Vanguard Explorer Value Fund NCSRS Certified semi-annual shareholder report (management investment company)

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:	811-07803
Name of Registrant:	Vanguard Scottsdale Funds
Address of Registrant:	P.O. Box 2600
	Valley Forge, PA 19482
Name and address of agent for service:	Heidi Stam, Esquire
	P.O. Box 876
	Valley Forge, PA 19482
Registrant’s telephone number, including area code:	(610) 669-1000
Date of fiscal year end: August 31
Date of reporting period: September 1, 2013 – February 28, 2014
Item 1: Reports to Shareholders

Semiannual Report | February 28, 2014

Vanguard Explorer Value^™Fund

Vanguard’s Principles for Investing Success

We want to give you the best chance of investment success. These principles,
grounded in Vanguard’s research and experience, can put you on the right path.

Goals. Create clear, appropriate investment goals.

Balance. Develop a suitable asset allocation using broadly diversified funds.

Cost. Minimize cost.

Discipline. Maintain perspective and long-term discipline.

A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.


Contents
Your Fund’s Total Returns.	1
Chairman’s Letter.	2
Advisors’ Report.	7
Fund Profile.	11
Performance Summary.	12
Financial Statements.	13
About Your Fund’s Expenses.	24
Trustees Approve Advisory Arrangements.	26
Glossary.	28

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: The ship’s wheel represents leadership and guidance, essential qualities in navigating difficult seas.
This one is a replica based on an 18th-century British vessel. The HMSVanguard, another ship of that era, served as the
flagship for British Admiral Horatio Nelson when he defeated a French fleet at the Battle of the Nile.

Your Fund’s Total Returns


Six Months Ended February 28, 2014
	Total
	Returns
Vanguard Explorer Value Fund	16.03%
Russell 2500 Value Index	16.79
Small-Cap Value Funds Average	15.67
Small-Cap Value Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


Your Fund’s Performance at a Glance
August 31, 2013, Through February 28, 2014
			Distributions Per Share
	Starting	Ending	Income	Capital
	Share Price	Share Price	Dividends	Gains
Vanguard Explorer Value Fund	$29.39	$31.79	$0.168	$2.042

Chairman’s Letter

Dear Shareholder,

As investors became more confident about the health of the economy, domestic stocks surged in the six-month period ended February 28, 2014. The gains were broadly based, with small and mid-sized stocks finishing a step ahead of the market as a whole.

Vanguard Explorer Value Fund returned 16.03% for the period, slightly lagging the 16.79% advance of its benchmark, the Russell 2500 Value Index, but outpacing the average return of 15.67% for its peer group.

Eight of the fund’s ten sectors recorded double-digit gains for the fiscal half year. Compared with the benchmark, the advisors gave a heavier allocation to the information technology sector, largely at the expense of financials, which proved a good call. In terms of stock selection, the advisors’ choices helped performance within a number of sectors, including health care and energy; however, within industrials, consumer discretionary, telecommunication services, and materials, their choices detracted from performance.

A set of supportive factors combined to boost U.S. stocks

Favorable corporate earnings, generally positive economic news, improved investor sentiment, and the Federal Reserve’s accommodative bond-buying program—all of these factors helped the broad U.S. stock market post a strong six-month return of a little less than 16%.

International stocks, in aggregate, returned about 12%. Most of the strength came from the developed markets of Europe; those in the Pacific region managed single-digit returns for the period, as did emerging markets. The latter have seen particularly volatile results amid concerns about China’s slowing economy and the effects of higher interest rates as the Fed winds down its stimulus program.

Bonds staged a rebound after last year’s swoon

Bonds, which had slumped notably in 2013 as investors worried over the future of the Fed’s bond-buying program, delivered solid results for the six months. Even as the Fed began trimming its purchases in January, bonds seemed to regain their appeal for investors.

The broad U.S. taxable bond market returned 2.84% for the half year. The yield of the 10-year Treasury note finished the six months at 2.64%, down a bit from 2.76% at the end of August. (Bond prices and yields move in opposite directions.)

Municipal bonds, which had declined sharply in the fiscal year ended August 31, regained some ground, returning 5.71%. The market was roiled last summer by headlines about Detroit’s bankruptcy and Puerto Rico’s fiscal woes, but as those headlines receded, investors seemed to take a more comprehensive view of state and local finances. Our chief investment officer, Tim Buckley, noted recently that, on the whole, “municipalities out there are actually doing a lot better than they were a few years ago.”


Market Barometer

	Total Returns
	Periods Ended February 28, 2014
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	15.67%	26.34%	23.63%
Russell 2000 Index (Small-caps)	17.75	31.56	26.63
Russell 3000 Index (Broad U.S. market)	15.83	26.74	23.86
FTSE All-World ex US Index (International)	12.20	12.19	17.71

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.84%	0.15%	5.13%
Barclays Municipal Bond Index (Broad tax-exempt market)	5.71	-0.21	5.68
Citigroup Three-Month U.S. Treasury Bill Index	0.00	0.05	0.08

CPI
Consumer Price Index	0.39%	1.13%	2.04%

Money market and savings account returns remained capped by the Fed’s target of 0%–0.25% for short-term interest rates.

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 4.93%.

Stock selection helped the fund capture most of the market’s gains

The fund has three advisors, each using its own approach to identify small and mid-sized U.S. companies whose stocks are undervalued by the market. Their choices collectively resulted in a strong six-month return, but one that slightly lagged the benchmark as the economy seemed to gain more solid footing.

More than half of Explorer Value’s return came from opportunities the advisors found among information technology and financial stocks, which accounted for roughly half of the fund’s assets on average during the period. In the technology sector, outsized allocations to providers of payment and processing services and to mobile device-related semiconductor companies paid off, more than offsetting subpar returns from hardware manufacturers. Within financials, holding only a modest allocation to regional banks and real estate companies, two segments in which strong performance has narrowed the field of undervalued securities, worked in the fund’s favor. Aside from the insurance segment, the advisors’ stock selection in this sector added to performance.


Expense Ratios
Your Fund Compared With Its Peer Group
		Peer Group
	Fund	Average
Explorer Value Fund	0.66%	1.36%

The fund expense ratio shown is from the prospectus dated December 20, 2013, and represents estimated costs for the current fiscal year.
For the six months ended February 28, 2014, the fund’s annualized expense ratio was 0.57%. The peer-group expense ratio is derived from
data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2013.

Peer group: Small-Cap Value Funds.

A handful of holdings in the health care sector, notably among biotechnology and pharmaceutical companies, produced a return of around 30%, almost double the gain posted by health care stocks in the benchmark. The advisors’ good choices

in the energy sector and their skirting of many utility stocks added to relative performance as well.

Elsewhere, however, the advisors’ stock selection disappointed. In the industrial sector, the fund’s allocation to poorly

The appeal of low-cost investing is growing

Minimizing investment costs is a critical part of every investor’s toolkit. Why? Because every

dollar paid for fund management expenses is simply a dollar less that can work on your behalf.

Put another way, the lower your mutual fund’s costs, the greater your share of the fund’s return.

Not surprisingly, research indicates that lower-cost investments have tended to outperform

their higher-cost counterparts.

