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: 811-01530 | ||
Name of Registrant: | Vanguard Explorer Fund | |
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: October 31 | ||
Date of reporting period: November 1, 2011 – October 31, 2012 | ||
Item 1: Reports to Shareholders |
Annual Report | October 31, 2012
Vanguard ExplorerTM Fund
![](https://capedge.com/proxy/N-CSR/0000932471-12-005915/explorerfund_24x1x2.jpg)
> For the fiscal year ended October 31, 2012, Vanguard Explorer Fund returned
about 7%, lagging its comparative standards.
> The advisors’ stock choices in the information technology and health care
sectors, in particular, detracted from the fund’s performance relative to its
benchmark.
> For the ten years ended October 31, the fund’s average annual return was ahead
of its peer group but behind that of its benchmark.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisors’ Report. | 8 |
Fund Profile. | 13 |
Performance Summary. | 14 |
Financial Statements. | 16 |
Your Fund’s After-Tax Returns. | 30 |
About Your Fund’s Expenses. | 31 |
Glossary. | 33 |
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: Our cover photograph shows rigging on the HMSSurprise, a replica of an 18th-century Royal Navy frigate. It
was featured in the 2003 movie Master and Commander: The Far Side of the World, which was based on Patrick O’Brian’s sea
novels, set amid the Napoleonic Wars. Vanguard was named for another ship of that era, the HMSVanguard, which was the
flagship of British Admiral Horatio Nelson at the Battle of the Nile.
Your Fund’s Total Returns
Fiscal Year Ended October 31, 2012 | |
Total | |
Returns | |
Vanguard Explorer Fund | |
Investor Shares | 7.00% |
Admiral™ Shares | 7.16 |
Russell 2500 Growth Index | 10.08 |
Small-Cap Growth Funds Average | 8.96 |
Small-Cap Growth Funds Average: Derived from data provided by Lipper Inc. | |
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements. |
Your Fund’s Performance at a Glance | ||||
October 31, 2011, Through October 31, 2012 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Explorer Fund | ||||
Investor Shares | $73.02 | $78.03 | $0.096 | $0.000 |
Admiral Shares | 68.04 | 72.68 | 0.217 | 0.000 |
1
Chairman’s Letter
Dear Shareholder,
Stocks were buoyed by cautious optimism about the economy at the beginning of 2012. However, as the year went on, renewed concerns about the European debt crisis and about growth both at home and abroad curbed investor enthusiasm, especially for riskier assets. In this environment, returns for small-capitalization growth stocks, the focus of Vanguard Explorer Fund, generally lagged those of their large-cap and value-oriented counterparts.
For the 12 months ended October 31, 2012, the fund returned 7.00% for Investor Shares and 7.16% for Admiral Shares. These results trailed the 10.08% return of the benchmark Russell 2500 Growth Index and the 8.96% average return for peer funds.
The fund outperformed its benchmark in consumer discretionary and financials, but not by enough to offset the laggards in information technology and missed opportunities among health care stocks.
If you hold shares of the fund in a taxable account, you may wish to review information about the fund’s after-tax returns later in this report.
2
U.S. stocks led the advance for global equity markets
U.S. stocks returned about 14% for the 12 months ended October 31, putting domestic equities ahead of their international counterparts. Stocks in Europe and Asia, meanwhile, posted modestly positive results.
The advances came amid moves by U.S. and European central bankers to manage risks to the U.S. economy and the finances of European governments and banks. The president of the European Central Bank declared in July that policymakers would do whatever was needed to preserve the euro (common currency).
Although investors’ worries have eased, Europe’s financial troubles are by no means resolved. Vanguard economists believe the most likely scenario is that the Eurozone will “muddle through” for several years, with occasional spikes in market volatility, as fiscal tightening persists in the face of weak economic growth.
Bonds continued their march, but leaner times may lie ahead
The broad U.S. taxable bond market returned about 5% for the 12 months. Municipal bonds delivered a robust performance, returning 9%.
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended October 31, 2012 | |||
One | Three | Five | |
Year | Years | Years | |
Stocks | |||
Russell 1000 Index (Large-caps) | 14.97% | 13.48% | 0.53% |
Russell 2000 Index (Small-caps) | 12.08 | 14.82 | 1.19 |
Dow Jones U.S. Total Stock Market Index | 14.45 | 13.62 | 0.75 |
MSCI All Country World Index ex USA (International) | 3.98 | 3.74 | -5.08 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 5.25% | 6.08% | 6.38% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 9.03 | 6.84 | 6.02 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.06 | 0.08 | 0.56 |
CPI | |||
Consumer Price Index | 2.16% | 2.28% | 2.06% |
3
As bond prices rose, the yield of the 10-year U.S. Treasury note fell to a record low in July, closing below 1.5%. (Bond yields and prices move in opposite directions.) By the end of the period, the yield had climbed, but it still remained exceptionally low by historical standards.
Bondholders have enjoyed years of healthy returns. But as Tim Buckley, our incoming chief investment officer, has noted, investors shouldn’t be surprised if future results are much more modest. As yields remain low, the opportunity for similarly strong returns diminishes.
The Federal Reserve announced on September 13 that it would continue to hold its target for short-term interest rates between 0% and 0.25% at least through mid-2015. The exceptionally low rates, in place since late 2008, kept a tight lid on returns from money market funds and savings accounts.
For investors, grass was greener outside small-cap growth stocks
Vanguard Explorer Fund gained ground during the 12 months under review, but relatively high volatility in the stock market and modest prospects for economic
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
Explorer Fund | 0.50% | 0.34% | 1.51% |
The fund expense ratios shown are from the prospectus dated February 17, 2012, and represent estimated costs for the current fiscal year.
For the fiscal year ended October 31, 2012, the fund’s expense ratios were 0.49% for Investor Shares and 0.32% for Admiral Shares. The
peer-group expense ratio is derived from data provided by Lipper Inc. and captures information through year-end 2011.
Peer group: Small-Cap Growth Funds.
4
growth led investors to favor better-known names. The fund’s slight tilt toward smaller-cap stocks compared with its benchmark, a strategy that has served it well under different market conditions, proved a modest hindrance to performance for the period. The same was true of the fund’s allocations to innovative but not-yet-profitable companies and to struggling companies poised to make a turnaround.
Information technology stocks, which accounted for almost one-quarter of the fund’s assets during the period, returned about –6% for the fund; in the benchmark,
where their weighting was less, these stocks turned in a slightly positive result. A large portion of the tech-sector declines came from its holdings among semiconductor makers, internet software firms, and communications firms, as a cooling off in business spending contributed to double-digit drops in their stock prices.
Health care, another of Explorer’s heavily weighted sectors, returned almost 15% for the fund. For the benchmark, however, which had a slightly lighter weighting, the sector returned more than 22%. Here, the relative underperformance
Total Returns | |
Ten Years Ended October 31, 2012 | |
Average | |
Annual Return | |
Explorer Fund Investor Shares | 8.86% |
Russell 2500 Growth Index | 10.40 |
Small-Cap Growth Funds Average | 8.00 |
Small-Cap Growth Funds Average: Derived from data provided by Lipper Inc. |
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.
5
was largely attributable to the fund’s lack of exposure to several pharmaceutical and biotechnology stocks that produced stellar returns on product pipeline advances and merger-and-acquisition activity.
Among the fund’s successes in stock selection were homebuilders, which helped the fund generate a return almost double that of the benchmark in the consumer discretionary sector. Strong stock selection among banks and insurance companies enabled the fund to outpace the benchmark in financials as well.
Small-cap investors were rewarded for additional risk
For the ten years ended October 31, 2012, the Explorer Fund posted an average annual return of 8.86% for Investor Shares and 9.04% for the Admiral Shares, outperforming the 8.00% average annual return of competing small-cap growth funds but lagging the benchmark index’s annualized return of 10.40%.
Although the fund’s relative results were subpar, investors benefited from the relative strength of small caps. The fund’s annualized return bested the Russell 1000 Index (+6.79%), which tracks larger-cap U.S. stocks, and the Russell 3000 Index (+7.64%), which represents the broad U.S. stock market. All strategies go through periods of relative strength and weakness. Over time, however, we expect that Explorer’s use of multiple talented advisors with diverse strategies, delivered to investors at a low cost, will help strength to predominate.
How our core purpose informs our approach to active management
At Vanguard, we sum up our core purpose this way: To take a stand for all investors, to treat them fairly, and to give them the best chance for investment success. When it comes to our actively managed funds, such as the Explorer Fund, this commitment to investors is reflected both in our rigorous process for selecting fund advisors and in our ongoing efforts to keep the costs of our funds low. We believe our approach gives investors the opportunity to outperform market indexes over the long term.
But make no mistake: Outperformance is hard to come by. For one thing, competition among investors is fierce. Charles Ellis, author of one of my favorite books on investing, Winning the Loser’s Game, points out that the competition is not between the skilled and the inept. It’s between the skilled and the skilled. “It’s like the Williams sisters playing tennis against each other,” as he put it in a recent Vanguard webcast.
Because we recognize the challenges inherent in active management, Vanguard has offered, and advocated for, index funds for more than 35 years. By seeking to track—rather than beat—market returns, index funds provide several benefits: low costs, diversification across a market, and limited deviation from the performance of market benchmarks.
6
Still, the case for indexing doesn’t preclude the potential for skilled, seasoned managers to deliver outperformance. And the chances for success can increase if those managers deliver their services at low cost, allowing investors to keep more of their returns.
As always, thank you for entrusting your assets to Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSR/0000932471-12-005915/explorerfund_24x9x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
November 15, 2012
7
Advisors’ Report
For the 12 months ended October 31, 2012, Vanguard Explorer Fund returned about 7% for both share classes. Your fund is managed by six independent advisors, a strategy that enhances the fund’s diversification by providing exposure to distinct, yet complementary, investment approaches. It’s 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 on page 12. The advisors have provided the following assessment of the investment environment during the past 12 months and the notable successes and shortfalls in their portfolios. These comments were prepared on November 20, 2012.
Wellington Management Company, llp
Portfolio Manager:
Kenneth L. Abrams, Senior Vice President
and Equity Portfolio Manager
U.S. stocks posted double-digit returns for the 12 months while results in developed equity markets elsewhere were more muted. At times, the market appeared to be returning to a more normalized environment following the extreme fear and volatility of recent periods. Regardless, we remain true to our process, using an opportunistic and flexible investment approach to build the portfolio from the bottom up, investing in high-quality smaller market-capitalization companies.
Successes: Stock selection was particularly favorable within the consumer discretionary sector. Our holdings in homebuilder stocks PulteGroup and Lennar led the way. The combination of record home affordability, an improving jobs picture, and low levels of new home construction provided a powerful backdrop for U.S. homebuilders following the prolonged, multiyear recession. We trimmed our positions in both PulteGroup and Lennar as their stock prices advanced.
Shortfalls: Security selection, on the other hand, was not as favorable within the information technology and health care sectors. In terms of individual holdings, the most significant detractor for the year was Ferro, a U.S.-based specialty materials and chemicals company. The stock declined after management released disappointing results, citing a weakening economic environment in Europe and higher-than-expected health care and pension expenses.
Granahan Investment
Management, Inc.
Portfolio Managers:
John J. Granahan, CFA, Co-Founder
and Chairman
Gary C. Hatton, CFA, Co-Founder
and Chief Investment Officer
Jane M. White, President and Chief
Executive Officer
Amid slow growth in economies around the world, and further downward revisions of estimates for future growth, it seems incongruent to report that stock indexes marked new highs during the period.
8
Enthusiasm over the third round of quantitative easing is likely the driver. On the other hand, the looming “fiscal cliff” has prompted many CEOs to rein in capital expenditures and hiring. As uncertainty dissipates, we expect small companies with innovative products and strong balance sheets to rebound.
Successes: Our best-performing stocks were in the health care sector. Regeneron Pharmaceuticals and Onyx Pharmaceuticals were the two best names, as both benefited from product portfolios with strong pricing power.
Shortfalls: Despite strong performances from our “software-as-a-service” companies Ultimate Software and SuccessFactors, our overweighted position in information technology hurt performance this year. Rovi, Riverbed Technology, and Acme Packet all announced disappointing top-line results because of customer delays and some product transition. Performance in the financial sector of the index was driven by banks, where our relative weighting was half that of the index—another penalty to performance this year.
Kalmar Investment Advisers
Portfolio Manager:
Ford B. Draper, Jr., President and
Chief Investment Officer
Despite substantial uncertainties related to the slow global economy, the sovereign debt crisis and recession in the Eurozone, and risks from the “fiscal cliff” here at home, signs of improvement can be
found in the U.S. economy (namely in retail spending and the housing recovery), in China, and among leading economic and credit market indicators. Together with unprecedented supportive actions taken by central banks around the world, these signs suggest a potentially more optimistic outlook for 2013. Nevertheless, we think concentration on high-quality businesses remains essential.
