Vanguard® Growth Index Fund
Schedule of Investments (unaudited)
As of September 30, 2021
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
Shares | Market Value ($000) | ||
Common Stocks (99.9%) | |||
Basic Materials (1.2%) | |||
Linde plc | 4,069,486 | 1,193,906 | |
Ecolab Inc. | 2,032,363 | 423,991 | |
Fastenal Co. | 4,536,549 | 234,131 | |
Albemarle Corp. | 461,547 | 101,065 | |
FMC Corp. | 508,026 | 46,515 | |
1,999,608 | |||
Consumer Discretionary (23.9%) | |||
* | Amazon.com Inc. | 3,397,873 | 11,162,149 |
* | Tesla Inc. | 6,325,753 | 4,905,495 |
Home Depot Inc. | 8,330,310 | 2,734,508 | |
* | Walt Disney Co. | 14,343,192 | 2,426,438 |
* | Netflix Inc. | 3,393,573 | 2,071,233 |
Costco Wholesale Corp. | 3,489,379 | 1,567,952 | |
NIKE Inc. Class B | 10,088,376 | 1,465,135 | |
McDonald's Corp. | 5,894,776 | 1,421,289 | |
Lowe's Cos. Inc. | 5,517,468 | 1,119,274 | |
Starbucks Corp. | 9,307,075 | 1,026,663 | |
* | Booking Holdings Inc. | 324,101 | 769,374 |
TJX Cos. Inc. | 9,047,043 | 596,924 | |
Estee Lauder Cos. Inc. Class A | 1,738,900 | 521,548 | |
Activision Blizzard Inc. | 6,138,708 | 475,075 | |
* | Uber Technologies Inc. | 10,411,581 | 466,439 |
* | Airbnb Inc. Class A | 2,523,348 | 423,292 |
Dollar General Corp. | 1,841,626 | 390,683 | |
* | Chipotle Mexican Grill Inc. Class A | 210,675 | 382,906 |
* | Lululemon Athletica Inc. | 936,974 | 379,193 |
* | O'Reilly Automotive Inc. | 544,264 | 332,578 |
Electronic Arts Inc. | 2,246,339 | 319,542 | |
* | Aptiv plc | 2,135,151 | 318,073 |
Ross Stores Inc. | 2,818,846 | 306,831 | |
* | Marriott International Inc. Class A | 2,056,157 | 304,496 |
* | Hilton Worldwide Holdings Inc. | 2,199,764 | 290,611 |
* | AutoZone Inc. | 170,057 | 288,755 |
Yum! Brands Inc. | 2,333,693 | 285,434 | |
* | Trade Desk Inc. Class A | 3,426,612 | 240,891 |
* | Copart Inc. | 1,680,634 | 233,138 |
* | Etsy Inc. | 999,107 | 207,774 |
* | Carvana Co. Class A | 666,987 | 201,123 |
* | Expedia Group Inc. | 1,146,882 | 187,974 |
Tractor Supply Co. | 902,517 | 182,859 | |
* | Caesars Entertainment Inc. | 1,600,416 | 179,695 |
* | Peloton Interactive Inc. Class A | 2,015,197 | 175,423 |
Shares | Market Value ($000) | ||
* | Roblox Corp. Class A | 2,058,417 | 155,513 |
* | Ulta Beauty Inc. | 429,050 | 154,853 |
*,1 | AMC Entertainment Holdings Inc. Class A | 4,051,845 | 154,213 |
* | Royal Caribbean Cruises Ltd. | 1,708,578 | 151,978 |
* | Burlington Stores Inc. | 526,662 | 149,346 |
* | Wayfair Inc. Class A | 579,917 | 148,175 |
* | Take-Two Interactive Software Inc. | 919,727 | 141,702 |
Domino's Pizza Inc. | 290,929 | 138,762 | |
* | NVR Inc. | 26,722 | 128,107 |
* | Lyft Inc. Class A | 2,190,323 | 117,379 |
* | DraftKings Inc. Class A | 2,229,004 | 107,349 |
* | Live Nation Entertainment Inc. | 1,123,522 | 102,387 |
MGM Resorts International | 1,616,484 | 69,751 | |
* | Wynn Resorts Ltd. | 821,718 | 69,641 |
Rollins Inc. | 1,941,817 | 68,604 | |