Investors are catching on to the value of lower-cost mutual funds. Funds with lower expense

ratios dominated in attracting investment dollars over the decade ended December 31, 2012,

according to a Vanguard research paper. (You can read the paper, Costs Matter: Are Fund

Investors Voting With Their Feet?, at vanguard.com/research.) And, as the chart below shows,

Vanguard’s leadership in keeping down costs for investors seems to have encouraged the

industry to reduce its average costs—at least over the past decade.

Even so, Vanguard’s average expenses continue to be less than one-fifth the industry average:

0.19% versus 1.08% (as of December 31, 2013). That cost difference remains a powerful tool

in the hands of Vanguard clients.

Vanguard fund costs remain far below industry average

Sources: Vanguard and Lipper, a Thomson Reuters Company.

performing commercial services and supply-chain management stocks outweighed solid returns from other segments. In the consumer discretionary sector, the fund held media and educational services stocks that detracted from relative performance, and it missed out on the strong gains made by certain homebuilders and retailers.

Although the telecommunication services sector made up a very small part of the fund—less than 1% of its assets—the declines in those holdings took away from relative performance as well as from the overall return.

For more about the advisors’ strategies and the fund’s positioning during the six months, see the Advisors’ Report that follows this letter.

Rebalancing your portfolio keeps your target in focus

The surge in U.S. stocks in 2013 undoubtedly brought good cheer to investors at the end of the year. Although the rally has been welcome, we simply don’t know how long it will last. History teaches that it’s wise to anticipate a pullback after an extended winning streak.

At Vanguard, no matter what the current market conditions, we encourage you to maintain a diversified portfolio with a mix of stock, bond, and money market funds consistent with your long-term goals and risk tolerance.

Following such a robust year for stocks, you may find that your asset mix has drifted from your original target. If your allocation is off-target by about 5 percentage points or more, it may be time to rebalance. Specifically, the strong results for stocks and weak results for bonds in 2013 may mean directing assets from equities to fixed income.

I understand that it feels counterintuitive to move away from one asset class that’s done well recently and into another that’s underperformed. But, as a Vanguard research paper puts it, “bonds are likely to remain one of the best diversifiers of equity market risk and . . . will likely provide downside protection to balanced investors over the long term.” (You can read Risk of Loss: Should the Prospect of Rising Rates Push Investors from High-Quality Bonds? at vanguard.com/research.)

Ultimately, rebalancing is about controlling risk by keeping your portfolio in line with your target asset allocation. The alternative is to allow market fluctuations to set your asset mix, potentially leaving you with a portfolio that’s more risky than you intended. As we’ve long counseled our clients, focusing on what you can control is one of the most prudent steps you can take as an investor.

As always, thank you for entrusting your assets to Vanguard.

Sincerely,

F. William McNabb III
Chairman and Chief Executive Officer
March 12, 2014

Advisors’ Report

For the half-year ended February 28, 2014, Vanguard Explorer Value Fund returned 16.03%. Your fund is managed by three independent advisors, a strategy that enhances the fund’s diversification by providing exposure to distinct, yet complementary, investment approaches. It is not uncommon for different advisors to have different views about individual securities or the broader investment environment.

The advisors, the amount and percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the half-year and of how their portfolio positioning reflects this

assessment. (Please note that the Frontier and Sterling discussions refer to industry sectors as defined by Russell classifications, rather than by the Global Industry Classification Standard used elsewhere in this report.) These comments were prepared on March 14, 2014.

Cardinal Capital Management, L.L.C.

Portfolio Managers:
Robert B. Kirkpatrick, CFA,
Managing Partner

Eugene Fox III, Managing Partner

Rachel D. Matthews, Partner

For the six months ended February 28, the strong performance of domestic equities was consistent with a more optimistic view of the economy, as cyclical


Vanguard Explorer Value Fund Investment Advisors

	Fund Assets Managed
Investment Advisor	%	$ Million	Investment Strategy
Cardinal Capital Management,	33	92	The advisor seeks stocks that are able to generate
L.L.C.			excess cash flow and reinvest the cash to increase
			shareholder value.
Frontier Capital Management Co.,	32	91	The advisor selects stocks by identifying companies it
LLC			believes are underpriced relative to their long-term
			value. These companies are generally inexpensive and
			have low price-to-book and price-to-earnings ratios.
Sterling Capital Management LLC	31	88	The advisor searches for stocks of quality companies
			selling at large discounts compared with their
			underlying value. It defines quality stocks as those that
			generate considerable cash flow, reinvest in
			opportunities with attractive returns, and have a
			competitive advantage within their business sector.
Cash Investments	4	10	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.

stocks posted the strongest returns while more defensive stocks lagged. The U.S. economy continued to grow at a modest pace, with consumer confidence and spending boosted by rising home and stock prices and an improving employment outlook. Nonetheless, economic challenges exist; it is uncertain how much interest rates will rise as the Federal Reserve’s bond-buying program winds down and how much higher interest rates will restrain economic growth.

During the semiannual period, our portfolio’s performance was hampered by stock selection in the industrial, consumer discretionary, and materials sectors and by the drag from holding residual cash in a rising market. Shares of Clean Harbors, which disposes of environmental waste, declined as its recently acquired oil re-refining business has proven very challenging. The stock price of Atlas Air Worldwide, an air freight logistics provider, fell as the company cut its earnings guidance because of weak commercial charter pricing and lower military cargo volumes. The position was sold.

Shares of Cinemark, an owner/operator of theater chains, lagged as its attractive Latin American presence became a focus of near-term concern; this was prompted by the Federal Reserve’s reduction in bond-buying, which caused most Latin American currencies to depreciate relative to the dollar. The stock of Silgan Holdings, which processes metal food cans and plastic bottles, rose only modestly after management offered a conservative outlook based on the impact of two long-term contract extensions and increased investment in product development.

Contributors to relative performance included stock selection in the health care and financial services sectors. Shares of Ligand Pharmaceuticals, which develops and licenses drug candidates to major pharmaceutical companies, rose sharply as investors showed more interest in the potential of its portfolio. The stock price of Howard Hughes, which owns valuable land in a few key cities, climbed significantly as the pace of land sales and property development accelerated.

The largest contributor to the portfolio was our holding in IAC/InterActiveCorp. Its shares rose on news of a management reorganization that investors saw as a sign that the company would separate or spin off its crown-jewel online-dating business, Match.com, from its less-attractive online search and toolbars business.

Our investment outlook for the equity market remains cautiously optimistic. Valuations are attractive relative to fixed income and cash alternatives, especially in the face of rising long-term interest rates. Merger-and-acquisition activity should pick up as corporate balance sheets remain flush with cash and companies look for growth. The management teams of the companies in our portfolio are actively deploying their free cash flow through share repurchases, dividends, and opportunistic acquisitions.

Frontier Capital Management Co., LLC

Portfolio Managers:
Thomas W. Duncan, Jr.,
Senior Vice President

William A. Teichner, CFA,
Senior Vice President

Relative to the benchmark, our portion of the fund benefited from both positive stock selection and sector selection, primarily in energy, materials & processing, producer durables, and technology.

