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: | 811-04526 | |
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, 2015 – March 31, 2016 | ||
Item 1: Reports to Shareholders |
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/growthandincomefundx1x1.jpg)
Semiannual Report | March 31, 2016
Vanguard Growth and Income Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisors’ Report. | 7 |
Fund Profile. | 11 |
Performance Summary. | 12 |
Financial Statements. | 13 |
About Your Fund’s Expenses. | 33 |
Glossary. | 35 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the
risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the
sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows
us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended March 31, 2016 | |
Total | |
Returns | |
Vanguard Growth and Income Fund | |
Investor Shares | 8.07% |
Admiral™ Shares | 8.12 |
S&P 500 Index | 8.49 |
Large-Cap Core Funds Average | 6.23 |
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
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, 2015, Through March 31, 2016
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Growth and Income Fund | ||||
Investor Shares | $39.55 | $40.09 | $0.388 | $2.265 |
Admiral Shares | 64.57 | 65.45 | 0.668 | 3.697 |
1
Chairman’s Letter
Dear Shareholder,
Despite a resurgence of volatility early in the second half of the period, U.S. stocks produced solid gains for the six months ended March 31, 2016. Stocks of larger-capitalization companies generally outpaced those of smaller firms.
Vanguard Growth and Income Fund, which focuses on mid- and large-cap stocks, returned about 8% for the period. It finished behind its benchmark, the Standard & Poor’s 500 Index, but ahead of the average return of its peers.
The fund posted gains in all ten industry sectors, with stocks of information technology, consumer staples, and industrials companies adding most to returns. However, the fund’s holdings in some of the top-performing sectors failed to keep pace with their counterparts in the index.
Stocks charted an uneven course en route to a favorable outcome
The broad U.S. stock market returned about 7% over the six months. The period began and ended strongly, with fluctuations in the middle as China’s economic slowdown and falling oil and commodity prices worried investors.
Stocks rallied in March as investors again seemed encouraged by news about monetary policy. The Federal Reserve indicated, after a mid-March meeting, that it would raise interest rates fewer times in 2016 than previously anticipated. And central
2
bankers in Europe and Asia kept up stimulus measures to combat weak growth and low inflation.
International stocks returned about 3% for the period after surging more than 8% in March. Stocks from emerging markets and from developed markets of the Pacific region outperformed European stocks, which were nearly flat.
Bonds produced gains following a subpar start
After posting weak results for the first three months of the period, bonds managed solid gains in the final three. The broad U.S. taxable bond market returned 2.44% for the fiscal half year.
With stocks volatile and the Fed proceeding cautiously with rate hikes, bonds proved attractive. The yield of the 10-year U.S. Treasury note closed at 1.77% at the end of March, down from 2.05% six months earlier. (Bond prices and yields move in opposite directions.)
Returns for money market funds and savings accounts remained limited by the Fed’s target rate of 0.25%–0.5%—still low despite rising a quarter percentage point in December.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 6.90%. International bonds got a boost as foreign currencies strengthened against the dollar, a turn-about from the trend of recent years.
Market Barometer | |||
Total Returns | |||
Periods Ended March 31, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 7.75% | 0.50% | 11.35% |
Russell 2000 Index (Small-caps) | 2.02 | -9.76 | 7.20 |
Russell 3000 Index (Broad U.S. market) | 7.30 | -0.34 | 11.01 |
FTSE All-World ex US Index (International) | 3.09 | -8.53 | 0.70 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 2.44% | 1.96% | 3.78% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.20 | 3.98 | 5.59 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.06 | 0.08 | 0.04 |
CPI | |||
Consumer Price Index | 0.08% | 0.85% | 1.28% |
3
Even without this currency benefit, however, international bond returns were solidly positive.
The fund delivered solid gains despite trailing its benchmark
The Growth and Income Fund provides broad exposure to the large- and mid-cap segments of the U.S. stock market. Each of the fund’s three advisors uses its own quantitative approach to screen stocks based on fundamental data such as earnings growth prospects and balance-sheet quality. All share the goal of outpacing the fund’s benchmark over the long term without taking on significant additional risk.
As I mentioned earlier in this letter, the fund produced positive results in all ten sectors for the most recent six months, with information technology, consumer staples, and industrials contributing most to overall performance. Together, the fund’s holdings in these three sectors accounted for almost 5 percentage points of its total return.
The fund’s underperformance relative to its benchmark can be attributed to its smaller returns in a handful of sectors. Although they notched impressive returns, the fund’s holdings in information technology and industrials failed to keep pace with their counterparts in the index. This was also true of energy, health care, and utilities.
Expense Ratios | |||
Your Fund Compared With Its Peer Group | |||
Investor | Admiral | Peer Group | |
Shares | Shares | Average | |
Growth and Income Fund | 0.34% | 0.23% | 1.11% |
The fund expense ratios shown are from the prospectus dated January 26, 2016, and represent estimated costs for the current fiscal year. For
the six months ended March 31, 2016, the fund’s annualized 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, a Thomson Reuters Company, and captures information through
year-end 2015.
Peer group: Large-Cap Core Funds.
4
Financials, which is one of the largest sectors, was also a relatively bright spot, as the fund’s holdings in this sector outpaced their benchmark counterparts by a wide margin. The fund also had a stronger showing than its benchmark in the lightly held materials sector.
For more about the advisors’ strategy and the Growth and Income Fund’s positioning during the six months, please see the Advisors’ Report that follows this letter.
Vanguard’s growth translates into lower costs for you |
Research indicates that lower-cost investments have tended to outperform higher-cost ones. |
So it’s little wonder that funds with lower expense ratios—including those at Vanguard—have |
dominated the industry’s cash inflows in recent years. |
Vanguard has long been a low-cost leader, with expenses well below those of many other |
investment management companies. That cost difference remains a powerful advantage for |
Vanguard clients. Why? Because a lower expense ratio allows a fund to pass along a greater |
share of its returns to its investors. |
What’s more, as you can see in the chart below, we’ve been able to lower our costs continually |
as our assets under management have grown. Our steady growth has not been an explicit |
business objective. Rather, we focus on putting our clients’ interests first at all times, and |
giving them the best chance for investment success. But economies of scale—the cost |
efficiencies that come with our growth—have allowed us to keep lowering our fund costs, |
even as we invest in our people and technology. |
The benefit of economies of scale |
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/growthandincomefundx7x1.jpg)
Note: Data are for U.S.-based Vanguard funds only. |
Source: Vanguard. |
5
Consider rebalancing to manage your risk
Let’s say you’ve taken the time to carefully create an appropriate asset allocation for your investment portfolio. Your efforts have produced a diversified mix of stock, bond, and money market funds tailored to your goals, time horizon, and risk tolerance.
But what should you do when your portfolio drifts from its original asset allocation as the financial markets rise or fall? Consider rebalancing to bring it back to the proper mix.
Just one year of outsized returns can throw your allocation out of whack. Take 2013 as an example. That year, the broad stock market (as measured by the Russell 3000 Index) returned 33.55% and the broad taxable bond market (as measured by the Barclays U.S. Aggregate Bond Index) returned –2.02%. A hypothetical portfolio that tracked the broad domestic market indexes and started the year with 60% stocks and 40% bonds would have ended with a more aggressive mix of 67% stocks and 33% bonds.
Rebalancing to bring your portfolio back to its original targets would require you to shift assets away from areas that have been performing well toward those that have been falling behind. That isn’t easy or intuitive. It’s a way to minimize risk rather than maximize returns and to stick with your investment plan through different types of markets. (You can read more about our approach in Best Practices for Portfolio Rebalancing at vanguard.com/research.)
It’s not necessary to check your portfolio every day or every month, much less rebalance it that frequently. It may be more appropriate to monitor it annually or semiannually and rebalance when your allocation swings 5 percentage points or more from its target.
It’s important, of course, to be aware of the tax implications. You’ll want to consult with your tax advisor, but generally speaking, it may be a good idea to make any asset changes within a tax-advantaged retirement account or to direct new cash flows into the underweighted asset class.
However you go about it, keeping your asset allocation from drifting too far off target can help you stay on track with the investment plan you’ve crafted to meet your financial goals.
As always, thank you for investing with Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/growthandincomefundx8x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
April 12, 2016
6
Advisors’ Report
Vanguard Growth and Income Fund’s Investor Shares returned 8.07% for the six months ended March 31, 2016. The Admiral Shares returned 8.12%. The S&P 500 Index returned 8.49%, and the average return of large-capitalization core funds was 6.23%.
Your fund is managed by three independent advisors, a strategy that enhances the fund’s diversification by providing exposure to distinct yet complementary investment approaches. It is not uncommon for different advisors to have different views about individual securities or the broader investment environment.
The advisors, the percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal half year and of how the portfolio’s positioning reflects this assessment. (Please note that Los Angeles Capital’s discussion refers to industry sectors as defined by Russell classifications, rather than by the Global Industry Classification Standard used elsewhere in this report.) These comments were prepared on April 18, 2016.
Vanguard Growth and Income Fund Investment Advisors | |||
Fund Assets Managed | |||
Investment Advisor | % | $ Million | Investment Strategy |
Los Angeles Capital | 33 | 2,049 | Employs a quantitative model that emphasizes stocks |
with characteristics investors are currently seeking and | |||
underweights stocks with characteristics investors are | |||
currently avoiding. The portfolio’s sector weights, size, | |||
and style characteristics may differ modestly from the | |||
benchmark in a risk-controlled manner. | |||
D. E. Shaw Investment | 33 | 2,042 | Employs quantitative models that seek to capture |
Management, L.L.C. | predominantly “bottom up” stock-specific return | ||
opportunities while aiming to keep the portfolio’s | |||
sector weights, size, and style characteristics similar to | |||
the benchmark. | |||
Vanguard Quantitative Equity | 33 | 2,040 | Employs a quantitative fundamental management |
Group | approach, using models that assess valuation, growth | ||
prospects, management decisions, market sentiment, | |||
and earnings and balance-sheet quality of companies | |||
as compared with their peers. | |||
Cash Investments | 1 | 129 | These short-term reserves are invested by Vanguard in |
equity index products to simulate investments in | |||
stocks. Each advisor also may maintain a modest cash | |||
position. |
7
Los Angeles Capital
Portfolio Managers:
Thomas D. Stevens, CFA,
Chairman and Principal
Hal W. Reynolds, CFA,
Chief Investment Officer and Principal
The S&P 500 Index generated an 8.49% return for the six months ended March 31, 2016, as share prices recovered from January’s lows. Although falling equity volatility and rising energy prices eased credit concerns, investors remained concerned that earnings weakness could broaden outside of the energy and materials sectors.
The best-performing stocks over the six months were those with larger market capitalization and higher dividend yields. Stocks of companies with a large percentage of revenues outside the United States also performed well. These themes were driven by falling bond yields and a recent reversal in dollar strength. The high-yielding telecommunication services and utilities sectors outperformed and the internet subsector also posted strong gains. The biotechnology and financials segments lagged, with banks especially weak as low interest rates continued to impact net interest margins.
Over the six months, the portfolio maintained a bias towards lower-volatility stocks with strong analyst sentiment that contributed positively to returns. In addition, the portfolio’s tilt toward yield added value as investors sought stocks with higher payout ratios. Its bias toward
smaller-cap stocks and its underweighting of stocks with foreign revenues modestly detracted from results. In terms of sectors, lower exposure to utilities detracted, while overweighting consumer staples and materials contributed to returns.
Although the market continues to favor companies with strong profit margins, value-linked factors such as stronger earnings yield and stronger dividend yield are increasingly attractive. Investors are still penalizing volatile assets, along with riskier factors such as leverage and distress. The portfolio is tilted away from higher-growth segments of the market such as biotechnology, internet, and retail, and is tilted towards consumer staples.
D. E. Shaw Investment
Management, L.L.C.
Portfolio Managers:
Anne Dinning, Ph.D., Managing Director
and Chief Investment Officer
Philip Kearns, Ph.D., Managing Director
The S&P 500 Index fluctuated during the six months, but ended the period with a return of 8.5% after a strong rally in the final six weeks. After much anticipation, the Federal Reserve raised interest rates in mid-December. Possibly because it had been telegraphed well ahead of time, the move seemed to have little effect on equity markets. The price of crude oil fell during the period but showed some signs of life at the tail end; the oil component of the S&P GSCI Commodity Index, for example, dropped 40% through mid-February but finished down only 15%.
8
Global equity markets exhibited mixed performance, with the MSCI Pacific Index returning 4.9% and the MSCI Europe Index essentially flat. The Shanghai Composite Index had returned 20% as of the third week in December, but gave it all back after the People’s Bank of China cut the yuan fixing rate by nearly 1.5% over a period of eight days. European stocks fell in December after the European Central Bank (ECB) lowered its deposit rate to –0.3% and extended its bond purchase program by six months. The Eurostoxx 50 Index lost 9.5% in eight days following the ECB announcement.
While we actively monitor such market activity, we generally do not make portfolio decisions based on a subjective analysis of the investment environment, aside from attempting to mitigate newly emergent risk factors identified by the firm. There were no such occurrences during the half year.
Our quantitative equity investment process deploys alpha models that seek to forecast individual stock returns and deploys risk models that seek to mitigate active exposures to industries, sectors, and common risk factors. However, in constructing the equity portfolios, this process may result in small to moderate active exposures to industries, sectors, and risk factors as a by-product of our focus on bottom-up stock selection. We therefore generally attribute portfolio performance to three major sources: bottom-up stock selection; exposure to risk factors such as value, growth, and market capitalization; and exposure to industry groups.
Stock selection was the main reason for the underperformance of our portfolio, followed by exposure to certain industry groups. The largest drag on relative performance came from an overweight exposure to multiple segments of the pharmaceutical and energy sectors. Overall exposure to risk factors did not contribute materially to relative performance. Although underweight exposure to high-dividend-yield stocks and overweight exposure to high-volatility stocks detracted from relative performance, these were largely counterbalanced by underweight exposure to momentum stocks.
The three largest single-stock contributors were an underweight position in Bank of America, an overweight position in AT&T, and an underweight position in JP Morgan Chase & Co. The three largest single-stock detractors were underweight positions in Facebook and Verizon Communications and an overweight position in Williams.
The U.S. economy appears to be picking up strength, with unemployment remaining at or below 5% and the economy adding over 1.4 million nonfarm payroll jobs during the period. However, uncertainty and signs of weakness in various regions and sectors of the world economy could still dampen equity market returns. Japanese and core European five-year interest rates are currently negative, which may indicate troubled economic times ahead. In addition, China’s economy is still relatively weak, and the direction of oil prices remains uncertain. And while markets are generally anticipating that the Fed will raise interest rates again this year, there is much debate about the timing and size of the hike.
9
Vanguard Quantitative Equity Group
Portfolio Managers:
Michael R. Roach, CFA
James P. Stetler, Principal
Binbin Guo, Principal, Head of Equity
Research and Portfolio Strategies
Moving into 2016, the U.S. economy continued to grow, but at a slower pace. Fourth quarter 2015 real GDP grew 1.4%, down from 2.0% in the third quarter. The deceleration was mainly attributed to downturns in nonresidential fixed investment, exports, and state and local government spending. Corporate profits decreased 8.1%, reflecting the largest quarterly decline since the first quarter of 2011. The job market further improved, however. Total nonfarm payroll employment rose by 215,000 in March, while the unemployment rate was slightly changed at 5.0%.
In the first quarter of 2016, oil prices declined significantly but then recovered, increasing by more than 40% from mid-February’s bottom. This volatility spilled over into the global stock markets as they saw similar price action in the same quarter.
The U.S. Federal Reserve raised interest rates in December, after keeping rates near zero since 2008. Further gradual interest rate hikes are expected later this year, but they are dependent on the direction of global economic data. Even as the United States begins experiencing higher interest rates, several other central banks, including the European Central Bank and the Bank of Japan, are experimenting with negative interest rates in an attempt to spur economic growth.
Over the period, our growth and management models contributed positively to performance, but our sentiment, valuation, and quality models did not perform as expected. We were able to produce positive stock selection results in five of the ten sectors in the benchmark. Our strongest results were in consumer discretionary, telecommunication services, and financials. Our worst results were in energy and information technology.
At the individual stock level, the largest contributions came from overweight positions in PVH Corp, Leggett and Platt, and CenturyLink. In addition, when comparing the portfolio’s performance relative to its benchmark’s, we benefited from underweighting or avoiding poorly performing stocks such as Chipotle Mexican Grill, Staples, and Netflix.
Unfortunately, we were not able to avoid all bad performers. Overweight positions in Transocean Ltd, Marathon Petroleum Corporation, and Ensco Plc directly lowered performance. Also, underweighting companies that were not positively identified by the fundamentals in our model, such as Chevron Corporation and Facebook Inc., hurt our overall outperformance relative to the benchmark.
10
Growth and Income Fund
Fund Profile
As of March 31, 2016
Share-Class Characteristics | ||
Investor | Admiral | |
Shares | Shares | |
Ticker Symbol | VQNPX | VGIAX |
Expense Ratio1 | 0.34% | 0.23% |
30-Day SEC Yield | 1.87% | 1.99% |
Portfolio Characteristics | |||
DJ | |||
U.S. Total | |||
S&P 500 | Market | ||
Fund | Index | FA Index | |
Number of Stocks | 949 | 504 | 3,900 |
Median Market Cap | $52.6B | $79.4B | $52.5B |
Price/Earnings Ratio | 18.6x | 20.5x | 21.8x |
Price/Book Ratio | 2.8x | 2.8x | 2.7x |
Return on Equity | 18.5% | 18.5% | 17.5% |
Earnings Growth | |||
Rate | 8.2% | 7.6% | 8.0% |
Dividend Yield | 2.3% | 2.2% | 2.1% |
Foreign Holdings | 0.2% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 99% | — | — |
Short-Term Reserves | 0.5% | — | — |
Sector Diversification (% of equity exposure) | |||
DJ | |||
U.S. Total | |||
S&P 500 | Market | ||
Fund | Index FA Index | ||
Consumer | |||
Discretionary | 12.2% | 12.9% | 13.6% |
Consumer Staples | 11.5 | 10.4 | 9.2 |
Energy | 6.4 | 6.8 | 6.1 |
Financials | 15.0 | 15.6 | 17.4 |
Health Care | 14.5 | 14.3 | 13.7 |
Industrials | 10.3 | 10.1 | 10.7 |
Information | |||
Technology | 20.1 | 20.8 | 20.1 |
Materials | 3.7 | 2.8 | 3.2 |
Telecommunication | |||
Services | 3.0 | 2.8 | 2.5 |
Utilities | 3.3 | 3.5 | 3.5 |
Volatility Measures | ||
DJ | ||
U.S. Total | ||
S&P 500 | Market | |
Index | FA Index | |
R-Squared | 0.99 | 0.99 |
Beta | 0.98 | 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. | Technology | |
Hardware, Storage & | ||
Peripherals | 3.3% | |
Johnson & Johnson | Pharmaceuticals | 2.3 |
Microsoft Corp. | Systems Software | 2.0 |
Exxon Mobil Corp. | Integrated Oil & Gas | 1.7 |
AT&T Inc. | Integrated | |
Telecommunication | ||
Services | 1.6 | |
Alphabet Inc. | Internet Software & | |
Services | 1.6 | |
Wells Fargo & Co. | Diversified Banks | 1.5 |
Coca-Cola Co. | Soft Drinks | 1.2 |
Amazon.com Inc. | Internet Retail | 1.2 |
Altria Group Inc. | Tobacco | 1.1 |
Top Ten | 17.5% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/growthandincomefundx13x1.jpg)
1 The expense ratios shown are from the prospectus dated January 26, 2016, and represent estimated costs for the current fiscal year. For the six
months ended March 31, 2016, the annualized expense ratios were 0.32% for Investor Shares and 0.21% for Admiral Shares.
11
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.
Fiscal-Year Total Returns (%): September 30, 2005, Through March 31, 2016
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/growthandincomefundx14x1.jpg)
Average Annual Total Returns: Periods Ended March 31, 2016
Inception | One | Five | Ten | |
Date | Year | Years | Years | |
Investor Shares | 12/10/1986 | 1.75% | 11.98% | 6.31% |
Admiral Shares | 5/14/2001 | 1.88 | 12.10 | 6.44 |
See Financial Highlights for dividend and capital gains information.
