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: 811-4526
Name of Registrant: Vanguard Quantitative Funds
Address of Registrant:
P.O. Box 2600
Valley Forge, PA 19482
Name and address of agent for service:
Heidi Stam, Esquire
P.O. Box 876
Valley Forge, PA 19482
Registrant’s telephone number, including area code: (610) 669-1000
Date of fiscal year end: September 30
Date of reporting period: October 1, 2009 – September 30, 2010
Item 1: Reports to Shareholders
Vanguard Growth and Income Fund |
Annual Report |
September 30, 2010 |
> Vanguard Growth and Income Fund’s Investor Shares returned 9.24%, and the Admiral Shares returned 9.37%, solid absolute returns that fell short of the benchmark index’s result.
> Among the fund’s bright spots were benchmark-beating stock selections in the materials, health care, and consumer staples sectors.
> Missteps in the utilities, information technology, and industrial sectors offset the fund’s relative strengths elsewhere.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisor’s Report. | 7 |
Fund Profile. | 9 |
Performance Summary. | 10 |
Financial Statements. | 12 |
Your Fund’s After-Tax Returns. | 23 |
About Your Fund’s Expenses. | 24 |
Trustees Approve Advisory Agreement. | 26 |
Glossary. | 27 |
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.
Cover photograph: Jean Maher.
Your Fund’s Total Returns | ||||
Fiscal Year Ended September 30, 2010 | ||||
Total | ||||
Returns | ||||
Vanguard Growth and Income Fund | ||||
Investor Shares | 9.24% | |||
Admiral™ Shares | 9.37 | |||
S&P 500 Index | 10.16 | |||
Large-Cap Core Funds Average | 7.86 | |||
Large-Cap Core 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 | ||||
September 30, 2009, Through September 30, 2010 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Growth and Income Fund | ||||
Investor Shares | $22.34 | $23.98 | $0.408 | $0.000 |
Admiral Shares | 36.48 | 39.15 | 0.718 | 0.000 |
1
Chairman’s Letter
Dear Shareholder,
Investor Shares of Vanguard Growth and Income Fund returned 9.24% for the fiscal year ended September 30; Admiral Shares returned 9.37%. This performance trailed that of the Standard & Poor’s 500 Index, but surpassed the average return of large-cap core funds. Subpar stock selections in sectors such as utilities, information technology, and industrials offset notable strengths in materials, health care, and consumer staples, keeping the fund a few steps behind its benchmark index.
If you hold shares of the fund in a taxable account, you may wish to review information on the fund’s after-tax returns that appears later in this report.
On October 6, after the close of the period, Vanguard broadened the availability of our lower-cost Admiral Shares. We reduced the Admiral minimums on most of our actively managed funds to $50,000 from $100,000, as part of our ongoing efforts to lower the cost of investing for our clients.
An upbeat end to a worrisome 12 months
Although global stock markets traced a ragged trajectory, they ultimately gained ground for the 12 months ended September 30. Europe’s sovereign debt crisis and a dispiriting lack of vigor in the U.S. economy weighed on stock prices
2
through the spring and summer. In September, however, investor sentiment perked up, buoyed by continued signs of strength in corporate financial statements. The broad U.S. stock market rallied to close the 12-month period with a return of more than 11%. Small-capitalization stocks finished a few steps ahead of their large-cap counterparts.
International stock markets were a mixed bag: middling returns in Europe, stagnation in the Pacific region’s developed markets, and a return of more than 20% from emerging markets. The combined result, as measured by the MSCI All Country World Index ex USA, was a 12-month return of 8%.
Bond prices rallied, driving yields to surprising lows
Bonds produced strong 12-month returns, a gratifying performance that nevertheless raises questions about the prospects for total returns in a fixed income market where yields hover near all-time lows. At the start of the period, the 10-year U.S. Treasury note yielded 3.31%; at the end of the period, the figure was 2.51% as investors bid up bond prices. As yields move lower, of course, the scope for continued declines—and the attendant rise in prices—diminishes. Corporate bonds performed best for the 12 months. Municipal bonds delivered solid, but more modest, returns.
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended September 30, 2010 | |||
One | Three | Five | |
Year | Years | Years | |
Stocks | |||
Russell 1000 Index (Large-caps) | 10.75% | -6.79% | 0.86% |
Russell 2000 Index (Small-caps) | 13.35 | -4.29 | 1.60 |
Dow Jones U.S. Total Stock Market Index | 11.51 | -6.12 | 1.37 |
MSCI All Country World Index ex USA (International) | 8.00 | -6.98 | 4.72 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | 8.16% | 7.42% | 6.20% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | 5.81 | 6.04 | 5.13 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.12 | 1.01 | 2.47 |
CPI | |||
Consumer Price Index | 1.14% | 1.57% | 1.90% |
3
As has been the case for almost two years now, the yields of money market securities remained near 0%, a consequence of the Federal Reserve Board’s efforts to stimulate the economy by keeping a tight lid on borrowing costs.
Despite a solid 12-month return, the fund trailed its benchmark
Vanguard Growth and Income Fund’s advisor, Mellon Capital Management, uses quantitative stock-selection models with the aim of matching the risk profile of its benchmark, the S&P 500 Index, while producing superior returns. Although the fund’s sector weightings are very similar to those of the benchmark, the advisor seeks to hold the best, and avoid the worst, stocks in each sector, and thus produce benchmark-beating returns.
Although the fund generated a solid absolute return over the past 12 months, it fell short of this goal. Poor stock selection in the utilities sector—including the advisor’s overweighting of some weak-performing electric utilities and lack of exposure to some of the better performers—contributed to the fund’s underperformance relative to the benchmark. In the information technology sector, the fund did not hold several computer storage and peripherals stocks that posted healthy returns. And within industrials, the fund overweighted some weak-performing aerospace and defense stocks and had no stake in several that posted robust returns. The advisor also made some poor stock choices among regional bank stocks.
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
Growth and Income Fund | 0.35% | 0.21% | 1.27% |
The fund expense ratios shown are from the prospectus dated January 27, 2010, and represent estimated costs for the current fiscal year. For the fiscal year ended September 30, 2010, the fund’s expense ratios were 0.32% for Investor Shares and 0.21% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper Inc. and captures information through year-end 2009.
Peer group: Large-Cap Core Funds.
4
The record was better in the materials, health care, and consumer staples sectors, where the fund outperformed the benchmark. In materials, the overweighting of a couple of diversified metals and mining stocks boosted returns. In health care, the fund’s advisor avoided a couple of poorly performing health care equipment stocks and overweighted some managed health care companies that generated strong returns for the year. In consumer staples, good stock picks in packaged foods also buoyed returns.
A challenging decade
The Growth and Income Fund benefited from the broad market rally over the last 12 months. Still, the fund’s ten-year record bears the scars of the financial markets’ recent turmoil. The average annual return for the fund’s Investor Shares over the last ten years was –1.10%, a performance that trails that of the S&P 500, which posted an annualized return of –0.43% for the period. The fund’s return did, however, surpass the –2.07% average annual return for large-cap core funds for the period.
The decade has been challenging for all investment managers, but the market dynamics, particularly the character of the market’s 2008 downturn and subsequent rebound, have tended to put quantitative managers at a disadvantage. The stocks typically favored by these managers—those with below-average valuations, better-than-average earnings growth prospects, and solid balance sheets—have trailed some of the market’s more speculative fare.
Total Returns | |
Ten Years Ended September 30, 2010 | |
Average | |
Annual Return | |
Growth and Income Fund Investor Shares | -1.10% |
S&P 500 Index | -0.43 |
Large-Cap Core Funds Average | -2.07 |
Large-Cap Core 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
Despite its recent challenges, we remain confident that the fund’s disciplined, research-based approach to stock selection, combined with the advantage of Vanguard’s low costs, will produce competitive long-term returns.
Please note: After the close of the period, Oliver E. Buckley, who has managed the fund since 2008, announced that he plans to retire at the end of 2010. We thank him for his service to the fund’s shareholders. Warren Chiang, CFA and Langton C. Garvin, CFA, who have since joined Mr. Buckley as co-managers, will continue to manage the fund after Mr. Buckley’s retirement.
Market turbulence should not alter investing strategy
The volatility in stocks over the last two years has served as a stark reminder to investors that financial markets rarely follow a smooth path. After a period of steep market declines, the U.S. stock market produced strong returns over the last 12 months. Still, significant uncertainty remains about the outlook for future gains as U.S. employment remains at stubbornly high levels and economic growth forecasts for the United States look relatively modest.
That uncertainty, however, should not dictate a change in investing strategy. Instead, investors should continue to hold a diversified portfolio of stocks and bonds that is tailored to their risk tolerance and time horizon. Such an approach will not totally insulate investors from the market’s ups and downs, but rather will position them to generate solid returns over the long term. The Vanguard Growth and Income Fund, combined with other equity and fixed income investments, can be an important part of that sound financial plan.
As always, thank you for entrusting your assets to Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
October 13, 2010
6
Advisor’s Report
Vanguard Growth and Income Fund’s Investor Shares returned 9.24% for the fiscal year ended September 30. The Admiral Shares returned 9.37%. The S&P 500 Index returned 10.16%, while the average return of large-cap core funds was 7.86%.
Significant market gains over the period
The S&P 500 Index gained more than 10% in the 12-month period ended September 30, 2010. Strong gains were posted early in the period amid positive indicators in manufacturing and consumer confidence, although that strength has waned since April as investors have become more uneasy about the strength of the recovery. Although corporate earnings have continued to increase year-over-year, concerns about the sustainability of U.S. economic growth, persistently high unemployment, and sovereign weakness in Europe have all contributed to recurring periods of risk aversion in the markets this year.
Fund performance trailed the S&P 500 benchmark during the period
Although the fund performed approximately in line with the S&P 500 Index during much of the period, unfavorable stock selection in the most recent quarter resulted in underperformance for the full year. Neither industry/sector weight differences relative to the benchmark nor differences in other top-down measures such as market capitalization had a significant impact on performance.
The fund’s performance has been most affected by the continuing vacillation of investor sentiment regarding the prospects for recovery in the global economy. In this “risk on, risk off” environment, with higher-than-normal correlations among stocks, performance relative to the benchmark suffered somewhat as share prices responded less to the corporate fundamentals of valuation, earnings growth, and quality that we rely on, than to alternating states of pessimism and optimism.
Over the past 12 months, we witnessed significant reversals in the S&P 500 Index. During positive sentiment in the fourth quarter of last year and the first quarter of this year, the index rose a bit more than 5% in each quarter. Then, amid sharply negative sentiment in the second quarter of this year, the benchmark retreated more than 11%. During the third calendar quarter, as optimism seemed to reassert itself, the market rose more than 11%. Within the quarter, we saw the index rise by 7% in July, drop almost 5% in August, and then rebound nearly 9% in September. During that three-month period, as confidence came and went, the names we held in the fund lagged the S&P 500 by approximately 1%.
Some of the poorest-performing stocks included holdings in the utilities and industrials sectors. In utilities, we owned Exelon and Constellation Energy, which underperformed peers in an environment in which industrial and small commercial energy demand remained very soft.
7
In the information technology sector, performance was mixed. Overall, stock selection was negative as the fund held hard-drive maker Western Digital and flash memory maker Micron Technology, both of which fell after a strong run-up fueled by an early rebound in PC demand, amid mounting concerns about oversupply and softening PC sales. IT outsourcer Computer Sciences Corporation also declined in the period after posting weak earnings. However, the fund gained from holding accounting software maker Intuit, which soared more than 50% on strong growth in sales of its tax preparation software product TurboTax.
Portfolio performance was strongest in the health care and materials sectors. Drug distributor McKesson rose amid perceptions that the company would benefit from the U.S. health care overhaul, particularly with regard to opportunities for its medical technology business. At the same time, the fund avoided Boston Scientific, which fell more than 40% in the wake of a March announcement that it was suspending sales of its two leading defibrillators because of regulatory concerns.
In the materials sector, Titanium Metals rose sharply amid rising demand for titanium among airplane makers as production of new airplane models ramped up. Energy holding Pioneer Natural Resources gained as the company increased production and signed a $1.4 billion joint venture with Reliance Industries to develop some of its shale gas assets. In the chemical industry, the fund did not hold benchmark component Monsanto, which declined sharply because of falling prices in both its herbicide and seed segments.
The fund’s positioning and risk controls
During the past year, we have completed the integration of the legacy Franklin Portfolio and legacy Mellon Capital stock selection models. As we have mentioned in previous shareholder letters, the new process seeks stocks with the same characteristics—attractive valuation, favorable momentum, and the sustainability and quality of earnings—as did the legacy Franklin Portfolio stock selection model. At the same time, we also believe the new process to be somewhat more robust and better diversified than either of its legacy components.
The effects of the economic debacle of late 2008 continue to influence the market. As investor confidence waxes and wanes, its impact on share prices is apparent. And it is likely that there will be more “bumps down the road” as global economic issues arise and play out. However, by and large, we believe that an environment of stability is slowly reestablishing itself. The fund is positioned to prosper as the market returns to valuing companies based on underlying fundamentals.
Oliver E. Buckley, Executive Vice President and Head of Active Equity Strategies Mellon Capital Management Corp. October 12, 2010
8
Growth and Income Fund
Fund Profile
As of September 30, 2010
Share-Class Characteristics | |||
Investor | Admiral | ||
Shares | Shares | ||
Ticker Symbol | VQNPX | VGIAX | |
Expense Ratio1 | 0.35% | 0.21% | |
30-Day SEC Yield | 1.51% | 1.57% | |
Portfolio Characteristics | |||
DJ | |||
U.S. Total | |||
S&P 500 | Market | ||
Fund | Index | Index | |
Number of Stocks | 120 | 500 | 3,920 |
Median Market Cap $40.1B | $42.1B | $27.3B | |
Price/Earnings Ratio | 13.4x | 15.9x | 17.1x |
Price/Book Ratio | 2.0x | 2.1x | 2.1x |
Return on Equity | 21.1% | 20.5% | 19.1% |
Earnings Growth Rate | 5.5% | 6.2% | 6.4% |
Dividend Yield | 2.1% | 2.0% | 1.8% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | 94% | — | — |
Short-Term Reserves | 0.3% | — | — |
Sector Diversification (% of equity exposure)
DJ | |||
U.S. Total | |||
S&P 500 | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 9.8% | 10.4% | 11.7% |
Consumer Staples | 11.3 | 11.3 | 10.1 |
Energy | 11.1 | 10.9 | 9.7 |
Financials | 15.1 | 15.7 | 16.6 |
Health Care | 12.7 | 11.7 | 11.2 |
Industrials | 9.8 | 10.8 | 11.1 |
Information | |||
Technology | 19.8 | 18.8 | 19.0 |
Materials | 3.3 | 3.5 | 4.2 |
Telecommunication | |||
Services | 3.6 | 3.2 | 2.9 |
Utilities | 3.5 | 3.7 | 3.5 |
Volatility Measures | ||
DJ | ||
U.S. Total | ||
S&P 500 | Market | |
Index | Index | |
R-Squared | 0.99 | 0.99 |
Beta | 1.02 | 0.99 |
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)
Johnson & Johnson | Pharmaceuticals | 2.9% |
Chevron Corp. | Integrated Oil & | |
Gas | 2.9 | |
Exxon Mobil Corp. | Integrated Oil & | |
Gas | 2.9 | |
International Business | IT Consulting & | |
Machines Corp. | Other Services | 2.8 |
Microsoft Corp. | Systems Software | 2.6 |
AT&T Inc. | Integrated | |
Telecommunication | ||
Services | 2.6 | |
Procter & Gamble Co. | Household | |
Products | 2.3 | |
JPMorgan Chase & Co. | Diversified Financial | |
Services | 2.2 | |
Apple Inc. | Computer | |
Hardware | 2.2 | |
Intel Corp. | Semiconductors | 1.8 |
Top Ten | 25.2% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
1 The expense ratios shown are from the prospectus dated January 27, 2010, and represent estimated costs for the current fiscal year. For the fiscal year ended September 30, 2010, the expense ratios were 0.32% for Investor Shares and 0.21% for Admiral Shares.
9
Growth and Income 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: September 30, 2000, Through September 30, 2010
Initial Investment of $10,000
Average Annual Total Returns | |||||
Periods Ended September 30, 2010 | |||||
Final Value | |||||
One | Five | Ten | of a $10,000 | ||
Year | Years | Years | Investment | ||
Growth and Income Fund Investor | |||||
Shares | 9.24% | -1.06% | -1.10% | $8,957 | |
•••••••• | Dow Jones U.S. Total Stock Market | ||||
Index | 11.51 | 1.37 | 0.41 | 10,421 | |
– – – – | S&P 500 Index | 10.16 | 0.64 | -0.43 | 9,577 |
Large-Cap Core Funds Average | 7.86 | -0.19 | -2.07 | 8,113 | |
Large-Cap Core Funds Average: Derived from data provided by Lipper Inc. |
See Financial Highlights for dividend and capital gains information.
10
Growth and Income Fund | ||||
Average Annual Total Returns | ||||
Periods Ended September 30, 2010 | ||||
Since | Final Value | |||
One | Five | Inception | of a $50,000 | |
Year | Years | (5/14/2001) | Investment | |
Growth and Income Fund Admiral | ||||
Shares | 9.37% | -0.91% | 0.42% | $51,992 |
Dow Jones U.S. Total Stock Market | ||||
Index | 11.51 | 1.37 | 2.18 | 61,212 |
S&P 500 Index | 10.16 | 0.64 | 0.96 | 54,666 |
"Since Inception" performance is calculated from the Admiral Shares’ inception date for both the fund and its comparative standards.