The portfolio’s ten best-contributing stocks added, on average, approximately 80 basis points each to absolute performance. These holdings were spread over five sectors and included three technology stocks, one energy stock, and two stocks each from financial services, producer durables, and materials & processing.

The biggest single contributor was E*TRADE Financial, a provider of online brokerage and banking services. The stock added approximately 110 basis points to absolute performance thanks to higher-than-expected earnings. The company’s profitability was boosted by declining loan loss provision expenses in its banking operation and rising trading commissions in its brokerage business. We believe E*TRADE can continue to improve its financial results.

The portfolio’s ten largest detractors trimmed, on average, approximately 20 basis points each from performance. These stocks were spread over six sectors and included three holdings each in producer durables and technology.

The largest detractor during the period was NII Holdings, a U.S.-domiciled provider of wireless communication services to subscribers in Mexico, Brazil, and two other Latin American countries. The stock trimmed approximately 60 basis points from the portfolio’s performance. Despite promising new management at the helm, the firm’s financial results were worse than consensus expectations as a result of cell phone subscriber cancellations, lower revenue per subscriber, and currency depreciation. We sold the stock, having lost confidence that the company would succeed in turning itself around.

During the period, we bought six new stocks and sold nine holdings. The purchases were spread across five sectors, as were the sales. The net effect was an increase in the technology and materials & processing segments of our portfolio and a reduction in producer durables and energy. As is typical for Frontier, the changes were based on company-specific reasons rather than top-down positioning.

Sterling Capital Management LLC

Portfolio Managers:
Eduardo A. Brea, CFA,
Managing Director

Timothy P. Beyer, CFA,
Managing Director

For the six months ended February 28, stock selection disappointed. Our holdings in the producer durables and consumer discretionary sectors were subpar, most notably UTi Worldwide (–40%), Performant Financial (–27%), and American Public Education (–11%). This was somewhat offset by the gain of AerCap Holdings (+121%). Sectors in which the portfolio performed well included financials, led by E*TRADE Financial (+60%) and Global Payments (+48%), and utilities, where we were significantly underweighted relative to the index owing to concerns about valuation levels.

The portfolio had strong representation in the consumer discretionary and technology sectors, as attractive valuation levels and our expectation for accelerating growth in the U.S. economy favor those sectors. We had only modest exposure to yield-oriented segments (e.g., utilities and REITs), which strike us as fully valued if interest rates begin to rise materially, and to energy stocks, because of that sector’s capital-intensive nature and the capriciousness of energy prices.

We continue to expect slow but accelerating economic activity in the United States. The new Federal Reserve chair, Janet Yellen, will likely be patient in reducing the Fed’s stimulative bond purchases. We do expect the Fed to end that activity in 2015, leading to higher interest rates. While the market appears fairly valued for the moment, momentum trades are carrying some stocks to absurd levels while others are punished for falling short of market expectations. These dislocations provide us with opportunities to buy cash-generative, well-financed businesses at attractive valuations.

Explorer Value Fund

Fund Profile
As of February 28, 2014


Portfolio Characteristics
			DJ
			U.S.
		Russell	Total
		2500	Market
		Value	FA
	Fund	Index	Index
Number of Stocks	180	1,738	3,622
Median Market Cap	$2.5B	$3.4B	$42.4B
Price/Earnings Ratio	22.2x	22.5x	19.8x
Price/Book Ratio	1.9x	1.7x	2.6x
Return on Equity	9.3%	7.1%	16.8%
Earnings Growth
Rate	12.7%	7.9%	12.0%
Dividend Yield	1.4%	1.9%	1.9%
Foreign Holdings	1.3%	0.0%	0.0%
Turnover Rate
(Annualized)	37%	—	—
Ticker Symbol	VEVFX	—	—
Expense Ratio¹	0.66%	—	—
30-Day SEC Yield	0.66%	—	—
Short-Term Reserves	3.5%	—	—


Sector Diversification (% of equity exposure)
			DJ
			U.S.
		Russell	Total
		2500	Market
		Value	FA
	Fund	Index	Index
Consumer Discretionary	12.9%	10.9%	13.2%
Consumer Staples	1.5	1.7	8.2
Energy	4.7	7.3	9.3
Financials	29.9	37.6	17.2
Health Care	5.2	5.1	13.3
Industrials	16.6	13.3	11.5
Information Technology	21.2	9.8	18.3
Materials	4.9	5.7	3.9
Telecommunication
Services	0.6	0.9	2.1
Utilities	2.5	7.7	3.0


Volatility Measures
	Russell	DJ
	2500	U.S. Total
	Value	Market
	Index	FA Index
R-Squared	0.98	0.95
Beta	1.00	1.16
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.


Ten Largest Holdings (% of total net assets)
E*TRADE Financial	Investment Banking
Corp.	& Brokerage	1.5%
Skyworks Solutions Inc.	Semiconductors	1.5
Endurance Specialty
Holdings Ltd.	Reinsurance	1.5
CapitalSource Inc.	Regional Banks	1.4
Aspen Insurance	Property & Casualty
Holdings Ltd.	Insurance	1.4
IAC/InterActiveCorp	Internet Software &
	Services	1.3
Loral Space &
Communications Inc.	Cable & Satellite	1.3
Howard Hughes Corp.	Real Estate
	Development	1.3
KAR Auction Services	Diversified Support
Inc.	Services	1.2
Silgan Holdings Inc.	Metal & Glass
	Containers	1.1
Top Ten		13.5%
The holdings listed exclude any temporary cash investments and equity index products.

Investment Focus

1 The expense ratio shown is from the prospectus dated December 20, 2013, and represents estimated costs for the current fiscal year. For the six
months ended February 28, 2014, the annualized expense ratio was 0.57%.

Explorer Value Fund

Performance Summary

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.

Fiscal-Year Total Returns (%): March 30, 2010, Through February 28, 2014

Note: For 2014, performance data reflect the six months ended February 28, 2014.

Average Annual Total Returns: Periods Ended December 31, 2013
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.


	Inception	One	Since
	Date	Year	Inception
Explorer Value Fund	3/30/2010	38.15%	18.13%

See Financial Highlights for dividend and capital gains information.

Explorer Value Fund

Financial Statements (unaudited)

Statement of Net Assets
As of February 28, 2014

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).


