stocks in the portfolio have fallenout of favor, we are encouraged that theunderlying fundamentals remaincompelling and constructive.

Over the past year, our framework hasidentified several areas of opportunity. Thelargest dislocations currently include theelectric vehicle (EV) value chain, energy,and U.K. industrials. We have alsoidentified capital formation opportunitiesthroughout the EV value chain and in U.S.housing. China cut governmentsubsidiaries for EVs more than a year ago,the pandemic impaired supply chains, andcapital expenditure dropped.

We believe these factors signal anattractive opportunity because of the needfor future investment.We havemaintained positions in Livent and Baidu,the latter of which owns several important

technologies essential for the continuedevolution of EVs and autonomous driving.

We are increasingly excited about thecapital cycle associated with the energytransition.We think this spend, whichcould be $1 trillion to $2 trillion per yearglobally, has the potential to createsignificant opportunity in utilities and inbase metals and other materialscompanies.

In metals and mining, we have maintainedpositions in Anglo American and BarrickGold.We believe that Barrick has thestrongest management team in naturalresources and has been raising the bar forthe industry—both gold mining andmining more broadly. Through AngloAmerican, we gain exposure tocopper—which aligns with our view thatspending for renewables and low-carbonfuel sources is an enduring trend—andplatinum group metals.While we reducedour gold exposure earlier in the fourthquarter, we continue to look foropportunities to add back to gold amid theuncertainty of fiscal spending.

Keith E.WhiteSenior Managing Director andEquity Portfolio Manager

Wellington Management Company LLP

February 10, 2021

4

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 ongoingcosts 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.

About Your Fund’s Expenses

5

Six Months Ended January 31, 2021

Global Capital Cycles Fund

BeginningAccount Value

7/31/2020

EndingAccount Value

1/31/2021

ExpensesPaid During

Period

Based on Actual Fund Return $1,000.00 $1,176.30 $1.86

Based on Hypothetical 5% Yearly Return 1,000.00 1,023.43 1.73

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratio forthat period is 0.34%. The dollar amounts shown as ”Expenses Paid” are equal to the annualized expense ratio multiplied by the averageaccount value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days inthe most recent 12-month period (184/366).

6

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: January 31, 2011,Through January 31, 2021Initial Investment of $10,000

$26,000

1,0005,029

2021202020192018201720162015201420132012

Average Annual Total ReturnsPeriods Ended January 31, 2021

OneYear

FiveYears

TenYears

Final Valueof a $10,000Investment

Global Capital Cycles Fund 22.63% 10.93% -6.64% $ 5,029

Spliced Global Capital Cycles Index 20.70 20.05 -2.79 7,533

MSCI All Country World Index 17.02 13.56 8.91 23,479

Spliced Global Capital Cycles Index: S&P/Citigroup World Equity Gold Index through June 30, 2005; S&P Global Custom Metals andMining Index through September 25, 2018; S&P Global BMI Metals & Mining 25% Weighted Index thereafter.


Performance Summary

See Financial Highlights for dividend and capital gains information.

7

Communication Services 7.2%

Consumer Discretionary 1.6

Consumer Staples 3.1

Energy 7.5

Financials 11.3

Health Care 2.8

Industrials 10.9

Information Technology 4.0

Materials 32.1

Real Estate 4.5

Utilities 15.0

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

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service markof MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed foruse by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICSclassification 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 oforiginality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standardor classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third partyinvolved 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.


Fund AllocationAs of January 31, 2021

8

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

Shares

MarketValue•

($000)

Common Stocks (99.7%)

Australia (9.7%)BHP Group plc ADR 904,128 49,384Rio Tinto plc ADR 556,728 42,545BHP Group Ltd. 677,588 22,597

114,526Canada (12.3%)

Intact Financial Corp. 552,451 60,916Barrick Gold Corp. 2,471,137 55,279Agnico Eagle Mines Ltd. 333,599 23,302Kinross Gold Corp. 910,399 6,355

145,852China (10.2%)* Baidu Inc. ADR 361,016 84,846

Ningbo JoysonElectronic Corp.Class A 4,643,300 19,032

*,1 ChinaYangtze Power Co.Ltd. GDR 569,724 16,985

120,863France (13.9%)* Engie SA 3,796,914 58,925

TOTAL SE 914,242 38,534Rubis SCA 796,281 36,041Cie de Saint-Gobain 405,437 20,155Gaztransport EtTechnigaz SA 121,587 11,075

