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: 811-1530
Name of Registrant: Vanguard Explorer Fund
Address of Registrant: P.O. Box 2600
Valley Forge, PA 19482
Name and address of agent for service: R. Gregory Barton, Esquire
P.O. Box 876
Valley Forge, PA 19482
Registrant's telephone number, including area code: (610) 669-1000
Date of fiscal year end: October 31
Date of reporting period: November 1, 2002 - April 30, 2003
Item 1: Reports to Shareholders
VANGUARD(R) EXPLORER(TM) FUND
Semiannual Report
[Graphic Art]
April 30, 2003
THE VANGUARD GROUP (R)
ETERNAL PRINCIPLES
Markets change, but the principles of successful investing do not. During the
past few years, radical upheaval in the stock market has displayed the power of
this simple truth to dramatic effect.
In the late 1990s, stocks experienced one of the greatest bull markets in
financial history. Then, in March 2000, the longest downturn since the Great
Depression began.
In both bull and bear markets, however, the principles of successful
investing are identical: balance, diversification, and attention to costs.
Balance among stock, bond, and money market funds allows you to pursue long-term
growth while moderating your risk. Diversification limits your exposure to the
disasters that can befall any one security or sector. Attention to costs means
you keep a larger share of any rewards produced by your investments.
These principles are timeless. In fact, they're the basis of our very first
mutual fund--Vanguard(R) Wellington(TM) Fund, a balanced portfolio established
in 1929. Over time, balance, diversification, and attention to costs have proven
to be the master keys to investment success.
================================================================================
SUMMARY
- --------------------------------------------------------------------------------
* Vanguard Explorer Fund's Investor Shares returned 6.1%--a solid performance
that surpassed that of its average peer but lagged that of its primary
index benchmark.
* The six-month period was marked by short, powerful stock market rallies,
with longer stretches of weakness in between.
* More than a third of the Explorer Fund's returns came from just one sector:
technology.
- --------------------------------------------------------------------------------
================================================================================
CONTENTS
- --------------------------------------------------------------------------------
1 Letter from the Chairman
5 Report from the Advisers
7 Fund Profile
8 Performance Summary
9 Results of Proxy Voting
10 Financial Statements
================================================================================
================================================================================
LETTER FROM THE CHAIRMAN
[Picture of John J. Brennan]
Fellow Shareholder,
The Investor Shares of Vanguard Explorer Fund produced a 6.1% return during the
first six months of the fund's 2003 fiscal year. Explorer's Admiral Shares
returned 6.2%. These results were superior to that of the broad stock market and
the average return of the fund's peers but lagged the 7.8% gain of the Russell
2500 Growth Index--the unmanaged benchmark we consider the best comparative
measure for the fund. The returns of your fund and its benchmarks appear in the
adjacent table.
=====================================================
TOTAL RETURNS SIX MONTHS ENDED
APRIL 30, 2003
- -----------------------------------------------------
VANGUARD EXPLORER FUND
Investor Shares 6.1%
Admiral Shares 6.2
Average Small-Cap Growth Fund* 4.6
Russell 2500 Growth Index 7.8
Wilshire 5000 Index 5.0
- -----------------------------------------------------
*Derived from data provided by Lipper Inc.
=====================================================
Although the Explorer Fund earned good absolute returns in growth-heavy
sectors such as technology, its commitment to those strong-performing sectors
wasn't quite as large as that of the Russell 2500 Growth Index, which explains
much of the fund's relative underperformance. On the other hand, your fund
produced solid gains in producer durables and auto & transportation--sectors not
typically mined by growth funds--partially closing the gap.
For the per-share components of your fund's six-month total
returns--starting and ending net asset values, plus income distributions--see
page 4.
STOCKS OPENED AND CLOSED STRONGLY
During the six months ended April 30, 2003, the overall U.S. stock market, as
measured by the Wilshire 5000 Total Market Index, returned 5.0%, a performance
reflecting vigorous rallies at the beginning and end of the period. Inside these
bookends, however, stock prices drifted lower, depressed by investor
apprehension about geopolitical tensions and generally glum economic news.
Although the U.S. military campaign in Iraq was brief and successful, economic
uncertainty remained. Consumer spending was strong, but the job market
deteriorated, and the red-hot real estate market began to cool. The broad
economy registered anemic growth.
Small stocks, as represented by the Russell 2000 Index, performed better
than the large stocks in the
================================================================================
ADMIRAL(TM) SHARES A LOWER-COST CLASS OF SHARES AVAILABLE TO MANY LONGTIME
SHAREHOLDERS AND TO THOSE WITH SIGNIFICANT INVESTMENTS IN THE FUND.
================================================================================
1
Russell 1000 Index, while growth stocks (those that are expected to produce
rapid earnings growth) and value stocks (those that generally trade at
below-market valuations) produced similar returns.
BONDS DEFIED EXPECTATIONS
Bonds generated surprisingly strong results, with the Lehman Brothers Aggregate
Bond Index--a broad measure of the taxable bond market--returning 4.3%. Bond
yields began the fiscal half-year at their lowest levels in 40 years, which
would generally portend unimpressive returns, but the bond market rallied
further, in part because of a strong rebound in hard-hit corporate bonds. Long-
and intermediate-term interest rates fell modestly during the period, and the
yield of the 3-month U.S. Treasury bill--a fair proxy for money market
yields--declined 34 basis points (0.34 percentage point) to 1.11%.
================================================================================
MARKET BAROMETER TOTAL RETURNS
PERIODS ENDED APRIL 30, 2003
---------------------------------
SIX ONE FIVE
MONTHS YEAR YEARS*
- -------------------------------------------------------------------------------
STOCKS
Russell 1000 Index (Large-caps) 4.8% -13.5% -2.3%
Russell 2000 Index (Small-caps) 7.6 -20.8 -2.5
Wilshire 5000 Index (Entire market) 5.0 -13.6 -2.6
MSCI All Country World Index Free
ex USA (International) 3.1 -15.2 -4.9
- -------------------------------------------------------------------------------
BONDS
Lehman Aggregate Bond Index 4.3% 10.5% 7.6%
(Broad taxable market)
Lehman Municipal Bond Index 3.6 8.5 6.3
Citigroup 3-Month Treasury Bill Index 0.6 1.5 4.0
===============================================================================
CPI
Consumer Price Index 1.4% 2.2% 2.5%
===============================================================================
*Annualized.
================================================================================
THE FUND'S ADVISERS CHOSE WELL IN MANY SECTORS
In the first half of its 2003 fiscal year, Vanguard Explorer Fund benefited from
the generally strong performance of smaller stocks, which delivered a return
more than 2 percentage points higher than that of the broad stock market.
In particular, your fund posted substantial gains in traditional
growth-stock areas such as the technology sector. The Explorer Fund's stake in
technology, which was the period's best-performing sector, accounted for more
than one-third of the fund's half-year results.
Your fund also earned good results outside the traditional growth sectors,
distinguishing itself with fine stock selection in the auto & transportation,
producer durables, and financial services sectors. Its stock selections in auto
& transportation and producer durables--both sectors dominated by slow-growing,
================================================================================
THE FUND EARNED MUCH OF ITS RETURN IN THE TECHNOLOGY SECTOR, BUT ALSO BENEFITED
FROM GOOD STOCK SELECTION IN PRODUCER DURABLES.
================================================================================
2
heavy manufacturing companies--produced double-digit returns, far exceeding the
returns of those same sectors in the Russell 2500 Growth Index.
Overall, however, the advisers who manage the portfolio underperformed the
Russell 2500 Growth Index, though they navigated your fund to peer-beating
results. (The five advisers and their share of portfolio assets are listed in
the table below.) This shortfall was primarily the result of Explorer's smaller
average weighting in technology compared with the benchmark. It's also worth
noting, however, that the index is a theoretical construct having no operating
or transaction costs, which can be substantial among small-cap growth stocks.
================================================================================
YOUR FUND BESTED ITS AVERAGE PEER, BUT LAGGED THE UNMANAGED RUSSELL 2500 GROWTH
INDEX.
================================================================================
DIVERSIFICATION: THE PRUDENT RESPONSE
The stock market's strong returns in recent months represent a welcome break
from what has been a very long downturn. While we hope that the market's
broad-based upturn marks the start of a new performance cycle that will allow
investors to recoup some of the losses sustained in recent years, the wisest
investment approach is to build a portfolio that can weather any market-- up,
down, or sideways.
That's why we advise investors to establish an allocation of stock, bond,
and money market funds consistent with their goals, time horizon, risk
tolerance, and unique financial circumstances. Diversification is the most
prudent response to the financial markets' inherent uncertainties.
Vanguard Explorer Fund can play an important role in a diversified
portfolio, providing broad-based exposure to the market's small growth stocks.
It also exemplifies two keys to investment success: low costs and a long-term
focus. During the first six months of fiscal 2003, for example, your fund
carried an annualized expense ratio of 0.78% (0.61% for Admiral Shares); the
average peer charged an imposing 1.74%. And this fiscal year Explorer marks 35
years of distinguished service to shareholders--a long life among mutual
================================================================================
=============================================================
FUND ASSETS MANAGED APRIL 30, 2003
---------------------
$ MILLION PERCENTAGE
- -------------------------------------------------------------
Granahan Investment Management, Inc. $1,309 33%
Wellington Management Company, llp 964 23
Grantham, Mayo, Van Otterloo & Co. LLC 750 18
Vanguard Quantitative Equity Group 501 12
Chartwell Investment Partners 430 10
Cash Investments* 154 4
- -------------------------------------------------------------
Total $4,108 100%
=============================================================
*This cash is invested by The Vanguard Group in equity index products to
simulate investment in stocks. Each adviser may also maintain a modest cash
position.
================================================================================
3
funds in general, and an unusually long record for those investing in the
market's smaller stocks.
We thank you for your continued trust and confidence.
Sincerely,
/s:/John J. Brennan/
John J. Brennan
Chairman and Chief Executive Officer
May 12, 2003
================================================================================
YOUR FUND'S PERFORMANCE AT A GLANCE OCTOBER 31, 2002-APRIL 30, 2003
DISTRIBUTIONS PER SHARE
---------------------------
STARTING ENDING INCOME CAPITAL
SHARE PRICE SHARE PRICE DIVIDENDS GAINS
- --------------------------------------------------------------------------------
Explorer Fund
Investor Shares $44.60 $47.31 $0.005 $0.000
Admiral Shares 41.43 43.95 0.043 0.000
================================================================================
4
REPORT FROM THE ADVISERS
During the six months ended April 30, 2003, the Investor Shares of Vanguard
Explorer Fund returned 6.1% and the Admiral Shares, 6.2%. The fund's performance
was superior to the 4.6% return of our average peer, but was less impressive
than the 7.8% return of the Russell 2500 Growth Index, Explorer's new primary
benchmark as of January 31, 2003. (The Russell 2000 Growth Index, the fund's
previous primary benchmark, returned 7.7% during the period.)
The past six months have been volatile. Investors greeted the new year, and
President George Bush's plan for "jobs and growth," with optimism. The
subsequent preparation for the war with Iraq eroded this optimism, but the
conflict's swift and successful resolution ignited a powerful rally in the broad
stock market.
The market is now looking beyond the war to the shape of the domestic and
world economies. The talk among executives in our portfolio companies is not
about wartime uncertainty and rising raw-materials costs (fuel, in particular)
but about spending patterns in the months to come. We are paying close attention
to business-confidence levels and are monitoring capital spending. U.S.
consumers have done their "fair share" and may need a rest; if growth is to
resume, it needs to be spurred by business investment.
THE FUND'S SUCCESSES
The Explorer Fund had strong performance in stocks that can be broadly
classified as industrial holdings, most notably in AirTran Holdings, a low-fare
airline that is benefiting from the contraction and bankruptcies that are
roiling the hub carriers. AirTran returned more than 100% for the half-year.