			Market
			Value
		Shares	($000)
Common Stocks (93.0%)¹
Consumer Discretionary (12.0%)
*	Loral Space &
	Communications Inc.	46,700	3,690
	Interpublic Group of
	Cos. Inc.	166,300	2,947
*	Crocs Inc.	186,366	2,838
	Six Flags Entertainment
	Corp.	56,000	2,285
*	Ascena Retail Group Inc.	123,350	2,256
*	Modine Manufacturing Co.	137,045	2,027
	Cinemark Holdings Inc.	67,100	1,974
	Chico’s FAS Inc.	101,720	1,681
	Kohl’s Corp.	29,000	1,630
	Guess? Inc.	50,600	1,535
	Meredith Corp.	32,550	1,523
*	News Corp. Class B	79,300	1,419
*	LIN Media LLC	56,900	1,297
	Regis Corp.	83,500	1,174
*	Tuesday Morning Corp.	70,000	1,095
	Nexstar Broadcasting
	Group Inc. Class A	24,800	1,059
*	American Public
	Education Inc.	26,000	921
	Universal Technical
	Institute Inc.	46,900	635
*	Quiksilver Inc.	80,803	630
	International Speedway
	Corp. Class A	14,858	501
	American Eagle
	Outfitters Inc.	32,701	475
*	Cambium Learning
	Group Inc.	44,400	91
			33,683
Consumer Staples (1.3%)
*	Medifast Inc.	54,900	1,446
	Pinnacle Foods Inc.	41,200	1,167
	JM Smucker Co.	8,300	830
	Herbalife Ltd.	2,667	178
			3,621


Energy (4.4%)
*	Carrizo Oil & Gas Inc.	46,172	2,297
	World Fuel Services Corp.	50,300	2,264
*	Concho Resources Inc.	13,900	1,684
*	Oasis Petroleum Inc.	30,300	1,320
	Comstock Resources Inc.	62,678	1,239
*	SandRidge Energy Inc.	146,166	943
*	Bonanza Creek Energy Inc.	18,100	904
*	Resolute Energy Corp.	95,100	886
	Tidewater Inc.	14,433	703
			12,240
Financials (28.1%)
*	E*TRADE Financial Corp.	190,228	4,274
	Endurance Specialty
	Holdings Ltd.	80,960	4,221
	CapitalSource Inc.	275,100	4,044
	Aspen Insurance
	Holdings Ltd.	102,717	3,858
*	Howard Hughes Corp.	25,600	3,534
*	Popular Inc.	101,024	2,888
	Leucadia National Corp.	93,800	2,621
*	American Capital Ltd.	154,181	2,399
	AG Mortgage Investment
	Trust Inc.	116,500	2,137
	Argo Group International
	Holdings Ltd.	47,052	2,077
	Ryman Hospitality
	Properties Inc.	47,815	2,017
	Pinnacle Financial
	Partners Inc.	54,197	1,955
*	Markel Corp.	3,300	1,907
	AmTrust Financial
	Services Inc.	50,070	1,893
	Medical Properties
	Trust Inc.	143,300	1,890
	Selective Insurance
	Group Inc.	81,006	1,866
	HCC Insurance Holdings Inc.	42,119	1,849
	Assured Guaranty Ltd.	72,400	1,777
	WSFS Financial Corp.	24,457	1,744

Explorer Value Fund


			Market
			Value
		Shares	($000)
*	Navigators Group Inc.	28,393	1,721
	Willis Group Holdings plc	41,200	1,696
	Ares Capital Corp.	92,400	1,666
	Flushing Financial Corp.	79,967	1,657
	Renasant Corp.	56,078	1,630
	Two Harbors
	Investment Corp.	155,700	1,616
	Lincoln National Corp.	31,900	1,599
	Starwood Property Trust Inc.	65,200	1,566
	First Midwest Bancorp Inc.	93,044	1,551
	EPR Properties	26,800	1,427
	First Horizon National Corp.	107,429	1,286
	Washington Federal Inc.	55,403	1,242
	National Retail
	Properties Inc.	33,915	1,217
	First Citizens BancShares
	Inc. Class A	5,375	1,206
*	Investment Technology
	Group Inc.	68,800	1,189
	Nelnet Inc. Class A	29,300	1,176
	Parkway Properties Inc.	59,511	1,097
*	PHH Corp.	33,700	877
	BGC Partners Inc. Class A	125,100	851
	Ramco-Gershenson
	Properties Trust	47,100	787
*	Texas Capital
	Bancshares Inc.	12,333	776
	Berkshire Hills Bancorp Inc.	30,800	774
	Campus Crest
	Communities Inc.	82,507	683
*	Affiliated Managers
	Group Inc.	2,100	395
*	Starwood Waypoint
	Residential Trust	13,040	354
			78,990
Health Care (4.5%)
*	Ligand Pharmaceuticals Inc.	31,600	2,204
*	Allscripts Healthcare
	Solutions Inc.	106,963	1,986
*	Globus Medical Inc.	73,600	1,741
*	VCA Antech Inc.	48,000	1,487
*	Laboratory Corp. of
	America Holdings	14,900	1,394
*	Symmetry Medical Inc.	101,325	1,072
	Omnicare Inc.	15,500	913
*	Myriad Genetics Inc.	20,445	740
*	Mallinckrodt plc	8,900	603
*	Merit Medical Systems Inc.	37,296	563
			12,703
Industrials (15.5%)
	KAR Auction Services Inc.	111,800	3,484
*	Teledyne Technologies Inc.	27,342	2,679
	Altra Industrial Motion Corp.	64,120	2,270
	Copa Holdings SA Class A	14,500	1,964
*	Clean Harbors Inc.	40,800	1,928


	Lennox International Inc.	19,886	1,827
*	Saia Inc.	51,788	1,789
	Celadon Group Inc.	77,877	1,768
*	Hertz Global Holdings Inc.	60,300	1,689
*	II-VI Inc.	101,500	1,664
*	MasTec Inc.	39,400	1,613
	UTi Worldwide Inc.	149,300	1,469
	Kaman Corp.	34,200	1,358
*	Wabash National Corp.	100,407	1,356
	Carlisle Cos. Inc.	14,924	1,184
	Babcock & Wilcox Co.	34,900	1,150
*	Roadrunner Transportation
	Systems Inc.	48,400	1,138
*	FTI Consulting Inc.	36,500	1,065
	Woodward Inc.	24,300	1,059
	Harsco Corp.	38,118	958
	Elbit Systems Ltd.	16,400	946
*	MRC Global Inc.	35,533	914
*	Furmanite Corp.	76,587	907
*	Performant Financial Corp.	114,500	906
	Equifax Inc.	12,700	890
	Timken Co.	14,500	875
	Primoris Services Corp.	26,978	844
	HNI Corp.	23,264	827
	Mine Safety Appliances Co.	11,458	589
*	WESCO International Inc.	6,805	587
	Encore Wire Corp.	10,319	540
*	Hub Group Inc. Class A	11,984	468
	Briggs & Stratton Corp.	20,511	467
*	CRA International Inc.	19,227	449
			43,621
Information Technology (19.9%)
*	Skyworks Solutions Inc.	120,200	4,262
	IAC/InterActiveCorp	48,600	3,768
	Global Payments Inc.	39,700	2,792
	j2 Global Inc.	50,700	2,606
	Convergys Corp.	115,700	2,368
*	MicroStrategy Inc. Class A	17,105	2,209
*	Ingram Micro Inc.	70,928	2,089
*	Advanced Energy
	Industries Inc.	75,311	2,067
*	MICROS Systems Inc.	33,625	1,867
	InterDigital Inc.	52,700	1,607
*	ON Semiconductor Corp.	169,212	1,581
*	Itron Inc.	44,284	1,550
*	Virtusa Corp.	42,570	1,548
	Fidelity National Information
	Services Inc.	26,900	1,496
	DST Systems Inc.	14,825	1,393
*	Progress Software Corp.	55,000	1,372
*	Sykes Enterprises Inc.	68,600	1,350
*	Kulicke &
	Soffa Industries Inc.	107,600	1,242
*	ACI Worldwide Inc.	19,800	1,189
*	Atmel Corp.	144,954	1,168