Successes: Apart from the uncertainties, our earlier view that decent equity returns were possible in calendar 2012 has been borne out so far. Over the last 12 months, our biggest successes came from a variety of sectors and included Alliance Data Systems, Cooper Companies, SBA Communications, Middleby, W.R. Grace, and EnerSys.
Shortfalls: Our biggest detractors came from our technology and health care holdings. These included Rovi, Atmel, VeriFone Systems, and Allscripts Healthcare Solutions.
Century Capital Management, LLC
Portfolio Manager:
Alexander L. Thorndike, Managing Partner
For corporations, the near-term economic outlook remains mixed and tentative in light of the uncertainties surrounding postelection tax and spending policies. Management teams are hesitant to invest in new hiring and production until there are signs of an improvement in the economic and political climate. Investors are focused
9
on valuations, which is unsurprising, given the double-digit returns from U.S. equities year to date.
Corporate balance sheets remain high in cash and relatively unleveraged by debt. In our opinion, a continued drop toward 6.5% in the unemployment rate is necessary to trigger strong GDP growth. We hope that in the aftermath of the November elections, some bipartisan compromise can bring a measure of clarity to the markets and set the stage for accelerating GDP growth in 2013.
Shorter term, investors will face several challenges, including concerns surrounding the “fiscal cliff,” ongoing European debt issues, the slowing Chinese economy, and tensions in the Middle East and North Africa. Against this backdrop, we remain focused on owning domestically oriented businesses with high recurring revenues and sustainable competitive advantages that can organically grow their businesses in an environment of low GDP growth.
Successes: Industrials was our best-performing sector for the year, with Beacon Roofing Supply and CAI International top performers. The consumer staples sector also contributed, with Hain Celestial Group and McCormick & Company adding to performance.
Shortfalls: Materials was our weakest-performing sector for the period, with Noranda Aluminum Holding Corporation and Intrepid Potash among the top detractors. The health care sector also lagged, particularly Quality Systems and Questcor Pharmaceuticals.
Chartwell Investment Partners, L.P.
Portfolio Managers:
Edward N. Antoian, CFA, CPA,
Managing Partner
John A. Heffern, Managing Partner and
Senior Portfolio Manager
The market environment has been characterized by unrelenting concern over the outlook for economic growth domestically and internationally. Fundamentally, corporate expectations remain guarded. Against this backdrop, our portfolio decisions steadfastly reflect our bias toward quality, leadership, defensible margins, and a pattern of successful execution around growth-oriented business models.
Successes: Ocwen Financial was our top-performing holding for the fiscal year. The residential loan servicer announced two important acquisitions, both of which add materially to its servicing portfolio. Improved production execution at energy company Kodiak Oil & Gas drove solid investment returns. The portfolio also benefited from investments in two acquired companies: Kenexa, a human resources software company, and Catalyst Health Solutions, a pharmacy benefit manager.
Shortfalls: Our investment in Express, a national apparel and accessories retailer, performed poorly because of merchandising mishaps and increased competition. NxStage Medical, a provider of medical solutions for renal care, saw slower revenue growth in the home dialysis segment.
10
Vanguard Equity Investment Group
Portfolio Managers:
James D. Troyer, CFA, Principal
James P. Stetler, Principal
Michael R. Roach, CFA
Our diversified, multifactor stock selection model performed well over the fiscal year. For the period, our growth, management decisions, and quality indicators contributed positively to performance, while our valuation and market sentiment indicators detracted from it.
Successes: Our stock selection results were best within the consumer discretionary and information technology sectors. In consumer discretionary, overweighted positions in Conn’s, PetSmart, and Ulta Salon, Cosmetics & Fragrance added the most to our results. Overweightings in Booz Allen & Hamilton, FEI, and Maximus generated the best relative returns in information technology.
Shortfalls: Unfortunately, we were not able to avoid disappointing results in the health care and telecommunications sectors. In health care, underweightings in Pharmasset and Regeneron Pharmaceuticals and an overweighted position in Salix Pharmaceuticals detracted from our overall performance. Underweighted positions in SBA Communications and MetroPCS Communications and an overweighting in Vonage hurt performance in telecommunication services.
11
Vanguard Explorer Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Wellington Management | 28 | 2,421 | Conducts research and analysis of individual |
Company, LLP | companies to select stocks believed to have | ||
exceptional growth potential relative to their market | |||
valuations. Each stock is considered individually before | |||
purchase, and company developments are continually | |||
monitored for comparison with expectations for | |||
growth. | |||
Granahan Investment | 24 | 2,104 | Bases its investment process on the beliefs that |
Management, Inc. | earnings drive stock prices and that small, dynamic | ||
companies with exceptional growth prospects have the | |||
greatest long-term potential. A bottom-up, fundamental | |||
approach places companies in one of three life-cycle | |||
categories: pioneer, core growth, and special situation. | |||
In each, the process looks for companies with strong | |||
earnings growth potential and leadership in their | |||
markets. | |||
Kalmar Investment Advisers | 24 | 2,071 | Employs a “growth with value” strategy using creative, |
bottom-up research to uncover vigorously growing, | |||
high-quality businesses whose stocks can also be | |||
bought inefficiently valued. The strategy has a dual | |||
objective of strong returns with lower risk. | |||
Century Capital Management, | 10 | 850 | Employs a fundamental, bottom-up approach that |
LLC | attempts to identify reasonably priced companies that | ||
will grow faster than the overall market. Companies | |||
also must have a superior return on equity, high | |||
recurring revenues, and improving margins. | |||
Chartwell Investment Partners, | 9 | 774 | Uses a bottom-up, fundamental, research-driven |
L.P. | stock-selection strategy focusing on companies with | ||
sustainable growth, strong management teams, | |||
competitive positions, and outstanding product and | |||
service offerings. These companies should continually | |||
demonstrate growth in earnings per share. | |||
Vanguard Equity Investment | 4 | 348 | Employs a quantitative fundamental management |
Group | approach, using models that assess valuation, growth | ||
prospects, management decisions, market sentiment, | |||
and earnings quality of companies as compared with | |||
their peers. | |||
Cash Investments | 1 | 198 | These short-term reserves are invested by Vanguard in |
equity index products to simulate investment in stocks. | |||
Each advisor also may maintain a modest cash | |||
position. |
12
Explorer Fund
Fund Profile
As of October 31, 2012
Share-Class Characteristics | ||
Investor | Admiral | |
Shares | Shares | |
Ticker Symbol | VEXPX | VEXRX |
Expense Ratio1 | 0.50% | 0.34% |
30-Day SEC Yield | 0.13% | 0.29% |
Portfolio Characteristics | |||
Russell | DJ | ||
2500 | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Number of Stocks | 588 | 1,388 | 3,636 |
Median Market Cap | $2.4B | $2.6B | $34.8B |
Price/Earnings Ratio | 21.0x | 26.0x | 16.3x |
Price/Book Ratio | 2.4x | 3.5x | 2.1x |
Return on Equity | 11.6% | 14.2% | 17.6% |
Earnings Growth Rate | 11.3% | 11.0% | 10.0% |
Dividend Yield | 0.6% | 0.9% | 2.1% |
Foreign Holdings | 3.4% | 0.0% | 0.0% |
Turnover Rate | 59% | — | — |
Short-Term Reserves | 2.5% | — | — |
Sector Diversification (% of equity exposure) | |||
Russell | DJ | ||
2500 | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Consumer Discretionary 18.4% | 18.4% | 12.1% | |
Consumer Staples | 3.0 | 3.9 | 9.5 |
Energy | 6.5 | 4.9 | 10.4 |
Financials | 8.0 | 10.0 | 16.6 |
Health Care | 18.1 | 15.8 | 11.9 |
Industrials | 16.8 | 17.2 | 10.8 |
Information Technology 22.0 | 20.6 | 18.3 | |
Materials | 5.7 | 7.0 | 3.9 |
Telecommunication | |||
Services | 1.4 | 1.6 | 2.8 |
Utilities | 0.1 | 0.6 | 3.7 |
Volatility Measures | ||
DJ | ||
U.S. | Total | |
Russell 2500 | Market | |
Growth Index | Index | |
R-Squared | 0.99 | 0.93 |
Beta | 0.98 | 1.20 |
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) | ||
Alliance Data Systems | Data Processing & | |
Corp. | Outsourced Services | 1.1% |
Cooper Cos Inc. | Health Care Supplies | 1.0 |
Triumph Group Inc. | Aerospace & | |
Defense | 0.8 | |
Cadence Design | ||
Systems Inc. | Application Software | 0.8 |
MSC Industrial Direct | Trading Companies & | |
Co. Inc. Class A | Distributors | 0.8 |
Alkermes plc | Biotechnology | 0.7 |
TiVo Inc. | Application Software | 0.7 |
Urban Outfitters Inc. | Apparel Retail | 0.7 |
Kennametal Inc. | Industrial Machinery | 0.7 |
Life Time Fitness Inc. | Leisure Facilities | 0.7 |
Top Ten | 8.0% | |
The holdings listed exclude any temporary cash investments and equity index products. |
Investment Focus
1 The expense ratios shown are from the prospectus dated February 17, 2012, and represent estimated costs for the current fiscal year. For
the fiscal year ended October 31, 2012, the expense ratios were 0.49% for Investor Shares and 0.32% for Admiral Shares.
13
Explorer 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.
Cumulative Performance: October 31, 2002, Through October 31, 2012
Initial Investment of $10,000
![](https://capedge.com/proxy/N-CSR/0000932471-12-005915/explorerfund_24x16x1.jpg)
Average Annual Total Returns | |||||
Periods Ended October 31, 2012 | |||||
Final Value | |||||
One | Five | Ten | of a $10,000 | ||
Year | Years | Years | Investment | ||
Explorer Fund Investor Shares | 7.00% | 0.72% | 8.86% | $23,369 | |
•••••••• | Russell 2500 Growth Index | 10.08 | 2.04 | 10.40 | 26,908 |
– – – – | Small-Cap Growth Funds Average | 8.96 | -0.23 | 8.00 | 21,586 |
Dow Jones U.S. Total Stock Market | |||||
Index | 14.45 | 0.75 | 7.78 | 21,163 | |
Small-Cap Growth Funds Average: Derived from data provided by Lipper Inc. |
Final Value | ||||
One | Five | Ten | of a $50,000 | |
Year | Years | Years | Investment | |
Explorer Fund Admiral Shares | 7.16% | 0.90% | 9.04% | $118,794 |
Russell 2500 Growth Index | 10.08 | 2.04 | 10.40 | 134,540 |
Dow Jones U.S. Total Stock Market Index | 14.45 | 0.75 | 7.78 | 105,815 |
See Financial Highlights for dividend and capital gains information.
14
Explorer Fund
Fiscal-Year Total Returns (%): October 31, 2002, Through October 31, 2012
![](https://capedge.com/proxy/N-CSR/0000932471-12-005915/explorerfund_24x17x1.jpg)
Average Annual Total Returns: Periods Ended September 30, 2012
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 | Five | Ten | |
Date | Year | Years | Years | |
Investor Shares | 12/11/1967 | 26.76% | 1.71% | 9.56% |
Admiral Shares | 11/12/2001 | 26.96 | 1.89 | 9.74 |
15
Explorer Fund
Financial Statements
Statement of Net Assets—Investments Summary
As of October 31, 2012
This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.