EGL, a global transportation and supply-chain management company, also performed
admirably. Our producer durables stocks delivered solid results, thanks to our
large investment in Garmin, a rapidly growing maker of GPS (Global Positioning
System) products for consumers. Palm Harbor Homes, a producer of manufactured
housing, was another top performer.
Although, on average, we were modestly underweighted in technology stocks
relative to the Russell 2500 Growth Index, we enjoyed strong performance from
several holdings, with disk-drive companies Agere Systems, Maxtor, and Western
Digital leading the way.
THE FUND'S SHORTFALLS
In addition to our underweighting in tech stocks, our shortfall relative to the
benchmark was a
================================================================================
INVESTMENT PHILOSOPHY
THE FUND REFLECTS A BELIEF THAT SUPERIOR LONG-TERM INVESTMENT RESULTS CAN BE
ACHIEVED BY SELECTING A DIVERSIFIED GROUP OF SMALL-COMPANY STOCKS WITH PROSPECTS
FOR ABOVE-AVERAGE GROWTH.
================================================================================
5
function of several individual tech stock selections, including WebEx
Communications, which was hit following Microsoft's acquisition of a competitor
in collaborative Web browsing. A handful of Internet-related stocks, including
Overture Services, an online marketing company, also turned in disappointing
results.
On balance, our consumer-oriented stocks also detracted from relative
performance, both because we were slightly underweighted in these sectors and
because we held some poorly performing stocks. Particularly burdensome were
Scholastic (educational materials), which suffered from a decline in book-club
and retail business, and BJ's Wholesale Club, a warehouse retail club that
continues to struggle. We remain optimistic about Scholastic, but have cooled on
BJ's Wholesale.
THE FUND'S POSITIONING
Among our portfolio companies, we are beginning to see some acceleration in
earnings growth, albeit from depressed levels. In general, the higher earnings
aren't yet the result of higher sales. Instead, company managements have
succeeded in cutting costs in an environment of relatively tepid demand.
Based on current earnings, stock valuations remain high. On a positive
note, earnings are proving more stable than in recent periods. Whether stocks
remain expensive depends in part on whether companies can drive earnings higher.
Although a broad-based economic rebound is not a prerequisite (as stated, our
companies have generated some growth through internal improvements), a healthy
economy would greatly accelerate matters.
In our opinion, sustained economic growth is mostly a question of "when,"
not "if." Accordingly, we have been combing through our expansive universe of
potential holdings to find companies that should perform well in a growing
economy. The three-year bear market has left small-capitalization managers with
a much larger selection, and we continue to find a target-rich investment
environment. Red Hat, a software company that we recently added, embodies many
of the characteristics that we are emphasizing in the portfolio--market share
leadership, lean cost structure, and solid capitalization. During the past
quarter, we increased our weightings in this and other such promising names.
Granahan Investment Management, Inc.
Wellington Management Company, llp
Grantham, Mayo, Van Otterloo & Co. LLC
Vanguard Quantitative Equity Group
Chartwell Investment Partners
May 16, 2003
6
================================================================================
FUND PROFILE As of April 30, 2003
This Profile provides a snapshot of the fund's characteristics, compared where
indicated with both an appropriate market index and a broad market index.
EXPLORER FUND
==================================================
PORTFOLIO CHARACTERISTICS
COMPARATIVE BROAD
FUND INDEX* INDEX**
- --------------------------------------------------
Number of Stocks 926 1,529 5,546
Median Market Cap $1.2B $1.2B $28.2B
Price/Earnings Ratio 30.2x 28.6x 20.8x
Price/Book Ratio 2.2x 2.6x 2.6x
Yield 0.6% 1.7%
Investor Shares 0.0%
Admiral Shares 0.2%
Return on Equity 13.1% 15.6% 20.9%
Earnings Growth Rate 11.1% 15.4% 8.6%
Foreign Holdings 2.3% 0.0% 0.3%
Turnover Rate 66%+ -- --
Expense Ratio -- --
Investor Shares 0.78%+
Admiral Shares 0.61%+
Cash Investments 4.0% -- --
- --------------------------------------------------
==================================================
TEN LARGEST HOLDINGS (% of total net assets)
Maxtor Corp. 0.9%
(computer technology)
Garmin Ltd. 0.8
(telecommunications)
Cree, Inc. 0.8
(electronics)
C.H. Robinson Worldwide, Inc. 0.7
(transportation)
Western Digital Corp. 0.7
(computer technology)
Coventry Health Care Inc. 0.7
(health care products and services)
Foot Locker, Inc. 0.7
(retail)
The Dun & Bradstreet Corp. 0.7
(financial services)
Mettler-Toledo International Inc. 0.6
(electronics)
Mentor Corp. 0.6
(medical)
- --------------------------------------------------
Top Ten 7.2%
==================================================
The "Ten Largest Holdings" excludes any temporary cash investments and equity
index products.
==============================================================
VOLATILITY MEASURES
COMPARATIVE BROAD
FUND INDEX* FUND INDEX**
- --------------------------------------------------------------
R-Squared 0.94 1.00 0.82 1.00
Beta 0.80 1.00 1.24 1.00
==============================================================
======================
INVESTMENT FOCUS
STYLE - GROWTH
MARKET CAP - SMALL
======================
====================================================
SECTOR DIVERSIFICATION (% OF COMMON STOCKS)
COMPARATIVE BROAD
FUND INDEX* INDEX**
- ----------------------------------------------------
Auto & Transportation 4.1% 3.1% 2.6%
Consumer Discretionary 22.1 23.6 15.6
Consumer Staples 1.6 2.6 6.8
Financial Services 13.8 15.5 22.5
Health Care 19.8 19.6 14.2
Integrated Oils 0.0 0.0 3.6
Other Energy 5.3 4.5 2.1
Materials & Processing 4.3 4.2 3.7
Producer Durables 7.4 6.6 3.9
Technology 19.3 18.1 13.2
Utilities 1.7 1.9 6.9
Other 0.6 0.3 4.9
====================================================
*Russell 2500 Growth Index.
**Wilshire 5000 Index.
+Annualized.
Visit our website at
WWW.VANGUARD.COM
for regularly updated fund information.
7
================================================================================
PERFORMANCE SUMMARY As of April 30, 2003
All of the returns in this report represent past performance, which cannot be
used to predict future returns that may be achieved by the fund. Note, too, that
both share price and return can fluctuate widely. An investor's shares, when
redeemed, 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 redemption of fund shares.
EXPLORER FUND
- --------------------------------------------------------------------------------
FISCAL-YEAR TOTAL RETURNS (%) October 31, 1992-April 30, 2003
SCALE RANGE -45% to 60%
EXPLORER FUND RUSSELL 2500
INVESTOR SHARES GROWTH INDEX
---------------- ------------
1993 22.3% 24.0%
1994 4.5 1.9
1995 17.5 23.5
1996 18.0 16.5
1997 18.9 21.8
1998 -11.2 -13.9
1999 25.1 37.4
2000 42.6 29.7
2001 -16.2 -33.1
2002 -13.9 -20.6
2003* 6.1 7.8
*Six months ended April 30, 2003.
Note: See Financial Highlights tables on pages 24 and 25 for dividend and
capital gains information.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS for periods ended March 31, 2003
This table presents average annual total returns through the latest calendar
quarter--rather than through the end of the fiscal period. Securities and
Exchange Commission rules require that we provide this information.
TEN YEARS
ONE FIVE -----------------------
INCEPTION DATE YEAR YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------
Explorer Fund
Investor Shares 12/11/1967 -28.80% 0.48% 7.68% 0.35% 8.03%
Admiral Shares 11/12/2001 -28.72 -14.11* -- -- --
*Return since inception.
8
================================================================================
NOTICE TO SHAREHOLDERS
At a special meeting of shareholders on December 3, 2002, fund shareholders
approved the following proposals:
- - ELECT TRUSTEES FOR THE FUND. The individuals listed in the table below were
elected as trustees for the fund. All trustees served as trustees to the
fund prior to the shareholder meeting.
- --------------------------------------------------------------------------------
PERCENTAGE
TRUSTEE FOR WITHHELD FOR
- --------------------------------------------------------------------------------
John J. Brennan 2,340,906,512 31,825,357 98.7%
Charles D. Ellis 2,340,596,667 32,135,201 98.6
Rajiv L. Gupta 2,336,110,501 36,621,367 98.5
JoAnn Heffernan Heisen 2,339,958,404 32,773,464 98.6
Burton G. Malkiel 2,336,053,462 36,678,407 98.5
Alfred M. Rankin, Jr. 2,336,569,407 36,162,462 98.5
J. Lawrence Wilson 2,336,138,643 36,593,225 98.5
- --------------------------------------------------------------------------------
- - CHANGE THE FUND'S POLICY ON INVESTING IN OTHER MUTUAL FUNDS. This change
enables the fund to invest its cash reserves in specially created money
market and short-term bond funds. This new cash management program, which
is similar to those of other large mutual fund complexes, should help the
fund to achieve greater diversification and to earn modestly higher returns
on its cash reserves. The fund will need Securities and Exchange Commission
approval before implementing this new cash management program.
- --------------------------------------------------------------------------------
BROKER PERCENTAGE
FOR AGAINST ABSTAIN NON-VOTES FOR
- --------------------------------------------------------------------------------
2,186,352,220 83,993,382 36,323,444 66,062,823 92.1%
- --------------------------------------------------------------------------------
Note: Vote tabulations are rounded to the nearest whole number.
9
================================================================================
FINANCIAL STATEMENTS April 30, 2003 (unaudited)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of the fund's holdings, including each
security's market value on the last day of the reporting period. Securities are
grouped and subtotaled by asset type (common stocks, bonds, etc.) and by
industry sector. Other assets are added to, and liabilities are subtracted from,
the value of Total Investments to calculate the fund's Net Assets. Finally, Net
Assets are divided by the outstanding shares of the fund to arrive at its share
price, or Net Asset Value (NAV) Per Share.
At the end of the Statement of Net Assets, you will find a table displaying
the composition of the fund's net assets. Because all income and any realized
gains must be distributed to shareholders each year, the bulk of net assets
consists of Paid-in Capital (money invested by shareholders). The amounts shown
for Undistributed Net Investment Income and Accumulated Net Realized Gains
usually approximate the sums the fund had available to distribute to
shareholders as income dividends or capital gains as of the statement date, but
may differ because certain investments or transactions may be treated
differently for financial statement and tax purposes. Any Accumulated Net
Realized Losses, and any cumulative excess of distributions over net income or
net realized gains, will appear as negative balances. Unrealized Appreciation
(Depreciation) is the difference between the market value of the fund's
investments and their cost, and reflects the gains (losses) that would be
realized if the fund were to sell all of its investments at their statement-date
values.