Explorer Value Fund


			Market
			Value
		Shares	($000)
	Jabil Circuit Inc.	59,362	1,099
*	Orbotech Ltd.	74,600	1,059
*	NCR Corp.	30,900	1,052
*	TriQuint Semiconductor Inc.	79,312	971
*	QLogic Corp.	80,000	914
*	Insight Enterprises Inc.	39,740	913
	Black Box Corp.	34,300	912
	Belden Inc.	12,400	894
*	Fairchild Semiconductor
	International Inc. Class A	62,361	878
*	Pericom
	Semiconductor Corp.	108,445	877
*	Emulex Corp.	119,812	872
*	Conversant Inc.	34,000	845
	Western Union Co.	47,100	788
*	CIBER Inc.	162,137	775
*	Integrated Device
	Technology Inc.	61,501	725
	Littelfuse Inc.	7,549	712
*	Knowles Corp.	20,000	643
*	Dice Holdings Inc.	70,950	522
	Broadridge Financial
	Solutions Inc.	11,100	419
*	Entropic
	Communications Inc.	93,939	412
			55,806
Materials (4.5%)
	Silgan Holdings Inc.	62,000	2,989
	FMC Corp.	25,900	1,999
	Albemarle Corp.	26,000	1,716
	Schnitzer Steel
	Industries Inc.	63,501	1,611
	Eagle Materials Inc.	13,748	1,215
	Cabot Corp.	17,374	941
	PH Glatfelter Co.	19,257	584
*	Kraton Performance
	Polymers Inc.	20,755	576
*	Boise Cascade Co.	18,926	560
	Cytec Industries Inc.	5,820	551
			12,742
Telecommunication Services (0.5%)
*	Intelsat SA	76,800	1,524

Utilities (2.3%)
	Westar Energy Inc. Class A	49,997	1,711
	Portland General Electric Co.	47,953	1,525
	WGL Holdings Inc.	23,600	949
	Unitil Corp.	29,000	913


	Southwest Gas Corp.	16,293	880
	Piedmont Natural
	Gas Co. Inc.	13,963	472
			6,450
Total Common Stocks
(Cost $203,939)			261,380
Temporary Cash Investments (7.3%)¹
Money Market Fund (6.9%)
2	Vanguard Market Liquidity
	Fund, 0.130%	19,418,430	19,418

		Face
		Amount
		($000)
U.S. Government and Agency Obligations (0.4%)
3	Federal Home Loan
	Bank Discount Notes,
	0.075%, 3/5/14	500	500
^3,4	Federal Home Loan
	Bank Discount Notes,
	0.075%, 5/21/14	200	200
^3,4	Federal Home Loan
	Bank Discount Notes,
	0.090%, 7/16/14	500	500
			1,200
Total Temporary Cash Investments
(Cost $20,618)			20,618
Total Investments (100.3%)
(Cost $224,557)			281,998
Other Assets and Liabilities (-0.3%)
Other Assets			2,521
Liabilities			(3,461)
			(940)
Net Assets (100%)
Applicable to 8,839,917 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)			281,058
Net Asset Value Per Share			$31.79

Explorer Value Fund


At February 28, 2014, net assets consisted of:
	Amount
	($000)
Paid-in Capital	216,976
Undistributed Net Investment Income	121
Accumulated Net Realized Gains	6,226
Unrealized Appreciation (Depreciation)
Investment Securities	57,441
Futures Contracts	294
Net Assets	281,058

See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 96.8% and 3.5%, respectively, of
net assets.
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 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the
full faith and credit of the U.S. government.
4 Securities with a value of $600,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.

Explorer Value Fund

Statement of Operations


	Six Months Ended
	February 28, 2014
	($000)
Investment Income
Income
Dividends	1,769
Interest¹	13
Securities Lending	20
Total Income	1,802
Expenses
Investment Advisory Fees—Note B
Basic Fee	448
Performance Adjustment	(10)
The Vanguard Group—Note C
Management and Administrative	253
Marketing and Distribution	20
Custodian Fees	9
Shareholders’ Reports	2
Total Expenses	722
Net Investment Income	1,080
Realized Net Gain (Loss)
Investment Securities Sold	9,136
Futures Contracts	1,355
Realized Net Gain (Loss)	10,491
Change in Unrealized Appreciation (Depreciation)
Investment Securities	24,712
Futures Contracts	466
Change in Unrealized Appreciation (Depreciation)	25,178
Net Increase (Decrease) in Net Assets Resulting from Operations	36,749
1 Interest income from an affiliated company of the fund was $12,000.

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

Explorer Value Fund

Statement of Changes in Net Assets


	Six Months Ended	Year Ended
	February 28,	August 31,
	2014	2013
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	1,080	1,463
Realized Net Gain (Loss)	10,491	14,699
Change in Unrealized Appreciation (Depreciation)	25,178	22,412
Net Increase (Decrease) in Net Assets Resulting from Operations	36,749	38,574
Distributions
Net Investment Income	(1,328)	(1,492)
Realized Capital Gain¹	(16,137)	(2,284)
Total Distributions	(17,465)	(3,776)
Capital Share Transactions
Issued	60,275	104,200
Issued in Lieu of Cash Distributions	16,457	3,514
Redeemed	(36,912)	(43,330)
Net Increase (Decrease) from Capital Share Transactions	39,820	64,384
Total Increase (Decrease)	59,104	99,182
Net Assets
Beginning of Period	221,954	122,772
End of Period²	281,058	221,954
1 Includes fiscal 2014 and 2013 short-term gain distributions totaling $5,516,000 and $530,000, respectively. Short-term gain distributions are
treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed net investment income of $121,000 and $369,000.

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


Explorer Value Fund


Financial Highlights


	Six Months				March 16,
	Ended				2010¹to
		Year Ended August 31,
For a Share Outstanding	February 28,				Aug. 31,
Throughout Each Period	2014	2013	2012	2011	2010
Net Asset Value, Beginning of Period	$29.39	$23.44	$21.94	$18.09	$20.00
Investment Operations
Net Investment Income	.133	. 255	. 232	.190	. 044
Net Realized and Unrealized Gain (Loss)
on Investments	4.477	6.429	2.476	3.991	(1.954)
Total from Investment Operations	4.610	6.684	2.708	4.181	(1.910)
Distributions
Dividends from Net Investment Income	(.168)	(. 290)	(.189)	(.135)	—
Distributions from Realized Capital Gains	(2.042)	(.444)	(1.019)	(.196)	—
Total Distributions	(2.210)	(.734)	(1.208)	(.331)	—
Net Asset Value, End of Period	$31.79	$29.39	$23.44	$21.94	$18.09

Total Return²	16.03%	29.19%	13.10%	23.04%	-9.55%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$281	$222	$123	$116	$75
Ratio of Total Expenses to
Average Net Assets³	0.57%	0.60%	0.59%	0.57%	0.56%⁴
Ratio of Net Investment Income to
Average Net Assets	0.91%	0.88%	1.00%	0.82%	0.55%⁴
Portfolio Turnover Rate	37%	46%	38%	41%	16%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Subscription period for the fund was March 16, 2010, to March 30, 2010, during which time all assets were held in money market
instruments. Performance measurement began March 30, 2010, at a net asset value of $20.00.
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%), 0.04%, 0.03%, 0.01%, and 0.00%.
4 Annualized.