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 complete listing of the fund’s holdings is available electronically on vanguard.com and on the Securities and Exchange Commission’s website (sec.gov), or you can have it mailed to you without charge by calling 800-662-7447. For the first and third fiscal quarters, the fund files the lists with the SEC on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website. 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 | Percentage | |||
Value | of Net | |||
Shares | ($000) | Assets | ||
Common Stocks | ||||
Consumer Discretionary | ||||
* | Urban Outfitters Inc. | 1,742,550 | 62,314 | 0.7% |
* | Life Time Fitness Inc. | 1,346,145 | 60,428 | 0.7% |
* | CarMax Inc. | 1,406,070 | 47,455 | 0.5% |
* | Hanesbrands Inc. | 1,258,427 | 42,120 | 0.5% |
* | PulteGroup Inc. | 2,274,700 | 39,443 | 0.5% |
DSW Inc. Class A | 586,835 | 36,730 | 0.4% | |
Aaron’s Inc. | 1,188,090 | 36,629 | 0.4% | |
Cheesecake Factory Inc. | 1,084,706 | 35,860 | 0.4% | |
Brunswick Corp. | 1,507,285 | 35,557 | 0.4% | |
Tractor Supply Co. | 357,525 | 34,408 | 0.4% | |
Consumer Discretionary—Other † | 1,116,630 | 12.7% | ||
1,547,574 | 17.6% | |||
Consumer Staples | ||||
Herbalife Ltd. | 998,010 | 51,248 | 0.6% | |
Consumer Staples—Other † | 199,488 | 2.3% | ||
250,736 | 2.9% | |||
Energy | ||||
* | Atwood Oceanics Inc. | 726,725 | 34,737 | 0.4% |
Energy—Other † | 507,750 | 5.8% | ||
542,487 | 6.2% | |||
Exchange-Traded Funds | ||||
1 | Vanguard Small-Cap ETF | 865,083 | 68,255 | 0.8% |
^,1 | Vanguard Small-Cap Growth ETF | 713,200 | 61,292 | 0.7% |
Exchange-Traded Funds—Other † | 21,929 | 0.2% | ||
151,476 | 1.7% |
16
Explorer Fund | ||||
Market | Percentage | |||
Value | of Net | |||
Shares | ($000) | Assets | ||
Financials | ||||
* | Affiliated Managers Group Inc. | 318,875 | 40,338 | 0.5% |
*,2 | eHealth Inc. | 1,491,625 | 32,368 | 0.4% |
*,2 | HFF Inc. Class A | 2,224,407 | 30,986 | 0.3% |
Financials—Other † | 543,363 | 6.2% | ||
647,055 | 7.4% | |||
Health Care | ||||
Cooper Cos. Inc. | 945,008 | 90,702 | 1.0% | |
* | Alkermes plc | 3,444,435 | 63,825 | 0.7% |
* | Covance Inc. | 1,070,180 | 52,128 | 0.6% |
ResMed Inc. | 1,301,110 | 51,966 | 0.6% | |
* | Salix Pharmaceuticals Ltd. | 1,224,070 | 47,788 | 0.6% |
* | Onyx Pharmaceuticals Inc. | 590,900 | 46,303 | 0.5% |
* | Bruker Corp. | 3,549,421 | 42,912 | 0.5% |
* | Regeneron Pharmaceuticals Inc. | 288,080 | 40,994 | 0.5% |
* | Catamaran Corp. | 854,832 | 40,314 | 0.5% |
Universal Health Services Inc. Class B | 955,022 | 39,528 | 0.5% | |
* | Seattle Genetics Inc. | 1,493,304 | 37,572 | 0.4% |
* | Elan Corp. plc ADR | 3,436,708 | 37,116 | 0.4% |
* | ICON plc ADR | 1,520,070 | 35,782 | 0.4% |
* | Health Management Associates Inc. Class A | 4,834,485 | 35,292 | 0.4% |
*,2 | Kindred Healthcare Inc. | 2,855,239 | 27,981 | 0.3% |
Health Care—Other † | 834,444 | 9.5% | ||
1,524,647 | 17.4% | |||
Industrials | ||||
Triumph Group Inc. | 1,049,242 | 68,641 | 0.8% | |
MSC Industrial Direct Co. Inc. Class A | 883,121 | 65,881 | 0.8% | |
Kennametal Inc. | 1,738,880 | 61,591 | 0.7% | |
* | Middleby Corp. | 394,485 | 49,291 | 0.6% |
Pentair Ltd. | 1,116,260 | 47,151 | 0.5% | |
* | Genesee & Wyoming Inc. Class A | 590,113 | 42,765 | 0.5% |
Belden Inc. | 981,140 | 35,125 | 0.4% | |
Industrials—Other † | 1,029,271 | 11.7% | ||
1,399,716 | 16.0% | |||
Information Technology | ||||
* | Alliance Data Systems Corp. | 652,193 | 93,296 | 1.1% |
* | Cadence Design Systems Inc. | 5,398,860 | 68,350 | 0.8% |
*,2 | TiVo Inc. | 6,228,460 | 63,219 | 0.7% |
* | Sapient Corp. | 5,513,687 | 56,681 | 0.6% |
* | Ultimate Software Group Inc. | 479,019 | 48,553 | 0.6% |
* | Teradyne Inc. | 3,315,120 | 48,467 | 0.6% |
* | Microsemi Corp. | 2,432,790 | 46,710 | 0.5% |
* | VeriFone Systems Inc. | 1,429,175 | 42,361 | 0.5% |
FEI Co. | 727,210 | 40,033 | 0.5% | |
* | Parametric Technology Corp. | 1,951,601 | 39,383 | 0.4% |
Convergys Corp. | 2,221,985 | 37,352 | 0.4% | |
* | Aruba Networks Inc. | 1,953,166 | 35,489 | 0.4% |
Information Technology—Other † | 1,227,421 | 14.0% | ||
1,847,315 | 21.1% |
17
Explorer Fund | |||||
Market | Percentage | ||||
Value• | of Net | ||||
Shares | ($000) | Assets | |||
Materials | |||||
Smurfit Kappa Group plc | 3,366,256 | 37,013 | 0.4% | ||
* | KapStone Paper and Packaging Corp. | 1,663,940 | 36,557 | 0.4% | |
* | WR Grace & Co. | 560,760 | 35,978 | 0.4% | |
Materials—Other † | 365,939 | 4.2% | |||
475,487 | 5.4% | ||||
Telecommunication Services | |||||
* | SBA Communications Corp. Class A | 602,890 | 40,171 | 0.5% | |
Telecommunication Services—Other † | 78,786 | 0.9% | |||
118,957 | 1.4% | ||||
Utilities † | 713 | 0.0% | |||
Total Common Stocks (Cost $7,072,466) | 8,506,163 | 97.1%3 | |||
Coupon | |||||
Temporary Cash Investments | |||||
Money Market Fund | |||||
4,5 Vanguard Market Liquidity Fund | 0.167% | 331,031,716 | 331,032 | 3.8% | |
Repurchase Agreement † | 32,200 | 0.3% | |||
6U.S. Government and Agency Obligations † | 6,201 | 0.1% | |||
Total Temporary Cash Investments (Cost $369,433) | 369,433 | 4.2%3 | |||
Total Investments (Cost $7,441,899) | 8,875,596 | 101.3% | |||
Other Assets and Liabilities | |||||
Other Assets | 87,429 | 1.0% | |||
Liabilities5 | (197,164) | (2.3%) | |||
(109,735) | (1.3%) | ||||
Net Assets | 8,765,861 | 100.0% |
18
Explorer Fund
At October 31, 2012, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 7,087,927 |
Overdistributed Net Investment Income | (2,738) |
Accumulated Net Realized Gains | 249,158 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 1,433,697 |
Futures Contracts | (2,183) |
Net Assets | 8,765,861 |
Investor Shares—Net Assets | |
Applicable to 64,188,577 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 5,008,407 |
Net Asset Value Per Share—Investor Shares | $78.03 |
Admiral Shares—Net Assets | |
Applicable to 51,698,507 outstanding $.001 par value shares of | |
beneficial interest (unlimited authorization) | 3,757,454 |
Net Asset Value Per Share—Admiral Shares | $72.68 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $81,111,000.
† Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent
1% or less of net assets.
1 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
2 Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.
3 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 97.8% and 3.5%, respectively, of net
assets.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
5 Includes $84,197,000 of collateral received for securities on loan.
6 Securities with a value of $3,099,000 have been segregated as initial margin for open futures contracts.
ADR—American Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.
19
Explorer Fund
Statement of Operations
Year Ended | |
October 31, 2012 | |
($000) | |
Investment Income | |
Income | |
Dividends1,2 | 56,903 |
Interest2 | 372 |
Security Lending | 2,278 |
Total Income | 59,553 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 19,599 |
Performance Adjustment | (2,338) |
The Vanguard Group—Note C | |
Management and Administrative—Investor Shares | 15,059 |
Management and Administrative—Admiral Shares | 4,014 |
Marketing and Distribution—Investor Shares | 1,213 |
Marketing and Distribution—Admiral Shares | 810 |
Custodian Fees | 164 |
Auditing Fees | 38 |
Shareholders’ Reports—Investor Shares | 64 |
Shareholders’ Reports—Admiral Shares | 18 |
Trustees’ Fees and Expenses | 22 |
Total Expenses | 38,663 |
Expenses Paid Indirectly | (297) |
Net Expenses | 38,366 |
Net Investment Income | 21,187 |
Realized Net Gain (Loss) | |
Investment Securities Sold2 | 468,454 |
Futures Contracts | 16,327 |
Foreign Currencies | (21) |
Realized Net Gain (Loss) | 484,760 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 126,664 |
Futures Contracts | (1,465) |
Foreign Currencies | (21) |
Change in Unrealized Appreciation (Depreciation) | 125,178 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 631,125 |
1 Dividends are net of foreign withholding taxes of $361,000.
2 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $1,128,000, $321,000, and
($697,000), respectively.
See accompanying Notes, which are an integral part of the Financial Statements.
20
Explorer Fund
Statement of Changes in Net Assets
Year Ended October 31, | ||
2012 | 2011 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 21,187 | 17,186 |
Realized Net Gain (Loss) | 484,760 | 1,405,645 |
Change in Unrealized Appreciation (Depreciation) | 125,178 | (411,730) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 631,125 | 1,011,101 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (7,529) | (9,771) |
Admiral Shares | (10,619) | (9,545) |
Realized Capital Gain | ||
Investor Shares | — | — |
Admiral Shares | — | — |
Total Distributions | (18,148) | (19,316) |
Capital Share Transactions | ||
Investor Shares | (1,230,052) | (1,113,873) |
Admiral Shares | 230,431 | 121,274 |
Net Increase (Decrease) from Capital Share Transactions | (999,621) | (992,599) |
Total Increase (Decrease) | (386,644) | (814) |
Net Assets | ||
Beginning of Period | 9,152,505 | 9,153,319 |
End of Period1 | 8,765,861 | 9,152,505 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($2,738,000) and ($3,542,000).
See accompanying Notes, which are an integral part of the Financial Statements.
21
Explorer Fund
Financial Highlights
Investor Shares | |||||
For a Share Outstanding | Year Ended October 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $73.02 | $66.02 | $51.77 | $45.54 | $83.93 |
Investment Operations | |||||
Net Investment Income | .108 | .077 | .109 | .178 | .295 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 4.998 | 7.029 | 14.239 | 6.334 | (31.589) |
Total from Investment Operations | 5.106 | 7.106 | 14.348 | 6.512 | (31.294) |
Distributions | |||||
Dividends from Net Investment Income | (.096) | (.106) | (.098) | (.282) | (.310) |
Distributions from Realized Capital Gains | — | — | — | — | (6.786) |
Total Distributions | (.096) | (.106) | (.098) | (.282) | (7.096) |
Net Asset Value, End of Period | $78.03 | $73.02 | $66.02 | $51.77 | $45.54 |
Total Return1 | 7.00% | 10.76% | 27.74% | 14.46% | -40.17% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $5,008 | $5,864 | $6,290 | $5,677 | $5,026 |
Ratio of Total Expenses to | |||||
Average Net Assets2 | 0.49% | 0.50% | 0.49% | 0.54% | 0.44% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 0.16% | 0.12% | 0.19% | 0.38% | 0.40% |
Portfolio Turnover Rate | 59% | 89%3 | 82% | 95% | 112% |
1 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.
2 Includes performance-based investment advisory fee increases (decreases) of (0.03%), 0.00%, (0.01%), (0.01%), and (0.02%).
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.
See accompanying Notes, which are an integral part of the Financial Statements.
22
Explorer Fund
Financial Highlights
Admiral Shares | |||||
For a Share Outstanding | Year Ended October 31, | ||||
Throughout Each Period | 2012 | 2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $68.04 | $61.50 | $48.21 | $42.45 | $78.25 |
Investment Operations | |||||
Net Investment Income | .236 | .179 | .206 | .246 | .385 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 4.621 | 6.550 | 13.259 | 5.881 | (29.442) |
Total from Investment Operations | 4.857 | 6.729 | 13.465 | 6.127 | (29.057) |
Distributions | |||||
Dividends from Net Investment Income | (.217) | (.189) | (.175) | (.367) | (.427) |
Distributions from Realized Capital Gains | — | — | — | — | (6.316) |
Total Distributions | (.217) | (.189) | (.175) | (.367) | (6.743) |
Net Asset Value, End of Period | $72.68 | $68.04 | $61.50 | $48.21 | $42.45 |
Total Return1 | 7.16% | 10.94% | 27.98% | 14.66% | -40.07% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $3,757 | $3,288 | $2,864 | $2,252 | $2,023 |
Ratio of Total Expenses to | |||||
Average Net Assets2 | 0.32% | 0.34% | 0.32% | 0.34% | 0.26% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 0.33% | 0.28% | 0.36% | 0.58% | 0.58% |
Portfolio Turnover Rate | 59% | 89%3 | 82% | 95% | 112% |
1 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.