================================================================================
MARKET
VALUE*
EXPLORER FUND SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (92.1%)(1)
- --------------------------------------------------------------------------------
AUTO & Transportation (3.8%)
C.H. Robinson Worldwide, Inc. 828,600 30,484
Tidewater Inc. 793,600 21,347
* EGL, Inc. 956,900 15,349
Polaris Industries, Inc. 287,400 15,195
* Heartland Express, Inc. 511,960 11,775
CNF Inc. 362,100 10,986
BorgWarner, Inc. 123,800 7,263
* AirTran Holdings, Inc. 858,600 6,740
* Pacer International, Inc. 360,215 5,727
* Navistar International Corp. 202,400 5,647
* Landstar System, Inc. 68,100 4,231
Thor Industries, Inc. 111,000 3,550
* JetBlue Airways Corp. 100,400 3,156
Oshkosh Truck Corp. 29,400 1,646
Superior Industries
International, Inc. 39,100 1,547
Winnebago Industries, Inc. 34,100 1,262
ArvinMeritor, Inc. 73,900 1,169
* SCS Transportation, Inc. 83,100 996
* ExpressJet Holdings, Inc. 83,600 966
* Atlantic Coast Airlines
Holdings Inc. 113,700 949
Arctic Cat, Inc. 47,932 873
* Mesa Air Group Inc. 157,000 845
* P.A.M. Transportation
Services, Inc. 33,700 800
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* Frontier Airlines, Inc. 101,650 615
* Aftermarket Technology Corp. 42,524 453
* Tower Automotive, Inc. 157,600 441
Spartan Motors, Inc. 32,400 303
Wabtec Corp. 23,900 293
* Keystone Automotive
Industries, Inc. 13,300 243
-----------
154,851
-----------
CONSUMER DISCRETIONARY (20.4%)
ADVERTISING AGENCIES (1.0%)
* Lamar Advertising Co. Class A 654,950 23,526
Harte-Hanks, Inc. 714,500 12,861
* Catalina Marketing Corp. 112,700 2,009
CABLE TELEVISION SERVICES (0.4%)
* Insight Communications Co., Inc. 981,700 13,479
* TiVo Inc. 86,400 514
CASINOS & GAMBLING (1.0%)
* Shuffle Master, Inc. 564,900 12,936
* Station Casinos, Inc. 236,000 5,100
* Wynn Resorts Ltd. 300,700 5,079
* GTECH Holdings Corp. 131,400 4,424
* MTR Gaming Group Inc. 476,100 3,856
* Boyd Gaming Corp. 249,200 3,551
* Multimedia Games Inc. 53,100 1,338
* Isle of Capri Casinos, Inc. 92,900 1,199
* Scientific Games Corp. 90,100 587
* Ameristar Casinos, Inc. 36,000 488
- --------------------------------------------------------------------------------
10
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
COMMERCIAL INFORMATION SERVICES (0.2%)
* SOURCECORP, Inc. 305,000 4,819
* ProQuest Co. 58,800 1,475
* LookSmart, Ltd. 434,294 1,464
* Arbitron Inc. 25,800 879
CONSUMER ELECTRONICS (0.5%)
* Take-Two Interactive
Software, Inc. 250,700 5,640
* United Online, Inc. 220,500 4,930
* Register.com, Inc. 635,300 3,621
* PLATO Learning, Inc. 401,666 1,868
* THQ Inc. 87,450 1,236
* iVillage Inc. 1,720,400 1,084
* Alloy, Inc. 133,500 808
* DoubleClick Inc. 93,100 801
* NetFlix.com, Inc. 33,900 776
* eUniverse, Inc. 111,882 430
CONSUMER PRODUCTS (0.4%)
Blyth, Inc. 170,700 4,503
* Oakley, Inc. 183,700 1,929
Matthews International Corp. 71,342 1,681
The Nautilus Group, Inc. 128,700 1,634
* Jarden Corp. 51,600 1,522
* The Topps Co., Inc. 157,200 1,464
The Toro Co. 30,400 1,134
* The Yankee Candle Co., Inc. 28,400 622
COSMETICS
Nu Skin Enterprises, Inc. 100,100 901
* Elizabeth Arden, Inc. 41,164 523
* Del Laboratories, Inc. 12,290 285
EDUCATION--SERVICES (1.1%)
* Corinthian Colleges, Inc. 337,863 15,471
* Education Management Corp. 217,535 10,620
* ITT Educational Services, Inc. 222,300 6,558
* Career Education Corp. 100,900 6,067
* University of Phoenix 53,133 2,345
* DeVry, Inc. 81,000 1,874
* Sylvan Learning Systems, Inc. 84,800 1,487
* Bright Horizons Family
Solutions, Inc. 42,900 1,288
Strayer Education, Inc. 14,200 924
ENTERTAINMENT (0.8%)
*(2)LodgeNet Entertainment Corp. 919,700 9,565
* AMC Entertainment, Inc. 981,400 9,402
* Pixar, Inc. 99,400 5,804
* Hollywood Entertainment Corp. 209,600 3,720
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* Movie Gallery, Inc. 145,200 2,685
* Alliance Gaming Corp. 30,930 494
HOTEL/MOTEL (0.6%)
Intrawest Corp. 1,248,400 14,556
The Marcus Corp. 673,600 9,565
Hilton Hotels Corp. 189,350 2,522
HOUSEHOLD FURNISHINGS (0.3%)
* Furniture Brands
International Inc. 319,700 7,593
American Woodmark Corp. 40,500 1,942
Ethan Allen Interiors, Inc. 45,900 1,546
Haverty Furniture Cos., Inc. 87,500 1,229
Libbey, Inc. 28,100 632
JEWELRY, WATCHES & Gems (0.2%)
Tiffany & Co. 250,000 6,935
* Fossil, Inc. 117,100 2,141
LEISURE TIME (0.7%)
Callaway Golf Co. 1,514,000 21,090
* SCP Pool Corp. 93,600 3,090
* Penn National Gaming, Inc. 101,500 1,982
Action Performance Cos., Inc. 72,900 1,348
* Bally Total Fitness Holding Corp. 126,500 803
MISCELLANEOUS BUSINESS & CONSUMER DISCRETIONARY
* RC2 Corp. 126,800 2,014
PUBLISHING--MISCELLANEOUS (0.5%)
*(2) Playboy Enterprises, Inc. Class B 1,236,700 12,021
* Scholastic Corp. 266,600 7,574
Reader's Digest Association, Inc. 78,900 947
* PRIMEDIA Inc. 268,900 699
Courier Corp. 6,000 293
RADIO & TELEVISION BROADCASTERS (1.5%)
* Entercom Communications Corp. 333,315 16,196
* Cox Radio, Inc. 413,500 9,432
Gray Television, Inc. 788,400 8,712
* Radio One, Inc. Class D 530,000 8,109
* Westwood One, Inc. 189,796 6,624
* Cumulus Media Inc. 355,532 6,129
* Lin TV Corp. 165,175 3,949
* Sinclair Broadcast Group, Inc. 154,300 1,636
* Entravision
Communications Corp. 82,600 629
RENT/LEASE SERVICES--CONSUMER (0.3%)
* Rent-A-Center, Inc. 170,000 10,914
Aaron Rents, Inc. Class B 50,400 1,126
================================================================================
11
================================================================================
MARKET
VALUE*
EXPLORER FUND SHARES (000)
- --------------------------------------------------------------------------------
RESTAURANTS (1.3%)
Ruby Tuesday, Inc. 481,900 9,493
* California Pizza Kitchen, Inc. 408,800 8,241
* Rare Hospitality International Inc. 223,500 6,511
* The Cheesecake Factory 142,400 4,498
Wendy's International, Inc. 142,880 4,149
Applebee's International, Inc. 123,250 3,377
Outback Steakhouse 84,900 3,034
* Papa John's International, Inc. 122,000 2,901
* P.F. Chang's China Bistro, Inc. 59,100 2,476
* Jack in the Box Inc. 138,800 2,470
Bob Evans Farms, Inc. 50,400 1,279
* Ryan's Family Steak Houses, Inc. 94,650 1,173
* CKE Restaurants Inc. 205,800 1,126
* Sonic Corp. 30,300 818
* Steak n Shake Co. 31,400 363
* Panera Bread Co. 8,100 276
RETAIL (4.9%)
Foot Locker, Inc. 2,569,400 28,263
Ross Stores, Inc. 418,600 15,865
* Pacific Sunwear of
California, Inc. 533,600 12,182
Pier 1 Imports Inc. 573,800 10,650
* Borders Group, Inc. 629,700 10,075
* Fisher Scientific
International Inc. 342,350 9,863
* Cost Plus, Inc. 264,100 8,116
* MSC Industrial Direct Co., Inc.
Class A 430,000 7,955
Claire's Stores, Inc. 226,200 5,879
* A.C. Moore Arts & Crafts, Inc. 291,250 5,018
* PETsMART, Inc. 327,850 4,960
* CDW Computer Centers, Inc. 105,320 4,491
* Abercrombie & Fitch Co. 136,200 4,478
* Williams-Sonoma, Inc. 168,040 4,349
* Insight Enterprises, Inc. 544,900 4,109
* FreeMarkets, Inc. 625,500 4,078
* Advance Auto Parts, Inc. 81,000 4,029
* Hot Topic, Inc. 158,425 3,873
* Tractor Supply Co. 89,300 3,782
* Tuesday Morning Corp. 158,200 3,699
* Chico's FAS, Inc. 148,500 3,614
* Urban Outfitters, Inc. 117,300 3,498
* Jo-Ann Stores, Inc. Class A 104,200 2,709
Fred's, Inc. 81,300 2,638
* Global Imaging Systems, Inc. 120,500 2,229
* American Eagle Outfitters, Inc. 115,700 2,025
* Sharper Image Corp. 94,900 1,878
* Dollar Tree Stores, Inc. 71,900 1,830
* The Gymboree Corp. 108,100 1,806
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* Mothers Work, Inc. 69,800 1,751
* The Children's Place
Retail Stores, Inc. 113,700 1,728
* Big Lots Inc. 130,700 1,636
* BJ's Wholesale Club, Inc. 112,200 1,584
Cato Corp. Class A 77,100 1,581
* The Sports Authority, Inc. 175,700 1,516
* Payless ShoeSource, Inc. 82,800 1,313
* AnnTaylor Stores Corp. 54,400 1,287
* bebe stores, inc 69,600 1,056
* Priceline.com Inc. 443,300 984
* United Natural Foods, Inc. 32,500 949
* Genesco, Inc. 59,200 888
* Stage Stores, Inc. 39,800 833
* Men's Wearhouse, Inc. 46,700 778
* Party City Corp. 76,800 758
* Stein Mart, Inc. 109,200 597
* J. Jill Group, Inc. 39,200 562
* The Dress Barn, Inc. 35,800 538
* GSI Commerce, Inc. 159,700 466
* Group 1 Automotive, Inc. 14,200 391
* Linens 'n Things, Inc. 15,700 333
* ShopKo Stores, Inc. 6,600 79
SERVICES--COMMERCIAL (3.4%)
* Kroll Inc. 939,600 20,953
* FTI Consulting, Inc. 444,500 20,114
* The Corporate Executive
Board Co. 469,500 19,245
ServiceMaster Co. 1,000,000 9,050
* Weight Watchers
International, Inc. 181,075 8,507
* The Advisory Board Co. 210,150 7,696
* Iron Mountain, Inc. 167,145 6,661
Regis Corp. 201,700 5,713
* Teletech Holdings Inc. 1,259,000 5,137
* Tetra Tech, Inc. 260,150 4,032
* Waste Connections, Inc. 115,600 3,889
* ChoicePoint Inc. 106,350 3,752
* Getty Images, Inc. 104,600 3,541
* MemberWorks, Inc. 120,400 2,640
* Right Management
Consultants, Inc. 166,150 2,077
* Labor Ready, Inc. 217,900 1,405
* Forrester Research, Inc. 86,600 1,341
* MPS Group, Inc. 197,500 1,333
* ProBusiness Services, Inc. 86,400 1,217
* Overture Services, Inc. 107,600 1,151
* CoStar Group, Inc. 49,900 1,111
* Pre-Paid Legal Services, Inc. 46,200 1,065
* Lightbridge, Inc. 134,200 960
================================================================================
12
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* Pegasus Solutions Inc. 75,900 903
* DiamondCluster
International, Inc. 458,700 876
* Navigant Consulting, Inc. 111,800 840
Rollins, Inc. 32,250 781
* West Corp. 34,500 779
* MAXIMUS, Inc. 30,200 728
World Fuel Services Corp. 29,200 625
* Metro One
Telecommunications, Inc. 93,200 603
* Spherion Corp. 125,900 548
* Cross Country, Inc. 45,200 512
* 4Kids Entertainment Inc. 24,300 374
* ICT Group, Inc. 47,300 362
* APAC Teleservices, Inc. 89,100 280
SHOES (0.5%)
*(2)Vans, Inc. 1,295,840 6,065
* Reebok International Ltd. 128,500 3,991
* Steven Madden, Ltd. 128,900 2,284
* Kenneth Cole Productions, Inc. 88,800 2,047
* Timberland Co. 39,500 1,975
* Skechers U.S.A., Inc. 216,400 1,467
K-Swiss, Inc. 45,300 1,347
* Shoe Carnival, Inc. 16,900 246
TEXTILES & APPAREL MANUFACTURING (0.8%)
* Tokyo Style Co., Ltd. 1,133,000 9,529
* Coach, Inc. 212,300 9,237
* Quiksilver, Inc. 148,500 4,841
Phillips-Van Heusen Corp. 361,700 4,803
* Columbia Sportswear Co. 80,300 3,855
Oshkosh B' Gosh, Inc. Class A 15,800 480
* Nautica Enterprises, Inc. 35,500 404
WHOLESALERS
* United Stationers, Inc. 64,800 1,757
--------
836,121
--------
CONSUMER STAPLES (1.4%)
* Wild Oats Markets Inc. 1,269,100 13,732
* Constellation Brands, Inc.