164,730Germany (3.0%)

Brenntag AG 292,611 22,9211 Covestro AG 186,339 12,658

35,579Hong Kong (1.9%)

ASM Pacific TechnologyLtd. 1,546,100 22,452

India (3.9%)Power Grid Corp. ofIndia Ltd. 18,128,117 45,750

Shares

MarketValue•

($000)

Kazakhstan (1.8%)1 NAC Kazatomprom JSC

GDR 935,375 16,095NAC Kazatomprom JSCGDR 274,369 4,721

20,816Mexico (1.7%)

Fresnillo plc 1,512,339 20,378

Mongolia (0.4%)* Turquoise Hill Resources

Ltd. 408,030 4,488

South Africa (8.9%)Anglo American plc 2,114,906 69,567Gold Fields Ltd. ADR 3,784,643 35,311

104,878Switzerland (2.0%)

Novartis AG (Registered) 191,597 17,348STMicroelectronics NV 156,484 6,270

23,618Taiwan (1.6%)

Taiwan SemiconductorManufacturing Co. Ltd.ADR 152,585 18,542

United Kingdom (2.3%)* Babcock International

Group plc 3,647,297 11,597* Serco Group plc 7,104,039 11,348* National Express Group

plc 1,190,347 4,068

27,013United States (26.1%)

Medical PropertiesTrust Inc. 2,496,769 52,707

Bank of America Corp. 1,273,668 37,764* Enstar Group Ltd. 175,285 35,094

BWXTechnologies Inc. 606,806 32,719Archer-Daniels-MidlandCo. 505,515 25,281

* Livent Corp. 1,069,944 19,494


Financial Statements

Schedule of InvestmentsAs of January 31, 2021

9

Shares

MarketValue•

($000)

American Electric PowerCo. Inc. 240,214 19,436

Viper EnergyPartners LP 1,284,676 17,652

Mosaic Co. 640,463 16,626Lockheed Martin Corp. 50,749 16,332Bristol-Myers SquibbCo. 252,393 15,505

Procter & Gamble Co. 88,528 11,350Fortive Corp. 144,940 9,578

309,538

Total Common Stocks(Cost $997,987) 1,179,023

Temporary Cash Investments (1.1%)

Money Market Fund (1.1%)2 Vanguard Market

Liquidity Fund, 0.107%(Cost $13,140) 131,401 13,140

Total Investments (100.8%)(Cost $1,011,127) 1,192,163

Other Assets andLiabilities—Net(-0.8%) (10,000)

Net Assets (100%) 1,182,163

Cost is in $000.• See Note A in Notes to Financial Statements.* Non-income-producing security.1 Security exempt from registration under Rule 144A of theSecurities Act of 1933. Such securities may be sold intransactions exempt from registration, normally to qualifiedinstitutional buyers. At January 31, 2021, the aggregate valueof these securities was $45,738,000, representing 3.9% of netassets.

2 Affiliated money market fund available only to Vanguard fundsand certain trusts and accounts managed by Vanguard. Rateshown is the 7-day yield.ADR—American Depositary Receipt.GDR—Global Depositary Receipt.


10

($000s, except shares and per-share amounts) Amount

Assets

Investments in Securities, at Value

Unaffiliated Issuers (Cost $997,987) 1,179,023

Affiliated Issuers (Cost $13,140) 13,140

Total Investments in Securities 1,192,163

Investment in Vanguard 45

Receivables for Investment Securities Sold 4,613

Receivables for Accrued Income 678

Receivables for Capital Shares Issued 1,022

Total Assets 1,198,521

Liabilities

Due to Custodian 2,413

Payables for Investment Securities Purchased 12,616

Payables for Capital Shares Redeemed 923

Payables to Investment Advisor 337

Payables to Vanguard 69

Total Liabilities 16,358

Net Assets 1,182,163

At January 31, 2021, net assets consisted of:

Paid-in Capital 3,360,346

Total Distributable Earnings (Loss) (2,178,183)

Net Assets 1,182,163

Net Assets

Applicable to 123,523,798 outstanding $.001 par value shares ofbeneficial interest (unlimited authorization) 1,182,163