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

Explorer Value Fund

Notes to Financial Statements

Vanguard Explorer Value Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.

A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. 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 materially 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 board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity 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. Other temporary cash investments are valued at amortized cost, which approximates market value.

2. 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.

Futures contracts are valued at their quoted daily settlement prices. The aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets 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 futures gains (losses).

During the six months ended February 28, 2014, the fund’s average investments in long and short futures contracts represented 4% and 0% of net assets, respectively, based on quarterly average aggregate settlement values.

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2010–2013), and for the period ended February 28, 2014, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

Explorer Value Fund

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans 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 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 absence 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 for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.

6. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. 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.

B. Cardinal Capital Management L.L.C., Frontier Capital Management Co., LLC, and Sterling 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 Cardinal Capital Management L.L.C. is subject to quarterly adjustments based on performance for the preceding three years relative to the Russell Mid-Cap Value Custom Cap-Range Index. The basic fee of Frontier Capital Management Co., LLC, is subject to quarterly adjustments based on performance for the preceding three years relative to the Russell 2000 Value Index. The basic fee of Sterling Capital Management LLC is subject to quarterly adjustments based on performance for the preceding three years relative to the Russell 2500 Value Index.

The Vanguard Group manages the cash reserves of the fund on an at-cost basis.

For the six months ended February 28, 2014, the aggregate investment advisory fee represented an effective annual basic rate of 0.35% of the fund’s average net assets, before a decrease of $10,000 (0.01%) based on performance.

C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2014, the fund had contributed capital of $31,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.01% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

Explorer Value Fund

D. Various inputs may be used to determine the value of the fund’s investments. 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).

The following table summarizes the market value of the fund’s investments as of February 28, 2014, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
Common Stocks	261,380	—	—
Temporary Cash Investments	19,418	1,200	—
Futures Contracts—Liabilities¹	(48)	—	—
Total	280,750	1,200	—
1 Represents variation margin on the last day of the reporting period.

E. At February 28, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:


			($000)
			Aggregate
		Number of	Settlement	Unrealized
		Long (Short)	Value	Appreciation
Futures Contracts	Expiration	Contracts	Long (Short)	(Depreciation)
E-mini Russell 2000 Index	March 2014	90	10,637	294

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

F. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.

At February 28, 2014, the cost of investment securities for tax purposes was $224,557,000. Net unrealized appreciation of investment securities for tax purposes was $57,441,000, consisting of unrealized gains of $61,354,000 on securities that had risen in value since their purchase and $3,913,000 in unrealized losses on securities that had fallen in value since their purchase.

Explorer Value Fund

G. During the six months ended February 28, 2014, the fund purchased $67,202,000 of investment securities and sold $43,617,000 of investment securities, other than temporary cash investments.

H. Capital shares issued and redeemed were:


	Six Months Ended	Year Ended
	February 28, 2014	August 31, 2013
	Shares	Shares
	(000)	(000)
Issued	1,927	3,776
Issued in Lieu of Cash Distributions	542	145
Redeemed	(1,181)	(1,607)
Net Increase (Decrease) in Shares Outstanding	1,288	2,314

I. Management has determined that no material events or transactions occurred subsequent to February 28, 2014, that would require recognition or disclosure in these financial statements.

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 February 28, 2014
	Beginning	Ending	Expenses
	Account Value	Account Value	Paid During
Explorer Value Fund	8/31/2013	2/28/2014	Period
Based on Actual Fund Return	$1,000.00	$1,160.32	$3.05
Based on Hypothetical 5% Yearly Return	1,000.00	1,021.97	2.86

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratio for that
period is 0.57%. 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.

Trustees Approve Advisory Arrangements

The board of trustees of Vanguard Explorer Value Fund has renewed the fund’s investment advisory arrangements with Cardinal Capital Management, L.L.C. (Cardinal), Frontier Capital Management Co., LLC (Frontier), and Sterling Capital Management LLC (Sterling). The board determined that renewing the fund’s advisory arrangements was in the best interest of the fund and its shareholders.

In addition, Cardinal underwent an internal corporate restructuring that resulted in what is legally referred to as a change in control and management. This change constituted an “assignment” under the Investment Company Act of 1940 and triggered the automatic termination of the former advisory agreement. The board of trustees approved a new advisory agreement to allow for an uninterrupted advisory relationship between Cardinal and the fund. The new agreement is identical to the former agreement with Cardinal except for the date.

The board based its decisions upon an evaluation of each advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangements. Rather, it was the totality of the circumstances that drove the board’s decision.

Nature, extent, and quality of services

The board considered the quality of the fund’s investment management services since its inception in 2010, and took into account the organizational depth and stability of each advisor. The board noted the following:

Cardinal. Founded in 1995, Cardinal is an investment advisor that manages small- and mid-cap value portfolios. Cardinal believes that a company’s stock price is ultimately determined by its ability to generate excess cash flow and redeploy that cash to enhance shareholder value. Cardinal has advised a portion of the fund since the fund’s inception.

Frontier. Founded in 1980, Frontier is an investment advisor with a long history of investing in small- and mid-cap stocks. Frontier selects stocks by identifying companies that the advisor believes are underpriced relative to their long-term value. These companies generally are inexpensive in many ways, including price-to-book and price-to-earnings ratios. Frontier has advised a portion of the fund since the fund’s inception.

Sterling. Founded in 1970, Sterling is an investment advisor that manages fixed income and equity portfolios, with the latter focused on small- and mid-sized companies. Sterling uses a value-oriented strategy that seeks to identify stocks of quality companies selling at large discounts compared with the underlying value of the business. Sterling defines quality companies as those that generate considerable cash flow, offer reinvestment opportunities with attractive returns, and enjoy competitive advantages in their business sector. Sterling has advised a portion of the fund since the fund’s inception.

The board concluded that each advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangements.

Investment performance

The board considered the performance of the fund and each advisor since the fund’s inception, including any periods of outperformance or underperformance relative to a benchmark index and peer group. The board concluded that the performance was such that each advisory arrangement should continue. Information about the fund’s performance since inception can be found in the Performance Summary section of this report.

Cost

The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.

The board did not consider profitability of the fund’s advisors in determining whether to approve the advisory fees, because the firms are independent of Vanguard, and the advisory fees are the result of arm’s-length negotiations.

The benefit of economies of scale

The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the advisory fee schedules. The breakpoints reduce the effective rate of the fees as the fund’s assets managed by each advisor increase.

The board will consider whether to renew the advisory arrangements again after a one-year period.

Glossary

30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.

Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.

Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.

Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.

Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.

Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.

Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.

Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.

Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.

Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.

Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.

Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.

Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.

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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 on an at-cost basis.