Class A 359,400 9,636
* Hain Celestial Group, Inc. 404,600 6,983
* Smithfield Foods, Inc. 295,300 5,788
* Whole Foods Market, Inc. 73,600 4,369
* NBTY, Inc. 191,800 2,973
Universal Corp. (VA) 71,200 2,780
Sensient Technologies Corp. 117,300 2,592
Dial Corp. 119,900 2,497
* Chiquita Brands
International, Inc. 144,100 1,938
* American Italian Pasta Co. 42,600 1,879
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
J.M. Smucker Co. 39,100 1,419
Schweitzer-Mauduit
International, Inc. 34,700 760
Interstate Bakeries Corp. 52,100 545
Sanderson Farms, Inc. 20,600 391
* Del Monte Foods Co. 43,100 343
* National Beverage Corp. 9,700 136
--------
58,761
--------
FINANCIAL SERVICES (12.7%)
* The Dun & Bradstreet Corp. 719,100 27,182
Avalonbay Communities,
Inc. REIT 592,000 23,615
Jefferies Group, Inc. 606,800 23,556
* Providian Financial Corp. 2,975,800 21,932
Legg Mason Inc. 388,000 21,068
Regency Centers Corp. REIT 591,600 19,523
Sun Communities, Inc. REIT 440,100 16,961
Manufactured Home
Communities, Inc. REIT 528,550 16,935
* CheckFree Corp. 611,700 16,865
MFA Mortgage Investments,
Inc. REIT 1,356,200 12,708
Prentiss Properties Trust REIT 446,000 12,265
* Host Marriott Corp. REIT 1,377,300 10,633
Reinsurance Group of
America, Inc. 346,300 9,921
* eSPEED, Inc. Class A 752,615 9,822
GATX Corp. 519,000 9,778
* Investment Technology
Group, Inc. 662,900 9,473
* E*TRADE Group, Inc. 1,620,650 8,914
Westcorp, Inc. 400,800 8,497
* Concord EFS, Inc. 488,545 6,757
John H. Harland Co. 265,100 6,349
Redwood Trust, Inc. REIT 188,300 6,259
New York Community
Bancorp, Inc. 171,500 5,954
Fidelity National Financial, Inc. 172,800 5,944
Odyssey Re Holdings Corp. 280,300 5,886
Doral Financial Corp. 145,800 5,833
UCBH Holdings, Inc. 222,600 5,663
* Affiliated Computer Services, Inc.
Class A 118,500 5,652
Chelsea Property Group REIT 138,600 5,497
Everest Re Group, Ltd. 78,580 5,473
* BISYS Group, Inc. 304,250 5,136
Fair, Isaac, Inc. 97,000 5,052
Willis Group Holdings Ltd. 161,610 5,041
General Growth Properties
Inc. REIT 90,100 5,011
Pacific Capital Bancorp 153,100 4,993
New Century Financial Corp. 122,500 4,512
================================================================================
13
================================================================================
MARKET
VALUE*
EXPLORER FUND SHARES (000)
- --------------------------------------------------------------------------------
Moody's Corp. 91,565 4,422
* Alliance Data Systems Corp. 195,100 4,097
R & G Financial Corp. Class B 150,300 4,070
The PMI Group Inc. 127,315 3,924
FactSet Research Systems Inc. 106,600 3,710
LaBranche & Co. Inc. 218,150 3,617
Commerce Bancorp, Inc. 88,200 3,587
First Bancorp/Puerto Rico 116,150 3,586
Friedman, Billings, Ramsey
Group, Inc. 306,410 3,364
The Macerich Co. REIT 100,100 3,303
Staten Island Bancorp, Inc. 187,700 3,221
East West Bancorp, Inc. 83,296 2,820
Texas Regional Bancshares, Inc. 77,110 2,799
Independent Bank Corp. (MI) 109,848 2,618
Irwin Financial Corp. 110,300 2,614
Community First Bankshares, Inc. 88,800 2,391
* Southwest Bancorporation of
Texas, Inc. 67,000 2,277
Dime Community Bancshares 97,425 2,247
Hudson United Bancorp 67,100 2,237
Student Loan Corp. 20,100 2,155
Westamerica Bancorporation 47,300 2,039
Mills Corp. REIT 61,938 1,980
Federal Realty Investment
Trust REIT 63,300 1,951
International Bancshares Corp. 44,400 1,945
* First Federal Financial Corp. 57,000 1,852
Chittenden Corp. 68,345 1,849
* CompuCredit Corp. 243,358 1,842
Bank of Hawaii Corp. 55,800 1,839
* Triad Guaranty, Inc. 41,200 1,641
Provident Bankshares Corp. 62,800 1,595
First Midwest Bancorp, Inc. 57,300 1,587
Shurgard Storage Centers, Inc.
Class A REIT 47,800 1,562
The South Financial Group, Inc. 60,900 1,492
Hilb, Rogal and Hamilton Co. 41,800 1,486
CVB Financial Corp. 72,281 1,467
* Ameritrade Holding Corp. 281,300 1,412
Washington REIT 52,700 1,378
* Kronos, Inc. 29,500 1,346
* LendingTree, Inc. 89,200 1,264
* Saxon Capital Inc. 85,240 1,257
Essex Property Trust, Inc. REIT 22,800 1,253
Alexandria Real Estate Equities,
Inc. REIT 28,200 1,193
* S1 Corp. 270,700 1,191
Republic Bancorp, Inc. 90,690 1,178
Oriental Financial Group Inc. 47,325 1,164
City Holding Co. 40,300 1,153
* PRG-Schultz International, Inc. 180,300 1,150
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
NDCHealth Corp. 57,500 1,107
* First Republic Bank 43,400 1,089
* eFunds Corp. 117,500 1,075
Midwest Banc Holdings, Inc. 58,103 1,045
Pacific Northwest Bancorp 36,850 1,038
* NCO Group, Inc. 61,400 1,028
Flushing Financial Corp. 53,600 1,024
R.L.I. Corp. 34,520 1,020
Net.Bank, Inc. 101,400 1,012
NBT Bancorp, Inc. 52,700 959
* Financial Federal Corp. 41,900 939
American Home Mortgage
Holdings, Inc. 76,700 936
First Niagara Financial Group, Inc. 75,534 918
Pennsylvania REIT 31,700 905
Independent Bank Corp. (MA) 44,600 904
CPB, Inc. 34,400 875
Sterling Bancshares, Inc. 71,300 849
CBL & Associates Properties,
Inc. REIT 19,700 836
Sandy Spring Bancorp, Inc. 25,320 803
Apex Mortgage Capital, Inc. REIT 122,400 800
MAF Bancorp, Inc. 23,700 800
Anchor Bancorp Wisconsin Inc. 34,000 787
United Bankshares, Inc. 27,100 783
McGrath Rent Corp. 31,600 782
Brookline Bancorp, Inc. 58,200 778
Cathay Bancorp, Inc. 17,595 765
Bank of the Ozarks, Inc. 22,431 763
Chateau Communities, Inc. REIT 35,000 757
Chemical Financial Corp. 24,360 717
Seacoast Financial Services Corp. 37,500 708
Glacier Bancorp, Inc. 22,600 631
Gold Banc Corp., Inc. 69,900 615
Tompkins Trustco, Inc. 13,200 607
Arrow Financial Corp. 20,990 606
Boston Private Financial
Holdings, Inc. 31,700 598
Great Southern Bancorp, Inc. 15,400 584
Wintrust Financial Corp. 18,300 556
F & M Bancorp 11,300 543
First Essex Bancorp, Inc. 15,300 535
S & T Bancorp, Inc. 19,373 534
Tanger Factory Outlet Centers,
Inc. REIT 16,300 525
Sterling Bancorp 17,812 487
Getty Realty Holding Corp. REIT 24,400 485
Umpqua Holdings Corp. 24,100 474
PrivateBancorp, Inc. 19,700 473
Hanmi Financial Corp. 28,100 469
* Clark/Bardes Inc. 39,600 463
Harleysville National Corp. 17,400 461
================================================================================
14
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
First Financial Bankshares, Inc. 11,500 460
TrustCo Bank NY 43,400 453
Alfa Corp. 34,300 443
Columbia Bancorp 16,400 420
Seacoast Banking Corp. of Florida 19,700 364
Interchange Financial
Services Corp. 18,700 334
* World Acceptance Corp. 28,100 305
Ventas, Inc. REIT 20,200 263
Humboldt Bancorp 19,898 258
Peoples Bancorp, Inc. 10,900 251
The Trust Co. of New Jersey 8,700 244
* Pacific Union Bank 17,800 231
Merchants Bancshares, Inc. 9,500 222
TriCo Bancshares 8,600 211
Peapack Gladstone Financial Corp. 7,300 210
Financial Institutions, Inc. 7,500 165
First Financial Holdings, Inc. 5,800 156
Camden National Corp. 6,000 152
Capitol Bancorp Ltd. 4,800 102
* Actrade Financial
Technologies, Ltd. 84,100 53
---------
520,530
---------
HEALTH CARE (18.3%)
BIOTECH RESEARCH & PRODUCTION (3.1%)
* Chiron Corp. 355,000 14,495
* Biogen, Inc. 350,000 13,297
* Millennium Pharmaceuticals, Inc. 1,040,100 11,441
* Human Genome Sciences, Inc. 817,000 9,551
* Protein Design Labs, Inc. 801,200 7,956
* Telik, Inc. 552,468 7,265
* Cephalon, Inc. 174,400 7,122
* OSI Pharmaceuticals, Inc. 328,900 6,907
* IDEXX Laboratories Corp. 138,800 5,412
* NPS Pharmaceuticals Inc. 281,200 5,357
* Martek Biosciences Corp. 129,700 4,414
* Abgenix, Inc. 457,400 4,345
* Gene Logic Inc. 656,117 4,337
* Charles River Laboratories, Inc. 106,900 2,902
* Neurocrine Biosciences, Inc. 55,000 2,489
* Cell Genesys, Inc. 273,300 2,438
* Transkaryotic Therapies, Inc. 378,000 2,268
* Trimeris, Inc. 38,600 1,713
* Enzon Pharmaceuticals, Inc. 107,100 1,469
* Applera Corp.-
Celera Genomics Group 136,800 1,436
* Immunomedics Inc. 365,000 1,434
* Albany Molecular Research, Inc. 110,500 1,275
* Corixa Corp. 167,900 1,204
* Digene Corp. 62,437 1,187
* Tanox, Inc. 58,900 931
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* Integra LifeSciences Holdings 30,300 809
* Aksys, Ltd. 81,600 636
* Invitrogen Corp. 17,100 559
* Harvard Bioscience, Inc. 127,300 432
* Exact Sciences Corp. 42,200 403
* Genencor International Inc. 35,800 396
* Allos Therapeutics Inc. 202,400 381
* Serologicals Corp. 28,800 266
* Array BioPharma Inc. 107,900 244
* Diversa Corp. 16,732 173
* Organogenesis, Inc. 44,300 3
DRUGS & PHARMACEUTICALS (4.6%)
* Watson Pharmaceuticals, Inc. 785,400 22,832
* SICOR, Inc. 1,269,800 22,768
* Amylin Pharmaceuticals, Inc. 868,400 16,630
* Barr Laboratories, Inc. 242,855 13,503
* SangStat Medical Corp. 737,900 9,298
* Salix Pharmaceuticals, Ltd. 712,900 8,034
* Pharmaceutical Resources, Inc. 181,000 7,955
* Kos Pharmaceuticals, Inc. 353,800 7,218
* Andrx Group 445,000 7,182
* Vertex Pharmaceuticals, Inc. 564,400 6,812
* Taro Pharmaceutical
Industries Ltd. 143,450 6,564
* Kissei Pharmaceutical Co., Ltd. 474,000 5,544
* Eon Labs, Inc. 180,080 5,518
Mylan Laboratories, Inc. 180,890 5,114
* Collagenex Pharmaceuticals, Inc. 508,627 4,679
* American Pharmaceuticals
Partners, Inc. 182,755 4,267
* CV Therapeutics, Inc. 205,000 4,096
* Tularik, Inc. 546,000 2,987
* Priority Healthcare Corp. Class B 102,400 2,335
* Chattem, Inc. 170,690 2,333
* ImmunoGen, Inc. 652,000 1,976
Perrigo Co. 127,300 1,955
* IVAX Corp. 117,600 1,890
* Regeneron Pharmaceuticals, Inc. 284,294 1,800
* The Medicines Co. 85,300 1,753
* Endo Pharmaceuticals
Holdings, Inc. 101,300 1,673
* Noven Pharmaceuticals, Inc. 172,300 1,659
* Medarex, Inc. 374,000 1,560
* Alkermes, Inc. 141,386 1,411
* CIMA Labs Inc. 47,900 1,157
* Enzo Biochem, Inc. 72,000 1,078
* AtheroGenics, Inc. 117,900 1,073
* aaiPharma Inc. 86,350 976
* Sepracor Inc. 40,200 770
* BioMarin Pharmaceutical Inc. 65,800 722
================================================================================
15