* | Vail Resorts Inc. | 158,928 | 53,090 |
* | Penn National Gaming Inc. | 618,765 | 44,836 |
*,1 | Chewy Inc. Class A | 658,119 | 44,824 |
1 | Sirius XM Holdings Inc. | 6,393,847 | 39,002 |
*,1 | QuantumScape Corp. Class A | 1,324,029 | 32,492 |
Warner Music Group Corp. Class A | 738,261 | 31,553 | |
*,1 | Endeavor Group Holdings Inc. Class A | 4,687 | 134 |
40,464,458 | |||
Consumer Staples (0.9%) | |||
Colgate-Palmolive Co. | 6,658,215 | 503,228 | |
* | Monster Beverage Corp. | 2,922,301 | 259,588 |
Hershey Co. | 1,147,947 | 194,290 | |
Church & Dwight Co. Inc. | 1,938,149 | 160,033 | |
Brown-Forman Corp. Class B | 2,320,705 | 155,510 | |
McCormick & Co. Inc. | 983,783 | 79,716 | |
Lamb Weston Holdings Inc. | 1,145,402 | 70,293 | |
Brown-Forman Corp. Class A | 268,802 | 16,846 | |
* | Olaplex Holdings Inc. | 35,758 | 876 |
Clorox Co. | 95 | 16 | |
1,440,396 | |||
Energy (0.4%) | |||
Pioneer Natural Resources Co. | 1,733,062 | 288,572 | |
* | Cheniere Energy Inc. | 1,901,714 | 185,741 |
* | Enphase Energy Inc. | 956,227 | 143,405 |
* | Plug Power Inc. | 4,537,156 | 115,879 |
Hess Corp. | 243 | 19 | |
733,616 | |||
Financials (2.1%) | |||
S&P Global Inc. | 1,902,294 | 808,266 | |
Aon plc Class A (XNYS) | 1,692,800 | 483,751 | |
Moody's Corp. | 1,249,316 | 443,645 | |
MSCI Inc. Class A | 618,198 | 376,075 | |
* | SVB Financial Group | 447,992 | 289,797 |
First Republic Bank | 1,410,968 | 272,147 | |
* | Coinbase Global Inc. Class A | 1,012,871 | 230,408 |
Broadridge Financial Solutions Inc. | 916,981 | 152,806 | |
MarketAxess Holdings Inc. | 284,945 | 119,874 | |
FactSet Research Systems Inc. | 298,211 | 117,728 | |
Tradeweb Markets Inc. Class A | 830,618 | 67,097 | |
* | Markel Corp. | 54,163 | 64,732 |
Apollo Global Management Inc. Class A | 836,394 | 51,513 | |
*,1 | Lucid Group Inc. | 1,596,468 | 40,518 |
Shares | Market Value ($000) | ||
SEI Investments Co. | 501,097 | 29,715 | |
Interactive Brokers Group Inc. Class A | 348,573 | 21,730 | |
Intercontinental Exchange Inc. | 478 | 55 | |
3,569,857 | |||
Health Care (8.2%) | |||
Thermo Fisher Scientific Inc. | 3,105,388 | 1,774,201 | |
* | Moderna Inc. | 2,708,204 | 1,042,279 |
* | Intuitive Surgical Inc. | 938,502 | 933,012 |
Danaher Corp. | 2,535,755 | 771,985 | |
Zoetis Inc. | 3,740,991 | 726,276 | |
Stryker Corp. | 2,678,865 | 706,470 | |
* | Edwards Lifesciences Corp. | 4,920,113 | 557,006 |
* | Illumina Inc. | 1,235,268 | 501,037 |
* | Boston Scientific Corp. | 11,238,936 | 487,657 |
* | Regeneron Pharmaceuticals Inc. | 788,164 | 476,981 |
* | IDEXX Laboratories Inc. | 671,533 | 417,626 |
* | DexCom Inc. | 763,675 | 417,623 |
* | Align Technology Inc. | 592,473 | 394,249 |
Agilent Technologies Inc. | 2,391,722 | 376,768 | |
* | Vertex Pharmaceuticals Inc. | 2,047,747 | 371,441 |
* | IQVIA Holdings Inc. | 1,512,469 | 362,297 |
* | Veeva Systems Inc. Class A | 1,090,475 | 314,242 |