2 Includes performance-based investment advisory fee increases (decreases) of (0.03%), 0.00%, (0.01%), (0.01%), and (0.02%).
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares.
See accompanying Notes, which are an integral part of the Financial Statements.
23
Explorer Fund
Notes to Financial Statements
Vanguard Explorer Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.
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 affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. 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. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. 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.
Futures contracts are valued at their quoted daily settlement prices. The aggregate principal 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).
24
Explorer Fund
During the year ended October 31, 2012, the fund’s average investment in futures contracts represented less than 1% of net assets, based on quarterly average aggregate settlement values.
4. Repurchase Agreements: The fund may enter into repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default or bankruptcy by the other party to the agreement, the fund may sell or retain the collateral; however, such action may be subject to legal proceedings.
5. 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 (October 31, 2009–2012), and has concluded that no provision for federal income tax is required in the fund’s financial statements.
6. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
7. Security Lending: The fund may lend its securities to qualified institutional borrowers to earn additional income. Security loans are required to be secured at all times by collateral at least equal to the market value of 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. Security lending income represents fees charged to borrowers plus income earned on investing cash collateral, less expenses associated with the loan.
8. 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. 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.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. Wellington Management Company, LLP, Granahan Investment Management, Inc., Kalmar Investment Advisers, Century Capital Management, LLC, and Chartwell Investment Partners, L.P., 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 fees of Wellington Management Company, LLP, Granahan Investment Management, Inc., and Kalmar Investment Advisers, are subject to quarterly adjustments based on performance for the preceding three years relative to the Russell 2500 Growth Index. The basic fee of Century Capital Management, LLC, is subject to quarterly adjustments based on performance for the preceding three years relative to a 50/50 blend of the Russell 2500 Index and Russell 2500 Growth Index. The basic fee of Chartwell Investment Partners, L.P., is subject to quarterly adjustments based on performance for the preceding three years relative to the Russell 2500 Growth Index for periods prior to February 1, 2012, and the new benchmark, Russell 2000 Growth Index, beginning February 1, 2012. The new benchmark will be fully phased in by January 31, 2015.
The Vanguard Group provides investment advisory services to a portion of the fund on an at-cost basis; the fund paid Vanguard advisory fees of $325,000 for the year ended October 31, 2012.
25
Explorer Fund
For the year ended October 31, 2012, the aggregate investment advisory fee represented an effective annual basic rate of 0.21% of the fund’s average net assets, before a decrease of $2,338,000 (0.03%) 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 October 31, 2012, the fund had contributed capital of $1,256,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.50% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
D. The fund has asked its investment advisors to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund’s management and administrative expenses. For the year ended October 31, 2012, these arrangements reduced the fund’s expenses by $297,000 (an annual rate of 0.00% of average net assets).
E. 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 October 31, 2012, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 8,464,836 | 37,013 | 4,314 |
Temporary Cash Investments | 331,032 | 38,401 | — |
Futures Contracts—Assets1 | 425 | — | — |
Futures Contracts—Liabilities1 | (44) | — | — |
Total | 8,796,249 | 75,414 | 4,314 |
1 Represents variation margin on the last day of the reporting period. |
26
Explorer Fund
F. At October 31, 2012, 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 | December 2012 | 571 | 46,611 | (1,359) |
E-mini S&P MidCap 400 Index | December 2012 | 235 | 22,985 | (824) |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
G. 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.
During the year ended October 31, 2012, the fund realized net foreign currency losses of $21,000, which decreased distributable net income for tax purposes; accordingly, such losses have been reclassified from accumulated net realized gains to overdistributed net investment income.
The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from net investment income and realized capital gains. Accordingly, the fund has reclassified $2,214,000 from overdistributed net investment income, and $29,161,000 from accumulated net realized gains, to paid-in capital.
The fund used capital loss carryforwards of $192,848,000 to offset taxable capital gains realized during the year ended October 31, 2012, reducing the amount of capital gains that would otherwise be available to distribute to shareholders. For tax purposes, at October 31, 2012, the fund had $17,965,000 of ordinary income and $253,696,000 of long-term capital gains available for distribution.
At October 31, 2012, the cost of investment securities for tax purposes was $7,448,795,000. Net unrealized appreciation of investment securities for tax purposes was $1,426,801,000, consisting of unrealized gains of $1,948,681,000 on securities that had risen in value since their purchase and $521,880,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the year ended October 31, 2012, the fund purchased $5,249,425,000 of investment securities and sold $6,280,050,000 of investment securities, other than temporary cash investments.
27
Explorer Fund
I. Capital share transactions for each class of shares were:
Year Ended October 31, | ||||
2012 | 2011 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 476,407 | 6,191 | 1,036,029 | 14,148 |
Issued in Lieu of Cash Distributions | 7,422 | 103 | 9,647 | 133 |
Redeemed | (1,713,881) | (22,411) | (2,159,549) | (29,243) |
Net Increase (Decrease)—Investor Shares | (1,230,052) | (16,117) | (1,113,873) | (14,962) |
Admiral Shares | ||||
Issued | 946,621 | 13,411 | 1,282,862 | 18,703 |
Issued in Lieu of Cash Distributions | 9,801 | 146 | 8,743 | 130 |
Redeemed | (725,991) | (10,188) | (1,170,331) | (17,067) |
Net Increase (Decrease)—Admiral Shares | 230,431 | 3,369 | 121,274 | 1,766 |
J. Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company. Transactions during the period in securities of these companies were as follows:
Current Period Transactions | |||||
Oct. 31, 2011 | Proceeds from | Oct. 31, 2012 | |||
Market | Purchases | Securities | Dividend | Market | |
Value | at Cost | Sold | Income | Value | |
($000) | ($000) | ($000) | ($000) | ($000) | |
eHealth Inc. | NA1 | 10,072 | 2,966 | — | 32,368 |
HFF Inc. Class A | 34,678 | 5,181 | 18,891 | — | 30,986 |
Kindred Healthcare Inc. | NA1 | 6,323 | 4,490 | — | 27,981 |
TiVo Inc. | 66,203 | 9,059 | 7,809 | — | 63,219 |
100,881 | — | 154,554 | |||
1 Not applicable—At October 31, 2011, the issuer was not an affiliated company of the fund. |
K. In preparing the financial statements as of October 31, 2012, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
28
Report of Independent Registered
Public Accounting Firm
To the Trustees and Shareholders of Vanguard Explorer Fund:
In our opinion, the accompanying statement of net assets - investments summary and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Explorer Fund (the “Fund”) at October 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2012 by correspondence with the custodians and brokers and by agreement to the underlying ownership records of the transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 11, 2012
![](https://capedge.com/proxy/N-CSR/0000932471-12-005915/explorerfund_24x31x1.jpg)
Special 2012 tax information (unaudited) for Vanguard Explorer Fund
This information for the fiscal year ended October 31, 2012, is included pursuant to provisions of the Internal Revenue Code.
The fund distributed $18,148,000 of qualified dividend income to shareholders during the fiscal year.
For corporate shareholders, 100% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.
29
Your Fund’s After-Tax Returns
This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund’s distributions, and (2) assuming that an investor paid taxes on the fund’s distributions and sold all shares at the end of each period.
Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect any qualified dividend income, using actual prior-year figures and estimates for 2012. (In the example, returns after the sale of fund shares may be higher than those assuming no sale. This occurs when the sale would have produced a capital loss. The calculation assumes that the investor received a tax deduction for the loss.)
The table shows returns for Investor Shares only; returns for other share classes will differ. Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes.
Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.
Average Annual Total Returns: Explorer Fund Investor Shares | |||
Periods Ended October 31, 2012 | |||
One | Five | Ten | |
Year | Years | Years | |
Returns Before Taxes | 7.00% | 0.72% | 8.86% |
Returns After Taxes on Distributions | 6.98 | 0.32 | 8.30 |
Returns After Taxes on Distributions and Sale of Fund Shares | 4.58 | 0.50 | 7.71 |
30
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.
31
Six Months Ended October 31, 2012 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Explorer Fund | 4/30/2012 | 10/31/2012 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $966.44 | $2.33 |
Admiral Shares | 1,000.00 | 967.13 | 1.54 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,022.84 | $2.40 |
Admiral Shares | 1,000.00 | 1,023.64 | 1.58 |
The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that
period are 0.47% for Investor Shares and 0.31% for Admiral Shares. 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.
32
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.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
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.
33
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.
R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.
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.
34