================================================================================
MARKET
VALUE*
EXPLORER FUND SHARES (000)
- --------------------------------------------------------------------------------
* ILEX Oncology, Inc. 48,000 643
* Indevus Pharmaceuticals, Inc. 157,200 582
* Connetics Corp. 31,683 535
ELECTRONICS--MEDICAL SYSTEMS (0.8%)
* Varian Medical Systems, Inc. 229,755 12,375
*(2)I-STAT Corp. 1,280,200 8,513
* EPIX Medical, Inc. 604,500 5,773
* eResearch Technology, Inc. 56,000 1,669
* Hologic, Inc. 65,900 593
* HealthTronics Surgical
Services, Inc. 62,930 504
* Bruker Daltonics, Inc. 139,800 477
* Luminex Corp. 76,365 466
HEALTH & PERSONAL CARE (1.1%)
* IDX Systems Corp. 970,300 14,234
*(2)Matria Healthcare, Inc. 612,500 7,644
* Stericycle, Inc. 184,600 7,253
* Lincare Holdings, Inc. 201,700 6,126
* Odyssey Healthcare, Inc. 114,900 2,969
* Apria Healthcare Group Inc. 106,200 2,490
* LabOne, Inc. 90,500 1,706
* Province Healthcare Co. 67,900 679
* Dynacq International, Inc. 50,600 651
* Impath, Inc. 12,301 181
HEALTH CARE FACILITIES (1.5%)
* Manor Care, Inc. 742,800 14,447
* Triad Hospitals, Inc. 478,366 10,529
* Pharmaceutical Product
Development, Inc. 374,750 9,807
* LifePoint Hospitals, Inc. 410,700 8,017
* Quest Diagnostics, Inc. 82,200 4,911
* Beverly Enterprises, Inc. 2,120,900 4,051
* United Surgical Partners
International, Inc. 207,240 3,840
* Renal Care Group, Inc. 74,300 2,407
* DaVita, Inc. 66,100 1,363
* American Healthways Inc. 48,620 1,200
* National Healthcare Corp. 9,300 174
HEALTH CARE MANAGEMENT SERVICES (2.1%)
* Caremark Rx, Inc. 1,199,300 23,878
IMS Health, Inc. 950,000 14,630
* Humana Inc. 1,072,300 11,849
* Mid Atlantic Medical
Services, Inc. 115,000 5,008
* Pediatrix Medical Group, Inc. 122,300 3,897
* WebMD Corp. 386,200 3,723
* Universal Health Services Class B 93,000 3,596
* AMERIGROUP Corp. 113,800 3,314
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* AdvancePCS 110,200 3,313
* Sierra Health Services, Inc. 175,800 2,918
* AmSurg Corp. 69,300 1,800
* VitalWorks Inc. 493,318 1,727
* Centene Corp. 48,300 1,547
* First Health Group Corp. 57,500 1,440
* Select Medical Corp. 79,800 1,350
* Cobalt Corp. 72,700 1,196
* MIM Corp. 134,600 985
* American Medical Security
Group, Inc. 51,200 870
* CorVel Corp. 17,900 560
* Computer Programs and
Systems, Inc. 4,500 87
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES (4.2%)
Mentor Corp. 1,325,476 24,535
* Henry Schein, Inc. 535,500 23,107
Bausch & Lomb, Inc. 574,000 20,182
DENTSPLY International Inc. 444,050 16,630
Arrow International, Inc. 345,000 14,718
* CONMED Corp. 656,500 11,436
* Sybron Dental Specialties, Inc. 473,833 9,643
* Immucor Inc. 314,300 6,453
* STERIS Corp. 232,500 5,278
* Biosite Inc. 117,100 4,998
* Cyberonics, Inc. 179,600 4,100
Cooper Cos., Inc. 125,600 3,504
PolyMedica Corp. 90,300 3,364
* Conceptus, Inc. 307,400 3,206
Invacare Corp. 72,201 2,307
* Merit Medical Systems, Inc. 116,300 2,278
* INAMED Corp. 59,200 2,208
* Advanced Neuromodulation
Systems, Inc. 48,500 2,031
* Bio-Rad Laboratories, Inc. Class A 31,200 1,459
* Respironics, Inc. 36,800 1,414
* Sola International Inc. 94,800 1,328
* American Medical Systems
Holdings, Inc. 76,200 1,209
* Osteotech, Inc. 107,100 1,120
* ICU Medical, Inc. 32,100 1,020
* Ocular Sciences, Inc. 68,500 993
* Alaris Medical, Inc. 91,600 875
* ResMed Inc. 21,300 781
* IGEN International, Inc. 20,879 759
Landauer, Inc. 19,600 752
* Techne Corp. 29,800 662
* CryoLife Inc. 85,350 649
* Cepheid, Inc. 82,000 308
* OraSure Technologies, Inc. 39,200 251
* Cytyc Corp. 1,000 13
================================================================================
16
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
MEDICAL SERVICES (0.9%)
* Coventry Health Care Inc. 726,430 29,653
* Covance, Inc. 297,300 5,271
* Hanger Orthopedic Group, Inc. 158,901 1,638
* Curative Health Services Inc. 63,300 791
* RehabCare Group, Inc. 19,800 346
----------
749,836
----------
INTEGRATED OILS
* Plains Exploration & Production Co. 115,300 960
OTHER ENERGY (4.9%)
St. Mary Land & Exploration Co. 859,600 22,023
Sunoco, Inc. 422,000 15,703
* Unit Corp. 772,800 15,147
* Grey Wolf, Inc. 3,313,200 13,418
CARBO Ceramics Inc. 333,700 12,554
* TETRA Technologies, Inc. 425,600 11,321
Helmerich & Payne, Inc. 326,200 8,393
* Core Laboratories NV 779,500 7,795
* IHC Caland NV 139,600 7,206
Chesapeake Energy Corp. 829,800 6,688
XTO Energy, Inc. 310,933 6,063
* Patterson-UTI Energy, Inc. 157,585 5,214
Pogo Producing Co. 128,400 5,085
Patina Oil & Gas Corp. 136,700 4,720
* Pioneer Natural Resources Co. 195,100 4,666
* Denbury Resources, Inc. 419,500 4,447
* Cooper Cameron Corp. 89,500 4,283
* Evergreen Resources, Inc. 74,700 3,552
* Smith International, Inc. 98,100 3,488
Rowan Cos., Inc. 151,600 3,108
Equitable Resources, Inc. 73,700 2,832
* Ultra Petroleum Corp. 273,200 2,732
* Pride International, Inc. 172,500 2,677
* Stone Energy Corp. 76,100 2,673
Vintage Petroleum, Inc. 262,700 2,569
* Houston Exploration Co. 86,200 2,411
* Oceaneering International, Inc. 100,900 2,276
* Oil States International, Inc. 190,300 2,166
* Varco International, Inc. 117,900 2,074
Frontier Oil Corp. 96,900 1,640
* Key Energy Services, Inc. 151,000 1,521
* Plains Resources Inc. 104,600 1,268
* Prima Energy Corp. 62,400 1,225
* Comstock Resources, Inc. 107,400 1,192
* Hydrill Co. 48,300 1,150
* Quicksilver Resources, Inc. 40,600 939
* Harvest Natural Resources, Inc. 183,800 937
* Superior Energy Services, Inc. 88,900 805
* Horizon Offshore, Inc. 149,800 550
* Spinnaker Exploration Co. 21,100 452
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* Atwood Oceanics, Inc. 16,300 425
Berry Petroleum Class A 25,300 392
* Cal Dive International, Inc. 19,000 306
* Veritas DGC Inc. 36,700 251
* Gulf Island Fabrication, Inc. 8,100 136
----------
200,473
----------
MATERIALS & PROCESSING (3.9%)
Valmont Industries, Inc. 638,700 12,340
* Cytec Industries, Inc. 378,200 12,106
* Dycom Industries, Inc. 1,054,600 11,643
Minerals Technologies, Inc. 253,500 11,217
IMC Global Inc. 974,000 8,824
Granite Construction Co. 509,850 8,565
Hughes Supply, Inc. 290,000 8,140
Wellman, Inc. 706,800 8,086
* Croda International PLC 1,724,300 7,234
Cambrex Corp. 412,000 7,169
Bowater Inc. 163,300 6,357
Delta & Pine Land Co. 211,700 4,924
Chicago Bridge & Iron Co. N.V 232,100 4,642
* Energizer Holdings, Inc. 142,600 4,110
* Pactiv Corp. 173,550 3,561
Great Lakes Chemical Corp. 112,200 2,756
Ball Corp. 49,000 2,752
* Steel Dynamics, Inc. 214,900 2,600
Olin Corp. 139,900 2,535
* Airgas, Inc. 98,800 1,999
Georgia Gulf Corp. 87,700 1,982
Clarcor Inc. 50,100 1,874
Albany International Corp. 78,600 1,866
* Crown Holdings, Inc. 350,300 1,857
* Phelps Dodge Corp. 58,300 1,818
* Trex Co., Inc. 44,100 1,809
Crompton Corp. 277,400 1,781
* Simpson Manufacturing Co. 45,800 1,608
Apogee Enterprises, Inc. 152,100 1,573
MacDermid, Inc. 60,700 1,380
Acuity Brands, Inc. 87,100 1,327
* Jones Lang Lasalle Inc. 78,800 1,187
* Hecla Mining Co. 314,600 1,177
New England Business
Service, Inc. 40,700 1,036
The Standard Register Co. 56,600 978
Royal Gold, Inc. 55,200 881
* Cabot Microelectronics Corp. 17,900 774
Glatfelter 64,200 735
Centex Construction Products, Inc. 17,700 684
A. Schulman Inc. 39,500 646
* EMCOR Group, Inc. 10,200 521
Spartech Corp. 23,900 517
Wausau-Mosinee Paper Corp. 35,600 379
Interface, Inc. 102,700 370
================================================================================
17
================================================================================
MARKET
VALUE*
EXPLORER FUND SHARES (000)
- --------------------------------------------------------------------------------
Ennis Business Forms, Inc. 25,400 317
* Maverick Tube Corp. 12,600 224
* Owens-Illinois, Inc. 12,000 107
* Drew Industries, Inc. 4,400 66
---------
161,034
---------
PRODUCER DURABLES (6.8%)
* Garmin Ltd. 791,600 33,548
* Mettler-Toledo International Inc. 709,100 25,173
Donaldson Co., Inc. 309,200 12,343
* Plantronics, Inc. 651,200 12,047
* Palm Harbor Homes, Inc. 699,708 11,713
* American Tower Corp. Class A 1,746,500 11,597
* Ultratech Stepper, Inc. 809,300 11,468
* Polycom, Inc. 1,089,900 10,703
* AGCO Corp. 568,800 10,358
Lindsay Manufacturing Co. 415,050 9,027
Kennametal, Inc. 284,100 8,946
* ATMI, Inc. 271,200 5,722
* NVR, Inc. 15,800 5,652
* Itron, Inc. 278,500 5,576
* Hovnanian Enterprises Class A 137,200 5,461
* Cymer, Inc. 164,600 4,699
* ASML Holding (New York) 532,795 4,694
* Photon Dynamics, Inc. 210,700 4,614
Ametek, Inc. 117,400 4,426
* KLA-Tencor Corp. 104,465 4,283
* Meritage Corp. 112,100 4,277
* Dionex Corp. 119,400 4,109
* Interdigital Communications Corp. 155,900 3,512
* LAM Research Corp. 237,150 3,446
* Rudolph Technologies, Inc. 228,000 3,445
* DuPont Photomasks, Inc. 176,100 3,274
Engineered Support
Systems, Inc. 92,600 3,216
* Photronics Inc. 247,500 3,111
* SpectraLink Corp. 393,400 3,076
* MKS Instruments, Inc. 211,500 2,953
* Headwaters Inc. 170,900 2,803
Lincoln Electric Holdings, Inc. 144,700 2,780
* Zygo Corp. 344,000 2,570
* Axcelis Technologies, Inc. 411,200 2,336
* American Power
Conversion Corp. 127,700 1,990
Pulte Homes, Inc. 33,700 1,954
* Varian Semiconductor
Equipment Associates, Inc. 84,100 1,938
* Genlyte Group, Inc. 40,600 1,531
* FEI Co. 79,400 1,452
Briggs & Stratton Corp. 30,300 1,368
Curtiss-Wright Corp. 22,500 1,356
Cohu, Inc. 70,500 1,270
CTS Corp. 149,800 1,251
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
United Industrial Corp. 91,300 1,243
* Mykrolis Corp. 146,900 1,178
* Paxar Corp. 108,800 1,124
The Manitowac Co., Inc. 59,900 1,114
* Technitrol, Inc. 68,900 1,088
Nordson Corp. 40,800 1,031
Franklin Electric, Inc. 19,700 1,021
X-Rite Inc. 82,600 842
C & D Technologies, Inc. 61,500 818
Helix Technology Corp. 70,600 813
General Cable Corp. 177,000 796
Standard Pacific Corp. 26,300 796