12
Growth and Income Fund
Financial Statements (unaudited)
Statement of Net Assets
As of March 31, 2016
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 (97.6%)1 | |||
Consumer Discretionary (11.9%) | |||
* | Amazon.com Inc. | 122,581 | 72,769 |
Home Depot Inc. | 471,519 | 62,915 | |
Walt Disney Co. | 464,223 | 46,102 | |
McDonald’s Corp. | 278,970 | 35,061 | |
Target Corp. | 377,623 | 31,071 | |
Comcast Corp. Class A | 475,170 | 29,023 | |
Time Warner Cable Inc. | 123,026 | 25,174 | |
Lowe’s Cos. Inc. | 322,852 | 24,456 | |
Omnicom Group Inc. | 270,032 | 22,475 | |
Darden Restaurants Inc. | 334,609 | 22,185 | |
Leggett & Platt Inc. | 438,340 | 21,216 | |
* | Priceline Group Inc. | 15,600 | 20,108 |
L Brands Inc. | 210,780 | 18,509 | |
Time Warner Inc. | 254,205 | 18,443 | |
Interpublic Group of Cos. | |||
Inc. | 783,716 | 17,986 | |
Carnival Corp. | 324,256 | 17,111 | |
General Motors Co. | 474,041 | 14,899 | |
NIKE Inc. Class B | 239,700 | 14,734 | |
Wyndham Worldwide Corp. | 192,650 | 14,724 | |
PVH Corp. | 142,150 | 14,081 | |
Best Buy Co. Inc. | 423,670 | 13,744 | |
* | O’Reilly Automotive Inc. | 50,013 | 13,687 |
Marriott International Inc. | |||
Class A | 175,600 | 12,499 | |
Goodyear Tire & Rubber | |||
Co. | 374,218 | 12,342 | |
^ | Nordstrom Inc. | 192,518 | 11,014 |
GameStop Corp. Class A | 329,500 | 10,455 | |
* | Netflix Inc. | 97,100 | 9,927 |
News Corp. Class B | 749,142 | 9,926 | |
* | Discovery Communications | ||
Inc. Class A | 329,393 | 9,430 | |
VF Corp. | 123,300 | 7,985 | |
Staples Inc. | 528,733 | 5,832 | |
* | AutoZone Inc. | 7,118 | 5,671 |
Twenty-First Century Fox | |||
Inc. Class A | 200,554 | 5,591 |
* | Liberty Global plc | 132,800 | 4,988 |
* | Michael Kors Holdings Ltd. | 85,840 | 4,889 |
Viacom Inc. Class B | 111,800 | 4,615 | |
Johnson Controls Inc. | 112,740 | 4,393 | |
* | Mohawk Industries Inc. | 19,820 | 3,784 |
Hanesbrands Inc. | 133,100 | 3,772 | |
* | AutoNation Inc. | 75,800 | 3,538 |
TEGNA Inc. | 140,475 | 3,296 | |
Kohl’s Corp. | 64,470 | 3,005 | |
DR Horton Inc. | 85,054 | 2,571 | |
Tiffany & Co. | 34,700 | 2,546 | |
* | Ulta Salon Cosmetics & | ||
Fragrance Inc. | 12,700 | 2,460 | |
* | Discovery Communications | ||
Inc. | 78,302 | 2,114 | |
* | DISH Network Corp. | ||
Class A | 42,566 | 1,969 | |
Aramark | 49,800 | 1,649 | |
Hasbro Inc. | 19,727 | 1,580 | |
Hilton Worldwide Holdings | |||
Inc. | 65,857 | 1,483 | |
Restaurant Brands | |||
International Inc. | 35,960 | 1,396 | |
Bloomin’ Brands Inc. | 71,337 | 1,203 | |
Graham Holdings Co. | |||
Class B | 2,354 | 1,130 | |
News Corp. Class A | 82,820 | 1,058 | |
* | Liberty Ventures Class A | 24,700 | 966 |
Cable One Inc. | 2,155 | 942 | |
Royal Caribbean Cruises | |||
Ltd. | 10,585 | 870 | |
Service Corp. International | 35,000 | 864 | |
Gannett Co. Inc. | 54,195 | 820 | |
* | TripAdvisor Inc. | 12,200 | 811 |
* | Sirius XM Holdings Inc. | 199,800 | 789 |
* | Vista Outdoor Inc. | 14,100 | 732 |
* | Sally Beauty Holdings Inc. | 21,200 | 686 |
TJX Cos. Inc. | 8,269 | 648 | |
Twenty-First Century Fox | |||
Inc. | 21,400 | 603 |
13
Growth and Income Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Liberty Global plc Class A | 15,600 | 601 |
Magna International Inc. | 12,900 | 554 | |
Wendy’s Co. | 48,200 | 525 | |
Whirlpool Corp. | 2,557 | 461 | |
Starbucks Corp. | 6,600 | 394 | |
^ | Lions Gate Entertainment | ||
Corp. | 18,000 | 393 | |
* | Michaels Cos. Inc. | 13,800 | 386 |
Fiat Chrysler Automobiles | |||
NV | 46,600 | 376 | |
CST Brands Inc. | 9,600 | 368 | |
* | Liberty Media Corp. | 9,447 | 360 |
* | LKQ Corp. | 10,800 | 345 |
Rent-A-Center Inc. | 20,100 | 319 | |
* | Denny’s Corp. | 23,600 | 244 |
* | Houghton Mifflin Harcourt | ||
Co. | 11,100 | 221 | |
* | Liberty Media Corp. Class A | 5,400 | 209 |
* | Restoration Hardware | ||
Holdings Inc. | 4,700 | 197 | |
Newell Rubbermaid Inc. | 4,167 | 185 | |
PulteGroup Inc. | 8,800 | 165 | |
Time Inc. | 9,700 | 150 | |
DeVry Education Group Inc. | 7,000 | 121 | |
* | NVR Inc. | 60 | 104 |
Churchill Downs Inc. | 682 | 101 | |
* | La Quinta Holdings Inc. | 8,042 | 101 |
* | Isle of Capri Casinos Inc. | 6,527 | 91 |
Cheesecake Factory Inc. | 1,700 | 90 | |
Marriott Vacations | |||
Worldwide Corp. | 1,331 | 90 | |
* | New York & Co. Inc. | 19,273 | 76 |
Libbey Inc. | 3,900 | 73 | |
Nutrisystem Inc. | 3,000 | 63 | |
Gentex Corp. | 3,900 | 61 | |
* | Bed Bath & Beyond Inc. | 1,070 | 53 |
Aaron’s Inc. | 2,000 | 50 | |
Sonic Automotive Inc. | |||
Class A | 2,400 | 44 | |
Barnes & Noble Inc. | 3,400 | 42 | |
La-Z-Boy Inc. | 1,500 | 40 | |
* | TopBuild Corp. | 1,300 | 39 |
* | Murphy USA Inc. | 600 | 37 |
* | Party City Holdco Inc. | 2,340 | 35 |
* | Liberty TripAdvisor Holdings | ||
Inc. Class A | 1,500 | 33 | |
Chico’s FAS Inc. | 2,500 | 33 | |
* | Bojangles’ Inc. | 1,900 | 32 |
Gap Inc. | 1,080 | 32 | |
Citi Trends Inc. | 1,596 | 28 | |
Cato Corp. Class A | 700 | 27 | |
Texas Roadhouse Inc. Class A | 600 | 26 | |
* | Townsquare Media Inc. | ||
Class A | 2,302 | 26 | |
ClubCorp Holdings Inc. | 1,764 | 25 |
* | Sears Holdings Corp. | 1,590 | 24 | |
* | Liberty Broadband Corp. | 400 | 23 | |
Carter’s Inc. | 200 | 21 | ||
* | Live Nation Entertainment | |||
Inc. | 900 | 20 | ||
Genuine Parts Co. | 200 | 20 | ||
Journal Media Group Inc. | 1,600 | 19 | ||
* | Lee Enterprises Inc. | 9,597 | 17 | |
Yum! Brands Inc. | 200 | 16 | ||
* | Chegg Inc. | 3,500 | 16 | |
* | Express Inc. | 700 | 15 | |
* | Ruby Tuesday Inc. | 2,670 | 14 | |
* | Biglari Holdings Inc. | 34 | 13 | |
Signet Jewelers Ltd. | 100 | 12 | ||
* | Nautilus Inc. | 600 | 12 | |
Ross Stores Inc. | 200 | 12 | ||
* | ServiceMaster Global | |||
Holdings Inc. | 300 | 11 | ||
Williams-Sonoma Inc. | 200 | 11 | ||
* | Tumi Holdings Inc. | 400 | 11 | |
* | Starz | 400 | 11 | |
Lennar Corp. Class A | 200 | 10 | ||
Wolverine World Wide Inc. | 500 | 9 | ||
* | Regis Corp. | 600 | 9 | |
* | Container Store Group Inc. | 1,400 | 8 | |
* | Liberty Interactive Corp. | |||
QVC Group Class A | 300 | 8 | ||
* | Barnes & Noble Education Inc. | 700 | 7 | |
* | Carrols Restaurant Group Inc. | 454 | 7 | |
Haverty Furniture Cos. Inc. | 300 | 6 | ||
International Game | ||||
Technology plc | 335 | 6 | ||
* | MGM Resorts International | 234 | 5 | |
* | Caesars Entertainment Corp. | 700 | 5 | |
* | Mattress Firm Holding Corp. | 100 | 4 | |
* | J Alexander’s Holdings Inc. | 365 | 4 | |
* | Cherokee Inc. | 200 | 4 | |
* | Perry Ellis International Inc. | 107 | 2 | |
745,733 | ||||
Consumer Staples (11.2%) | ||||
Coca-Cola Co. | 1,674,904 | 77,699 | ||
Altria Group Inc. | 1,108,712 | 69,472 | ||
Procter & Gamble Co. | 805,141 | 66,271 | ||
Wal-Mart Stores Inc. | 877,877 | 60,126 | ||
PepsiCo Inc. | 497,178 | 50,951 | ||
Philip Morris International | ||||
Inc. | 402,921 | 39,531 | ||
General Mills Inc. | 499,098 | 31,618 | ||
Kimberly-Clark Corp. | 234,890 | 31,595 | ||
Dr Pepper Snapple Group | ||||
Inc. | 318,006 | 28,436 | ||
CVS Health Corp. | 246,099 | 25,528 | ||
Kroger Co. | 614,159 | 23,492 | ||
Clorox Co. | 183,844 | 23,175 | ||
ConAgra Foods Inc. | 455,115 | 20,307 |
14
Growth and Income Fund
Market | ||||
Value• | ||||
Shares | ($000) | |||
Campbell Soup Co. | 271,544 | 17,322 | ||
Colgate-Palmolive Co. | 208,160 | 14,706 | ||
Mondelez International Inc. | ||||
Class A | 361,800 | 14,515 | ||
Sysco Corp. | 278,139 | 12,997 | ||
Hershey Co. | 140,205 | 12,911 | ||
Tyson Foods Inc. Class A | 188,735 | 12,581 | ||
Coca-Cola Enterprises Inc. | 240,810 | 12,219 | ||
Kraft Heinz Co. | 149,300 | 11,729 | ||
Archer-Daniels-Midland Co. | 261,437 | 9,493 | ||
Kellogg Co. | 116,323 | 8,905 | ||
Constellation Brands Inc. | ||||
Class A | 44,700 | 6,754 | ||
Bunge Ltd. | 73,800 | 4,182 | ||
Church & Dwight Co. Inc. | 40,082 | 3,695 | ||
Mead Johnson Nutrition Co. | 41,200 | 3,501 | ||
Walgreens Boots Alliance | ||||
Inc. | 40,000 | 3,370 | ||
Whole Foods Market Inc. | 90,100 | 2,803 | ||
Costco Wholesale Corp. | 15,320 | 2,414 | ||
Molson Coors Brewing Co. | ||||
Class B | 5,500 | 529 | ||
Hormel Foods Corp. | 10,079 | 436 | ||
*,^ | Pilgrim’s Pride Corp. | 16,400 | 417 | |
Spectrum Brands Holdings | ||||
Inc. | 3,600 | 393 | ||
* | Edgewell Personal Care Co. | 4,800 | 387 | |
McCormick & Co. Inc. | 1,390 | 138 | ||
Reynolds American Inc. | 2,203 | 111 | ||
* | Adecoagro SA | 6,100 | 70 | |
Brown-Forman Corp. Class B | 700 | 69 | ||
* | Sprouts Farmers Market Inc. | 1,700 | 49 | |
* | Hain Celestial Group Inc. | 900 | 37 | |
Lancaster Colony Corp. | 300 | 33 | ||
JM Smucker Co. | 221 | 29 | ||
Dean Foods Co. | 1,300 | 22 | ||
Flowers Foods Inc. | 800 | 15 | ||
* | SunOpta Inc. | 3,200 | 14 | |
* | USANA Health Sciences Inc. | 100 | 12 | |
705,059 | ||||
Energy (6.2%) | ||||
Exxon Mobil Corp. | 1,247,902 | 104,312 | ||
Schlumberger Ltd. | 498,693 | 36,779 | ||
Phillips 66 | 309,140 | 26,768 | ||
Valero Energy Corp. | 416,150 | 26,692 | ||
Tesoro Corp. | 293,192 | 25,217 | ||
Chevron Corp. | 256,768 | 24,496 | ||
Marathon Petroleum Corp. | 488,380 | 18,158 | ||
* | FMC Technologies Inc. | 607,764 | 16,628 | |
Ensco plc Class A | 1,258,796 | 13,054 | ||
Anadarko Petroleum Corp. | 233,913 | 10,893 | ||
Occidental Petroleum Corp. | 149,483 | 10,229 | ||
Kinder Morgan Inc. | 532,300 | 9,507 | ||
^ | Transocean Ltd. | 974,592 | 8,908 | |
National Oilwell Varco Inc. | 270,072 | 8,399 | ||
Noble Corp. plc | 751,100 | 7,774 |
* | Cameron International Corp. | 101,521 | 6,807 |
EOG Resources Inc. | 93,125 | 6,759 | |
Williams Cos. Inc. | 398,500 | 6,404 | |
ConocoPhillips | 115,601 | 4,655 | |
Devon Energy Corp. | 161,617 | 4,435 | |
Marathon Oil Corp. | 234,812 | 2,616 | |
Apache Corp. | 40,654 | 1,984 | |
*,^ | Southwestern Energy Co. | 146,440 | 1,182 |
Cabot Oil & Gas Corp. | 35,900 | 815 | |
Columbia Pipeline Group Inc. | 31,950 | 802 | |
ONEOK Inc. | 24,116 | 720 | |
Energen Corp. | 16,530 | 605 | |
*,^ | Seadrill Ltd. | 158,100 | 522 |
* | Newfield Exploration Co. | 12,806 | 426 |
^ | Cameco Corp. | 31,100 | 399 |
EQT Corp. | 4,400 | 296 | |
Golar LNG Ltd. | 12,100 | 217 | |
Encana Corp. | 18,500 | 113 | |
Golar LNG Partners LP | 6,580 | 97 | |
* | Memorial Resource | ||
Development Corp. | 8,780 | 89 | |
US Silica Holdings Inc. | 3,900 | 89 | |
CVR Energy Inc. | 3,100 | 81 | |
Euronav NV | 6,245 | 64 | |
* | Cobalt International Energy | ||
Inc. | 21,400 | 64 | |
* | Oasis Petroleum Inc. | 8,000 | 58 |
Halliburton Co. | 1,570 | 56 | |
* | Harvest Natural Resources | ||
Inc. | 79,000 | 48 | |
Frank’s International NV | 2,582 | 43 | |
EnLink Midstream LLC | 3,600 | 40 | |
* | Kosmos Energy Ltd. | 6,900 | 40 |
* | TETRA Technologies Inc. | 4,900 | 31 |
* | Laredo Petroleum Inc. | 3,500 | 28 |
Aegean Marine Petroleum | |||
Network Inc. | 3,260 | 25 | |
Teekay Corp. | 2,800 | 24 | |
Plains GP Holdings LP | |||
Class A | 2,600 | 23 | |
* | InterOil Corp. | 600 | 19 |
* | Forum Energy | ||
Technologies Inc. | 1,386 | 18 | |
Baker Hughes Inc. | 348 | 15 | |
SemGroup Corp. Class A | 400 | 9 | |
* | TransAtlantic Petroleum Ltd. | 8,887 | 7 |
* | Natural Gas Services Group | ||
Inc. | 300 | 6 | |
* | Gener8 Maritime Inc. | 800 | 6 |
Atwood Oceanics Inc. | 600 | 5 | |
* | Pacific Drilling SA | 9,240 | 5 |
* | Weatherford International plc | 400 | 3 |
* | Willbros Group Inc. | 1,447 | 3 |
California Resources Corp. | 2,349 | 2 | |
388,569 |
15
Growth and Income Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Financials (14.6%) | |||
Wells Fargo & Co. | 1,883,368 | 91,080 | |
JPMorgan Chase & Co. | 982,280 | 58,171 | |
Citigroup Inc. | 1,370,873 | 57,234 | |
* | Berkshire Hathaway Inc. | ||
Class B | 381,002 | 54,057 | |
Bank of New York Mellon | |||
Corp. | 860,399 | 31,688 | |
Travelers Cos. Inc. | 261,597 | 30,531 | |
Hartford Financial Services | |||
Group Inc. | 622,160 | 28,669 | |
Prologis Inc. | 599,735 | 26,496 | |
Crown Castle International | |||
Corp. | 296,290 | 25,629 | |
Bank of America Corp. | 1,750,366 | 23,665 | |
Aon plc | 200,980 | 20,992 | |
AvalonBay Communities | |||
Inc. | 103,410 | 19,669 | |
McGraw Hill Financial Inc. | 179,237 | 17,741 | |
Prudential Financial Inc. | 223,411 | 16,135 | |
Navient Corp. | 1,266,200 | 15,156 | |
Capital One Financial Corp. | 215,763 | 14,955 | |
Kimco Realty Corp. | 482,864 | 13,897 | |
Progressive Corp. | 370,173 | 13,008 | |
Huntington Bancshares | |||
Inc. | 1,359,367 | 12,968 | |
Discover Financial | |||
Services | 253,927 | 12,930 | |
Ameriprise Financial Inc. | 135,708 | 12,758 | |
American Express Co. | 207,500 | 12,740 | |
People’s United Financial | |||
Inc. | 768,752 | 12,246 | |
SunTrust Banks Inc. | 337,726 | 12,185 | |
Public Storage | 42,769 | 11,797 | |
Nasdaq Inc. | 174,862 | 11,607 | |
Fifth Third Bancorp | 678,518 | 11,324 | |
CME Group Inc. | 115,000 | 11,046 | |
Equinix Inc. | 32,161 | 10,636 | |
Macerich Co. | 119,636 | 9,480 | |
Moody’s Corp. | 96,000 | 9,270 | |
Allstate Corp. | 135,704 | 9,142 | |
Chubb Ltd. | 75,217 | 8,962 | |
Northern Trust Corp. | 134,981 | 8,797 | |
BlackRock Inc. | 24,980 | 8,507 | |
Aflac Inc. | 127,785 | 8,068 | |
US Bancorp | 191,180 | 7,760 | |
Extra Space Storage Inc. | 77,970 | 7,287 | |
Unum Group | 224,671 | 6,947 | |
Cincinnati Financial Corp. | 102,416 | 6,694 | |
* | Synchrony Financial | 232,983 | 6,677 |
Realty Income Corp. | 105,198 | 6,576 | |
Simon Property Group Inc. | 30,618 | 6,359 | |
Marsh & McLennan Cos. | |||
Inc. | 101,980 | 6,199 | |
Willis Towers Watson plc | 50,101 | 5,945 |
Weyerhaeuser Co. | 177,745 | 5,507 | |
Intercontinental Exchange | |||
Inc. | 22,440 | 5,277 | |
Principal Financial Group | |||
Inc. | 132,930 | 5,244 | |
Welltower Inc. | 74,424 | 5,161 | |
Equity LifeStyle Properties | |||
Inc. | 66,738 | 4,854 | |
Voya Financial Inc. | 160,600 | 4,781 | |
First Horizon National Corp. | 335,670 | 4,397 | |
Lincoln National Corp. | 109,651 | 4,298 | |
General Growth Properties | |||
Inc. | 135,130 | 4,017 | |
* | Realogy Holdings Corp. | 91,000 | 3,286 |
Goldman Sachs Group Inc. | 19,961 | 3,133 | |
Torchmark Corp. | 55,212 | 2,990 | |
HCP Inc. | 91,672 | 2,987 | |
Regions Financial Corp. | 371,847 | 2,919 | |
Comerica Inc. | 76,100 | 2,882 | |
MetLife Inc. | 65,472 | 2,877 | |
Vornado Realty Trust | 21,690 | 2,048 | |
American International | |||
Group Inc. | 36,700 | 1,984 | |
Zions Bancorporation | 75,950 | 1,839 | |
Host Hotels & Resorts Inc. | 109,233 | 1,824 | |
Equity Residential | 23,428 | 1,758 | |
PNC Financial Services | |||
Group Inc. | 20,100 | 1,700 | |
State Street Corp. | 25,980 | 1,520 | |
Boston Properties Inc. | 11,400 | 1,449 | |
Apartment Investment & | |||
Management Co. | 34,420 | 1,439 | |
East West Bancorp Inc. | 43,100 | 1,400 | |
Four Corners Property Trust | |||
Inc. | 76,404 | 1,371 | |
Ventas Inc. | 19,693 | 1,240 | |
Charles Schwab Corp. | 39,600 | 1,110 | |
FNF Group | 27,800 | 942 | |
Synovus Financial Corp. | 32,500 | 940 | |
Essex Property Trust Inc. | 3,427 | 801 | |
Retail Properties of America | |||
Inc. | 40,700 | 645 | |
Radian Group Inc. | 46,200 | 573 | |
* | Equity Commonwealth | 19,800 | 559 |
Umpqua Holdings Corp. | 31,596 | 501 | |
* | Santander Consumer USA | ||
Holdings Inc. | 45,500 | 477 | |
Franklin Resources Inc. | 12,173 | 475 | |
FNB Corp. | 35,600 | 463 | |
* | E*TRADE Financial Corp. | 17,500 | 429 |
Citizens Financial Group Inc. | 19,500 | 409 | |
Great Western Bancorp Inc. | 14,800 | 404 | |
KeyCorp | 36,085 | 398 | |
Axis Capital Holdings Ltd. | 7,100 | 394 | |
* | MGIC Investment Corp. | 50,800 | 390 |
16
Growth and Income Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Assured Guaranty Ltd. | 15,000 | 379 | |
* | Arch Capital Group Ltd. | 5,100 | 363 |
Annaly Capital Management | |||
Inc. | 35,300 | 362 | |
TCF Financial Corp. | 27,915 | 342 | |
Empire State Realty Trust | |||
Inc. | 18,400 | 323 | |
ProAssurance Corp. | 6,100 | 309 | |
WR Berkley Corp. | 5,400 | 303 | |
* | Essent Group Ltd. | 12,000 | 250 |
National Health Investors Inc. | 3,700 | 246 | |
Post Properties Inc. | 4,003 | 239 | |
American Capital Agency | |||
Corp. | 11,600 | 216 | |
United Bankshares Inc. | 5,288 | 194 | |
Loews Corp. | 4,900 | 187 | |
Legg Mason Inc. | 5,400 | 187 | |
Wintrust Financial Corp. | 4,100 | 182 | |
Liberty Property Trust | 5,400 | 181 | |
Morgan Stanley | 7,046 | 176 | |
RLJ Lodging Trust | 7,300 | 167 | |
Ares Capital Corp. | 11,136 | 165 | |
Allied World Assurance Co. | |||
Holdings AG | 4,500 | 157 | |
UMB Financial Corp. | 3,000 | 155 | |
Prosperity Bancshares Inc. | 3,300 | 153 | |
MFA Financial Inc. | 22,200 | 152 | |
Aspen Insurance Holdings | |||
Ltd. | 3,100 | 148 | |
Care Capital Properties Inc. | 5,500 | 148 | |
Two Harbors Investment | |||
Corp. | 18,500 | 147 | |
Old Republic International | |||
Corp. | 7,200 | 132 | |
Trustmark Corp. | 5,700 | 131 | |
Hancock Holding Co. | 5,200 | 119 | |
Forest City Realty Trust Inc. | |||
Class A | 5,500 | 116 | |
Invesco Ltd. | 3,706 | 114 | |
* | CBRE Group Inc. Class A | 3,700 | 107 |
* | Markit Ltd. | 2,824 | 100 |
Washington Federal Inc. | 4,400 | 100 | |
* | PHH Corp. | 7,600 | 95 |
Hospitality Properties Trust | 3,500 | 93 | |
Cathay General Bancorp | 3,200 | 91 | |
BankUnited Inc. | 2,600 | 90 | |
* | Stifel Financial Corp. | 3,000 | 89 |
* | Flagstar Bancorp Inc. | 3,900 | 84 |
Brookline Bancorp Inc. | 7,000 | 77 | |
Camden Property Trust | 900 | 76 | |