ResMed Inc. | 1,149,898 | 303,056 | |
West Pharmaceutical Services Inc. | 583,939 | 247,905 | |
* | Horizon Therapeutics plc | 1,783,038 | 195,314 |
* | Seagen Inc. | 1,077,037 | 182,881 |
* | Catalent Inc. | 1,344,376 | 178,896 |
* | Alnylam Pharmaceuticals Inc. | 938,101 | 177,123 |
Cooper Cos. Inc. | 388,744 | 160,672 | |
Baxter International Inc. | 1,973,002 | 158,689 | |
* | Insulet Corp. | 543,631 | 154,516 |
* | Teladoc Health Inc. | 1,131,257 | 143,455 |
Teleflex Inc. | 369,414 | 139,103 | |
* | Exact Sciences Corp. | 1,357,226 | 129,547 |
* | Bio-Rad Laboratories Inc. Class A | 165,729 | 123,626 |
* | BioMarin Pharmaceutical Inc. | 1,447,272 | 111,860 |
* | ABIOMED Inc. | 340,284 | 110,769 |
* | Incyte Corp. | 1,481,655 | 101,908 |
* | 10X Genomics Inc. Class A | 643,609 | 93,697 |
Cerner Corp. | 1,166,903 | 82,290 | |
* | Charles River Laboratories International Inc. | 198,843 | 82,057 |
STERIS plc | 393,704 | 80,426 | |
* | Avantor Inc. | 1,959,172 | 80,130 |
PerkinElmer Inc. | 442,346 | 76,654 | |
* | PPD Inc. | 1,109,313 | 51,905 |
* | Novocure Ltd. | 347,688 | 40,391 |
* | Oak Street Health Inc. | 855,452 | 36,382 |
* | GoodRx Holdings Inc. Class A | 506,021 | 20,757 |
* | agilon health Inc. | 311,178 | 8,156 |
Becton Dickinson and Co. | 255 | 63 | |
* | Centene Corp. | 485 | 30 |
13,903,408 | |||
Industrials (11.5%) | |||
Visa Inc. Class A | 12,876,157 | 2,868,164 | |
Mastercard Inc. Class A | 6,953,607 | 2,417,630 | |
* | PayPal Holdings Inc. | 9,274,937 | 2,413,431 |
Accenture plc Class A | 5,005,472 | 1,601,351 |
Shares | Market Value ($000) | ||
* | Boeing Co. | 4,626,689 | 1,017,594 |
* | Square Inc. Class A | 3,136,748 | 752,318 |
Automatic Data Processing Inc. | 3,339,533 | 667,640 | |
United Parcel Service Inc. Class B | 2,874,299 | 523,410 | |
Sherwin-Williams Co. | 1,870,498 | 523,234 | |
* | Fiserv Inc. | 4,704,345 | 510,422 |
Union Pacific Corp. | 2,574,426 | 504,613 | |
Global Payments Inc. | 2,318,650 | 365,373 | |
IHS Markit Ltd. | 2,831,764 | 330,240 | |
Fidelity National Information Services Inc. | 2,438,428 | 296,708 | |
Paychex Inc. | 2,556,256 | 287,451 | |
Rockwell Automation Inc. | 915,767 | 269,272 | |
Cintas Corp. | 690,835 | 262,973 | |
Verisk Analytics Inc. Class A | 1,273,629 | 255,070 | |
* | Mettler-Toledo International Inc. | 182,471 | 251,328 |
Equifax Inc. | 961,688 | 243,711 | |
* | Keysight Technologies Inc. | 1,452,369 | 238,610 |
Old Dominion Freight Line Inc. | 822,714 | 235,280 | |
* | Zebra Technologies Corp. Class A | 421,521 | 217,260 |
* | Generac Holdings Inc. | 498,211 | 203,604 |
Kansas City Southern | 718,018 | 194,324 | |
* | Waters Corp. | 484,363 | 173,063 |
* | FleetCor Technologies Inc. | 652,034 | 170,357 |
TransUnion | 1,511,598 | 169,768 | |
Vulcan Materials Co. | 994,901 | 168,298 | |
* | Trimble Inc. | 1,986,088 | 163,356 |
Expeditors International of Washington Inc. | 1,340,982 | 159,751 | |
