Vanguard® S&P Mid-Cap 400 Value Index Fund
Schedule of Investments (unaudited)
As of May 31, 2023
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
Shares | Market Value ($000) | |||||
Common Stocks (99.9%) | ||||||
Communication Services (1.9%) | ||||||
TEGNA Inc. | 185,392 | 2,872 | ||||
* | Frontier Communications Parent Inc. | 185,308 | 2,757 | |||
Cable One Inc. | 4,006 | 2,451 | ||||
New York Times Co. Class A | 68,380 | 2,422 | ||||
* | Ziff Davis Inc. | 39,202 | 2,314 | |||
* | TripAdvisor Inc. | 87,308 | 1,359 | |||
John Wiley & Sons Inc. Class A | 35,441 | 1,276 | ||||
15,451 | ||||||
Consumer Discretionary (17.4%) | ||||||
Lear Corp. | 49,084 | 6,021 | ||||
Toll Brothers Inc. | 85,361 | 5,779 | ||||
* | Skechers USA Inc. Class A | 111,422 | 5,724 | |||
Lithia Motors Inc. Class A | 22,692 | 5,294 | ||||
* | Mattel Inc. | 294,574 | 5,128 | |||
*,1 | GameStop Corp. Class A | 210,151 | 5,054 | |||
Aramark | 127,777 | 5,045 | ||||
PVH Corp. | 52,589 | 4,524 | ||||
Marriott Vacations Worldwide Corp. | 31,857 | 3,925 | ||||
* | Taylor Morrison Home Corp. Class A | 90,073 | 3,822 | |||
* | RH | 15,530 | 3,804 | |||
* | Capri Holdings Ltd. | 104,318 | 3,661 | |||
Autoliv Inc. | 43,850 | 3,574 | ||||
Thor Industries Inc. | 44,474 | 3,481 | ||||
Leggett & Platt Inc. | 110,196 | 3,359 | ||||
Williams-Sonoma Inc. | 28,773 | 3,266 | ||||
* | Penn Entertainment Inc. | 128,962 | 3,229 | |||
* | Goodyear Tire & Rubber Co. | 234,946 | 3,226 | |||
Dick's Sporting Goods Inc. | 24,873 | 3,171 | ||||
Macy's Inc. | 225,339 | 3,062 | ||||
Valvoline Inc. | 77,121 | 2,969 | ||||
KB Home | 67,822 | 2,939 | ||||
Gentex Corp. | 105,250 | 2,764 | ||||
* | Adient plc | 79,251 | 2,670 | |||
* | TopBuild Corp. | 12,490 | 2,519 | |||
* | Five Below Inc. | 14,299 | 2,467 | |||
Travel + Leisure Co. | 67,506 | 2,462 | ||||
* | Light & Wonder Inc. | 42,020 | 2,449 | |||
Wyndham Hotels & Resorts Inc. | 35,215 | 2,403 | ||||
Polaris Inc. | 21,724 | 2,340 | ||||
Columbia Sportswear Co. | 29,393 | 2,170 | ||||
* | AutoNation Inc. | 15,311 | 2,004 |
Shares | Market Value ($000) | |||||
Carter's Inc. | 31,695 | 1,970 | ||||
* | Topgolf Callaway Brands Corp. | 115,156 | 1,966 | |||
* | Helen of Troy Ltd. | 19,896 | 1,916 | |||
Brunswick Corp. | 24,636 | 1,860 | ||||
Graham Holdings Co. Class B | 3,185 | 1,799 | ||||
Boyd Gaming Corp. | 26,984 | 1,720 | ||||
Kohl's Corp. | 91,735 | 1,681 | ||||
Foot Locker Inc. | 65,891 | 1,668 | ||||
Nordstrom Inc. | 92,848 | 1,421 | ||||
Gap Inc. | 176,350 | 1,414 | ||||
* | Hilton Grand Vacations Inc. | 32,188 | 1,376 | |||
* | Victoria's Secret & Co. | 67,128 | 1,371 | |||
Dana Inc. | 105,369 | 1,356 | ||||
* | Ollie's Bargain Outlet Holdings Inc. | 24,457 | 1,348 | |||
Harley-Davidson Inc. | 40,759 | 1,268 | ||||
* | YETI Holdings Inc. | 32,343 | 1,183 | |||