Columbia Property Trust Inc. | 3,400 | 75 | |
Ryman Hospitality Properties | |||
Inc. | 1,280 | 66 | |
Blackstone Mortgage Trust | |||
Inc. Class A | 2,000 | 54 |
SEI Investments Co. | 1,200 | 52 | |
* | Beneficial Bancorp Inc. | 3,480 | 48 |
Erie Indemnity Co. Class A | 500 | 46 | |
* | FNFV Group | 4,200 | 46 |
Financial Engines Inc. | 1,400 | 44 | |
Glacier Bancorp Inc. | 1,700 | 43 | |
BancorpSouth Inc. | 2,000 | 43 | |
Outfront Media Inc. | 1,900 | 40 | |
* | Western Alliance Bancorp | 1,200 | 40 |
* | Ocwen Financial Corp. | 15,000 | 37 |
Old National Bancorp | 2,900 | 35 | |
Iron Mountain Inc. | 1,000 | 34 | |
* | NewStar Financial Inc. | 3,572 | 31 |
Brixmor Property Group Inc. | 1,200 | 31 | |
United Community Banks Inc. | 1,600 | 30 | |
Greenhill & Co. Inc. | 1,200 | 27 | |
First Financial Bancorp | 1,427 | 26 | |
Meridian Bancorp Inc. | 1,800 | 25 | |
Southwest Bancorp Inc. | 1,600 | 24 | |
Monogram Residential Trust | |||
Inc. | 2,400 | 24 | |
Apollo Investment Corp. | 4,000 | 22 | |
Government Properties | |||
Income Trust | 1,200 | 21 | |
Omega Healthcare Investors | |||
Inc. | 600 | 21 | |
American Tower Corporation | 200 | 20 | |
Arbor Realty Trust Inc. | 2,800 | 19 | |
AG Mortgage Investment | |||
Trust Inc. | 1,405 | 18 | |
* | Credit Acceptance Corp. | 100 | 18 |
Columbia Banking System Inc. | 600 | 18 | |
HFF Inc. Class A | 600 | 16 | |
Argo Group International | |||
Holdings Ltd. | 279 | 16 | |
Anworth Mortgage Asset | |||
Corp. | 3,400 | 16 | |
Boston Private Financial | |||
Holdings Inc. | 1,335 | 15 | |
Ladder Capital Corp. | 1,200 | 15 | |
First Republic Bank | 201 | 13 | |
Credicorp Ltd. | 100 | 13 | |
* | PRA Group Inc. | 400 | 12 |
Valley National Bancorp | 1,200 | 11 | |
SL Green Realty Corp. | 100 | 10 | |
Raymond James Financial Inc. | 200 | 10 | |
Associated Banc-Corp | 500 | 9 | |
WP Carey Inc. | 141 | 9 | |
Washington REIT | 300 | 9 | |
American Equity Investment | |||
Life Holding Co. | 500 | 8 | |
Brown & Brown Inc. | 211 | 8 | |
Alexander & Baldwin Inc. | 200 | 7 | |
Brandywine Realty Trust | 500 | 7 | |
Sierra Bancorp | 386 | 7 |
17
Growth and Income Fund
Market | ||||
Value• | ||||
Shares | ($000) | |||
Armada Hoffler Properties Inc. | 600 | 7 | ||
West Bancorporation Inc. | 352 | 6 | ||
Corrections Corp. of America | 200 | 6 | ||
Hudson Pacific Properties Inc. | 221 | 6 | ||
New Residential | ||||
Investment Corp. | 500 | 6 | ||
* | OneMain Holdings Inc. | |||
Class A | 200 | 5 | ||
THL Credit Inc. | 445 | 5 | ||
Investors Bancorp Inc. | 400 | 5 | ||
Banner Corp. | 100 | 4 | ||
MVC Capital Inc. | 457 | 3 | ||
* | SLM Corp. | 500 | 3 | |
Artisan Partners Asset | ||||
Management Inc. Class A | 100 | 3 | ||
BB&T Corp. | 82 | 3 | ||
CareTrust REIT Inc. | 200 | 3 | ||
Suffolk Bancorp | 100 | 3 | ||
FelCor Lodging Trust Inc. | 300 | 2 | ||
916,576 | ||||
Health Care (14.1%) | ||||
Johnson & Johnson | 1,313,633 | 142,135 | ||
Merck & Co. Inc. | 1,186,200 | 62,762 | ||
Pfizer Inc. | 1,967,361 | 58,313 | ||
Amgen Inc. | 388,302 | 58,218 | ||
Gilead Sciences Inc. | 540,006 | 49,605 | ||
Eli Lilly & Co. | 633,075 | 45,588 | ||
Bristol-Myers Squibb Co. | 619,692 | 39,586 | ||
Anthem Inc. | 278,626 | 38,726 | ||
* | Express Scripts Holding | |||
Co. | 523,483 | 35,958 | ||
AbbVie Inc. | 540,475 | 30,872 | ||
Cardinal Health Inc. | 347,787 | 28,501 | ||
AmerisourceBergen Corp. | ||||
Class A | 241,530 | 20,904 | ||
Abbott Laboratories | 492,213 | 20,589 | ||
McKesson Corp. | 128,081 | 20,141 | ||
* | Biogen Inc. | 73,165 | 19,046 | |
UnitedHealth Group Inc. | 143,254 | 18,465 | ||
* | Allergan plc | 63,132 | 16,921 | |
* | HCA Holdings Inc. | 211,046 | 16,472 | |
Medtronic plc | 204,548 | 15,341 | ||
Aetna Inc. | 126,538 | 14,217 | ||
Thermo Fisher Scientific | ||||
Inc. | 99,770 | 14,126 | ||
Agilent Technologies Inc. | 313,416 | 12,490 | ||
Zoetis Inc. | 278,610 | 12,351 | ||
Cigna Corp. | 78,292 | 10,745 | ||
Zimmer Biomet Holdings | ||||
Inc. | 77,500 | 8,264 | ||
* | DaVita HealthCare Partners | |||
Inc. | 109,400 | 8,028 | ||
* | Boston Scientific Corp. | 400,790 | 7,539 | |
* | Vertex Pharmaceuticals Inc. | 75,000 | 5,962 | |
Patterson Cos. Inc. | 124,120 | 5,775 |
* | Regeneron Pharmaceuticals | |||
Inc. | 14,041 | 5,061 | ||
Stryker Corp. | 42,850 | 4,597 | ||
Baxter International Inc. | 109,531 | 4,500 | ||
Baxalta Inc. | 102,118 | 4,126 | ||
Becton Dickinson and Co. | 25,922 | 3,935 | ||
Humana Inc. | 21,360 | 3,908 | ||
CR Bard Inc. | 16,660 | 3,377 | ||
* | Cerner Corp. | 50,453 | 2,672 | |
Universal Health Services | ||||
Inc. Class B | 20,095 | 2,506 | ||
Perrigo Co. plc | 15,700 | 2,009 | ||
St. Jude Medical Inc. | 32,797 | 1,804 | ||
* | VCA Inc. | 22,800 | 1,315 | |
Quest Diagnostics Inc. | 16,000 | 1,143 | ||
* | United Therapeutics Corp. | 9,300 | 1,036 | |
* | Hologic Inc. | 22,200 | 766 | |
* | Intuitive Surgical Inc. | 1,000 | 601 | |
* | Medivation Inc. | 12,900 | 593 | |
* | Envision Healthcare | |||
Holdings Inc. | 21,600 | 441 | ||
PerkinElmer Inc. | 8,221 | 407 | ||
DENTSPLY SIRONA Inc. | 6,241 | 385 | ||
* | Community Health Systems | |||
Inc. | 17,300 | 320 | ||
* | VWR Corp. | 7,900 | 214 | |
* | Myriad Genetics Inc. | 4,500 | 168 | |
* | QIAGEN NV | 7,456 | 167 | |
* | Pain Therapeutics Inc. | 66,692 | 149 | |
* | Mallinckrodt plc | 2,300 | 141 | |
* | Mylan NV | �� | 2,952 | 137 |
* | IMS Health Holdings Inc. | 5,000 | 133 | |
* | Rigel Pharmaceuticals Inc. | 52,910 | 110 | |
* | Amicus Therapeutics Inc. | 10,300 | 87 | |
* | Waters Corp. | 620 | 82 | |
* | BioTelemetry Inc. | 4,800 | 56 | |
* | AMAG Pharmaceuticals Inc. | 2,300 | 54 | |
* | PAREXEL International Corp. | 800 | 50 | |
* | Innoviva Inc. | 3,600 | 45 | |
* | SciClone Pharmaceuticals Inc. | 3,300 | 36 | |
* | Neurocrine Biosciences Inc. | 800 | 32 | |
* | ARIAD Pharmaceuticals Inc. | 4,400 | 28 | |
* | Triple-S Management Corp. | |||
Class B | 1,065 | 26 | ||
* | FibroGen Inc. | 1,205 | 26 | |
* | BioCryst Pharmaceuticals Inc. | 8,600 | 24 | |
* | Catalent Inc. | 900 | 24 | |
* | Centene Corp. | 370 | 23 | |
* | Imprivata Inc. | 1,700 | 21 | |
* | Orthofix International NV | 500 | 21 | |
* | OraSure Technologies Inc. | 2,000 | 14 | |
* | Halyard Health Inc. | 500 | 14 | |
* | ArQule Inc. | 8,649 | 14 | |
* | Acorda Therapeutics Inc. | 500 | 13 | |
*,^ | MannKind Corp. | 6,200 | 10 |
18
Growth and Income Fund
Market | ||||
Value• | ||||
Shares | ($000) | |||
* | Corcept Therapeutics Inc. | 2,100 | 10 | |
Bio-Techne Corp. | 100 | 9 | ||
Bruker Corp. | 300 | 8 | ||
* | INC Research Holdings Inc. | |||
Class A | 200 | 8 | ||
Owens & Minor Inc. | 200 | 8 | ||
* | OPKO Health Inc. | 700 | 7 | |
* | Lexicon Pharmaceuticals Inc. | 600 | 7 | |
* | Genocea Biosciences Inc. | 923 | 7 | |
* | Syneron Medical Ltd. | 899 | 7 | |
* | Threshold Pharmaceuticals | |||
Inc. | 14,000 | 6 | ||
* | BioScrip Inc. | 2,800 | 6 | |
* | Momenta Pharmaceuticals | |||
Inc. | 600 | 6 | ||
* | Nektar Therapeutics | 400 | 6 | |
* | Exact Sciences Corp. | 800 | 5 | |
Hill-Rom Holdings Inc. | 100 | 5 | ||
* | Puma Biotechnology Inc. | 162 | 5 | |
* | Select Medical Holdings Corp. | 400 | 5 | |
* | HealthStream Inc. | 200 | 4 | |
HealthSouth Corp. | 100 | 4 | ||
* | GTx Inc. | 4,487 | 2 | |
* | RTI Surgical Inc. | 400 | 2 | |
885,188 | ||||
Industrials (10.1%) | ||||
General Electric Co. | 1,971,808 | 62,684 | ||
General Dynamics Corp. | 358,000 | 47,030 | ||
Northrop Grumman Corp. | 159,763 | 31,617 | ||
Lockheed Martin Corp. | 138,374 | 30,650 | ||
Boeing Co. | 189,022 | 23,994 | ||
Cintas Corp. | 246,355 | 22,125 | ||
Southwest Airlines Co. | 491,554 | 22,022 | ||
Stanley Black & Decker Inc. | 198,935 | 20,930 | ||
United Parcel Service Inc. | ||||
Class B | 168,417 | 17,763 | ||
* | United Continental | |||
Holdings Inc. | 274,125 | 16,409 | ||
Masco Corp. | 518,000 | 16,291 | ||
PACCAR Inc. | 271,492 | 14,848 | ||
Republic Services Inc. | ||||
Class A | 307,227 | 14,639 | ||
Pitney Bowes Inc. | 648,770 | 13,975 | ||
Raytheon Co. | 109,930 | 13,481 | ||
Union Pacific Corp. | 163,400 | 12,999 | ||
Illinois Tool Works Inc. | 123,550 | 12,656 | ||
Equifax Inc. | 109,660 | 12,533 | ||
Delta Air Lines Inc. | 252,248 | 12,279 | ||
Ingersoll-Rand plc | 192,180 | 11,917 | ||
3M Co. | 70,818 | 11,800 | ||
* | United Rentals Inc. | 189,259 | 11,770 | |
Waste Management Inc. | 193,980 | 11,445 | ||
* | Quanta Services Inc. | 506,486 | 11,426 | |
FedEx Corp. | 69,600 | 11,325 | ||
Caterpillar Inc. | 140,504 | 10,754 |
Fluor Corp. | 200,263 | 10,754 | |
American Airlines Group | |||
Inc. | 251,369 | 10,309 | |
Allison Transmission | |||
Holdings Inc. | 373,520 | 10,078 | |
Tyco International plc | 219,000 | 8,040 | |
Honeywell International | |||
Inc. | 67,900 | 7,608 | |
* | Spirit AeroSystems | ||
Holdings Inc. Class A | 147,000 | 6,668 | |
Snap-on Inc. | 40,692 | 6,388 | |
KAR Auction Services Inc. | 152,700 | 5,824 | |
Rockwell Automation Inc. | 48,573 | 5,525 | |
AMETEK Inc. | 92,900 | 4,643 | |
ADT Corp. | 109,100 | 4,501 | |
L-3 Communications | |||
Holdings Inc. | 36,035 | 4,270 | |
Dun & Bradstreet Corp. | 33,330 | 3,436 | |
Nielsen Holdings plc | 63,570 | 3,348 | |
CSX Corp. | 125,152 | 3,223 | |
Cummins Inc. | 25,760 | 2,832 | |
* | AerCap Holdings NV | 68,600 | 2,659 |
Danaher Corp. | 27,692 | 2,627 | |
United Technologies Corp. | 25,085 | 2,511 | |
Allegion plc | 35,100 | 2,236 | |
Deere & Co. | 27,994 | 2,155 | |
Expeditors International of | |||
Washington Inc. | 44,000 | 2,148 | |
CH Robinson Worldwide Inc. | 27,200 | 2,019 | |
* | IHS Inc. Class A | 15,259 | 1,895 |
Textron Inc. | 48,883 | 1,782 | |
Pentair plc | 27,100 | 1,470 | |
Roper Technologies Inc. | 7,141 | 1,305 | |
* | JetBlue Airways Corp. | 54,800 | 1,157 |
Norfolk Southern Corp. | 11,300 | 941 | |
Carlisle Cos. Inc. | 9,300 | 925 | |
* | Armstrong World Industries | ||
Inc. | 19,100 | 924 | |
* | HD Supply Holdings Inc. | 26,800 | 886 |
Covanta Holding Corp. | 47,300 | 798 | |
BWX Technologies Inc. | 19,900 | 668 | |
* | RPX Corp. | 53,900 | 607 |
Dover Corp. | 8,237 | 530 | |
Hubbell Inc. Class B | 4,769 | 505 | |
* | Kirby Corp. | 5,280 | 318 |
* | Continental Building | ||
Products Inc. | 17,100 | 317 | |
Kansas City Southern | 3,600 | 308 | |
Huntington Ingalls Industries | |||
Inc. | 2,200 | 301 | |
Xylem Inc. | 7,000 | 286 | |
Air Lease Corp. Class A | 6,900 | 222 | |
Joy Global Inc. | 11,800 | 190 | |
Nordson Corp. | 2,300 | 175 | |
West Corp. | 7,011 | 160 |
19
Growth and Income Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Watsco Inc. | 1,100 | 148 | |
Landstar System Inc. | 2,100 | 136 | |
Steelcase Inc. Class A | 8,173 | 122 | |
* | Babcock & Wilcox | ||
Enterprises Inc. | 5,100 | 109 | |
Eaton Corp. plc | 1,330 | 83 | |
Albany International Corp. | 2,100 | 79 | |
SPX Corp. | 4,703 | 71 | |
* | Rexnord Corp. | 3,400 | 69 |
Barnes Group Inc. | 1,924 | 67 | |
Kaman Corp. | 1,500 | 64 | |
Woodward Inc. | 1,100 | 57 | |
* | Hub Group Inc. Class A | 1,400 | 57 |
Allegiant Travel Co. Class A | 300 | 53 | |
* | NCI Building Systems Inc. | 3,600 | 51 |
RR Donnelley & Sons Co. | 3,000 | 49 | |
* | Moog Inc. Class A | 1,000 | 46 |
Brady Corp. Class A | 1,700 | 46 | |
* | ARC Document Solutions Inc. | 9,800 | 44 |
* | Masonite International Corp. | 600 | 39 |
* | MFC Bancorp Ltd. | 19,512 | 39 |
JB Hunt Transport Services | |||
Inc. | 440 | 37 | |
* | Mistras Group Inc. | 1,487 | 37 |
* | Atlas Air Worldwide Holdings | ||
Inc. | 800 | 34 | |
Knoll Inc. | 1,517 | 33 | |
* | Jacobs Engineering Group Inc. | 700 | 31 |
Matson Inc. | 600 | 24 | |
Quad/Graphics Inc. | 1,800 | 23 | |
Triumph Group Inc. | 700 | 22 | |
Seaspan Corp. Class A | 1,200 | 22 | |
* | Air Transport Services Group | ||
Inc. | 1,300 | 20 | |
Ennis Inc. | 1,000 | 20 | |
* | Hertz Global Holdings Inc. | 1,700 | 18 |
* | Huron Consulting Group Inc. | 300 | 17 |
Hillenbrand Inc. | 400 | 12 | |
Mueller Water Products Inc. | |||
Class A | 1,100 | 11 | |
Exponent Inc. | 200 | 10 | |
* | Blount International Inc. | 1,012 | 10 |
* | USG Corp. | 400 | 10 |
Korn/Ferry International | 300 | 9 | |
* | Navigant Consulting Inc. | 500 | 8 |
IDEX Corp. | 78 | 6 | |
EnPro Industries Inc. | 73 | 4 | |
* | Saia Inc. | 143 | 4 |
* | Roadrunner Transportation | ||
Systems Inc. | 300 | 4 | |
NN Inc. | 206 | 3 | |
Costamare Inc. | 300 | 3 | |
* | Accuride Corp. | 1,500 | 2 |
631,697 |
Information Technology (19.6%) | |||
Apple Inc. | 1,875,902 | 204,455 | |
Microsoft Corp. | 2,198,413 | 121,418 | |
Intel Corp. | 1,979,582 | 64,039 | |
International Business | |||
Machines Corp. | 420,129 | 63,629 | |
* | Alphabet Inc. Class A | 81,400 | 62,100 |
Visa Inc. Class A | 757,077 | 57,901 | |
* | Alphabet Inc. Class C | 53,755 | 40,045 |
Cisco Systems Inc. | 1,267,117 | 36,075 | |
Accenture plc Class A | 297,748 | 34,360 | |
Symantec Corp. | 1,663,056 | 30,567 | |
Broadcom Ltd. | 158,144 | 24,433 | |
Western Union Co. | 1,179,693 | 22,756 | |
* | Facebook Inc. Class A | 199,039 | 22,710 |
* | Citrix Systems Inc. | 264,510 | 20,785 |
HP Inc. | 1,676,971 | 20,660 | |
QUALCOMM Inc. | 394,960 | 20,198 | |
Intuit Inc. | 188,629 | 19,619 | |
Motorola Solutions Inc. | 256,693 | 19,432 | |
* | Fiserv Inc. | 181,561 | 18,625 |
CSRA Inc. | 667,231 | 17,949 | |
MasterCard Inc. Class A | 184,236 | 17,410 | |
Fidelity National | |||
Information Services Inc. | 263,544 | 16,685 | |
* | Electronic Arts Inc. | 248,548 | 16,432 |
Total System Services Inc. | 332,768 | 15,833 | |
Hewlett Packard | |||
Enterprise Co. | 886,870 | 15,724 | |
Xerox Corp. | 1,235,842 | 13,792 | |
NVIDIA Corp. | 376,576 | 13,417 | |
Juniper Networks Inc. | 519,294 | 13,247 | |
* | VeriSign Inc. | 140,300 | 12,422 |
Oracle Corp. | 282,153 | 11,543 | |
Texas Instruments Inc. | 197,562 | 11,344 | |
* | F5 Networks Inc. | 96,100 | 10,172 |
Corning Inc. | 486,785 | 10,169 | |
Paychex Inc. | 183,411 | 9,906 | |
* | PayPal Holdings Inc. | 243,970 | 9,417 |
TE Connectivity Ltd. | 141,500 | 8,762 | |
Lam Research Corp. | 104,169 | 8,604 | |
* | Teradata Corp. | 317,072 | 8,320 |
Computer Sciences Corp. | 238,650 | 8,207 | |
Harris Corp. | 91,950 | 7,159 | |
Automatic Data | |||
Processing Inc. | 75,500 | 6,773 | |
Analog Devices Inc. | 78,900 | 4,670 | |
EMC Corp. | 168,640 | 4,494 | |
Applied Materials Inc. | 193,500 | 4,098 | |
* | eBay Inc. | 167,400 | 3,994 |
CA Inc. | 122,810 | 3,781 | |
Seagate Technology plc | 106,127 | 3,656 | |
* | Akamai Technologies Inc. | 58,400 | 3,245 |
Western Digital Corp. | 59,100 | 2,792 | |
* | LinkedIn Corp. Class A | 22,262 | 2,546 |
20
Growth and Income Fund
Market | |||
Value• | |||
Shares | ($000) | ||
IAC/InterActiveCorp | 35,700 | 1,681 | |
* | Flextronics International | ||
Ltd. | 136,300 | 1,644 | |
* | Red Hat Inc. | 22,060 | 1,644 |
Amdocs Ltd. | 23,200 | 1,402 | |
* | VMware Inc. Class A | 25,900 | 1,355 |
* | Cadence Design Systems | ||
Inc. | 53,927 | 1,272 | |
* | Micron Technology Inc. | 109,908 | 1,151 |
* | CoreLogic Inc. | 31,700 | 1,100 |
FLIR Systems Inc. | 33,036 | 1,089 | |
* | ANSYS Inc. | 10,700 | 957 |
* | Twitter Inc. | 45,500 | 753 |
Marvell Technology Group | |||
Ltd. | 68,200 | 703 | |
* | InterXion Holding NV | 16,300 | 564 |
* | Genpact Ltd. | 20,400 | 555 |
* | ON Semiconductor Corp. | 56,000 | 537 |
* | Trimble Navigation Ltd. | 18,800 | 466 |
* | Synopsys Inc. | 8,800 | 426 |
* | WebMD Health Corp. | 6,200 | 388 |
Teradyne Inc. | 15,900 | 343 | |
* | MicroStrategy Inc. Class A | 1,900 | 341 |
Tessera Technologies Inc. | 10,600 | 329 | |
* | CommScope Holding Co. Inc. | 11,400 | 318 |
* | Mellanox Technologies Ltd. | 5,000 | 272 |
Brocade Communications | |||
Systems Inc. | 25,200 | 267 | |
* | Polycom Inc. | 22,500 | 251 |
Sabre Corp. | 8,474 | 245 | |
* | Pandora Media Inc. | 27,300 | 244 |
* | Zebra Technologies Corp. | 3,500 | 242 |
* | OSI Systems Inc. | 3,296 | 216 |
* | Nuance Communications Inc. | 10,700 | 200 |
* | Sohu.com Inc. | 4,000 | 198 |
* | NCR Corp. | 6,300 | 189 |
* | Keysight Technologies Inc. | 6,500 | 180 |
NIC Inc. | 9,700 | 175 | |
* | VeriFone Systems Inc. | 5,783 | 163 |
* | Amkor Technology Inc. | 27,700 | 163 |
* | Blackhawk Network | ||
Holdings Inc. | 4,564 | 157 | |
* | Calix Inc. | 21,824 | 155 |
Leidos Holdings Inc. | 2,900 | 146 | |
Jabil Circuit Inc. | 6,800 | 131 | |
* | Zynga Inc. Class A | 51,500 | 117 |
* | NetScout Systems Inc. | 4,500 | 103 |
* | Bankrate Inc. | 11,132 | 102 |
* | Cimpress NV | 1,100 | 100 |
* | Rackspace Hosting Inc. | 4,400 | 95 |
* | Qlik Technologies Inc. | 3,200 | 93 |
Intersil Corp. Class A | 6,700 | 90 | |
* | Net 1 UEPS Technologies | ||
Inc. | 9,431 | 87 | |
* | Rambus Inc. | 6,300 | 87 |
* | RetailMeNot Inc. | 10,782 | 86 |
* | Photronics Inc. | 8,200 | 85 |
* | EchoStar Corp. Class A | 1,907 | 84 |
SanDisk Corp. | 1,100 | 84 | |
* | comScore Inc. | 2,600 | 78 |
* | II-VI Inc. | 3,400 | 74 |
* | QLogic Corp. | 5,200 | 70 |
* | SPS Commerce Inc. | 1,600 | 69 |
Cabot Microelectronics Corp. | 1,676 | 69 | |
* | DHI Group Inc. | 7,700 | 62 |
* | Angie’s List Inc. | 7,285 | 59 |
Plantronics Inc. | 1,500 | 59 | |
InterDigital Inc. | 910 | 51 | |
* | Verint Systems Inc. | 1,200 | 40 |
Mentor Graphics Corp. | 1,800 | 37 | |
* | Silicon Laboratories Inc. | 800 | 36 |
* | Semtech Corp. | 1,600 | 35 |
* | SunEdison Semiconductor | ||
Ltd. | 5,400 | 35 | |
* | SunPower Corp. Class A | 1,500 | 34 |