Net Asset Value Per Share $9.57

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


Statement of Assets and LiabilitiesAs of January 31, 2021

11

Year EndedJanuary 31, 2021

($000)

Investment Income

Income

Dividends1 29,443

Interest2 162

Securities Lending—Net 148

Total Income 29,753

Expenses

Investment Advisory Fees—Note B

Basic Fee 1,554

Performance Adjustment (283)

The Vanguard Group—Note C

Management and Administrative 2,237

Marketing and Distribution 99

Custodian Fees 53

Auditing Fees 32

Shareholders’ Reports 27

Trustees’ Fees and Expenses 3

Total Expenses 3,722

Net Investment Income 26,031

Realized Net Gain (Loss)

Investment Securities Sold2 38,759

Foreign Currencies 409

Realized Net Gain (Loss) 39,168

Change in Unrealized Appreciation (Depreciation)

Investment Securities2 140,225

Foreign Currencies 26

Change in Unrealized Appreciation (Depreciation) 140,251

Net Increase (Decrease) in Net Assets Resulting from Operations 205,450

1 Dividends are net of foreign withholding taxes of $2,108,000.2 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund

were $162,000, ($3,000), and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes.



Statement of Operations

12

Year Ended January 31,

2021($000)

2020($000)

Increase (Decrease) in Net Assets

Operations

Net Investment Income 26,031 35,453

Realized Net Gain (Loss) 39,168 (37,364)

Change in Unrealized Appreciation (Depreciation) 140,251 95,274

Net Increase (Decrease) in Net Assets Resulting from Operations 205,450 93,363

Distributions1

Total Distributions (23,982) (30,515)

Capital Share Transactions

Issued 177,189 171,647

Issued in Lieu of Cash Distributions 21,201 26,951

Redeemed (410,113) (448,234)

Net Increase (Decrease) from Capital Share Transactions (211,723) (249,636)

Total Increase (Decrease) (30,255) (186,788)

Net Assets

Beginning of Period 1,212,418 1,399,206

End of Period 1,182,163 1,212,418

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



Statement of Changes in Net Assets

13

For a Share OutstandingThroughout Each Period

Year Ended January 31,

2021 2020 2019 2018 2017

Net Asset Value, Beginning of Period $7.97 $7.62 $10.57 $10.74 $6.22

Investment Operations

Net Investment Income1 .197 .212 .122 .049 .0662

Net Realized and Unrealized Gain (Loss) onInvestments 1.597 .337 (2.858) (.217) 4.615

Total from Investment Operations 1.794 .549 (2.736) (.168) 4.681

Distributions

Dividends from Net Investment Income (.194) (.199) (.214) (.002) (.161)

Distributions from Realized Capital Gains — — — — —

Total Distributions (.194) (.199) (.214) (.002) (.161)

Net Asset Value, End of Period $9.57 $7.97 $7.62 $10.57 $10.74

Total Return3 22.63% 7.11% -26.17% -1.56% 75.99%

Ratios/Supplemental Data

Net Assets, End of Period (Millions) $1,182 $1,212 $1,399 $2,568 $2,612

Ratio of Total Expenses to Average Net Assets4 0.35% 0.38% 0.33% 0.36% 0.43%

Ratio of Net Investment Income toAverage Net Assets 2.43% 2.68% 1.38% 0.47% 0.65%2

Portfolio Turnover Rate 70% 56% 110% 35% 29%

1 Calculated based on average shares outstanding.2 Net investment income per share and the ratio of net investment income to average net assets include $.012 and 0.12%, respectively,

resulting from a special dividend from Lucara Diamond Corp. in September 2016.3 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information

about any applicable account service fees.4 Includes performance-based investment advisory fee increases (decreases) of (0.03)%, 0.00%, (0.04)%, 0.00%, and 0.06%.


Financial Highlights


14

Vanguard Global Capital Cycles Fund is registered under the Investment Company Act of 1940 asan open-end investment company, or mutual fund. The fund invests in securities of foreign issuers,which may subject it to investment risks not normally associated with investing in securities ofU.S. corporations. Market disruptions associated with the COVID-19 pandemic have had a globalimpact, and uncertainty exists as to the long-term implications. Such disruptions can adverselyaffect assets of the fund and thus fund performance.