Fiscal-Year Total Returns (%): September 30, 2000, Through September 30, 2010
11
Growth and Income Fund
Financial Statements
Statement of Net Assets
As of September 30, 2010
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | ||
Value | ||
Shares | ($000) | |
Common Stocks (98.4%)1 | ||
Consumer Discretionary (9.6%) | ||
Target Corp. | 1,178,300 | 62,968 |
News Corp. Class A | 4,122,200 | 53,836 |
* Ford Motor Co. | 4,210,900 | 51,541 |
Starbucks Corp. | 1,903,700 | 48,697 |
TJX Cos. Inc. | 1,085,300 | 48,437 |
VF Corp. | 403,100 | 32,659 |
Time Warner Inc. | 698,500 | 21,409 |
Whirlpool Corp. | 259,200 | 20,985 |
Wyndham Worldwide | ||
Corp. | 631,400 | 17,345 |
Gannett Co. Inc. | 1,211,900 | 14,821 |
Mattel Inc. | 561,300 | 13,168 |
NIKE Inc. Class B | 104,800 | 8,399 |
Home Depot Inc. | 180,600 | 5,721 |
Limited Brands Inc. | 192,300 | 5,150 |
405,136 | ||
Consumer Staples (11.1%) | ||
Procter & Gamble Co. | 1,627,100 | 97,577 |
Philip Morris | ||
International Inc. | 919,000 | 51,482 |
Dr Pepper Snapple | ||
Group Inc. | 1,266,300 | 44,979 |
Wal-Mart Stores Inc. | 785,200 | 42,024 |
Walgreen Co. | 1,174,300 | 39,339 |
Coca-Cola Co. | 558,800 | 32,701 |
Estee Lauder Cos. | ||
Inc. Class A | 449,800 | 28,441 |
ConAgra Foods Inc. | 1,097,600 | 24,081 |
Tyson Foods Inc. Class A | 1,415,800 | 22,681 |
Hormel Foods Corp. | 346,400 | 15,450 |
Coca-Cola Enterprises Inc. | 498,200 | 15,444 |
Colgate-Palmolive Co. | 183,200 | 14,081 |
Hershey Co. | 295,500 | 14,063 |
Costco Wholesale Corp. | 214,200 | 13,814 |
PepsiCo Inc. | 181,800 | 12,079 |
468,236 |
Market | |||
Value | |||
Shares | ($000) | ||
Energy (10.9%) | |||
Chevron Corp. | 1,527,800 | 123,828 | |
Exxon Mobil Corp. | 1,965,336 | 121,438 | |
ConocoPhillips | 1,163,200 | 66,803 | |
Apache Corp. | 642,600 | 62,821 | |
Williams Cos. Inc. | 1,863,700 | 35,615 | |
Schlumberger Ltd. | 547,800 | 33,750 | |
Pioneer Natural | |||
Resources Co. | 184,400 | 11,991 | |
Occidental Petroleum Corp. | 67,000 | 5,246 | |
461,492 | |||
Financials (14.9%) | |||
JPMorgan Chase & Co. | 2,488,000 | 94,718 | |
Goldman Sachs Group Inc. | 344,200 | 49,764 | |
Prudential Financial Inc. | 904,800 | 49,022 | |
Franklin Resources Inc. | 449,600 | 48,062 | |
PNC Financial Services | |||
Group Inc. | 892,900 | 46,350 | |
Fifth Third Bancorp | 3,366,200 | 40,495 | |
Travelers Cos. Inc. | 745,100 | 38,820 | |
Host Hotels & | |||
Resorts Inc. | 2,369,800 | 34,315 | |
Comerica Inc. | 863,000 | 32,061 | |
Aflac Inc. | 601,300 | 31,093 | |
Moody’s Corp. | 1,105,100 | 27,605 | |
Bank of America Corp. | 2,051,099 | 26,890 | |
Plum Creek Timber Co. Inc. | 536,100 | 18,924 | |
Wells Fargo & Co. | 736,400 | 18,506 | |
MetLife Inc. | 377,100 | 14,500 | |
Unum Group | 570,400 | 12,634 | |
* | Berkshire Hathaway Inc. | ||
Class B | 145,800 | 12,055 | |
T Rowe Price Group Inc. | 187,500 | 9,387 | |
State Street Corp. | 225,700 | 8,500 | |
Ameriprise Financial Inc. | 170,900 | 8,089 | |
* | Citigroup Inc. | 1,627,600 | 6,348 |
628,138 |
12
Growth and Income Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Health Care (12.5%) | |||
Johnson & Johnson | 2,002,000 | 124,044 | |
* | Amgen Inc. | 1,209,200 | 66,639 |
Eli Lilly & Co. | 1,627,400 | 59,449 | |
Bristol-Myers Squibb Co. | 1,870,092 | 50,698 | |
* | Zimmer Holdings Inc. | 855,800 | 44,784 |
Cardinal Health Inc. | 1,266,400 | 41,842 | |
Allergan Inc. | 490,600 | 32,640 | |
Abbott Laboratories | 614,700 | 32,112 | |
* | Humana Inc. | 584,500 | 29,365 |
CIGNA Corp. | 435,900 | 15,596 | |
* | Gilead Sciences Inc. | 385,600 | 13,731 |
CR Bard Inc. | 125,000 | 10,179 | |
* | Waters Corp. | 76,300 | 5,401 |
526,480 | |||
Industrials (9.6%) | |||
United Parcel Service Inc. | |||
Class B | 1,033,500 | 68,924 | |
General Electric Co. | 2,937,300 | 47,731 | |
Raytheon Co. | 899,600 | 41,121 | |
L-3 Communications | |||
Holdings Inc. | 560,400 | 40,500 | |
Illinois Tool Works Inc. | 858,500 | 40,367 | |
Southwest Airlines Co. | 2,695,300 | 35,227 | |
Textron Inc. | 1,610,000 | 33,102 | |
3M Co. | 316,900 | 27,478 | |
General Dynamics Corp. | 338,000 | 21,230 | |
United Technologies Corp. | 262,300 | 18,684 | |
Caterpillar Inc. | 108,400 | 8,529 | |
WW Grainger Inc. | 54,700 | 6,515 | |
Cummins Inc. | 66,000 | 5,978 | |
CSX Corp. | 94,500 | 5,228 | |
Lockheed Martin Corp. | 72,000 | 5,132 | |
405,746 | |||
Information Technology (19.5%) | |||
International Business | |||
Machines Corp. | 875,300 | 117,413 | |
Microsoft Corp. | 4,533,700 | 111,030 | |
* | Apple Inc. | 325,600 | 92,389 |
Intel Corp. | 3,909,600 | 75,182 | |
* | Google Inc. Class A | 129,140 | 67,901 |
Corning Inc. | 2,943,100 | 53,800 | |
Computer Sciences Corp. | 1,100,100 | 50,605 | |
* | Lexmark International Inc. | ||
Class A | 766,100 | 34,183 | |
* | SanDisk Corp. | 865,000 | 31,702 |
Harris Corp. | 671,900 | 29,758 | |
CA Inc. | 1,395,800 | 29,479 | |
* | Micron Technology Inc. | 3,700,400 | 26,680 |
Oracle Corp. | 879,700 | 23,620 | |
Visa Inc. Class A | 291,400 | 21,639 |
Market | |||
Value | |||
Shares | ($000) | ||
* | Cisco Systems Inc. | 733,700 | 16,068 |
Tellabs Inc. | 1,936,700 | 14,428 | |
Hewlett-Packard Co. | 215,300 | 9,058 | |
* | Intuit Inc. | 150,000 | 6,572 |
* | Advanced Micro | ||
Devices Inc. | 836,000 | 5,944 | |
* | Teradyne Inc. | 504,600 | 5,621 |
823,072 | |||
Materials (3.2%) | |||
Freeport-McMoRan | |||
Copper & Gold Inc. | 799,900 | 68,303 | |
PPG Industries Inc. | 315,700 | 22,983 | |
EI du Pont de | |||
Nemours & Co. | 335,300 | 14,961 | |
International Paper Co. | 480,900 | 10,460 | |
* | Titanium Metals Corp. | 352,900 | 7,044 |
Newmont Mining Corp. | 104,900 | 6,589 | |
Cliffs Natural Resources Inc. | 80,300 | 5,133 | |
135,473 | |||
Telecommunication Services (3.6%) | |||
AT&T Inc. | 3,869,800 | 110,676 | |
Verizon | |||
Communications Inc. | 1,233,000 | 40,184 | |
150,860 | |||
Utilities (3.5%) | |||
DTE Energy Co. | 1,126,000 | 51,717 | |
Constellation Energy | |||
Group Inc. | 1,573,200 | 50,720 | |
Integrys Energy Group Inc. | 292,700 | 15,238 | |
American Electric | |||
Power Co. Inc. | 408,000 | 14,782 | |
Entergy Corp. | 174,400 | 13,347 | |
145,804 | |||
Total Common Stocks | |||
(Cost $3,813,660) | 4,150,437 | ||
Temporary Cash Investment (1.5%)1 | |||
Money Market Fund (1.5%) | |||
2 | Vanguard Market | ||
Liquidity Fund, 0.261% | |||
(Cost $66,118) | 66,118,332 | 66,118 | |
Total Investments (99.9%) | |||
(Cost $3,879,778) | 4,216,555 | ||
Other Assets and Liabilities (0.1%) | |||
Other Assets3 | 155,417 | ||
Liabilities | (152,755) | ||
2,662 | |||
Net Assets (100%) | 4,219,217 |
13
Growth and Income Fund
At September 30, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 5,635,163 |
Undistributed Net Investment Income | 6,664 |
Accumulated Net Realized Losses | (1,761,730) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 336,777 |
Futures Contracts | 2,343 |
Net Assets | 4,219,217 |
Investor Shares—Net Assets | |
Applicable to 125,931,486 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 3,020,068 |
Net Asset Value Per Share— | |
Investor Shares | $23.98 |
Admiral Shares—Net Assets | |
Applicable to 30,628,933 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 1,199,149 |
Net Asset Value Per Share— | |
Admiral Shares | $39.15 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.6% and 0.3%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 Cash in the amount of $7,110,000 has been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
14
Growth and Income Fund | |
Statement of Operations | |
Year Ended | |
September 30, 2010 | |
($000) | |
Investment Income | |
Income | |
Dividends | 91,340 |
Interest1 | 129 |
Security Lending | 846 |
Total Income | 92,315 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 4,510 |
Performance Adjustment | (2,002) |
The Vanguard Group—Note C | |
Management and Administrative—Investor Shares | 7,376 |
Management and Administrative—Admiral Shares | 1,665 |
Marketing and Distribution—Investor Shares | 686 |
Marketing and Distribution—Admiral Shares | 270 |
Custodian Fees | 39 |
Auditing Fees | 26 |
Shareholders’ Reports—Investor Shares | 97 |
Shareholders’ Reports—Admiral Shares | 8 |
Trustees’ Fees and Expenses | 10 |
Total Expenses | 12,685 |
Expenses Paid Indirectly | (291) |
Net Expenses | 12,394 |
Net Investment Income | 79,921 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 177,736 |
Futures Contracts | 1,206 |
Realized Net Gain (Loss) | 178,942 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 134,146 |
Futures Contracts | 2,183 |
Change in Unrealized Appreciation (Depreciation) | 136,329 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 395,192 |
1 Interest income from an affiliated company of the fund was $129,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
15
Growth and Income Fund | ||
Statement of Changes in Net Assets | ||
Year Ended September 30, | ||
2010 | 2009 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 79,921 | 98,334 |
Realized Net Gain (Loss) | 178,942 | (1,371,420) |
Change in Unrealized Appreciation (Depreciation) | 136,329 | 545,703 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 395,192 | (727,383) |
Distributions | ||
Net Investment Income | ||
Investor Shares | (55,197) | (73,186) |
Admiral Shares | (24,503) | (36,418) |
Realized Capital Gain | ||
Investor Shares | — | — |
Admiral Shares | — | — |
Total Distributions | (79,700) | (109,604) |
Capital Share Transactions | ||
Investor Shares | (455,269) | (120,422) |
Admiral Shares | (335,182) | (174,315) |
Net Increase (Decrease) from Capital Share Transactions | (790,451) | (294,737) |
Total Increase (Decrease) | (474,959) | (1,131,724) |
Net Assets | ||
Beginning of Period | 4,694,176 | 5,825,900 |
End of Period1 | 4,219,217 | 4,694,176 |
1 Net Assets—End of Period includes undistributed net investment income of $6,664,000 and $6,443,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
16
Growth and Income Fund | |||||
Financial Highlights | |||||
Investor Shares | |||||
For a Share Outstanding | Year Ended September 30, | ||||
Throughout Each Period | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $22.34 | $25.84 | $38.62 | $33.79 | $31.29 |
Investment Operations | |||||
Net Investment Income | .418 | .447 | .546 | .600 | .550 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 1.630 | (3.453) | (8.758) | 4.840 | 2.470 |
Total from Investment Operations | 2.048 | (3.006) | (8.212) | 5.440 | 3.020 |
Distributions | |||||
Dividends from Net Investment Income | (.408) | (.494) | (.560) | (.610) | (.520) |
Distributions from Realized Capital Gains | — | — | (4.008) | — | — |
Total Distributions | (.408) | (.494) | (4.568) | (.610) | (.520) |
Net Asset Value, End of Period | $23.98 | $22.34 | $25.84 | $38.62 | $33.79 |
Total Return1 | 9.24% | -11.29% | -23.28% | 16.20% | 9.76% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $3,020 | $3,253 | $3,919 | $5,465 | $5,088 |
Ratio of Total Expenses to | |||||
Average Net Assets2 | 0.32% | 0.35% | 0.31% | 0.32% | 0.38% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 1.74% | 2.28% | 1.69% | 1.61% | 1.65% |
Portfolio Turnover Rate | 94% | 83% | 96% | 100% | 93% |
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 (0.04%), (0.04%), (0.02%), 0.00%, and 0.01%.
See accompanying Notes, which are an integral part of the Financial Statements.
17
Growth and Income Fund | |||||
Financial Highlights | |||||
Admiral Shares | |||||
For a Share Outstanding | Year Ended September 30, | ||||
Throughout Each Period | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $36.48 | $42.20 | $63.08 | $55.20 | $51.12 |
Investment Operations | |||||
Net Investment Income | .722 | .775 | .963 | 1.070 | .997 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 2.666 | (5.638) | (14.313) | 7.903 | 4.036 |
Total from Investment Operations | 3.388 | (4.863) | (13.350) | 8.973 | 5.033 |
Distributions | |||||
Dividends from Net Investment Income | (.718) | (.857) | (.985) | (1.093) | (.953) |
Distributions from Realized Capital Gains | — | — | (6.545) | — | — |
Total Distributions | (.718) | (.857) | (7.530) | (1.093) | (.953) |
Net Asset Value, End of Period | $39.15 | $36.48 | $42.20 | $63.08 | $55.20 |
Total Return | 9.37% | -11.15% | -23.19% | 16.37% | 9.97% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $1,199 | $1,441 | $1,907 | $2,794 | $2,321 |
Ratio of Total Expenses to | |||||
Average Net Assets1 | 0.21% | 0.21% | 0.16% | 0.18% | 0.20% |
Ratio of Net Investment Income to | |||||
Average Net Assets | 1.85% | 2.42% | 1.84% | 1.75% | 1.83% |
Portfolio Turnover Rate | 94% | 83% | 96% | 100% | 93% |
1 Includes performance-based investment advisory fee increases (decreases) of (0.04%), (0.04%), (0.02%), 0.00%, and 0.01%.
See accompanying Notes, which are an integral part of the Financial Statements.
18
Growth and Income Fund
Notes to Financial Statements
Vanguard Growth and Income 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 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.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
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).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2007–2010), and has concluded that no provision for federal income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. 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.
6. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. 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.
19
Growth and Income Fund
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. Mellon Capital Management Corporation provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. The basic fee is subject to quarterly adjustments based on the fund’s performance for the preceding three years relative to the S&P 500 Index. For the year ended September 30, 2010, the investment advisory fee represented an effective annual basic rate of 0.10% of the fund’s average net assets before a decrease of $2,002,000 (0.04%) 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 September 30, 2010, the fund had contributed capital of $741,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.30% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
D. The fund has asked its investment advisor 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 September 30, 2010, these arrangements reduced the fund’s expenses by $291,000 (an annual rate of 0.01% 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).
At September 30, 2010, 100% of the fund’s investments were valued based on Level 1 inputs.
F. At September 30, 2010, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:
($000) | ||||
Number of | Aggregate | Unrealized | ||
Long (Short) | Settlement | Appreciation | ||
Futures Contracts | Expiration | Contracts | Value | (Depreciation) |
S&P 500 Index | December 2010 | 186 | 52,857 | 2,343 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
20
Growth and Income Fund
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.
For tax purposes, at September 30, 2010, the fund had $20,957,000 of ordinary income available for distribution. The fund had available capital loss carryforwards totaling $1,692,658,000 to offset future net capital gains of $845,748,000 through September 30, 2017, and $846,910,000 through September 30, 2018. In addition, the fund realized losses of $67,319,000 during the period from November 1, 2009, through September 30, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011.
At September 30, 2010, the cost of investment securities for tax purposes was $3,879,778,000. Net unrealized appreciation of investment securities for tax purposes was $336,777,000, consisting of unrealized gains of $476,739,000 on securities that had risen in value since their purchase and $139,962,000 in unrealized losses on securities that had fallen in value since their purchase.
H. During the year ended September 30, 2010, the fund purchased $4,096,899,000 of investment securities and sold $4,877,018,000 of investment securities, other than temporary cash investments.
I. Capital share transactions for each class of shares were: | ||||
Year Ended September 30, | ||||
2010 | 2009 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 231,031 | 9,843 | 342,754 | 17,955 |
Issued in Lieu of Cash Distributions | 53,684 | 2,315 | 70,600 | 3,711 |
Redeemed | (739,984) | (31,813) | (533,776) | (27,759) |
Net Increase (Decrease)—Investor Shares | (455,269) | (19,655) | (120,422) | (6,093) |
Admiral Shares | ||||
Issued | 131,639 | 3,429 | 152,599 | 4,878 |
Issued in Lieu of Cash Distributions | 22,345 | 590 | 32,886 | 1,059 |
Redeemed | (489,166) | (12,898) | (359,800) | (11,621) |
Net Increase (Decrease)—Admiral Shares | (335,182) | (8,879) | (174,315) | (5,684) |
J. In preparing the financial statements as of September 30, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
21
Report of Independent Registered
Public Accounting Firm
To the Trustees of Vanguard Quantitative Funds and the Shareholders of Vanguard Growth and Income Fund:
In our opinion, the accompanying statement of net assets 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 Growth and Income Fund (constituting a separate portfolio of Vanguard Quantitative Funds, hereafter referred to as the “Fund”) at September 30, 2010, 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 con ducted 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 September 30, 2010 by correspondence with the custodian and broker and by agreement to the underlying ownership records of Vanguard Market Liquidity Fund, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 8, 2010
Special 2010 tax information (unaudited) for Vanguard Growth and Income Fund |
This information for the fiscal year ended September 30, 2010, is included pursuant to provisions of the Internal Revenue Code. |
The fund distributed $79,700,000 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. |
22
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 2010. (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 c urrent taxes.
Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.
Average Annual Total Returns: Growth and Income Fund Investor Shares | |||
Periods Ended September 30, 2010 | |||
One | Five | Ten | |
Year | Years | Years | |
Returns Before Taxes | 9.24% | -1.06% | -1.10% |
Returns After Taxes on Distributions | 8.95 | -1.71 | -1.60 |
Returns After Taxes on Distributions and Sale of Fund Shares | 6.37 | -0.86 | -0.98 |
23
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 the account service fee described in the prospectus. If such a fee were applied to your account, your costs would be higher. Your fund does not charge transaction fees, such as purchase or redemption fees, nor does it 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.
24
Six Months Ended September 30, 2010 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Growth and Income Fund | 3/31/2010 | 9/30/2010 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $977.88 | $1.54 |
Admiral Shares | 1,000.00 | 978.47 | 0.89 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,023.51 | $1.57 |
Admiral Shares | 1,000.00 | 1,024.17 | 0.91 |
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 0.31% for Investor Shares and 0.18% 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.
25
Trustees Approve Advisory Agreement
The board of trustees of Vanguard Growth and Income Fund has approved an amended investment advisory agreement with Mellon Capital Management Corporation effective July 1, 2010. The performance adjustment schedule was revised to better align the advisor’s compensation with performance. The board determined that retaining Mellon Capital and amending the performance adjustment schedule was in the best interests of the fund and its shareholders.
The board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the agreement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board considered the quality of the fund’s investment management over both the short and long term, and took into account the organizational depth and stability of the advisor. The board noted that Mellon Capital, founded in 1983, is a leader in asset allocation and quantitative investment strategies. The firm, through its predecessor, Franklin Portfolio Associates, has advised the fund since 1986. The investment team at Mellon Capital employs a quantitative investment strategy that seeks to provide a total return greater than that of the S&P 500 Index by investing in U.S. large- and mid-capitalization stocks. Stock selection focuses on identifying stocks with attractive valuation, positive sentiment, and solid earnings quality.
The board concluded that the advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of and amendments to the advisory agreement.
Investment performance
The board considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance of a relevant benchmark and peer group. The board noted that the advisor has carried out the fund’s investment strategy in disciplined fashion, and the results have been mixed—with periods of outperformance and periods of underperformance versus the fund’s benchmark and peer group. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.
Cost
The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.
The board did not consider profitability of Mellon Capital in determining whether to approve the advisory fee, because Mellon Capital is independent of Vanguard, and the advisory fee is the result of arm’s-length negotiations.
The benefit of economies of scale
The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the advisory fee schedule. The breakpoints reduce the effective rate of the fee as the fund’s assets increase.
The board will consider whether to renew the advisory agreement again after a one-year period.
26
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 (in the case of bonds) 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. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Foreign Holdings. The percentage of a fund represented by stocks 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.
27
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.
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 178 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.
Interested Trustee1 | Amy Gutmann |
Born 1949. Trustee Since June 2006. Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years: President |
Born 1957. Trustee Since July 2009. Chairman of the | of the University of Pennsylvania; Christopher H. |
Board. Principal Occupation(s) During the Past Five | Browne Distinguished Professor of Political Science |
Years: Chairman of the Board of The Vanguard Group, | in the School of Arts and Sciences with secondary |
Inc., and of each of the investment companies served | appointments at the Annenberg School for Commu- |
by The Vanguard Group, since January 2010; Director | nication and the Graduate School of Education |
of The Vanguard Group since 2008; Chief Executive | of the University of Pennsylvania; Director of |
Officer and President of The Vanguard Group and of | Carnegie Corporation of New York, Schuylkill River |
each of the investment companies served by The | Development Corporation, and Greater Philadelphia |
Vanguard Group since 2008; Director of Vanguard | Chamber of Commerce; Trustee of the National |
Marketing Corporation; Managing Director of The | Constitution Center; Chair of the Presidential |
Vanguard Group (1995–2008) . | Commission for the Study of Bioethical Issues. |
JoAnn Heffernan Heisen | |
Independent Trustees | Born 1950. Trustee Since July 1998. Principal |
Occupation(s) During the Past Five Years: Corporate | |
Emerson U. Fullwood | Vice President and Chief Global Diversity Officer |
Born 1948. Trustee Since January 2008. Principal | since 2006 (retired 2008) and Member of the |
Occupation(s) During the Past Five Years: Executive | Executive Committee (retired 2008) of Johnson & |
Chief Staff and Marketing Officer for North America | Johnson (pharmaceuticals/consumer products); Vice |
and Corporate Vice President (retired 2008) of Xerox | President and Chief Information Officer of Johnson & |
Corporation (document management products and | Johnson (1997–2005); Director of the University |
services); Director of SPX Corporation (multi-industry | Medical Center at Princeton and Women’s Research |
manufacturing), the United Way of Rochester, | and Education Institute; Member of the Advisory |
Amerigroup Corporation (managed health care), | Board of the Maxwell School of Citizenship and Public |
the University of Rochester Medical Center, and | Affairs at Syracuse University. |
Monroe Community College Foundation. | |
F. Joseph Loughrey | |
Rajiv L. Gupta | Born 1949. Trustee Since October 2009. Principal |
Born 1945. Trustee Since December 2001.2 | Occupation(s) During the Past Five Years: President |
Principal Occupation(s) During the Past Five Years: | and Chief Operating Officer since 2005 (retired 2009) |
Chairman and Chief Executive Officer (retired 2009) | and Vice Chairman of the Board (2008–2009) of |
and President (2006–2008) of Rohm and Haas Co. | Cummins Inc. (industrial machinery); Director of |
(chemicals); Director of Tyco International, Ltd. | SKF AB (industrial machinery), Hillenbrand, Inc. |
(diversified manufacturing and services) and Hewlett- | (specialized consumer services), Sauer-Danfoss Inc. |
Packard Co. (electronic computer manufacturing); | (machinery), the Lumina Foundation for Education, |
Trustee of The Conference Board; Member of the | and Oxfam America; Chairman of the Advisory |
Board of Managers of Delphi Automotive LLP | Council for the College of Arts and Letters at the |
(automotive components) . | University of Notre Dame. |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School; Chair of the Investment Committee | the investment companies served by The Vanguard | |
of HighVista Strategies LLC (private investment firm) . | Group since 2008; Assistant Treasurer of each of the | |
investment companies served by The Vanguard Group | ||
Alfred M. Rankin, Jr. | (1988–2008) . | |
Born 1941. Trustee Since January 1993. Principal | ||
Occupation(s) During the Past Five Years: Chairman, | Heidi Stam | |
President, and Chief Executive Officer of NACCO | Born 1956. Secretary Since July 2005. Principal | |
Industries, Inc. (forklift trucks/housewares/lignite); | Occupation(s) During the Past Five Years: Managing | |
Director of Goodrich Corporation (industrial products/ | Director of The Vanguard Group, Inc., since 2006; | |
aircraft systems and services); Chairman of the | General Counsel of The Vanguard Group since 2005; | |
Federal Reserve Bank of Cleveland; Trustee of The | Secretary of The Vanguard Group and of each of the | |
Cleveland Museum of Art. | investment companies served by The Vanguard Group | |
since 2005; Director and Senior Vice President of | ||
Peter F. Volanakis | Vanguard Marketing Corporation since 2005; | |
Born 1955. Trustee Since July 2009. Principal | Principal of The Vanguard Group (1997–2006). | |
Occupation(s) During the Past Five Years: President | ||
since 2007 and Chief Operating Officer since 2005 | ||
of Corning Incorporated (communications equipment); | Vanguard Senior Management Team | |
President of Corning Technologies (2001–2005); | ||
Director of Corning Incorporated and Dow Corning; | R. Gregory Barton | Michael S. Miller |
Trustee of the Corning Incorporated Foundation and | Mortimer J. Buckley | James M. Norris |
the Corning Museum of Glass; Overseer of the | Kathleen C. Gubanich | Glenn W. Reed |
Amos Tuck School of Business Administration at | Paul A. Heller | George U. Sauter |
Dartmouth College. | ||
Chairman Emeritus and Senior Advisor | ||
Executive Officers | ||
John J. Brennan | ||
Glenn Booraem | Chairman, 1996–2009 | |
Born 1967. Controller Since July 2010. Principal | Chief Executive Officer and President, 1996–2008 | |
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | ||
the investment companies served by The Vanguard | Founder | |
Group since 2010; Assistant Controller of each of | ||
the investment companies served by The Vanguard | John C. Bogle | |
Group (2001–2010) . | Chairman and Chief Executive Officer, 1974–1996 | |
Thomas J. Higgins | ||
Born 1957. Chief Financial Officer Since September | ||
2008. Principal Occupation(s) During the Past Five | ||
Years: Principal of The Vanguard Group, Inc.; Chief | ||
Financial Officer of each of the investment companies | ||
served by The Vanguard Group since 2008; Treasurer | ||
of each of the investment companies served by The | ||
Vanguard Group (1998–2008) . |
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. | |
© 2010 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q930 112010 |
Vanguard Structured Equity Funds |
Annual Report |
September 30, 2010 |
Vanguard Structured Large-Cap Equity Fund |
Vanguard Structured Large-Cap Growth Fund |
Vanguard Structured Large-Cap Value Fund |
Vanguard Structured Broad Market Fund |
> For the fiscal year ended September 30, 2010, the Vanguard Structured Equity Funds posted returns ranging from 5.90% to 11.75%.