* | TechTarget Inc. | 4,200 | 31 |
Activision Blizzard Inc. | 900 | 30 | |
NVE Corp. | 530 | 30 | |
* | XO Group Inc. | 1,821 | 29 |
* | ShoreTel Inc. | 3,700 | 28 |
* | Knowles Corp. | 2,000 | 26 |
* | Celestica Inc. | 2,300 | 25 |
* | Ixia | 2,000 | 25 |
* | FormFactor Inc. | 3,360 | 24 |
Belden Inc. | 394 | 24 | |
* | Web.com Group Inc. | 1,200 | 24 |
* | Alliance Data Systems Corp. | 100 | 22 |
* | Progress Software Corp. | 900 | 22 |
* | United Online Inc. | 1,500 | 17 |
* | Blucora Inc. | 3,300 | 17 |
* | Zix Corp. | 4,300 | 17 |
EVERTEC Inc. | 1,200 | 17 | |
MKS Instruments Inc. | 400 | 15 | |
Microchip Technology Inc. | 300 | 14 | |
* | Orbotech Ltd. | 600 | 14 |
Xilinx Inc. | 300 | 14 | |
NetApp Inc. | 500 | 14 | |
* | ACI Worldwide Inc. | 600 | 12 |
* | Cognizant Technology | ||
Solutions Corp. Class A | 196 | 12 | |
* | Endurance International | ||
Group Holdings Inc. | 1,100 | 12 | |
Amphenol Corp. Class A | 200 | 12 | |
* | ARRIS International plc | 500 | 11 |
* | Ultratech Inc. | 515 | 11 |
* | VASCO Data Security | ||
International Inc. | 700 | 11 | |
* | Sigma Designs Inc. | 1,500 | 10 |
* | Veeco Instruments Inc. | 500 | 10 |
* | Quotient Technology Inc. | 800 | 9 |
* | Entegris Inc. | 600 | 8 |
* | Diodes Inc. | 400 | 8 |
Growth and Income Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | Monster Worldwide Inc. | 2,400 | 8 |
* | Yandex NV Class A | 500 | 8 |
Maxim Integrated Products | |||
Inc. | 203 | 7 | |
* | TTM Technologies Inc. | 968 | 6 |
* | Ciber Inc. | 2,844 | 6 |
* | BlackBerry Ltd. | 700 | 6 |
* | Brightcove Inc. | 900 | 6 |
* | Bazaarvoice Inc. | 1,700 | 5 |
* | Anixter International Inc. | 100 | 5 |
* | Zillow Group Inc. Class A | 200 | 5 |
* | Infinera Corp. | 300 | 5 |
* | Kemet Corp. | 2,000 | 4 |
* | GoDaddy Inc. Class A | 100 | 3 |
* | Fortinet Inc. | 100 | 3 |
* | Advanced Micro Devices Inc. | 900 | 3 |
* | Lionbridge Technologies Inc. | 500 | 3 |
* | VirnetX Holding Corp. | 504 | 2 |
1,225,693 | |||
Materials (3.6%) | |||
Air Products & Chemicals | |||
Inc. | 246,154 | 35,459 | |
Sealed Air Corp. | 635,836 | 30,527 | |
LyondellBasell Industries | |||
NV Class A | 263,100 | 22,516 | |
Sherwin-Williams Co. | 77,052 | 21,934 | |
Dow Chemical Co. | 422,863 | 21,507 | |
Avery Dennison Corp. | 263,864 | 19,027 | |
Monsanto Co. | 150,520 | 13,207 | |
Ball Corp. | 160,906 | 11,471 | |
PPG Industries Inc. | 76,327 | 8,510 | |
Mosaic Co. | 292,790 | 7,905 | |
Praxair Inc. | 48,390 | 5,538 | |
Eastman Chemical Co. | 63,801 | 4,608 | |
Newmont Mining Corp. | 131,100 | 3,485 | |
Ecolab Inc. | 26,100 | 2,911 | |
Martin Marietta Materials | |||
Inc. | 10,800 | 1,723 | |
Freeport-McMoRan Inc. | 150,700 | 1,558 | |
Vulcan Materials Co. | 14,200 | 1,499 | |
Graphic Packaging Holding | |||
Co. | 107,600 | 1,383 | |
International Paper Co. | 32,956 | 1,353 | |
Westlake Chemical Corp. | 22,900 | 1,060 | |
Celanese Corp. Class A | 15,487 | 1,014 | |
International Flavors & | |||
Fragrances Inc. | 8,848 | 1,007 | |
Nucor Corp. | 19,900 | 941 | |
CF Industries Holdings Inc. | 26,185 | 821 | |
* | Crown Holdings Inc. | 13,300 | 660 |
Reliance Steel & Aluminum | |||
Co. | 4,500 | 311 | |
* | Berry Plastics Group Inc. | 7,811 | 282 |
EI du Pont de Nemours & | |||
Co. | 3,700 | 234 |
Potash Corp. of | ||||
Saskatchewan Inc. | 11,200 | 191 | ||
SunCoke Energy Inc. | 22,600 | 147 | ||
Ferroglobe plc | 13,700 | 121 | ||
* | Axalta Coating Systems Ltd. | 3,500 | 102 | |
* | Headwaters Inc. | 5,000 | 99 | |
* | Century Aluminum Co. | 13,600 | 96 | |
Valspar Corp. | 807 | 86 | ||
Materion Corp. | 2,900 | 77 | ||
* | Constellium NV Class A | 13,300 | 69 | |
* | Turquoise Hill Resources | |||
Ltd. | 21,550 | 55 | ||
* | Ferro Corp. | 3,700 | 44 | |
* | Owens-Illinois Inc. | 2,500 | 40 | |
Schweitzer-Mauduit | ||||
International Inc. | 1,200 | 38 | ||
Bemis Co. Inc. | 700 | 36 | ||
Eldorado Gold Corp. | 10,400 | 33 | ||
Orion Engineered Carbons | ||||
SA | 2,088 | 29 | ||
* | Boise Cascade Co. | 1,400 | 29 | |
Mercer International Inc. | 2,800 | 26 | ||
* | Novagold Resources Inc. | 4,400 | 22 | |
Silgan Holdings Inc. | 400 | 21 | ||
Allegheny Technologies Inc. | 1,200 | 20 | ||
KMG Chemicals Inc. | 700 | 16 | ||
PH Glatfelter Co. | 640 | 13 | ||
Mesabi Trust | 2,015 | 12 | ||
* | Flotek Industries Inc. | 1,600 | 12 | |
Kaiser Aluminum Corp. | 100 | 8 | ||
* | Intrepid Potash Inc. | 5,500 | 6 | |
Sonoco Products Co. | 117 | 6 | ||
Olin Corp. | 200 | 3 | ||
* | Stillwater Mining Co. | 298 | 3 | |
223,911 | ||||
Other (0.2%) | ||||
SPDR S&P 500 ETF Trust | 55,572 | 11,423 | ||
* | Safeway Inc. CVR (Casa Ley) | |||
Exp. 01/30/2018 | 75,810 | 10 | ||
* | Safeway Inc. CVR (PDC) | |||
Exp. 01/30/2017 | 75,810 | 4 | ||
* | Biosante Pharmaceutical | |||
Inc. CVR | 4,189 | — | ||
11,437 | ||||
Telecommunication Services (2.9%) | ||||
AT&T Inc. | 2,634,359 | 103,188 | ||
Verizon Communications | ||||
Inc. | 1,038,048 | 56,138 | ||
CenturyLink Inc. | 479,774 | 15,333 | ||
* | Level 3 Communications | |||
Inc. | 114,600 | 6,057 | ||
Frontier Communications | ||||
Corp. | 78,800 | 440 | ||
Telephone & Data | ||||
Systems Inc. | 9,800 | 295 |
22
Growth and Income Fund
Market | ||||
Value• | ||||
Shares | ($000) | |||
* | Sprint Corp. | 10,738 | 37 | |
Inteliquent Inc. | 1,100 | 18 | ||
* | Globalstar Inc. | 7,900 | 12 | |
181,518 | ||||
Utilities (3.2%) | ||||
American Electric Power | ||||
Co. Inc. | 287,260 | 19,074 | ||
Southern Co. | 354,870 | 18,357 | ||
Entergy Corp. | 229,976 | 18,233 | ||
FirstEnergy Corp. | 489,457 | 17,606 | ||
Ameren Corp. | 314,425 | 15,753 | ||
Exelon Corp. | 417,410 | 14,968 | ||
PPL Corp. | 378,286 | 14,401 | ||
Public Service Enterprise | ||||
Group Inc. | 295,273 | 13,919 | ||
Duke Energy Corp. | 160,390 | 12,940 | ||
NextEra Energy Inc. | 84,240 | 9,969 | ||
Sempra Energy | 80,610 | 8,387 | ||
Consolidated Edison Inc. | 104,932 | 8,040 | ||
CenterPoint Energy Inc. | 300,610 | 6,289 | ||
Dominion Resources Inc. | 74,984 | 5,633 | ||
PG&E Corp. | 62,985 | 3,761 | ||
Pinnacle West Capital Corp. | 46,235 | 3,471 | ||
DTE Energy Co. | 29,619 | 2,685 | ||
SCANA Corp. | 23,800 | 1,670 | ||
NiSource Inc. | 35,040 | 826 | ||
* | Dynegy Inc. | 44,100 | 634 | |
* | Calpine Corp. | 25,700 | 390 | |
Edison International | 3,860 | 277 | ||
Atlantic Power Corp. | 104,726 | 258 | ||
Xcel Energy Inc. | 5,860 | 245 | ||
Atmos Energy Corp. | 2,500 | 186 | ||
Eversource Energy | 2,430 | 142 | ||
Great Plains Energy Inc. | 3,700 | 119 | ||
New Jersey Resources Corp. | 2,300 | 84 | ||
Laclede Group Inc. | 1,000 | 68 | ||
PNM Resources Inc. | 1,800 | 61 | ||
OGE Energy Corp. | 1,300 | 37 | ||
Pattern Energy Group Inc. | ||||
Class A | 1,590 | 30 | ||
Avista Corp. | 441 | 18 | ||
WGL Holdings Inc. | 200 | 14 | ||
El Paso Electric Co. | 300 | 14 | ||
ONE Gas Inc. | 200 | 12 | ||
MDU Resources Group Inc. | 400 | 8 | ||
198,579 | ||||
Total Common Stocks | ||||
(Cost $5,267,587) | 6,113,960 | |||
Temporary Cash Investments (2.7%)1 | ||||
Money Market Fund (2.5%) | ||||
2,3 | Vanguard Market | |||
Liquidity Fund, | ||||
0.495% | 157,662,748 | 157,663 |
Face | Market | ||
Amount | Value• | ||
($000) | ($000) | ||
U.S. Government and Agency Obligations (0.2%) | |||
4,5 | Federal Home Loan | ||
Bank Discount Notes, | |||
0.245%, 4/20/16 | 2,000 | 1,999 | |
4,5 | Federal Home Loan | ||
Bank Discount Notes, | |||
0.260%, 4/27/16 | 500 | 500 | |
4,5 | Federal Home Loan | ||
Bank Discount Notes, | |||
0.290%, 4/29/16 | 5,000 | 4,999 | |
6 | Freddie Mac Discount | ||
Notes, 0.220%, 4/15/16 | 2,300 | 2,300 | |
9,798 | |||
Total Temporary Cash Investments | |||
(Cost $167,461) | 167,461 | ||
Total Investments (100.3%) | |||
(Cost $5,435,048) | 6,281,421 | ||
Amount | |||
($000) | |||
Other Assets and Liabilities (-0.3%) | |||
Other Assets | |||
Investment in VGI | 526 | ||
Receivables for Investment Securities Sold 63,280 | |||
Receivables for Accrued Income | 7,983 | ||
Receivables for Capital Shares Issued | 2,719 | ||
Other Assets | 12 | ||
Total Other Assets | 74,520 | ||
Liabilities | |||
Payables for Investment Securities | |||
Purchased | (69,623) | ||
Collateral for Securities on Loan | (6,656) | ||
Payables to Investment Advisor | (1,249) | ||
Payables for Capital Shares Redeemed | (5,597) | ||
Payables to Vanguard | (12,821) | ||
Other Liabilities | (261) | ||
Total Liabilities | (96,207) | ||
Net Assets (100%) | 6,259,734 |
At March 31, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 5,340,405 |
Undistributed Net Investment Income | 28,866 |
Accumulated Net Realized Gains | 41,438 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 846,373 |
Futures Contracts | 2,652 |
Net Assets | 6,259,734 |
23
Growth and Income Fund | |
Amount | |
($000) | |
Investor Shares—Net Assets | |
Applicable to 70,092,671 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 2,809,708 |
Net Asset Value Per Share— | |
Investor Shares | $40.09 |
Admiral Shares—Net Assets | |
Applicable to 52,711,280 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 3,450,026 |
Net Asset Value Per Share— | |
Admiral Shares | $65.45 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $6,162,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 99.8% and 0.5%, respectively,
of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
3 Includes $6,656,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full
faith and credit of the U.S. government.
5 Securities with a value of $6,499,000 have been segregated as initial margin for open futures contracts.
6 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for
senior preferred stock.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.
24
Growth and Income Fund
Statement of Operations
Six Months Ended | |
March 31, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends1 | 78,321 |
Interest2 | 271 |
Securities Lending | 173 |
Total Income | 78,765 |
Expenses | |
Investment Advisory Fees—Note B | |
Basic Fee | 3,539 |
Performance Adjustment | (220) |
The Vanguard Group—Note C | |
Management and Administrative—Investor Shares | 2,475 |
Management and Administrative—Admiral Shares | 1,424 |
Marketing and Distribution—Investor Shares | 269 |
Marketing and Distribution—Admiral Shares | 133 |
Custodian Fees | 116 |
Shareholders’ Reports—Investor Shares | 36 |
Shareholders’ Reports—Admiral Shares | 10 |
Trustees’ Fees and Expenses | 4 |
Total Expenses | 7,786 |
Net Investment Income | 70,979 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 78,718 |
Futures Contracts | 6,109 |
Realized Net Gain (Loss) | 84,827 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 311,064 |
Futures Contracts | 5,080 |
Change in Unrealized Appreciation (Depreciation) | 316,144 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 471,950 |
1 Dividends are net of foreign withholding taxes of $9,000. | |
2 Interest income from an affiliated company of the fund was $258,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
25
Growth and Income Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
March 31, | September 30, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 70,979 | 109,469 |
Realized Net Gain (Loss) | 84,827 | 348,167 |
Change in Unrealized Appreciation (Depreciation) | 316,144 | (438,192) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 471,950 | 19,444 |
Distributions | ||
Net Investment Income | ||
Investor Shares | (26,123) | (50,108) |
Admiral Shares | (32,871) | (57,404) |
Realized Capital Gain1 | ||
Investor Shares | (152,494) | (180,933) |
Admiral Shares | (181,922) | (179,399) |
Total Distributions | (393,410) | (467,844) |
Capital Share Transactions | ||
Investor Shares | 83,951 | (82,169) |
Admiral Shares | 229,736 | 501,641 |
Net Increase (Decrease) from Capital Share Transactions | 313,687 | 419,472 |
Total Increase (Decrease) | 392,227 | (28,928) |
Net Assets | ||
Beginning of Period | 5,867,507 | 5,896,435 |
End of Period2 | 6,259,734 | 5,867,507 |
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $65,407,000 and $830,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $28,866,000 and $16,881,000.
See accompanying Notes, which are an integral part of the Financial Statements.
26
Growth and Income Fund
Financial Highlights
Investor Shares | |||||||
Six Months | |||||||
Ended | |||||||
For a Share Outstanding | March 31, | Year Ended September 30, | |||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |
Net Asset Value, Beginning of Period | $39.55 | $42.69 | $36.02 | $30.73 | $23.86 | $23.98 | |
Investment Operations | |||||||
Net Investment Income | . 459 | .729 | . 671 | . 631 | . 549 | . 482 | |
Net Realized and Unrealized Gain (Loss) | |||||||
on Investments | 2.734 | (.541) | 6.639 | 5.288 | 6.846 | (.124) | |
Total from Investment Operations | 3.193 | .188 | 7.310 | 5.919 | 7.395 | .358 | |
Distributions | |||||||
Dividends from Net Investment Income | (. 388) | (.724) | (. 640) | (. 629) | (. 525) | (. 478) | |
Distributions from Realized Capital Gains | (2.265) | (2.604) | — | — | — | — | |
Total Distributions | (2.653) | (3.328) | (.640) | (.629) | (.525) | (.478) | |
Net Asset Value, End of Period | $40.09 | $39.55 | $42.69 | $36.02 | $30.73 | $23.86 | |
Total Return1 | 8.07% | 0.22% | 20.42% | 19.54% | 31.27% | 1.28% | |
Ratios/Supplemental Data | |||||||
Net Assets, End of Period (Millions) | $2,810 | $2,691 | $2,979 | $2,869 | $2,798 | $2,548 | |
Ratio of Total Expenses to | |||||||
Average Net Assets2 | 0.32% | 0.34% | 0.37% | 0.36% | 0.36% | 0.32% | |
Ratio of Net Investment Income to | |||||||
Average Net Assets | 2.31% | 1.70% | 1.67% | 1.90% | 1.94% | 1.78% | |
Portfolio Turnover Rate | 99% | 116% | 133% | 109% | 102% | 120% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
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 (0.01%), 0.00%, 0.02%, 0.01%, 0.01%, and (0.04%).
See accompanying Notes, which are an integral part of the Financial Statements.
27
Growth and Income Fund
Financial Highlights
Admiral Shares | |||||||
Six Months | |||||||
Ended | |||||||
For a Share Outstanding | March 31, | Year Ended September 30, | |||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |
Net Asset Value, Beginning of Period | $64.57 | $69.71 | $58.82 | $50.18 | $38.97 | $39.15 | |
Investment Operations | |||||||
Net Investment Income | .784 | 1.272 | 1.176 | 1.097 | .952 | .832 | |
Net Realized and Unrealized Gain (Loss) | |||||||
on Investments | 4.461 | (.897) | 10.833 | 8.633 | 11.168 | (.199) | |
Total from Investment Operations | 5.245 | .375 | 12.009 | 9.730 | 12.120 | .633 | |
Distributions | |||||||
Dividends from Net Investment Income | (.668) | (1.264) | (1.119) | (1.090) | (.910) | (.813) | |
Distributions from Realized Capital Gains | (3.697) | (4.251) | — | — | — | — | |
Total Distributions | (4.365) | (5.515) | (1.119) | (1.090) | (.910) | (.813) | |
Net Asset Value, End of Period | $65.45 | $64.57 | $69.71 | $58.82 | $50.18 | $38.97 | |
Total Return1 | 8.12% | 0.31% | 20.55% | 19.69% | 31.40% | 1.39% | |
Ratios/Supplemental Data | |||||||
Net Assets, End of Period (Millions) | $3,450 | $3,177 | $2,917 | $2,157 | $1,591 | $1,131 | |
Ratio of Total Expenses to | |||||||
Average Net Assets2 | 0.21% | 0.23% | 0.26% | 0.26% | 0.25% | 0.21% | |
Ratio of Net Investment Income to | |||||||
Average Net Assets | 2.42% | 1.81% | 1.78% | 2.00% | 2.05% | 1.89% | |
Portfolio Turnover Rate | 99% | 116% | 133% | 109% | 102% | 120% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
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 (0.01%), 0.00%, 0.02%, 0.01%, 0.01%, and (0.04%).
See accompanying Notes, which are an integral part of the Financial Statements.
28
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. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.
Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
During the six months ended March 31, 2016, the fund’s average investments in long and short futures contracts represented 2% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.
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, 2012–2015), and for the period ended March 31, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
29
Growth and Income Fund
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.
The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
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.
30
Growth and Income Fund
B. The investment advisory firms Los Angeles Capital Management and Equity Research, Inc., and D. E. Shaw Investment Management, L.L.C., each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fee of Los Angeles Capital Management and Equity Research, Inc., is subject to quarterly adjustments based on performance relative to the S&P 500 Index for the preceding three years. The basic fee of and D. E. Shaw Investment Management, L.L.C., is subject to quarterly adjustments based on performance relative to the S&P 500 Index for the preceding three years.
Vanguard provides investment advisory services to a portion of the fund as described below; the fund paid Vanguard advisory fees of $782,000 for the six months ended March 31, 2016.
For the six months ended March 31, 2016, the aggregate investment advisory fee paid to all advisors represented an effective annual basic rate of 0.12% of the fund’s average net assets, before a net decrease of $220,000 (-0.01%) based on performance.