A. The following significant accounting policies conform to generally accepted accountingprinciples for U.S. investment companies. The fund consistently follows such policies in preparingits financial statements.

1. Security Valuation: Securities are valued as of the close of trading on the New York StockExchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at thelatest quoted sales prices or official closing prices taken from the primary market in which eachsecurity trades; such securities not traded on the valuation date are valued at the mean of thelatest 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 afterthe close of the securities’ primary markets, are valued at their fair values calculated according toprocedures adopted by the board of trustees. These procedures include obtaining quotations froman independent pricing service, monitoring news to identify significant market- or security-specificevents, and evaluating changes in the values of foreign market proxies (for example, ADRs, futurescontracts, or exchange-traded funds), between the time the foreign markets close and the fund’spricing time.When fair-value pricing is employed, the prices of securities used by a fund tocalculate 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 currenciesare translated into U.S. dollars using exchange rates obtained from an independent third party asof 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 thesecurities were purchased, combined with the effects of changes in security prices. Fluctuations inthe value of other assets and liabilities resulting from changes in exchange rates are recorded asunrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at whichtime they are recorded as realized foreign currency gains (losses).

3. Federal IncomeTaxes: The fund intends to continue to qualify as a regulated investmentcompany and distribute all of its taxable income. The fund’s tax returns are open to examination bythe relevant tax authorities until expiration of the applicable statute of limitations, which isgenerally three years after the filing of the tax return. Management has analyzed the fund’s taxpositions taken for all open federal and state income tax years, and has concluded that noprovision for income tax is required in the fund’s financial statements.

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributionsare determined on a tax basis at the fiscal year-end and may differ from net investment incomeand realized capital gains for financial reporting purposes.

5. Securities Lending: To earn additional income, the fund lends its securities to qualifiedinstitutional borrowers. Security loans are subject to termination by the fund at any time, and arerequired to be secured at all times by collateral in an amount at least equal to the market value ofsecurities loaned. Daily market fluctuations could cause the value of loaned securities to be more


Notes to Financial Statements

15

or less than the value of the collateral received.When this occurs, the collateral is adjusted andsettled before the opening of the market on the next business day. The fund further mitigates itscounterparty risk by entering into securities lending transactions only with a diverse group ofprequalified counterparties, monitoring their financial strength, and entering into master securitieslending agreements with its counterparties. The master securities lending agreements providethat, in the event of a counterparty’s default (including bankruptcy), the fund may terminate anyloans with that borrower, determine the net amount owed, and sell or retain the collateral up tothe 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 experiencedelays and costs in recovering the securities loaned. The fund invests cash collateral received inVanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilitiesfor the return of the collateral, during the period the securities are on loan. Collateral investmentsin Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securitieslending income represents fees charged to borrowers plus income earned on invested cashcollateral, less expenses associated with the loan. During the term of the loan, the fund is entitledto all distributions made on or in respect of the loaned securities.

6. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed byThe Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by asyndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided byVanguard. Both facilities may be renewed annually. Each fund is individually liable for itsborrowings, if any, under the credit facilities. Borrowings may be utilized for temporary oremergency purposes, subject to the fund’s regulatory and contractual borrowing restrictions.Withrespect to the committed credit facility, the participating funds are charged administrative fees andan annual commitment fee of 0.10% of the undrawn committed amount of the facility; these feesare allocated to the funds based on a method approved by the fund’s board of trustees andincluded in Management and Administrative expenses on the fund’s Statement of Operations. Anyborrowings under either facility bear interest at a rate based upon the higher of the one-monthLondon Interbank Offered Rate (or an acceptable alternate rate, if necessary), federal fundseffective rate, or overnight bank funding rate plus an agreed-upon spread, except that borrowingsunder the uncommitted credit facility may bear interest based upon an alternative rate agreed toby the fund and Vanguard.

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

For the year ended January 31, 2021, the fund did not utilize the credit facilities or the InterfundLending Program.

7. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included individend income, if any, are recorded at the fair value of the securities received. Interest income


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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 todetermine realized gains (losses) on the sale of investment securities are those of the specificsecurities sold.