* | Teledyne Technologies Inc. | 367,881 | 158,034 |
Ball Corp. | 1,289,012 | 115,972 | |
JB Hunt Transport Services Inc. | 664,228 | 111,072 | |
* | Affirm Holdings Inc. | 873,526 | 104,063 |
* | Bill.Com Holdings Inc. | 379,379 | 101,275 |
Martin Marietta Materials Inc. | 246,187 | 84,117 | |
HEICO Corp. Class A | 572,995 | 67,860 | |
Cognex Corp. | 662,432 | 53,140 | |
Jack Henry & Associates Inc. | 292,112 | 47,924 | |
HEICO Corp. | 345,230 | 45,526 | |
Lockheed Martin Corp. | 200 | 69 | |
L3Harris Technologies Inc. | 178 | 39 | |
AMETEK Inc. | 205 | 25 | |
Masco Corp. | 213 | 12 | |
19,344,732 | |||
Real Estate (2.5%) | |||
American Tower Corp. | 3,592,569 | 953,504 | |
Crown Castle International Corp. | 3,411,462 | 591,275 | |
Equinix Inc. | 708,419 | 559,743 | |
Public Storage | 1,175,665 | 349,290 | |
Digital Realty Trust Inc. | 2,230,562 | 322,205 | |
SBA Communications Corp. Class A | 864,745 | 285,859 | |
* | CoStar Group Inc. | 3,117,471 | 268,289 |
Invitation Homes Inc. | 4,550,540 | 174,422 | |
Sun Communities Inc. | 914,873 | 169,343 | |
* | Zillow Group Inc. Class C | 1,313,122 | 115,739 |
Alexandria Real Estate Equities Inc. | 601,479 | 114,925 | |
Realty Income Corp. | 1,536,894 | 99,683 | |
* | Opendoor Technologies Inc. | 3,887,053 | 79,801 |
UDR Inc. | 1,171,556 | 62,069 | |
* | Zillow Group Inc. Class A | 347,059 | 30,742 |
Shares | Market Value ($000) | ||
Regency Centers Corp. | 78 | 5 | |
4,176,894 | |||
Technology (48.1%) | |||
Apple Inc. | 123,954,534 | 17,539,567 | |
Microsoft Corp. | 59,317,616 | 16,722,822 | |
* | Facebook Inc. Class A | 18,816,250 | 6,386,047 |
* | Alphabet Inc. Class A | 2,376,400 | 6,353,353 |
* | Alphabet Inc. Class C | 2,148,292 | 5,725,864 |
NVIDIA Corp. | 18,746,657 | 3,883,557 | |
* | Adobe Inc. | 3,760,405 | 2,164,940 |
* | salesforce.com Inc. | 6,943,853 | 1,883,312 |
Texas Instruments Inc. | 7,287,210 | 1,400,675 | |
Intuit Inc. | 2,049,100 | 1,105,510 | |
* | Advanced Micro Devices Inc. | 9,574,355 | 985,201 |
* | ServiceNow Inc. | 1,563,674 | 973,027 |
Applied Materials Inc. | 7,127,132 | 917,476 | |
* | Snap Inc. Class A | 9,418,650 | 695,756 |
Lam Research Corp. | 1,120,485 | 637,724 | |
* | Snowflake Inc. Class A | 2,103,662 | 636,211 |
Micron Technology Inc. | 8,885,936 | 630,724 | |
QUALCOMM Inc. | 4,451,840 | 574,198 | |
* | Autodesk Inc. | 1,736,625 | 495,233 |
* | Zoom Video Communications Inc. Class A | 1,611,510 | 421,410 |
* | Twilio Inc. Class A | 1,317,628 | 420,389 |
KLA Corp. | 1,205,605 | 403,287 | |
Marvell Technology Inc. | 6,468,543 | 390,118 | |
* | Crowdstrike Holdings Inc. Class A | 1,572,681 | 386,534 |
* | DocuSign Inc. Class A | 1,460,989 | 376,102 |
* | Workday Inc. Class A | 1,491,851 | 372,799 |
Roper Technologies Inc. | 832,157 | 371,250 | |
* | Twitter Inc. | 5,983,671 | 361,354 |
* | Synopsys Inc. | 1,203,749 | 360,415 |
* | Palo Alto Networks Inc. | 730,303 | 349,815 |