* | Under Armour Inc. Class A | 156,994 | 1,132 | |||
Choice Hotels International Inc. | 9,471 | 1,075 | ||||
* | Under Armour Inc. Class C | 157,111 | 1,034 | |||
Papa John's International Inc. | 14,736 | 1,033 | ||||
143,896 | ||||||
Consumer Staples (4.6%) | ||||||
Ingredion Inc. | 54,580 | 5,709 | ||||
* | US Foods Holding Corp. | 131,181 | 5,218 | |||
* | Performance Food Group Co. | 71,364 | 3,946 | |||
* | Post Holdings Inc. | 44,539 | 3,784 | |||
* | Coty Inc. Class A | 304,710 | 3,303 | |||
* | BJ's Wholesale Club Holdings Inc. | 48,026 | 3,009 | |||
Coca-Cola Consolidated Inc. | 3,822 | 2,529 | ||||
* | BellRing Brands Inc. | 65,375 | 2,394 | |||
* | Grocery Outlet Holding Corp. | 73,406 | 2,108 | |||
Energizer Holdings Inc. | 55,076 | 1,796 | ||||
Flowers Foods Inc. | 58,910 | 1,472 | ||||
* | Sprouts Farmers Market Inc. | 40,340 | 1,394 | |||
* | Pilgrim's Pride Corp. | 37,445 | 831 | |||
* | Boston Beer Co. Inc. Class A | 2,433 | 821 | |||
38,314 | ||||||
Energy (0.7%) | ||||||
HF Sinclair Corp. | 62,554 | 2,592 | ||||
Equitrans Midstream Corp. | 194,694 | 1,661 | ||||
Chord Energy Corp. | 8,265 | 1,182 | ||||
5,435 | ||||||
Financials (18.0%) | ||||||
Reinsurance Group of America Inc. | 55,364 | 7,751 | ||||
Unum Group | 155,262 | 6,746 | ||||
New York Community Bancorp Inc. | 598,608 | 6,154 | ||||
Old Republic International Corp. | 229,246 | 5,614 | ||||
Voya Financial Inc. | 80,627 | 5,467 | ||||
Webster Financial Corp. | 144,644 | 5,142 | ||||
Stifel Financial Corp. | 87,413 | 4,858 | ||||
First American Financial Corp. | 86,067 | 4,728 | ||||
1 | Starwood Property Trust Inc. | 257,338 | 4,516 | |||
Prosperity Bancshares Inc. | 75,885 | 4,339 | ||||
Essent Group Ltd. | 89,521 | 3,954 | ||||
MGIC Investment Corp. | 243,880 | 3,687 | ||||
American Financial Group Inc. | 31,929 | 3,585 | ||||
Western Union Co. | 310,404 | 3,536 |
Shares | Market Value ($000) | |||||
RenaissanceRe Holdings Ltd. | 18,354 | 3,457 | ||||
Home BancShares Inc. | 157,218 | 3,375 | ||||
FNB Corp. | 299,571 | 3,292 | ||||
Synovus Financial Corp. | 120,930 | 3,276 | ||||
Wintrust Financial Corp. | 50,502 | 3,210 | ||||
Bank OZK | 91,528 | 3,165 | ||||
Pinnacle Financial Partners Inc. | 63,577 | 3,093 | ||||
Old National Bancorp | 243,391 | 3,023 | ||||
Interactive Brokers Group Inc. Class A | 37,602 | 2,904 | ||||
Janus Henderson Group plc | 110,102 | 2,894 | ||||
East West Bancorp Inc. | 57,366 | 2,745 | ||||
Cadence Bank | 151,569 | 2,722 | ||||
Valley National Bancorp | 349,059 | 2,576 | ||||
Kemper Corp. | 53,113 | 2,299 | ||||
* | Brighthouse Financial Inc. | 56,697 | 2,283 | |||
* | Euronet Worldwide Inc. | 19,902 | 2,217 | |||
CNO Financial Group Inc. | 94,795 | 2,058 | ||||
UMB Financial Corp. | 36,110 | 2,045 | ||||
* | Texas Capital Bancshares Inc. | 40,040 | 1,894 | |||