* Orbital Sciences Corp. 130,100 726
* Cognex Corp. 32,700 716
* Entegris Inc. 60,900 699
* Astec Industries, Inc. 81,400 666
* Electro Scientific Industries, Inc. 49,000 658
Roper Industries Inc. 21,100 645
* Champion Enterprises, Inc. 257,100 622
* TRC Cos., Inc. 51,200 583
* C-COR Electronics, Inc. 167,900 573
* Rayovac Corp. 43,300 450
* Arris Group Inc. 102,200 399
* Powell Industries, Inc. 27,300 381
* Semitool, Inc. 81,500 373
* Somera Communications, Inc. 230,100 258
* Asyst Technologies, Inc. 47,900 228
Baldor Electric Co. 8,500 189
--------
281,098
--------
TECHNOLOGY (17.8%)
* Maxtor Corp. 6,841,580 37,629
* Cree, Inc. 1,681,300 33,542
* Western Digital Corp. 3,264,300 30,456
* Foundry Networks, Inc. 2,101,300 22,862
* Verity, Inc. 1,235,600 20,424
* Red Hat, Inc. 3,174,374 19,046
* 3Com Corp. 3,166,500 16,466
* Trimble Navigation Ltd. 640,696 16,178
* Agere Systems Inc. Class A 8,200,700 14,679
* Acxiom Corp. 1,020,450 14,245
* Varian, Inc. 430,300 13,602
* Actel Corp. 652,300 12,922
* Fairchild Semiconductor Corp. 1,057,600 12,554
* Hyperion Solutions Corp. 429,600 12,149
* McDATA Corp. Class A 1,074,365 11,367
* J.D. Edwards & Co. 939,400 11,254
* FLIR Systems, Inc. 215,800 11,239
* DSP Group Inc. 485,800 10,153
* Citrix Systems, Inc. 521,900 9,895
* Exar Corp. 669,800 9,880
* The TriZetto Group, Inc. 1,737,700 9,384
* Ingram Micro, Inc. Class A 932,500 9,325
================================================================================
18
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* Packeteer, Inc. 712,800 9,323
* Cray Inc. 1,166,800 8,809
* WebEx Communications, Inc. 832,000 8,570
* Artisan Components, Inc. 402,800 7,963
* Brocade Communications
Systems, Inc. 1,350,100 7,790
* Emulex Corp. 378,400 7,753
* Hutchinson Technology, Inc. 324,300 7,666
* ActivCard Corp. 750,000 7,088
Applera Corp.-
Applied Biosystems Group 400,000 7,012
* Sybase, Inc. 542,000 6,938
* NetIQ Corp. 494,708 6,817
* Netscreen Technologies, Inc. 333,100 6,755
* Solectron Corp. 2,095,600 6,685
* ManTech International Corp. 419,900 6,550
Scientific-Atlanta, Inc. 400,000 6,500
* Marvell Technology Group Ltd. 276,500 6,381
* Manhattan Associates, Inc. 261,100 6,316
* Silicon Laboratories Inc. 220,700 6,279
* Planar Systems, Inc. 354,800 6,241
* Electronics for Imaging, Inc. 323,125 6,204
* Digitas Inc. 1,471,500 5,886
* SanDisk Corp. 234,800 5,682
* Anteon International Corp. 234,175 5,545
* Rambus Inc. 377,259 5,395
* Cognizant Technology
Solutions Corp. 291,900 5,243
* Borland Software Corp. 573,300 5,200
Microchip Technology, Inc. 243,990 5,073
* Monolithic System
Technology, Inc. 841,800 5,051
* Genesis Microchip Inc. 282,900 4,855
* Silicon Image, Inc. 789,975 4,724
* Juniper Networks, Inc. 459,400 4,695
* Mercury Interactive Corp. 128,100 4,348
* L-3 Communications
Holdings, Inc. 97,235 4,317
* Avocent Corp. 145,100 4,298
* Aeroflex, Inc. 786,000 4,229
* OmniVision Technologies, Inc. 172,400 4,186
* GlobespanVirata, Inc. 626,050 3,800
* Pinnacle Systems, Inc. 388,900 3,675
* Network Associates, Inc. 319,265 3,649
* Jabil Circuit, Inc. 194,800 3,643
* Imation Corp. 105,900 3,632
* Ulticom, Inc. 431,300 3,127
* Tier Technologies, Inc. 466,500 3,079
* Benchmark Electronics, Inc. 116,900 3,034
* ADTRAN Inc. 74,400 3,012
* Stratex Networks, Inc. 1,190,000 2,927
* Documentum, Inc. 154,100 2,834
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* ANSYS, Inc. 106,600 2,820
* Fidelity National Information
Solutions, Inc. 159,400 2,797
* Concord Communications, Inc. 210,000 2,652
* Ceridian Corp. 188,200 2,625
* Skyworks Solutions, Inc. 487,000 2,605
* BEA Systems, Inc. 242,000 2,592
* j2 Global Communications, Inc. 87,100 2,572
* Avid Technology, Inc. 90,200 2,478
* American Management
Systems, Inc. 199,800 2,458
* Extreme Networks, Inc. 565,200 2,391
Black Box Corp. 75,300 2,391
* TTM Technologies, Inc. 501,575 2,362
* MICROS Systems, Inc. 89,800 2,248
* CIENA Corp. 459,000 2,235
* Lexar Media, Inc. 431,170 2,091
* Dendrite International, Inc. 204,200 2,091
* Virage Logic Corp. 449,200 1,958
* Palm, Inc. 201,120 1,929
* WatchGuard Technologies, Inc. 431,000 1,896
* Digital River, Inc. 112,800 1,886
* Storage Technology Corp. 74,100 1,832
* Macromedia, Inc. 134,800 1,700
* Mentor Graphics Corp. 157,300 1,639
* Macrovision Corp. 90,400 1,597
* Progress Software Corp. 80,700 1,573
* Zoran Corp. 87,500 1,557
* Intergraph Corp. 74,600 1,522
* RealNetworks, Inc. 290,800 1,492
* CACI International, Inc. 42,300 1,478
* Moldflow Corp. 177,500 1,420
* MEMC Electronic Materials, Inc. 118,500 1,405
* Legato Systems, Inc. 235,000 1,391
* Advanced Digital
Information Corp. 173,000 1,387
* Power Integrations, Inc. 62,100 1,374
* Adaptec, Inc. 196,200 1,342
Inter-Tel, Inc. 78,200 1,286
* Parlex Corp. 166,000 1,262
* ScanSoft, Inc. 232,500 1,202
* SPSS, Inc. 96,900 1,200
Talx Corp. 93,300 1,187
* SERENA Software, Inc. 68,300 1,076
* InVision Technologies, Inc. 43,100 1,024
* Overland Storage, Inc. 57,200 1,012
* Ariba, Inc. 308,854 1,007
* Catapult Communications Corp. 108,800 963
* Sapient Corp. 500,000 950
* Herley Industries Inc. 58,300 942
* Liberate Technologies, Inc. 362,500 937
* MSC.Software Corp. 150,100 928
================================================================================
19
================================================================================
MARKET
VALUE*
EXPLORER FUND SHARES (000)
- --------------------------------------------------------------------------------
* OSI Systems Inc. 59,800 905
* DRS Technologies, Inc. 30,800 863
* Digimarc Corp. 66,400 853
* MRO Software Inc. 99,300 851
* RadiSys Corp. 99,600 843
* Tyler Technologies, Inc. 207,200 818
* F5 Networks, Inc. 59,300 816
* Standard Microsystem Corp. 63,100 799
* Enterasys Networks, Inc. 329,200 790
* Zomax Inc. 213,600 713
* EPIQ Systems, Inc. 33,800 698
* JDA Software Group, Inc. 61,200 689
* Sonus Networks, Inc. 214,700 687
* Excel Technology, Inc. 29,900 685
* Identix, Inc. 135,532 664
* Gartner, Inc. Class A 83,100 660
* Netegrity, Inc. 139,020 659
* Daktronics, Inc. 46,500 653
* webMethods, Inc. 62,500 629
* ESS Technology, Inc. 90,800 628
* Informatica Corp. 94,400 616
* Siliconix, Inc. 21,600 610
Sypris Solutions, Inc. 66,900 603
* Ascential Software Corp. 152,783 587
Cubic Corp. 28,400 551
* Micromuse Inc. 83,800 548
* Systems & Computer
Technology Corp. 76,100 546
* RSA Security Inc. 56,300 540
* Answerthink Consulting
Group, Inc. 273,900 534
* CommScope, Inc. 61,100 524
* Websense, Inc. 34,100 487
* Syntel, Inc. 31,000 465
Bel Fuse, Inc. Class B 23,000 453
* Datastream Systems, Inc. 51,600 451
* EMS Technologies, Inc. 36,000 437
* Verint Systems Inc. 21,700 426
* Docucorp International, Inc. 96,700 423
* Keane, Inc. 41,800 403
* Phoenix Technologies Ltd. 87,400 396
* InFocus Corp. 78,100 351
* Vitesse Semiconductor Corp. 108,500 338
* Manufacturers' Services Ltd. 79,100 305
* Pegasystems Inc. 41,000 280
* Plexus Corp. 25,200 257
- --------------------------------------------------------------------------------
================================================================================
MARKET
VALUE*
SHARES (000)
- --------------------------------------------------------------------------------
* Altiris, Inc. 15,700 256
* Radiant Systems, Inc. 37,512 237
* Roxio, Inc. 41,600 218
* Newport Corp. 15,800 204
* Checkpoint Systems, Inc. 14,600 195
* Mercury Computer Systems, Inc. 6,500 136
* Clearone Communications Inc. 72,700 69
* MSCi, Inc. 166,300 17
---------
730,158
---------
UTILITIES (1.5%)
* Nextel Partners, Inc. 2,408,200 13,992
* Qwest Communications
International Inc. 3,000,000 11,310
* General Communication, Inc. 1,153,200 7,139
UGI Corp. Holding Co. 144,000 4,550
* UnitedGlobalCom Inc. Class A 1,159,400 4,464
* Commonwealth Telephone
Enterprises, Inc. 106,240 4,223
Energen Corp. 109,900 3,605
* Level 3 Communications, Inc. 529,700 3,030
* Citizens Communications Co. 243,100 2,657
* Cablevision Systems-
NY Group Class A 104,800 2,350
Black Hills Corp. 44,300 1,262
* Boston Communications
Group, Inc. 64,400 1,165
* Time Warner Telecom Inc. 265,300 955
MGE Energy, Inc. 22,600 653
North Pittsburgh Systems, Inc. 44,900 620
* IDT Corp. 42,300 604
* Western Wireless Corp. Class A 88,800 543
Shenandoah
Telecommunications Co. 7,300 322
* Price Communications Corp. 25,700 314
Southwest Water Co. 22,165 270
Otter Tail Corp. 6,700 184
--------
64,212
--------
OTHER (0.6%)
Brunswick Corp. 854,500 18,654
Lancaster Colony Corp. 63,000 2,692
Lennox International Inc. 164,000 2,437
Carlisle Co., Inc. 41,900 1,901
GenCorp, Inc. 95,100 723
--------
26,407
--------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,691,823) 3,784,441
- --------------------------------------------------------------------------------
20
================================================================================
FACE MARKET
AMOUNT VALUE*
(000) (000)
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (10.3%)(1)
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
(3) 1.17%, 7/2/2003 $16,500 16,467
Repurchase Agreements
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
1.32%, 5/1/2003 325,432 325,432
1.32%, 5/1/2003--Note G 82,146 82,146
- --------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(Cost $424,045) 424,045
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (102.4%)
(Cost $4,115,868) 4,208,486
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-2.4%)
- --------------------------------------------------------------------------------
Other Assets--Note C 47,042
Liabilities--Note G (147,392)
----------
(100,350)
----------
- --------------------------------------------------------------------------------
NET ASSETS (100%) $4,108,136
================================================================================
*See Note A in Notes to Financial Statements.