> Fund returns generally fell short of their benchmark index results.
> The subpar performance of the advisor’s stock selections in the industrials sector was a common theme across all the funds.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisor’s Report. | 8 |
Structured Large-Cap Equity Fund. | 10 |
Structured Large-Cap Growth Fund. | 23 |
Structured Large-Cap Value Fund. | 37 |
Structured Broad Market Fund. | 49 |
About Your Fund’s Expenses. | 66 |
Glossary. | 69 |
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.
Cover photograph: Jean Maher.
Your Fund’s Total Returns | |
Fiscal Year Ended September 30, 2010 | |
Total | |
Returns | |
Vanguard Structured Large-Cap Equity Fund | |
Institutional Shares | 9.68% |
Institutional Plus Shares | 9.78 |
S&P 500 Index | 10.16 |
Large-Cap Core Funds Average | 7.86 |
Large-Cap Core Funds Average: Derived from data provided by Lipper Inc. | |
Vanguard Structured Large-Cap Growth Fund | |
Institutional Shares | 11.66% |
Institutional Plus Shares | 11.75 |
Russell 1000 Growth Index | 12.65 |
Large-Cap Growth Funds Average | 10.23 |
Large-Cap Growth Funds Average: Derived from data provided by Lipper Inc. | |
Vanguard Structured Large-Cap Value Fund | 5.90% |
Russell 1000 Value Index | 8.90 |
Large-Cap Value Funds Average | 7.01 |
Large-Cap Value Funds Average: Derived from data provided by Lipper Inc. | |
Vanguard Structured Broad Market Fund | |
Institutional Shares | 10.88% |
Institutional Plus Shares | 10.96 |
Russell 3000 Index | 10.96 |
Multi-Cap Core Funds Average | 9.82 |
Multi-Cap Core Funds Average: Derived from data provided by Lipper Inc.
Institutional and Institutional Plus Shares are available to certain institutional investors who meet specific administrative, service, and account-size criteria.
1
Chairman’s Letter
Dear Shareholder,
The Vanguard Structured Equity Funds produced solid absolute returns for fiscal-year 2010 but generally fell short of their goal, which is to outperform their indexes while maintaining risk profiles similar to those of their benchmarks.
The Structured Large-Cap Value Fund’s 3-percentage-point gap versus its benchmark was the largest among the funds. The Structured Broad Market Fund had the best relative results: Its Institutional Plus Shares matched the 10.96% return of the Russell 3000 Index, and its Institutional Shares were close behind.
In general, the funds’ strong stock selections in consumer-oriented sectors were offset by subpar selections in industrials and utilities, though the precise mix of outperformers and laggards varied from fund to fund.
An upbeat end to a worrisome 12 months
Although global stock markets traced a ragged trajectory, they ultimately gained ground for the 12 months ended September 30. Europe’s sovereign debt crisis and a dispiriting lack of vigor in the U.S. economy weighed on stock prices through the spring and summer. In September, however, investor sentiment perked up, buoyed by continued signs of strength in corporate financial statements. The broad U.S. stock market rallied to close the 12-month period with a return
2
of more than 11%. Small-capitalization stocks finished a few steps ahead of their large-cap counterparts.
International stock markets were a mixed bag: middling returns in Europe, stagnation in the Pacific region’s developed markets, and a return of more than 20% from emerging markets. The combined result, as measured by the MSCI All Country World Index ex USA, was a 12-month return of 8%.
Bond prices rallied, driving yields to surprising lows
Bonds produced strong 12-month returns, a gratifying performance that nevertheless raised questions about the prospects for total returns in a fixed income market where yields hovered near all-time lows.
At the start of the period, the 10-year U.S. Treasury note yielded 3.31%; at the end of the period, the figure was 2.51% as investors bid up bond prices. As yields move lower, of course, the scope for continued declines—and the attendant rise in prices—diminishes. Corporate bonds performed best for the 12 months. Municipal bonds delivered solid, but more modest, returns.
As has been the case for almost two years now, the yields of money market securities remained near 0%, a consequence of the Federal Reserve Board’s efforts to stimulate the economy by keeping a tight lid on borrowing costs.
Market Barometer | |||
Average Annual Total Returns | |||
Periods Ended September 30, 2010 | |||
One | Three | Five | |
Year | Years | Years | |
Stocks | |||
Russell 1000 Index (Large-caps) | 10.75% | -6.79% | 0.86% |
Russell 2000 Index (Small-caps) | 13.35 | -4.29 | 1.60 |
Dow Jones U.S. Total Stock Market Index | 11.51 | -6.12 | 1.37 |
MSCI All Country World Index ex USA (International) | 8.00 | -6.98 | 4.72 |
Bonds | |||
Barclays Capital U.S. Aggregate Bond Index (Broad | |||
taxable market) | 8.16% | 7.42% | 6.20% |
Barclays Capital Municipal Bond Index (Broad | |||
tax-exempt market) | 5.81 | 6.04 | 5.13 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.12 | 1.01 | 2.47 |
CPI | |||
Consumer Price Index | 1.14% | 1.57% | 1.90% |
3
Funds fell short of a clear but challenging objective
The Vanguard Structured Equity Funds pursue a clear-cut goal: to outperform their target indexes while closely matching their risk profiles. Ideally, the long-term result should be tightly risk-controlled exposure to the broad stock market or discrete segments, enhanced with modest margins of alpha.
As easy as it is to state, however, this goal is difficult to accomplish—something that can be said of any actively managed strategy. The funds’ advisor, Vanguard Quantitative Equity Group, uses computer models to identify stocks with characteristics such as below-average valuation and above-average earnings growth that, in the advisor’s judgment, can deliver superior long-term performance. The funds then combine these stocks in a portfolio with sector weightings, market-capitalization exposures, and other risk characteristics similar to those of their benchmarks.
Over the past few years, the Vanguard Structured Equity Funds’ stock selections have generally been out of step with market trends. Financially weaker stocks have rallied as the economy’s slow, but real, recovery has pulled many companies back from the brink of bankruptcy. The higher-quality, better-capitalized companies favored by the funds’ stock selection models have lagged.
Although the funds delivered strong absolute returns for the 12 months ended September 30, they generally fell a few steps shy of their benchmarks.
Vanguard Structured Large-Cap Growth Fund, buoyed by the overall strength of large growth stocks, posted the highest return—better than 11%, about 1 percentage point behind its benchmark index. The fund generated notably strong relative performance in the health care and consumer staples sectors but struggled badly in industrials, where its stock selections returned about 14% while those in the index gained nearly 23%.
Vanguard Structured Broad Market Fund produced the second-best absolute return—almost 11%—and the best relative performance. The fund’s Institutional Plus Shares matched the 10.96% return of the Russell 3000 Index, while its Institutional Shares returned 10.88%, a difference attributable to the Institutional Shares’ higher expense ratio. Like the Large-Cap Growth Fund, the Structured Broad Market Fund paid a price for subpar selections in the industrials and utilities sectors, but success among consumer discretionary and financial stocks offset most of the damage.
Vanguard Structured Large-Cap Equity Fund, which seeks to outperform the Standard & Poor’s 500 Index, returned more than 9%, about 0.50 percentage point behind the index result. Again, selections in the industrials sector were prominent laggards. Bright spots included materials and consumer staples stocks. Vanguard Structured Large-Cap Value Fund’s 5.90% return was the lowest absolute result and weakest relative performance among the four funds. The benchmark, the Russell 1000 Value Index, returned 8.90%. Stock selections in the
4
industrials, energy, and utilities sectors weighed heavily on the fund’s relative performance, offsetting impressive selections in consumer discretionary.
Recent struggles mar longer-term returns
The four Structured Equity Funds have different inception dates. The Broad Market Fund, with the longest record, began in May 2004. The Large-Cap Equity Fund, which opened in May 2006, got the latest start. The funds’ recent struggles are reflected also in their longer-term returns, which lag those of their indexes. The Broad Market Fund has the narrowest gap, trailing its benchmark by 0.72 percentage point since its inception, while the Large-Cap Value Fund has the widest, lagging its index by 1.58 percentage points since inception.
Total Returns | |
Inception Through September 30, 2010 | |
Average | |
Annual Return | |
Structured Large-Cap Equity Fund Institutional Plus Shares | |
(Returns since inception: 5/15/2006) | -1.78% |
S&P 500 Index | -0.73 |
Large-Cap Core Funds Average | -1.46 |
Large-Cap Core Funds Average: Derived from data provided by Lipper Inc. | |
Structured Large-Cap Growth Fund Institutional Plus Shares | |
(Returns since inception: 1/19/2006) | 0.19% |
Russell 1000 Growth Index | 0.98 |
Large-Cap Growth Funds Average | -0.71 |
Large-Cap Growth Funds Average: Derived from data provided by Lipper Inc. | |
Structured Large-Cap Value Fund Institutional Plus Shares | |
(Returns since inception: 12/15/2005) | -2.60% |
Russell 1000 Value Index | -1.02 |
Large-Cap Value Funds Average | -1.34 |
Large-Cap Value Funds Average: Derived from data provided by Lipper Inc. | |
Structured Broad Market Fund Institutional Plus Shares | |
(Returns since inception: 5/3/2004) | 2.24% |
Russell 3000 Index | 2.96 |
Multi-Cap Core Funds Average | 2.58 |
Multi-Cap Core 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
These results are disappointing, but it’s important to recognize that the time periods involved are relatively short, and most have been dominated by a climate in which the stocks selected by most active quantitative strategies have been out of favor with investors.
Stock market cycles echo across the investment universe
The stock market’s violent ups and downs over the past year, and indeed since late 2008, are representative of the cycles that characterize all segments of the financial markets and the various strategies that we use to extract value from them. Just as stocks and bonds have traded leadership in often dramatic fashion over the past few years, so do growth and value stocks, and low-quality and high-quality companies. Different strategies such as valuation-conscious quantitative methods and momentum-driven growth approaches also move in and out of favor.
A prudent response to this never-ending, always unpredictable change is to maintain a portfolio that is broadly diversified both within and across asset classes. The Vanguard Structured Equity Funds can play an important role in such a portfolio, delivering risk-controlled exposure to the broad stock market and its segments, with the opportunity to outperform these markets over time.
Thank you for entrusting your assets to Vanguard.
Sincerely,
F. William McNabb III
Chairman and Chief Executive Officer
October 14, 2010
6
Your Fund’s Performance at a Glance | ||||
September 30, 2009, Through September 30, 2010 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Structured Large-Cap Equity Fund | ||||
Institutional Shares | $19.47 | $20.97 | $0.371 | $0.000 |
Institutional Plus Shares | 38.97 | 41.98 | 0.772 | 0.000 |
Vanguard Structured Large-Cap Growth Fund | ||||
Institutional Shares | $21.38 | $23.56 | $0.300 | $0.000 |
Institutional Plus Shares | 42.60 | 46.95 | 0.627 | 0.000 |
Vanguard Structured Large-Cap Value Fund | $36.43 | $37.69 | $0.870 | $0.000 |
Vanguard Structured Broad Market Fund | ||||
Institutional Shares | $18.99 | $20.70 | $0.338 | $0.000 |
Institutional Plus Shares | 37.94 | 41.36 | 0.701 | 0.000 |
7
Advisor’s Report
The fiscal year ended September 30, 2010, was a challenging period for Vanguard’s Structured Equity Funds, which for the most part slightly trailed their benchmarks. The funds’ returns ranged from 5.90% for the Structured Large-Cap Value Fund to 11.75% for the Structured Large-Cap Growth Fund, both as represented by the funds’ Institutional Plus Shares.
The investment environment
The fiscal year started with two strong quarters. The market then declined more than 10%, weighed down by investors’ concern over sovereign debt and doubts about economic recovery, before returning almost to its March 31 levels during September’s rally. The growth rate for GDP in the United States has declined steadily since the fourth quarter of 2009, when it was 5%; that was followed by a 3.7% rate in the first quarter of 2010 and a 1.6% rate in the second. Although corporate earnings have been strong and may remain so, nearly 10%unemployment, lingering sovereign debt concerns, and doubts about the strength of economic growth have left investors cautious about the outlook for equities.
These sudden changes in the market’s direction reinforce our conviction that attempting to time our investments is not profitable. Our aim, instead, is to identify individual stocks that may outperform over the long run. To select these stocks, we use a model with five components: valuation, growth, management decisions, market sentiment, and quality. Each component is itself a model, with several
underlying parts. Each of the five models can yield superior stock selections, but combining them creates a stronger indicator than any individual signal. Each individual model goes through periods of over- or underperformance; combining them dampens the cyclicality and improves the overall results, although our overall model also experiences periods when it does not match the benchmark return.
Our process displays a preference for stocks that have a low multiple on earnings or cash flow, with growth and other fundamental characteristics that are similar to or better than those of their peers. Our valuation model assesses the price we pay for earnings and cash flows relative to other stocks of the same size in an industry. Because buying cheap earnings that are shrinking is not a compelling strategy, we use our growth model to evaluate each company’s earnings growth prospects, again relative to its peers. We measure a firm’s ability to sustain earnings growth with our quality model, which analyzes balance sheet strength and returns on invested capital. We consider management’s opinions through our management decisions model, which evaluates capital spending and debt and stock issuance. Finally, we use our market sentiment model to capture investors’ opinions of a company as reflected in market activity.
We then use the results of our overall model to construct our portfolio, with the goal of minimizing exposure to risks that our research indicates do not improve
8
returns. Thus, we are always fully invested and do not try to add value by over- or underweighting sectors. Our portfolio’s major risk factors, such as market capitalization and beta, will closely match the benchmark’s. Finally, we want to hold many small stakes, so we own a portfolio with several hundred holdings. This means that our return will be determined by how our model performs, not by one or two stocks.
For the past year, our portfolios have lagged their benchmarks, hurt primarily by investors’ rapidly changing views of the economic future. At times like these, investors tend to trade securities as quickly as possible. This puts a premium on liquidity, and means that more finely grained distinctions among stocks are not as important as overall market exposure. As investors become less uncertain, we believe they will once again focus on the fundamental differences among stocks and prefer companies with strong fundamentals and low multiples.
Structured Large-Cap Equity Fund
Ford and Limited Brands were the top two contributors to portfolio return. The biggest detractors were underweight positions in Amazon.com and Altria Group.
Structured Large-Cap Growth Fund
TRW Automotive Holdings aided performance most, followed by Big Lots and DuPont. Underweight positions in Amazon.com and Microsoft had the most negative effect.
Structured Large-Cap Value Fund
The best-performing stocks were Ford and Joy Global. Underweight positions in AK Steel Holding Corp. and PNC Financial Services Group hurt performance.
Structured Broad Market Fund
Ford and Wyndham Worldwide contributed most to return, while underweight positions in Microsoft and Union Pacific reduced it.
We cannot predict the strength or timing of economic recovery, but we continue to believe that stocks are an important part of a diversified investment plan, as is a portfolio of companies with lower relative price/earnings and price/cash flow ratios, growth rates near the market’s overall rate, a higher return on equity, quality balance sheets, and positive market sentiment. We thank you for your investment and look forward to the coming year.
James D. Troyer, CFA
Principal and Portfolio Manager
James P. Stetler
Principal and Portfolio Manager
Joel M. Dickson, Ph.D.
Principal and Head, Vanguard Active Quantitative Equity Management
Vanguard Quantitative Equity Group
October 15, 2010
9
Structured Large-Cap Equity Fund
Fund Profile | |||
As of September 30, 2010 | |||
Share-Class Characteristics | |||
Institutional | Institutional | ||
Shares | Plus Shares | ||
Ticker Symbol | VSLIX | VSLPX | |
Expense Ratio1 | 0.25% | 0.17% | |
30-Day SEC Yield | 1.57% | 1.64% | |
Portfolio Characteristics | |||
DJ | |||
U.S. Total | |||
S&P 500 Market | |||
Fund | Index | Index | |
Number of Stocks | 165 | 500 | 3,920 |
Median Market Cap $46.6B | $42.1B | $27.3B | |
Price/Earnings Ratio | 13.9x | 15.9x | 17.1x |
Price/Book Ratio | 2.1x | 2.1x | 2.1x |
Return on Equity | 20.4% | 20.5% | 19.1% |
Earnings Growth Rate | 5.4% | 6.2% | 6.4% |
Dividend Yield | 2.1% | 2.0% | 1.8% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | 61% | — | — |
Short-Term Reserves | 0.0% | — | — |
Sector Diversification (% of equity exposure)
DJ | |||
U.S. Total | |||
S&P 500 | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 10.8% | 10.4% | 11.7% |
Consumer Staples | 11.1 | 11.3 | 10.1 |
Energy | 10.5 | 10.9 | 9.7 |
Financials | 16.2 | 15.7 | 16.6 |
Health Care | 12.3 | 11.7 | 11.2 |
Industrials | 11.1 | 10.8 | 11.1 |
Information | |||
Technology | 17.9 | 18.8 | 19.0 |
Materials | 3.3 | 3.5 | 4.2 |
Telecommunication | |||
Services | 3.6 | 3.2 | 2.9 |
Utilities | 3.2 | 3.7 | 3.5 |
Volatility Measures | ||
DJ | ||
U.S. Total | ||
S&P 500 | Market | |
Index | Index | |
R-Squared | 1.00 | 0.99 |
Beta | 0.98 | 0.95 |
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)
Exxon Mobil Corp. | Integrated Oil & | |
Gas | 3.2% | |
Apple Inc. | Computer | |
Hardware | 3.0 | |
Microsoft Corp. | Systems Software | 2.3 |
AT&T Inc. | Integrated | |
Telecommunication | ||
Services | 2.2 | |
International Business | IT Consulting & | |
Machines Corp. | Other Services | 2.2 |
Procter & Gamble Co. | Household | |
Products | 2.2 | |
Chevron Corp. | Integrated Oil & | |
Gas | 2.1 | |
JPMorgan Chase & Co. | Diversified Financial | |
Services | 2.0 | |
Johnson & Johnson | Pharmaceuticals | 1.9 |
Google Inc. Class A | Internet Software & | |
Services | 1.7 | |
Top Ten | 22.8% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
1 The expense ratios shown are from the prospectus dated January 27, 2010. For the fiscal year ended September 30, 2010, the expense ratios were 0.24% for Institutional Shares and 0.17% for Institutional Plus Shares.
10
Structured Large-Cap Equity 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: May 16, 2006, Through September 30, 2010
Initial Investment of $5,000,000
Average Annual Total Returns | ||||
Periods Ended September 30, 2010 | ||||
Since | Final Value | |||
One | Inception | of a $5,000,000 | ||
Year | (5/16/2006) | Investment | ||
Structured Large-Cap Equity Fund | ||||
Institutional Shares | 9.68% | -1.83% | $4,610,832 | |
•••••••• | Dow Jones U.S. Total Stock Market | |||
Index | 11.51 | -0.09 | 4,979,426 | |
– – – – | S&P 500 Index | 10.16 | -0.69 | 4,850,495 |
Large-Cap Core Funds Average | 7.86 | -1.42 | 4,696,292 |
Large-Cap Core Funds Average: Derived from data provided by Lipper Inc.
"Since Inception" performance is calculated from the Institutional Shares’ inception date for both the fund and its comparative standards.
Since | Final Value | ||
One | Inception | of a $200,000,000 | |
Year | (5/15/2006) | Investment | |
Structured Large-Cap Equity Fund | |||
Institutional Plus Shares | 9.78% | -1.78% | $184,870,368 |
Dow Jones U.S. Total Stock Market | |||
Index | 11.51 | -0.12 | 198,909,314 |
S&P 500 Index | 10.16 | -0.73 | 193,659,492 |
"Since Inception" performance is calculated from the Institutional Plus Shares’ inception date for both the fund and its comparative standards.
See Financial Highlights for dividend and capital gains information.