This page intentionally left blank.
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 180 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; Trustee of | |
F. William McNabb III | The Conference Board. |
Born 1957. Trustee Since July 2009. Chairman of the | |
Board. Principal Occupation(s) During the Past Five | Amy Gutmann |
Years: Chairman of the Board of The Vanguard Group, | Born 1949. Trustee Since June 2006. Principal |
Inc., and of each of the investment companies served | Occupation(s) During the Past Five Years: President |
by The Vanguard Group, since January 2010; Director | of the University of Pennsylvania; Christopher H. |
of The Vanguard Group since 2008; Chief Executive | Browne Distinguished Professor of Political Science |
Officer and President of The Vanguard Group and of | in the School of Arts and Sciences with secondary |
each of the investment companies served by The | appointments at the Annenberg School for |
Vanguard Group since 2008; Director of Vanguard | Communication and the Graduate School of Education |
Marketing Corporation; Managing Director of The | of the University of Pennsylvania; Member of the |
Vanguard Group (1995–2008). | National Commission on the Humanities and Social |
Sciences; Trustee of Carnegie Corporation of New | |
IndependentTrustees | York and of the National Constitution Center; Chair |
of the U. S. Presidential Commission for the Study | |
Emerson U. Fullwood | of Bioethical Issues. |
Born 1948. Trustee Since January 2008. Principal | |
JoAnn Heffernan Heisen | |
Occupation(s) During the Past Five Years: Executive | Born 1950. Trustee Since July 1998. Principal |
Chief Staff and Marketing Officer for North America | Occupation(s) During the Past Five Years: Corporate |
and Corporate Vice President (retired 2008) of Xerox | Vice President and Chief Global Diversity Officer |
Corporation (document management products and | (retired 2008) and Member of the Executive |
services); Executive in Residence and 2010 | Committee (1997–2008) of Johnson & Johnson |
Distinguished Minett Professor at the Rochester | (pharmaceuticals/medical devices/consumer |
Institute of Technology; Director of SPX Corporation | products); Director of Skytop Lodge Corporation |
(multi-industry manufacturing), the United Way of | (hotels), the University Medical Center at Princeton, |
Rochester, Amerigroup Corporation (managed health | the Robert Wood Johnson Foundation, and the Center |
care), the University of Rochester Medical Center, | for Talent Innovation; Member of the Advisory Board |
Monroe Community College Foundation, and North | of the Maxwell School of Citizenship and Public Affairs |
Carolina A&T University. | at Syracuse University. |
Rajiv L. Gupta | F. Joseph Loughrey |
Born 1945. Trustee Since December 2001.2 | Born 1949. Trustee Since October 2009. Principal |
Principal Occupation(s) During the Past Five Years: | Occupation(s) During the Past Five Years: President |
Chairman and Chief Executive Officer (retired 2009) | and Chief Operating Officer (retired 2009) of Cummins |
and President (2006–2008) of Rohm and Haas Co. | Inc. (industrial machinery); Director of SKF AB |
(chemicals); Director of Tyco International, Ltd. | (industrial machinery), Hillenbrand, Inc. (specialized |
(diversified manufacturing and services), Hewlett- | consumer services), the Lumina Foundation for |
Packard Co. (electronic computer manufacturing), |
Education, and Oxfam America; Chairman of the | Executive Officers | |
Advisory Council for the College of Arts and Letters | ||
and Member of the Advisory Board to the Kellogg | Glenn Booraem | |
Institute for International Studies at the University | Born 1967. Controller Since July 2010. Principal | |
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 at IBM (information | ||
technology services); Fiduciary Member of IBM’s | Thomas J. Higgins | |
Retirement Plan Committee. | Born 1957. Chief Financial Officer Since September | |
2008. Principal Occupation(s) During the Past Five | ||
Scott C. Malpass | Years: Principal of The Vanguard Group, Inc.; Chief | |
Born 1962. Trustee Since March 2012. Principal | Financial Officer of each of the investment companies | |
Occupation(s) During the Past Five Years: Chief | served by The Vanguard Group; Treasurer of each of | |
Investment Officer and Vice President at the University | the investment companies served by The Vanguard | |
of Notre Dame; Assistant Professor of Finance at the | Group (1998–2008). | |
Mendoza College of Business at Notre Dame; Member | ||
of the Notre Dame 403(b) Investment Committee; | Kathryn J. Hyatt | |
Director of TIFF Advisory Services, Inc. (investment | Born 1955. Treasurer Since November 2008. Principal | |
advisor); Member of the Investment Advisory | Occupation(s) During the Past Five Years: Principal of | |
Committees of the Financial Industry Regulatory | The Vanguard Group, Inc.; Treasurer of each of the | |
Authority (FINRA) and of Major League Baseball. | investment companies served by The Vanguard | |
Group; Assistant Treasurer of each of the investment | ||
André F. Perold | companies served by The Vanguard Group (1988–2008). | |
Born 1952. Trustee Since December 2004. Principal | ||
Occupation(s) During the Past Five Years: George | Heidi Stam | |
Gund Professor of Finance and Banking at the Harvard | Born 1956. Secretary Since July 2005. Principal | |
Business School (retired 2011); Chief Investment | Occupation(s) During the Past Five Years: Managing | |
Officer and Managing Partner of HighVista Strategies | Director of The Vanguard Group, Inc.; General Counsel | |
LLC (private investment firm); Director of Rand | of The Vanguard Group; Secretary of The Vanguard | |
Merchant Bank; Overseer of the Museum of Fine | Group and of each of the investment companies | |
Arts Boston. | served by The Vanguard Group; Director and Senior | |
Vice President of Vanguard Marketing Corporation. | ||
Alfred M. Rankin, Jr. | ||
Born 1941. Trustee Since January 1993. Principal | Vanguard Senior ManagementTeam | |
Occupation(s) During the Past Five Years: Chairman, | ||
President, and Chief Executive Officer of NACCO | Mortimer J. Buckley | Michael S. Miller |
Industries, Inc. (forklift trucks/housewares/lignite); | Kathleen C. Gubanich | James M. Norris |
Director of Goodrich Corporation (industrial products/ | Paul A. Heller | Glenn W. Reed |
aircraft systems and services) and the National | Martha G. King | George U. Sauter |
Association of Manufacturers; Chairman of the Board | Chris D. McIsaac | |
of the Federal Reserve Bank of Cleveland and of | ||
University Hospitals of Cleveland; Advisory Chairman | ||
of the Board of The Cleveland Museum of Art. | Chairman Emeritus and Senior Advisor | |
John J. Brennan | ||
Peter F. Volanakis | Chairman, 1996–2009 | |
Born 1955. Trustee Since July 2009. Principal | Chief Executive Officer and President, 1996–2008 | |
Occupation(s) During the Past Five Years: President | ||
and Chief Operating Officer (retired 2010) of Corning | ||
Incorporated (communications equipment); Director | Founder | |
of SPX Corporation (multi-industry manufacturing); | ||
Overseer of the Amos Tuck School of Business | John C. Bogle | |
Administration at Dartmouth College; Advisor to the | Chairman and Chief Executive Officer, 1974–1996 | |
Norris Cotton Cancer Center. |
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 | |
Connect with Vanguard® > vanguard.com | |
Fund Information > 800-662-7447 | CFA® is a trademark owned by CFA Institute. |
Direct Investor Account Services > 800-662-2739 | |
Institutional Investor Services > 800-523-1036 | |
Text Telephone for People | |
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 Inc. 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. | |
© 2012 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q240 122012 |
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (97.1%)1 | |||
Consumer Discretionary (17.6%) | |||
* | Urban Outfitters Inc. | 1,742,550 | 62,314 |
* | Life Time Fitness Inc. | 1,346,145 | 60,428 |
* | CarMax Inc. | 1,406,070 | 47,455 |
* | Hanesbrands Inc. | 1,258,427 | 42,120 |
* | PulteGroup Inc. | 2,274,700 | 39,443 |
DSW Inc. Class A | 586,835 | 36,730 | |
Aaron's Inc. | 1,188,090 | 36,629 | |
Cheesecake Factory Inc. | 1,084,706 | 35,860 | |
Brunswick Corp. | 1,507,285 | 35,557 | |
Tractor Supply Co. | 357,525 | 34,408 | |
* | TRW Automotive Holdings Corp. | 728,165 | 33,867 |
Lennar Corp. Class A | 903,725 | 33,863 | |
* | Fifth & Pacific Cos. Inc. | 3,047,390 | 33,460 |
* | LKQ Corp. | 1,555,390 | 32,492 |
Texas Roadhouse Inc. Class A | 1,935,325 | 31,507 | |
Gentex Corp. | 1,815,620 | 31,265 | |
* | Crocs Inc. | 2,480,935 | 31,260 |
* | Steven Madden Ltd. | 708,200 | 30,396 |
HSN Inc. | 584,300 | 30,395 | |
Churchill Downs Inc. | 457,850 | 29,911 | |
* | Tumi Holdings Inc. | 1,258,434 | 28,189 |
Service Corp. International | 2,002,130 | 28,110 | |
* | Tenneco Inc. | 887,677 | 27,119 |
* | DreamWorks Animation SKG Inc. Class A | 1,323,040 | 26,950 |
GameStop Corp. Class A | 1,168,392 | 26,674 | |
*,^ | Vera Bradley Inc. | 890,500 | 26,546 |
* | MGM Resorts International | 2,399,530 | 24,739 |
* | Sally Beauty Holdings Inc. | 996,097 | 23,986 |
Tiffany & Co. | 365,200 | 23,088 | |
Dana Holding Corp. | 1,728,000 | 22,740 | |
* | Buffalo Wild Wings Inc. | 283,300 | 21,517 |
Cinemark Holdings Inc. | 863,500 | 21,320 | |
* | AMC Networks Inc. Class A | 455,400 | 21,276 |
Dunkin' Brands Group Inc. | 661,125 | 20,495 | |
*,^ | Coinstar Inc. | 429,221 | 20,148 |
* | Live Nation Entertainment Inc. | 2,179,380 | 19,941 |
Oxford Industries Inc. | 351,715 | 19,513 | |
* | Carter's Inc. | 354,100 | 19,143 |
* | Steiner Leisure Ltd. | 433,500 | 19,039 |
* | ANN Inc. | 537,471 | 18,897 |
* | Francesca's Holdings Corp. | 549,500 | 16,227 |
Domino's Pizza Inc. | 347,057 | 14,097 | |
DR Horton Inc. | 635,719 | 13,325 | |
Pier 1 Imports Inc. | 637,766 | 13,010 | |
* | Denny's Corp. | 2,826,500 | 13,002 |
Group 1 Automotive Inc. | 205,691 | 12,755 | |
Men's Wearhouse Inc. | 380,766 | 12,485 | |
* | American Public Education Inc. | 335,247 | 12,213 |
* | Jos A Bank Clothiers Inc. | 258,000 | 12,072 |
Ulta Salon Cosmetics & Fragrance Inc. | 130,697 | 12,053 | |
* | Bloomin' Brands Inc. | 850,385 | 11,625 |
* | Hibbett Sports Inc. | 202,886 | 10,954 |
^ | Sturm Ruger & Co. Inc. | 229,535 | 10,841 |
Chico's FAS Inc. | 561,200 | 10,438 | |
Monro Muffler Brake Inc. | 303,150 | 10,283 | |
* | BJ's Restaurants Inc. | 305,900 | 10,110 |
Six Flags Entertainment Corp. | 174,411 | 9,961 | |
* | Lululemon Athletica Inc. | 140,000 | 9,661 |
Vail Resorts Inc. | 166,793 | 9,470 | |
*,^ | Pandora Media Inc. | 1,071,400 | 8,989 |
* | Select Comfort Corp. | 296,117 | 8,241 |
1
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
* | O'Reilly Automotive Inc. | 86,100 | 7,377 |
*,^ | SodaStream International Ltd. | 190,000 | 6,792 |
Ryland Group Inc. | 199,836 | 6,768 | |