C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, distribution, and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2016, the fund had contributed to Vanguard capital in the amount of $526,000, representing 0.01% of the fund’s net assets and 0.21% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
D. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The following table summarizes the market value of the fund’s investments as of March 31, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 6,113,946 | — | 14 |
Temporary Cash Investments | 157,663 | 9,798 | — |
Futures Contracts—Assets1 | 11 | — | — |
Futures Contracts—Liabilities1 | (259) | — | — |
Total | 6,271,361 | 9,798 | 14 |
1 Represents variation margin on the last day of the reporting period. |
31
Growth and Income Fund
E. At March 31, 2016, 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 | June 2016 | 1,284 | 131,706 | 2,652 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
F. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
At March 31, 2016, the cost of investment securities for tax purposes was $5,435,055,000. Net unrealized appreciation of investment securities for tax purposes was $846,366,000, consisting of unrealized gains of $979,257,000 on securities that had risen in value since their purchase and $132,891,000 in unrealized losses on securities that had fallen in value since their purchase.
G. During the six months ended March 31, 2016, the fund purchased $2,948,249,000 of investment securities and sold $2,940,497,000 of investment securities, other than temporary cash investments.
H. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
March 31, 2016 | September 30, 2015 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Investor Shares | ||||
Issued | 120,594 | 3,043 | 316,336 | 7,469 |
Issued in Lieu of Cash Distributions | 173,445 | 4,324 | 225,186 | 5,491 |
Redeemed | (210,088) | (5,305) | (623,691) | (14,720) |
Net Increase (Decrease)—Investor Shares | 83,951 | 2,062 | (82,169) | (1,760) |
Admiral Shares | ||||
Issued | 196,768 | 3,034 | 646,610 | 9,344 |
Issued in Lieu of Cash Distributions | 200,860 | 3,068 | 221,904 | 3,311 |
Redeemed | (167,892) | (2,589) | (366,873) | (5,305) |
Net Increase (Decrease)—Admiral Shares | 229,736 | 3,513 | 501,641 | 7,350 |
I. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.
32
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
33
Six Months Ended March 31, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
Growth and Income Fund | 9/30/2015 | 3/31/2016 | Period |
Based on Actual Fund Return | |||
Investor Shares | $1,000.00 | $1,080.70 | $1.66 |
Admiral Shares | 1,000.00 | 1,081.22 | 1.09 |
Based on Hypothetical 5% Yearly Return | |||
Investor Shares | $1,000.00 | $1,023.40 | $1.62 |
Admiral Shares | 1,000.00 | 1,023.95 | 1.06 |
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 0.32% for Investor Shares and 0.21% 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 (183/366).
34
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.
Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.
Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.
35
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 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
InterestedTrustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International PLC (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive PLC |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
IndependentTrustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | Mortimer J. Buckley | James M. Norris |
Partner of HighVista Strategies LLC (private investment | Kathleen C. Gubanich | Thomas M. Rampulla |
firm); Director of Rand Merchant Bank; Overseer of | Martha G. King | Glenn W. Reed |
the Museum of Fine Arts Boston. | John T. Marcante | Karin A. Risi |
Chris D. McIsaac | ||
Peter F. Volanakis | ||
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, 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 registered trademark owned by CFA Institute. | |
Direct Investor Account Services > 800-662-2739 | ||
Institutional Investor Services > 800-523-1036 | ||
Text Telephone for People | ||
Who Are Deaf or Hard of Hearing> 800-749-7273 | ||
This material may be used in conjunction | ||
with the offering of shares of any Vanguard | ||
fund only if preceded or accompanied by | ||
the fund’s current prospectus. | ||
All comparative mutual fund data are from Lipper, a | ||
Thomson Reuters Company, or Morningstar, Inc., unless | ||
otherwise noted. | ||
You can obtain a free copy of Vanguard’s proxy voting | ||
guidelines by visiting vanguard.com/proxyreporting or by | ||
calling Vanguard at 800-662-2739. The guidelines are | ||
also available from the SEC’s website, sec.gov. In | ||
addition, you may obtain a free report on how your fund | ||
voted the proxies for securities it owned during the 12 | ||
months ended June 30. To get the report, visit either | ||
vanguard.com/proxyreporting or sec.gov. | ||
You can review and copy information about your fund at | ||
the SEC’s Public Reference Room in Washington, D.C. To | ||
find out more about this public service, call the SEC at | ||
202-551-8090. Information about your fund is also | ||
available on the SEC’s website, and you can receive | ||
copies of this information, for a fee, by sending a | ||
request in either of two ways: via email addressed to | ||
publicinfo@sec.gov or via regular mail addressed to the | ||
Public Reference Section, Securities and Exchange | ||
Commission, Washington, DC 20549-1520. | ||
© 2016 The Vanguard Group, Inc. | ||
All rights reserved. | ||
Vanguard Marketing Corporation, Distributor. | ||
Q932 052016 |
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/structuredequityfundsx1x1.jpg)
Semiannual Report | March 31, 2016
Vanguard Structured Equity Funds
Vanguard Structured Large-Cap Equity Fund
Vanguard Structured Broad Market Fund
Vanguard’s Principles for Investing Success
We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.
Goals. Create clear, appropriate investment goals.
Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.
Discipline. Maintain perspective and long-term discipline.
A single theme unites these principles: Focus on the things you can control.
We believe there is no wiser course for any investor.
Contents | |
Your Fund’s Total Returns. | 1 |
Chairman’s Letter. | 2 |
Advisor’s Report. | 7 |
Structured Large-Cap Equity Fund. | 10 |
Structured Broad Market Fund. | 24 |
About Your Fund’s Expenses. | 39 |
Trustees Approve Advisory Arrangements. | 41 |
Glossary. | 42 |
Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the
risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the
sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows
us to help millions of clients around the world reach their financial goals.
Your Fund’s Total Returns
Six Months Ended March 31, 2016 | |
Total | |
Returns | |
Vanguard Structured Large-Cap Equity Fund | |
Institutional Shares | 8.40% |
Institutional Plus Shares | 8.42 |
S&P 500 Index | 8.49 |
Large-Cap Core Funds Average | 6.23 |
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. | |
Vanguard Structured Broad Market Fund | |
Institutional Shares | 5.24% |
Institutional Plus Shares | 5.28 |
Russell 3000 Index | 7.30 |
Multi-Cap Core Funds Average | 4.90 |
Multi-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Institutional Shares and Institutional Plus Shares are available to certain institutional investors who meet specific administrative, service, and
account-size criteria.
Your Fund’s Performance at a Glance | ||||
September 30, 2015, Through March 31, 2016 | ||||
Distributions Per Share | ||||
Starting | Ending | Income | Capital | |
Share Price | Share Price | Dividends | Gains | |
Vanguard Structured Large-Cap Equity Fund | ||||
Institutional Shares | $38.29 | $39.31 | $0.833 | $1.348 |
Institutional Plus Shares | 75.80 | 77.81 | 1.672 | 2.668 |
Vanguard Structured Broad Market Fund | ||||
Institutional Shares | $33.24 | $31.78 | $0.727 | $2.538 |
Institutional Plus Shares | 66.43 | 63.53 | 1.463 | 5.072 |
1
Chairman’s Letter
Dear Shareholder,
Anyone hoping that the financial markets might become a bit more settled after the Federal Reserve’s long-anticipated rate increase—announced December 16—would have been disappointed. Stocks slumped from December through mid-February before rebounding to finish the period higher. These sharp shifts led investors to favor safer assets, a trend that generally benefited larger-capitalization stocks and more defensive sectors.
Vanguard Structured Broad Market Fund, which includes small-, mid-, and large-cap stocks, struggled with the market movements. Institutional Shares returned 5.24%; Institutional Plus Shares, with their lower expense ratio, returned 5.28%. The fund’s results were about 2 percentage points lower than the return of its benchmark, the Russell 3000 Index, but were higher than the average return for its peer group.
Vanguard Structured Large-Cap Equity Fund fared better in navigating the ups and downs. The fund returned 8.40% for Institutional Shares and 8.42% for Institutional Plus Shares. Those performances were just shy of the return of the fund’s benchmark, the S&P 500 Index, and more than 2 percentage points better than the average return for peer funds.
In the benchmark indexes of both funds, returns were positive across all sectors, with telecommunication services and utilities leading the way and health care
2
and financials figuring among the laggards. Stock selection in both funds produced mixed results.
Stocks charted an uneven course en route to a solid outcome
The broad U.S. stock market returned about 7% for the six months. The period began and ended strongly, with fluctuations in the middle as China’s economic slowdown and falling oil and commodity prices worried investors.
Stocks rallied in March as investors again seemed encouraged by news about monetary policy, especially after the Fed indicated that it would raise interest rates fewer times in 2016 than previously anticipated. International stocks returned about 3% for the period after surging more than 8% in March. Stocks from emerging markets and from developed Pacific markets outperformed developed European stocks, which were nearly flat. U.S. dollar-based investors benefited as many foreign currencies strengthened against the dollar, a turnabout from the trend of recent years.
Bonds produced gains following a subpar start
The broad U.S. taxable bond market returned 2.44% for the fiscal half year. Returns were weak in the first three months, which culminated with the Fed’s quarter-percentage-point interest rate increase in December.
Market Barometer | |||
Total Returns | |||
Periods Ended March 31, 2016 | |||
Six | One | Five Years | |
Months | Year | (Annualized) | |
Stocks | |||
Russell 1000 Index (Large-caps) | 7.75% | 0.50% | 11.35% |
Russell 2000 Index (Small-caps) | 2.02 | -9.76 | 7.20 |
Russell 3000 Index (Broad U.S. market) | 7.30 | -0.34 | 11.01 |
FTSE All-World ex US Index (International) | 3.09 | -8.53 | 0.70 |
Bonds | |||
Barclays U.S. Aggregate Bond Index (Broad taxable market) | 2.44% | 1.96% | 3.78% |
Barclays Municipal Bond Index (Broad tax-exempt market) | 3.20 | 3.98 | 5.59 |
Citigroup Three-Month U.S. Treasury Bill Index | 0.06 | 0.08 | 0.04 |
CPI | |||
Consumer Price Index | 0.08% | 0.85% | 1.28% |
3
But with stocks volatile and the Fed indicating it would proceed cautiously with future rate hikes, bonds rallied in the final three months. The yield of the 10-year U.S. Treasury note closed at 1.77% at the end of March, down from 2.05% six months earlier. (Bond prices and yields move in opposite directions.)
Returns for money market funds and savings accounts remained limited by the Fed’s still-low target rate of 0.25%–0.5%.
International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned almost 7%. Like stocks, international bond returns for U.S.-based
Vanguard’s growth translates into lower costs for you |
Research indicates that lower-cost investments have tended to outperform higher-cost ones. |
So it’s little wonder that funds with lower expense ratios—including those at Vanguard—have |
dominated the industry’s cash inflows in recent years. |
Vanguard has long been a low-cost leader, with expenses well below those of many other |
investment management companies. That cost difference remains a powerful advantage for |
Vanguard clients. Why? Because a lower expense ratio allows a fund to pass along a greater |
share of its returns to its investors. |
What’s more, as you can see in the chart below, we’ve been able to lower our costs continually |
as our assets under management have grown. Our steady growth has not been an explicit |
business objective. Rather, we focus on putting our clients’ interests first at all times, and |
giving them the best chance for investment success. But economies of scale—the cost |
efficiencies that come with our growth—have allowed us to keep lowering our fund costs, |
even as we invest in our people and technology. |
The benefit of economies of scale |
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/structuredequityfundsx6x1.jpg)
Note: Data are for U.S.-based Vanguard funds only. |
Source: Vanguard. |
4
investors benefited from dollar weakness. Even in local currencies, however, international bond returns were solidly positive, boosted in part by additional stimulus measures taken in Europe and Asia to combat weak growth and low inflation.
The advisor’s model produced better returns among large-caps
Vanguard Quantitative Equity Group (QEG), the funds’ advisor, uses a disciplined, data-driven process to assess the relative attractiveness of stocks—with the goal of providing long-term returns that are greater than those of their benchmarks while tightly controlling risk. Similar to a traditional fund manager, QEG analyzes several criteria that research has shown can contribute to long-term outperformance, including valuation, revenue and earnings growth, dividend policy, reinvestment decisions, and balance sheet quality.
A proprietary computer model helps QEG systematically screen and rank stocks within each of the industry groups that make up the investable universe of each fund—roughly 3,000 stocks in the case of the Broad Market Fund and about 500 for the Large-Cap Equity Fund. This investment process has been developed and refined over more than three decades, and is supported by an experienced in-house research team.
QEG generally keeps each fund’s sector exposures aligned closely with those of the index; it doesn’t favor or shun a particular sector significantly in the attempt to improve performance relative to the benchmark. Positioning within industry subgroups can make a difference, but what often matters more is how the holdings in the funds perform.
The Broad Market Fund has had above-benchmark returns for each of the last five fiscal years, while the Large-Cap Equity Fund beat its benchmark in four of those years. However, as with any active investment strategy, it works better under some market conditions than others. For the six months under review, investors’ concerns about global macroeconomic factors seemed to take precedence over company-specific fundamentals. In this environment, the Large-Cap Equity Fund performed in line with its index, while the Broad Market Fund fell behind its benchmark.
Compared with the benchmark, the Broad Market Fund’s health care holdings were a bright spot. The screening process here led to outperformance in biotechnology and pharmaceuticals by helping the fund sidestep some of the poorest performers in those segments. Overall, however, stock selection in the fund proved subpar, with notable pockets of underperformance in information technology, financials, and consumer discretionary.
For the Large-Cap Equity Fund, areas of relative strength included stocks of apparel makers, internet retailers, and auto parts companies in the consumer discretionary sector, as well as insurance and consumer finance companies in the financial sector. The fund’s successes were offset, however, by underperformance elsewhere,
5
including health care providers and services. Holdings in energy and industrials were significant detractors as well.
For more information about the advisor’s approach and the funds’ positioning during the year, please see the Advisor’s Report that follows this letter.
Consider rebalancing to manage your risk
Let’s say you’ve taken the time to carefully create an appropriate asset allocation for your investment portfolio. Your efforts have produced a diversified mix of stock, bond, and money market funds tailored to your goals, time horizon, and risk tolerance.
But what should you do when your portfolio drifts from its original asset allocation as the financial markets rise or fall? Consider rebalancing to bring it back to the proper mix.
Just one year of outsized returns can throw your allocation out of whack. Take 2013 as an example. That year, the broad stock market (as measured by the Russell 3000 Index) returned 33.55% and the broad taxable bond market (as measured by the Barclays U.S. Aggregate Bond Index) returned –2.02%. A hypothetical portfolio that tracked the broad domestic market indexes and started the year with 60% stocks and 40% bonds would have ended with a more aggressive mix of 67% stocks and 33% bonds.
Rebalancing to bring your portfolio back to its original targets would require you to shift assets away from areas that have been performing well toward those that have been falling behind. That isn’t easy or intuitive. It’s a way to minimize risk rather than maximize returns and to stick with your investment plan through different types of markets. (You can read more about our approach in Best Practices for Portfolio Rebalancing at vanguard.com/research.)
It’s not necessary to check your portfolio every day or every month, much less rebalance it that frequently. It may be more appropriate to monitor it annually or semiannually and rebalance when your allocation swings 5 percentage points or more from its target.
It’s important, of course, to be aware of the tax implications. You’ll want to consult with your tax advisor, but generally speaking, it may be a good idea to make any asset changes within a tax-advantaged retirement account or to direct new cash flows into the underweighted asset class.
However you go about it, keeping your asset allocation from drifting too far off target can help you stay on track with the investment plan you’ve crafted to meet your financial goals.
As always, thank you for investing with Vanguard.
Sincerely,
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/structuredequityfundsx8x1.jpg)
F. William McNabb III
Chairman and Chief Executive Officer
April 13, 2016
6
Advisor’s Report
For the fiscal half year ended March 31, 2016, Vanguard Structured Large-Cap Equity Fund returned 8.40% for Institutional Shares, underperforming the return of its benchmark, the S&P 500 Index, by 0.09 percentage point. Vanguard Structured Broad Market Fund returned 5.24% for Institutional Shares, underperforming its benchmark, the Russell 3000 Index, by 2.06 percentage points.
Over the period, U.S. equities produced strong returns, but experienced heavy volatility. The broad U.S. equity market, as measured by the Russell 3000 Index, was up 7.30%. Large-capitalization stocks performed better than smaller-caps, and value-oriented stocks outpaced growth stocks. Globally, the U.S. equity market outperformed international markets, while emerging markets outpaced developed markets.
All ten sector groups in the broad U.S. equity market generated positive returns. Results were best in telecommunication services, utilities, and materials. Energy, financials, and health care were the laggards.
In late 2015, the U.S. economy continued to grow, but at a slower pace. Fourth-quarter real GDP came in at 1.4%, compared with 2.0% in the third quarter, with the deceleration attributed primarily to downturns in nonresidential fixed investment, exports, and state and local government spending. Corporate profits decreased 8.1% in the final quarter of 2015, reflecting the largest quarterly decline since the first quarter of 2011. However, the U.S. job market improved further. In March, total nonfarm payrolls rose by 215,000, and the unemployment rate stood at 5.0%.
Oil prices declined significantly in the first quarter of 2016 but have since recovered, increasing over 40% from their mid-February low. This volatility spilled over into the global stock markets, as they saw similar price movements in the same quarter. The U.S. Federal Reserve raised interest rates in December, after keeping rates near zero since 2008. Additional interest rate hikes are expected later this year, but changes are likely to be gradual and will depend on global economic data. Meanwhile, several of the world’s central banks, including the European Central Bank and the Bank of Japan, are experimenting with negative interest rates in an attempt to spur economic growth.
Although we seek to understand the impact of macroeconomic factors on portfolio performance, our investment process is centered on specific stock fundamentals. We use a disciplined, quantitative approach, not technical analysis of stock price movements. Our model aims to systematically identify stocks within each industry group in our investment universe that are more likely to exhibit long-term outperformance.
Our model focuses on five key themes that we believe attractive stocks tend to exhibit: high quality (healthy balance sheets and consistent cash flow generation); effective management decisions regarding the use of capital (sound investment policies that favor internal over external
7
funding); consistent earnings growth (a demonstrated ability to increase earnings year after year); strong momentum (a market confirmation of our view); and reasonable valuations (we try to avoid overpriced stocks).
This framework helps us to identify and take advantage of inefficiencies in the market caused by persistent biases in investor behavior. Using the results of our model, we then construct and review our portfolio daily with the goal of maximizing expected return while minimizing exposure to risks that our research indicates do not improve returns, such as deviations from sector weightings relative to the benchmark.
The management decisions and valuation components of our model were able to produce positive relative performance for both the Structured Broad Market Fund and Structured Large-Cap Equity Fund. Unfortunately, the momentum and quality components did not perform as expected.
The model’s effectiveness over the period across sectors was mixed. The Structured Large-Cap Equity Fund produced positive stock selection results in four of the ten sectors in the benchmark, benefiting the most from the strong stock selection in consumer discretionary, financials, and telecommunication services. We underper-formed in health care and energy.
The Structured Broad Market Fund also produced positive stock selection results in four of ten sectors, with the strongest results coming from health care and telecommunication services. We underperformed in consumer discretionary, financials, and information technology.
Structured Large-Cap Equity Fund
At the individual stock level, the largest contributors came from overweight positions in Nasdaq (+25.5%), CenturyLink (+32.0%), and Avery Dennison (+28.9%). In addition, when comparing the portfolio’s performance with that of its benchmark, we benefited from underweighting or avoiding poorly performing stocks such as American Express (–16.5%) and Morgan Stanley (–19.8%).
Unfortunately, we were not able to avoid all poor performers. Overweight positions in Express Scripts Holding Co. (–15.2%) and Eli Lilly (–12.8%) directly lowered performance. Also, underweighting companies that were not positively identified by the fundamentals in our model, such as General Electric (+28.0%) and Philip Morris International (+26.4%), hurt our overall outperformance relative to our benchmark.
Structured Broad Market Fund
At the individual stock level, the largest contributors came from overweight positions in Trinseo (+45.8%), Verizon Communications (+27.5%), and Hawaiian Holdings (+91.2%). In addition, when comparing the portfolio’s performance with that of its benchmark, we benefited from underweighting or avoiding poor performers such as Biogen (–10.8%) and Kinder Morgan (–33.8%).
8
Overweight positions in Santander Consumer USA Holdings (–48.6%) and Fitbit (–59.8%) directly lowered performance. Also, underweighting companies that were not positively identified by the fundamentals in our model, such as McDonald’s (+29.5%) and Microsoft (+26.5%), hurt our overall performance relative to our benchmark.
Although we recognize that risk can reward or punish us in the near term, we continue to believe that constructing a portfolio that emphasizes the key fundamentals within our model will benefit investors over the long term. We feel that the Structured Equity Funds offer a strong mix of stocks with attractive valuation and growth characteristics relative to their underlying benchmarks.
We thank you for your investment and look forward to the second half of the fiscal year.
Portfolio Managers:
James P. Stetler, Principal
Michael R. Roach, CFA
Anatoly Shtekhman, CFA
Binbin Guo, Principal, Head of Equity
Research and Portfolio Strategies
Vanguard Quantitative Equity Group
April 19, 2016
9
Structured Large-Cap Equity Fund
Fund Profile
As of March 31, 2016
Share-Class Characteristics | ||
Institutional | Institutional | |
Shares | Plus Shares | |
Ticker Symbol | VSLIX | VSLPX |
Expense Ratio1 | 0.20% | 0.16% |
30-Day SEC Yield | 1.96% | 2.00% |
Portfolio Characteristics | |||
DJ | |||
U.S. Total | |||
S&P 500 | Market | ||
Fund | Index | FA Index | |
Number of Stocks | 176 | 504 | 3,900 |
Median Market Cap | $33.0B | $79.4B | $52.5B |
Price/Earnings Ratio | 17.7x | 20.5x | 21.8x |
Price/Book Ratio | 2.6x | 2.8x | 2.7x |
Return on Equity | 17.7% | 18.5% | 17.5% |
Earnings Growth | |||
Rate | 8.4% | 7.6% | 8.0% |
Dividend Yield | 2.2% | 2.2% | 2.1% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 75% | — | — |
Short-Term Reserves | -0.3% | — | — |
Sector Diversification (% of equity exposure) | |||
DJ | |||
U.S. Total | |||
S&P 500 | Market | ||
Fund | Index FA Index | ||
Consumer | |||
Discretionary | 13.0% | 12.9% | 13.6% |
Consumer Staples | 10.4 | 10.4 | 9.2 |
Energy | 6.7 | 6.8 | 6.1 |
Financials | 15.6 | 15.6 | 17.4 |
Health Care | 14.4 | 14.3 | 13.7 |
Industrials | 10.1 | 10.1 | 10.7 |
Information | |||
Technology | 20.8 | 20.8 | 20.1 |
Materials | 2.8 | 2.8 | 3.2 |
Telecommunication | |||
Services | 2.8 | 2.8 | 2.5 |
Utilities | 3.4 | 3.5 | 3.5 |
Volatility Measures | ||
DJ | ||
U.S. Total | ||
S&P 500 | Market | |
Index | FA Index | |
R-Squared | 0.98 | 0.98 |
Beta | 1.00 | 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) | ||
Apple Inc. | Technology | |
Hardware, Storage & | ||
Peripherals | 2.8% | |
Alphabet Inc. | Internet Software & | |
Services | 2.3 | |
Johnson & Johnson | Pharmaceuticals | 2.2 |
General Electric Co. | Industrial | |
Conglomerates | 2.2 | |
Microsoft Corp. | Systems Software | 1.9 |
Exxon Mobil Corp. | Integrated Oil & Gas | 1.4 |
Verizon Communications Integrated | ||
Inc. | Telecommunication | |
Services | 1.3 | |
Amazon.com Inc. | Internet Retail | 1.3 |
Gilead Sciences Inc. | Biotechnology | 1.2 |
JPMorgan Chase & Co. | Diversified Banks | 1.2 |
Top Ten | 17.8% |
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 26, 2016. For the six months ended March 31, 2016, the annualized expense
ratios were 0.18% for Institutional Shares and 0.14% 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.