Associated Banc-Corp | 124,824 | 1,849 | ||||
Cullen/Frost Bankers Inc. | 17,602 | 1,764 | ||||
Primerica Inc. | 9,481 | 1,726 | ||||
United Bankshares Inc. | 57,961 | 1,705 | ||||
SouthState Corp. | 26,924 | 1,683 | ||||
Columbia Banking System Inc. | 82,601 | 1,655 | ||||
Evercore Inc. Class A | 14,877 | 1,606 | ||||
First Horizon Corp. | 151,527 | 1,562 | ||||
Affiliated Managers Group Inc. | 10,622 | 1,477 | ||||
Commerce Bancshares Inc. | 30,304 | 1,453 | ||||
Hanover Insurance Group Inc. | 12,094 | 1,348 | ||||
Hancock Whitney Corp. | 36,087 | 1,318 | ||||
First Financial Bankshares Inc. | 50,528 | 1,309 | ||||
Navient Corp. | 83,966 | 1,272 | ||||
Glacier Bancorp Inc. | 42,434 | 1,223 | ||||
Cathay General Bancorp | 29,695 | 868 | ||||
Fulton Financial Corp. | 71,216 | 795 | ||||
Federated Hermes Inc. Class B | 21,850 | 752 | ||||
International Bancshares Corp. | 17,182 | 734 | ||||
Bank of Hawaii Corp. | 16,273 | 637 | ||||
149,341 | ||||||
Health Care (7.6%) | ||||||
* | Tenet Healthcare Corp. | 89,761 | 6,391 | |||
* | Envista Holdings Corp. | 135,660 | 4,326 | |||
* | Penumbra Inc. | 11,680 | 3,590 | |||
Perrigo Co. plc | 111,882 | 3,576 | ||||
* | Syneos Health Inc. | 85,519 | 3,558 | |||
* | Neogen Corp. | 179,612 | 3,141 | |||
* | ICU Medical Inc. | 16,740 | 2,928 | |||
Encompass Health Corp. | 44,781 | 2,777 | ||||
* | Omnicell Inc. | 37,102 | 2,724 | |||
* | Azenta Inc. | 57,395 | 2,482 | |||
* | Masimo Corp. | 14,861 | 2,405 | |||
Bruker Corp. | 34,064 | 2,354 | ||||
* | Integra LifeSciences Holdings Corp. | 60,378 | 2,291 | |||
* | Acadia Healthcare Co. Inc. | 31,735 | 2,241 | |||
Chemed Corp. | 3,952 | 2,109 | ||||
* | Enovis Corp. | 39,595 | 2,088 | |||
* | Amedisys Inc. | 26,941 | 2,046 |
Shares | Market Value ($000) | |||||
* | LivaNova plc | 44,377 | 1,965 | |||
Patterson Cos. Inc. | 71,622 | 1,876 | ||||
* | R1 RCM Inc. | 114,013 | 1,853 | |||
* | QuidelOrtho Corp. | 19,962 | 1,700 | |||
* | Arrowhead Pharmaceuticals Inc. | 46,699 | 1,607 | |||
* | Progyny Inc. | 39,274 | 1,463 | |||
* | Sotera Health Co. | 81,736 | 1,152 | |||
* | STAAR Surgical Co. | 12,867 | 746 | |||
63,389 | ||||||
Industrials (19.3%) | ||||||
Regal Rexnord Corp. | 54,902 | 7,131 | ||||
Fortune Brands Innovations Inc. | 106,423 | 6,433 | ||||
* | GXO Logistics Inc. | 98,438 | 5,505 | |||
Woodward Inc. | 49,644 | 5,233 | ||||
* | MasTec Inc. | 49,259 | 4,993 | |||
MDU Resources Group Inc. | 169,047 | 4,933 | ||||
Hexcel Corp. | 70,049 | 4,833 | ||||
* | Univar Solutions Inc. | 135,642 | 4,831 | |||
* | XPO Inc. | 95,612 | 4,487 | |||
AECOM | 53,145 | 4,148 | ||||
Maximus Inc. | 50,511 | 4,089 | ||||
Oshkosh Corp. | 54,371 | 4,014 | ||||
Owens Corning | 35,740 | 3,800 | ||||
Graco Inc. | 49,035 | 3,751 | ||||
Knight-Swift Transportation Holdings Inc. Class A | 66,797 | 3,673 | ||||