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 179 Vanguard funds.

The following table provides information for each trustee and executive officer of the fund. 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.


InterestedTrustee¹	and Delphi Automotive LLP (automotive components);
	Senior Advisor at New Mountain Capital.
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the	Amy Gutmann
Board. Principal Occupation(s) During the Past Five	Born 1949. Trustee Since June 2006. Principal
Years: Chairman of the Board of The Vanguard Group,	Occupation(s) During the Past Five Years: President of
Inc., and of each of the investment companies served	the University of Pennsylvania; Christopher H. Browne
by The Vanguard Group, since January 2010; Director	Distinguished Professor of Political Science, School of
of The Vanguard Group since 2008; Chief Executive	Arts and Sciences, and Professor of Communication,
Officer and President of The Vanguard Group, and of	Annenberg School for Communication, with secondary
each of the investment companies served by The	faculty appointments in the Department of Philosophy,
Vanguard Group, since 2008; Director of Vanguard	School of Arts and Sciences, and at the Graduate
Marketing Corporation; Managing Director of The	School of Education, University of Pennsylvania;
Vanguard Group (1995–2008).	Trustee of the National Constitution Center; Chair
	of the Presidential Commission for the Study of
	Bioethical Issues.
IndependentTrustees

Emerson U. Fullwood	JoAnn Heffernan Heisen
Born 1948. Trustee Since January 2008. Principal	Born 1950. Trustee Since July 1998. Principal
Occupation(s) During the Past Five Years: Executive	Occupation(s) During the Past Five Years: Corporate
Chief Staff and Marketing Officer for North America	Vice President and Chief Global Diversity Officer
and Corporate Vice President (retired 2008) of Xerox	(retired 2008) and Member of the Executive
Corporation (document management products and	Committee (1997–2008) of Johnson & Johnson
services); Executive in Residence and 2010	(pharmaceuticals/medical devices/consumer
Distinguished Minett Professor at the Rochester	products); Director of Skytop Lodge Corporation
Institute of Technology; Director of SPX Corporation	(hotels), the University Medical Center at Princeton,
(multi-industry manufacturing), the United Way of	the Robert Wood Johnson Foundation, and the Center
Rochester, Amerigroup Corporation (managed health	for Talent Innovation; Member of the Advisory Board
care), the University of Rochester Medical Center,	of the Maxwell School of Citizenship and Public Affairs
Monroe Community College Foundation, and North	at Syracuse University.
Carolina A&T University.
	F. Joseph Loughrey
Rajiv L. Gupta	Born 1949. Trustee Since October 2009. Principal
Born 1945. Trustee Since December 2001.²	Occupation(s) During the Past Five Years: President
Principal Occupation(s) During the Past Five Years:	and Chief Operating Officer (retired 2009) of Cummins
Chairman and Chief Executive Officer (retired 2009)	Inc. (industrial machinery); Chairman of the Board
and President (2006–2008) of Rohm and Haas Co.	of Hillenbrand, Inc. (specialized consumer services),
(chemicals); Director of Tyco International, Ltd.	and of Oxfam America; Director of SKF AB (industrial
(diversified manufacturing and services), Hewlett-	machinery), Hyster-Yale Materials Handling, Inc.
Packard Co. (electronic computer manufacturing),	(forklift trucks), the Lumina Foundation for Education,


and the V Foundation for Cancer Research; Member	Executive Officers
of the Advisory Council for the College of Arts and
Letters and of the Advisory Board to the Kellogg	Glenn Booraem
Institute for International Studies, both at the	Born 1967. Controller Since July 2010. Principal
University of Notre Dame.	Occupation(s) During the Past Five Years: Principal
	of The Vanguard Group, Inc.; Controller of each of
Mark Loughridge	the investment companies served by The Vanguard
Born 1953. Trustee Since March 2012. Principal	Group; Assistant Controller of each of the investment
Occupation(s) During the Past Five Years: Senior Vice	companies served by The Vanguard Group (2001–2010).
President and Chief Financial Officer (retired 2013)
at IBM (information technology services); Fiduciary	Thomas J. Higgins
Member of IBM’s Retirement Plan Committee (2004–	Born 1957. Chief Financial Officer Since September
2013); Member of the Council on Chicago Booth.	2008. Principal Occupation(s) During the Past Five
	Years: Principal of The Vanguard Group, Inc.; Chief
Scott C. Malpass	Financial Officer of each of the investment companies
Born 1962. Trustee Since March 2012. Principal	served by The Vanguard Group; Treasurer of each of
Occupation(s) During the Past Five Years: Chief	the investment companies served by The Vanguard
Investment Officer and Vice President at the University	Group (1998–2008).
of Notre Dame; Assistant Professor of Finance at the
Mendoza College of Business at Notre Dame; Member	Kathryn J. Hyatt
of the Notre Dame 403(b) Investment Committee;	Born 1955. Treasurer Since November 2008. Principal
Board Member of TIFF Advisory Services, Inc.	Occupation(s) During the Past Five Years: Principal of
(investment advisor); Member of the Investment	The Vanguard Group, Inc.; Treasurer of each of the
Advisory Committees of the Financial Industry	investment companies served by The Vanguard
Regulatory Authority (FINRA) and of Major League	Group; Assistant Treasurer of each of the investment
Baseball.	companies served by The Vanguard Group (1988–2008).

André F. Perold	Heidi Stam
Born 1952. Trustee Since December 2004. Principal	Born 1956. Secretary Since July 2005. Principal
Occupation(s) During the Past Five Years: George	Occupation(s) During the Past Five Years: Managing
Gund Professor of Finance and Banking, Emeritus	Director of The Vanguard Group, Inc.; General Counsel
at the Harvard Business School (retired 2011);	of The Vanguard Group; Secretary of The Vanguard
Chief Investment Officer and Managing Partner of	Group and of each of the investment companies
HighVista Strategies LLC (private investment firm);	served by The Vanguard Group; Director and Senior
Director of Rand Merchant Bank; Overseer of the	Vice President of Vanguard Marketing Corporation.
Museum of Fine Arts Boston.
	Vanguard Senior ManagementTeam
Alfred M. Rankin, Jr.
Born 1941. Trustee Since January 1993. Principal	Mortimer J. Buckley	Chris D. McIsaac
Occupation(s) During the Past Five Years: Chairman,	Kathleen C. Gubanich	Michael S. Miller
President, and Chief Executive Officer of NACCO	Paul A. Heller	James M. Norris
Industries, Inc. (housewares/lignite), and of Hyster-	Martha G. King	Glenn W. Reed
Yale Materials Handling, Inc. (forklift trucks); Chairman	John T. Marcante
of the Board of University Hospitals of Cleveland.

Peter F. Volanakis	Chairman Emeritus and Senior Advisor
Born 1955. Trustee Since July 2009. Principal
Occupation(s) During the Past Five Years: President	John J. Brennan
and Chief Operating Officer (retired 2010) of Corning	Chairman, 1996–2009
Incorporated (communications equipment); Trustee of	Chief Executive Officer and President, 1996–2008
Colby-Sawyer College; Member of the Advisory Board
of the Norris Cotton Cancer Center and of the Advisory
Board of the Parthenon Group (strategy consulting).	Founder
	John C. Bogle
	Chairman and Chief Executive Officer, 1974–1996

1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the
Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard
State Tax-Exempt Funds.