Fiscal-Year Total Returns (%): May 16, 2006, Through March 31, 2016
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/structuredequityfundsx13x1.jpg)
Average Annual Total Returns: Periods Ended March 31, 2016 | ||||
Inception | One | Five | Since | |
Date | Year | Years | Inception | |
Institutional Shares | 5/16/2006 | 2.64% | 12.99% | 7.38% |
Institutional Plus Shares | 5/15/2006 | 2.66 | 13.05 | 7.44 |
See Financial Highlights for dividend and capital gains information.
11
Structured Large-Cap Equity Fund
Financial Statements (unaudited)
Statement of Net Assets
As of March 31, 2016
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 (13.0%) | |||
* | Amazon.com Inc. | 11,688 | 6,938 |
Target Corp. | 54,677 | 4,499 | |
Walt Disney Co. | 38,034 | 3,777 | |
Carnival Corp. | 70,800 | 3,736 | |
* | O’Reilly Automotive Inc. | 13,199 | 3,612 |
Omnicom Group Inc. | 41,668 | 3,468 | |
Marriott International Inc. | |||
Class A | 47,672 | 3,393 | |
Leggett & Platt Inc. | 66,493 | 3,218 | |
^ | Nordstrom Inc. | 56,009 | 3,204 |
Staples Inc. | 290,404 | 3,203 | |
Best Buy Co. Inc. | 94,970 | 3,081 | |
Darden Restaurants Inc. | 46,300 | 3,070 | |
* | Discovery Communications | ||
Inc. Class A | 104,142 | 2,982 | |
GameStop Corp. Class A | 92,108 | 2,923 | |
News Corp. Class B | 215,600 | 2,857 | |
Goodyear Tire & Rubber Co. | 81,671 | 2,693 | |
Home Depot Inc. | 17,444 | 2,328 | |
PVH Corp. | 23,372 | 2,315 | |
General Motors Co. | 73,500 | 2,310 | |
Interpublic Group of | |||
Cos. Inc. | 86,180 | 1,978 | |
Comcast Corp. Class A | 29,036 | 1,774 | |
DR Horton Inc. | 56,052 | 1,694 | |
* | Michael Kors Holdings Ltd. | 21,959 | 1,251 |
McDonald’s Corp. | 5,457 | 686 | |
* | Discovery | ||
Communications Inc. | 8,000 | 216 | |
71,206 | |||
Consumer Staples (10.3%) | |||
Wal-Mart Stores Inc. | 89,089 | 6,102 | |
Procter & Gamble Co. | 50,079 | 4,122 | |
General Mills Inc. | 62,714 | 3,973 | |
Kroger Co. | 100,170 | 3,831 | |
ConAgra Foods Inc. | 79,124 | 3,531 | |
Tyson Foods Inc. Class A | 52,502 | 3,500 | |
Kimberly-Clark Corp. | 25,118 | 3,379 |
Campbell Soup Co. | 51,747 | 3,301 | |
Dr Pepper Snapple | |||
Group Inc. | 35,567 | 3,180 | |
Coca-Cola Enterprises Inc. | 62,545 | 3,174 | |
Clorox Co. | 25,089 | 3,163 | |
Altria Group Inc. | 46,026 | 2,884 | |
Sysco Corp. | 59,350 | 2,773 | |
Coca-Cola Co. | 56,576 | 2,625 | |
Hershey Co. | 25,382 | 2,337 | |
PepsiCo Inc. | 18,092 | 1,854 | |
Philip Morris | |||
International Inc. | 17,041 | 1,672 | |
Colgate-Palmolive Co. | 8,542 | 603 | |
CVS Health Corp. | 5,300 | 550 | |
Estee Lauder Cos. Inc. | |||
Class A | 2,750 | 259 | |
Archer-Daniels-Midland Co. | 1,744 | 63 | |
56,876 | |||
Energy (6.7%) | |||
Exxon Mobil Corp. | 94,396 | 7,890 | |
Phillips 66 | 47,531 | 4,116 | |
Valero Energy Corp. | 59,749 | 3,832 | |
Tesoro Corp. | 35,658 | 3,067 | |
*,^ | Southwestern Energy Co. | 374,391 | 3,021 |
^ | Transocean Ltd. | 302,599 | 2,766 |
Ensco plc Class A | 265,031 | 2,748 | |
Spectra Energy Corp. | 81,711 | 2,500 | |
Chevron Corp. | 26,056 | 2,486 | |
Noble Corp. plc | 220,100 | 2,278 | |
Devon Energy Corp. | 69,482 | 1,907 | |
* | Cameron International Corp. | 4,200 | 282 |
36,893 | |||
Financials (15.5%) | |||
JPMorgan Chase & Co. | 113,219 | 6,705 | |
Citigroup Inc. | 157,348 | 6,569 | |
Wells Fargo & Co. | 86,814 | 4,198 | |
Travelers Cos. Inc. | 34,795 | 4,061 | |
Bank of New York | |||
Mellon Corp. | 107,046 | 3,943 | |
Prudential Financial Inc. | 54,145 | 3,910 |
12
Structured Large-Cap Equity Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Prologis Inc. | 84,545 | 3,735 | |
McGraw Hill Financial Inc. | 37,398 | 3,702 | |
Capital One Financial Corp. | 53,000 | 3,674 | |
Fifth Third Bancorp | 191,869 | 3,202 | |
Bank of America Corp. | 236,488 | 3,197 | |
Host Hotels & Resorts Inc. | 190,346 | 3,179 | |
Nasdaq Inc. | 47,768 | 3,171 | |
Unum Group | 100,586 | 3,110 | |
Navient Corp. | 252,560 | 3,023 | |
Macerich Co. | 37,774 | 2,993 | |
Discover Financial Services | 58,214 | 2,964 | |
Regions Financial Corp. | 369,443 | 2,900 | |
* | Berkshire Hathaway Inc. | ||
Class B | 20,205 | 2,867 | |
Aflac Inc. | 44,747 | 2,825 | |
AvalonBay Communities Inc. | 12,600 | 2,397 | |
* | Berkshire Hathaway Inc. | ||
Class A | 11 | 2,348 | |
SunTrust Banks Inc. | 52,146 | 1,881 | |
Kimco Realty Corp. | 64,900 | 1,868 | |
Public Storage | 3,600 | 993 | |
HCP Inc. | 21,500 | 701 | |
Ameriprise Financial Inc. | 4,499 | 423 | |
Essex Property Trust Inc. | 1,531 | 358 | |
Hartford Financial Services | |||
Group Inc. | 6,188 | 285 | |
Realty Income Corp. | 2,730 | 171 | |
Northern Trust Corp. | 322 | 21 | |
85,374 | |||
Health Care (14.3%) | |||
Johnson & Johnson | 111,116 | 12,023 | |
Gilead Sciences Inc. | 73,633 | 6,764 | |
Bristol-Myers Squibb Co. | 94,800 | 6,056 | |
Amgen Inc. | 35,532 | 5,327 | |
Eli Lilly & Co. | 65,287 | 4,701 | |
* | Express Scripts Holding Co. | 59,668 | 4,099 |
* | Biogen Inc. | 15,477 | 4,029 |
Anthem Inc. | 27,206 | 3,781 | |
AbbVie Inc. | 64,868 | 3,705 | |
* | HCA Holdings Inc. | 47,343 | 3,695 |
Cardinal Health Inc. | 44,300 | 3,630 | |
McKesson Corp. | 23,000 | 3,617 | |
AmerisourceBergen Corp. | |||
Class A | 36,991 | 3,202 | |
Zoetis Inc. | 70,046 | 3,105 | |
Pfizer Inc. | 94,800 | 2,810 | |
Merck & Co. Inc. | 34,456 | 1,823 | |
CR Bard Inc. | 8,504 | 1,724 | |
Aetna Inc. | 11,657 | 1,310 | |
* | Hologic Inc. | 28,986 | 1,000 |
UnitedHealth Group Inc. | 5,754 | 742 | |
* | Allergan plc | 2,131 | 571 |
Medtronic plc | 6,500 | 487 | |
Cigna Corp. | 3,100 | 425 | |
Baxter International Inc. | 5,616 | 231 | |
78,857 |
Industrials (10.1%) | |||
General Electric Co. | 378,126 | 12,021 | |
Northrop Grumman Corp. | 20,094 | 3,977 | |
General Dynamics Corp. | 29,665 | 3,897 | |
Southwest Airlines Co. | 86,130 | 3,859 | |
* | United Continental | ||
Holdings Inc. | 61,129 | 3,659 | |
PACCAR Inc. | 64,860 | 3,547 | |
Masco Corp. | 105,789 | 3,327 | |
Delta Air Lines Inc. | 65,311 | 3,179 | |
* | Quanta Services Inc. | 137,325 | 3,098 |
* | United Rentals Inc. | 49,737 | 3,093 |
Cintas Corp. | 32,696 | 2,936 | |
Fluor Corp. | 51,223 | 2,751 | |
Rockwell Automation Inc. | 17,200 | 1,957 | |
Stanley Black & Decker Inc. | 16,869 | 1,775 | |
American Airlines Group Inc. | 32,100 | 1,316 | |
Equifax Inc. | 5,245 | 599 | |
Pitney Bowes Inc. | 19,845 | 428 | |
3M Co. | 1,400 | 233 | |
55,652 | |||
Information Technology (20.8%) | |||
Apple Inc. | 142,686 | 15,551 | |
Microsoft Corp. | 191,248 | 10,563 | |
* | Alphabet Inc. Class A | 11,105 | 8,472 |
Accenture plc Class A | 45,218 | 5,218 | |
* | Facebook Inc. Class A | 44,481 | 5,075 |
Broadcom Ltd. | 29,400 | 4,542 | |
* | Alphabet Inc. Class C | 5,647 | 4,207 |
Intuit Inc. | 37,055 | 3,854 | |
Intel Corp. | 116,932 | 3,783 | |
HP Inc. | 296,928 | 3,658 | |
NVIDIA Corp. | 100,494 | 3,581 | |
* | Fiserv Inc. | 34,150 | 3,503 |
Xerox Corp. | 306,496 | 3,421 | |
* | Citrix Systems Inc. | 43,398 | 3,410 |
Motorola Solutions Inc. | 44,711 | 3,385 | |
* | Electronic Arts Inc. | 51,027 | 3,373 |
Lam Research Corp. | 40,211 | 3,321 | |
Western Union Co. | 166,393 | 3,210 | |
CSRA Inc. | 116,210 | 3,126 | |
Hewlett Packard | |||
Enterprise Co. | 169,927 | 3,013 | |
* | Teradata Corp. | 112,100 | 2,942 |
Total System Services Inc. | 55,806 | 2,655 | |
* | F5 Networks Inc. | 24,246 | 2,566 |
Computer Sciences Corp. | 50,400 | 1,733 | |
Visa Inc. Class A | 21,712 | 1,661 | |
Cisco Systems Inc. | 47,878 | 1,363 | |
Juniper Networks Inc. | 40,660 | 1,037 | |
International Business | |||
Machines Corp. | 6,587 | 998 | |
Oracle Corp. | 23,888 | 977 | |
Texas Instruments Inc. | 11 | 1 | |
114,199 |
13
Structured Large-Cap Equity Fund
Market | ||
Value• | ||
Shares | ($000) | |
Materials (2.8%) | ||
Dow Chemical Co. | 92,323 | 4,695 |
LyondellBasell Industries | ||
NV Class A | 45,339 | 3,880 |
Sealed Air Corp. | 67,688 | 3,250 |
Avery Dennison Corp. | 44,214 | 3,188 |
Sherwin-Williams Co. | 1,640 | 467 |
15,480 | ||
Telecommunication Services (2.8%) | ||
Verizon | ||
Communications Inc. | 136,310 | 7,372 |
AT&T Inc. | 113,456 | 4,444 |
CenturyLink Inc. | 109,247 | 3,491 |
15,307 | ||
Utilities (3.4%) | ||
Exelon Corp. | 110,102 | 3,948 |
PPL Corp. | 95,824 | 3,648 |
FirstEnergy Corp. | 94,587 | 3,402 |
Entergy Corp. | 40,802 | 3,235 |
Public Service Enterprise | ||
Group Inc. | 59,274 | 2,794 |
American Electric Power | ||
Co. Inc. | 26,600 | 1,766 |
NiSource Inc. | 3,196 | 76 |
18,869 | ||
Total Common Stocks | ||
(Cost $463,883) | 548,713 | |
Temporary Cash Investments (0.5%)1 | ||
Money Market Fund (0.4%) | ||
2,3 Vanguard Market | ||
Liquidity Fund, 0.495% | 2,326,000 | 2,326 |
Face | ||
Amount | ||
($000) | ||
U.S. Government and Agency Obligations (0.1%) | ||
4,5 Federal Home Loan Bank | ||
Discount Notes, | ||
0.411%, 6/2/16 | 200 | 200 |
Total Temporary Cash Investments | ||
(Cost $2,526) | 2,526 | |
Total Investments (100.2%) | ||
(Cost $466,409) | 551,239 |
Amount | |
($000) | |
Other Assets and Liabilities (-0.2%) | |
Other Assets | |
Investments in Vanguard | 47 |
Receivables for Investment Securities Sold | 2,106 |
Receivables for Accrued Income | 755 |
Receivables for Capital Shares Issued | 1,000 |
Total Other Assets | 3,908 |
Liabilities | |
Payables for Investment Securities | |
Purchased | (1,000) |
Collateral for Securities on Loan | (2,326) |
Payables for Capital Shares Redeemed | (93) |
Payables to Vanguard | (515) |
Other Liabilities | (834) |
Total Liabilities | (4,768) |
Net Assets (100%) | 550,379 |
14
Structured Large-Cap Equity Fund
At March 31, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 453,790 |
Undistributed Net Investment Income | 2,388 |
Accumulated Net Realized Gains | 9,339 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 84,830 |
Futures Contracts | 32 |
Net Assets | 550,379 |
Institutional Shares—Net Assets | |
Applicable to 2,278,481 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 89,558 |
Net Asset Value Per Share— | |
Institutional Shares | $39.31 |
Institutional Plus Shares—Net Assets | |
Applicable to 5,922,060 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 460,821 |
Net Asset Value Per Share— | |
Institutional Plus Shares | $77.81 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $2,224,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.2%, 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 Includes $2,326,000 of collateral received for securities on loan.
4 Securities with a value of $200,000 have been segregated as initial margin for open futures contracts.
5 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full
faith and credit of the U.S. government.
See accompanying Notes, which are an integral part of the Financial Statements.
15
Structured Large-Cap Equity Fund
Statement of Operations
Six Months Ended | |
March 31, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends | 6,891 |
Interest1 | 3 |
Securities Lending | 40 |
Total Income | 6,934 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 225 |
Management and Administrative—Institutional Shares | 39 |
Management and Administrative—Institutional Plus Shares | 130 |
Marketing and Distribution—Institutional Shares | 1 |
Marketing and Distribution—Institutional Plus Shares | 3 |
Custodian Fees | 6 |
Shareholders’ Reports—Institutional Shares | 1 |
Shareholders’ Reports—Institutional Plus Shares | — |
Total Expenses | 405 |
Net Investment Income | 6,529 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 11,849 |
Futures Contracts | 53 |
Realized Net Gain (Loss) | 11,902 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 25,572 |
Futures Contracts | 48 |
Change in Unrealized Appreciation (Depreciation) | 25,620 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 44,051 |
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.
16
Structured Large-Cap Equity Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
March 31, | September 30, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 6,529 | 11,535 |
Realized Net Gain (Loss) | 11,902 | 101,772 |
Change in Unrealized Appreciation (Depreciation) | 25,620 | (100,461) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 44,051 | 12,846 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (1,885) | (1,797) |
Institutional Plus Shares | (10,088) | (11,950) |
Realized Capital Gain | ||
Institutional Shares | (3,050) | — |
Institutional Plus Shares | (16,098) | — |
Total Distributions | (31,121) | (13,747) |
Capital Share Transactions | ||
Institutional Shares | 463 | 31,286 |
Institutional Plus Shares | (7,810) | (223,798) |
Net Increase (Decrease) from Capital Share Transactions | (7,347) | (192,512) |
Total Increase (Decrease) | 5,583 | (193,413) |
Net Assets | ||
Beginning of Period | 544,796 | 738,209 |
End of Period1 | 550,379 | 544,796 |
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $2,388,000 and $7,832,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
17
Structured Large-Cap Equity Fund
Financial Highlights
Institutional Shares | |||||||
Six Months | |||||||
Ended | |||||||
For a Share Outstanding | March 31, | Year Ended September 30, | |||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |
Net Asset Value, Beginning of Period | $38.29 | $38.88 | $32.42 | $27.83 | $21.49 | $20.97 | |
Investment Operations | |||||||
Net Investment Income | . 457 | .7731 | .710 | .618 | .531 | .4281 | |
Net Realized and Unrealized Gain (Loss) | |||||||
on Investments | 2.744 | (.355) | 6.363 | 4.542 | 6.306 | .458 | |
Total from Investment Operations | 3.201 | .418 | 7.073 | 5.160 | 6.837 | .886 | |
Distributions | |||||||
Dividends from Net Investment Income | (. 833) | (1.008) | (. 613) | (. 570) | (. 497) | (. 366) | |
Distributions from Realized Capital Gains | (1.348) | — | — | — | — | — | |
Total Distributions | (2.181) | (1.008) | (.613) | (.570) | (.497) | (.366) | |
Net Asset Value, End of Period | $39.31 | $38.29 | $38.88 | $32.42 | $27.83 | $21.49 | |
Total Return | 8.40% | 1.03% | 22.08% | 18.93% | 32.32% | 4.14% | |
Ratios/Supplemental Data | |||||||
Net Assets, End of Period (Millions) | $90 | $87 | $58 | $52 | $15 | $12 | |
Ratio of Total Expenses to | |||||||
Average Net Assets | 0.18% | 0.20% | 0.24% | 0.24% | 0.24% | 0.24% | |
Ratio of Net Investment Income to | |||||||
Average Net Assets | 2.21% | 1.93% | 1.86% | 2.09% | 2.10% | 1.95% | |
Portfolio Turnover Rate | 75% | 73% | 68% | 62% | 64% | 67% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
See accompanying Notes, which are an integral part of the Financial Statements.
18
Structured Large-Cap Equity Fund
Financial Highlights
Institutional Plus Shares | |||||||
Six Months | |||||||
Ended | |||||||
For a Share Outstanding | March 31, | Year Ended September 30, | |||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |
Net Asset Value, Beginning of Period | $75.80 | $76.94 | $64.10 | $55.02 | $42.48 | $41.98 | |
Investment Operations | |||||||
Net Investment Income | . 918 | 1.5501 | 1.455 | 1.207 | 1.084 | .9101 | |
Net Realized and Unrealized Gain (Loss) | |||||||
on Investments | 5.432 | (.703) | 12.586 | 9.037 | 12.466 | .906 | |
Total from Investment Operations | 6.350 | .847 | 14.041 | 10.244 | 13.550 | 1.816 | |
Distributions | |||||||
Dividends from Net Investment Income | (1.672) | (1.987) | (1.201) | (1.164) | (1.010) | (1.316) | |
Distributions from Realized Capital Gains | (2.668) | — | — | — | — | — | |
Total Distributions | (4.340) | (1.987) | (1.201) | (1.164) | (1.010) | (1.316) | |
Net Asset Value, End of Period | $77.81 | $75.80 | $76.94 | $64.10 | $55.02 | $42.48 | |
Total Return | 8.42% | 1.05% | 22.17% | 19.02% | 32.42% | 4.18% | |
Ratios/Supplemental Data | |||||||
Net Assets, End of Period (Millions) | $461 | $458 | $680 | $612 | $497 | $379 | |
Ratio of Total Expenses to | |||||||
Average Net Assets | 0.14% | 0.16% | 0.17% | 0.17% | 0.17% | 0.17% | |
Ratio of Net Investment Income to | |||||||
Average Net Assets | 2.25% | 1.97% | 1.93% | 2.16% | 2.17% | 2.02% | |
Portfolio Turnover Rate | 75% | 73% | 68% | 62% | 64% | 67% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
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. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.
Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
During the six months ended March 31, 2016, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.
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, 2012–2015), and for the period ended March 31, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
20
Structured Large-Cap Equity Fund
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread
The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
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.
21
Structured Large-Cap Equity Fund
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2016, the fund had contributed to Vanguard capital in the amount of $47,000, representing 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, 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 market value of the fund’s investments as of March 31, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 548,713 | — | — |
Temporary Cash Investments | 2,326 | 200 | — |
Futures Contracts—Liabilities1 | (3) | — | — |
Total | 551,036 | 200 | — |
1 Represents variation margin on the last day of the reporting period. |
D. At March 31, 2016, 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 | June 2016 | 17 | 1,744 | 32 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
22
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.
At March 31, 2016, the cost of investment securities for tax purposes was $466,409,000. Net unrealized appreciation of investment securities for tax purposes was $84,830,000, consisting of unrealized gains of $101,086,000 on securities that had risen in value since their purchase and $16,256,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended March 31, 2016, the fund purchased $206,350,000 of investment securities and sold $238,946,000 of investment securities, other than temporary cash investments.
G. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
March 31, 2016 | September 30, 2015 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 6,057 | 155 | 83,381 | 2,068 |
Issued in Lieu of Cash Distributions | 3,786 | 97 | 1,272 | 33 |
Redeemed | (9,380) | (242) | (53,367) | (1,328) |
Net Increase (Decrease)—Institutional Shares | 463 | 10 | 31,286 | 773 |
Institutional Plus Shares | ||||
Issued | 653 | 9 | 2,279 | 28 |
Issued in Lieu of Cash Distributions | 16,131 | 209 | — | — |
Redeemed | (24,594) | (337) | (226,077) | (2,825) |
Net Increase (Decrease)—Institutional Plus Shares | (7,810) | (119) | (223,798) | (2,797) |
At March 31, 2016, one shareholder was the record or beneficial owner of 83% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.
H. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.
23
Structured Broad Market Fund
Fund Profile
As of March 31, 2016
Share-Class Characteristics | ||
Institutional | Institutional | |
Shares | Plus Shares | |
Ticker Symbol | VSBMX | VSBPX |
Expense Ratio1 | 0.20% | 0.16% |
30-Day SEC Yield | 1.92% | 1.99% |
Portfolio Characteristics | |||
DJ | |||
Russell | U.S. Total | ||
3000 | Market | ||
Fund | Index | FA Index | |
Number of Stocks | 250 | 2,979 | 3,900 |
Median Market Cap | $27.6B | $52.6B | $52.5B |
Price/Earnings Ratio | 16.6x | 21.7x | 21.8x |
Price/Book Ratio | 2.5x | 2.7x | 2.7x |
Return on Equity | 17.2% | 17.6% | 17.5% |
Earnings Growth | |||
Rate | 9.8% | 8.0% | 8.0% |
Dividend Yield | 2.2% | 2.1% | 2.1% |
Foreign Holdings | 0.0% | 0.0% | 0.0% |
Turnover Rate | |||
(Annualized) | 77% | — | — |
Short-Term Reserves | -0.5% | — | — |
Sector Diversification (% of equity exposure) | |||
DJ | |||
Russell | U.S. Total | ||
3000 | Market | ||
Fund | Index | FA Index | |
Consumer | |||
Discretionary | 13.5% | 13.6% | 13.6% |
Consumer Staples | 9.1 | 9.2 | 9.2 |
Energy | 6.1 | 6.1 | 6.1 |
Financials | 17.2 | 17.3 | 17.4 |
Health Care | 13.7 | 13.7 | 13.7 |
Industrials | 11.0 | 10.9 | 10.7 |
Information | |||
Technology | 20.1 | 20.0 | 20.1 |
Materials | 3.2 | 3.2 | 3.2 |
Telecommunication | |||
Services | 2.5 | 2.5 | 2.5 |
Utilities | 3.6 | 3.5 | 3.5 |
Volatility Measures | ||
DJ | ||
Russell | U.S. Total | |
3000 | Market | |
Index | FA Index | |
R-Squared | 0.97 | 0.97 |
Beta | 0.99 | 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) | ||
Apple Inc. | Technology | |
Hardware, Storage & | ||
Peripherals | 2.4% | |
Alphabet Inc. | Internet Software & | |
Services | 2.3 | |
Johnson & Johnson | Pharmaceuticals | 1.9 |
Verizon Communications Integrated | ||
Inc. | Telecommunication | |
Services | 1.6 | |
Microsoft Corp. | Systems Software | 1.5 |
JPMorgan Chase & Co. | Diversified Banks | 1.5 |
Berkshire Hathaway Inc. Multi-Sector Holdings | 1.5 | |
Amazon.com Inc. | Internet Retail | 1.3 |
Exxon Mobil Corp. | Integrated Oil & Gas | 1.1 |
Gilead Sciences Inc. | Biotechnology | 1.1 |
Top Ten | 16.2% |
The holdings listed exclude any temporary cash investments and equity index products.
Investment Focus
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/structuredequityfundsx26x1.jpg)
1 The expense ratios shown are from the prospectus dated January 26, 2016. For the six months ended March 31, 2016, the annualized expense
ratios were 0.19% for Institutional Shares and 0.14% for Institutional Plus Shares.
24
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.
Fiscal-Year Total Returns (%): November 30, 2006, Through March 31, 2016
![](https://capedge.com/proxy/N-CSRS/0000932471-16-013655/structuredequityfundsx27x1.jpg)
Average Annual Total Returns: Periods Ended March 31, 2016 | ||||
Inception | One | Five | Ten | |
Date | Year | Years | Years | |
Institutional Shares | 11/30/2006 | -0.11% | 12.63% | 6.71%1 |
Institutional Plus Shares | 5/3/2004 | -0.06 | 12.70 | 7.25 |
The fund commenced operations as a registered investment company on October 3, 2006. The fund’s performance before that date includes
the performance of a predecessor trust, Vanguard Fiduciary Trust Company Structured Broad Market Trust.
1 Return since inception.
See Financial Highlights for dividend and capital gains information.
25
Structured Broad Market Fund
Financial Statements (unaudited)
Statement of Net Assets
As of March 31, 2016
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 (99.5%)1 | |||
Consumer Discretionary (13.4%) | |||
* | Amazon.com Inc. | 12,479 | 7,408 |
Walt Disney Co. | 59,346 | 5,894 | |
Home Depot Inc. | 39,881 | 5,321 | |
Comcast Corp. Class A | 76,028 | 4,644 | |
NIKE Inc. Class B | 73,033 | 4,489 | |
Lowe’s Cos. Inc. | 58,157 | 4,405 | |
Target Corp. | 52,709 | 4,337 | |
Carnival Corp. | 68,973 | 3,640 | |
* | O’Reilly Automotive Inc. | 13,210 | 3,615 |
Darden Restaurants Inc. | 46,959 | 3,113 | |
Marriott International Inc. | |||
Class A | 40,662 | 2,894 | |
^ | Outerwall Inc. | 77,000 | 2,848 |
Cooper Tire & Rubber Co. | 72,482 | 2,683 | |
* | Smith & Wesson Holding | ||
Corp. | 73,366 | 1,953 | |
General Motors Co. | 58,884 | 1,851 | |
News Corp. Class B | 131,904 | 1,748 | |
Omnicom Group Inc. | 20,880 | 1,738 | |
* | Isle of Capri Casinos Inc. | 116,399 | 1,630 |
* | Boyd Gaming Corp. | 75,500 | 1,560 |
* | American Axle & | ||
Manufacturing | |||
Holdings Inc. | 79,300 | 1,220 | |
^ | World Wrestling | ||
Entertainment Inc. Class A | 67,501 | 1,192 | |
Sinclair Broadcast Group Inc. | |||
Class A | 31,300 | 963 | |
Sturm Ruger & Co. Inc. | 12,948 | 885 | |
Leggett & Platt Inc. | 14,327 | 693 | |
New York Times Co. Class A | 48,377 | 603 | |
* | Discovery Communications | ||
Inc. Class A | 20,807 | 596 | |
Abercrombie & Fitch Co. | 13,768 | 434 | |
* | Penn National Gaming Inc. | 25,671 | 429 |
Whirlpool Corp. | 2,279 | 411 | |
McDonald’s Corp. | 3,074 | 386 |
DR Horton Inc. | 10,975 | 332 | |
* | Michael Kors Holdings Ltd. | 5,591 | 319 |
* | Cooper-Standard Holding Inc. | 3,889 | 279 |
Nordstrom Inc. | 4,761 | 272 | |
74,785 | |||
Consumer Staples (9.1%) | |||
Altria Group Inc. | 91,948 | 5,761 | |
Wal-Mart Stores Inc. | 82,188 | 5,629 | |
Kroger Co. | 97,630 | 3,734 | |
Tyson Foods Inc. Class A | 51,950 | 3,463 | |
^ | Cal-Maine Foods Inc. | 57,038 | 2,961 |
Universal Corp. | 52,000 | 2,954 | |
Procter & Gamble Co. | 34,551 | 2,844 | |
Dr Pepper Snapple | |||
Group Inc. | 31,602 | 2,826 | |
Dean Foods Co. | 150,219 | 2,602 | |
*,^ | Herbalife Ltd. | 40,513 | 2,494 |
Bunge Ltd. | 42,549 | 2,411 | |
^ | Coty Inc. Class A | 62,152 | 1,730 |
Ingles Markets Inc. Class A | 41,556 | 1,558 | |
Coca-Cola Co. | 33,365 | 1,548 | |
Energizer Holdings Inc. | 35,809 | 1,451 | |
ConAgra Foods Inc. | 27,932 | 1,246 | |
PepsiCo Inc. | 11,405 | 1,169 | |
* | USANA Health Sciences Inc. | 9,100 | 1,105 |
Philip Morris International Inc. | 8,815 | 865 | |
SpartanNash Co. | 24,140 | 732 | |
* | Omega Protein Corp. | 29,100 | 493 |
^ | Natural Health Trends Corp. | 12,550 | 416 |
CVS Health Corp. | 3,107 | 322 | |
50,314 | |||
Energy (6.1%) | |||
Exxon Mobil Corp. | 75,582 | 6,318 | |
Valero Energy Corp. | 58,500 | 3,752 | |
Tesoro Corp. | 33,950 | 2,920 | |
PBF Energy Inc. Class A | 85,572 | 2,841 | |
Noble Corp. plc | 243,586 | 2,521 | |
^ | Ship Finance | ||
International Ltd. | 177,541 | 2,466 |
26
Structured Broad Market Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Rowan Cos. plc Class A | 150,304 | 2,420 | |
^ | Nordic American | ||
Tankers Ltd. | 158,459 | 2,233 | |
Chevron Corp. | 17,765 | 1,695 | |
^ | Frontline Ltd. | 159,600 | 1,336 |
Western Refining Inc. | 44,945 | 1,307 | |
Teekay Tankers Ltd. | |||
Class A | 280,749 | 1,030 | |
Phillips 66 | 11,678 | 1,011 | |
Marathon Petroleum Corp. | 15,317 | 570 | |
Ensco plc Class A | 39,261 | 407 | |
* | FMC Technologies Inc. | 10,970 | 300 |
HollyFrontier Corp. | 8,296 | 293 | |
Scorpio Tankers Inc. | 46,735 | 273 | |
DHT Holdings Inc. | 44,603 | 257 | |
33,950 | |||
Financials (17.1%) | |||
JPMorgan Chase & Co. | 141,636 | 8,388 | |
* | Berkshire Hathaway Inc. | ||
Class B | 57,500 | 8,158 | |
Citigroup Inc. | 144,700 | 6,041 | |
Bank of America Corp. | 419,200 | 5,668 | |
Wells Fargo & Co. | 102,326 | 4,948 | |
Travelers Cos. Inc. | 33,825 | 3,948 | |
MSCI Inc. Class A | 41,253 | 3,056 | |
Gaming and Leisure | |||
Properties Inc. | 95,730 | 2,960 | |
Assured Guaranty Ltd. | 115,300 | 2,917 | |
* | Walker & Dunlop Inc. | 108,389 | 2,631 |
Ameriprise Financial Inc. | 27,900 | 2,623 | |
Hospitality Properties Trust | 93,512 | 2,484 | |
^ | Universal Insurance | ||
Holdings Inc. | 136,718 | 2,434 | |
American Express Co. | 37,272 | 2,288 | |
* | MGIC Investment Corp. | 296,000 | 2,270 |
Lazard Ltd. Class A | 57,778 | 2,242 | |
Heritage Insurance | |||
Holdings Inc. | 138,013 | 2,204 | |
Lamar Advertising Co. | |||
Class A | 35,712 | 2,196 | |
Prudential Financial Inc. | 28,998 | 2,094 | |
Digital Realty Trust Inc. | 22,500 | 1,991 | |
CoreSite Realty Corp. | 27,900 | 1,953 | |
Bank of New York Mellon | |||
Corp. | 45,875 | 1,690 | |
Government Properties | |||
Income Trust | 89,118 | 1,591 | |
Simon Property Group Inc. | 7,058 | 1,466 | |
CBL & Associates | |||
Properties Inc. | 120,000 | 1,428 | |
Communications Sales | |||
& Leasing Inc. | 58,453 | 1,301 | |
Ryman Hospitality | |||
Properties Inc. | 23,400 | 1,205 | |
AvalonBay Communities Inc. | 5,687 | 1,082 |
^ | Apple Hospitality REIT Inc. | 53,500 | 1,060 |
Capital One Financial Corp. | 15,094 | 1,046 | |
DuPont Fabros | |||
Technology Inc. | 24,500 | 993 | |
Mack-Cali Realty Corp. | 42,228 | 992 | |
Unum Group | 29,048 | 898 | |
Everest Re Group Ltd. | 3,900 | 770 | |
SunTrust Banks Inc. | 16,865 | 608 | |
Nelnet Inc. Class A | 14,966 | 589 | |
Weingarten Realty Investors | 14,841 | 557 | |
Fifth Third Bancorp | 26,364 | 440 | |
Discover Financial Services | 8,617 | 439 | |
Monmouth Real Estate | |||
Investment Corp. | 35,585 | 423 | |
Hartford Financial Services | |||
Group Inc. | 8,100 | 373 | |
Xenia Hotels & Resorts Inc. | 23,626 | 369 | |
* | INTL. FCStone Inc. | 13,772 | 368 |
Navient Corp. | 29,933 | 358 | |
* | E*TRADE Financial Corp. | 14,240 | 349 |
OM Asset Management plc | 24,747 | 330 | |
* | KCG Holdings Inc. Class A | 25,512 | 305 |
* | Ally Financial Inc. | 15,460 | 289 |
Nasdaq Inc. | 4,287 | 285 | |
95,098 | |||
Health Care (13.6%) | |||
Johnson & Johnson | 97,033 | 10,499 | |
Gilead Sciences Inc. | 68,551 | 6,297 | |
Bristol-Myers Squibb Co. | 85,200 | 5,443 | |
Amgen Inc. | 29,900 | 4,483 | |
Eli Lilly & Co. | 61,720 | 4,445 | |
* | Express Scripts Holding Co. | 55,835 | 3,835 |
Anthem Inc. | 25,900 | 3,600 | |
Cardinal Health Inc. | 39,695 | 3,253 | |
Aetna Inc. | 28,861 | 3,243 | |
UnitedHealth Group Inc. | 24,523 | 3,161 | |
AmerisourceBergen Corp. | |||
Class A | 35,900 | 3,107 | |
* | Charles River Laboratories | ||
International Inc. | 39,800 | 3,022 | |
* | INC Research Holdings Inc. | ||
Class A | 69,162 | 2,850 | |
Merck & Co. Inc. | 53,231 | 2,816 | |
* | PRA Health Sciences Inc. | 62,828 | 2,687 |
* | Amsurg Corp. | 30,100 | 2,246 |
Pfizer Inc. | 62,125 | 1,841 | |
* | HCA Holdings Inc. | 19,204 | 1,499 |
* | Quintiles Transnational | ||
Holdings Inc. | 18,700 | 1,217 | |
* | Hologic Inc. | 28,419 | 980 |
McKesson Corp. | 6,000 | 944 | |
AbbVie Inc. | 16,009 | 914 | |
Cigna Corp. | 6,500 | 892 | |
* | Infinity | ||
Pharmaceuticals Inc. | 155,500 | 820 |
27
Structured Broad Market Fund
Market | |||
Value• | |||
Shares | ($000) | ||
* | ICU Medical Inc. | 5,757 | 599 |
* | Amedisys Inc. | 9,697 | 469 |
* | Prestige Brands | ||
Holdings Inc. | 7,853 | 419 | |
Bruker Corp. | 11,751 | 329 | |
75,910 | |||
Industrials (10.9%) | |||
General Electric Co. | 164,425 | 5,227 | |
Northrop Grumman Corp. | 20,020 | 3,962 | |
General Dynamics Corp. | 28,400 | 3,731 | |
* | Hawaiian Holdings Inc. | 68,075 | 3,213 |
Huntington Ingalls | |||
Industries Inc. | 23,400 | 3,204 | |
PACCAR Inc. | 57,989 | 3,171 | |
* | Wabash National Corp. | 232,891 | 3,074 |
BWX Technologies Inc. | 89,912 | 3,017 | |
* | Spirit AeroSystems | ||
Holdings Inc. Class A | 66,411 | 3,012 | |
Global Brass & Copper | |||
Holdings Inc. | 118,163 | 2,948 | |
* | JetBlue Airways Corp. | 119,400 | 2,522 |
Cintas Corp. | 26,404 | 2,371 | |
Boeing Co. | 17,884 | 2,270 | |
* | United Continental | ||
Holdings Inc. | 35,651 | 2,134 | |
Southwest Airlines Co. | 47,258 | 2,117 | |
Owens Corning | 39,075 | 1,848 | |
Alaska Air Group Inc. | 19,630 | 1,610 | |
Briggs & Stratton Corp. | 66,068 | 1,580 | |
Ennis Inc. | 77,668 | 1,518 | |
Comfort Systems USA Inc. | 41,918 | 1,332 | |
SkyWest Inc. | 49,001 | 980 | |
Interface Inc. Class A | 49,792 | 923 | |
Masco Corp. | 29,067 | 914 | |
Herman Miller Inc. | 25,971 | 802 | |
* | Quanta Services Inc. | 33,754 | 762 |
B/E Aerospace Inc. | 14,616 | 674 | |
Insteel Industries Inc. | 13,625 | 417 | |
Trinity Industries Inc. | 18,819 | 345 | |
Fluor Corp. | 6,076 | 326 | |
General Cable Corp. | 26,187 | 320 | |
Steelcase Inc. Class A | 21,040 | 314 | |
60,638 | |||
Information Technology (20.0%) | |||
Apple Inc. | 121,505 | 13,243 | |
Microsoft Corp. | 155,297 | 8,577 | |
* | Alphabet Inc. Class A | 9,690 | 7,392 |
* | Alphabet Inc. Class C | 7,047 | 5,250 |
Accenture plc Class A | 43,045 | 4,967 | |
* | Facebook Inc. Class A | 30,161 | 3,441 |
CDW Corp. | 77,200 | 3,204 | |
Booz Allen Hamilton | |||
Holding Corp. Class A | 103,700 | 3,140 | |
* | Aspen Technology Inc. | 84,492 | 3,053 |
* | Tech Data Corp. | 39,377 | 3,023 |
* | Sykes Enterprises Inc. | 96,182 | 2,903 |
CSG Systems | |||
International Inc. | 63,184 | 2,853 | |
* | GoDaddy Inc. Class A | 85,923 | 2,778 |
* | Cirrus Logic Inc. | 75,554 | 2,751 |
* | Manhattan Associates Inc. | 48,325 | 2,748 |
Intel Corp. | 82,524 | 2,670 | |
EarthLink Holdings Corp. | 465,912 | 2,642 | |
CSRA Inc. | 96,320 | 2,591 | |
Computer Sciences Corp. | 73,477 | 2,527 | |
* | Sigma Designs Inc. | 350,200 | 2,381 |
* | Electronic Arts Inc. | 35,623 | 2,355 |
Broadcom Ltd. | 13,942 | 2,154 | |
Avnet Inc. | 47,236 | 2,093 | |
SYNNEX Corp. | 22,071 | 2,043 | |
International Business | |||
Machines Corp. | 12,686 | 1,921 | |
Jabil Circuit Inc. | 90,771 | 1,749 | |
HP Inc. | 125,000 | 1,540 | |
Texas Instruments Inc. | 24,408 | 1,401 | |
* | Extreme Networks Inc. | 445,795 | 1,386 |
Leidos Holdings Inc. | 26,049 | 1,311 | |
* | ON Semiconductor Corp. | 132,000 | 1,266 |
* | Advanced Micro | ||
Devices Inc. | 433,705 | 1,236 | |
Broadridge Financial | |||
Solutions Inc. | 19,100 | 1,133 | |
* | Gigamon Inc. | 30,198 | 937 |
* | Cadence Design | ||
Systems Inc. | 39,326 | 927 | |
Visa Inc. Class A | 11,820 | 904 | |
Cisco Systems Inc. | 23,383 | 666 | |
Intuit Inc. | 6,342 | 660 | |
* | NeoPhotonics Corp. | 46,000 | 646 |
* | Wix.com Ltd. | 26,000 | 527 |
* | Benchmark Electronics Inc. | 18,020 | 415 |
* | NCR Corp. | 12,568 | 376 |
NVIDIA Corp. | 9,364 | 334 | |
* | First Data Corp. Class A | 24,423 | 316 |
Oracle Corp. | 7,398 | 303 | |
DST Systems Inc. | 2,590 | 292 | |
111,025 | |||
Materials (3.2%) | |||
Dow Chemical Co. | 86,200 | 4,384 | |
LyondellBasell Industries | |||
NV Class A | 41,223 | 3,528 | |
*,^ | Trinseo SA | 79,818 | 2,938 |
Sealed Air Corp. | 56,808 | 2,727 | |
Avery Dennison Corp. | 23,625 | 1,704 | |
* | Chemtura Corp. | 54,786 | 1,446 |
International Paper Co. | 16,128 | 662 | |
AEP Industries Inc. | 7,500 | 495 | |
17,884 |
28
Structured Broad Market Fund
Market | |||
Value• | |||
Shares | ($000) | ||
Telecommunication Services (2.5%) | |||
Verizon | |||
Communications Inc. | 160,203 | 8,664 | |
AT&T Inc. | 78,245 | 3,065 | |
CenturyLink Inc. | 50,686 | 1,620 | |
* | Cincinnati Bell Inc. | 175,505 | 679 |
14,028 | |||
Utilities (3.6%) | |||
Exelon Corp. | 107,100 | 3,841 | |
Public Service Enterprise | |||
Group Inc. | 76,677 | 3,615 | |
FirstEnergy Corp. | 94,495 | 3,399 | |
UGI Corp. | 79,176 | 3,190 | |
American Electric Power | |||
Co. Inc. | 42,200 | 2,802 | |
WGL Holdings Inc. | 19,968 | 1,445 | |
Entergy Corp. | 13,495 | 1,070 | |
PPL Corp. | 13,565 | 516 | |
19,878 | |||
Total Common Stocks | |||
(Cost $462,514) | 553,510 | ||
Temporary Cash Investments (1.9%)1 | |||
Money Market Fund (1.8%) | |||
2,3 | Vanguard Market | ||
Liquidity Fund, 0.495% | 10,540,902 | 10,541 | |
Face | |||
Amount | |||
($000) | |||
U.S. Government and Agency Obligations (0.1%) | |||
4,5 | Federal Home Loan Bank | ||
Discount Notes, | |||
0.572%, 6/22/16 | 200 | 200 | |
5,6 | Freddie Mac Discount Notes, | ||
0.220%, 4/15/16 | 100 | 100 | |
300 | |||
Total Temporary Cash Investments | |||
(Cost $10,840) | 10,841 | ||
Total Investments (101.4%) | |||
(Cost $473,354) | 564,351 |
Amount | |
($000) | |
Other Assets and Liabilities (-1.4%) | |
Other Assets | |
Investment in Vanguard | 48 |
Receivables for Investment Securities Sold | 3,303 |
Receivables for Accrued Income | 558 |
Total Other Assets | 3,909 |
Liabilities | |
Payables for Investment Securities | |
Purchased | (843) |
Collateral for Securities on Loan | (10,541) |
Payables to Vanguard | (331) |
Other Liabilities | (25) |
Total Liabilities | (11,740) |
Net Assets (100%) | 556,520 |
29
Structured Broad Market Fund
At March 31, 2016, net assets consisted of: | |
Amount | |
($000) | |
Paid-in Capital | 449,388 |
Undistributed Net Investment Income | 2,493 |
Accumulated Net Realized Gains | 13,586 |
Unrealized Appreciation (Depreciation) | |
Investment Securities | 90,997 |
Futures Contracts | 56 |
Net Assets | 556,520 |
Institutional Shares—Net Assets | |
Applicable to 1,147,331 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 36,468 |
Net Asset Value Per Share— | |
Institutional Shares | $31.78 |
Institutional Plus Shares—Net Assets | |
Applicable to 8,185,541 outstanding | |
$.001 par value shares of beneficial | |
interest (unlimited authorization) | 520,052 |
Net Asset Value Per Share— | |
Institutional Plus Shares | $63.53 |
• See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $10,167,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 1.4%, 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 Includes $10,541,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full
faith and credit of the U.S. government.