* | Meritage Homes Corp. | 126,400 | 4,674 |
* | Krispy Kreme Doughnuts Inc. | 563,345 | 4,186 |
* | Genesco Inc. | 69,545 | 3,985 |
* | Toll Brothers Inc. | 107,200 | 3,539 |
Polaris Industries Inc. | 41,558 | 3,512 | |
* | Fossil Inc. | 34,000 | 2,961 |
bebe stores inc | 681,524 | 2,760 | |
American Eagle Outfitters Inc. | 125,000 | 2,609 | |
* | Capella Education Co. | 82,400 | 2,573 |
* | Goodyear Tire & Rubber Co. | 210,000 | 2,396 |
Brinker International Inc. | 77,499 | 2,387 | |
*,^ | ITT Educational Services Inc. | 110,000 | 2,364 |
Harman International Industries Inc. | 55,600 | 2,331 | |
^ | Buckle Inc. | 50,800 | 2,295 |
*,^ | Zagg Inc. | 315,400 | 2,265 |
* | Asbury Automotive Group Inc. | 70,600 | 2,239 |
* | Papa John's International Inc. | 41,600 | 2,218 |
* | WMS Industries Inc. | 134,700 | 2,213 |
Foot Locker Inc. | 62,700 | 2,100 | |
Regal Entertainment Group Class A | 136,500 | 2,097 | |
Jarden Corp. | 40,600 | 2,022 | |
* | Conn's Inc. | 77,997 | 1,976 |
* | Smith & Wesson Holding Corp. | 203,600 | 1,955 |
Thor Industries Inc. | 48,500 | 1,844 | |
PetSmart Inc. | 27,545 | 1,829 | |
Sinclair Broadcast Group Inc. Class A | 143,800 | 1,812 | |
* | Cabela's Inc. | 36,000 | 1,613 |
PVH Corp. | 13,300 | 1,463 | |
Ameristar Casinos Inc. | 61,900 | 1,130 | |
* | DineEquity Inc. | 15,600 | 978 |
Cracker Barrel Old Country Store Inc. | 13,300 | 847 | |
* | SHFL Entertainment Inc. | 55,800 | 788 |
* | Multimedia Games Holding Co. Inc. | 48,600 | 773 |
* | Panera Bread Co. Class A | 3,550 | 599 |
Hot Topic Inc. | 51,000 | 439 | |
* | Vitamin Shoppe Inc. | 4,600 | 263 |
1,547,574 | |||
Consumer Staples (2.9%) | |||
Herbalife Ltd. | 998,010 | 51,248 | |
Casey's General Stores Inc. | 632,690 | 32,615 | |
* | United Natural Foods Inc. | 598,194 | 31,848 |
* | Smithfield Foods Inc. | 1,457,510 | 29,835 |
PriceSmart Inc. | 252,209 | 20,931 | |
*,^ | Green Mountain Coffee Roasters Inc. | 632,100 | 15,271 |
* | Hain Celestial Group Inc. | 249,304 | 14,410 |
* | Monster Beverage Corp. | 302,900 | 13,531 |
McCormick & Co. Inc. | 206,850 | 12,746 | |
*,^ | Boston Beer Co. Inc. Class A | 115,000 | 12,372 |
^ | Diamond Foods Inc. | 160,000 | 2,963 |
Nu Skin Enterprises Inc. Class A | 54,327 | 2,571 | |
* | Susser Holdings Corp. | 71,296 | 2,562 |
* | Dean Foods Co. | 151,300 | 2,548 |
* | Pilgrim's Pride Corp. | 353,536 | 1,990 |
Ingredion Inc. | 19,400 | 1,192 | |
* | Rite Aid Corp. | 816,000 | 947 |
* | WhiteWave Foods Co. | 44,000 | 725 |
B&G Foods Inc. | 14,240 | 431 | |
250,736 | |||
Energy (6.2%) | |||
* | Atwood Oceanics Inc. | 726,725 | 34,737 |
* | SemGroup Corp. Class A | 858,740 | 33,182 |
2
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
* | Superior Energy Services Inc. | 1,575,951 | 32,039 |
Cabot Oil & Gas Corp. | 675,915 | 31,754 | |
* | Carrizo Oil & Gas Inc. | 1,141,843 | 30,624 |
^ | Core Laboratories NV | 273,280 | 28,328 |
* | Comstock Resources Inc. | 1,587,830 | 27,184 |
* | Rosetta Resources Inc. | 590,300 | 27,177 |
Patterson-UTI Energy Inc. | 1,470,500 | 23,793 | |
* | ION Geophysical Corp. | 3,580,138 | 23,128 |
* | SandRidge Energy Inc. | 3,338,565 | 20,766 |
* | Whiting Petroleum Corp. | 453,889 | 19,072 |
Trican Well Service Ltd. | 1,432,300 | 17,094 | |
Arch Coal Inc. | 2,054,500 | 16,354 | |
* | Rex Energy Corp. | 1,213,535 | 16,067 |
*,^ | Clean Energy Fuels Corp. | 1,328,620 | 15,213 |
Oceaneering International Inc. | 271,900 | 14,229 | |
* | Southwestern Energy Co. | 397,625 | 13,798 |
* | Kodiak Oil & Gas Corp. | 1,406,413 | 12,995 |
RPC Inc. | 1,039,050 | 11,908 | |
* | McDermott International Inc. | 1,068,590 | 11,445 |
* | Pioneer Energy Services Corp. | 1,669,949 | 11,022 |
* | Approach Resources Inc. | 371,400 | 9,148 |
* | Key Energy Services Inc. | 1,278,200 | 8,359 |
*,^ | James River Coal Co. | 1,307,800 | 6,552 |
* | Gulfport Energy Corp. | 160,955 | 5,341 |
* | Cloud Peak Energy Inc. | 248,408 | 5,241 |
* | Alpha Natural Resources Inc. | 611,400 | 5,240 |
* | TETRA Technologies Inc. | 899,116 | 4,810 |
* | Basic Energy Services Inc. | 377,400 | 3,921 |
Energy XXI Bermuda Ltd. | 117,100 | 3,876 | |
* | Oil States International Inc. | 38,500 | 2,814 |
CONSOL Energy Inc. | 60,400 | 2,124 | |
Western Refining Inc. | 82,400 | 2,049 | |
* | Vaalco Energy Inc. | 237,500 | 1,940 |
HollyFrontier Corp. | 48,246 | 1,864 | |
* | Stone Energy Corp. | 75,200 | 1,774 |
* | Rentech Inc. | 521,825 | 1,346 |
* | Oasis Petroleum Inc. | 45,200 | 1,328 |
* | Mitcham Industries Inc. | 81,200 | 1,100 |
* | Gulfmark Offshore Inc. | 31,600 | 1,021 |
* | Callon Petroleum Co. | 94,100 | 538 |
Crosstex Energy Inc. | 14,000 | 192 | |
542,487 | |||
Exchange-Traded Funds (1.7%) | |||
2 | Vanguard Small-Cap ETF | 865,083 | 68,255 |
^,2 | Vanguard Small-Cap Growth ETF | 713,200 | 61,292 |
iShares Russell 2000 Index Fund | 269,925 | 21,929 | |
151,476 | |||
Financials (7.4%) | |||
* | Affiliated Managers Group Inc. | 318,875 | 40,338 |
Zions Bancorporation | 1,557,190 | 33,433 | |
*,3 | eHealth Inc. | 1,491,625 | 32,368 |
*,3 | HFF Inc. Class A | 2,224,407 | 30,986 |
NASDAQ OMX Group Inc. | 1,289,577 | 30,705 | |
* | National Financial Partners Corp. | 1,643,147 | 30,152 |
East West Bancorp Inc. | 1,281,410 | 27,281 | |
* | Financial Engines Inc. | 1,123,600 | 26,978 |
Och-Ziff Capital Management Group LLC Class A | 2,510,379 | 25,129 | |
* | Signature Bank | 352,699 | 25,126 |
International Bancshares Corp. | 1,349,255 | 24,489 | |
National Penn Bancshares Inc. | 2,729,493 | 24,374 | |
MFA Financial Inc. | 2,980,325 | 24,349 | |
Protective Life Corp. | 881,347 | 24,061 | |
PS Business Parks Inc. | 353,323 | 22,659 | |
Cash America International Inc. | 477,100 | 18,650 |
3
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
* | DFC Global Corp. | 1,053,004 | 17,743 |
Cathay General Bancorp | 930,590 | 16,462 | |
Wintrust Financial Corp. | 437,889 | 16,180 | |
* | WisdomTree Investments Inc. | 2,485,584 | 15,933 |
* | Ocwen Financial Corp. | 411,361 | 15,866 |
Cardinal Financial Corp. | 961,347 | 15,353 | |
Jefferies Group Inc. | 798,713 | 11,374 | |
*,^ | Zillow Inc. Class A | 284,800 | 10,640 |
Validus Holdings Ltd. | 279,800 | 10,017 | |
Tanger Factory Outlet Centers | 272,146 | 8,564 | |
* | PHH Corp. | 371,150 | 7,724 |
First Horizon National Corp. | 817,060 | 7,607 | |
TCF Financial Corp. | 585,923 | 6,703 | |
Essex Property Trust Inc. | 42,900 | 6,435 | |
KBW Inc. | 302,029 | 4,908 | |
State Bank Financial Corp. | 155,934 | 2,365 | |
* | Nationstar Mortgage Holdings Inc. | 63,000 | 2,276 |
Allied World Assurance Co. Holdings AG | 27,400 | 2,200 | |
* | World Acceptance Corp. | 29,876 | 1,994 |
QC Holdings Inc. | 566,930 | 1,916 | |
Nelnet Inc. Class A | 78,076 | 1,906 | |
* | First Cash Financial Services Inc. | 38,861 | 1,736 |
Apartment Investment & Management Co. Class A | 63,200 | 1,687 | |
Montpelier Re Holdings Ltd. | 71,100 | 1,626 | |
Extra Space Storage Inc. | 45,500 | 1,569 | |
Omega Healthcare Investors Inc. | 67,900 | 1,558 | |
* | Credit Acceptance Corp. | 18,135 | 1,481 |
Regency Centers Corp. | 30,200 | 1,450 | |
Home Properties Inc. | 20,800 | 1,264 | |
Sovran Self Storage Inc. | 21,300 | 1,231 | |
Inland Real Estate Corp. | 115,400 | 943 | |
CBL & Associates Properties Inc. | 42,100 | 942 | |
* | St. Joe Co. | 46,800 | 927 |
* | Alexander & Baldwin Inc. | 29,900 | 865 |
Macerich Co. | 14,200 | 809 | |
Digital Realty Trust Inc. | 11,065 | 680 | |
Federal Realty Investment Trust | 6,300 | 679 | |
Rayonier Inc. | 10,127 | 496 | |
* | FelCor Lodging Trust Inc. | 98,200 | 432 |
GAMCO Investors Inc. | 8,000 | 392 | |
Federated Investors Inc. Class B | 15,000 | 349 | |
CBOE Holdings Inc. | 8,400 | 248 | |
Camden Property Trust | 3,600 | 236 | |
* | Taylor Capital Group Inc. | 11,300 | 211 |
647,055 | |||
Health Care (17.4%) | |||
Cooper Cos. Inc. | 945,008 | 90,702 | |
* | Alkermes plc | 3,444,435 | 63,825 |
* | Covance Inc. | 1,070,180 | 52,128 |
ResMed Inc. | 1,301,110 | 51,966 | |
* | Salix Pharmaceuticals Ltd. | 1,224,070 | 47,788 |
* | Onyx Pharmaceuticals Inc. | 590,900 | 46,303 |
* | Bruker Corp. | 3,549,421 | 42,912 |
* | Regeneron Pharmaceuticals Inc. | 288,080 | 40,994 |
* | Catamaran Corp. | 854,832 | 40,314 |
Universal Health Services Inc. Class B | 955,022 | 39,528 | |
* | Seattle Genetics Inc. | 1,493,304 | 37,572 |
* | Elan Corp. plc ADR | 3,436,708 | 37,116 |
* | ICON plc ADR | 1,520,070 | 35,782 |
* | Health Management Associates Inc. Class A | 4,834,485 | 35,292 |
West Pharmaceutical Services Inc. | 629,150 | 33,892 | |
* | Henry Schein Inc. | 415,950 | 30,689 |
* | BioMarin Pharmaceutical Inc. | 820,200 | 30,380 |
* | Insulet Corp. | 1,420,185 | 30,122 |
4
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
* | Volcano Corp. | 1,015,859 | 29,074 |
* | Vertex Pharmaceuticals Inc. | 589,500 | 28,437 |
*,3 | Kindred Healthcare Inc. | 2,855,239 | 27,981 |
* | PAREXEL International Corp. | 878,350 | 26,957 |
* | Watson Pharmaceuticals Inc. | 306,835 | 26,372 |
* | Mettler-Toledo International Inc. | 154,659 | 26,195 |
DENTSPLY International Inc. | 688,950 | 25,381 | |
* | Bio-Rad Laboratories Inc. Class A | 242,640 | 24,592 |
* | Brookdale Senior Living Inc. Class A | 1,032,042 | 24,212 |
* | Thoratec Corp. | 670,043 | 23,921 |
* | Cubist Pharmaceuticals Inc. | 542,780 | 23,285 |
* | Luminex Corp. | 1,370,590 | 22,039 |
* | ABIOMED Inc. | 1,063,400 | 21,077 |
Coventry Health Care Inc. | 481,500 | 21,013 | |
* | Nektar Therapeutics | 2,222,800 | 20,005 |
* | Allscripts Healthcare Solutions Inc. | 1,498,200 | 19,357 |
* | Edwards Lifesciences Corp. | 219,400 | 19,051 |
* | Jazz Pharmaceuticals plc | 336,783 | 18,095 |
* | QIAGEN NV | 1,016,700 | 17,741 |
* | Optimer Pharmaceuticals Inc. | 1,847,250 | 17,623 |
* | Alexion Pharmaceuticals Inc. | 191,923 | 17,346 |
* | MedAssets Inc. | 954,686 | 16,927 |
* | IPC The Hospitalist Co. Inc. | 425,518 | 14,676 |
*,^ | Exelixis Inc. | 2,946,847 | 13,998 |
Patterson Cos. Inc. | 415,800 | 13,888 | |
* | Momenta Pharmaceuticals Inc. | 1,072,390 | 13,598 |
* | WuXi PharmaTech Cayman Inc. ADR | 951,475 | 13,501 |
* | Incyte Corp. Ltd. | 767,830 | 12,255 |
* | Align Technology Inc. | 448,893 | 11,932 |
* | AVEO Pharmaceuticals Inc. | 1,514,500 | 11,556 |
* | Air Methods Corp. | 104,507 | 11,457 |
* | MWI Veterinary Supply Inc. | 96,101 | 10,093 |
* | Akorn Inc. | 803,855 | 9,654 |
* | Immunogen Inc. | 786,800 | 8,718 |
* | WellCare Health Plans Inc. | 175,215 | 8,340 |
* | Isis Pharmaceuticals Inc. | 928,939 | 8,035 |
* | Cyberonics Inc. | 146,288 | 6,766 |
* | Centene Corp. | 149,115 | 5,663 |
* | Impax Laboratories Inc. | 260,685 | 5,540 |
* | Globus Medical Inc. | 321,780 | 5,522 |
* | Tornier NV | 302,938 | 5,180 |
Invacare Corp. | 363,550 | 4,962 | |
* | Acadia Healthcare Co. Inc. | 208,200 | 4,283 |
* | Sirona Dental Systems Inc. | 70,540 | 4,039 |
* | NxStage Medical Inc. | 270,116 | 3,025 |
* | Pharmacyclics Inc. | 45,100 | 2,754 |
Chemed Corp. | 33,106 | 2,226 | |