* | Kirby Corp. | 49,789 | 3,563 | |||
Flowserve Corp. | 108,663 | 3,537 | ||||
EnerSys | 33,932 | 3,300 | ||||
Ryder System Inc. | 41,763 | 3,292 | ||||
* | Stericycle Inc. | 76,622 | 3,230 | |||
* | Fluor Corp. | 118,096 | 3,137 | |||
* | Sunrun Inc. | 177,141 | 3,125 | |||
* | Middleby Corp. | 23,287 | 3,074 | |||
ManpowerGroup Inc. | 42,013 | 2,948 | ||||
ITT Inc. | 37,105 | 2,826 | ||||
Lennox International Inc. | 10,193 | 2,808 | ||||
AGCO Corp. | 24,698 | 2,724 | ||||
* | ASGN Inc. | 41,455 | 2,712 | |||
* | Saia Inc. | 9,458 | 2,688 | |||
Tetra Tech Inc. | 19,011 | 2,613 | ||||
Terex Corp. | 56,066 | 2,600 | ||||
Esab Corp. | 42,907 | 2,519 | ||||
Genpact Ltd. | 60,097 | 2,210 | ||||
* | Trex Co. Inc. | 42,746 | 2,195 | |||
Werner Enterprises Inc. | 48,850 | 2,145 | ||||
* | Chart Industries Inc. | 19,447 | 2,134 | |||
Donaldson Co. Inc. | 36,386 | 2,130 | ||||
* | CACI International Inc. Class A | 7,017 | 2,100 | |||
* | Hertz Global Holdings Inc. | 133,800 | 2,098 | |||
Timken Co. | 28,037 | 2,006 | ||||
Acuity Brands Inc. | 13,305 | 2,005 | ||||
MSA Safety Inc. | 13,751 | 1,892 | ||||
* | JetBlue Airways Corp. | 269,662 | 1,842 | |||
MSC Industrial Direct Co. Inc. Class A | 19,619 | 1,764 | ||||
Watts Water Technologies Inc. Class A | 10,849 | 1,719 | ||||
GATX Corp. | 14,012 | 1,666 | ||||
Science Applications International Corp. | 14,932 | 1,453 | ||||
Crane Co. | 19,854 | 1,443 |
Shares | Market Value ($000) | |||||
Brink's Co. | 20,391 | 1,357 | ||||
Exponent Inc. | 13,033 | 1,190 | ||||
Advanced Drainage Systems Inc. | 11,911 | 1,153 | ||||
Crane NXT Co. | 19,898 | 1,047 | ||||
* | Mercury Systems Inc. | 20,336 | 825 | |||
* | Vicor Corp. | 10,636 | 589 | |||
* | SunPower Corp. | 31,122 | 330 | |||
159,843 | ||||||
Information Technology (11.2%) | ||||||
Jabil Inc. | 110,636 | 9,904 | ||||
* | Arrow Electronics Inc. | 48,387 | 6,128 | |||
* | Ciena Corp. | 123,369 | 5,766 | |||
MKS Instruments Inc. | 47,553 | 4,627 | ||||
* | Coherent Corp. | 115,533 | 4,270 | |||
* | Aspen Technology Inc. | 24,229 | 3,972 | |||
* | Manhattan Associates Inc. | 21,817 | 3,958 | |||
Vontier Corp. | 131,331 | 3,893 | ||||
Cognex Corp. | 68,982 | 3,791 | ||||
Avnet Inc. | 75,924 | 3,329 | ||||
TD SYNNEX Corp. | 34,864 | 3,116 | ||||
* | Lumentum Holdings Inc. | 56,899 | 3,010 | |||
* | IPG Photonics Corp. | 26,719 | 2,952 | |||
* | Synaptics Inc. | 32,731 | 2,816 | |||
Vishay Intertechnology Inc. | 107,613 | 2,774 | ||||
* | Wolfspeed Inc. | 56,835 | 2,730 | |||
* | NCR Corp. | 114,586 | 2,716 | |||
National Instruments Corp. | 45,576 | 2,634 | ||||
* | Teradata Corp. | 45,597 | 2,137 | |||
* | Kyndryl Holdings Inc. | 170,064 | 2,136 | |||
* | ACI Worldwide Inc. | 93,315 | 2,129 | |||
Littelfuse Inc. | 7,811 | 2,000 | ||||