11
Structured Large-Cap Equity Fund
Fiscal-Year Total Returns (%): May 16, 2006, Through September 30, 2010
12
Structured Large-Cap Equity Fund
Financial Statements
Statement of Net Assets
As of September 30, 2010
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (99.7%)1 | |||
Consumer Discretionary (10.8%) | |||
* | Ford Motor Co. | 488,206 | 5,976 |
McDonald’s Corp. | 74,397 | 5,543 | |
Time Warner Inc. | 173,000 | 5,302 | |
Starbucks Corp. | 176,000 | 4,502 | |
TJX Cos. Inc. | 99,616 | 4,446 | |
* | DIRECTV Class A | 105,500 | 4,392 |
Comcast Corp. Class A | 226,785 | 4,100 | |
Limited Brands Inc. | 151,793 | 4,065 | |
Time Warner Cable Inc. | 73,200 | 3,952 | |
Whirlpool Corp. | 46,658 | 3,777 | |
Macy’s Inc. | 162,100 | 3,743 | |
Hasbro Inc. | 83,300 | 3,708 | |
Target Corp. | 48,600 | 2,597 | |
Wyndham Worldwide Corp. | 94,140 | 2,586 | |
Gannett Co. Inc. | 204,700 | 2,504 | |
Family Dollar Stores Inc. | 44,600 | 1,970 | |
Comcast Corp. | |||
Special Class A Shares | 111,200 | 1,892 | |
* | Big Lots Inc. | 51,400 | 1,709 |
Ross Stores Inc. | 27,800 | 1,518 | |
Darden Restaurants Inc. | 20,200 | 864 | |
Walt Disney Co. | 23,529 | 779 | |
* | AutoZone Inc. | 2,660 | 609 |
Nordstrom Inc. | 11,300 | 420 | |
Mattel Inc. | 8,600 | 202 | |
Home Depot Inc. | 6,000 | 190 | |
Leggett & Platt Inc. | 8,200 | 187 | |
71,533 | |||
Consumer Staples (11.1%) | |||
Procter & Gamble Co. | 239,094 | 14,338 | |
Wal-Mart Stores Inc. | 196,796 | 10,532 | |
Philip Morris | |||
International Inc. | 169,736 | 9,509 | |
Costco Wholesale Corp. | 82,700 | 5,333 | |
Coca-Cola Co. | 87,440 | 5,117 | |
Coca-Cola Enterprises Inc. | 141,500 | 4,386 | |
Estee Lauder Cos. Inc. | |||
Class A | 60,900 | 3,851 | |
Sara Lee Corp. | 276,000 | 3,707 |
Market | ||
Value | ||
Shares | ($000) | |
Tyson Foods Inc. Class A | 226,940 | 3,636 |
Hershey Co. | 74,341 | 3,538 |
PepsiCo Inc. | 50,792 | 3,375 |
Dr Pepper Snapple | ||
Group Inc. | 78,200 | 2,778 |
Campbell Soup Co. | 49,258 | 1,761 |
Kroger Co. | 38,200 | 827 |
ConAgra Foods Inc. | 29,738 | 652 |
Kimberly-Clark Corp. | 6,844 | 445 |
73,785 | ||
Energy (10.5%) | ||
Exxon Mobil Corp. | 341,439 | 21,098 |
Chevron Corp. | 174,856 | 14,172 |
ConocoPhillips | 157,759 | 9,060 |
Apache Corp. | 53,746 | 5,254 |
Anadarko Petroleum Corp. | 88,592 | 5,054 |
Peabody Energy Corp. | 85,602 | 4,195 |
Pioneer Natural | ||
Resources Co. | 52,300 | 3,401 |
Occidental Petroleum Corp. | 39,951 | 3,128 |
Schlumberger Ltd. | 26,455 | 1,630 |
Marathon Oil Corp. | 45,000 | 1,490 |
El Paso Corp. | 69,250 | 857 |
Williams Cos. Inc. | 10,300 | 197 |
Devon Energy Corp. | 2,900 | 188 |
69,724 | ||
Financials (16.2%) | ||
JPMorgan Chase & Co. | 341,079 | 12,985 |
Wells Fargo & Co. | 315,535 | 7,929 |
Goldman Sachs Group Inc. | 54,798 | 7,923 |
American Express Co. | 156,385 | 6,573 |
Bank of America Corp. | 403,553 | 5,291 |
PNC Financial Services | ||
Group Inc. | 93,800 | 4,869 |
Travelers Cos. Inc. | 92,968 | 4,844 |
Chubb Corp. | 84,443 | 4,812 |
Capital One Financial Corp. | 111,100 | 4,394 |
Ameriprise Financial Inc. | 91,000 | 4,307 |
Vornado Realty Trust | 49,900 | 4,268 |
Franklin Resources Inc. | 38,826 | 4,151 |
13
Structured Large-Cap Equity Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
* | Berkshire Hathaway Inc. | ||
Class B | 50,005 | 4,134 | |
* | Citigroup Inc. | 1,057,956 | 4,126 |
US Bancorp | 180,024 | 3,892 | |
Assurant Inc. | 93,500 | 3,805 | |
Prudential Financial Inc. | 68,100 | 3,690 | |
M&T Bank Corp. | 42,900 | 3,510 | |
Aflac Inc. | 64,794 | 3,351 | |
MetLife Inc. | 82,100 | 3,157 | |
* | Berkshire Hathaway Inc. | ||
Class A | 11 | 1,370 | |
Simon Property Group Inc. | 14,117 | 1,309 | |
Discover Financial Services | 54,700 | 912 | |
Ventas Inc. | 14,104 | 727 | |
* | SLM Corp. | 49,000 | 566 |
Progressive Corp. | 16,400 | 342 | |
Torchmark Corp. | 4,900 | 260 | |
Apartment Investment & | |||
Management Co. | 2,300 | 49 | |
107,546 | |||
Health Care (12.2%) | |||
Johnson & Johnson | 205,746 | 12,748 | |
* | Amgen Inc. | 117,013 | 6,449 |
UnitedHealth Group Inc. | 178,774 | 6,277 | |
Bristol-Myers Squibb Co. | 231,000 | 6,262 | |
Eli Lilly & Co. | 157,187 | 5,742 | |
Pfizer Inc. | 303,819 | 5,216 | |
* | WellPoint Inc. | 88,184 | 4,995 |
CIGNA Corp. | 115,100 | 4,118 | |
Merck & Co. Inc. | 110,594 | 4,071 | |
McKesson Corp. | 65,600 | 4,053 | |
* | Biogen Idec Inc. | 72,200 | 4,052 |
AmerisourceBergen Corp. | |||
Class A | 125,598 | 3,851 | |
* | Humana Inc. | 75,500 | 3,793 |
* | Mylan Inc. | 181,000 | 3,405 |
* | Cephalon Inc. | 53,205 | 3,322 |
Abbott Laboratories | 30,468 | 1,592 | |
* | Waters Corp. | 6,800 | 481 |
* | Medco Health Solutions Inc. | 9,066 | 472 |
* | Hospira Inc. | 6,000 | 342 |
81,241 | |||
Industrials (11.0%) | |||
General Electric Co. | 558,722 | 9,079 | |
3M Co. | 84,213 | 7,302 | |
United Parcel Service Inc. | |||
Class B | 108,721 | 7,251 | |
Boeing Co. | 87,500 | 5,822 | |
Deere & Co. | 74,500 | 5,199 | |
Cummins Inc. | 54,295 | 4,918 | |
Northrop Grumman Corp. | 75,216 | 4,560 | |
Waste Management Inc. | 125,730 | 4,494 | |
Eaton Corp. | 52,900 | 4,364 | |
United Technologies Corp. | 53,536 | 3,813 | |
Caterpillar Inc. | 46,300 | 3,643 | |
Rockwell Automation Inc. | 53,400 | 3,296 |
Market | |||
Value | |||
Shares | ($000) | ||
CSX Corp. | 55,618 | 3,077 | |
Honeywell International Inc. | 53,783 | 2,363 | |
Southwest Airlines Co. | 108,200 | 1,414 | |
Parker Hannifin Corp. | 16,800 | 1,177 | |
RR Donnelley & Sons Co. | 63,700 | 1,080 | |
Avery Dennison Corp. | 10,900 | 405 | |
73,257 | |||
Information Technology (17.9%) | |||
* | Apple Inc. | 69,342 | 19,676 |
Microsoft Corp. | 621,141 | 15,212 | |
International Business | |||
Machines Corp. | 107,640 | 14,439 | |
* | Google Inc. Class A | 21,555 | 11,333 |
Intel Corp. | 470,753 | 9,053 | |
Hewlett-Packard Co. | 195,800 | 8,237 | |
* | Cognizant Technology | ||
Solutions Corp. Class A | 78,400 | 5,054 | |
* | Motorola Inc. | 588,450 | 5,019 |
* | NetApp Inc. | 97,665 | 4,863 |
* | Cisco Systems Inc. | 212,215 | 4,648 |
* | Intuit Inc. | 100,000 | 4,381 |
* | Novellus Systems Inc. | 128,800 | 3,423 |
* | Lexmark International Inc. | ||
Class A | 72,000 | 3,213 | |
Oracle Corp. | 107,988 | 2,899 | |
* | Micron Technology Inc. | 242,700 | 1,750 |
Computer Sciences Corp. | 30,098 | 1,385 | |
* | Advanced Micro | ||
Devices Inc. | 174,800 | 1,243 | |
* | Teradata Corp. | 23,739 | 915 |
QUALCOMM Inc. | 19,157 | 864 | |
Broadcom Corp. Class A | 23,400 | 828 | |
* | JDS Uniphase Corp. | 28,600 | 354 |
* | Agilent Technologies Inc. | 5,400 | 180 |
* | Autodesk Inc. | 3,900 | 125 |
* | Teradyne Inc. | 6,700 | 75 |
* | VeriSign Inc. | 2,300 | 73 |
119,242 | |||
Materials (3.3%) | |||
EI du Pont de Nemours | |||
& Co. | 143,453 | 6,401 | |
PPG Industries Inc. | 58,700 | 4,273 | |
International Paper Co. | 135,300 | 2,943 | |
Freeport-McMoRan | |||
Copper & Gold Inc. | 34,200 | 2,920 | |
Newmont Mining Corp. | 45,600 | 2,864 | |
Eastman Chemical Co. | 31,100 | 2,302 | |
21,703 | |||
Telecommunication Services (3.5%) | |||
AT&T Inc. | 506,735 | 14,493 | |
Verizon | |||
Communications Inc. | 240,896 | 7,851 | |
* | American Tower Corp. | ||
Class A | 13,600 | 697 |
14
Structured Large-Cap Equity Fund | ||
Market | ||
Value | ||
Shares | ($000) | |
Qwest Communications | ||
International Inc. | 95,900 | 601 |
23,642 | ||
Utilities (3.2%) | ||
Dominion Resources Inc. | 110,800 | 4,838 |
Integrys Energy Group Inc. | 72,800 | 3,790 |
DTE Energy Co. | 78,600 | 3,610 |
NiSource Inc. | 172,700 | 3,005 |
CMS Energy Corp. | 99,238 | 1,788 |
Nicor Inc. | 26,700 | 1,223 |
Oneok Inc. | 25,300 | 1,140 |
CenterPoint Energy Inc. | 41,300 | 649 |
Entergy Corp. | 8,400 | 643 |
Exelon Corp. | 12,700 | 541 |
21,227 | ||
Total Common Stocks | ||
(Cost $607,062) | 662,900 | |
Temporary Cash Investments (0.3%)1 | ||
Money Market Fund (0.3%) | ||
2 Vanguard Market Liquidity | ||
Fund, 0.261% | 1,950,365 | 1,950 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.0%) | ||
3,4 Freddie Mac Discount | ||
Notes, 0.240%, 3/14/11 | 175 | 175 |
Total Temporary Cash Investments | ||
(Cost $2,125) | 2,125 | |
Total Investments (100.0%) | ||
(Cost $609,187) | 665,025 | |
Other Assets and Liabilities (0.0%) | ||
Other Assets | 1,176 | |
Liabilities | (1,459) | |
(283) | ||
Net Assets (100%) | 664,742 |
At September 30, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 876,454 |
Undistributed Net Investment Income | 8,386 |
Accumulated Net Realized Losses | (275,965) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 55,838 |
Futures Contracts | 29 |
Net Assets | 664,742 |
Institutional Shares—Net Assets | |
Applicable to 4,537,971 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 95,179 |
Net Asset Value Per Share— | |
Institutional Shares | $20.97 |
Institutional Plus Shares—Net Assets | |
Applicable to 13,568,911 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 569,563 |
Net Asset Value Per Share— | |
Institutional Plus Shares | $41.98 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
4 Securities with a value of $175,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
15
Structured Large-Cap Equity Fund | |
Statement of Operations | |
Year Ended | |
September 30, 2010 | |
($000) | |
Investment Income | |
Income | |
Dividends | 12,871 |
Interest1 | 4 |
Security Lending | 63 |
Total Income | 12,938 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 494 |
Management and Administrative—Institutional Shares | 137 |
Management and Administrative—Institutional Plus Shares | 333 |
Marketing and Distribution—Institutional Shares | 19 |
Marketing and Distribution—Institutional Plus Shares | 93 |
Custodian Fees | 16 |
Auditing Fees | 28 |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—Institutional Plus Shares | 1 |
Trustees’ Fees and Expenses | 1 |
Total Expenses | 1,122 |
Net Investment Income | 11,816 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 6,739 |
Futures Contracts | (131) |
Realized Net Gain (Loss) | 6,608 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 39,292 |
Futures Contracts | 37 |
Change in Unrealized Appreciation (Depreciation) | 39,329 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 57,753 |
1 Interest income from an affiliated company of the fund was $3,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
16
Structured Large-Cap Equity Fund | ||
Statement of Changes in Net Assets | ||
Year Ended September 30, | ||
2010 | 2009 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 11,816 | 12,474 |
Realized Net Gain (Loss) | 6,608 | (242,061) |
Change in Unrealized Appreciation (Depreciation) | 39,329 | 118,445 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 57,753 | (111,142) |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (2,024) | (3,907) |
Institutional Plus Shares | (9,247) | (13,919) |
Realized Capital Gain | ||
Institutional Shares | — | — |
Institutional Plus Shares | — | — |
Total Distributions | (11,271) | (17,826) |
Capital Share Transactions | ||
Institutional Shares | (19,348) | (10,600) |
Institutional Plus Shares | 64,445 | (99,837) |
Net Increase (Decrease) from Capital Share Transactions | 45,097 | (110,437) |
Total Increase (Decrease) | 91,579 | (239,405) |
Net Assets | ||
Beginning of Period | 573,163 | 812,568 |
End of Period1 | 664,742 | 573,163 |
1 Net Assets—End of Period includes undistributed net investment income of $8,386,000 and $7,841,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
Structured Large-Cap Equity Fund | |||||
Financial Highlights | |||||
Institutional Shares | |||||
May 16, | |||||
20061 to | |||||
For a Share Outstanding | Year Ended September 30, | Sept. 30, | |||
Throughout Each Period | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $19.47 | $22.56 | $29.98 | $26.03 | $24.96 |
Investment Operations | |||||
Net Investment Income | .366 | .546 | .492 | .4762 | .130 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 1.505 | (2.993) | (7.091) | 3.657 | .940 |
Total from Investment Operations | 1.871 | (2.447) | (6.599) | 4.133 | 1.070 |
Distributions | |||||
Dividends from Net Investment Income | (.371) | (.643) | (.430) | (.172) | — |
Distributions from Realized Capital Gains | — | — | (.391) | (.011) | — |
Total Distributions | (.371) | (.643) | (.821) | (.183) | — |
Net Asset Value, End of Period | $20.97 | $19.47 | $22.56 | $29.98 | $26.03 |
Total Return | 9.68% | -10.25% | -22.52% | 15.94% | 4.29% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $95 | $106 | $135 | $187 | $127 |
Ratio of Total Expenses to Average Net Assets | 0.24% | 0.25% | 0.20% | 0.25% | 0.25%3 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 1.86% | 2.33% | 1.91% | 1.69% | 1.67%3 |
Portfolio Turnover Rate | 61% | 80%4 | 72% | 54%4 | 30% |
1 Inception.
2 Calculated based on average shares outstanding.
3 Annualized.
4 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.
18
Structured Large-Cap Equity Fund | |||||
Financial Highlights | |||||
Institutional Plus Shares | |||||
May 15, | |||||
20061 to | |||||
For a Share Outstanding | Year Ended September 30, | Sept. 30, | |||
Throughout Each Period | 2010 | 2009 | 2008 | 2007 | 2006 |
Net Asset Value, Beginning of Period | $38.97 | $45.15 | $60.02 | $52.07 | $50.00 |
Investment Operations | |||||
Net Investment Income | .768 | 1.116 | 1.025 | 1.0182 | .250 |
Net Realized and Unrealized Gain (Loss) | |||||
on Investments | 3.014 | (5.980) | (14.193) | 7.317 | 1.820 |
Total from Investment Operations | 3.782 | (4.864) | (13.168) | 8.335 | 2.070 |
Distributions | |||||
Dividends from Net Investment Income | (.772) | (1.316) | (.920) | (.363) | — |
Distributions from Realized Capital Gains | — | — | (.782) | (.022) | — |
Total Distributions | (.772) | (1.316) | (1.702) | (.385) | — |
Net Asset Value, End of Period | $41.98 | $38.97 | $45.15 | $60.02 | $52.07 |
Total Return | 9.78% | -10.16% | -22.46% | 16.07% | 4.14% |
Ratios/Supplemental Data | |||||
Net Assets, End of Period (Millions) | $570 | $467 | $677 | $819 | $203 |
Ratio of Total Expenses to Average Net Assets | 0.17% | 0.17% | 0.12% | 0.15% | 0.15%3 |
Ratio of Net Investment Income to | |||||
Average Net Assets | 1.93% | 2.41% | 1.99% | 1.79% | 1.77%3 |
Portfolio Turnover Rate | 61% | 80%4 | 72% | 54%4 | 30% |
1 Inception.
2 Calculated based on average shares outstanding.
3 Annualized.
4 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.
19
Structured Large-Cap Equity Fund
Notes to Financial Statements
Vanguard Structured Large-Cap Equity 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: Institutional Shares and Institutional Plus Shares. Institutional Shares and Institutional Plus 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 materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
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).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2007–2010), and has concluded that no provision for federal income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. 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.
6. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. 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.
20
Structured Large-Cap Equity Fund
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. The Vanguard Group furnishes at cost investment advisory, 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 September 30, 2010, the fund had contributed capital of $117,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.05% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
C. 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 fund’s investments as of September 30, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 662,900 | — | — |
Temporary Cash Investments | 1,950 | 175 | — |
Futures Contracts—Liabilities1 | (7) | — | — |
Total | 664,843 | 175 | — |
1 Represents variation margin on the last day of the reporting period. |
D. At September 30, 2010, 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) |
S&P 500 Index | December 2010 | 4 | 1,137 | 21 |
E-mini S&P 500 Index | December 2010 | 12 | 682 | 8 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
21
Structured Large-Cap Equity Fund
E. 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.
For tax purposes, at September 30, 2010, the fund had $9,118,000 of ordinary income available for distribution. The fund had available capital loss carryforwards totaling $275,945,000 to offset future net capital gains of $163,235,000 through September 30, 2017, and $112,710,000 through September 30, 2018.
At September 30, 2010, the cost of investment securities for tax purposes was $609,187,000. Net unrealized appreciation of investment securities for tax purposes was $55,838,000, consisting of unrealized gains of $81,926,000 on securities that had risen in value since their purchase and $26,088,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the year ended September 30, 2010, the fund purchased $413,671,000 of investment securities and sold $368,142,000 of investment securities, other than temporary cash investments.
G. Capital share transactions for each class of shares were: | ||||
Year Ended September 30, | ||||
2010 | 2009 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 1,649 | 41 | 4,395 | 272 |
Issued in Lieu of Cash Distributions | 343 | 17 | 1,002 | 62 |
Redeemed | (21,340) | (986) | (15,997) | (874) |
Net Increase (Decrease)—Institutional Shares | (19,348) | (928) | (10,600) | (540) |
Institutional Plus Shares | ||||
Issued | 59,610 | 1,471 | 41,945 | 1,312 |
Issued in Lieu of Cash Distributions | 4,835 | 120 | 7,918 | 246 |
Redeemed | — | — | (149,700) | (4,575) |
Net Increase (Decrease)—Institutional Plus Shares | 64,445 | 1,591 | (99,837) | (3,017) |
H. In preparing the financial statements as of September 30, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
22
Structured Large-Cap Growth Fund
Fund Profile | |||
As of September 30, 2010 | |||
Share-Class Characteristics | |||
Institutional | Institutional | ||
Shares | Plus Shares | ||
Ticker Symbol | VSTLX | VSGPX | |
Expense Ratio1 | 0.25% | 0.17% | |
30-Day SEC Yield | 1.24% | 1.31% | |
Portfolio Characteristics | |||
Russell | DJ | ||
1000 | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Number of Stocks | 208 | 627 | 3,920 |
Median Market Cap $37.8B | $34.9B | $27.3B | |
Price/Earnings Ratio | 15.3x | 17.9x | 17.1x |
Price/Book Ratio | 3.4x | 3.5x | 2.1x |
Return on Equity | 24.7% | 24.7% | 19.1% |
Earnings Growth Rate 11.8% | 11.7% | 6.4% | |
Dividend Yield | 1.6% | 1.5% | 1.8% |
Foreign Holdings | 0.5% | 0.0% | 0.0% |
Turnover Rate | 62% | — | — |
Short-Term Reserves | 0.1% | — | — |
Sector Diversification (% of equity exposure)
Russell | DJ | ||
1000 | U.S. Total | ||
Growth | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 13.8% | 14.7% | 11.7% |
Consumer Staples | 10.8 | 10.1 | 10.1 |
Energy | 10.0 | 10.0 | 9.7 |
Financials | 5.0 | 4.6 | 16.6 |
Health Care | 10.5 | 10.1 | 11.2 |
Industrials | 13.7 | 13.1 | 11.1 |
Information | |||
Technology | 30.9 | 31.4 | 19.0 |
Materials | 4.6 | 5.0 | 4.2 |
Telecommunication | |||
Services | 0.5 | 0.9 | 2.9 |
Utilities | 0.2 | 0.1 | 3.5 |
Volatility Measures | ||
DJ | ||
U.S. Total | ||
Russell 1000 | Market | |
Growth Index | Index | |
R-Squared | 1.00 | 0.96 |
Beta | 0.99 | 0.96 |
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)
Apple Inc. | Computer | |
Hardware | 4.5% | |
Exxon Mobil Corp. | Integrated Oil & | |
Gas | 4.3 | |
International Business | IT Consulting & | |
Machines Corp. | Other Services | 3.5 |
Microsoft Corp. | Systems Software | 2.6 |
Google Inc. Class A | Internet Software & | |
Services | 2.6 | |
Cisco Systems Inc. | Communications | |
Equipment | 2.1 | |
Hewlett-Packard Co. | Computer | |
Hardware | 1.8 | |
Oracle Corp. | Systems Software | 1.7 |
Wal-Mart Stores Inc. | Hypermarkets & | |
Super Centers | 1.6 | |
3M Co. | Industrial | |
Conglomerates | 1.6 | |
Top Ten | 26.3% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
1 The expense ratios shown are from the prospectus dated January 27, 2010. For the fiscal year ended September 30, 2010, the expense ratios were 0.24% for Institutional Shares and 0.17% for Institutional Plus Shares.
23
Structured Large-Cap Growth 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: June 22, 2007, Through September 30, 2010
Initial Investment of $5,000,000
Average Annual Total Returns | ||||
Periods Ended September 30, 2010 | ||||
Since | Final Value | |||
One | Inception | of a $5,000,000 | ||
Year | (6/22/2007) | Investment | ||
Structured Large-Cap Growth Fund | ||||
Institutional Shares | 11.66% | -4.49% | $4,302,418 | |
•••••••• | Dow Jones U.S. Total Stock Market | |||
Index | 11.51 | -5.19 | 4,199,425 | |
– – – – | Russell 1000 Growth Index | 12.65 | -2.79 | 4,557,248 |
Large-Cap Growth Funds Average | 10.23 | -3.68 | 4,422,832 |
Large-Cap Growth Funds Average: Derived from data provided by Lipper Inc.
"Since Inception" performance is calculated from the Institutional Shares’ inception date for both the fund and its comparative standards.