Taxes on foreign dividends and capital gains have been provided for in accordance with the fund’sunderstanding of the applicable countries’ tax rules and rates. Foreign capital gains tax, if any, isaccrued daily based upon applicable net unrealized gains. The fund has filed tax reclaims forpreviously withheld taxes on dividends earned in certain European Union countries. These filingsare subject to various administrative and judicial proceedings within these countries. Such taxreclaims received during the year, if any, are included in dividend income. No other amounts foradditional tax reclaims are reflected in the financial statements due to the uncertainty as to theultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potentialtiming of payment.

B. Wellington Management Company LLP provides investment advisory services to the fund for afee calculated at an annual percentage rate of average net assets. In accordance with the advisorycontract entered into withWellington Management Company LLP, beginning February 1, 2020, thebasic fee will be subject to quarterly adjustments based on the performance relative to theCustom Global Capital Cycles Index since January 31, 2019. For the year ended January 31, 2021,the investment advisory fee represented an effective annual basic rate of 0.15% of the fund’saverage net assets, before a decrease of $283,000 (0.03%) based on performance.

C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguardand the fund, Vanguard furnishes to the fund corporate management, administrative, marketing,and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs ofoperations are allocated to the fund based on methods and guidelines approved by the board oftrustees 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 inVanguard. At January 31, 2021, the fund had contributed to Vanguard capital in the amount of$45,000, representing less than 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalreceived pursuant to the FSA. The fund’s trustees and officers are also directors and employees,respectively, of Vanguard.

D. Various inputs may be used to determine the value of the fund’s investments. These inputs aresummarized in three broad levels for financial statement purposes. The inputs or methodologiesused to value securities are not necessarily an indication of the risk associated with investing inthose securities.

Level 1—Quoted prices in active markets for identical securities.

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

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


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The following table summarizes the market value of the fund's investments as of January 31,2021, based on the inputs used to value them:

Level 1($000)

Level 2($000)

Level 3($000)

Total($000)

Investments

Assets

Common Stocks 690,506 488,517 — 1,179,023

Temporary Cash Investments 13,140 — — 13,140

Total 703,646 488,517 — 1,192,163

E. Permanent differences between book-basis and tax-basis components of net assets arereclassified among capital accounts in the financial statements to reflect their tax character. Thesereclassifications have no effect on net assets or net asset value per share. As of period end,permanent differences primarily attributable to the accounting for foreign currency transactionswere reclassified between the individual components of total distributable earnings (loss).

Temporary differences between book-basis and tax-basis components of total distributableearnings (loss) arise when certain items of income, gain, or loss are recognized in different periodsfor 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. 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 1,482

Undistributed Long-Term Gains —

Capital Loss Carryforwards (2,360,718)

Qualified Late-Year Losses —

Net Unrealized Gains (Losses) 181,062

The tax character of distributions paid was as follows:

Year EndedJanuary 31,

2021Amount

($000)

2020Amount

($000)

Ordinary Income 23,982 30,515

Long-Term Capital Gains — —

Total 23,982 30,515


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As of January 31, 2021, gross unrealized appreciation and depreciation for investments based oncost for U.S. federal income tax purposes were as follows:

Amount($000)

Tax Cost 1,011,127

Gross Unrealized Appreciation 228,994

Gross Unrealized Depreciation (47,958)

Net Unrealized Appreciation (Depreciation) 181,036

F. During the year ended January 31, 2021, the fund purchased $731,358,000 of investmentsecurities and sold $900,500,000 of investment securities, other than temporary cashinvestments.

G. Capital shares issued and redeemed were:

Year EndedJanuary 31,

2021Shares

(000)

2020Shares

(000)

Issued 21,854 21,681

Issued in Lieu of Cash Distributions 2,335 3,259

Redeemed (52,703) (56,526)

Net Increase (Decrease) in Shares Outstanding (28,514) (31,586)

H. Management has determined that no events or transactions occurred subsequent toJanuary 31, 2021, that would require recognition or disclosure in these financial statements.