Amphenol Corp. Class A | 4,721,718 | 345,771 | |
Microchip Technology Inc. | 2,163,075 | 332,010 | |
* | Cadence Design Systems Inc. | 2,184,726 | 330,855 |
* | Match Group Inc. | 2,075,697 | 325,864 |
* | DoorDash Inc. Class A | 1,572,865 | 323,979 |
* | Fortinet Inc. | 1,095,771 | 320,009 |
* | Palantir Technologies Inc. Class A | 12,519,680 | 300,973 |
Xilinx Inc. | 1,953,321 | 294,932 | |
* | Okta Inc. | 1,132,301 | 268,740 |
* | Datadog Inc. Class A | 1,797,669 | 254,101 |
* | EPAM Systems Inc. | 424,651 | 242,255 |
* | HubSpot Inc. | 352,473 | 238,304 |
* | ANSYS Inc. | 688,707 | 234,470 |
* | MongoDB Inc. Class A | 484,310 | 228,357 |
* | Pinterest Inc. Class A | 4,382,154 | 223,271 |
Skyworks Solutions Inc. | 1,303,551 | 214,799 | |
* | Cloudflare Inc. Class A | 1,871,414 | 210,815 |
* | Paycom Software Inc. | 403,187 | 199,880 |
* | Gartner Inc. | 627,264 | 190,613 |
* | Splunk Inc. | 1,293,826 | 187,230 |
Monolithic Power Systems Inc. | 344,294 | 166,872 | |
* | Zscaler Inc. | 594,685 | 155,938 |
* | Unity Software Inc. | 1,226,455 | 154,840 |
* | VeriSign Inc. | 750,619 | 153,884 |
* | Tyler Technologies Inc. | 322,400 | 147,869 |
Shares | Market Value ($000) | ||
Teradyne Inc. | 1,302,174 | 142,158 | |
* | RingCentral Inc. Class A | 642,374 | 139,716 |
* | Akamai Technologies Inc. | 1,285,292 | 134,429 |
* | Coupa Software Inc. | 580,353 | 127,202 |
SS&C Technologies Holdings Inc. | 1,712,686 | 118,860 | |
Bentley Systems Inc. Class B | 1,598,713 | 96,946 | |
* | GoDaddy Inc. Class A | 1,332,307 | 92,862 |
* | ZoomInfo Technologies Inc. Class A | 1,435,030 | 87,810 |
* | Black Knight Inc. | 1,174,548 | 84,567 |
* | IAC/InterActiveCorp. | 625,708 | 81,524 |
* | Dropbox Inc. Class A | 2,364,568 | 69,093 |
* | Zendesk Inc. | 473,924 | 55,160 |
*,1 | VMware Inc. Class A | 308,503 | 45,874 |
* | IPG Photonics Corp. | 274,441 | 43,471 |
* | Bumble Inc. Class A | 661,890 | 33,081 |
*,1 | AppLovin Corp. Class A | 265,822 | 19,238 |
* | Qualtrics International Inc. Class A | 324,777 | 13,881 |
* | Toast Inc. Class A | 171,681 | 8,575 |
Broadcom Inc. | 325 | 158 | |
Analog Devices Inc. | 450 | 75 | |
Citrix Systems Inc. | 95 | 10 | |
* | Vimeo Inc. | 115 | 3 |
81,365,994 | |||
Telecommunications (0.9%) | |||
* | Charter Communications Inc. Class A | 943,155 | 686,202 |
* | Roku Inc. | 918,809 | 287,909 |
* | Liberty Broadband Corp. Class C | 1,142,817 | 197,364 |
* | Arista Networks Inc. | 454,129 | 156,057 |
Motorola Solutions Inc. | 668,219 | 155,241 | |
* | Altice USA Inc. Class A | 1,713,005 | 35,493 |
* | Liberty Broadband Corp. Class A | 191,005 | 32,156 |
Ubiquiti Inc. | 49,875 | 14,896 | |
1,565,318 | |||
Utilities (0.2%) | |||
Waste Connections Inc. (XTSE) | 2,056,351 | 258,956 | |
Total Common Stocks (Cost $70,936,960) | 168,823,237 | ||
Temporary Cash Investments (0.3%) | |||
Money Market Fund (0.3%) | |||