Since | Final Value | ||
One | Inception | of a $200,000,000 | |
Year | (1/19/2006) | Investment | |
Structured Large-Cap Growth Fund | |||
Institutional Plus Shares | 11.75% | 0.19% | $201,814,455 |
Dow Jones U.S. Total Stock Market | |||
Index | 11.51 | 0.24 | 202,248,082 |
Russell 1000 Growth Index | 12.65 | 0.98 | 209,335,896 |
"Since Inception" performance is calculated from the Institutional Plus Shares’ inception date for both the fund and its comparative standards.
The fund commenced operations as a registered investment company on October 3, 2006. The fund's performance includes the performance of a predecessor trust, Vanguard Fiduciary Trust Company Structured Large-Cap Growth Trust, from January 19, 2006, to October 3, 2006.
See Financial Highlights for dividend and capital gains information.
24
Structured Large-Cap Growth Fund
Fiscal-Year Total Returns (%): June 22, 2007, Through September 30, 2010
25
Structured Large-Cap Growth Fund
Financial Statements
Statement of Net Assets
As of September 30, 2010
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (99.6%)1 | |||
Consumer Discretionary (13.8%) | |||
McDonald’s Corp. | 8,864 | 660 | |
* | Ford Motor Co. | 48,200 | 590 |
* | DIRECTV Class A | 13,100 | 545 |
TJX Cos. Inc. | 9,250 | 413 | |
Starbucks Corp. | 15,900 | 407 | |
Target Corp. | 6,820 | 364 | |
Limited Brands Inc. | 12,000 | 321 | |
Mattel Inc. | 13,400 | 314 | |
Ross Stores Inc. | 5,700 | 311 | |
* | TRW Automotive | ||
Holdings Corp. | 7,100 | 295 | |
Macy’s Inc. | 12,300 | 284 | |
Advance Auto Parts Inc. | 4,800 | 282 | |
Darden Restaurants Inc. | 6,500 | 278 | |
* | Amazon.com Inc. | 1,500 | 236 |
Williams-Sonoma Inc. | 6,900 | 219 | |
Home Depot Inc. | 5,100 | 162 | |
* | AutoZone Inc. | 620 | 142 |
* | Panera Bread Co. Class A | 1,600 | 142 |
Yum! Brands Inc. | 2,800 | 129 | |
Whirlpool Corp. | 1,400 | 113 | |
McGraw-Hill Cos. Inc. | 3,100 | 103 | |
Omnicom Group Inc. | 2,202 | 87 | |
Gap Inc. | 3,650 | 68 | |
Comcast Corp. | |||
Special Class A Shares | 3,300 | 56 | |
Phillips-Van Heusen Corp. | 460 | 28 | |
* | Aeropostale Inc. | 1,000 | 23 |
* | Dollar Tree Inc. | 450 | 22 |
* | ITT Educational Services Inc. | 300 | 21 |
H&R Block Inc. | 1,500 | 19 | |
Hillenbrand Inc. | 800 | 17 | |
* | Harman International | ||
Industries Inc. | 400 | 13 | |
* | Career Education Corp. | 500 | 11 |
Wyndham Worldwide Corp. | 200 | 6 | |
6,681 |
Market | |||
Value | |||
Shares | ($000) | ||
Consumer Staples (10.8%) | |||
Wal-Mart Stores Inc. | 14,957 | 800 | |
Coca-Cola Co. | 12,948 | 758 | |
Philip Morris International Inc. | 12,869 | 721 | |
PepsiCo Inc. | 7,601 | 505 | |
Estee Lauder Cos. Inc. | |||
Class A | 5,000 | 316 | |
Hershey Co. | 5,800 | 276 | |
Colgate-Palmolive Co. | 3,405 | 262 | |
Walgreen Co. | 7,510 | 252 | |
Procter & Gamble Co. | 3,703 | 222 | |
Kimberly-Clark Corp. | 2,800 | 182 | |
Sara Lee Corp. | 13,300 | 179 | |
Sysco Corp. | 5,094 | 145 | |
Altria Group Inc. | 5,269 | 126 | |
Costco Wholesale Corp. | 1,700 | 110 | |
Campbell Soup Co. | 2,600 | 93 | |
General Mills Inc. | 2,400 | 88 | |
Dr Pepper Snapple Group Inc. | 2,200 | 78 | |
Coca-Cola Enterprises Inc. | 1,800 | 56 | |
CVS Caremark Corp. | 1,384 | 43 | |
Mead Johnson Nutrition Co. | 303 | 17 | |
5,229 | |||
Energy (9.9%) | |||
Exxon Mobil Corp. | 33,973 | 2,099 | |
ConocoPhillips | 9,000 | 517 | |
Schlumberger Ltd. | 5,400 | 333 | |
Chevron Corp. | 4,100 | 332 | |
Core Laboratories NV | 3,300 | 291 | |
Peabody Energy Corp. | 5,500 | 270 | |
Cimarex Energy Co. | 4,000 | 265 | |
Frontline Ltd. | 7,300 | 208 | |
El Paso Corp. | 14,800 | 183 | |
* | Whiting Petroleum Corp. | 1,700 | 162 |
* | FMC Technologies Inc. | 1,100 | 75 |
Consol Energy Inc. | 950 | 35 | |
EXCO Resources Inc. | 1,600 | 24 | |
Diamond Offshore Drilling Inc. | 300 | 20 | |
* | Oceaneering International Inc. | 100 | 5 |
4,819 |
26
Structured Large-Cap Growth Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Financials (4.9%) | |||
American Express Co. | 13,827 | 581 | |
Franklin Resources Inc. | 3,100 | 331 | |
* | CNA Financial Corp. | 8,700 | 244 |
Capital One Financial Corp. | 6,000 | 237 | |
Ameriprise Financial Inc. | 4,700 | 222 | |
Aflac Inc. | 3,769 | 195 | |
Vornado Realty Trust | 1,300 | 111 | |
Apartment Investment & | |||
Management Co. | 4,700 | 101 | |
Simon Property Group Inc. | 651 | 60 | |
Public Storage | 600 | 58 | |
* | CB Richard Ellis Group Inc. | ||
Class A | 2,400 | 44 | |
Digital Realty Trust Inc. | 700 | 43 | |
* | TD Ameritrade Holding Corp. | 2,500 | 40 |
Jones Lang LaSalle Inc. | 400 | 35 | |
General Growth Properties Inc. | 1,400 | 22 | |
Federated Investors Inc. | |||
Class B | 900 | 20 | |
BlackRock Inc. | 100 | 17 | |
Rayonier Inc. | 300 | 15 | |
Hudson City Bancorp Inc. | 700 | 9 | |
Endurance Specialty | |||
Holdings Ltd. | 200 | 8 | |
BOK Financial Corp. | 100 | 5 | |
2,398 | |||
Health Care (10.5%) | |||
Abbott Laboratories | 11,469 | 599 | |
* | Medco Health Solutions Inc. | 8,290 | 432 |
Perrigo Co. | 5,000 | 321 | |
AmerisourceBergen Corp. | |||
Class A | 10,360 | 318 | |
McKesson Corp. | 4,740 | 293 | |
Eli Lilly & Co. | 7,600 | 278 | |
CIGNA Corp. | 7,700 | 275 | |
Bristol-Myers Squibb Co. | 9,781 | 265 | |
* | Humana Inc. | 5,200 | 261 |
* | Hospira Inc. | 4,500 | 257 |
* | Cephalon Inc. | 4,038 | 252 |
Johnson & Johnson | 4,012 | 249 | |
* | WellPoint Inc. | 4,100 | 232 |
Baxter International Inc. | 4,142 | 198 | |
Lincare Holdings Inc. | 5,900 | 148 | |
Medtronic Inc. | 4,240 | 142 | |
* | Community Health | ||
Systems Inc. | 4,000 | 124 | |
* | Waters Corp. | 1,700 | 120 |
* | Gilead Sciences Inc. | 3,070 | 109 |
Cardinal Health Inc. | 2,400 | 79 | |
Quest Diagnostics Inc. | 1,200 | 61 | |
* | Mylan Inc. | 2,100 | 39 |
Market | |||
Value | |||
Shares | ($000) | ||
Valeant Pharmaceuticals | |||
International Inc. | 1,068 | 27 | |
* | Health Management | ||
Associates Inc. Class A | 2,600 | 20 | |
5,099 | |||
Industrials (13.6%) | |||
3M Co. | 8,926 | 774 | |
Caterpillar Inc. | 8,700 | 684 | |
United Technologies Corp. | 6,482 | 462 | |
Deere & Co. | 6,600 | 461 | |
Cummins Inc. | 4,800 | 435 | |
United Parcel Service Inc. | |||
Class B | 5,947 | 397 | |
Joy Global Inc. | 4,800 | 337 | |
Rockwell Automation Inc. | 5,300 | 327 | |
* | Delta Air Lines Inc. | 26,400 | 307 |
Eaton Corp. | 3,400 | 280 | |
Honeywell International Inc. | 6,380 | 280 | |
Southwest Airlines Co. | 20,300 | 265 | |
Emerson Electric Co. | 4,746 | 250 | |
Northrop Grumman Corp. | 4,000 | 242 | |
RR Donnelley & Sons Co. | 8,700 | 148 | |
Lockheed Martin Corp. | 2,004 | 143 | |
Waste Management Inc. | 3,458 | 124 | |
* | Owens Corning | 4,200 | 108 |
Republic Services Inc. Class A | 3,000 | 91 | |
Boeing Co. | 1,200 | 80 | |
* | Waste Connections Inc. | 1,700 | 67 |
General Electric Co. | 3,700 | 60 | |
FedEx Corp. | 700 | 60 | |
Flowserve Corp. | 400 | 44 | |
Iron Mountain Inc. | 1,700 | 38 | |
PACCAR Inc. | 700 | 34 | |
Pitney Bowes Inc. | 1,500 | 32 | |
* | Alliant Techsystems Inc. | 300 | 23 |
* | Navistar International Corp. | 400 | 17 |
Crane Co. | 400 | 15 | |
Avery Dennison Corp. | 400 | 15 | |
* | WESCO International Inc. | 300 | 12 |
6,612 | |||
Information Technology (30.8%) | |||
* | Apple Inc. | 7,712 | 2,188 |
International Business | |||
Machines Corp. | 12,507 | 1,678 | |
Microsoft Corp. | 52,285 | 1,280 | |
* | Google Inc. Class A | 2,385 | 1,254 |
* | Cisco Systems Inc. | 46,750 | 1,024 |
Hewlett-Packard Co. | 20,677 | 870 | |
Oracle Corp. | 31,396 | 843 | |
QUALCOMM Inc. | 10,903 | 492 | |
Intel Corp. | 21,920 | 422 | |
* | NetApp Inc. | 7,900 | 393 |
* | Intuit Inc. | 8,200 | 359 |
* | Agilent Technologies Inc. | 10,600 | 354 |
Altera Corp. | 10,900 | 329 | |
* | Rovi Corp. | 6,300 | 318 |
27
Structured Large-Cap Growth Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
* | VMware Inc. Class A | 3,700 | 314 |
* | Red Hat Inc. | 7,500 | 307 |
* | Teradata Corp. | 7,400 | 285 |
* | Novellus Systems Inc. | 10,200 | 271 |
* | Cognizant Technology | ||
Solutions Corp. Class A | 3,200 | 206 | |
* | Advanced Micro Devices Inc. | 28,200 | 201 |
* | Vishay Intertechnology Inc. | 20,300 | 197 |
Mastercard Inc. Class A | 700 | 157 | |
Texas Instruments Inc. | 4,761 | 129 | |
Visa Inc. Class A | 1,600 | 119 | |
* | Avago Technologies Ltd. | 4,900 | 110 |
* | SanDisk Corp. | 2,700 | 99 |
* | Marvell Technology | ||
Group Ltd. | 4,700 | 82 | |
* | EMC Corp. | 3,400 | 69 |
Xilinx Inc. | 2,500 | 67 | |
* | Micron Technology Inc. | 9,100 | 66 |
* | BMC Software Inc. | 1,610 | 65 |
CA Inc. | 2,800 | 59 | |
* | eBay Inc. | 2,400 | 59 |
* | Hewitt Associates Inc. | ||
Class A | 800 | 40 | |
* | Seagate Technology PLC | 3,334 | 39 |
Global Payments Inc. | 800 | 34 | |
* | Alliance Data Systems Corp. | 500 | 33 |
* | ON Semiconductor Corp. | 4,200 | 30 |
Jabil Circuit Inc. | 1,500 | 22 | |
* | NeuStar Inc. Class A | 800 | 20 |
Harris Corp. | 400 | 18 | |
Activision Blizzard Inc. | 1,600 | 17 | |
* | Western Digital Corp. | 600 | 17 |
* | Symantec Corp. | 1,000 | 15 |
* | Cypress Semiconductor Corp. | 1,100 | 14 |
14,965 | |||
Materials (4.6%) | |||
EI du Pont de Nemours & Co. | 8,800 | 393 | |
Freeport-McMoRan | |||
Copper & Gold Inc. | 3,900 | 333 | |
Lubrizol Corp. | 3,000 | 318 | |
Walter Energy Inc. | 3,600 | 293 | |
Ashland Inc. | 4,700 | 229 | |
Praxair Inc. | 2,070 | 187 | |
PPG Industries Inc. | 2,300 | 167 | |
Monsanto Co. | 2,027 | 97 | |
Sherwin-Williams Co. | 800 | 60 | |
Newmont Mining Corp. | 900 | 56 | |
Celanese Corp. Class A | 1,470 | 47 | |
* | Pactiv Corp. | 1,200 | 40 |
* | Owens-Illinois Inc. | 600 | 17 |
Ball Corp. | 200 | 12 | |
2,249 |
Market | |||
Value | |||
Shares | ($000) | ||
Telecommunication Services (0.5%) | |||
* | American Tower Corp. | ||
Class A | 1,800 | 92 | |
* | tw telecom inc Class A | 4,600 | 86 |
Frontier | |||
Communications Corp. | 5,900 | 48 | |
226 | |||
Utilities (0.2%) | |||
Integrys Energy Group Inc. | 1,400 | 73 | |
Total Common Stocks | |||
(Cost $39,940) | 48,351 | ||
Temporary Cash Investments (0.5%)1 | |||
Money Market Fund (0.4%) | |||
2 | Vanguard Market Liquidity | ||
Fund, 0.261% | 169,814 | 170 | |
Face | |||
Amount | |||
($000) | |||
U.S. Government and Agency Obligations (0.1%) | |||
3,4 | Fannie Mae Discount | ||
Notes, 0.341%, 3/1/11 | 50 | 50 | |
Total Temporary Cash Investments | |||
(Cost $220) | 220 | ||
Total Investments (100.1%) | |||
(Cost $40,160) | 48,571 | ||
Other Assets and Liabilities (-0.1%) | |||
Other Assets | 90 | ||
Liabilities | (134) | ||
(44) | |||
Net Assets (100%) | 48,527 |
28
Structured Large-Cap Growth Fund
At September 30, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 53,495 |
Undistributed Net Investment Income | 519 |
Accumulated Net Realized Losses | (13,901) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 8,411 |
Futures Contracts | 3 |
Net Assets | 48,527 |
Institutional Shares—Net Assets | |
Applicable to 429,489 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 10,119 |
Net Asset Value Per Share— | |
Institutional Shares | $23.56 |
Institutional Plus Shares—Net Assets | |
Applicable to 818,142 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 38,408 |
Net Asset Value Per Share— | |
Institutional Plus Shares | $46.95 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.1%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
4 Securities with a value of $50,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
29
Structured Large-Cap Growth Fund | |
Statement of Operations | |
Year Ended | |
September 30, 2010 | |
($000) | |
Investment Income | |
Income | |
Dividends | 871 |
Security Lending | 2 |
Total Income | 873 |
Expenses | |
The Vanguard Group—Note B | |
Management and Administrative—Institutional Shares | 16 |
Management and Administrative—Institutional Plus Shares | 37 |
Marketing and Distribution—Institutional Shares | 2 |
Marketing and Distribution—Institutional Plus Shares | 3 |
Custodian Fees | 8 |
Auditing Fees | 26 |
Total Expenses | 92 |
Net Investment Income | 781 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 2,726 |
Futures Contracts | 24 |
Realized Net Gain (Loss) | 2,750 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 2,274 |
Futures Contracts | 5 |
Change in Unrealized Appreciation (Depreciation) | 2,279 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 5,810 |
See accompanying Notes, which are an integral part of the Financial Statements.
30
Structured Large-Cap Growth Fund | ||
Statement of Changes in Net Assets | ||
Year Ended September 30, | ||
2010 | 2009 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 781 | 755 |
Realized Net Gain (Loss) | 2,750 | (12,827) |
Change in Unrealized Appreciation (Depreciation) | 2,279 | 9,941 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 5,810 | (2,131) |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (140) | (137) |
Institutional Plus Shares | (644) | (618) |
Realized Capital Gain | ||
Institutional Shares | — | — |
Institutional Plus Shares | — | — |
Total Distributions | (784) | (755) |
Capital Share Transactions | ||
Institutional Shares | (864) | 137 |
Institutional Plus Shares | (9,352) | 618 |
Net Increase (Decrease) from Capital Share Transactions | (10,216) | 755 |
Total Increase (Decrease) | (5,190) | (2,131) |
Net Assets | ||
Beginning of Period | 53,717 | 55,848 |
End of Period1 | 48,527 | 53,717 |
1 Net Assets—End of Period includes undistributed net investment income of $519,000 and $522,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
31
Structured Large-Cap Growth Fund | ||||
Financial Highlights | ||||
Institutional Shares | ||||
June 22, | ||||
20071 to | ||||
Year Ended September 30, | Sept. 30, | |||
For a Share Outstanding Throughout Each Period | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $21.38 | $22.63 | $29.93 | $29.04 |
Investment Operations | ||||
Net Investment Income | .345 | .290 | .283 | .050 |
Net Realized and Unrealized Gain (Loss) on Investments | 2.135 | (1.243) | (6.742) | .840 |
Total from Investment Operations | 2.480 | (.953) | (6.459) | .890 |
Distributions | ||||
Dividends from Net Investment Income | (.300) | (.297) | (.270) | — |
Distributions from Realized Capital Gains | — | — | (.571) | — |
Total Distributions | (.300) | (.297) | (.841) | — |
Net Asset Value, End of Period | $23.56 | $21.38 | $22.63 | $29.93 |
Total Return | 11.66% | -3.89% | -22.20% | 3.06% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $10 | $10 | $10 | $9 |
Ratio of Total Expenses to Average Net Assets | 0.24% | 0.25% | 0.20% | 0.25%2 |
Ratio of Net Investment Income to Average Net Assets | 1.49% | 1.60% | 1.07% | 0.84%2 |
Portfolio Turnover Rate | 62% | 66% | 70% | 56% |
1 Inception. | ||||
2 Annualized. |
See accompanying Notes, which are an integral part of the Financial Statements.
32
Structured Large-Cap Growth Fund | ||||
Financial Highlights | ||||
Institutional Plus Shares | ||||
Oct. 3, | ||||
20061 to | ||||
Year Ended September 30, | Sept. 30, | |||
For a Share Outstanding Throughout Each Period | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $42.60 | $45.07 | $59.60 | $50.00 |
Investment Operations | ||||
Net Investment Income | .716 | .607 | .591 | .547 |
Net Realized and Unrealized Gain (Loss) on Investments | 4.261 | (2.464) | (13.420) | 9.256 |
Total from Investment Operations | 4.977 | (1.857) | (12.829) | 9.803 |
Distributions | ||||
Dividends from Net Investment Income | (.627) | (.613) | (.564) | (.150) |
Distributions from Realized Capital Gains | — | — | (1.137) | (.053) |
Total Distributions | (.627) | (.613) | (1.701) | (.203) |
Net Asset Value, End of Period | $46.95 | $42.60 | $45.07 | $59.60 |
Total Return | 11.75% | -3.79% | -22.16% | 19.66% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $38 | $44 | $45 | $58 |
Ratio of Total Expenses to Average Net Assets | 0.17% | 0.17% | 0.12% | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 1.56% | 1.68% | 1.15% | 0.94%2 |
Portfolio Turnover Rate | 62% | 66% | 70% | 56% |
1 Commencement of operations as a registered investment company. | ||||
2 Annualized. |
See accompanying Notes, which are an integral part of the Financial Statements.
33
Structured Large-Cap Growth Fund
Notes to Financial Statements
Vanguard Structured Large-Cap Growth 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: Institutional Shares and Institutional Plus Shares. Institutional Shares and Institutional Plus 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 materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
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).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2007–2010), and has concluded that no provision for federal income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. 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.
6. Other: Dividend income is recorded on the ex-dividend date. 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.
34
Structured Large-Cap Growth Fund
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. The Vanguard Group furnishes at cost investment advisory, 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 September 30, 2010, the fund had contributed capital of $9,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
C. 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 fund’s investments as of September 30, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 48,351 | — | — |
Temporary Cash Investments | 170 | 50 | — |
Futures Contracts—Liabilities1 | (1) | — | — |
Total | 48,520 | 50 | — |
1 Represents variation margin on the last day of the reporting period. |
D. At September 30, 2010, 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 S&P 500 Index | December 2010 | 3 | 171 | 3 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
35
Structured Large-Cap Growth Fund
E. 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.
For tax purposes, at September 30, 2010, the fund had $571,000 of ordinary income available for distribution. The fund had available capital loss carryforwards totaling $13,898,000 to offset future net capital gains of $5,741,000 through September 30, 2017, and $8,157,000 through September 30, 2018.
At September 30, 2010, the cost of investment securities for tax purposes was $40,160,000. Net unrealized appreciation of investment securities for tax purposes was $8,411,000, consisting of unrealized gains of $9,092,000 on securities that had risen in value since their purchase and $681,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the year ended September 30, 2010, the fund purchased $30,745,000 of investment securities and sold $40,867,000 of investment securities, other than temporary cash investments.