* | Charles River Laboratories International Inc. | 58,400 | 2,179 |
Trinity Biotech plc ADR | 150,869 | 2,133 | |
* | HealthSouth Corp. | 94,500 | 2,091 |
* | Team Health Holdings Inc. | 75,500 | 2,009 |
* | Orthofix International NV | 47,700 | 1,892 |
* | Affymax Inc. | 78,226 | 1,783 |
* | Auxilium Pharmaceuticals Inc. | 79,300 | 1,624 |
PDL BioPharma Inc. | 214,300 | 1,597 | |
Perrigo Co. | 12,992 | 1,494 | |
* | Select Medical Holdings Corp. | 138,900 | 1,471 |
* | Array BioPharma Inc. | 353,145 | 1,462 |
Questcor Pharmaceuticals Inc. | 51,624 | 1,315 | |
* | Infinity Pharmaceuticals Inc. | 55,300 | 1,238 |
* | ICU Medical Inc. | 20,500 | 1,216 |
* | Acorda Therapeutics Inc. | 49,800 | 1,193 |
* | Dynavax Technologies Corp. | 198,615 | 822 |
* | Molina Healthcare Inc. | 28,350 | 711 |
5
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
* | Anika Therapeutics Inc. | 55,100 | 618 |
* | Genomic Health Inc. | 12,692 | 397 |
* | Dyax Corp. | 112,800 | 338 |
Analogic Corp. | 4,300 | 317 | |
* | Celldex Therapeutics Inc. | 53,400 | 294 |
* | IDEXX Laboratories Inc. | 2,500 | 240 |
* | Medicines Co. | 8,254 | 181 |
* | United Therapeutics Corp. | 3,500 | 160 |
* | Sucampo Pharmaceuticals Inc. Class A | 25,400 | 127 |
* | Agenus Inc. | 21,925 | 98 |
1,524,647 | |||
Industrials (16.0%) | |||
Triumph Group Inc. | 1,049,242 | 68,641 | |
MSC Industrial Direct Co. Inc. Class A | 883,121 | 65,881 | |
Kennametal Inc. | 1,738,880 | 61,591 | |
* | Middleby Corp. | 394,485 | 49,291 |
Pentair Ltd. | 1,116,260 | 47,151 | |
* | Genesee & Wyoming Inc. Class A | 590,113 | 42,765 |
Belden Inc. | 981,140 | 35,125 | |
* | B/E Aerospace Inc. | 760,907 | 34,309 |
* | RBC Bearings Inc. | 677,173 | 33,628 |
Flowserve Corp. | 228,905 | 31,014 | |
*,^ | Polypore International Inc. | 876,684 | 30,929 |
Chicago Bridge & Iron Co. NV | 784,951 | 29,475 | |
* | AerCap Holdings NV | 2,358,116 | 29,382 |
Manpower Inc. | 762,990 | 28,948 | |
* | IHS Inc. Class A | 342,370 | 28,893 |
Waste Connections Inc. | 842,300 | 27,653 | |
* | Swift Transportation Co. | 2,588,500 | 25,238 |
Armstrong World Industries Inc. | 474,335 | 24,571 | |
* | US Airways Group Inc. | 2,007,955 | 24,457 |
* | Beacon Roofing Supply Inc. | 750,819 | 24,281 |
* | EnerSys Inc. | 689,815 | 23,785 |
* | Teledyne Technologies Inc. | 364,967 | 23,369 |
* | Moog Inc. Class A | 564,525 | 20,893 |
* | Mobile Mini Inc. | 1,180,600 | 20,566 |
Towers Watson & Co. Class A | 376,870 | 20,242 | |
Landstar System Inc. | 396,530 | 20,084 | |
AMETEK Inc. | 560,295 | 19,918 | |
* | Atlas Air Worldwide Holdings Inc. | 355,992 | 19,576 |
* | Trimas Corp. | 752,430 | 18,871 |
* | Huron Consulting Group Inc. | 608,230 | 17,547 |
* | Stericycle Inc. | 174,815 | 16,565 |
UTi Worldwide Inc. | 1,152,235 | 16,005 | |
Con-way Inc. | 549,140 | 15,985 | |
Corrections Corp. of America | 474,760 | 15,976 | |
Lennox International Inc. | 316,846 | 15,858 | |
Graco Inc. | 326,620 | 15,697 | |
Snap-on Inc. | 200,305 | 15,490 | |
* | WESCO International Inc. | 230,596 | 14,961 |
Knight Transportation Inc. | 988,480 | 14,946 | |
* | United Rentals Inc. | 357,926 | 14,553 |
Progressive Waste Solutions Ltd. | 725,405 | 14,029 | |
* | Old Dominion Freight Line Inc. | 397,029 | 13,316 |
* | Hexcel Corp. | 517,100 | 13,217 |
* | Avis Budget Group Inc. | 790,914 | 13,074 |
TAL International Group Inc. | 377,323 | 12,882 | |
* | American Woodmark Corp. | 556,297 | 12,795 |
* | CAI International Inc. | 553,873 | 12,274 |
* | Colfax Corp. | 328,090 | 11,283 |
* | DigitalGlobe Inc. | 385,200 | 9,992 |
* | Clean Harbors Inc. | 165,966 | 9,684 |
* | Rush Enterprises Inc. Class A | 481,536 | 9,149 |
Lindsay Corp. | 119,432 | 9,121 |
6
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
* | II-VI Inc. | 525,500 | 8,676 |
* | Team Inc. | 254,666 | 8,348 |
Kaman Corp. | 222,801 | 8,288 | |
* | Exponent Inc. | 147,522 | 8,111 |
* | TrueBlue Inc. | 613,600 | 8,007 |
^ | Titan International Inc. | 371,436 | 7,793 |
Woodward Inc. | 225,876 | 7,567 | |
* | Hub Group Inc. Class A | 231,033 | 7,164 |
* | Advisory Board Co. | 130,200 | 6,185 |
* | Greenbrier Cos. Inc. | 337,800 | 5,881 |
Gardner Denver Inc. | 84,000 | 5,824 | |
Actuant Corp. Class A | 202,743 | 5,725 | |
* | Dycom Industries Inc. | 384,017 | 5,468 |
* | Chart Industries Inc. | 67,027 | 4,745 |
* | Thermon Group Holdings Inc. | 178,996 | 4,446 |
* | MasTec Inc. | 191,578 | 4,322 |
Primoris Services Corp. | 223,200 | 3,118 | |
* | Copart Inc. | 101,200 | 2,914 |
Lincoln Electric Holdings Inc. | 62,500 | 2,711 | |
Toro Co. | 63,770 | 2,692 | |
Dun & Bradstreet Corp. | 32,400 | 2,626 | |
* | USG Corp. | 96,000 | 2,564 |
Deluxe Corp. | 73,509 | 2,316 | |
Applied Industrial Technologies Inc. | 56,297 | 2,285 | |
* | Hertz Global Holdings Inc. | 164,000 | 2,176 |
* | Alaska Air Group Inc. | 55,924 | 2,139 |
Equifax Inc. | 41,400 | 2,072 | |
Hubbell Inc. Class B | 24,500 | 2,051 | |
AO Smith Corp. | 33,500 | 2,036 | |
Steelcase Inc. Class A | 167,879 | 1,680 | |
Aircastle Ltd. | 135,900 | 1,513 | |
Cintas Corp. | 34,600 | 1,447 | |
Covanta Holding Corp. | 66,700 | 1,213 | |
* | JetBlue Airways Corp. | 220,000 | 1,164 |
Generac Holdings Inc. | 30,800 | 1,047 | |
Mine Safety Appliances Co. | 26,700 | 1,031 | |
Sauer-Danfoss Inc. | 24,608 | 986 | |
* | Spirit Airlines Inc. | 52,000 | 913 |
H&E Equipment Services Inc. | 44,100 | 671 | |
Mueller Industries Inc. | 13,700 | 600 | |
Acuity Brands Inc. | 8,200 | 531 | |
Mueller Water Products Inc. Class A | 101,700 | 530 | |
Robert Half International Inc. | 18,800 | 506 | |
Standex International Corp. | 10,600 | 490 | |
Argan Inc. | 24,249 | 431 | |
Timken Co. | 9,300 | 367 | |
* | WABCO Holdings Inc. | 6,000 | 351 |
* | Dollar Thrifty Automotive Group Inc. | 3,900 | 300 |
* | Republic Airways Holdings Inc. | 54,100 | 253 |
Donaldson Co. Inc. | 6,000 | 194 | |
TransDigm Group Inc. | 1,400 | 187 | |
Textainer Group Holdings Ltd. | 4,474 | 135 | |
1,399,716 | |||
Information Technology (21.1%) | |||
* | Alliance Data Systems Corp. | 652,193 | 93,296 |
* | Cadence Design Systems Inc. | 5,398,860 | 68,350 |
*,3 | TiVo Inc. | 6,228,460 | 63,219 |
* | Sapient Corp. | 5,513,687 | 56,681 |
* | Ultimate Software Group Inc. | 479,019 | 48,553 |
* | Teradyne Inc. | 3,315,120 | 48,467 |
* | Microsemi Corp. | 2,432,790 | 46,710 |
* | VeriFone Systems Inc. | 1,429,175 | 42,361 |
FEI Co. | 727,210 | 40,033 | |
* | Parametric Technology Corp. | 1,951,601 | 39,383 |
7
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
Convergys Corp. | 2,221,985 | 37,352 | |
* | Aruba Networks Inc. | 1,953,166 | 35,489 |
* | F5 Networks Inc. | 409,273 | 33,757 |
* | Silicon Laboratories Inc. | 828,345 | 33,482 |
IAC/InterActiveCorp | 642,335 | 31,057 | |
j2 Global Inc. | 1,006,229 | 30,227 | |
* | ValueClick Inc. | 1,569,685 | 26,167 |
* | RADWARE Ltd. | 781,541 | 25,634 |
Jabil Circuit Inc. | 1,459,665 | 25,311 | |
* | NCR Corp. | 1,175,874 | 25,023 |
* | Trimble Navigation Ltd. | 521,885 | 24,622 |
* | Riverbed Technology Inc. | 1,309,100 | 24,179 |
* | MICROS Systems Inc. | 529,547 | 24,036 |
* | Rovi Corp. | 1,748,520 | 23,657 |
* | Acxiom Corp. | 1,275,000 | 23,269 |
* | Euronet Worldwide Inc. | 1,144,530 | 23,222 |
FactSet Research Systems Inc. | 252,400 | 22,855 | |
MKS Instruments Inc. | 953,615 | 22,534 | |
* | Red Hat Inc. | 450,400 | 22,146 |
*,^ | First Solar Inc. | 872,100 | 21,201 |
* | NICE Systems Ltd. ADR | 631,945 | 21,044 |
* | Concur Technologies Inc. | 316,435 | 20,957 |
* | ON Semiconductor Corp. | 3,397,540 | 20,895 |
Syntel Inc. | 343,007 | 20,447 | |
Cypress Semiconductor Corp. | 2,028,840 | 20,106 | |
* | Informatica Corp. | 724,330 | 19,658 |
* | Nuance Communications Inc. | 882,280 | 19,640 |
* | Liquidity Services Inc. | 446,347 | 18,403 |
* | DealerTrack Holdings Inc. | 659,816 | 18,033 |
* | Bankrate Inc. | 1,644,830 | 17,649 |
* | Ciena Corp. | 1,414,820 | 17,558 |
* | Finisar Corp. | 1,513,560 | 17,436 |
Fair Isaac Corp. | 357,765 | 16,672 | |
* | BroadSoft Inc. | 430,550 | 16,456 |
* | Salesforce.com Inc. | 111,140 | 16,224 |
* | Sourcefire Inc. | 379,100 | 16,222 |
* | Cardtronics Inc. | 570,742 | 16,215 |
* | FleetCor Technologies Inc. | 341,343 | 16,183 |
* | SolarWinds Inc. | 317,491 | 16,062 |
* | IPG Photonics Corp. | 282,700 | 15,006 |
Heartland Payment Systems Inc. | 572,224 | 14,924 | |
* | Atmel Corp. | 3,088,985 | 14,410 |
MercadoLibre Inc. | 170,831 | 14,345 | |
Avago Technologies Ltd. | 422,630 | 13,959 | |
* | Akamai Technologies Inc. | 357,206 | 13,570 |
* | Manhattan Associates Inc. | 218,584 | 13,115 |
* | Hittite Microwave Corp. | 210,069 | 11,898 |
* | Aspen Technology Inc. | 479,015 | 11,870 |
* | NETGEAR Inc. | 327,550 | 11,631 |
* | JDS Uniphase Corp. | 1,181,320 | 11,447 |
* | Nanometrics Inc. | 819,392 | 11,275 |
* | CommVault Systems Inc. | 178,967 | 11,180 |
* | QLIK Technologies Inc. | 573,235 | 10,553 |
* | CACI International Inc. Class A | 207,352 | 10,457 |
* | WEX Inc. | 137,100 | 10,115 |
* | Acme Packet Inc. | 610,800 | 10,103 |
National Instruments Corp. | 423,739 | 9,983 | |
* | WNS Holdings Ltd. ADR | 944,461 | 9,917 |
* | SPS Commerce Inc. | 270,900 | 9,820 |
* | Mentor Graphics Corp. | 625,680 | 9,711 |
* | Bazaarvoice Inc. | 749,000 | 9,557 |
* | Ultratech Inc. | 306,751 | 9,482 |
* | LinkedIn Corp. Class A | 79,600 | 8,512 |
* | Entropic Communications Inc. | 1,756,300 | 8,448 |
8
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||
Value | |||
Shares | ($000) | ||
* | Global Cash Access Holdings Inc. | 1,106,560 | 7,801 |
* | Tyler Technologies Inc. | 149,100 | 7,128 |
* | Super Micro Computer Inc. | 882,974 | 6,984 |
* | Progress Software Corp. | 349,600 | 6,894 |
*,^ | Ubiquiti Networks Inc. | 483,400 | 5,704 |
* | Interactive Intelligence Group Inc. | 165,115 | 5,236 |
* | Active Network Inc. | 587,077 | 5,201 |
* | Diodes Inc. | 317,775 | 4,817 |
* | Polycom Inc. | 476,535 | 4,775 |
* | Universal Display Corp. | 138,295 | 4,533 |
* | Dropbox Private Placement | 445,203 | 4,314 |
* | Constant Contact Inc. | 344,513 | 4,251 |
Power Integrations Inc. | 135,660 | 4,013 | |
* | Cavium Inc. | 117,485 | 3,898 |
* | Skyworks Solutions Inc. | 165,600 | 3,875 |
* | Monolithic Power Systems Inc. | 190,000 | 3,692 |
* | PROS Holdings Inc. | 175,000 | 3,383 |
* | Volterra Semiconductor Corp. | 181,839 | 3,304 |
* | Allot Communications Ltd. | 136,800 | 3,196 |
* | Gartner Inc. | 66,938 | 3,107 |
* | LSI Corp. | 422,700 | 2,895 |
Littelfuse Inc. | 50,000 | 2,680 | |
Genpact Ltd. | 138,700 | 2,442 | |
MAXIMUS Inc. | 43,424 | 2,396 | |
Lender Processing Services Inc. | 91,700 | 2,211 | |
DST Systems Inc. | 35,896 | 2,047 | |
Anixter International Inc. | 33,931 | 1,989 | |
* | AOL Inc. | 54,100 | 1,857 |
* | Vantiv Inc. Class A | 90,100 | 1,818 |
* | Plexus Corp. | 65,500 | 1,763 |
* | Unisys Corp. | 95,340 | 1,625 |
* | Jive Software Inc. | 136,766 | 1,532 |
* | CalAmp Corp. | 155,800 | 1,383 |
Booz Allen Hamilton Holding Corp. | 103,141 | 1,380 | |
Intersil Corp. Class A | 175,495 | 1,237 | |