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To the Board of Trustees of Vanguard Specialized Funds and Shareholders of Vanguard GlobalCapital Cycles Fund

Opinion on the Financial StatementsWe have audited the accompanying statement of assets and liabilities, including the schedule ofinvestments, of Vanguard Global Capital Cycles Fund (one of the funds constituting VanguardSpecialized Funds, referred to hereafter as the “Fund”) as of January 31, 2021, the relatedstatement of operations for the year ended January 31, 2021, the statement of changes in netassets for each of the two years in the period ended January 31, 2021, including the related notes,and the financial highlights for each of the five years in the period ended January 31, 2021(collectively referred to as the “financial statements”). In our opinion, the financial statementspresent fairly, in all material respects, the financial position of the Fund as of January 31, 2021, theresults of its operations for the year then ended, the changes in its net assets for each of the twoyears in the period ended January 31, 2021 and the financial highlights for each of the five years inthe period ended January 31, 2021 in conformity with accounting principles generally accepted inthe United States of America.

Basis for OpinionThese financial statements are the responsibility of the Fund’s management. Our responsibility isto express an opinion on the Fund’s financial statements based on our audits. We are a publicaccounting 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 ExchangeCommission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of thePCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether dueto error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of thefinancial statements, whether due to error or fraud, and performing procedures that respond tothose risks. Such procedures included examining, on a test basis, evidence regarding the amountsand disclosures in the financial statements. Our audits also included evaluating the accountingprinciples used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. Our procedures included confirmation of securitiesowned as of January 31, 2021 by correspondence with the custodian, transfer agent and brokers;when replies were not received from brokers, we performed other auditing procedures.Webelieve that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLPPhiladelphia, PennsylvaniaMarch 17, 2021

We have served as the auditor of one or more investment companies in The Vanguard Group ofFunds since 1975.

Report of Independent RegisteredPublic Accounting Firm

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Special 2020 tax information (unaudited) for Vanguard Global Capital Cycles Fund

This information for the fiscal year ended January 31, 2021, is included pursuant to provisions ofthe Internal Revenue Code.

The fund distributed $23,982,000 of qualified dividend income to shareholders during the fiscalyear.

For corporate shareholders, 21.1% of investment income (dividend income plus short-term gains,if any) qualifies for the dividends-received deduction.

The fund designates to shareholders foreign source income of $25,388,000 and foreign taxes paidof $1,784,000. Shareholders received more detailed information with their Form 1099-DIV inJanuary 2021 to determine the calendar-year amounts to be included on their 2020 tax returns.

21

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The trustees of your mutual fund are there to see that the fund is operated and managed in yourbest interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees alsoserve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard fundsand provides services to them.

A majority of Vanguard’s board members are independent, meaning that they have no affiliationwith Vanguard or the funds they oversee, apart from the sizable personal investments they havemade as private individuals. The independent board members have distinguished backgrounds inbusiness, academia, and public service. Each of the trustees and executive officers oversees 211Vanguard funds.

Information for each trustee and executive officer of the fund appears below. That information, aswell as the Vanguard fund count, is as of the date on the cover of this fund report. The mailingaddress of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More informationabout the trustees is in the Statement of Additional Information, which can be obtained, withoutcharge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.

Interested Trustee1

Mortimer J. BuckleyBorn in 1969. Trustee since January 2018. Principaloccupation(s) during the past five years and otherexperience: chairman of the board (2019–present) ofVanguard and of each of the investment companiesserved by Vanguard; chief executive officer(2018–present) of Vanguard; chief executive officer,president, and trustee (2018–present) of each of theinvestment companies served by Vanguard; presidentand director (2017–present) of Vanguard; andpresident (2018–present) of Vanguard MarketingCorporation. Chief investment officer (2013–2017),managing director (2002–2017), head of the RetailInvestor Group (2006–2012), and chief informationofficer (2001–2006) of Vanguard. Chairman of theboard (2011–2017) and trustee (2009–2017) of theChildren’s Hospital of Philadelphia; and trustee(2018–present) and vice chair (2019–present) of TheShipley School.

Independent Trustees

Emerson U. FullwoodBorn in 1948. Trustee since January 2008. Principaloccupation(s) during the past five years and otherexperience: executive chief staff and marketingofficer for North America and corporate vice president(retired 2008) of Xerox Corporation (documentmanagement products and services). Formerpresident of theWorldwide Channels Group, LatinAmerica, andWorldwide Customer Service andexecutive chief staff officer of Developing Markets ofXerox. Executive in residence and 2009–2010Distinguished Minett Professor at the RochesterInstitute of Technology. Director of SPX FLOW, Inc.(multi-industry manufacturing). Director of theUniversity of Rochester Medical Center, the MonroeCommunity College Foundation, the UnitedWay ofRochester, North Carolina A&T University, andRobertsWesleyan College. Trustee of the Universityof Rochester.