G. Capital share transactions for each class of shares were: | ||||
Year Ended September 30, | ||||
2010 | 2009 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | — | — | — | — |
Issued in Lieu of Cash Distributions | 140 | 6 | 137 | 8 |
Redeemed | (1,004) | (44) | — | — |
Net Increase (Decrease)—Institutional Shares | (864) | (38) | 137 | 8 |
Institutional Plus Shares | ||||
Issued | — | — | — | — |
Issued in Lieu of Cash Distributions | 644 | 14 | 618 | 18 |
Redeemed | (9,996) | (223) | — | — |
Net Increase (Decrease)—Institutional Plus Shares | (9,352) | (209) | 618 | 18 |
H. In preparing the financial statements as of September 30, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
36
Structured Large-Cap Value Fund
Fund Profile | |||
As of September 30, 2010 | |||
Portfolio Characteristics | |||
Russell | DJ | ||
1000 | U.S. Total | ||
Value | Market | ||
Fund | Index | Index | |
Number of Stocks | 173 | 669 | 3,920 |
Median Market Cap $28.9B | $31.7B | $27.3B | |
Price/Earnings Ratio | 13.4x | 15.1x | 17.1x |
Price/Book Ratio | 1.6x | 1.5x | 2.1x |
Return on Equity | 15.7% | 15.1% | 19.1% |
Earnings Growth Rate | -0.5% | 0.5% | 6.4% |
Dividend Yield | 2.4% | 2.3% | 1.8% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | 66% | — | — |
Ticker Symbol | VSLVX | — | — |
Expense Ratio1 | 0.17% | — | — |
30-Day SEC Yield | 1.93% | — | — |
Short-Term Reserves | 0.0% | — | — |
Sector Diversification (% of equity exposure)
Russell | DJ | ||
1000 | U.S. Total | ||
Value | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 7.7% | 7.5% | 11.7% |
Consumer Staples | 10.3 | 10.4 | 10.1 |
Energy | 10.8 | 11.3 | 9.7 |
Financials | 27.4 | 27.3 | 16.6 |
Health Care | 13.8 | 13.4 | 11.2 |
Industrials | 9.0 | 8.9 | 11.1 |
Information | |||
Technology | 4.7 | 5.5 | 19.0 |
Materials | 3.5 | 2.9 | 4.2 |
Telecommunication | |||
Services | 4.9 | 5.4 | 2.9 |
Utilities | 7.9 | 7.4 | 3.5 |
Volatility Measures | ||
Russell | DJ | |
1000 | U.S. Total | |
Value | Market | |
Index | Index | |
R-Squared | 1.00 | 0.97 |
Beta | 0.97 | 0.98 |
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)
AT&T Inc. | Integrated | |
Telecommunication | ||
Services | 3.4% | |
Procter & Gamble Co. | Household | |
Products | 3.2 | |
Chevron Corp. | Integrated Oil & | |
Gas | 3.2 | |
JPMorgan Chase & Co. | Diversified Financial | |
Services | 3.1 | |
Berkshire Hathaway Inc. | Property & Casualty | |
Class B | Insurance | 2.9 |
Wells Fargo & Co. | Diversified Banks | 2.0 |
Johnson & Johnson | Pharmaceuticals | 1.9 |
General Electric Co. | Industrial | |
Conglomerates | 1.9 | |
Bank of America Corp. | Diversified Financial | |
Services | 1.9 | |
Pfizer Inc. | Pharmaceuticals | 1.8 |
Top Ten | 25.3% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
1 The expense ratio shown is from the prospectus dated January 27, 2010. For the fiscal year ended September 30, 2010, the expense ratio was 0.17%.
37
Structured Large-Cap Value Fund
Performance Summary
All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: December 15, 2005, Through September 30, 2010
Initial Investment of $200,000,000
Average Annual Total Returns | ||||
Periods Ended | ||||
Since | Final Value | |||
One | Inception | of a $200,000,000 | ||
Year | (12/15/2005) | Investment | ||
Structured Large-Cap Value Fund | 5.90% | -2.60% | $176,303,295 | |
•••••••• | Dow Jones U.S. Total Stock Market | |||
Index | 11.51 | 0.61 | 205,945,159 | |
– – – – | Russell 1000 Value Index | 8.90 | -1.02 | 190,378,834 |
Large-Cap Value Funds Average | 7.01 | -1.34 | 187,522,069 |
Large-Cap Value Funds Average: Derived from data provided by Lipper Inc.
"Since Inception" performance is calculated from the Institutional Plus Shares’ inception date for both the fund and its comparative standards.
The fund commenced operations as a registered investment company on January 18, 2007. The fund's performance includes the performance of a predecessor trust, Vanguard Fiduciary Trust Company Structured Large-Cap Value Trust, from December 15, 2005, to January 18, 2007.
See Financial Highlights for dividend and capital gains information.
38
Structured Large-Cap Value Fund
Fiscal-Year Total Returns (%): December 15, 2005, Through September 30, 2010
39
Structured Large-Cap Value Fund
Financial Statements
Statement of Net Assets
As of September 30, 2010
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (99.7%)1 | |||
Consumer Discretionary (7.7%) | |||
Time Warner Inc. | 16,840 | 516 | |
Comcast Corp. Class A | 25,876 | 468 | |
Time Warner Cable Inc. | 8,200 | 443 | |
Walt Disney Co. | 9,490 | 314 | |
* | DIRECTV Class A | 7,100 | 296 |
Limited Brands Inc. | 10,700 | 287 | |
Whirlpool Corp. | 3,400 | 275 | |
Gap Inc. | 14,200 | 265 | |
* | Ford Motor Co. | 21,600 | 264 |
Gannett Co. Inc. | 20,800 | 254 | |
Wyndham Worldwide Corp. | 7,000 | 192 | |
Comcast Corp. | |||
Special Class A Shares | 11,200 | 191 | |
DR Horton Inc. | 14,900 | 166 | |
* | TRW Automotive | ||
Holdings Corp. | 1,253 | 52 | |
Autoliv Inc. | 600 | 39 | |
DISH Network Corp. Class A | 900 | 17 | |
Mattel Inc. | 600 | 14 | |
4,053 | |||
Consumer Staples (10.3%) | |||
Procter & Gamble Co. | 28,415 | 1,704 | |
Wal-Mart Stores Inc. | 12,300 | 658 | |
Altria Group Inc. | 19,900 | 478 | |
Mead Johnson Nutrition Co. | 5,696 | 324 | |
Dr Pepper Snapple Group Inc. | 8,700 | 309 | |
Coca-Cola Enterprises Inc. | 9,800 | 304 | |
General Mills Inc. | 7,900 | 289 | |
Tyson Foods Inc. Class A | 17,900 | 287 | |
Hershey Co. | 5,900 | 281 | |
JM Smucker Co. | 4,100 | 248 | |
Kraft Foods Inc. | 5,476 | 169 | |
PepsiCo Inc. | 2,000 | 133 | |
Hormel Foods Corp. | 2,500 | 111 | |
CVS Caremark Corp. | 1,900 | 60 | |
Kroger Co. | 1,500 | 32 | |
Kimberly-Clark Corp. | 300 | 20 | |
McCormick & Co. Inc. | 300 | 13 | |
* | BJ’s Wholesale Club Inc. | 200 | 8 |
Market | |||
Value | |||
Shares | ($000) | ||
5,428 | |||
Energy (10.8%) | |||
Chevron Corp. | 20,790 | 1,685 | |
ConocoPhillips | 13,274 | 762 | |
Occidental Petroleum Corp. | 9,200 | 720 | |
Apache Corp. | 5,900 | 577 | |
Devon Energy Corp. | 7,900 | 511 | |
* | Newfield Exploration Co. | 5,700 | 327 |
Anadarko Petroleum Corp. | 5,450 | 311 | |
Sunoco Inc. | 7,200 | 263 | |
* | Whiting Petroleum Corp. | 2,100 | 201 |
QEP Resources Inc. | 5,900 | 178 | |
Chesapeake Energy Corp. | 2,900 | 66 | |
El Paso Corp. | 2,800 | 35 | |
* | Oceaneering International Inc. | 600 | 32 |
* | Oil States International Inc. | 500 | 23 |
Exxon Mobil Corp. | 283 | 18 | |
5,709 | |||
Financials (27.3%) | |||
JPMorgan Chase & Co. | 42,380 | 1,613 | |
* | Berkshire Hathaway Inc. | ||
Class B | 18,700 | 1,546 | |
Wells Fargo & Co. | 42,465 | 1,067 | |
Bank of America Corp. | 77,035 | 1,010 | |
* | Citigroup Inc. | 212,488 | 829 |
US Bancorp | 28,869 | 624 | |
Travelers Cos. Inc. | 9,400 | 490 | |
PNC Financial Services | |||
Group Inc. | 9,200 | 478 | |
Chubb Corp. | 7,900 | 450 | |
Goldman Sachs Group Inc. | 2,925 | 423 | |
Capital One Financial Corp. | 9,900 | 392 | |
Ameriprise Financial Inc. | 7,800 | 369 | |
Discover Financial Services | 21,400 | 357 | |
Assurant Inc. | 8,000 | 326 | |
Torchmark Corp. | 5,800 | 308 | |
Unum Group | 13,500 | 299 | |
M&T Bank Corp. | 3,600 | 294 | |
Vornado Realty Trust | 3,421 | 293 | |
* | CNA Financial Corp. | 10,200 | 285 |
Raymond James | |||
Financial Inc. | 10,400 | 263 |
40
Structured Large-Cap Value Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Simon Property Group Inc. | 2,705 | 251 | |
* | CIT Group Inc. | 6,000 | 245 |
SL Green Realty Corp. | 3,600 | 228 | |
American Financial Group Inc. | 7,400 | 226 | |
Ventas Inc. | 4,000 | 206 | |
Prudential Financial Inc. | 3,300 | 179 | |
Jefferies Group Inc. | 6,900 | 157 | |
Macerich Co. | 3,541 | 152 | |
Bank of Hawaii Corp. | 3,330 | 150 | |
New York Community | |||
Bancorp Inc. | 9,000 | 146 | |
Annaly Capital | |||
Management Inc. | 7,100 | 125 | |
NYSE Euronext | 3,700 | 106 | |
Rayonier Inc. | 2,000 | 100 | |
Hospitality Properties Trust | 3,600 | 80 | |
BOK Financial Corp. | 1,700 | 77 | |
CME Group Inc. | 200 | 52 | |
Equity Residential | 880 | 42 | |
Progressive Corp. | 1,800 | 38 | |
* | St. Joe Co. | 1,500 | 37 |
First Citizens BancShares Inc. | |||
Class A | 200 | 37 | |
Erie Indemnity Co. Class A | 500 | 28 | |
Unitrin Inc. | 900 | 22 | |
Plum Creek Timber Co. Inc. | 600 | 21 | |
* | AmeriCredit Corp. | 600 | 15 |
Bank of New York Mellon Corp. | 400 | 10 | |
Morgan Stanley | 290 | 7 | |
14,453 | |||
Health Care (13.8%) | |||
Johnson & Johnson | 16,590 | 1,028 | |
Pfizer Inc. | 56,531 | 971 | |
Merck & Co. Inc. | 20,433 | 752 | |
Bristol-Myers Squibb Co. | 25,529 | 692 | |
* | WellPoint Inc. | 7,490 | 424 |
UnitedHealth Group Inc. | 11,700 | 411 | |
* | Thermo Fisher Scientific Inc. | 8,000 | 383 |
McKesson Corp. | 5,300 | 327 | |
* | Cephalon Inc. | 5,000 | 312 |
* | Humana Inc. | 6,000 | 301 |
* | Watson Pharmaceuticals Inc. | 6,900 | 292 |
Eli Lilly & Co. | 7,930 | 290 | |
* | Mylan Inc. | 14,600 | 275 |
AmerisourceBergen Corp. | |||
Class A | 8,500 | 260 | |
* | Amgen Inc. | 3,700 | 204 |
* | Forest Laboratories Inc. | 5,500 | 170 |
* | LifePoint Hospitals Inc. | 2,300 | 81 |
CIGNA Corp. | 2,100 | 75 | |
* | Endo Pharmaceuticals | ||
Holdings Inc. | 1,500 | 50 | |
7,298 | |||
Industrials (8.9%) | |||
General Electric Co. | 62,350 | 1,013 | |
Northrop Grumman Corp. | 7,150 | 433 |
Market | |||
Value | |||
Shares | ($000) | ||
CSX Corp. | 7,700 | 426 | |
FedEx Corp. | 4,300 | 368 | |
Eaton Corp. | 4,400 | 363 | |
United Technologies Corp. | 4,600 | 328 | |
Joy Global Inc. | 4,175 | 294 | |
Deere & Co. | 4,100 | 286 | |
Parker Hannifin Corp. | 4,000 | 280 | |
RR Donnelley & Sons Co. | 10,200 | 173 | |
* | Oshkosh Corp. | 5,600 | 154 |
* | Owens Corning | 5,800 | 149 |
Timken Co. | 3,200 | 123 | |
Pitney Bowes Inc. | 4,500 | 96 | |
Avery Dennison Corp. | 1,800 | 67 | |
Cummins Inc. | 600 | 54 | |
Boeing Co. | 700 | 46 | |
Union Pacific Corp. | 400 | 33 | |
Regal-Beloit Corp. | 300 | 18 | |
* | UAL Corp. | 700 | 16 |
General Dynamics Corp. | 180 | 11 | |
4,731 | |||
Information Technology (4.6%) | |||
Microsoft Corp. | 33,100 | 811 | |
* | Lexmark International Inc. | ||
Class A | 7,450 | 332 | |
* | Motorola Inc. | 37,500 | 320 |
Intel Corp. | 15,700 | 302 | |
Computer Sciences Corp. | 6,200 | 285 | |
* | Micron Technology Inc. | 30,900 | 223 |
* | Tech Data Corp. | 1,800 | 73 |
AVX Corp. | 4,300 | 59 | |
* | Advanced Micro Devices Inc. | 6,400 | 45 |
2,450 | |||
Materials (3.5%) | |||
EI du Pont de Nemours | |||
& Co. | 11,900 | 531 | |
Ashland Inc. | 5,700 | 278 | |
International Paper Co. | 12,600 | 274 | |
Eastman Chemical Co. | 3,300 | 244 | |
Sonoco Products Co. | 5,300 | 177 | |
PPG Industries Inc. | 1,800 | 131 | |
Domtar Corp. | 1,700 | 110 | |
Valspar Corp. | 2,600 | 83 | |
Dow Chemical Co. | 310 | 9 | |
1,837 | |||
Telecommunication Services (4.9%) | |||
AT&T Inc. | 63,313 | 1,811 | |
Verizon Communications Inc. | 18,140 | 591 | |
Qwest Communications | |||
International Inc. | 13,800 | 86 | |
* | MetroPCS | ||
Communications Inc. | 4,800 | 50 | |
Frontier | |||
Communications Corp. | 4,354 | 36 | |
2,574 |
41
Structured Large-Cap Value Fund | ||
Market | ||
Value | ||
Shares | ($000) | |
Utilities (7.9%) | ||
Exelon Corp. | 12,000 | 511 |
Dominion Resources Inc. | 11,300 | 494 |
Public Service Enterprise | ||
Group Inc. | 12,700 | 420 |
NiSource Inc. | 18,800 | 327 |
DTE Energy Co. | 7,100 | 326 |
Integrys Energy Group Inc. | 6,100 | 318 |
Pinnacle West Capital Corp. | 7,500 | 310 |
Oneok Inc. | 6,000 | 270 |
Atmos Energy Corp. | 9,200 | 269 |
CenterPoint Energy Inc. | 17,000 | 267 |
Entergy Corp. | 3,400 | 260 |
Ameren Corp. | 5,800 | 165 |
CMS Energy Corp. | 7,400 | 133 |
NSTAR | 2,900 | 114 |
4,184 | ||
Total Common Stocks | ||
(Cost $49,658) | 52,717 | |
Temporary Cash Investments (0.3%)1 | ||
Money Market Fund (0.1%) | ||
2 Vanguard Market Liquidity | ||
Fund, 0.261% | 59,785 | 60 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.2%) | ||
3,4 Fannie Mae Discount | ||
Notes, 0.341%, 3/1/11 | 100 | 100 |
Total Temporary Cash Investments | ||
(Cost $160) | 160 | |
Total Investments (100.0%) | ||
(Cost $49,818) | 52,877 |
Market | |
Value | |
($000) | |
Other Assets and Liabilities (0.0%) | |
Other Assets | 107 |
Liabilities | (110) |
(3) | |
Net Assets (100%) | |
Applicable to 1,402,807 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 52,874 |
Net Asset Value Per Share | $37.69 |
At September 30, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 71,583 |
Undistributed Net Investment Income | 851 |
Accumulated Net Realized Losses | (22,622) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 3,059 |
Futures Contracts | 3 |
Net Assets | 52,874 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
4 Securities with a value of $100,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
42
Structured Large-Cap Value Fund | |
Statement of Operations | |
Year Ended | |
September 30, 2010 | |
($000) | |
Investment Income | |
Income | |
Dividends | 1,272 |
Interest1 | 1 |
Security Lending | 3 |
Total Income | 1,276 |
Expenses | |
The Vanguard Group—Note B | |
Management and Administrative | 45 |
Marketing and Distribution | 10 |
Custodian Fees | 8 |
Auditing Fees | 26 |
Total Expenses | 89 |
Net Investment Income | 1,187 |
Realized Net Gain (Loss) | |
Investment Securities Sold | (270) |
Futures Contracts | 9 |
Realized Net Gain (Loss) | (261) |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 2,013 |
Futures Contracts | 4 |
Change in Unrealized Appreciation (Depreciation) | 2,017 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 2,943 |
1 Interest income from an affiliated company of the fund was $1,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
43
Structured Large-Cap Value Fund | ||
Statement of Changes in Net Assets | ||
Year Ended September 30, | ||
2010 | 2009 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 1,187 | 1,253 |
Realized Net Gain (Loss) | (261) | (17,720) |
Change in Unrealized Appreciation (Depreciation) | 2,017 | 8,525 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 2,943 | (7,942) |
Distributions | ||
Net Investment Income | (1,191) | (1,827) |
Realized Capital Gain | — | — |
Total Distributions | (1,191) | (1,827) |
Capital Share Transactions | ||
Issued | — | — |
Issued in Lieu of Cash Distributions | 1,191 | 1,827 |
Redeemed | — | — |
Net Increase (Decrease) from Capital Share Transactions | 1,191 | 1,827 |
Total Increase (Decrease) | 2,943 | (7,942) |
Net Assets | ||
Beginning of Period | 49,931 | 57,873 |
End of Period1 | 52,874 | 49,931 |
1 Net Assets—End of Period includes undistributed net investment income of $851,000 and $855,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
44
Structured Large-Cap Value Fund | ||||
Financial Highlights | ||||
Institutional Plus Shares | ||||
Jan. 18, | ||||
20071 to | ||||
Year Ended September 30, | Sept. 30, | |||
For a Share Outstanding Throughout Each Period | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $36.43 | $44.00 | $63.87 | $60.09 |
Investment Operations | ||||
Net Investment Income | .852 | .926 | 1.426 | 1.030 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.278 | (7.108) | (15.946) | 2.750 |
Total from Investment Operations | 2.130 | (6.182) | (14.520) | 3.780 |
Distributions | ||||
Dividends from Net Investment Income | (.870) | (1.388) | (1.370) | — |
Distributions from Realized Capital Gains | — | — | (3.980) | — |
Total Distributions | (.870) | (1.388) | (5.350) | — |
Net Asset Value, End of Period | $37.69 | $36.43 | $44.00 | $63.87 |
Total Return | 5.90% | -13.73% | -24.47% | 6.29% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $53 | $50 | $58 | $79 |
Ratio of Total Expenses to Average Net Assets | 0.17% | 0.17% | 0.12% | 0.15%2 |
Ratio of Net Investment Income to Average Net Assets | 2.28% | 2.90% | 2.63% | 2.29%2 |
Portfolio Turnover Rate | 66% | 68% | 104% | 48% |
1 Commencement of operations as a registered investment company. | ||||
2 Annualized. |
See accompanying Notes, which are an integral part of the Financial Statements.
45
Structured Large-Cap Value Fund
Notes to Financial Statements
Vanguard Structured Large-Cap Value 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: Institutional Shares and Institutional Plus Shares. Institutional Shares and Institutional Plus Shares are designed for investors who meet certain administrative, service, and account-size criteria. The fund has not issued any Institutional Shares through September 30, 2010.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. mutual funds. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
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).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2007–2010), and has concluded that no provision for federal income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. 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.
46
Structured Large-Cap Value Fund
6. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
B. The Vanguard Group furnishes at cost investment advisory, 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 September 30, 2010, the fund had contributed capital of $9,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.00% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
C. 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 fund’s investments as of September 30, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 52,717 | — | — |
Temporary Cash Investments | 60 | 100 | — |
Futures Contracts—Liabilities1 | (1) | — | — |
Total | 52,776 | 100 | — |
1 Represents variation margin on the last day of the reporting period. |
D. At September 30, 2010, 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 S&P 500 Index | December 2010 | 3 | 171 | 3 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
47
Structured Large-Cap Value Fund
E. 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.
For tax purposes, at September 30, 2010, the fund had $905,000 of ordinary income available for distribution. The fund had available capital loss carryforwards totaling $21,741,000 to offset future net capital gains of $5,409,000 through September 30, 2017, and $16,332,000 through September 30, 2018. In addition, the fund realized losses of $878,000 during the period from November 1, 2009, through September 30, 2010, which are deferred and will be treated as realized for tax purposes in fiscal 2011.
At September 30, 2010, the cost of investment securities for tax purposes was $49,818,000. Net unrealized appreciation of investment securities for tax purposes was $3,059,000, consisting of unrealized gains of $5,721,000 on securities that had risen in value since their purchase and $2,662,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the year ended September 30, 2010, the fund purchased $34,945,000 of investment securities and sold $33,801,000 of investment securities, other than temporary cash investments.