		P.O. Box 2600
		Valley Forge, PA 19482-2600



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With Hearing Impairment > 800-749-7273

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 Lipper, a
Thomson Reuters Company, or 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, 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 sec.gov.

You can review and copy information about your fund at
the SEC’s Public Reference Room in Washington, D.C. To
find out more about this public service, call the SEC at
202-551-8090. Information about your fund is also
available on the SEC’s website, and you can receive
copies of this information, for a fee, by sending a
request in either of two ways: via e-mail addressed to
publicinfo@sec.gov or via regular mail addressed to the
Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-1520.

		© 2014 The Vanguard Group, Inc.
		All rights reserved.
		Vanguard Marketing Corporation, Distributor.

		Q16902 042014

Semiannual Report | February 28, 2014

Vanguard Russell 1000 Index Funds


Contents
Your Fund’s Total Returns.	1
Chairman’s Letter.	2
Russell 1000 Index Fund.	8
Russell 1000 Value Index Fund.	21
Russell 1000 Growth Index Fund.	34
About Your Fund’s Expenses.	47
Glossary.	49

Your Fund’s Total Returns


Six Months Ended February 28, 2014
	Total
	Returns
Vanguard Russell 1000 Index Fund
Institutional Shares	15.60%
ETF Shares
Market Price	15.62
Net Asset Value	15.57
Russell 1000 Index	15.67
Large-Cap Core Funds Average	14.71
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


Vanguard Russell 1000 Value Index Fund
Institutional Shares	13.41%
ETF Shares
Market Price	13.42
Net Asset Value	13.40
Russell 1000 Value Index	13.46
Large-Cap Value Funds Average	13.14
Large-Cap Value Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


Vanguard Russell 1000 Growth Index Fund
Institutional Shares	17.79%
ETF Shares
Market Price	17.67
Net Asset Value	17.76
Russell 1000 Growth Index	17.84
Large-Cap Growth Funds Average	19.74
Large-Cap Growth Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

Institutional Shares are available to certain institutional investors who meet specific administrative, service, and account-size criteria. The Vanguard ETF® Shares shown are traded on the Nasdaq exchange and are available only through brokers. The table provides ETF returns based on both the Nasdaq market price and the net asset value for a share. U.S. Pat. Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares' market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares' market price was above or below the NAV.

Chairman’s Letter

Dear Shareholder,

The broad U.S. stock market advanced robustly for the six months ended February 28, 2014. Large-capitalization stocks produced solid returns for the half year, but trailed their small- and mid-cap counterparts. Among large-cap funds, growth stocks performed better than value stocks.

The three Vanguard Russell 1000 Index Funds delivered returns ranging from more than 17% for the Russell 1000 Growth Index Fund to about 13% for the Russell 1000 Value Index Fund. The Russell 1000 Index Fund, a blend of growth and value stocks, returned more than 15%.

Each fund met its objective of closely tracking its benchmark index. The returns of the Russell 1000 Index Fund and the Russell 1000 Value Index Fund were slightly ahead of the average return of their peer funds; the return of the Russell 1000 Growth Index Fund lagged the average return of its peers.

Mostly positive factors lifted U.S. stock markets

International stocks, in aggregate, returned about 12%. Most of the strength came from the developed markets of Europe.

The developed markets of the Pacific region managed single-digit returns for the period, as did emerging markets, which have been particularly volatile amid concerns about China’s slowing economy and the effects of higher interest rates as the Fed winds down its stimulus.

Bonds staged a rebound after last year’s swoon

Municipal bonds, which had declined sharply in the fiscal year ended August 31, returned 5.71%. The market had been roiled during the summer by headlines about Detroit’s bankruptcy and Puerto Rico’s fiscal woes, but as the headlines receded, investors seemed to take a more comprehensive view of state and local finances. Our chief investment officer, Tim Buckley, noted recently that, on the whole, “municipalities out there are actually doing a lot better than they were a few years ago.”

Money market and savings account returns remained capped by the Fed’s target of 0%–0.25% for short-term interest rates.


Market Barometer

	Total Returns
	Periods Ended February 28, 2014
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	15.67%	26.34%	23.63%
Russell 2000 Index (Small-caps)	17.75	31.56	26.63
Russell 3000 Index (Broad U.S. market)	15.83	26.74	23.86
FTSE All-World ex US Index (International)	12.20	12.19	17.71

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.84%	0.15%	5.13%
Barclays Municipal Bond Index (Broad tax-exempt market)	5.71	-0.21	5.68
Citigroup Three-Month U.S. Treasury Bill Index	0.00	0.05	0.08

CPI
Consumer Price Index	0.39%	1.13%	2.04%

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 4.93%.

Technology stocks propelled large-cap growth stocks

The three Russell 1000 Index Funds provide investors with broad exposure to the largest companies in the U.S. stock market. In general, larger companies generate steadier earnings and higher yields, and their stocks tend to be less volatile than those of smaller companies.

During the six-month period, investors seemed to embrace risk and seek out companies that offered them the greatest opportunities for earnings growth. In such an environment, the Russell 1000 Growth Index Fund notched the strongest performance of the trio. The fund benefited most from its outsized allocation to the technology sector. Technology, the fund’s largest sector holding, contributed more than a fifth of its overall return. High-profile internet companies and software makers profited from both increased sales of web advertisements and their own streamlining efforts. Semiconductor manufacturers and enterprise software providers also stood out.

The fund’s consumer discretionary and health care sectors also were bright spots. Media conglomerates and specialty and online retailers were among the best performers in consumer discretionary.

As the economy improves, more consumers are willing and able to spend on entertainment and shopping.


Expense Ratios
Your Fund Compared With Its Peer Group

	Institutional	ETF	Peer Group
	Shares	Shares	Average
Russell 1000 Index Fund	0.08%	0.12%	1.15%
Russell 1000 Value Index Fund	0.08	0.15	1.14
Russell 1000 Growth Index Fund	0.08	0.15	1.22

The fund expense ratios shown are from the prospectus dated December 20, 2013, and represent estimated costs for the current fiscal year.
For the six months ended February 28, 2014, the funds’ annualized expense ratios were: for the Russell 1000 Index Fund, 0.08% for
Institutional Shares and 0.12% for ETF Shares; for the Russell 1000 Value Index Fund, 0.08% for Institutional Shares and 0.13% for ETF
Shares; and for the Russell 1000 Growth Index Fund, 0.08% for Institutional Shares and 0.14% for ETF Shares. Peer-group expense ratios are
derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2013.

Peer groups: For the Russell 1000 Index Fund, Large-Cap Core Funds; for the Russell 1000 Value Index Fund, Large-Cap Value Funds; and for
the Russell 1000 Growth Index Fund, Large-Cap Growth Funds.

In health care, providers of pharmaceutical, biotechnology, and medical services also excelled. Despite increased competition from generics, drugmakers made

significant headway through cost-cutting and research for new drugs to replenish their pipelines.