*Non-income-producing security.
(1)The fund invests a portion of its cash reserves in equity markets through the
use of index futures contracts. After giving effect to futures investments, the
fund's effective common stock and temporary cash investment positions represent
96.0% and 6.4%, respectively, of net assets. See Note E in Notes to Financial
Statements.
(2)Considered an affiliated company of the fund, as the fund owns more than 5%
of the outstanding voting securities of such company. The total market value of
investments in affiliated companies was $43,808,000.
(3)Security segregated as initial margin for open futures contracts.
REIT--Real Estate Investment Trust.
AMOUNT
(000)
- --------------------------------------------------------------------------------
AT APRIL 30, 2003, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Paid-in Capital $4,883,903
Accumulated Net Investment Losses (5,472)
Accumulated Net Realized Losses (875,787)
Unrealized Appreciation
Investment Securities 92,618
Futures Contracts 12,874
- --------------------------------------------------------------------------------
NET ASSETS $4,108,136
================================================================================
Investor Shares--Net Assets
Applicable to 78,585,602 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $3,718,222
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $47.31
================================================================================
Admiral Shares--Net Assets
Applicable to 8,871,809 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $389,914
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
ADMIRAL SHARES $43.95
================================================================================
See Note E in Notes to Financial Statements for the tax-basis components of net
assets.
21
STATEMENT OF OPERATIONS
This Statement shows the types of income earned by the fund during the reporting
period, and details the operating expenses charged to each class of its shares.
These expenses directly reduce the amount of investment income available to pay
to shareholders as income dividends. This Statement also shows any Net Gain
(Loss) realized on the sale of investments, and the increase or decrease in the
Unrealized Appreciation (Depreciation) of investments during the period.
================================================================================
EXPLORER FUND
SIX MONTHS ENDED APRIL 30, 2003
(000)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends* $ 10,353
Interest 2,448
Security Lending 652
- --------------------------------------------------------------------------------
Total Income 13,453
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee 4,147
Performance Adjustment 1,591
The Vanguard Group--Note C
Management and Administrative
Investor Shares 7,800
Admiral Shares 479
Marketing and Distribution
Investor Shares 261
Admiral Shares 18
Custodian Fees 45
Shareholders' Reports and Proxies
Investor Shares 161
Admiral Shares --
Trustees' Fees and Expenses 3
- --------------------------------------------------------------------------------
Total Expenses 14,505
Expenses Paid Indirectly--Note D (269)
- --------------------------------------------------------------------------------
Net Expenses 14,236
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (783)
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS)
Investment Securities Sold* (287,531)
Futures Contracts (9,699)
- --------------------------------------------------------------------------------
REALIZED NET GAIN (LOSS) (297,230)
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
Investment Securities 513,768
Futures Contracts 16,827
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 530,595
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 232,582
================================================================================
*Dividend income and realized net gain (loss) from affiliated companies of the
fund were $0 and $(3,700,000), respectively.
22
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how the fund's total net assets changed during the two most
recent reporting periods. The Operations section summarizes information detailed
in the Statement of Operations. The amounts shown as Distributions to
shareholders from the fund's net income and capital gains may not match the
amounts shown in the Operations section, because distributions are determined on
a tax basis and may be made in a period different from the one in which the
income was earned or the gains were realized on the financial statements. The
Capital Share Transactions section shows the net amount shareholders invested in
or redeemed from the fund. Distributions and Capital Share Transactions are
shown separately for each class of shares.
================================================================================
EXPLORER FUND
------------------------------------
SIX MONTHS YEAR
ENDED ENDED
APR. 30, 2003 OCT. 31, 2002
(000) (000)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income (Loss) $ (783) $ (332)
Realized Net Gain (Loss) (297,230) (380,998)
Change in Unrealized Appreciation
(Depreciation) 530,595 (270,988)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 232,582 (652,318)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income
Investor Shares (389) (8,068)
Admiral Shares (309) (188)
Realized Capital Gain
Investor Shares -- --
Admiral Shares -- --
- --------------------------------------------------------------------------------
Total Distributions (698) (8,256)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--Note H
Investor Shares 76,547 9,090
Admiral Shares 75,161 379,967
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital
Share Transactions 151,708 389,057
- --------------------------------------------------------------------------------
Total Increase (Decrease) 383,592 (271,517)
- --------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 3,724,544 3,996,061
- --------------------------------------------------------------------------------
End of Period $4,108,136 $3,724,544
================================================================================
23
FINANCIAL HIGHLIGHTS
This table summarizes the fund's investment results and distributions to
shareholders on a per-share basis for each class of shares. It also presents the
Total Return and shows net investment income and expenses as percentages of
average net assets. These data will help you assess: the variability of the
fund's net income and total returns from year to year; the relative
contributions of net income and capital gains to the fund's total return; how
much it costs to operate the fund; and the extent to which the fund tends to
distribute capital gains. The table also shows the Portfolio Turnover Rate, a
measure of trading activity. A turnover rate of 100% means that the average
security is held in the fund for one year. Explorer Fund Investor Shares
SIX MONTHS YEAR ENDED OCTOBER 31,
ENDED ---------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD APR. 30, 2003 2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $44.60 $51.91 $77.28 $61.49 $49.60 $62.31
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income (Loss) (.011) (.005) .15 .25 .21 .21
Net Realized and Unrealized Gain (Loss)
on Investments 2.726 (7.200) (11.36) 23.80 12.18 (6.82)
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.715 (7.205) (11.21) 24.05 12.39 (6.61)
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.005) (.105) (.25) (.23) (.20) (.25)
Distributions from Realized Capital Gains -- -- (13.91) (8.03) (.30) (5.85)
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (.005) (.105) (14.16) (8.26) (.50) (6.10)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $47.31 $44.60 $51.91 $77.28 $61.49 $49.60
=======================================================================================================================
TOTAL RETURN 6.09% -13.93% -16.22% 42.56% 25.14% -11.22%
=======================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $3,718 $3,432 $3,996 $4,566 $2,484 $2,196
Ratio of Total Expenses to Average Net Assets 0.78%* 0.70% 0.72% 0.71% 0.74% 0.62%
Ratio of Net Investment Income (Loss) to
Average Net Assets (0.06%)* (0.01%) 0.24% 0.36% 0.36% 0.37%
Portfolio Turnover Rate 66%* 69% 77% 123% 79% 72%
=======================================================================================================================
*Annualized.
24
EXPLORER FUND ADMIRAL SHARES
================================================================================
SIX MONTHS NOV. 12,
ENDED 2001* TO
APR. 30, OCT. 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD 2003 2002
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $41.43 $50.00
- --------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .028 .035
Net Realized and Unrealized Gain (Loss)
on Investments 2.535 (8.498)
- --------------------------------------------------------------------------------
Total from Investment Operations 2.563 (8.463)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.043) (.107)
Distributions from Realized Capital Gains -- --
- --------------------------------------------------------------------------------
Total Distributions (.043) (.107)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $43.95 $41.43
================================================================================
TOTAL RETURN 6.19% -16.98%
================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $390 $293
Ratio of Total Expenses to Average Net Assets 0.61%** 0.61%**
Ratio of Net Investment Income to Average Net Assets 0.10%** 0.13%*
Portfolio Turnover Rate 66%** 69%
================================================================================
*Inception.
**Annualized.
25
NOTES TO FINANCIAL STATEMENTS
Vanguard Explorer Fund is registered under the Investment Company Act of 1940 as
an open-end investment company, or mutual fund. The fund offers two classes of
shares, Investor Shares and Admiral Shares. Investor Shares are available to any
investor who meets the fund's minimum purchase requirements. Admiral Shares were
first issued on November 12, 2001, and are designed for investors who meet
certain administrative, servicing, tenure, and account-size criteria.
A. The following significant accounting policies conform to generally accepted
accounting principles for U.S. mutual funds. The fund consistently follows such
policies in preparing its financial statements.
1. SECURITY VALUATION: Securities are valued as of the close of trading on
the New York Stock Exchange (generally 4:00 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 their primary
markets, are valued by methods deemed by the board of trustees to represent fair
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 S&P MidCap 400 and Russell 2000 Index
futures contracts to a limited extent, with the objectives of maintaining full
exposure to the stock market while maintaining liquidity. The fund may purchase
or sell futures contracts to achieve a desired level of investment, whether to
accommodate portfolio turnover or cash flows from capital share transactions.
The primary risks associated with the use of futures contracts are imperfect
correlation between changes in market values of stocks held by the fund and the
prices of futures contracts, and the possibility of an illiquid market.
Futures contracts are valued at their quoted daily settlement prices. The
aggregate principal amounts of the contracts are not recorded in the financial
statements. 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 gains (losses) on futures contracts.