Universal Display Corp. | 13,314 | 1,962 | ||||
* | Silicon Laboratories Inc. | 12,446 | 1,751 | |||
* | Super Micro Computer Inc. | 7,774 | 1,741 | |||
* | Blackbaud Inc. | 19,952 | 1,464 | |||
Xerox Holdings Corp. | 92,896 | 1,307 | ||||
* | Allegro MicroSystems Inc. | 33,084 | 1,301 | |||
* | Envestnet Inc. | 23,511 | 1,230 | |||
* | CommVault Systems Inc. | 12,270 | 855 | |||
* | SiTime Corp. | 6,166 | 611 | |||
93,010 | ||||||
Materials (4.6%) | ||||||
* | Cleveland-Cliffs Inc. | 427,680 | 5,936 | |||
Alcoa Corp. | 147,091 | 4,666 | ||||
United States Steel Corp. | 188,367 | 3,941 | ||||
AptarGroup Inc. | 28,758 | 3,235 | ||||
* | Axalta Coating Systems Ltd. | 100,830 | 2,925 | |||
Avient Corp. | 71,012 | 2,592 | ||||
Sensient Technologies Corp. | 34,920 | 2,515 | ||||
Sonoco Products Co. | 39,698 | 2,376 | ||||
Scotts Miracle-Gro Co. | 33,919 | 2,144 | ||||
Commercial Metals Co. | 42,721 | 1,826 | ||||
Chemours Co. | 52,814 | 1,399 | ||||
Greif Inc. Class A | 21,202 | 1,274 | ||||
Ashland Inc. | 13,730 | 1,166 | ||||
NewMarket Corp. | 2,565 | 1,000 |
Shares | Market Value ($000) | |||||
Worthington Industries Inc. | 12,895 | 724 | ||||
37,719 | ||||||
Real Estate (10.9%) | ||||||
Healthcare Realty Trust Inc. Class A | 315,900 | 5,879 | ||||
* | Jones Lang LaSalle Inc. | 39,395 | 5,529 | |||
Spirit Realty Capital Inc. | 116,082 | 4,534 | ||||
Apartment Income REIT Corp. Class A | 123,619 | 4,288 | ||||
1 | Medical Properties Trust Inc. | 497,898 | 4,108 | |||
CubeSmart | 85,878 | 3,817 | ||||
Rexford Industrial Realty Inc. | 67,598 | 3,680 | ||||
Kite Realty Group Trust | 182,120 | 3,541 | ||||
Life Storage Inc. | 27,558 | 3,511 | ||||
Independence Realty Trust Inc. | 185,978 | 3,212 | ||||
NNN REIT Inc. | 70,873 | 3,015 | ||||
Omega Healthcare Investors Inc. | 99,235 | 2,958 | ||||
Lamar Advertising Co. Class A | 31,913 | 2,868 | ||||
STAG Industrial Inc. | 81,870 | 2,849 | ||||
First Industrial Realty Trust Inc. | 53,790 | 2,796 | ||||
EastGroup Properties Inc. | 16,288 | 2,681 | ||||
EPR Properties | 62,337 | 2,600 | ||||
Physicians Realty Trust | 189,552 | 2,589 | ||||
Brixmor Property Group Inc. | 127,061 | 2,545 | ||||
Cousins Properties Inc. | 125,874 | 2,508 | ||||
Park Hotels & Resorts Inc. | 186,778 | 2,417 | ||||
Kilroy Realty Corp. | 87,511 | 2,375 | ||||
Sabra Health Care REIT Inc. | 191,842 | 2,160 | ||||
Vornado Realty Trust | 134,118 | 1,819 | ||||
Highwoods Properties Inc. | 87,205 | 1,803 | ||||
Macerich Co. | 178,429 | 1,720 | ||||
Douglas Emmett Inc. | 145,716 | 1,690 | ||||
Rayonier Inc. | 54,912 | 1,610 | ||||
Agree Realty Corp. | 22,752 | 1,467 | ||||
National Storage Affiliates Trust | 37,096 | 1,358 | ||||
PotlatchDeltic Corp. | 28,762 | 1,338 | ||||
Corporate Office Properties Trust | 44,968 | 1,026 | ||||
90,291 | ||||||
Utilities (3.7%) | ||||||