5 Securities with a value of $300,000 have been segregated as initial margin for open futures contracts.
6 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for
senior preferred stock.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.
30
Structured Broad Market Fund
Statement of Operations
Six Months Ended | |
March 31, 2016 | |
($000) | |
Investment Income | |
Income | |
Dividends | 6,623 |
Interest1 | 5 |
Securities Lending | 368 |
Total Income | 6,996 |
Expenses | |
The Vanguard Group—Note B | |
Investment Advisory Services | 229 |
Management and Administrative—Institutional Shares | 17 |
Management and Administrative—Institutional Plus Shares | 147 |
Marketing and Distribution—Institutional Shares | — |
Marketing and Distribution—Institutional Plus Shares | 4 |
Custodian Fees | 6 |
Shareholders’ Reports—Institutional Shares | — |
Shareholders’ Reports—Institutional Plus Shares | — |
Total Expenses | 403 |
Net Investment Income | 6,593 |
Realized Net Gain (Loss) | |
Investment Securities Sold | 13,452 |
Futures Contracts | 133 |
Realized Net Gain (Loss) | 13,585 |
Change in Unrealized Appreciation (Depreciation) | |
Investment Securities | 7,789 |
Futures Contracts | 103 |
Change in Unrealized Appreciation (Depreciation) | 7,892 |
Net Increase (Decrease) in Net Assets Resulting from Operations | 28,070 |
1 Interest income from an affiliated company of the fund was $4,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
31
Structured Broad Market Fund
Statement of Changes in Net Assets
Six Months Ended | Year Ended | |
March 31, | September 30, | |
2016 | 2015 | |
($000) | ($000) | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net Investment Income | 6,593 | 10,839 |
Realized Net Gain (Loss) | 13,585 | 48,798 |
Change in Unrealized Appreciation (Depreciation) | 7,892 | (44,242) |
Net Increase (Decrease) in Net Assets Resulting from Operations | 28,070 | 15,395 |
Distributions | ||
Net Investment Income | ||
Institutional Shares | (640) | (434) |
Institutional Plus Shares | (11,581) | (9,024) |
Realized Capital Gain1 | ||
Institutional Shares | (2,234) | (3,078) |
Institutional Plus Shares | (40,149) | (61,848) |
Total Distributions | (54,604) | (74,384) |
Capital Share Transactions | ||
Institutional Shares | 13,608 | 1,642 |
Institutional Plus Shares | 19,030 | 65,576 |
Net Increase (Decrease) from Capital Share Transactions | 32,638 | 67,218 |
Total Increase (Decrease) | 6,104 | 8,229 |
Net Assets | ||
Beginning of Period | 550,416 | 542,187 |
End of Period2 | 556,520 | 550,416 |
1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $251,000 and $16,777,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $2,493,000 and $8,121,000.
See accompanying Notes, which are an integral part of the Financial Statements.
32
Structured Broad Market Fund
Financial Highlights
Institutional Shares | |||||||
Six Months | |||||||
Ended | |||||||
For a Share Outstanding | March 31, | Year Ended September 30, | |||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |
Net Asset Value, Beginning of Period | $33.24 | $37.28 | $32.59 | $27.10 | $21.03 | $20.70 | |
Investment Operations | |||||||
Net Investment Income | . 384 | . 662 | . 632 | . 573 | . 544 | . 3851 | |
Net Realized and Unrealized Gain (Loss) | |||||||
on Investments | 1.421 | .394 | 5.996 | 5.492 | 5.973 | .338 | |
Total from Investment Operations | 1.805 | 1.056 | 6.628 | 6.065 | 6.517 | .723 | |
Distributions | |||||||
Dividends from Net Investment Income | (.727) | (. 630) | (. 564) | (. 575) | (. 447) | (. 393) | |
Distributions from Realized Capital Gains | (2.538) | (4.466) | (1.374) | — | — | — | |
Total Distributions | (3.265) | (5.096) | (1.938) | (.575) | (.447) | (.393) | |
Net Asset Value, End of Period | $31.78 | $33.24 | $37.28 | $32.59 | $27.10 | $21.03 | |
Total Return | 5.24% | 2.80% | 21.10% | 22.85% | 31.43% | 3.37% | |
Ratios/Supplemental Data | |||||||
Net Assets, End of Period (Millions) | $36 | $25 | $26 | $16 | $7 | $6 | |
Ratio of Total Expenses to | |||||||
Average Net Assets | 0.19% | 0.20% | 0.24% | 0.24% | 0.24% | 0.24% | |
Ratio of Net Investment Income to | |||||||
Average Net Assets | 2.20% | 1.86% | 1.67% | 1.94% | 2.19% | 1.64% | |
Portfolio Turnover Rate | 77% | 66% | 60% | 63% | 58% | 56% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
See accompanying Notes, which are an integral part of the Financial Statements.
33
Structured Broad Market Fund
Financial Highlights
Institutional Plus Shares | |||||||
Six Months | |||||||
Ended | |||||||
For a Share Outstanding | March 31, | Year Ended September 30, | |||||
Throughout Each Period | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | |
Net Asset Value, Beginning of Period | $66.43 | $74.52 | $65.15 | $54.17 | $42.02 | $41.36 | |
Investment Operations | |||||||
Net Investment Income | .767 | 1.355 | 1.303 | 1.186 | 1.122 | .7961 | |
Net Realized and Unrealized Gain (Loss) | |||||||
on Investments | 2.868 | .781 | 11.981 | 10.980 | 11.951 | .672 | |
Total from Investment Operations | 3.635 | 2.136 | 13.284 | 12.166 | 13.073 | 1.468 | |
Distributions | |||||||
Dividends from Net Investment Income | (1.463) | (1.302) | (1.169) | (1.186) | (.923) | (.808) | |
Distributions from Realized Capital Gains | (5.072) | (8.924) | (2.745) | — | — | — | |
Total Distributions | (6.535) | (10.226) | (3.914) | (1.186) | (.923) | (.808) | |
Net Asset Value, End of Period | $63.53 | $66.43 | $74.52 | $65.15 | $54.17 | $42.02 | |
Total Return | 5.28% | 2.84% | 21.16% | 22.95% | 31.56% | 3.43% | |
Ratios/Supplemental Data | |||||||
Net Assets, End of Period (Millions) | $520 | $526 | $516 | $465 | $379 | $290 | |
Ratio of Total Expenses to | |||||||
Average Net Assets | 0.14% | 0.16% | 0.17% | 0.17% | 0.17% | 0.17% | |
Ratio of Net Investment Income to | |||||||
Average Net Assets | 2.25% | 1.90% | 1.74% | 2.01% | 2.26% | 1.71% | |
Portfolio Turnover Rate | 77% | 66% | 60% | 63% | 58% | 56% |
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.
See accompanying Notes, which are an integral part of the Financial Statements.
34
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. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.
2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.
Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).
During the six months ended March 31, 2016, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.
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, 2012–2015), and for the period ended March 31, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.
35
Structured Broad Market Fund
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.
6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread
The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.
7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
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.
36
Structured Broad Market Fund
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2016, the fund had contributed to Vanguard capital in the amount of $48,000, representing 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, 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 market value of the fund’s investments as of March 31, 2016, based on the inputs used to value them:
Level 1 | Level 2 | Level 3 | |
Investments | ($000) | ($000) | ($000) |
Common Stocks | 553,510 | — | — |
Temporary Cash Investments | 10,541 | 300 | — |
Futures Contracts—Liabilities1 | (5) | — | — |
Total | 564,046 | 300 | — |
1 Represents variation margin on the last day of the reporting period. |
D. At March 31, 2016, 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 | June 2016 | 29 | 2,975 | 56 |
Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.
37
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. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.
At March 31, 2016, the cost of investment securities for tax purposes was $473,473,000. Net unrealized appreciation of investment securities for tax purposes was $90,878,000, consisting of unrealized gains of $108,972,000 on securities that had risen in value since their purchase and $18,094,000 in unrealized losses on securities that had fallen in value since their purchase.
F. During the six months ended March 31, 2016, the fund purchased $217,505,000 of investment securities and sold $232,544,000 of investment securities, other than temporary cash investments.
G. Capital share transactions for each class of shares were:
Six Months Ended | Year Ended | |||
March 31, 2016 | September 30, 2015 | |||
Amount | Shares | Amount | Shares | |
($000) | (000) | ($000) | (000) | |
Institutional Shares | ||||
Issued | 11,933 | 357 | — | — |
Issued in Lieu of Cash Distributions | 1,675 | 52 | 1,642 | 49 |
Redeemed | — | — | — | — |
Net Increase (Decrease)—Institutional Shares | 13,608 | 409 | 1,642 | 49 |
Institutional Plus Shares | ||||
Issued | 4,998 | 88 | 3,000 | 45 |
Issued in Lieu of Cash Distributions | 41,158 | 635 | 62,576 | 940 |
Redeemed | (27,126) | (453) | — | — |
Net Increase (Decrease)—Institutional Plus Shares | 19,030 | 270 | 65,576 | 985 |
At March 31, 2016, one shareholder was the record or beneficial owner of 93% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.
H. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.
38
About Your Fund’s Expenses
As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The accompanying table illustrates your fund’s costs in two ways:
• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“
• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”
The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.
You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.
39
Six Months Ended March 31, 2016 | |||
Beginning | Ending | Expenses | |
Account Value | Account Value | Paid During | |
9/30/2015 | 3/31/2016 | Period | |
Based on Actual Fund Return | |||
Structured Large-Cap Equity Fund | |||
Institutional Shares | $1,000.00 | $1,084.01 | $0.94 |
Institutional Plus Shares | 1,000.00 | 1,084.17 | 0.73 |
Structured Broad Market Fund | |||
Institutional Shares | $1,000.00 | $1,052.39 | $0.97 |
Institutional Plus Shares | 1,000.00 | 1,052.84 | 0.72 |
Based on Hypothetical 5% Yearly Return | |||
Structured Large-Cap Equity Fund | |||
Institutional Shares | $1,000.00 | $1,024.10 | $0.91 |
Institutional Plus Shares | 1,000.00 | 1,024.30 | 0.71 |
Structured Broad Market Fund | |||
Institutional Shares | $1,000.00 | $1,024.05 | $0.96 |
Institutional Plus Shares | 1,000.00 | 1,024.30 | 0.71 |
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, 0.18% for Institutional Shares and 0.14% for Institutional Plus Shares; for the Structured
Broad Market Fund, 0.19% for Institutional Shares and 0.14% 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 (183/366).
40
Trustees Approve Advisory Arrangements
The board of trustees of Vanguard Structured Large-Cap Equity and Structured Broad Market Funds has renewed each fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard)—through its Quantitative Equity Group. The board determined that continuing each fund’s internalized management structure was in the best interests of the funds and their 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 arrangements. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of each fund’s investment management services over both the short and long term, and took into account the organizational depth and stability of the advisor. The board considered that Vanguard has been managing investments for more than three decades. The Quantitative Equity Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangements.
Investment performance
The board considered the performance of the funds since their inceptions, including any periods of outperformance or underperformance relative to a benchmark index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about each fund’s most recent performance can be found in the Performance Summary pages of this report.
Cost
The board concluded that the funds’ expense ratios were well below the average expense ratios charged by funds in their respective peer groups and that the funds’ advisory fee rates were also well below their peer-group averages. Information about the funds’ expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements sections.
The board does not conduct a profitability analysis of Vanguard, because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees, and produces “profits” only in the form of reduced expenses for fund shareholders.
The benefit of economies of scale
The board concluded that the funds’ at-cost arrangements with Vanguard ensures that the funds will realize economies of scale as they grow, with the cost to shareholders declining as fund assets increase.
The board will consider whether to renew the advisory arrangements again after a one-year period.
41
Glossary
30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.
Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.
Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.
Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.
Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.
Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.
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.
42
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.
43
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 198 Vanguard funds.
The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.
InterestedTrustee1 | Rajiv L. Gupta |
Born 1945. Trustee Since December 2001.2 Principal | |
F. William McNabb III | Occupation(s) During the Past Five Years and Other |
Born 1957. Trustee Since July 2009. Chairman of | Experience: Chairman and Chief Executive Officer |
the Board. Principal Occupation(s) During the Past | (retired 2009) and President (2006–2008) of |
Five Years and Other Experience: Chairman of the | Rohm and Haas Co. (chemicals); Director of Tyco |
Board of The Vanguard Group, Inc., and of each of | International PLC (diversified manufacturing and |
the investment companies served by The Vanguard | services), HP Inc. (printer and personal computer |
Group, since January 2010; Director of The Vanguard | manufacturing), and Delphi Automotive PLC |
Group since 2008; Chief Executive Officer and | (automotive components); Senior Advisor at |
President of The Vanguard Group, and of each of | New Mountain Capital. |
the investment companies served by The Vanguard | |
Group, since 2008; Director of Vanguard Marketing | Amy Gutmann |
Corporation; Managing Director of The Vanguard | Born 1949. Trustee Since June 2006. Principal |
Group (1995–2008). | Occupation(s) During the Past Five Years and |
Other Experience: President of the University of | |
IndependentTrustees | Pennsylvania; Christopher H. Browne Distinguished |
Professor of Political Science, School of Arts and | |
Emerson U. Fullwood | Sciences, and Professor of Communication, Annenberg |
Born 1948. Trustee Since January 2008. Principal | School for Communication, with secondary faculty |
Occupation(s) During the Past Five Years and Other | appointments in the Department of Philosophy, School |
Experience: Executive Chief Staff and Marketing | of Arts and Sciences, and at the Graduate School of |
Officer for North America and Corporate Vice President | Education, University of Pennsylvania; Trustee of the |
(retired 2008) of Xerox Corporation (document manage- | National Constitution Center; Chair of the Presidential |
ment products and services); Executive in Residence | Commission for the Study of Bioethical Issues. |
and 2009–2010 Distinguished Minett Professor at | |
the Rochester Institute of Technology; Lead Director | JoAnn Heffernan Heisen |
of SPX FLOW, Inc. (multi-industry manufacturing); | Born 1950. Trustee Since July 1998. Principal |
Director of the United Way of Rochester, the University | Occupation(s) During the Past Five Years and |
of Rochester Medical Center, Monroe Community | Other Experience: Corporate Vice President and |
College Foundation, North Carolina A&T University, | Chief Global Diversity Officer (retired 2008) and |
and Roberts Wesleyan College. | Member of the Executive Committee (1997–2008) |
of Johnson & Johnson (pharmaceuticals/medical | |
devices/consumer products); Director of Skytop | |
Lodge Corporation (hotels) and the Robert Wood | |
Johnson Foundation; Member of the Advisory | |
Board of the Institute for Women’s Leadership | |
at Rutgers University. |
F. Joseph Loughrey | Executive Officers | |
Born 1949. Trustee Since October 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Glenn Booraem | |
Experience: President and Chief Operating Officer | Born 1967. Treasurer Since May 2015. Principal | |
(retired 2009) of Cummins Inc. (industrial machinery); | Occupation(s) During the Past Five Years and | |
Chairman of the Board of Hillenbrand, Inc. (specialized | Other Experience: Principal of The Vanguard Group, | |
consumer services), and of Oxfam America; Director | Inc.; Treasurer of each of the investment companies | |
of SKF AB (industrial machinery), Hyster-Yale Materials | served by The Vanguard Group; Controller of each of | |
Handling, Inc. (forklift trucks), the Lumina Foundation | the investment companies served by The Vanguard | |
for Education, and the V Foundation for Cancer | Group (2010–2015); Assistant Controller of each of | |
Research; Member of the Advisory Council for the | the investment companies served by The Vanguard | |
College of Arts and Letters and of the Advisory Board | Group (2001–2010). | |
to the Kellogg Institute for International Studies, both | ||
at the University of Notre Dame. | Thomas J. Higgins | |
Born 1957. Chief Financial Officer Since September | ||
Mark Loughridge | 2008. Principal Occupation(s) During the Past Five | |
Born 1953. Trustee Since March 2012. Principal | Years and Other Experience: Principal of The Vanguard | |
Occupation(s) During the Past Five Years and Other | Group, Inc.; Chief Financial Officer of each of the | |
Experience: Senior Vice President and Chief Financial | investment companies served by The Vanguard Group; | |
Officer (retired 2013) at IBM (information technology | Treasurer of each of the investment companies served | |
services); Fiduciary Member of IBM’s Retirement Plan | by The Vanguard Group (1998–2008). | |
Committee (2004–2013); Director of the Dow Chemical | ||
Company; Member of the Council on Chicago Booth. | Peter Mahoney | |
Born 1974. Controller Since May 2015. Principal | ||
Scott C. Malpass | Occupation(s) During the Past Five Years and | |
Born 1962. Trustee Since March 2012. Principal | Other Experience: Head of Global Fund Accounting | |
Occupation(s) During the Past Five Years and Other | at The Vanguard Group, Inc.; Controller of each of the | |
Experience: Chief Investment Officer and Vice | investment companies served by The Vanguard Group; | |
President at the University of Notre Dame; Assistant | Head of International Fund Services at The Vanguard | |
Professor of Finance at the Mendoza College of | Group (2008–2014). | |
Business at Notre Dame; Member of the Notre Dame | ||
403(b) Investment Committee, the Board of Advisors | Heidi Stam | |
for Spruceview Capital Partners, and the Investment | Born 1956. Secretary Since July 2005. Principal | |
Advisory Committee of Major League Baseball; Board | Occupation(s) During the Past Five Years and Other | |
Member of TIFF Advisory Services, Inc., and Catholic | Experience: Managing Director of The Vanguard | |
Investment Services, Inc. (investment advisors). | Group, Inc.; General Counsel of The Vanguard Group; | |
Secretary of The Vanguard Group and of each of the | ||
André F. Perold | investment companies served by The Vanguard Group; | |
Born 1952. Trustee Since December 2004. Principal | Director and Senior Vice President of Vanguard | |
Occupation(s) During the Past Five Years and Other | Marketing Corporation. | |
Experience: George Gund Professor of Finance and | ||
Banking, Emeritus at the Harvard Business School | Vanguard Senior ManagementTeam | |
(retired 2011); Chief Investment Officer and Managing | Mortimer J. Buckley | James M. Norris |
Partner of HighVista Strategies LLC (private investment | Kathleen C. Gubanich | Thomas M. Rampulla |
firm); Director of Rand Merchant Bank; Overseer of | Martha G. King | Glenn W. Reed |
the Museum of Fine Arts Boston. | John T. Marcante | Karin A. Risi |
Chris D. McIsaac | ||
Peter F. Volanakis | ||
Born 1955. Trustee Since July 2009. Principal | ||
Occupation(s) During the Past Five Years and Other | Chairman Emeritus and Senior Advisor | |
Experience: President and Chief Operating Officer | ||
(retired 2010) of Corning Incorporated (communications | John J. Brennan | |
equipment); Trustee of Colby-Sawyer College and | Chairman, 1996–2009 | |
Chairman of its Finance and Enrollment Committee; | Chief Executive Officer and President, 1996–2008 | |
Member of the Advisory Board of the Norris Cotton | ||
Cancer Center. | Founder | |
John C. Bogle | ||
Chairman and Chief Executive Officer, 1974–1996 |
1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.
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P.O. Box 2600 | ||
Valley Forge, PA 19482-2600 | ||
Connect with Vanguard® > vanguard.com | ||
Fund Information > 800-662-7447 | CFA® is a registered trademark owned by CFA Institute. | |
Direct Investor Account Services > 800-662-2739 | ||
Institutional Investor Services > 800-523-1036 | ||
Text Telephone for People | ||
Who Are Deaf or Hard of Hearing> 800-749-7273 | ||
This material may be used in conjunction | ||
with the offering of shares of any Vanguard | ||
fund only if preceded or accompanied by | ||
the fund’s current prospectus. | ||
All comparative mutual fund data are from Lipper, a | ||
Thomson Reuters Company, or Morningstar, Inc., unless | ||
otherwise noted. | ||
You can obtain a free copy of Vanguard’s proxy voting | ||
guidelines by visiting vanguard.com/proxyreporting or by | ||
calling Vanguard at 800-662-2739. The guidelines are | ||
also available from the SEC’s website, sec.gov. In | ||
addition, you may obtain a free report on how your fund | ||
voted the proxies for securities it owned during the 12 | ||
months ended June 30. To get the report, visit either | ||
vanguard.com/proxyreporting or sec.gov. | ||
You can review and copy information about your fund at | ||
the SEC’s Public Reference Room in Washington, D.C. To | ||
find out more about this public service, call the SEC at | ||
202-551-8090. Information about your fund is also | ||
available on the SEC’s website, and you can receive | ||
copies of this information, for a fee, by sending a | ||
request in either of two ways: via email addressed to | ||
publicinfo@sec.gov or via regular mail addressed to the | ||
Public Reference Section, Securities and Exchange | ||
Commission, Washington, DC 20549-1520. | ||
© 2016 The Vanguard Group, Inc. | ||
All rights reserved. | ||
Vanguard Marketing Corporation, Distributor. | ||
Q08702 052016 |
Item 2: Code of Ethics.
Not Applicable.
Item 3: Audit Committee Financial Expert.
Not Applicable.
Item 4: Principal Accountant Fees and Services.
(a) Audit Fees.
Not Applicable.
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) 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: May 18, 2016 |
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: May 18, 2016 | |
VANGUARD QUANTITATIVE FUNDS | |
BY: | /s/ THOMAS J. HIGGINS* |
THOMAS J. HIGGINS | |
CHIEF FINANCIAL OFFICER | |
Date: May 18, 2016 |
* By: /s/ Heidi Stam
Heidi Stam, pursuant to a Power of Attorney filed on April 22, 2014 see file Number 2-17620, Incorporated by Reference.