Amy GutmannBorn in 1949. Trustee since June 2006. Principaloccupation(s) during the past five years and otherexperience: president (2004–present) of theUniversity of Pennsylvania. Christopher H. BrowneDistinguished Professor of Political Science, School ofArts and Sciences, and professor of communication,Annenberg School for Communication, withsecondary faculty appointments in the Department ofPhilosophy, School of Arts and Sciences, and at theGraduate School of Education, University ofPennsylvania.

1 Mr. Buckley is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of theVanguard funds.

The People Who Govern Your Fund

F. Joseph LoughreyBorn in 1949. Trustee since October 2009. Principaloccupation(s) during the past five years and otherexperience: 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. (specializedconsumer services). Director of the V Foundation.Member of the advisory council for the College ofArts and Letters and chair of the advisory board to theKellogg Institute for International Studies, both at theUniversity of Notre Dame. Chairman of the board ofSaint Anselm College.

Mark LoughridgeBorn in 1953. Trustee since March 2012. Principaloccupation(s) during the past five years and otherexperience: senior vice president and chief financialofficer (retired 2013) of IBM (information technologyservices). Fiduciary member of IBM’s RetirementPlan Committee (2004–2013), senior vice presidentand general manager (2002–2004) of IBM GlobalFinancing, vice president and controller (1998–2002)of IBM, and a variety of other prior management rolesat IBM. Member of the Council on Chicago Booth.

Scott C. MalpassBorn in 1962. Trustee since March 2012. Principaloccupation(s) during the past five years and otherexperience: chief investment officer (retired June2020) and vice president (retired June 2020) of theUniversity of Notre Dame. Assistant professor (retiredJune 2020) of finance at the Mendoza College ofBusiness, University of Notre Dame, and member ofthe Notre Dame 403(b) Investment Committee.Member of the board of Catholic InvestmentServices, Inc. (investment advisors) and the board ofsuperintendence of the Institute for theWorks ofReligion.

Deanna MulliganBorn in 1963. Trustee since January 2018. Principaloccupation(s) during the past five years and otherexperience: board chair (2020), chief executive officer(2011–2020), and president (2010–2019) of TheGuardian Life Insurance Company of America. Chiefoperating officer (2010–2011) and executive vicepresident (2008–2010) of Individual Life and Disabilityof the Guardian Life Insurance Company of America.Member of the board of the Economic Club ofNew York. Trustee of the Partnership for New YorkCity (business leadership), Chief Executives forCorporate Purpose, NewYork-Presbyterian Hospital,and the Bruce Museum (arts and science). Memberof the Advisory Council for the Stanford GraduateSchool of Business.

André F. PeroldBorn in 1952. Trustee since December 2004. Principaloccupation(s) during the past five years and otherexperience: George Gund Professor of Finance andBanking, Emeritus at the Harvard Business School(retired 2011). Chief investment officer andco-managing partner of HighVista Strategies (privateinvestment firm). Member of the board(2018–present) of RIT Capital Partners (investmentfirm). Member of the investment committee ofPartners Health Care System.

Sarah Bloom RaskinBorn in 1961. Trustee since January 2018. Principaloccupation(s) during the past five years and otherexperience: deputy secretary (2014–2017) of theUnited States Department of theTreasury. Governor(2010–2014) of the Federal Reserve Board.Commissioner (2007–2010) of financial regulation forthe State of Maryland. Director (2017–present) of i(x)Investments, LLC. Rubenstein Fellow (2017–2020) ofDuke University. Trustee (2017–present) of AmherstCollege and member (2019–present) of AmherstCollege Investment Committee.

Peter F. VolanakisBorn in 1955. Trustee since July 2009. Principaloccupation(s) during the past five years and otherexperience: president and chief operating officer(retired 2010) of Corning Incorporated(communications equipment) and director of CorningIncorporated (2000–2010) and Dow Corning(2001–2010). Director (2012) of SPX Corporation(multi-industry manufacturing). Overseer of the AmosTuck School of Business Administration, DartmouthCollege (2001–2013). Chairman of the board oftrustees of Colby-Sawyer College. Member of theBMW Group Mobility Council.