UGI Corp. | 174,199 | 4,872 | ||||
Portland General Electric Co. | 74,202 | 3,616 | ||||
Hawaiian Electric Industries Inc. | 90,990 | 3,267 | ||||
Southwest Gas Holdings Inc. | 54,001 | 3,161 | ||||
ALLETE Inc. | 47,490 | 2,829 | ||||
NorthWestern Corp. | 47,998 | 2,716 | ||||
IDACORP Inc. | 19,743 | 2,055 | ||||
Black Hills Corp. | 25,894 | 1,578 | ||||
Ormat Technologies Inc. | 17,847 | 1,519 | ||||
Spire Inc. | 22,211 | 1,434 | ||||
New Jersey Resources Corp. | 28,076 | 1,360 | ||||
PNM Resources Inc. | 26,994 | 1,240 | ||||
National Fuel Gas Co. | 22,943 | 1,168 | ||||
30,815 | ||||||
Total Common Stocks (Cost $871,542) | 827,504 |
Coupon | Shares | Market Value ($000) | ||||
Temporary Cash Investments (1.3%) | ||||||
Money Market Fund (1.3%) | ||||||
2,3 | Vanguard Market Liquidity Fund (Cost $10,798) | 5.125% | 108,005 | 10,798 | ||
Total Investments (101.2%) (Cost $882,340) | 838,302 | |||||
Other Assets and Liabilities—Net (-1.2%) | (10,021) | |||||
Net Assets (100%) | 828,281 |
Cost is in $000. |
* | Non-income-producing security. |
1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $9,999,000. |
2 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
3 | Collateral of $10,798,000 was received for securities on loan. |
REIT—Real Estate Investment Trust. |
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts | ||||
($000) | ||||
Expiration | Number of Long (Short) Contracts | Notional Amount | Value and Unrealized Appreciation (Depreciation) | |
Long Futures Contracts | ||||
E-mini S&P Mid-Cap 400 Index | June 2023 | 3 | 723 | (1) |
A. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been 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 valuation designee to represent fair value and subject to oversight by the board of trustees.
Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value.
B. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any securities pledged as initial margin for open contracts are noted in the Schedule of Investments.
Futures contracts are valued at their quoted daily settlement prices. Fluctuations in the value of the contracts are recorded as an asset (liability).
C. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.
A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund's net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily
to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded as an asset (liability) and as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.
The fund had no open total return swap contracts at May 31, 2023.
D. Various inputs may be used to determine the value of the fund’s investments and derivatives. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.
At May 31, 2023, 100% of the market value of the fund's investments and derivatives was determined based on Level 1 inputs.