* | Nova Measuring Instruments Ltd. | 140,000 | 1,053 |
* | Freescale Semiconductor Ltd. | 100,400 | 898 |
* | RF Micro Devices Inc. | 197,030 | 869 |
Total System Services Inc. | 35,200 | 792 | |
* | Websense Inc. | 51,251 | 677 |
* | Exar Corp. | 71,200 | 609 |
* | MEMC Electronic Materials Inc. | 231,900 | 584 |
* | CSG Systems International Inc. | 24,000 | 495 |
* | Silicon Image Inc. | 99,100 | 436 |
* | Cray Inc. | 35,000 | 426 |
* | ATMI Inc. | 17,200 | 340 |
MTS Systems Corp. | 6,700 | 338 | |
Diebold Inc. | 10,700 | 318 | |
* | Zygo Corp. | 14,400 | 268 |
Jack Henry & Associates Inc. | 6,600 | 251 | |
* | MaxLinear Inc. | 31,600 | 179 |
1,847,315 | |||
Materials (5.4%) | |||
Smurfit Kappa Group plc | 3,366,256 | 37,013 | |
* | KapStone Paper and Packaging Corp. | 1,663,940 | 36,557 |
* | WR Grace & Co. | 560,760 | 35,978 |
* | Graphic Packaging Holding Co. | 5,717,964 | 33,850 |
Ball Corp. | 769,585 | 32,961 | |
Silgan Holdings Inc. | 745,370 | 32,282 | |
Albemarle Corp. | 540,235 | 29,772 | |
PolyOne Corp. | 1,517,260 | 28,722 | |
Minerals Technologies Inc. | 387,730 | 27,785 | |
Methanex Corp. | 893,190 | 26,796 | |
FMC Corp. | 423,170 | 22,648 |
9
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Market | |||||
Value | |||||
Shares | ($000) | ||||
Ashland Inc. | 288,345 | 20,516 | |||
Carpenter Technology Corp. | 413,430 | 20,097 | |||
Schweitzer-Mauduit International Inc. | 529,200 | 18,538 | |||
Sensient Technologies Corp. | 300,186 | 10,921 | |||
* | Ferro Corp. | 3,803,855 | 10,004 | ||
Globe Specialty Metals Inc. | 564,552 | 8,485 | |||
* | LSB Industries Inc. | 200,390 | 8,070 | ||
* | TPC Group Inc. | 124,400 | 5,596 | ||
* | OM Group Inc. | 216,500 | 4,380 | ||
Aptargroup Inc. | 79,000 | 4,051 | |||
NewMarket Corp. | 9,873 | 2,679 | |||
Valspar Corp. | 42,200 | 2,364 | |||
Rockwood Holdings Inc. | 45,895 | 2,107 | |||
Westlake Chemical Corp. | 27,400 | 2,084 | |||
Airgas Inc. | 22,800 | 2,029 | |||
Eastman Chemical Co. | 32,874 | 1,947 | |||
* | Coeur d'Alene Mines Corp. | 57,400 | 1,774 | ||
Cliffs Natural Resources Inc. | 42,500 | 1,542 | |||
Myers Industries Inc. | 76,900 | 1,140 | |||
Walter Energy Inc. | 29,200 | 1,021 | |||
Haynes International Inc. | 16,650 | 844 | |||
* | OMNOVA Solutions Inc. | 48,900 | 383 | ||
* | Owens-Illinois Inc. | 13,200 | 257 | ||
International Flavors & Fragrances Inc. | 2,900 | 187 | |||
* | Chemtura Corp. | 6,700 | 107 | ||
475,487 | |||||
Telecommunication Services (1.4%) | |||||
* | SBA Communications Corp. Class A | 602,890 | 40,171 | ||
* | tw telecom inc Class A | 1,152,025 | 29,342 | ||
* | Vonage Holdings Corp. | 10,222,290 | 23,205 | ||
Cogent Communications Group Inc. | 932,599 | 20,247 | |||
* | Clearwire Corp. Class A | 1,765,410 | 3,531 | ||
*,^ | magicJack VocalTec Ltd. | 90,000 | 1,831 | ||
Primus Telecommunications Group Inc. | 32,700 | 478 | |||
* | Fairpoint Communications Inc. | 20,700 | 152 | ||
118,957 | |||||
Utilities (0.0%) | |||||
American States Water Co. | 16,200 | 713 | |||
Total Common Stocks (Cost $7,072,466) | 8,506,163 | ||||
Coupon | Shares | ||||
Temporary Cash Investments (4.2%)1 | |||||
Money Market Fund (3.8%) | |||||
4,5 | Vanguard Market Liquidity Fund | 0.167% | 331,031,716 | 331,032 | |
Face | |||||
Maturity | Amount | ||||
Coupon | Date | ($000) | |||
Repurchase Agreement (0.3%) | |||||
Deutsche Bank Securities, Inc.(Dated 10/31/12, | |||||
Repurchase Value $32,200,000, collateralized by | |||||
Government National Mortgage Assn. 3.500%, | |||||
1/20/42-10/20/42) | 0.350% | 11/1/12 | 32,200 | 32,200 | |
U.S. Government and Agency Obligations (0.1%) | |||||
6,7 | Fannie Mae Discount Notes | 0.120% | 12/26/12 | 1,000 | 1,000 |
6,7 | Freddie Mac Discount Notes | 0.170% | 12/17/12 | 2,200 | 2,199 |
10
Vanguard® Explorer Fund
Schedule of Investments
October 31, 2012
Face | Market | |||
Maturity | Amount | Value | ||
Coupon | Date | ($000) | ($000) | |
United States Treasury Note/Bond | 0.625% | 12/31/12 | 3,000 | 3,002 |
6,201 | ||||
Total Temporary Cash Investments (Cost $369,433) | 369,433 | |||
Total Investments (101.3%) (Cost $7,441,899) | 8,875,596 | |||
Other Assets and Liabilities—Net (-1.3%)5 | (109,735) | |||
Net Assets (100%) | 8,765,861 |
* Non-income-producing security.
^ Part of security position is on loan to broker-dealers. The total value of securities on loan is $81,111,000.
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 97.8% and 3.5%, respectively, of net assets.
2 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
3 Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day
yield.
5 Includes $84,197,000 of collateral received for securities on loan.
6 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for
senior preferred stock.
7 Securities with a value of $3,099,000 have been segregated as initial margin for open futures contracts.
ADR—American Depositary Receipt.
11
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders of Vanguard Explorer Fund:
We have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the financial statements (not presented herein) of Vanguard Explorer Fund (the “Fund”)
as of October 31, 2012 and for the period then ended and have issued our unqualified report thereon
dated December 11, 2012. Our audit included an audit of the Fund’s schedule of investments as of
October 31, 2012. This schedule of investments is the responsibility of the Fund’s management. Our
responsibility is to express an opinion on this schedule of investments based on our audit.
In our opinion, the accompanying schedule of investments referred to above, when read in conjunction
with the financial statements of the Fund referred to above, presents fairly, in all material respects, the
information set forth therein.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 11, 2012
12
© 2012 The Vanguard Group. Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SNA 240 122012
Item 2: Code of Ethics. The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.
Item 3: Audit Committee Financial Expert. The following members of the Audit Committee have been determined by the Registrant’s Board of Trustees to be Audit Committee Financial Experts serving on its Audit Committee, and to be independent: Rajiv L. Gupta, Amy Gutmann, JoAnn Heffernan Heisen, F. Joseph Loughrey, Mark Loughridge, Scott C. Malpass, André F. Perold, and Alfred M. Rankin, Jr.
Item 4: Principal Accountant Fees and Services.
(a) Audit Fees.
Audit Fees of the Registrant
Fiscal Year Ended October 31, 2012: $38,000
Fiscal Year Ended October 31, 2011: $38,000
Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group.
Fiscal Year Ended October 31, 2012: $4,809,780
Fiscal Year Ended October 31, 2011: $3,978,540
(b) Audit-Related Fees.
Fiscal Year Ended October 31, 2012: $1,812,565
Fiscal Year Ended October 31, 2011: $1,341,750
Includes fees billed in connection with assurance and related services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.
(c) Tax Fees.
Fiscal Year Ended October 31, 2012: $490,518
Fiscal Year Ended October 31, 2011: $373,830
Includes fees billed in connection with tax compliance, planning and advice services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group and related to income and excise taxes.
(d) All Other Fees.
Fiscal Year Ended October 31, 2012: $16,000
Fiscal Year Ended October 31, 2011: $16,000
Includes fees billed for services related to risk management and privacy matters. Services were provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.
(e) (1) Pre-Approval Policies. The policy of the Registrant’s Audit Committee is to consider and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit and non-audit services provided to: (1) the Registrant; (2) The Vanguard Group, Inc.; (3) other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant; and (4) other registered investment companies in the Vanguard Group. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.
In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, the Chairman of the Audit Committee would be called on to consider and, if appropriate, pre-approve audit or permitted non-audit services in an amount sufficient to complete services through the next Audit Committee meeting, and to determine if such services would be consistent with maintaining the accountant’s independence. At the next scheduled Audit Committee meeting, services and fees would be presented to the Audit Committee for formal consideration, and, if appropriate, approval by the entire Audit Committee. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.
The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Vanguard complex, whether such services are provided to: (1) the Registrant; (2) The Vanguard Group, Inc.; (3) other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant; or (4) other registered investment companies in the Vanguard Group.
(2) No percentage of the principal accountant’s fees or services were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) For the most recent fiscal year, over 50% of the hours worked under the principal accountant’s engagement were not performed by persons other than full-time, permanent employees of the principal accountant.
(g) Aggregate Non-Audit Fees.
Fiscal Year Ended October 31, 2012: $506,518
Fiscal Year Ended October 31, 2011: $389,830
Includes fees billed for non-audit services provided to the Registrant, The Vanguard Group, Inc., Vanguard Marketing Corporation, and other registered investment companies in the Vanguard Group.
(h) For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services was consistent with maintaining the principal accountant’s independence.
Item 5: Audit Committee of Listed Registrants.
Not Applicable.
Item 6: Investments.
Not Applicable.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not Applicable.
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not Applicable.
Item 9: Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not Applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11: Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective
based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Control Over Financial Reporting. There were no significant changes in Registrant’s Internal Control Over Financial Reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 12: Exhibits.
(a) Code of Ethics.
(b) Certifications.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VANGUARD EXPLORER FUND | |
BY: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: December 19, 2012 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
VANGUARD EXPLORER FUND | |
BY: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER
| |
Date: December 19, 2012
| |
VANGUARD EXPLORER FUND | |
BY: | /s/ THOMAS J. HIGGINS* |
THOMAS J. HIGGINS | |
CHIEF FINANCIAL OFFICER
| |
Date: December 19, 2012 |
* By: /s/ Heidi Stam
Heidi Stam, pursuant to a Power of Attorney filed on March 27, 2012 see file Number
2-11444, Incorporated by Reference.