G. Capital shares issued and redeemed were: | ||
Year Ended September 30, | ||
2010 | 2009 | |
Shares | Shares | |
(000) | (000) | |
Issued | — | — |
Issued in Lieu of Cash Distributions | 32 | 55 |
Redeemed | — | — |
Net Increase (Decrease) in Shares Outstanding | 32 | 55 |
H. In preparing the financial statements as of September 30, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
48
Structured Broad Market Fund
Fund Profile
As of September 30, 2010
Share-Class Characteristics | |||
Institutional | Institutional | ||
Shares | Plus Shares | ||
Ticker Symbol | VSBMX | VSBPX | |
Expense Ratio1 | 0.25% | 0.17% | |
30-Day SEC Yield | 1.38% | 1.45% | |
Portfolio Characteristics | |||
DJ | |||
Russell | U.S. Total | ||
3000 | Market | ||
Fund | Index | Index | |
Number of Stocks | 293 | 2,955 | 3,920 |
Median Market Cap $22.6B | $28.2B | $27.3B | |
Price/Earnings Ratio | 13.6x | 16.9x | 17.1x |
Price/Book Ratio | 2.2x | 2.1x | 2.1x |
Return on Equity | 20.0% | 19.0% | 19.1% |
Earnings Growth Rate | 8.0% | 6.2% | 6.4% |
Dividend Yield | 1.9% | 1.9% | 1.8% |
Foreign Holdings | 0.1% | 0.0% | 0.0% |
Turnover Rate | 52% | — | — |
Short-Term Reserves | 0.0% | — | — |
Sector Diversification (% of equity exposure)
DJ | |||
Russell | U.S. Total | ||
3000 | Market | ||
Fund | Index | Index | |
Consumer | |||
Discretionary | 11.7% | 11.3% | 11.7% |
Consumer Staples | 9.3 | 9.7 | 10.1 |
Energy | 10.3 | 10.2 | 9.7 |
Financials | 16.4 | 16.3 | 16.6 |
Health Care | 12.4 | 11.9 | 11.2 |
Industrials | 11.0 | 11.4 | 11.1 |
Information | |||
Technology | 18.3 | 18.5 | 19.0 |
Materials | 4.3 | 4.0 | 4.2 |
Telecommunication | |||
Services | 2.5 | 3.0 | 2.9 |
Utilities | 3.8 | 3.7 | 3.5 |
Volatility Measures | ||
DJ | ||
U.S. Total | ||
Russell 3000 | Market | |
Index | Index | |
R-Squared | 1.00 | 0.97 |
Beta | 0.97 | 0.98 |
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)
Exxon Mobil Corp. | Integrated Oil & | |
Gas | 2.8% | |
Apple Inc. | Computer | |
Hardware | 2.5 | |
Microsoft Corp. | Systems Software | 1.9 |
International Business | IT Consulting & | |
Machines Corp. | Other Services | 1.9 |
AT&T Inc. | Integrated | |
Telecommunication | ||
Services | 1.8 | |
Chevron Corp. | Integrated Oil & | |
Gas | 1.8 | |
Johnson & Johnson | Pharmaceuticals | 1.5 |
Wal-Mart Stores Inc. | Hypermarkets & | |
Super Centers | 1.4 | |
ConocoPhillips | Integrated Oil & | |
Gas | 1.2 | |
Hewlett-Packard Co. | Computer | |
Hardware | 1.1 | |
Top Ten | 17.9% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
1 The expense ratios shown are from the prospectus dated January 27, 2010. For the fiscal year ended September 30, 2010, the expense ratios were 0.24% for Institutional Shares and 0.17% for Institutional Plus Shares.
49
Structured Broad Market 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: November 30, 2006, Through September 30, 2010
Initial Investment of $5,000,000
Average Annual Total Returns | ||||
Periods Ended September 30, 2010 | ||||
Since | Final Value | |||
One | Inception | of a $5,000,000 | ||
Year | (11/30/2006) | Investment | ||
Structured Broad Market Fund | ||||
Institutional Shares | 10.88% | -4.49% | $4,193,498 | |
•••••••• | Dow Jones U.S. Total Stock Market | |||
Index | 11.51 | -2.35 | 4,564,697 | |
– – – – | Russell 3000 Index | 10.96 | -2.79 | 4,485,242 |
Multi-Cap Core Funds Average | 9.82 | -2.91 | 4,465,380 |
Multi-Cap Core Funds Average: Derived from data provided by Lipper Inc.
"Since Inception" performance is calculated from the Institutional Shares’ inception date for both the fund and its comparative standards.
Since | Final Value | |||
One | Five | Inception | of a $200,000,000 | |
Year | Years | (5/3/2004) | Investment | |
Structured Broad Market Fund | ||||
Institutional Plus Shares | 10.96% | -0.29% | 2.24% | $230,469,975 |
Dow Jones U.S. Total Stock Market | ||||
Index | 11.51 | 1.37 | 3.36 | 247,232,354 |
Russell 3000 Index | 10.96 | 0.92 | 2.96 | 241,158,331 |
"Since Inception" performance is calculated from the Institutional Plus Shares’ inception date for both the fund and its comparative standards.
The fund commenced operations as a registered investment company on October 3, 2006. The fund's performance includes the performance of a predecessor trust, Vanguard Fiduciary Trust Company Structured Broad Market Trust, from May 3, 2004, to October 3, 2006.
See Financial Highlights for dividend and capital gains information.
50
Structured Broad Market Fund
Fiscal-Year Total Returns (%): November 30, 2006, Through September 30, 2010
51
Structured Broad Market Fund
Financial Statements
Statement of Net Assets
As of September 30, 2010
The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).
Market | |||
Value | |||
Shares | ($000) | ||
Common Stocks (99.8%)1 | |||
Consumer Discretionary (11.7%) | |||
* | Ford Motor Co. | 211,862 | 2,593 |
McDonald’s Corp. | 30,431 | 2,267 | |
* | Liberty Media Corp.– | ||
Interactive | 147,200 | 2,018 | |
Comcast Corp. Class A | 105,991 | 1,916 | |
Wyndham Worldwide Corp. | 69,000 | 1,895 | |
Starbucks Corp. | 72,200 | 1,847 | |
TJX Cos. Inc. | 39,900 | 1,781 | |
* | DIRECTV Class A | 38,900 | 1,619 |
McGraw-Hill Cos. Inc. | 46,900 | 1,551 | |
Gap Inc. | 77,900 | 1,452 | |
Limited Brands Inc. | 52,200 | 1,398 | |
Time Warner Cable Inc. | 24,762 | 1,337 | |
* | Talbots Inc. | 99,200 | 1,300 |
Time Warner Inc. | 37,400 | 1,146 | |
Ross Stores Inc. | 17,900 | 978 | |
* | Big Lots Inc. | 29,000 | 964 |
* | Aeropostale Inc. | 36,525 | 849 |
* | Tempur-Pedic | ||
International Inc. | 21,400 | 663 | |
DISH Network Corp. Class A | 32,750 | 627 | |
DR Horton Inc. | 55,300 | 615 | |
Gannett Co. Inc. | 49,700 | 608 | |
Whirlpool Corp. | 6,700 | 542 | |
Autoliv Inc. | 8,100 | 529 | |
* | TRW Automotive | ||
Holdings Corp. | 12,663 | 526 | |
Darden Restaurants Inc. | 11,300 | 483 | |
Advance Auto Parts Inc. | 7,900 | 464 | |
Cablevision Systems Corp. | |||
Class A | 17,500 | 458 | |
Leggett & Platt Inc. | 19,500 | 444 | |
* | Dollar Tree Inc. | 8,850 | 432 |
* | Warnaco Group Inc. | 7,700 | 394 |
* | Valassis Communications Inc. | 11,300 | 383 |
Comcast Corp. | |||
Special Class A Shares | 22,000 | 374 | |
* | CEC Entertainment Inc. | 10,504 | 361 |
Market | |||
Value | |||
Shares | ($000) | ||
Viacom Inc. Class B | 8,395 | 304 | |
Polaris Industries Inc. | 4,500 | 293 | |
* | Lincoln Educational | ||
Services Corp. | 11,609 | 167 | |
* | AutoZone Inc. | 700 | 160 |
* | HSN Inc. | 3,400 | 102 |
H&R Block Inc. | 6,300 | 82 | |
* | Liberty Media Corp.–Starz | 1,200 | 78 |
Brinker International Inc. | 3,900 | 74 | |
* | Career Education Corp. | 2,500 | 54 |
36,128 | |||
Consumer Staples (9.2%) | |||
Wal-Mart Stores Inc. | 79,065 | 4,232 | |
Procter & Gamble Co. | 49,451 | 2,966 | |
Coca-Cola Enterprises Inc. | 62,500 | 1,937 | |
Costco Wholesale Corp. | 27,200 | 1,754 | |
General Mills Inc. | 47,800 | 1,747 | |
Estee Lauder Cos. Inc. | |||
Class A | 26,100 | 1,650 | |
Hershey Co. | 31,400 | 1,494 | |
Dr Pepper Snapple | |||
Group Inc. | 41,400 | 1,471 | |
Kroger Co. | 64,900 | 1,406 | |
Sara Lee Corp. | 99,800 | 1,340 | |
Del Monte Foods Co. | 99,700 | 1,307 | |
Coca-Cola Co. | 22,290 | 1,304 | |
ConAgra Foods Inc. | 53,000 | 1,163 | |
PepsiCo Inc. | 15,500 | 1,030 | |
Philip Morris International Inc. | 14,950 | 837 | |
Colgate-Palmolive Co. | 7,630 | 586 | |
Campbell Soup Co. | 12,500 | 447 | |
Casey’s General Stores Inc. | 9,358 | 391 | |
Clorox Co. | 5,700 | 381 | |
Tyson Foods Inc. Class A | 18,400 | 295 | |
Sanderson Farms Inc. | 6,100 | 264 | |
Altria Group Inc. | 9,800 | 235 | |
Nu Skin Enterprises Inc. | |||
Class A | 5,800 | 167 | |
* | Boston Beer Co. Inc. Class A | 1,400 | 94 |
28,498 |
52
Structured Broad Market Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Energy (10.3%) | |||
Exxon Mobil Corp. | 137,320 | 8,485 | |
Chevron Corp. | 68,665 | 5,565 | |
ConocoPhillips | 62,900 | 3,612 | |
Anadarko Petroleum Corp. | 42,540 | 2,427 | |
Apache Corp. | 23,140 | 2,262 | |
Occidental Petroleum Corp. | 25,840 | 2,023 | |
* | Newfield Exploration Co. | 32,900 | 1,890 |
National Oilwell Varco Inc. | 41,700 | 1,854 | |
Peabody Energy Corp. | 21,700 | 1,064 | |
* | Rowan Cos. Inc. | 32,200 | 978 |
* | James River Coal Co. | 15,500 | 272 |
Ship Finance | |||
International Ltd. | 13,100 | 255 | |
El Paso Corp. | 19,700 | 244 | |
Schlumberger Ltd. | 3,800 | 234 | |
Pioneer Natural Resources Co. | 3,100 | 202 | |
* | Oil States International Inc. | 4,200 | 195 |
* | FMC Technologies Inc. | 2,100 | 143 |
Southern Union Co. | 3,700 | 89 | |
31,794 | |||
Financials (16.4%) | |||
Goldman Sachs Group Inc. | 21,911 | 3,168 | |
JPMorgan Chase & Co. | 66,936 | 2,548 | |
American Express Co. | 60,020 | 2,523 | |
Wells Fargo & Co. | 95,070 | 2,389 | |
PNC Financial Services | |||
Group Inc. | 39,400 | 2,045 | |
Travelers Cos. Inc. | 37,500 | 1,954 | |
Capital One Financial Corp. | 49,100 | 1,942 | |
Franklin Resources Inc. | 17,700 | 1,892 | |
Aflac Inc. | 34,640 | 1,791 | |
Ameriprise Financial Inc. | 37,400 | 1,770 | |
Bank of America Corp. | 134,445 | 1,763 | |
* | Berkshire Hathaway Inc. | ||
Class B | 21,100 | 1,745 | |
US Bancorp | 79,650 | 1,722 | |
Assurant Inc. | 42,100 | 1,713 | |
Chubb Corp. | 25,070 | 1,429 | |
New York Community | |||
Bancorp Inc. | 69,030 | 1,122 | |
Progressive Corp. | 51,200 | 1,069 | |
* | World Acceptance Corp. | 21,956 | 970 |
Vornado Realty Trust | 11,100 | 949 | |
* | CNA Financial Corp. | 31,700 | 887 |
Hudson City Bancorp Inc. | 70,800 | 868 | |
M&T Bank Corp. | 10,500 | 859 | |
BOK Financial Corp. | 18,800 | 848 | |
NYSE Euronext | 29,000 | 829 | |
Macerich Co. | 18,387 | 790 | |
General Growth | |||
Properties Inc. | 50,400 | 786 | |
Moody’s Corp. | 30,100 | 752 | |
* | SLM Corp. | 64,500 | 745 |
Nelnet Inc. Class A | 29,600 | 677 | |
Taubman Centers Inc. | 14,800 | 660 |
Market | |||
Value | |||
Shares | ($000) | ||
American Financial Group Inc. | 21,300 | 651 | |
Apartment Investment & | |||
Management Co. | 29,600 | 633 | |
Sun Communities Inc. | 17,800 | 546 | |
Torchmark Corp. | 8,600 | 457 | |
Prudential Financial Inc. | 8,100 | 439 | |
Bank of Hawaii Corp. | 9,600 | 431 | |
Hospitality Properties Trust | 18,500 | 413 | |
* | Citigroup Inc. | 100,000 | 390 |
Highwoods Properties Inc. | 11,929 | 387 | |
Cash America | |||
International Inc. | 9,700 | 339 | |
SL Green Realty Corp. | 4,900 | 310 | |
CBL & Associates | |||
Properties Inc. | 22,900 | 299 | |
Brandywine Realty Trust | 18,200 | 223 | |
Lexington Realty Trust | 29,400 | 211 | |
Endurance Specialty | |||
Holdings Ltd. | 5,000 | 199 | |
Pennsylvania Real Estate | |||
Investment Trust | 16,495 | 196 | |
Federated Investors Inc. | |||
Class B | 7,800 | 178 | |
* | Credit Acceptance Corp. | 2,700 | 164 |
Aspen Insurance | |||
Holdings Ltd. | 4,400 | 133 | |
U-Store-It Trust | 15,500 | 129 | |
* | St. Joe Co. | 5,100 | 127 |
Winthrop Realty Trust | 8,700 | 108 | |
First Citizens BancShares Inc. | 400 | 74 | |
* | TD Ameritrade Holding Corp. | 3,316 | 54 |
* | Arch Capital Group Ltd. | 600 | 50 |
Montpelier Re Holdings Ltd. | 2,900 | 50 | |
Simon Property Group Inc. | 509 | 47 | |
City Holding Co. | 1,300 | 40 | |
Flagstone Reinsurance | |||
Holdings SA | 3,600 | 38 | |
* | AmeriCredit Corp. | 1,500 | 37 |
International | |||
Bancshares Corp. | 1,700 | 29 | |
50,587 | |||
Health Care (12.4%) | |||
Johnson & Johnson | 74,907 | 4,641 | |
Eli Lilly & Co. | 64,920 | 2,372 | |
* | Amgen Inc. | 40,015 | 2,205 |
UnitedHealth Group Inc. | 59,475 | 2,088 | |
* | WellPoint Inc. | 36,750 | 2,082 |
* | Medco Health Solutions Inc. | 36,585 | 1,905 |
McKesson Corp. | 29,000 | 1,792 | |
* | Biogen Idec Inc. | 31,900 | 1,790 |
* | Humana Inc. | 35,000 | 1,758 |
Pfizer Inc. | 96,864 | 1,663 | |
AmerisourceBergen Corp. | |||
Class A | 53,200 | 1,631 | |
* | Cephalon Inc. | 26,100 | 1,630 |
* | Forest Laboratories Inc. | 52,300 | 1,618 |
53
Structured Broad Market Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
Bristol-Myers Squibb Co. | 50,452 | 1,368 | |
Merck & Co. Inc. | 32,583 | 1,199 | |
* | Mylan Inc. | 62,411 | 1,174 |
Warner Chilcott PLC Class A | 50,800 | 1,140 | |
* | Waters Corp. | 14,800 | 1,048 |
CIGNA Corp. | 28,100 | 1,006 | |
* | DaVita Inc. | 10,300 | 711 |
Cooper Cos. Inc. | 12,700 | 587 | |
Quest Diagnostics Inc. | 9,000 | 454 | |
Lincare Holdings Inc. | 17,750 | 445 | |
Abbott Laboratories | 6,500 | 340 | |
* | Emergency Medical Services | ||
Corp. Class A | 5,376 | 286 | |
* | Mettler-Toledo | ||
International Inc. | 2,100 | 261 | |
Cardinal Health Inc. | 7,000 | 231 | |
* | Health Management | ||
Associates Inc. Class A | 20,000 | 153 | |
* | Bruker Corp. | 9,500 | 133 |
* | Catalyst Health Solutions Inc. | 2,400 | 85 |
* | Endo Pharmaceuticals | ||
Holdings Inc. | 2,500 | 83 | |
Perrigo Co. | 1,200 | 77 | |
* | LifePoint Hospitals Inc. | 1,800 | 63 |
* | Affymetrix Inc. | 11,800 | 54 |
* | Par Pharmaceutical Cos. Inc. | 1,800 | 52 |
* | Community Health | ||
Systems Inc. | 1,200 | 37 | |
38,162 | |||
Industrials (11.0%) | |||
United Technologies Corp. | 42,140 | 3,002 | |
3M Co. | 33,730 | 2,925 | |
United Parcel Service Inc. | |||
Class B | 40,800 | 2,721 | |
General Electric Co. | 159,380 | 2,590 | |
Cummins Inc. | 24,000 | 2,174 | |
Northrop Grumman Corp. | 32,630 | 1,978 | |
Joy Global Inc. | 27,800 | 1,955 | |
Eaton Corp. | 22,800 | 1,881 | |
Parker Hannifin Corp. | 25,900 | 1,814 | |
CSX Corp. | 29,637 | 1,639 | |
Lockheed Martin Corp. | 21,150 | 1,508 | |
Waste Management Inc. | 31,300 | 1,119 | |
* | Avis Budget Group Inc. | 81,100 | 945 |
* | Delta Air Lines Inc. | 78,600 | 915 |
* | Oshkosh Corp. | 26,600 | 731 |
Honeywell International Inc. | 14,524 | 638 | |
FedEx Corp. | 7,400 | 633 | |
* | General Cable Corp. | 22,700 | 616 |
Raytheon Co. | 13,300 | 608 | |
ITT Corp. | 10,900 | 510 | |
* | EMCOR Group Inc. | 19,600 | 482 |
RR Donnelley & Sons Co. | 27,100 | 460 | |
Rockwell Automation Inc. | 6,500 | 401 | |
Southwest Airlines Co. | 25,600 | 335 | |
Pitney Bowes Inc. | 14,300 | 306 |
Market | |||
Value | |||
Shares | ($000) | ||
Regal-Beloit Corp. | 5,200 | 305 | |
Avery Dennison Corp. | 6,500 | 241 | |
* | Owens Corning | 7,000 | 179 |
* | EnerSys | 3,500 | 87 |
Caterpillar Inc. | 800 | 63 | |
* | Dollar Thrifty Automotive | ||
Group Inc. | 660 | 33 | |
33,794 | |||
Information Technology (18.2%) | |||
* | Apple Inc. | 27,220 | 7,724 |
Microsoft Corp. | 239,697 | 5,870 | |
International Business | |||
Machines Corp. | 43,042 | 5,774 | |
Hewlett-Packard Co. | 79,599 | 3,349 | |
* | Google Inc. Class A | 6,090 | 3,202 |
* | Red Hat Inc. | 49,400 | 2,025 |
* | NetApp Inc. | 39,600 | 1,972 |
* | Agilent Technologies Inc. | 57,900 | 1,932 |
* | Motorola Inc. | 224,700 | 1,917 |
* | VMware Inc. Class A | 22,500 | 1,911 |
* | Rovi Corp. | 31,600 | 1,593 |
Activision Blizzard Inc. | 141,100 | 1,527 | |
* | Marvell Technology | ||
Group Ltd. | 86,300 | 1,511 | |
* | Cisco Systems Inc. | 66,050 | 1,446 |
Texas Instruments Inc. | 52,870 | 1,435 | |
Altera Corp. | 44,800 | 1,351 | |
Intel Corp. | 64,790 | 1,246 | |
* | Micron Technology Inc. | 172,200 | 1,241 |
* | Seagate Technology PLC | 93,803 | 1,105 |
* | Teradata Corp. | 25,700 | 991 |
* | Intuit Inc. | 20,500 | 898 |
Computer Sciences Corp. | 19,500 | 897 | |
Oracle Corp. | 25,948 | 697 | |
Xilinx Inc. | 21,600 | 575 | |
* | Lexmark International Inc. | ||
Class A | 12,800 | 571 | |
* | Advanced Micro Devices Inc. | 66,500 | 473 |
* | SanDisk Corp. | 11,600 | 425 |
Opnet Technologies Inc. | 21,000 | 381 | |
* | TIBCO Software Inc. | 16,400 | 291 |
* | Plexus Corp. | 9,900 | 290 |
* | Acxiom Corp. | 14,800 | 235 |
* | Fairchild Semiconductor | ||
International Inc. Class A | 16,900 | 159 | |
* | Radisys Corp. | 16,700 | 157 |
* | Power-One Inc. | 17,100 | 155 |
* | Hewitt Associates Inc. | ||
Class A | 2,500 | 126 | |
* | Veeco Instruments Inc. | 2,800 | 98 |
* | RF Micro Devices Inc. | 15,900 | 97 |
* | Teradyne Inc. | 8,500 | 95 |
* | Symantec Corp. | 6,000 | 91 |
Jabil Circuit Inc. | 4,600 | 66 | |
* | Lattice Semiconductor Corp. | 13,400 | 64 |
* | Vishay Intertechnology Inc. | 6,500 | 63 |
54
Structured Broad Market Fund | |||
Market | |||
Value | |||
Shares | ($000) | ||
* | Quest Software Inc. | 2,100 | 52 |
* | Manhattan Associates Inc. | 1,500 | 44 |
MAXIMUS Inc. | 700 | 43 | |
56,165 | |||
Materials (4.3%) | |||
Freeport-McMoRan | |||
Copper & Gold Inc. | 32,300 | 2,758 | |
EI du Pont | |||
de Nemours & Co. | 59,880 | 2,672 | |
Ashland Inc. | 33,700 | 1,643 | |
International Paper Co. | 64,400 | 1,401 | |
Ball Corp. | 21,700 | 1,277 | |
Eastman Chemical Co. | 12,100 | 895 | |
Celanese Corp. Class A | 26,200 | 841 | |
Lubrizol Corp. | 6,800 | 721 | |
* | Clearwater Paper Corp. | 5,200 | 396 |
Innophos Holdings Inc. | 8,500 | 281 | |
Rock-Tenn Co. Class A | 4,200 | 209 | |
* | Solutia Inc. | 4,600 | 74 |
Domtar Corp. | 900 | 58 | |
Walter Energy Inc. | 600 | 49 | |
13,275 | |||
Telecommunication Services (2.5%) | |||
AT&T Inc. | 197,829 | 5,658 | |
* | American Tower Corp. | ||
Class A | 12,400 | 635 | |
Verizon Communications Inc. | 18,157 | 592 | |
* | tw telecom inc Class A | 23,200 | 431 |
Qwest Communications | |||
International Inc. | 34,600 | 217 | |
Frontier | |||
Communications Corp. | 10,450 | 85 | |
7,618 | |||
Utilities (3.8%) | |||
Dominion Resources Inc. | 48,600 | 2,122 | |
Exelon Corp. | 49,340 | 2,101 | |
Public Service Enterprise | |||
Group Inc. | 56,800 | 1,879 | |
DTE Energy Co. | 34,700 | 1,594 | |
Entergy Corp. | 13,900 | 1,064 | |
CMS Energy Corp. | 33,400 | 602 | |
FirstEnergy Corp. | 12,000 | 463 | |
NiSource Inc. | 25,700 | 447 | |
IDACORP Inc. | 10,000 | 359 | |
Oneok Inc. | 7,400 | 333 | |
Integrys Energy Group Inc. | 5,900 | 307 | |
CenterPoint Energy Inc. | 6,700 | 105 | |
Nicor Inc. | 1,300 | 60 | |
Southwest Gas Corp. | 1,700 | 57 |
Market | |||
Value | |||
Shares | ($000) | ||
Hawaiian Electric | |||
Industries Inc. | 2,500 | 56 | |
Piedmont Natural | |||
Gas Co. Inc. | 1,900 | 55 | |
11,604 | |||
Total Common Stocks | |||
(Cost $271,701) | 307,625 | ||
Temporary Cash Investments (0.2%)1 | |||
Money Market Fund (0.1%) | |||
2 | Vanguard Market | ||
Liquidity Fund, 0.261% | 592,024 | 592 | |
Face | |||
Amount | |||
($000) | |||
U.S. Government and Agency Obligations (0.1%) | |||
3,4 | Fannie Mae Discount | ||
Notes, 0.300%, 3/21/11 | 100 | 100 | |
3,4 | Freddie Mac Discount | ||
Notes, 0.321%, 10/25/10 | 100 | 100 | |
200 | |||
Total Temporary Cash Investments | |||
(Cost $792) | 792 | ||
Total Investments (100.0%) | |||
(Cost $272,493) | 308,417 | ||
Other Assets and Liabilities (0.0%) | |||
Other Assets | 249 | ||
Liabilities | (378) | ||
(129) | |||
Net Assets (100%) | 308,288 |
55
Structured Broad Market Fund
At September 30, 2010, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 360,518 |
Undistributed Net Investment Income | 4,209 |
Accumulated Net Realized Losses | (92,373) |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 35,924 |
Futures Contracts | 10 |
Net Assets | 308,288 |
Institutional Shares—Net Assets | |
Applicable to 229,922 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 4,759 |
Net Asset Value Per Share— | |
Institutional Shares | $20.70 |
Institutional Plus Shares—Net Assets | |
Applicable to 7,339,048 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 303,529 |
Net Asset Value Per Share— | |
Institutional Plus Shares | $41.36 |
See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.0%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 The issuer operates under a congressional charter; its securities are not backed by the full faith and credit of the U.S. government.