2,3 | Vanguard Market Liquidity Fund, 0.068% (Cost $549,965) | 5,500,184 | 550,019 |
Total Investments (100.2%) (Cost $71,486,925) | 169,373,256 | ||
Other Assets and Liabilities—Net (-0.2%) | (294,632) | ||
Net Assets (100%) | 169,078,624 | ||
Cost is in $000. |
* | Non-income-producing security. |
1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $286,945,000. |
2 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
3 | Collateral of $294,194,000 was received for securities on loan, of which $292,735,000 is held in Vanguard Market Liquidity Fund and $1,459,000 is held in cash. |
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts | ||||
($000) | ||||
Expiration | Number of Long (Short) Contracts | Notional Amount | Value and Unrealized Appreciation (Depreciation) | |
Long Futures Contracts | ||||
E-mini S&P 500 Index | December 2021 | 586 | 125,924 | (4,205) |
Over-the-Counter Total Return Swaps | ||||||
Reference Entity | Termination Date | Counterparty | Notional Amount ($000) | Floating Interest Rate Received (Paid)1 (%) | Value and Unrealized Appreciation ($000) | Value and Unrealized (Depreciation) ($000) |
Netflix Inc. | 8/31/22 | BOANA | 61,034 | (0.050) | — | (2) |
Visa Inc. Class A | 8/31/22 | BOANA | 99,124 | 0.050 | 4 | — |
4 | (2) |
1 | Based on 1M USD Overnight Bank Funding Rate as of the most recent payment date. Floating interest payment received/paid monthly. |
1M—1-month. | |
BOANA—Bank of America, N.A. |
A. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value. Temporary cash investments 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.
B. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any securities pledged as initial margin for open contracts are noted in the Schedule of Investments.
Futures contracts are valued at their quoted daily settlement prices. Fluctuations in the value of the contracts are recorded as an asset (liability).
C. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.
A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded as an asset (liability) and as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.
D. Various inputs may be used to determine the value of the fund’s investments and derivatives. 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). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund’s investments and derivatives as of September 30, 2021, based on the inputs used to value them:
Level 1 ($000) | Level 2 ($000) | Level 3 ($000) | Total ($000) | |
Investments | ||||
Assets | ||||
Common Stocks | 168,823,237 | — | — | 168,823,237 |
Temporary Cash Investments | 550,019 | — | — | 550,019 |
Total | 169,373,256 | — | — | 169,373,256 |
Derivative Financial Instruments | ||||
Assets | ||||
Swap Contracts | — | 4 | — | 4 |
Liabilities | ||||
Futures Contracts1 | 4,205 | — | — | 4,205 |
Swap Contracts | — | 2 | — | 2 |
Total | 4,205 | 2 | — | 4,207 |
1 | Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. |