3. REPURCHASE AGREEMENTS: The fund, along with other members of The
Vanguard Group, transfers uninvested cash balances to a pooled cash account,
which is invested in repurchase agreements secured by U.S. government
securities. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal; however, in the event of default or bankruptcy by the other party
to the agreement, retention of the collateral may be subject to legal
proceedings.
4. FEDERAL INCOME TAXES: The fund intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for federal income taxes is required in the financial
statements.
5. DISTRIBUTIONS: Distributions to shareholders are recorded on the
ex-dividend date.
6. OTHER: Dividend income is recorded on the ex-dividend date. Security
transactions are accounted for on the date securities are bought or sold. Costs
used to determine realized gains (losses) on the sale of investment securities
are those of the specific securities sold.
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), shareholder reporting, and proxies. Marketing and
26
distribution expenses are allocated to each class of shares based on a method
approved by the board of trustees. Income, other non-class-specific expenses,
and gains and losses on investments are allocated to each class of shares based
on its relative net assets.
B. Granahan Investment Management, Inc., Wellington Management Company, llp,
Grantham, Mayo, Van Otterloo & Co. LLC ("GMO"), and Chartwell Investment
Partners 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 adviser. The basic fees of Granahan, Wellington, and Chartwell are subject
to quarterly adjustments based on performance for the preceding three years
relative to a combination of the Russell 2000 Growth Index and the Small Company
Growth Fund Stock Index (an index of the stocks held by the largest
small-capitalization stock mutual funds) for periods prior to January 31, 2003,
and their new benchmark, the Russell 2500 Growth Index, beginning January 31,
2003. The basic fee of GMO is subject to quarterly adjustments based on
performance for the preceding three years relative to the Russell 2000 Growth
Index for periods prior to January 31, 2003, and its new benchmark, the Russell
2500 Growth Index, beginning January 31, 2003. The benchmark changes will be
fully phased in by January 2006.
The Vanguard Group provides investment advisory services to a portion of
the fund on an at-cost basis; the fund paid Vanguard advisory fees of $304,000
for the six months ended April 30, 2003.
For the six months ended April 30, 2003, the aggregate investment advisory
fee represented an effective annual basic rate of 0.22% of the fund's average
net assets before an increase of $1,591,000 (0.08%) based on performance.
C. The Vanguard Group furnishes at cost corporate management, administrative,
marketing, and distribution services. The costs of such services are allocated
to the fund under methods approved by the board of trustees. The fund has
committed to provide up to 0.40% of its net assets in capital contributions to
Vanguard. At April 30, 2003, the fund had contributed capital of $709,000 to
Vanguard (included in Other Assets), representing 0.02% of the fund's net assets
and 0.71% of Vanguard's capitalization. The fund's trustees and officers are
also directors and officers of Vanguard.
D. The fund has asked its investment advisers to direct certain security trades,
subject to obtaining the best price and execution, to brokers who have agreed to
rebate to the fund part of the commissions generated. Such rebates are used
solely to reduce the fund's management and administrative expenses. For the six
months ended April 30, 2003, these arrangements reduced the fund's expenses by
$269,000 (an annual rate of 0.01% of average net assets).
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. For tax purposes, at October 31, 2002, the fund had
available realized losses of $580,717,000 to offset future net capital gains of
$201,887,000 through October 31, 2009, and $378,830,000 through October 31,
2010. The fund will use these capital losses to offset net taxable capital
gains, if any, realized during the year ending October 31, 2003; should the fund
realize net capital losses for the year, the losses will be added to the loss
carryforward balances above.
At April 30, 2003, net unrealized appreciation of investment securities for
tax purposes was $92,618,000, consisting of unrealized gains of $591,820,000 on
securities that had risen in value
27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
since their purchase and $499,202,000 in unrealized losses on securities that
had fallen in value since their purchase.
At April 30, 2003, the aggregate settlement value of open futures contracts
expiring in June 2003 and the related unrealized appreciation were:
================================================================================
(000)
-------------------------------------------
AGGREGATE UNREALIZED
NUMBER OF SETTLEMENT APPRECIATION
FUTURES CONTRACTS LONG CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
S&P MidCap 400 Index 130 $ 28,519 $3,043
Russell 2000 Index 663 132,152 9,831
================================================================================
Unrealized appreciation on open futures contracts is required to be treated as
realized gain for tax purposes.
F. During the six months ended April 30, 2003, the fund purchased $1,293,360,000
of investment securities and sold $1,165,842,000 of investment securities, other
than temporary cash investments.
G. The market value of securities on loan to broker/dealers at April 30, 2003,
was $77,254,000, for which the fund held cash collateral of $82,146,000. The
fund invests cash collateral received in repurchase agreements, and records a
liability for the return of the collateral, during the period the securities are
on loan.
H. Capital share transactions for each class of shares were:
============================================================================================
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
------------------ ------------------
AMOUNT SHARES AMOUNT SHARES
(000) (000) (000) (000)
- --------------------------------------------------------------------------------------------
Investor Shares
Issued $ 441,909 9,785 $1,165,688 21,456
Issued in Lieu of Cash Distributions 380 8 7,898 133
Redeemed (365,742) (8,149) (1,164,496) (21,632)
----------------------------------------------
Net Increase (Decrease)--Investor Shares 76,547 1,644 9,090 (43)
----------------------------------------------
Admiral Shares
Issued 105,968 2,549 434,053 8,238
Issued in Lieu of Cash Distributions 287 7 169 3
Redeemed (31,094) (748) (54,255) (1,177)
----------------------------------------------
Net Increase (Decrease)--Admiral Shares 75,161 1,808 379,967 7,064
----------------------------------------------
============================================================================================
28
================================================================================
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 trustees also serve on the board of directors of The
Vanguard Group, Inc., which is owned by the Vanguard(R) 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
investments they have made as private individuals. Our independent board members
bring distinguished backgrounds in business, academia, and public service to
their task of working with Vanguard officers to establish the policies and
oversee the activities of the funds.
Among board members' responsibilities are selecting investment advisers for
the funds; monitoring fund operations, performance, and costs; reviewing
contracts; nominating and selecting new trustees/directors; and electing
Vanguard officers. The dates in parentheses below show when each trustee was
initially elected.
=========================================================================================================================
JOHN J. BRENNAN* Chairman of the Board, Chief Executive Officer, and Director/Trustee of The Vanguard Group, Inc.,
(1987) and of each of the investment companies served by The Vanguard Group.
- -------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
CHARLES D. ELLIS The Partners of '63 (pro bono ventures in education); Senior Adviser to Greenwich Associates
(2001) (international business strategy consulting); Successor Trustee of Yale University; Overseer of
the Stern School of Business at New York University; Trustee of the Whitehead Institute for
Biomedical Research.
RAJIV L. GUPTA Chairman and Chief Executive Officer (since October 1999), Vice Chairman (January-September 1999),
(2001) and Vice President (prior to September 1999) of Rohm and Haas Co. (chemicals); Director of
Technitrol, Inc. (electronic components), and Agere Systems (communications components); Board
Member of the American Chemistry Council; Trustee of Drexel University.
JOANN HEFFERNAN HEISEN Vice President, Chief Information Officer, and Member of the Executive Committee of Johnson &
(1998) Johnson (pharmaceuticals/consumer products); Director of the Medical Center at Princeton and
Women's Research and Education Institute.
BURTON G. MALKIEL Chemical Bank Chairman's Professor of Economics, Princeton University; Director of Vanguard
(1977) Investment Series plc (Irish investment fund) (since November 2001), Vanguard Group (Ireland)
Limited (Irish investment management firm) (since November 2001), Prudential Insurance Co. of
America, BKF Capital (investment management firm), The Jeffrey Co. (holding company), and
NeuVis, Inc. (software company).
ALFRED M. RANKIN, JR. Chairman, President, Chief Executive Officer, and Director of NACCO Industries, Inc. (forklift
(1993) trucks/housewares/lignite); Director of Goodrich Corporation (industrial products/aircraft
systems and services); Director until 1998 of Standard Products Company (a supplier for the
automotive industry).
J. LAWRENCE WILSON Retired Chairman and Chief Executive Officer of Rohm and Haas Co. (chemicals); Director of
(1985) Cummins Inc. (diesel engines), MeadWestvaco Corp. (paper products), and AmerisourceBergen Corp.
(pharmaceutical distribution); Trustee of Vanderbilt University.
- -------------------------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICERS*
R. GREGORY BARTON Secretary; Managing Director and General Counsel of The Vanguard Group, Inc. (since September
1997); Secretary of The Vanguard Group and of each of the investment companies served by The
Vanguard Group; Principal of The Vanguard Group (prior to September 1997).
THOMAS J. HIGGINS Treasurer; Principal of The Vanguard Group, Inc.; Treasurer of each of the investment companies
served by The Vanguard Group.
- -------------------------------------------------------------------------------------------------------------------------
*Officers of the funds are "interested persons" as defined in the Investment
Company Act of 1940.
More information about the trustees is in the Statement of Additional
Information, available from The Vanguard Group.
- --------------------------------------------------------------------------------
VANGUARD SENIOR MANAGEMENT TEAM
MORTIMER J. BUCKLEY, Information Technology.
F. WILLIAM MCNABB, III, Client Relationship Group.
JAMES H. GATELY, Investment Programs and Services.
MICHAEL S. MILLER, Planning and Development.
KATHLEEN C. GUBANICH, Human Resources.
RALPH K. PACKARD, Finance.
IAN A. MACKINNON, Fixed Income Group.
GEORGE U. SAUTER, Quantitative Equity Group.
- --------------------------------------------------------------------------------
JOHN C. BOGLE, Founder; Chairman and Chief Executive Officer, 1974-1996.
[SHIP]
Post Office Box 2600
Valley Forge, PA 19482-2600
Vanguard, The Vanguard Group, Vanguard.com, Admiral, Explorer, Wellington, and
the ship logo are trademarks of The Vanguard Group, Inc.
All other marks are the exclusive property of their respective owners.
ABOUT OUR COVER
The photographs of the sails and ship that appear on the cover of this report
are copyrighted by Michael Kahn.
FOR MORE INFORMATION
This report is intended for the fund's shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.
To receive a free copy of the prospectus or the Statement of Additional
Information, or to request additional information about the fund or other
Vanguard funds, please contact us at one of the adjacent telephone numbers or by
e-mail through VANGUARD.COM(R). Prospectuses may also be viewed online.
All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc.,
unless otherwise noted.
WORLD WIDE WEB
www.vanguard.com
FUND INFORMATION
1-800-662-7447
DIRECT INVESTOR ACCOUNT SERVICES
1-800-662-2739
INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036
TEXT TELEPHONE
1-800-952-3335
(C) 2003 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
Q242 062003
Item 2: Code(s) of Ethics - Not applicable to this semi-annual report.
Item 3: Audit Committee Financial Expert - Not applicable to this semi-annual
report.
Item 4: Principal Accountant Fees and Services - Not applicable to this
semi-annual report.
Item 5: Not Applicable.
Item 6: Reserved.
Item 7: Not applicable.
Item 8: Reserved.
Item 9: 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 Controls. There were no significant changes in Registrant's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Item 10: Exhibits attached hereto. (Attach certifications as exhibits)
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
VANGUARD EXPLORER FUND
BY:_____________(signature)________________
(HEIDI STAM)
JOHN J. BRENNAN*
CHIEF EXECUTIVE OFFICER
Date: June 16, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
VANGUARD EXPLORER FUND
BY:_____________(signature)________________
(HEIDI STAM)
JOHN J. BRENNAN*
CHIEF EXECUTIVE OFFICER
Date: : June 16, 2003
VANGUARD EXPLORER FUND
BY:_____________(signature)________________
(HEIDI STAM)
THOMAS J. HIGGINS*
TREASURER
Date: : June 16, 2003
*By Power of Attorney. See File Number 2-57689, filed on December 26, 2002.
Incorporated by Reference.