Manager due Diligence (Vanguard Mega-Cap Value ETF)

Overview
Launched in 2007, The Vanguard Mega Cap Value ETF seeks to track the investment performance of the
CRSP US Mega Cap Value Index, which represents the value companies of the CRSP US Mega Cap
Index. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in
the stocks that make up the index, holding each stock in approximately the same proportion as its
weighting in the index.
The experience and stability of Vanguards Equity Index Group have permitted continuous refinement of
techniques for reducing tracking error. The group uses proprietary software to implement trading
decisions that accommodate cash flow and maintain close correlation with index characteristics.
Vanguards refined indexing process, combined with low management fees and efficient trading, has
provided tight tracking net of expenses.

Equity characteristics as Mega Cap Value CRSP US Mega Cap

of 03/31/2017 ETF Value Index
Number of stocks 147 146
Median market cap $165.8 billion $165.8 billion
Price/earnings ratio 20.4x 20.4x
Price/book ratio 2.3x 2.3x
Return on equity 15.00% 15.00%
Earnings growth rate 2.50% 2.50%
Foreign holdings 0.00% -
Turnover rate (as of fiscal year
end August) 7.60% -
Short-term reserves - -
Fund total net assets $1.7 billion -
Share class total net assets $1.6 billion -

Equity sector diversification as of Mega Cap Value CRSP US Mega Cap

03/31/2017 ETF Value Index
Basic Materials 2.50% 2.50%
Consumer Goods 7.50% 7.50%
Consumer Services 5.10% 5.10%
Financials 25.50% 25.50%
Health Care 14.10% 14.10%
Industrials 12.10% 12.10%
Oil & Gas 9.80% 9.80%
 Other - -
Technology 13.30% 13.20%
Telecommunications 5.00% 5.00%
Utilities 5.10% 5.20%

Historical volatility measures as

of 03/31/2017 R-Squared* Beta*
Spliced Mega Cap Value Index 1.0 1.0
Dow Jones U.S. Total Stock Market
Index 0.91 0.9

Management Team
Launched in 1975, The Vanguard Group, Malvern, Pennsylvania, is among the worlds largest equity and
fixed income managers. As chief investment officer and managing director, Mortimer J. Buckley oversees
Vanguards Equity Index, Quantitative Equity, and Fixed Income Groups. Joseph Brennan, CFA, Principal
and global head of Vanguard's Equity Index Group, is responsible for all equity index funds. The Equity
Index Group manages indexed equity portfolios covering U.S. and international markets. It has developed
sophisticated portfolio construction methodologies and efficient trading strategies that seek to deliver
returns that are highly correlated with target portfolio benchmarks. The group has advised Vanguard Mega
Cap Value ETF since 2007.
Vanguard Equity Index Group

Gerard C. O'Reilly, Principal

Portfolio manager.
Advised the fund since 2015.
Worked in investment management since 1992.
B.S., Villanova University.

Michael A. Johnson
Portfolio manager.
Advised the fund since 2015.
Worked in investment management since 2007.
B.S., B.A., Shippensburg University.
Strategy and policy
Investment strategy
Vanguard Mega Cap Value ETF is an exchange-traded share class of Vanguard Mega Cap Value Index
Fund, which employs an indexing investment approach designed to track the performance of the CRSP
US Mega Cap Value Index, which represents the value companies of the CRSP US Mega Cap Index. The
fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks
that make up the index, holding each stock in approximately the same proportion as its weighting in the
index.

Investment policy
The fund will invest at least 80% of its assets in the stocks that make up its target index.
The fund reserves the right to substitute a different index for the index it currently tracks if the current
index is discontinued, if the funds agreement with the sponsor of its target index is terminated, or for any
other reason determined in good faith by the funds board of trustees. In any such instance, the substitute
index would measure a market segment similar to the current index.
To help stay fully invested and to reduce transaction costs, the fund may invest, to a limited extent, in
derivatives. Generally speaking, a derivative is a financial contract whose growth is based on the value of
a financial asset (such as a stock or bond), a physical asset (such as gold), or a market index (such as the
S&P 500 Index). The fund will not use derivatives for speculation or for the purpose of leveraging
(magnifying) investment returns.

Mutual Fund Expenses

Expenses Expense Ratio
Mega Cap Value ETF 0.07%
Average expense ratio of similar
funds* 1.07%

Mutual Fund Performance

Average annual returnsupdated 1 3 5 10 Since Inception
monthly as of 03/31/2017 Year Year Year Year 12/17/2007
18.10 13.21
Mega Cap Value ETF Market Price % 9.60% % - 6.42%
18.09 13.21
Mega Cap Value ETF NAV % 9.60% % - 6.41%
18.14 13.29
Spliced Mega Cap Value Index* % 9.67% % 5.96% 6.46%