VANGUARD STAR FUNDS Form N-CSR Filed 2016-12-29
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SECURITIES AND EXCHANGE COMMISSION FORM N-CSR Certified annual shareholder report of registered management investment companies filed on Form N-CSR Filing Date: 2016-12-29 | Period of Report: 2016-10-31 SEC Accession No. 0000932471-16-015098 (HTML Version on secdatabase.com) FILER VANGUARD STAR FUNDS Mailing Address Business Address PO BOX 2600 PO BOX 2600 CIK:736054| IRS No.: 000000000 | State of Incorp.:DE | Fiscal Year End: 1031 V26 V26 Type: N-CSR | Act: 40 | File No.: 811-03919 | Film No.: 162074267 VALLEY FORGE PA 19482 VALLEY FORGE PA 19482 6106691000 Copyright © 2016 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES 811-03919 Investment Company Act file number: Vanguard STAR Funds Name of Registrant: P.O. Box 2600 Address of Registrant: Valley Forge, PA 19482 Anne E. Robinson, Esquire Name and address of agent for service: 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, 2015 – October 31, 2016 Item 1: Reports to Shareholders Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Annual Report | October 31, 2016 Vanguard LifeStrategy® Funds Vanguard LifeStrategy Income Fund Vanguard LifeStrategy Conservative Growth Fund Vanguard LifeStrategy Moderate Growth Fund Vanguard LifeStrategy Growth Fund Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document A new format, unwavering commitment As you begin reading this report, you’ll notice that we’ve made some improvements to the opening sections—based on feedback from you, our clients. Page 1 starts with a new ”Your Fund’s Performance at a Glance,” a concise, handy summary of how your fund performed during the period. In the renamed ”Chairman’s Perspective,” Bill McNabb will focus on enduring principles and investment insights. We’ve modified some tables, and eliminated some redundancy, but we haven’t removed any information. At Vanguard, we’re always looking for better ways to communicate and to help you make sound investment decisions. Thank you for entrusting your assets to us. Contents Your Fund’s Performance at a Glance. 1 Chairman’s Perspective. 3 LifeStrategy Income Fund. 7 LifeStrategy Conservative Growth Fund. 18 LifeStrategy Moderate Growth Fund. 29 LifeStrategy Growth Fund. 40 Your Fund’s After-Tax Returns. 53 About Your Fund’s Expenses. 55 Glossary. 57 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. See the Glossary for definitions of investment terms used in this report. About the cover: No matter what language you speak, Vanguard has one consistent message and set of principles. Our primary focus is on you, our clients. We conduct our business with integrity as a faithful steward of your assets. This message is shown translated into seven languages, reflecting our expanding global presence. Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Your Fund’s Performance at a Glance • Vanguard’s four LifeStrategy Funds provide a broadly diversified portfolio within a single fund. Each fund has a different fixed allocation to underlying U.S. and international stock and bond index funds. • For the 12 months ended October 31, 2016, returns for the LifeStrategy Funds ranged from 3.54% for the LifeStrategy Growth Fund, which has the largest allocation to stocks, to 4.42% for the LifeStrategy Income Fund, which has the largest allocation to bonds. • Each fund performed in line with its composite benchmark after expenses. All the funds surpassed the average return of their peer groups. • Of the funds’ four underlying investments, international bonds performed best, returning about 5% after hedging against currency fluctuations. International stocks were the laggards with a return of about 1%. The broad U.S. stock and bond markets fell in between, with each returning about 4%. Total Returns: Fiscal Year Ended October 31, 2016 Total Returns Vanguard LifeStrategy Income Fund 4.42% Income Composite Index 4.68 Income Composite Average 3.80 Income Composite Average: Derived from data provided by Lipper, a Thomson Reuters Company. Vanguard LifeStrategy Conservative Growth Fund 4.24% Conservative Growth Composite Index 4.43 Conservative Growth Composite Average 3.13 Conservative Growth Composite Average: Derived from data provided by Lipper, a Thomson Reuters Company. Vanguard LifeStrategy Moderate Growth Fund 3.96% Moderate Growth Composite Index 4.09 Moderate Growth Composite Average 2.41 Moderate Growth Composite Average: Derived from data provided by Lipper, a Thomson Reuters Company. Vanguard LifeStrategy Growth Fund 3.54% Growth Composite Index 3.67 Growth Composite Average 1.67 Growth Composite Average: Derived from data provided by Lipper, a Thomson Reuters Company. For a benchmark description, see the Glossary. 1 Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total Returns: Ten Years Ended October 31, 2016 Average Annual Return LifeStrategy Income Fund 4.34% Income Composite Index 4.96 Income Composite Average 3.99 Income Composite Average: Derived from data provided by Lipper, a Thomson Reuters Company. LifeStrategy Conservative Growth Fund 4.57% Conservative Growth Composite Index 5.13 Conservative Growth Composite Average 4.17 Conservative Growth Composite Average: Derived from data provided by Lipper, a Thomson Reuters Company. LifeStrategy Moderate Growth Fund 4.84% Moderate Growth Composite Index 5.43 Moderate Growth Composite Average 4.56 Moderate Growth Composite Average: Derived from data provided by Lipper, a Thomson Reuters Company. LifeStrategy Growth Fund 4.76% Growth Composite Index 5.36 Growth Composite Average 4.55 Growth Composite Average: Derived from data provided by Lipper, a Thomson Reuters Company. For a benchmark description, see the Glossary. The figures shown represent past performance, which is not a guarantee of future results. (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. Expense Ratios Your Fund Compared With Its Peer Group Acquired Fund Fees Peer Group and Expenses Average LifeStrategy Income Fund 0.12% 0.92% LifeStrategy Conservative Growth Fund 0.13 1.00 LifeStrategy Moderate Growth Fund 0.14 1.08 LifeStrategy Growth Fund 0.15 1.15 The fund expense figures shown—drawn from the prospectus dated February 25, 2016—represent an estimate of the weighted average of the expense ratios and any transaction fees charged by the underlying mutual funds (the ”acquired” funds) in which the LifeStrategy Funds invest. The LifeStrategy Funds do not charge any expenses or fees of their own. For the fiscal year ended October 31, 2016, the annualized acquired fund fees and expenses were 0.12% for the LifeStrategy Income Fund, 0.13% for the LifeStrategy Conservative Growth Fund, 0.14% for the LifeStrategy Moderate Growth Fund, and 0.15% for the LifeStrategy Growth Fund. Peer groups are the composites listed on page 1. Their expense figures are derived by applying the appropriate allocations to average expense ratios of these mutual fund peer groups: fixed income funds, general equity funds, and international funds. Average expense ratios for these groups are derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2015. 2 Copyright © 2013 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Chairman’s Perspective Bill McNabb Chairman and Chief Executive Officer Dear Shareholder, Over the three years ended August 31, 2016, investors poured more than $1 trillion into index funds. Indexing now accounts for nearly a third of all mutual fund assets—more than double what it did a decade ago and eight times its share two decades ago.1 By contrast, active management’s commercial struggles have reflected its disappointing investment performance. Over the decade ended December 31, 2015, 82% of actively managed stock funds and 81% of active bond funds have either underperformed their benchmarks or shut down. This subpar performance has fueled the explosion of asset growth in indexing among individual, retirement, and nonprofit investors. So what might the trend mean for the future of actively managed funds? Our research and experience indicate that active management can survive—and even succeed—but only if it’s offered at much lower expense. High costs, which limit a manager’s ability to deliver benchmark-beating returns to clients, are the biggest reason why active has lagged. Industrywide as of December 31, 2015, the average expense ratio for all active stock funds is 1.14%,