4 Securities with a value of $200,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
56
Structured Broad Market Fund | |
Statement of Operations | |
Year Ended | |
September 30, 2010 | |
($000) | |
Investment Income | |
Income | |
Dividends | 6,112 |
Interest1 | 3 |
Security Lending | 153 |
Total Income | 6,268 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 251 |
Management and Administrative—Institutional Shares | 6 |
Management and Administrative—Institutional Plus Shares | 141 |
Marketing and Distribution—Institutional Shares | — |
Marketing and Distribution—Institutional Plus Shares | 62 |
Custodian Fees | 11 |
Auditing Fees | 26 |
Total Expenses | 497 |
Net Investment Income | 5,771 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 9,175 |
Futures Contracts | 27 |
Realized Net Gain (Loss) | 9,202 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 15,765 |
Futures Contracts | 5 |
Change in Unrealized Appreciation (Depreciation) | 15,770 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 30,743 |
1 Interest income from an affiliated company of the fund was $2,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
57
Structured Broad Market Fund | ||
Statement of Changes in Net Assets | ||
Year Ended September 30, | ||
2010 | 2009 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 5,771 | 4,976 |
Realized Net Gain (Loss) | 9,202 | (74,111) |
Change in Unrealized Appreciation (Depreciation) | 15,770 | 54,465 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 30,743 | (14,670) |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (67) | (76) |
Institutional Plus Shares | (5,073) | (5,098) |
Realized Capital Gain | ||
Institutional Shares | — | — |
Institutional Plus Shares | — | — |
Total Distributions | (5,140) | (5,174) |
Capital Share Transactions | ||
Institutional Shares | 630 | 76 |
Institutional Plus Shares | 3,749 | 45,610 |
Net Increase (Decrease) from Capital Share Transactions | 4,379 | 45,686 |
Total Increase (Decrease) | 29,982 | 25,842 |
Net Assets | ||
Beginning of Period | 278,306 | 252,464 |
End of Period1 | 308,288 | 278,306 |
1 Net Assets—End of Period includes undistributed net investment income of $4,209,000 and $3,578,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
58
Structured Broad Market Fund | ||||
Financial Highlights | ||||
Institutional Shares | ||||
Nov. 30, | ||||
20061 to | ||||
Year Ended September 30, | Sept. 30, | |||
For a Share Outstanding Throughout Each Period | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $18.99 | $21.53 | $28.67 | $26.59 |
Investment Operations | ||||
Net Investment Income | .376 | .3522 | .402 | .3612 |
Net Realized and Unrealized Gain (Loss) on Investments | 1.672 | (2.500) | (6.833) | 1.930 |
Total from Investment Operations | 2.048 | (2.148) | (6.431) | 2.291 |
Distributions | ||||
Dividends from Net Investment Income | (.338) | (.392) | (.280) | (.116) |
Distributions from Realized Capital Gains | — | — | (.429) | (.095) |
Total Distributions | (.338) | (.392) | (.709) | (.211) |
Net Asset Value, End of Period | $20.70 | $18.99 | $21.53 | $28.67 |
Total Return | 10.88% | -9.67% | -22.95% | 8.68% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $5 | $4 | $4 | $14 |
Ratio of Total Expenses to Average Net Assets | 0.24% | 0.25% | 0.20% | 0.25%3 |
Ratio of Net Investment Income to Average Net Assets | 1.91% | 2.15% | 1.72% | 1.55%3 |
Portfolio Turnover Rate | 52% | 62% | 70% | 66% |
1 Inception.
2 Calculated based on average shares outstanding.
3 Annualized.
See accompanying Notes, which are an integral part of the Financial Statements.
59
Structured Broad Market Fund | ||||
Financial Highlights | ||||
Institutional Plus Shares | ||||
Oct. 3, | ||||
20061 to | ||||
Year Ended September 30, | Sept. 30, | |||
For a Share Outstanding Throughout Each Period | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $37.94 | $43.07 | $57.39 | $50.00 |
Investment Operations | ||||
Net Investment Income | .778 | .7252 | .873 | .9042 |
Net Realized and Unrealized Gain (Loss) on Investments | 3.343 | (5.006) | (13.714) | 6.910 |
Total from Investment Operations | 4.121 | (4.281) | (12.841) | 7.814 |
Distributions | ||||
Dividends from Net Investment Income | (.701) | (.849) | (.621) | (.234) |
Distributions from Realized Capital Gains | — | — | (.858) | (.190) |
Total Distributions | (.701) | (.849) | (1.479) | (.424) |
Net Asset Value, End of Period | $41.36 | $37.94 | $43.07 | $57.39 |
Total Return | 10.96% | -9.60% | -22.91% | 15.69% |
Ratios/Supplemental Data | ||||
Net Assets, End of Period (Millions) | $304 | $275 | $248 | $285 |
Ratio of Total Expenses to Average Net Assets | 0.17% | 0.17% | 0.12% | 0.15%3 |
Ratio of Net Investment Income to Average Net Assets | 1.98% | 2.23% | 1.80% | 1.65%3 |
Portfolio Turnover Rate | 52% | 62% | 70% | 66% |
1 Commencement of operations as a registered investment company.
2 Calculated based on average shares outstanding.
3 Annualized.
See accompanying Notes, which are an integral part of the Financial Statements.
60
Structured Broad Market Fund
Notes to Financial Statements
Vanguard Structured Broad Market 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: Institutional Shares and Institutional Plus Shares. Institutional Shares and Institutional Plus 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 materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market.
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).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2007–2010), and has concluded that no provision for federal income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. 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.
6. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. 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.
61
Structured Broad Market Fund
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. The Vanguard Group furnishes at cost investment advisory, 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 September 30, 2010, the fund had contributed capital of $54,000 to Vanguard (included in Other Assets), representing 0.02% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.
C. 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 fund’s investments as of September 30, 2010, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 307,625 | — | — |
Temporary Cash Investments | 592 | 200 | — |
Futures Contracts—Liabilities1 | (3) | — | — |
Total | 308,214 | 200 | — |
1 Represents variation margin on the last day of the reporting period. |
D. At September 30, 2010, 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 S&P 500 Index | December 2010 | 7 | 398 | 5 |
S&P 500 Index | December 2010 | 1 | 284 | 5 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
62
Structured Broad Market Fund
E. 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.
For tax purposes, at September 30, 2010, the fund had $4,450,000 of ordinary income available for distribution. The fund had available capital loss carryforwards totaling $92,356,000 to offset future net capital gains of $53,713,000 through September 30, 2017, and $38,643,000 through September 30, 2018.
At September 30, 2010, the cost of investment securities for tax purposes was $272,493,000. Net unrealized appreciation of investment securities for tax purposes was $35,924,000, consisting of unrealized gains of $47,001,000 on securities that had risen in value since their purchase and $11,077,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the year ended September 30, 2010, the fund purchased $154,856,000 of investment securities and sold $148,639,000 of investment securities, other than temporary cash investments.
G. Capital share transactions for each class of shares were: | ||||
Year Ended September 30, | ||||
2010 | 2009 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 563 | 29 | — | — |
Issued in Lieu of Cash Distributions | 67 | 3 | 76 | 5 |
Redeemed | — | — | — | — |
Net Increase (Decrease)—Institutional Shares | 630 | 32 | 76 | 5 |
Institutional Plus Shares | ||||
Issued | 16,974 | 437 | 43,734 | 1,413 |
Issued in Lieu of Cash Distributions | 1,775 | 45 | 1,876 | 58 |
Redeemed | (15,000) | (379) | — | — |
Net Increase (Decrease)—Institutional Plus Shares | 3,749 | 103 | 45,610 | 1,471 |
H. In preparing the financial statements as of September 30, 2010, management considered the impact of subsequent events for potential recognition or disclosure in these financial statements.
63
Report of Independent Registered Public Accounting Firm
To the Trustees of Vanguard Quantitative Funds and the Shareholders of Vanguard Structured Large-Cap Equity Fund, Vanguard Structured Large-Cap Growth Fund, Vanguard Structured Large-Cap Value Fund and Vanguard Structured Broad Market Fund:
In our opinion, the accompanying statements of net assets 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 Structured Large-Cap Equity Fund, Vanguard Structured Large-Cap Growth Fund, Vanguard Structured Large-Cap Value Fund and Vanguard Structured Broad Market Fund (constituting four separate portfolios of Vanguard Quantitative Funds, hereafter referred to as the “Funds”) at September 30, 2010, the results of each of their operations for the year ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, 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 respons ibility of the Funds’ 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 September 30, 2010 by correspondence with the custodian and broker and by agreement to the underlying ownership records of Vanguard Market Liquidity Fund, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 17, 2010
64
Special 2010 tax information (unaudited) for Vanguard Structured Equity Funds |
This information for the fiscal year ended September 30, 2010, is included pursuant to provisions of |
the Internal Revenue Code. |
The funds distributed qualified dividend income to shareholders during the fiscal year as follows: |
Qualified Dividend Income | |
Fund | ($000) |
Structured Large-Cap Equity | 11,271 |
Structured Large-Cap Growth | 784 |
Structured Large-Cap Value | 1,191 |
Structured Broad Market | 5,140 |
For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends-received deduction is as follows:
Fund | Percentage |
Structured Large-Cap Equity | 100% |
Structured Large-Cap Growth | 100 |
Structured Large-Cap Value | 100 |
Structured Broad Market | 100 |
65
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. Your fund does not charge transaction fees, such as purchase or redemption fees, nor does it 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.
66
Six Months Ended September 30, 2010 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
3/31/2010 | 9/30/2010 | Period | |
Based on Actual Fund Return | |||
Structured Large-Cap Equity Fund | |||
Institutional Shares | $1,000.00 | $978.08 | $1.19 |
Institutional Plus Shares | 1,000.00 | 978.78 | 0.84 |
Structured Large-Cap Growth Fund | |||
Institutional Shares | $1,000.00 | $992.00 | $1.20 |
Institutional Plus Shares | 1,000.00 | 992.39 | 0.85 |
Structured Large-Cap Value Fund | $1,000.00 | $962.46 | $0.84 |
Structured Broad Market Fund | |||
Institutional Shares | $1,000.00 | $986.65 | $1.20 |
Institutional Plus Shares | 1,000.00 | 986.88 | 0.85 |
67
Six Months Ended September 30, 2010 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
3/31/2010 | 9/30/2010 | Period | |
Based on Hypothetical 5% Yearly Return | |||
Structured Large-Cap Equity Fund | |||
Institutional Shares | $1,000.00 | $1,023.87 | $1.22 |
Institutional Plus Shares | 1,000.00 | 1,024.22 | 0.86 |
Structured Large-Cap Growth Fund | |||
Institutional Shares | $1,000.00 | $1,023.87 | $1.22 |
Institutional Plus Shares | 1,000.00 | 1,024.22 | 0.86 |
Structured Large-Cap Value Fund | $1,000.00 | $1,024.22 | $0.86 |
Structured Broad Market Fund | |||
Institutional Shares | $1,000.00 | $1,023.87 | $1.22 |
Institutional Plus Shares | 1,000.00 | 1,024.22 | 0.86 |
The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Structured Large-Cap Equity Fund, 0.24% for Institutional Shares and 0.17% for Institutional Plus Shares; for the Structured Large-Cap Growth Fund, 0.24% for Institutional Shares and 0.17% for Institutional Plus Shares; for the Structured Large-Cap Value Fund, 0.17% for Institutional Plus Shares; for the Structured Broad Market Fund, 0.24% for Institutional Shares and 0.17% for Institutional Plus 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.
68
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 (in the case of bonds) 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. The percentage of a fund’s average net assets used to pay its annual administrative and advisory expenses. These expenses directly reduce returns to investors.
Foreign Holdings. The percentage of a fund represented by stocks or depositary receipts of companies based outside the United States.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.
69
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.
70
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The People Who Govern Your Fund
The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.
A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 178 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.
Interested Trustee1 | Amy Gutmann |
Born 1949. Trustee Since June 2006. Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years: President |
Born 1957. Trustee Since July 2009. Chairman of the | of the University of Pennsylvania; Christopher H. |
Board. Principal Occupation(s) During the Past Five | Browne Distinguished Professor of Political Science |
Years: Chairman of the Board of The Vanguard Group, | in the School of Arts and Sciences with secondary |
Inc., and of each of the investment companies served | appointments at the Annenberg School for Commu- |
by The Vanguard Group, since January 2010; Director | nication and the Graduate School of Education |
of The Vanguard Group since 2008; Chief Executive | of the University of Pennsylvania; Director of |
Officer and President of The Vanguard Group and of | Carnegie Corporation of New York, Schuylkill River |
each of the investment companies served by The | Development Corporation, and Greater Philadelphia |
Vanguard Group since 2008; Director of Vanguard | Chamber of Commerce; Trustee of the National |
Marketing Corporation; Managing Director of The | Constitution Center; Chair of the Presidential |
Vanguard Group (1995–2008) . | Commission for the Study of Bioethical Issues. |
JoAnn Heffernan Heisen | |
Independent Trustees | Born 1950. Trustee Since July 1998. Principal |
Occupation(s) During the Past Five Years: Corporate | |
Emerson U. Fullwood | Vice President and Chief Global Diversity Officer |
Born 1948. Trustee Since January 2008. Principal | since 2006 (retired 2008) and Member of the |
Occupation(s) During the Past Five Years: Executive | Executive Committee (retired 2008) of Johnson & |
Chief Staff and Marketing Officer for North America | Johnson (pharmaceuticals/consumer products); Vice |
and Corporate Vice President (retired 2008) of Xerox | President and Chief Information Officer of Johnson & |
Corporation (document management products and | Johnson (1997–2005); Director of the University |
services); Director of SPX Corporation (multi-industry | Medical Center at Princeton and Women’s Research |
manufacturing), the United Way of Rochester, | and Education Institute; Member of the Advisory |
Amerigroup Corporation (managed health care), | Board of the Maxwell School of Citizenship and Public |
the University of Rochester Medical Center, and | Affairs at Syracuse University. |
Monroe Community College Foundation. | |
F. Joseph Loughrey | |
Rajiv L. Gupta | Born 1949. Trustee Since October 2009. Principal |
Born 1945. Trustee Since December 2001.2 | Occupation(s) During the Past Five Years: President |
Principal Occupation(s) During the Past Five Years: | and Chief Operating Officer since 2005 (retired 2009) |
Chairman and Chief Executive Officer (retired 2009) | and Vice Chairman of the Board (2008–2009) of |
and President (2006–2008) of Rohm and Haas Co. | Cummins Inc. (industrial machinery); Director of |
(chemicals); Director of Tyco International, Ltd. | SKF AB (industrial machinery), Hillenbrand, Inc. |
(diversified manufacturing and services) and Hewlett- | (specialized consumer services), Sauer-Danfoss Inc. |
Packard Co. (electronic computer manufacturing); | (machinery), the Lumina Foundation for Education, |
Trustee of The Conference Board; Member of the | and Oxfam America; Chairman of the Advisory |
Board of Managers of Delphi Automotive LLP | Council for the College of Arts and Letters at the |
(automotive components) . | University of Notre Dame. |
André F. Perold | Kathryn J. Hyatt | |
Born 1952. Trustee Since December 2004. Principal | Born 1955. Treasurer Since November 2008. Principal | |
Occupation(s) During the Past Five Years: George | Occupation(s) During the Past Five Years: Principal | |
Gund Professor of Finance and Banking at the Harvard | of The Vanguard Group, Inc.; Treasurer of each of | |
Business School; Chair of the Investment Committee | the investment companies served by The Vanguard | |
of HighVista Strategies LLC (private investment firm) . | Group since 2008; Assistant Treasurer of each of the | |
investment companies served by The Vanguard Group | ||
Alfred M. Rankin, Jr. | (1988–2008) . | |
Born 1941. Trustee Since January 1993. Principal | ||
Occupation(s) During the Past Five Years: Chairman, | Heidi Stam | |
President, and Chief Executive Officer of NACCO | Born 1956. Secretary Since July 2005. Principal | |
Industries, Inc. (forklift trucks/housewares/lignite); | Occupation(s) During the Past Five Years: Managing | |
Director of Goodrich Corporation (industrial products/ | Director of The Vanguard Group, Inc., since 2006; | |
aircraft systems and services); Chairman of the | General Counsel of The Vanguard Group since 2005; | |
Federal Reserve Bank of Cleveland; Trustee of The | Secretary of The Vanguard Group and of each of the | |
Cleveland Museum of Art. | investment companies served by The Vanguard Group | |
since 2005; Director and Senior Vice President of | ||
Peter F. Volanakis | Vanguard Marketing Corporation since 2005; | |
Born 1955. Trustee Since July 2009. Principal | Principal of The Vanguard Group (1997–2006). | |
Occupation(s) During the Past Five Years: President | ||
since 2007 and Chief Operating Officer since 2005 | ||
of Corning Incorporated (communications equipment); | Vanguard Senior Management Team | |
President of Corning Technologies (2001–2005); | ||
Director of Corning Incorporated and Dow Corning; | R. Gregory Barton | Michael S. Miller |
Trustee of the Corning Incorporated Foundation and | Mortimer J. Buckley | James M. Norris |
the Corning Museum of Glass; Overseer of the | Kathleen C. Gubanich | Glenn W. Reed |
Amos Tuck School of Business Administration at | Paul A. Heller | George U. Sauter |
Dartmouth College. | ||
Chairman Emeritus and Senior Advisor | ||
Executive Officers | ||
John J. Brennan | ||
Glenn Booraem | Chairman, 1996–2009 | |
Born 1967. Controller Since July 2010. Principal | Chief Executive Officer and President, 1996–2008 | |
Occupation(s) During the Past Five Years: Principal | ||
of The Vanguard Group, Inc.; Controller of each of | ||
the investment companies served by The Vanguard | Founder | |
Group since 2010; Assistant Controller of each of | ||
the investment companies served by The Vanguard | John C. Bogle | |
Group (2001–2010) . | Chairman and Chief Executive Officer, 1974–1996 | |
Thomas J. Higgins | ||
Born 1957. Chief Financial Officer Since September | ||
2008. Principal Occupation(s) During the Past Five | ||
Years: Principal of The Vanguard Group, Inc.; Chief | ||
Financial Officer of each of the investment companies | ||
served by The Vanguard Group since 2008; Treasurer | ||
of each of the investment companies served by The | ||
Vanguard Group (1998–2008) . |
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. | |
© 2010 The Vanguard Group, Inc. | |
All rights reserved. | |
Vanguard Marketing Corporation, Distributor. | |
Q08700 112010 |
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: Charles D. Ellis, Rajiv L. Gupta, JoAnn Heffernan Heisen, 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 September 30, 2010: $132,000 Fiscal Year Ended September 30, 2009: $117,000
Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group.
Fiscal Year Ended September 30, 2010: $3,607,060
Fiscal Year Ended September 30, 2009: $3,354,640
(b) Audit-Related Fees.
Fiscal Year Ended September 30, 2010: $791,350
Fiscal Year Ended September 30, 2009: $876,210
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 September 30, 2010: $336,090
Fiscal Year Ended September 30, 2009: $423,070
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 September 30, 2010: $16,000
Fiscal Year Ended September 30, 2009: $0
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 September 30, 2010: $352,090
Fiscal Year Ended September 30, 2009: $423,070
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 QUANTITATIVE FUNDS | |
By: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: November 18, 2010 |
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 QUANTITATIVE FUNDS | |
By: | /s/ F. WILLIAM MCNABB III* |
F. WILLIAM MCNABB III | |
CHIEF EXECUTIVE OFFICER | |
Date: November 18, 2010 | |
VANGUARD QUANTITATIVE FUNDS | |
By: | /s/ THOMAS J. HIGGINS* |
THOMAS J. HIGGINS | |
CHIEF FINANCIAL OFFICER | |
Date: November 18, 2010 |
* By: /s/ Heidi Stam
Heidi Stam, pursuant to a Power of Attorney filed on April 26, 2010, see file Number 33-53683, Incorporated by Reference.