Executive Officers

John BendlBorn in 1970. Principal occupation(s) during the pastfive years and other experience: principal of Vanguard.Chief financial officer (2019–present) of each of theinvestment companies served by Vanguard. Chiefaccounting officer, treasurer, and controller ofVanguard (2017–present). Partner (2003–2016) atKPMG (audit, tax, and advisory services).

Christine M. BuchananBorn in 1970. Principal occupation(s) during the pastfive years and other experience: principal of Vanguard.Treasurer (2017–present) of each of the investmentcompanies served by Vanguard. Partner (2005–2017)at KPMG (audit, tax, and advisory services).

David CermakBorn in 1960. Principal occupation(s) during the pastfive years and other experience: principal of Vanguard.Finance director (2019–present) of each of theinvestment companies served by Vanguard.Managing director and head (2017–present) ofVanguard Investments Singapore. Managing directorand head (2017–2019) of Vanguard Investments HongKong. Representative director and head (2014–2017)of Vanguard Investments Japan.

John GallowayBorn in 1973. Principal occupation(s) during the pastfive years and other experience: principal of Vanguard.Investment stewardship officer (September2020–present) of each of the investment companiesserved by Vanguard. Head of Investor Advocacy(February 2020–present) and head of MarketingStrategy and Planning (2017–2020) at Vanguard.Deputy assistant to the President of theUnited States (2015).

Peter MahoneyBorn in 1974. Principal occupation(s) during the pastfive years and other experience: principal of Vanguard.Controller (2015–present) of each of the investmentcompanies served by Vanguard. Head of InternationalFund Services (2008–2014) at Vanguard.

Anne E. RobinsonBorn in 1970. Principal occupation(s) during the pastfive years and other experience: general counsel(2016–present) of Vanguard. Secretary (2016–present)of Vanguard and of each of the investment companiesserved by Vanguard. Managing director(2016–present) of Vanguard. Managing director andgeneral counsel of Global Cards and ConsumerServices (2014–2016) at Citigroup. Counsel(2003–2014) at American Express.

Michael RollingsBorn in 1963. Principal occupation(s) during the pastfive years and other experience: finance director(2017–present) and treasurer (2017) of each of theinvestment companies served by Vanguard.Managing director (2016–present) of Vanguard. Chieffinancial 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. SchadlBorn in 1972. Principal occupation(s) during the pastfive years and other experience: principal of Vanguard.Chief compliance officer (2019–present) of Vanguardand of each of the investment companies served byVanguard. Assistant vice president (2019–present) ofVanguard Marketing Corporation.

Vanguard Senior Management Team

Joseph Brennan James M. NorrisMortimer J. Buckley Thomas M. RampullaGregory Davis Karin A. RisiJohn James Anne E. RobinsonJohn T. Marcante Michael RollingsChris D. McIsaac Lauren Valente

Connect withVanguard® > vanguard.com

Fund Information > 800-662-7447

Direct Investor Account Services > 800-662-2739

Institutional Investor Services > 800-523-1036

TextTelephone for PeopleWhoAre Deaf or Hard of Hearing > 800-749-7273

This material may be used in conjunctionwith the offering of shares of any Vanguardfund only if preceded or accompanied bythe 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 votingguidelines by visiting vanguard.com/proxyreporting or bycalling Vanguard at 800-662-2739. The guidelines arealso available from the SEC’s website, www.sec.gov. Inaddition, you may obtain a free report on how your fundvoted the proxies for securities it owned during the 12months ended June 30. To get the report, visit eithervanguard.com/proxyreporting or www.sec.gov.

You can review information about your fund on the SEC’swebsite, and you can receive copies of this information,for a fee, by sending a request via email addressed [email protected].

Source for Bloomberg Barclays indexes: BloombergIndex Services Limited. Copyright 2021, Bloomberg. Allrights reserved.

© 2021 The Vanguard Group, Inc.All rights reserved.Vanguard Marketing Corporation, Distributor.

Q530 032021

Vanguard Global Capital Cycles Fund Annual Report January ...

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